FROM $48 TO $4 MILLION

From a $48 Claim to a $4 Million Dollar Verdict: Norman v. Colonial Penn

When attorney William Shernoff joined a senior citizen named Elmer Norman in a $48 battle against the Colonial Penn Franklin Insurance Company, he never dreamed that the case would become one of the greatest David-and-Goliath legal scenarios in the field of bad faith law.

Elmer Norman owned health insurance with Colonial Penn because the company sold its policies through AARP, an organization that Elmer, like most retired Americans, trusted implicitly. But when Elmer submitted a $48 claim to cover a hearing test and prescription medicine, Colonial Penn denied the claim.

During a routine pre-trial deposition, Elmer mentioned something about a policy switch. Shernoff smelled a rat, and the scope of the small case suddenly ballooned.

A look at Colonial Penn’s internal documents revealed that the company indeed switched policies on all its AARP customers, intending to reduce its loss ratios by 40 percent and save $4 million in annual payouts. An interoffice memo even outlined ways to make the new policy “appear similar to the current plan.”

Shernoff investigated and discovered to his dismay that the “improvements” included added coverage for pregnancy and injuries related to war. Coverage that these retired Americans actually could use, such as for pre-existing conditions, was limited. The overall value of the policy was substantially reduced.

At trial, Shernoff exposed Colonial Penn’s deceptive, self-serving scheme to the jury, which needed little time to find the company guilty of fraud. They proceeded to award Elmer Norman $70,000 in compensatory damages and $4.5 million in punitive damages.

Perhaps more than any other bad faith incident, the Norman case demonstrated that our system of justice allows anyone – no matter how old or infirm – to make a difference.