A lawsuit in a United States federal court in Ohio, pitting the Cayman Islands National Insurance Company against its former claims administrator Simplifi, hinges on whether an email was suitable to give notice and cancel the contract.
Depositions and email exchanges in the suit, recently filed with the court, show a deteriorating relationship between CINICO’s chief executive officer Lonny Tibbetts and management at the Ohio-based company that handled insurance claims and payments.
A review of more than 1,200 pages of testimony shows disorganization at the insurance company and Simplifi management concerned over losing its biggest client.
Mr. Tibbetts declined to speak on the record about the ongoing suit, which has cost the insurer some $150,000 as of last month. Simplifi lawyers also would not comment on the legal dispute.
Simplifi as a company no longer exists, having sold its remaining assets to another company after the CINICO deal fell apart.
CINICO hired Simplifi in 2011 to handle insurance claim payments, but one year later the national insurer put out a request for proposals for a new administrator.
The U.S. company put in a new bid but did not win the contract. In an interview earlier this year, Mr. Tibbitts said Simplifi’s services “weren’t bringing us what we needed.”
In the depositions and email exchanges filed with the court, it’s clear that the relationship deteriorated after Mr. Tibbetts sent a two-sentence email to the company on Feb. 6, 2013: “Please accept this email as formal notice of termination of services on May 31st, 2013. Please schedule a call so we can begin discussions of the transition.”
Simplifi Vice President Tod Lawrence replied the next day by email to Mr. Tibbetts. He wrote, “It has now been 24 hours since your request for a call to begin our transition discussions and I have not heard from you.” He also noted in the email that CINICO had to send a formal letter, not an email, to cancel the contract.
According to Mr. Tibbetts’s deposition and other records in the suit, after that month he did not reply again to Simplifi until April. Meanwhile, Simplifi managers were preparing to lose more than $150,000 in monthly revenue, according to the email exhibits. Those plans included layoffs and closing two offices.
Court records show that CINICO emailed Simplifi on Dec. 11, 2012, telling the company that it did not win the bid for a new contract. Two months later, records show, Mr. Tibbetts emailed the company, saying the contract would end June 2013. Simplifi management replied that the termination needed to be in writing, but apparently neither Mr. Tibbetts nor anyone else at CINICO sent a written letter or a fax to end the contract. As the deadline neared to formally cancel the contract, Simplifi leadership did not remind CINICO that it had not given formal notification to stop the agreement from automatically renewing for another year.
The situation deteriorated further, with CINICO making late payments to the administrator, several times causing the services and website to be cut off.
As the agreement fell apart, Simplifi sued CINICO, alleging a breach of contract in July 2013, and CINICO counter-sued in October 2013, claiming the administrator had overbilled by more than $700,000.
When the relationship broke off completely, CINICO did not have a new administrator in place and was left without many financial records and no company ready to handle all the transactions with overseas hospitals.
Mr. Tibbetts, in an interview earlier this year, said the firm had to bring the accounting operations in house and use his own limited staff to make sure all the bills got paid. This interim system, as reported by the Cayman Compass, led to several Florida hospitals suing CINICO for unpaid bills over the past year.
The transition, Mr. Tibbetts said last month, has been a “rough period.” The insurer was essentially using spreadsheets to run a multimillion-dollar operation in an already understaffed office.
The lawsuit in Ohio continues, hinging in part on whether email was a permissible form for the formal notification to cancel the contract.