Update: N.Y. high court derails Blue Cross anti-tobacco suit

Several years ago, in a controversial ruling, activist federal judge Jack Weinstein ruled that health insurance plans in New York could sue tobacco companies for cost recoupment under state consumer protection law. The result, in 2000, was a jury verdict of $17 million to which Weinstein added an award of $32 million in attorney’s fees (see Mar. 6-7, 2002). However, the state’s highest court, the Court of Appeals, has now declared that the basis of the case is invalid: the Blues can’t invoke the consumer protection act. That will probably mean the suit’s dismissal. Health insurers do have a separate right to sue under older principles of “subrogation”, but the tobacco companies have robust defenses against that variety of action. (John Caher, “Insurer Loses Bid for Direct Recovery in Test Case Against Cigarette Makers”, New York Law Journal, Oct. 20). Two other Blue Cross actions in other states have also been dismissed. On dismissal of union health plans’ suits against tobacco companies, see Jan. 11, 2000.

And what about similar actions on behalf of government health insurers, as in the state-Medicaid legislation? Well, the handwriting would seem to be on the wall that those cases are not exactly founded on a good legal theory of recovery either — the trouble being that in the mean time the muscle of the state AGs and their lawyers nonetheless managed to extract hundreds of billions in tobacco lucre.

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