The damage from the Omega PregnancyCare insurance scandal continues to grow. Court-appointed liquidators for the segregated portfolio company based on the Caimans – which housed the main insurance unit of the insurance product sold in the United States – were demanding claims from victims. As reported at a Zoom creditors’ meeting on May 6, 2021, these claims have exceeded $ 6 million and are expected to increase before the count is complete.
The claims to date have been filed by more than 350 victims – surrogate motherships, intended parents, and support organizations who trusted Omega when they were promised a reliable insurance product to cover medical expenses related to their surrogacy pregnancy. In return, they paid a hefty monthly premium of over $ 1,000 and nearly $ 1,300 when the company collapsed in late 2020, two years after it was founded.
Current accounting for the company’s remaining assets does not leave victims with much hope of recovery. At least not directly from the company. The liquidators report that the company’s Cayman bank account barely hits $ 200,000 with an additional $ 50,000 in another account and possibly $ 350,000 owed to the company by related parties of “unknown realizable value” . But with the liquidators themselves accounting for $ 20,500 in March and $ 52,500 in April of expenses each month, those accounts are dwindling quickly.
Raising funds for further research
Cayman’s liquidators have conducted a preliminary analysis of possible recovery options, including Directors and Officers (D&O) insurance. However, the liquidators stated that it would take significant resources to pursue such contingent claims, including a full investigation, litigation and enforcement. They estimate that these stages cost between $ 800,000 and $ 1,050,000. The liquidators are looking for suggestions from interested parties for the provision of funding and ask them to contact you by June 30, 2021
That’s a lot of money, but it could be worth it if liquidators could successfully access D&O funds to cover damage.
The situation has not gone unnoticed by government agencies. Several states – including California and Oregon – have investigators at work to get to the bottom of what has happened. Among those digging deep is the California Department of Insurance. To help the victims cope with hospital bills, the department has issued a “victim letter”. The letter states that the department has received complaints regarding the Omega Insurance Company and the PregnancyCare plan and that the department is investigating these complaints and is aware of the related litigation.
The victim’s letter not only reassures victims that an active investigation is taking place, but also confirms the explanations made by the victims when describing the situation to the billing departments of the medical service providers. Yes, they were insured. But no, the insurance policy does not pay any insured claims. Really.
So many lawsuits
The victim’s letter references some, but not all, of the ongoing legal proceedings related to the Omega PregnancyCare situation. There is a lot to consider! Bankruptcy expert Justin Leonard is closely following the various related lawsuits and summarizes them as follows:
- A Kentucky District Court lawsuit against Performance Insurance Company SPC (Performance) (WD Kentucky 3: 20-cv-00330) on charges of insurance fraud involving a prisoner of performance (Omega Insurance Company SP) and allegedly forged policies ( Pregnancy Care) issued by Omega Family Services, LLC.
- The Chapter 7 bankruptcy filing of Omega Family Services, LLC (SD Cal. Bankruptcy Case No. 20-06121-LA7), which also did business as Prime Insurance Solutions and Lyfgro, and marketed the PregnancyCare insurance plan to various surrogate agencies and to future surrogate mothers and intended parents.
- The Chapter 7 bankruptcy filing of Omega Risk Management, LLC (SD Cal. Bankruptcy Case No. 21-01389-MM7), which was called “Omega Insurance Company” in the United States and owned and operated the websites for Omega Insurance Prenatal care.
- The voluntary liquidation procedures of Performance Insurance Company SPC and its proprietary insurance companies, including Omega Insurance Company SP (Grand Court of the Cayman Islands Case No. FSD 70 of 2021 (RPJ)), including the appointment of independent joint liquidators (Kenneth M. Krys and Neil S. Dempsey).
- The Chapter 15 bankruptcy case of Performance Insurance Company SPC and its proprietary insurance companies, including Omega Insurance Company SP (SD Florida (Miami) Bankruptcy Case No. 21-12609-AJC), based on the recognition of the foreign liquidation proceeding by the U.S. bankruptcy court.
Impressive. That’s a lot of legal disputes about an insurance product!
The real problem
The Cayman liquidators at Omega Insurance Company SP accepted nominations and set up an ad hoc advisory committee to promote transparency with creditors. Lisa Stark Hughes, founder of Gestational Surrogate Moms and Chair of Education and Deputy Treasurer of the Society for Ethics for Egg Donation and Surrogacy (SEEDS), volunteered and was named to the committee.
Stark Hughes stated that at this point, no one knows exactly what level the fraud happened and who knew what and when. However, the real crime, Stark Hughes said, is the state of the US healthcare system, which has made Omega victims unable to rely on standard insurance options. Most intended parents on a surrogacy arrangement have already suffered from failed fertility treatments – likely not covered by insurance – before moving on to surrogacy. Generally in the United States, Intended Parents’ insurance does not cover costs related to medical care for the surrogate mother. To make matters worse, the surrogate mother’s own insurance often does not cover the medical expenses. A number of insurance plans have excluded maternity care coverage when a woman’s pregnancy is a substitute. Other policies provide a right to withhold any compensation a surrogate mother receives for her work as a surrogate mother.
The lack of a unified and comprehensive health insurance system leads victims into the open arms of unique insurance “providers” like Omega.
Nevada has the right idea
I’m sure both sides of the aisle can agree that the American health insurance system could use significant improvements. Nevada took a stand a few years ago when it came to insurance coverage for women serving as surrogates. The state passed law banning discrimination through surrogacy and requiring insurance providers to treat surrogate mothers the same as any other pregnant woman carrying their own child.
Ensuring affordable health care for everyone, along with its many other benefits, would hopefully eliminate all future PregnancyCare-type scams. In the meantime, buyers attention, good luck to the PregnancyCare victims, and congratulations to all of the busy attorneys who have benefited from the mess.
Ellen Trachman is the executive attorney for Trachman Law Center, LLC, a Denver-based law firm specializing in assisted reproductive technology law, and co-host of the podcast I want to put a baby inside you. You can reach them at [email protected]vethelaw.com.