Labor Department Sues Food Product Operators for Failing To Pay Health Plan Claim

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor has filed a lawsuit against two company officers of Decatur, Ill.-based Kelly Food Products, Inc. for failing to pay $81,382 in health claims from monies forwarded for that purpose by the stop-loss insurer.

Defendants include Donald Schumacher, former chief executive officer and at least a 50 percent shareholder of the company, and his wife, Susan Bolin, also a former officer and director of the company. The company, which manufactured potato chips and other snack foods, ceased operations on Oct. 11, 1996 and was put into bankruptcy on Oct. 21, 1996.

Kelly sponsored a self-funded health plan, established in 1987 for the company’s employees. The plan was funded by contributions from the participants as well as the company. The company retained stop-loss insurance for paying individual claims in excess of $30,000 per participant per contract year.

In this case, the plan filed a notice/proof of loss with the stop-loss insurance provider for the medical treatment of one of the health plan’s beneficiaries, Marquita Roberts, and the insurer duly paid the amount to the company. The lawsuit alleges the check from the insurer was deposited to the company’s account and not forwarded to the plan. The lawsuit alleges that a check was submitted to the service provider, a local hospital, for the full amount, but the check was returned twice for insufficient funds, leaving the claim unpaid.

The department is seeking an order directing defendants Schumacher and Bolin to reimburse the plan for any losses, including interest, and to permanently bar them from serving as fiduciaries to any plan covered by the Employee Retirement Income Security Act.

The complaint resulted from an investigation conducted by the Kansas City Regional Office of the department’s Pension and Welfare Benefits Administration into alleged violations of the ERISA. It was filed in federal district court in the Central District of Illinois in Urbana on June 3.

(Herman v. Donald Schumacher, et al.)
Civil Action No. CV-99-2120

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Archived News Release — Caution: Information may be out of date.

Contact Name: Sharon Morrissey
Phone Number: 202.219.8921