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When Gulf War veteran Chris Anspach of Rapid City died of cancer in 2009 at age 45, the last thing his grieving widow expected to endure was a prolonged fight over his life insurance.

Yet four years later, Pratthana Anspach is still battling to be paid the $50,000 in benefits she and her husband were promised by the United of Omaha Life Insurance Co. when they took out a "guarantee issue" policy.

Anspach said she told the insurance agent all about her husband's past cancer, and was promised the policy would pay anyway. But so far, the insurer has refused to pay. "It's unbelievable," Anspach said last week, seated across the desk from her Rapid City attorney, Greg Sperlich. "You do your part and you expect that they will do their part."

Sperlich has taken Anspach's case to court. He made a first appearance in front of a federal judge in Rapid City last week, where he called national fraud investigator Mark Colbert of California as an expert witness. Sperlich is asking that Anspach's case against United of Omaha at least be heard by a jury and that Anspach, who paid all of the required premiums on the policy, be paid the $50,000 in death benefits as well as punitive damages and legal fees.

Sperlich alleges that United of Omaha Life Insurance not only knowingly sold the Anspachs coverage it never intended to honor, but that the company is engaging in a pattern of dishonest and at times illegal practices. The complaint cites breach of contract, bad faith, unfair trade practices and fraud.

Sperlich also cites three other South Dakota court cases against United of Omaha that had strikingly similar circumstances; all of those cases have been settled.

Sperlich said that while he obviously wants justice for his client, he also wants to ensure that no one else has to go through the turmoil of losing a loved one and then facing a fight for promised benefits. "I want them to stop doing this," Sperlich said.

United of Omaha declined to comment for this story, but the company has argued in court papers that its denial of Anspach's claim does not constitute fraud.

A soldier's story

Anspach described her late husband as a hard-working, honest man who loved motorcycles and "put people first before himself."

A graduate of the prestigious U.S. Air Force Academy, Capt. Chris Anspach served as a navigator on B-1B Lancer bombers in the Air Force. Stationed at Ellsworth Air Force Base in Box Elder, Chris was deployed to the Persian Gulf during Desert Storm in 1991. While serving, he began having difficulty breathing, an unusual symptom for a fit, healthy 28-year-old.

During a medical examination, doctors discovered that Chris had thymoma, a cancer of the thymus, a small organ located under the breastbone that helps the body develop white blood cells. Sperlich said it is believed that Chris was likely exposed to toxic chemicals during his deployment, chemicals which led to his cancer. "We believe that's what happened because he came back with cancer," he said.

Anspach said the cancer treatment of radiation and chemotherapy affected Chris' hearing, which ended his military navigator career. Chris was honorably discharged in 1993.

Chris and Pratthana met in Rapid City two years later and married in 1999.

Anspach, a petite woman with a no-nonsense attitude, said her husband underwent treatment off and on over the years, going in and out of remission several times. It was during one of the remissions that Anspach was offered the opportunity to purchase group life insurance.

At the time, Anspach worked as an employee of Pennington County, a fact that would help her case in the long run. During a mandatory employee meeting, a representative from United of Omaha pitched insurance plans to county employees. Anspach said during that meeting, the representative said United of Omaha offered a guaranteed benefit group life insurance policy regardless of health conditions.

Disbelieving, Anspach approached the man after the meeting to talk further. She said she told him that Chris had terminal cancer. According to Anspach, the agent assured her that as long as she purchased the $100,000 policy on herself, she could buy a $50,000 policy on her husband and it would be paid regardless of his health.

With the representative's assurances, Anspach bought the policy. The coverage began that day in September 2008 and automatic payments of about $36 a month were taken from her paycheck beginning that October, she said.

On Nov. 17, 2009, Chris lost his battle with cancer. Devastated, Anspach buried her husband and began putting her life back together. Within 10 days of his death, Anspach said she notified United of Omaha of his death as was required. It wasn't until February that the company sent her an official denial notice.

At war with an insurer

Anspach said she was shocked when, after her husband's death, United of Omaha claimed that an exclusion in the policy made Chris ineligible for coverage. They told her that he was never actually covered. Anspach said at no time did any representative from the company discuss any exclusion with her, nor was she ever given the policy to read. Yet, the company took her premiums month after month, she said. "They deceived me," she said.

In the denial, Anspach was told her husband fell under a policy exclusion that labeled him "disabled" when she took out the insurance on him, voiding the policy. As for a refund of her paid premiums, Anspach was told to ask Pennington County. Such a directive makes no sense, Sperlich said. Pennington County collected the fees to distribute to United of Omaha. It didn't have the fees. "It was just another hurdle," he said.

Sperlich said nine months before Anspach took out her policy with United, the company was informed by the South Dakota Division of Insurance that the same "confined/disabled exclusion" used in Anspach's case was illegal.

Anspach said United of Omaha told her she had the right to bring civil action under a law called the Employee Retirement Income Security Act, or ERISA.

Though she didn't know it at the time, ERISA has gained a reputation among lawyers as a cumbersome law benefiting insurance companies over consumers. "ERISA is full of tricks and trickery," said Roger Baron, a professor of law at  University of South Dakota in Vermillion.

Baron said originally, ERISA was created to protect pension funds. Over the years, the law has morphed into something quite different.

Baron said in general, insurance companies are regulated by states. State agencies decide what insurance companies can and cannot do and provide the consumer with the right to appeal claims and go to trial by jury.

Under ERISA policies that are self-funded by private companies — meaning the company uses employee premiums to pay claims — all of the state regulations and protections are stripped away, Baron said. In other words, insurance companies can issue ERISA policies that have exclusions, like the exclusion United says labeled Chris as "disabled."

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Randy Moses, deputy director in the South Dakota Division of Insurance, said his agency can use its regulatory rights to "disapprove" of unreasonable exclusions. If a policy is ERISA, however, it no longer has that ability. ERISA also takes away the right for a person to appeal before a jury.

"What the consumer doesn't know ... they believe they have some kind of normal coverage (protected under state law)," he said. "But they don't. ERISA is full of unfairness."

Baron said a large majority of private companies have self-funded ERISA policies, unbeknownst to the people who have health or life insurance through their company. Governmental agencies cannot offer employees ERISA policies.

A pattern of behavior?

Fortunately for Anspach, ERISA policies cannot be issued through governmental agencies such as Pennington County. But that didn't stop United of Omaha from claiming her policy was an ERISA policy for 1-1/2 years, Sperlich said.

Sperlich said United of Omaha routinely uses the ERISA claim as a way of chasing off potential appeals or claims. Lawyers know that ERISA claims are difficult and rarely worth the time and cost for their clients. The most a consumer will ever get in a winning case is the amount they were owed under their policy. Legal fees alone could cost people more than their benefits. "There's a terrible disincentive to go to court," Sperlich said.

Sperlich said United of Omaha uses ERISA rules, even in cases when policies are clearly not ERISA, as a way of discouraging potential claims.

Sperlich said he will argue in federal court that United of Omaha has a pattern of practice that calls for the denial of all claims under ERISA, regardless of the validity. He said that occurred in the three other eastern South Dakota cases against the company.

"I can prove they knew it wasn't ERISA," Sperlich said of Anspach's case. Sperlich said he also has proof the company automatically tells every person attempting to claim benefits that it falls under ERISA. "This is what is called 'institutional bad faith.'"

Sperlich alleges that after 18 months of arguing that Anspach's policy fell under ERISA, and was therefore not bound to state regulations, United of Omaha suddenly admitted ERISA did not apply. Sperlich says the company has now done an about-face and is using the very argument he made earlier to argue its case. "It makes your head spin," he said.

Sperlich also argues that United's own incontestability clause prevents them from denying Anspach's claim. He said the following statement is contained within the contract of insurance: "The company will not contest the validity of this policy after it has been in force for 1 year, except for nonpayment of premiums."

Sperlich said United has argued that the incontestability clause only applies to Pennington County — which has since dropped United — and not Anspach. He said the company has also argued that it doesn't apply because technically, Chris Anspach was never covered.

As the fight continues, Anspach and Sperlich have dug in. Anspach calls herself a motivated person who just can't walk away from this. The fact that her husband was always so genuine and honest makes it harder, she said. "It's not right," she said. "We need to hold them accountable."

After four years of legal battles, Sperlich said he is also frustrated and ready for his client to finally get some justice. "All Chris wanted was some money for his wife to have if and when he died," Sperlich said. "I love insurance ... the only problem is when it goes wrong. They just should tell you on the front end before they take your premiums."

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