Discovering and Exposing Great Benefit's Section U Denial Scheme

Rudy Baylor’s discovery of Section U turns Great Benefit’s scattered denials into evidence of a coordinated system: the company’s claims and underwriting departments passed files and instructions back and forth so that payment could be delayed indefinitely. The sections were missing from the manuals Great Benefit produced in discovery, but copies obtained from Cooper Jackson revealed the procedures. When Baylor confronted company witnesses with the complete manuals at trial, the missing material exposed both the scheme and the concealment that had kept it from him.

Background: Denials and incentives

The discovery grows out of a case that initially looks like one more dispute over a low-cost health policy. Max Leuberg explains to Baylor that debit insurance, sold door to door to low-income customers and paid for through frequent premium collections, routinely generates denied claims. Such policyholders may be reluctant to consult lawyers, and Leuberg estimates that only about one in thirty bad-faith denials reaches court. He also describes the economic obstacle facing plaintiffs: juries may award an insured’s modest medical costs but hesitate to impose substantial punitive damages on a wealthy company.

Baylor’s concern is not abstract. Great Benefit has refused to pay for a bone marrow transplant for Donny Ray Black, who is dying of leukemia. The policy excludes many organ transplants but does not specify bone marrow, and the company’s later policy language adds that exclusion. Leuberg calls the Black case good, though not great, and advises Baylor—who is not yet licensed—to send the family to an established trial lawyer. The case instead becomes Baylor’s own, and his search for a way to prove deliberate wrongdoing eventually takes him beyond the documents Great Benefit has supplied.

A parallel case in South Carolina gives him a lead. Cooper Jackson, whose client received $11,000 for a denied medical claim and an additional $200,000 in a confidential settlement, describes a process in which claims and underwriting appear to dispute responsibility while the insured receives further denials and requests for review. Jackson has records, including the company manuals, and lets Baylor examine them. He also tells Baylor about investigations in South Carolina, Georgia, and Florida, and a possible class action being considered by lawyers in Raleigh. Together, these cases suggest that the Black claim may belong to a wider pattern rather than an isolated mistake.

The manuals reveal the mechanism

In Jackson’s storage room, Baylor goes directly to the dark green claims and underwriting manuals. At first, the copies resemble the manuals he already obtained in discovery: both are procedural handbooks with sections and reference material. The decisive difference appears at the back of the claims manual. Jackson’s copy contains a Section U that Baylor’s does not. The underwriting manual contains a corresponding section, also absent from Baylor’s copy.

Read together, the two sections describe a circular process. A claims handler initially denies a claim and orders medical records covering the preceding five years. The insured may then receive another notice saying the claim is denied pending further review. The file moves to underwriting, which instructs claims not to pay until further notice; claims and underwriting exchange further paperwork, while the customer is left waiting. Neither department can authorize payment without the other’s word, and the required word never arrives. The manuals also prescribe documentation for each step, creating a paper trail that can make the delay appear to be careful review.

The sections make the process more than a vague bureaucratic suspicion. They set out actions and routing rules. The claims section, effective January 1, 1991, directs handlers to deny every claim within three days, then permits later review of some claims. Claims with potential value above $5,000 are sent to underwriting with a denial letter. Other instructions require workers to record how strongly an insured reacts, so that a threat to hire a lawyer or sue can prompt supervisory review while a customer who gives up may remain denied. Another provision directs a handler to prepare a check but send it, with the file, to underwriting, which is told not to mail it until further word from claims. That word does not come.

The missing sections also establish how the scheme could be concealed within ordinary administration. Claims and underwriting work for the same company, yet their employees are described as rarely knowing what the other department is doing. Meanwhile, customers receive letters from both sides of the process and may conclude that the company is still considering the claim. Jackson estimates that only about one in twenty-five insureds will consult a lawyer, a figure that underscores the advantage of delay: the procedure can succeed whenever a claimant gives up before challenging it.

Exposing the omissions in court

At trial, Baylor turns the claims manual Great Benefit produced into a test of its own account. He has Everett Lufkin, the vice president of claims, affirm that the manual is complete, authoritative, and the copy selected for discovery. Baylor then asks Lufkin to find Section U. Lufkin cannot. Baylor presents Jackson’s matching copy, whose revised-edition date is the same, and has Lufkin confirm that it contains the missing section. Asked whether he or someone else removed it, Lufkin says he does not know; he characterizes the omission as an oversight, but cannot explain how it happened.

Baylor gives the jury the section and walks Lufkin through its provisions. Lufkin cannot identify who drafted it or answer questions about the instructions, including the rule to deny claims promptly and route larger claims to underwriting. The witness’s inability to account for the manual’s contents sits beside his earlier insistence that it was complete. The confrontation also reaches Great Benefit’s in-house counsel, Jack Underhall, whose reaction makes clear that the missing material is a problem for the defense. Judge Tyrone Kipler later finds that the company has also failed to provide requested information about its policies and claims, and threatens contempt consequences unless it complies.

Baylor repeats the challenge with Kermit Aldy, the vice president of underwriting. This time Aldy acknowledges that the discovery copy has a section missing, though he cannot say who removed it or who selected that copy. He describes Section U in general terms as a system of checks and balances intended to ensure claims are handled properly. Baylor then produces the complete underwriting manual. Its Section U, like the claims section, lays out the disputed process, and the cross-examination leaves the defense with little room to present the procedures as innocent oversight.

From one claim to a company-wide experiment

The manuals establish how the process works; testimony from Jackie Lemancyzk connects it to Great Benefit’s broader policy. Lemancyzk testifies that, beginning January 1, 1991, the company adopted an experiment lasting twelve months: claims over $1,000 were denied initially regardless of their legitimacy, while some smaller claims were also denied when an arguable reason could be found. Larger claims might be paid only after an insured hired a lawyer and began making threats. According to her testimony, the experiment generated about $40 million in additional funds after the company accounted for quick settlements.

Lemancyzk also explains how the Black claim passed through that system. It was initially denied like other claims, but its size and Donny Ray’s acute leukemia brought it under closer monitoring. She says the company learned that the policy did not exclude bone marrow transplants, and that managers knew Donny Ray’s illness was terminal without a transplant. His medical records warned that the leukemia would return and eventually prove fatal if he did not receive one. Despite that knowledge, the denial continued because the company was relying on the chance that the family would not consult a lawyer.

The trial evidence thereby joins three levels of proof: the manual’s instructions, the company’s missing discovery materials, and testimony about the year-long denial policy and the Black file. Baylor uses Great Benefit’s own records and figures to present the volume of policies, claims, and denials, then places the company’s available cash, reserves, and undistributed surpluses at $475 million against its admitted net worth of $450 million. The figures support his argument that a punitive award must be large enough to matter to a wealthy corporation, rather than merely compensate an individual claim.

Significance in the case

Section U changes the dispute from an argument over a disputed policy term into a case about how Great Benefit handled claims and what it withheld from discovery. The documents give Baylor a concrete answer to the defense’s description of a routine coverage decision: the company had instructions for denial, transfer, delay, and tracking the insured’s response. Their absence from the produced manuals makes the discovery violation part of the proof, not a separate procedural footnote.

The exposure also gives the jury a way to connect institutional practice to a particular family’s loss. Great Benefit’s defense stresses that the policy did not expressly promise coverage for the transplant; Baylor’s evidence shows that the company discovered the coverage gap did not apply and nevertheless continued to deny the claim. When Donny Ray’s recorded testimony is played, the paperwork and corporate figures are set against the person whose treatment the process delayed. The exposure does not itself determine the verdict, but it gives the case its central causal account: a system designed to make denial profitable could leave even a valid, life-critical claim unpaid unless the insured found legal help.