Lawsuit, injunction muddy CVMA insurance plans

Sacramento, Calif. — The California Veterinary Medical Association's (CVMA) former insurance broker is accusing the group and an ex-executive of using confidential documents in a "scheme" to start its own insurance business.

Dr. Dick Schumacher

ABD Insurance & Financial Services Inc., which has offered worker's compensation, liability and malpractice coverage to CVMA members since 1966, filed a lawsuit against the association on Nov. 7 in Sacramento County Superior Court. A judge issued a temporary injunction against CVMA's plans to move forward with its Veterinary Insurance Service Company (VISC) until Dec. 31.

The 17-page complaint, which CVMA attorney Dan Baxter predicts will be hashed out in mediation, asks the court to enjoin CVMA from committing any further acts of unfair competition, aided by the use of "misappropriated" confidential, proprietary and trade-secret information. ABD seeks "equitable relief" totaling more than $25,000, court documents show.

The company accuses former ABD executive and consultant Jay O'Brien of gaining access to internal records under the guise of an "audit" and using the information to jumpstart VISC. O'Brien now shares the VISC chief executive officer title with Dr. Dick Schumacher, former CVMA executive director.

VISC, billed as the nation's first member-owned insurance program for veterinarians, is set to open for business Jan 1.

Where do policyholders stand?

Since the lawsuit's filing, both parties have refused to talk about the case. It is unclear how many of ABD's 2,000-plus veterinarian clients have joined VISC. Previous projections showed the broker drawing 800 to 1,000 insurees in its first year.

When asked what will happen to policyholders who've now named VISC as their broker of record, CVMA attorney Dan Baxter defers to answer what he admits is a "valid question."

"I can't comment substantively on the pending litigation," he says. "What I can say is that CVMA certainly has the best interest of the veterinary profession in mind. Frankly, we're not sure what ABD hopes to gain from this lawsuit."

Letter-writing wars

While company officials remain tightlipped, letters issued from both sides to CVMA's 5,200 members shed light on what appears an escalating battle.

An ABD letter dated Nov. 2 starts off, "You are likely to receive some aggressive and confusing communication from CVMA on behalf of their new 'Veterinary Insurance Service Company' (VISC), along with a request to make VISC your 'broker of record' in order to continue your coverage."

Signed by Association Services Producer Kathy Noe and Association Services Managing Director J. Edward Branam, DVM, the letter states that ABD believes VISC is not in the best interest of CVMA members.

Yet "it eliminates some long-standing obstacles and lets us offer you even greater protection and value," the letter claims.

In response to the ABD lawsuit filed five days later, CVMA President Dr. Jeff Smith issued a Nov. 20 letter assuring members that VISC remained in the works despite ABD's efforts to "stall" the association's efforts.

"ABD's delay tactics come despite the fact that ABD was properly given 13 months notice that CVMA was not renewing its contact. ... We do not understand why ABD is suing and denigrating CVMA when we simply decided to end our agreement," Smith writes.

Prompting change

The decision to move away from ABD reportedly came with the company's rumored purchase by Wells Fargo. In an interview with DVM Newsmagazine prior to the lawsuit, VISC co-Chief Executive Officer Schumacher reported veterinarians were getting lost in the shuffle.

Smith's letter outlines ABD's failure to broker personal lines of health insurance and its move to drop earthquake, construction and equine coverage as the basis for starting VISC, now headquartered in CVMA's Sacramento offices. Underwritten mainly by Fireman's Fund, the program is marketed as "for veterinarians, by veterinarians."

"We plan on offering a better product and more complete services at a highly competitive price," Schumacher says in DVM Newsmagazine's October issue. "Our goal will be to transition as many members as we can from the current broker for their '08 renewals."