Federal Jury Awards Empire BlueCross BlueShield $17.8M for Tobacco-Related Health Costs
A federal District Court jury in Brooklyn, N.Y., yesterday awarded $17.8 million in damages to Empire BlueCross BlueShield of New York, the state's largest health insurer, as compensation for smoking-related health costs, the Los Angeles Times reports. The damages were a "fraction" of the $2.4 billion that Empire had sought. The ruling represented cigarette makers' first "courtroom defeat" to an insurance company (Levin, Los Angeles Times, 6/5). Empire accused five tobacco firms -- R.J. Reynolds Tobacco Co., Philip Morris Inc., Brown & Williamson Tobacco Corp., Lorillard Tobacco Co. and Liggett Group Inc. -- of "deceptive business practices." While the jury found that the companies had "lied to the public about the dangers of smoking," it ruled that they had not committed fraud or racketeering (Feuer, New York Times, 6/5). Defense attorneys said that the cigarette makers "never plotted to deceive the public," adding that Empire's efforts to dissuade members from smoking "proved [that the insurer] was never defrauded" (de la Cruz, AP/Nando Times, 6/4). The tobacco companies also said that Empire, which passed smoking-related costs on to members through higher premiums, "suffered no economic damage" (Bloomberg News/Newsday, 6/5).
Plaintiffs' attorneys "hailed" the "landmark" verdict as a "victory," but "voiced regret" about the damages, which only amounted to a fraction of the billions of dollars that they had sought. "We're disappointed in the amount, but we're very happy with the basic result," Empire attorney Vincent FitzPatrick said. Tobacco companies praised the "modest scale" of damages and jurors' decision to reject "more serious claims of fraud and racketeering." Thomas McKim, assistant general counsel for R.J. Reynolds, said, "We ... consider this case a victory" (Los Angeles Times, 6/5). Philip Morris attorney Peter Bleakley said, "This is almost a total victory for the defense" (AP/Nando Times, 6/4). The tobacco companies plan to appeal the decision.
According to the Los Angeles Times, the verdict "breathes life" into a legal strategy that has failed during the past two years. During that time, eight federal appeals courts have rejected dozens of similar cases, dismissing the financial injuries claimed by third-party payers, such as insurance companies and labor unions, as "too remote from the actual harm suffered by smokers." The 2nd U.S. Circuit Court of Appeals -- which has "previously rejected third-party payer claims" -- would likely hear the tobacco companies' appeal in the Empire case, prompting some legal observers to predict that the companies "have a good chance of reversing Monday's loss" (Los Angeles Times, 6/5).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.