Phoenix Packaging seeking $2.5 million from insurance advisor and administrator

Monday, Nov 02, 2015

An international food packaging operation that is one of Pulaski County’s biggest employers claims the firm it hired to broker its self-insured health care benefits caused the plant $2.5 million in damages.

Phoenix Packaging, which employs approximately 450 people at its Dublin plant, has taken a lawsuit that was previously in Pulaski Circuit Court to the U.S. District Court for the Western District of Virginia. The suit, which also lists a benefits plan trustee as a plaintiff, targets Mesa, Arizona-based Mahoney Group and Salt Lake City, Utah-based Tall Tree Administrators.

The case revolves around a stop-loss insurance plan Phoenix Packaging acquired on the advice of the Mahoney Group. Tall Tree served as a third-party administrator of the plant’s self-insured plan.

Phoenix Packaging claims the Mahoney Group’s actions last year prompted the plant to spend $1.2 million in out-of-pocket expenses to cover unpaid employee claims. The plant argues it lost another $1.3 million due to a “laser/exclusion” in a renewed stop-loss policy obtained for a specific employee for the 2014-15 coverage year.

Tall Tree filed a partial motion to dismiss last week, arguing in part that the “plaintiffs’ complaint seeks to expand a simple breach of contract action into a much larger claim that improperly seeks recovery for fraud and other impermissible damages.”

Neither the Mahoney Group nor the attorneys representing Tall Tree and Phoenix Packaging returned calls seeking comment on the suit.

Phoenix Packaging hired the Mahoney Group during the summer of 2013 to serve as the plant’s exclusive insurance broker and adviser on employee health insurance strategies, according to the packaging company’s suit.

The Mahoney Group advised the plant to self-insure to lower the plant’s overall health insurance costs, and also recommended bringing on Tall Tree as the third-party administrator and Gerber Life Insurance Company as the stop-loss insurer, according to Phoenix’s suit.

Businesses that self-insure — or use their own money to fund health benefit plans — rely on stop loss to cover claims that go beyond the amount companies set aside for health insurance.

In September 2014, Tall Tree stated that all claims incurred after May 1, 2014, and paid at a later time would be covered under the stop-loss contract’s aggregate portion for the 2014-15 year.

The plant claims in its suit that it learned “many employee claims were in fact unpaid, and that Phoenix Packaging’s monthly contributions were as much as $80,000 short.”

Phoenix Packaging, according to the suit, inquired about whether it would be reimbursed, to which Gerber said it would be best to not do until after Oct. 1, 2014.

The Mahoney Group later that month informed the plant that Gerber refused to renew the stop-loss coverage unless the plan paid all unpaid claims for the previous coverage year, according to the suit.

Phoenix Packaging, according to the suit, eventually renewed a stop-loss agreement with Gerber in December, a deal that called for the stop-loss provider to pay unpaid claims for the prior coverage year.

Phoenix Packaging is suing the Mahoney Group and Tall Tree on counts of breach of contract, professional negligence, constructive fraud and fraudulent inducement.

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