Humana 2006 Annual Report Download - page 39

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ITEM 3. LEGAL PROCEEDINGS
Our current and past business practices are subject to review by various state insurance and health care
regulatory authorities and other state and federal regulatory authorities. These authorities regularly scrutinize the
business practices of health insurance and benefits companies. These reviews focus on numerous facets of our
business, including claims payment practices, competitive practices, commission payments, privacy issues,
utilization management practices, and sales practices. Some of these reviews have historically resulted in fines
imposed on us and some have required changes to some of our practices. We continue to be subject to these
reviews, which could result in additional fines or other sanctions being imposed on us or additional changes in
some of our practices.
We also are involved in various lawsuits that arise, for the most part, in the ordinary course of our business
operations, including employment litigation, claims of medical malpractice, bad faith, nonacceptance or
termination of providers, anticompetitive practices, improper rate setting, failure to disclose network discounts
and various other provider arrangements, intellectual property matters, and challenges to subrogation practices.
We also are subject to claims relating to performance of contractual obligations to providers, members, and
others, including failure to properly pay claims, challenges to our implementation of the new Medicare
prescription drug program and other litigation.
Personal injury claims and claims for extracontractual damages arising from medical benefit denials are
covered by insurance from our wholly owned captive insurance subsidiary and excess carriers, except to the
extent that claimants seek punitive damages, which may not be covered by insurance in certain states in which
insurance coverage for punitive damages is not permitted. In addition, insurance coverage for all or certain forms
of liability has become increasingly costly and may become unavailable or prohibitively expensive in the future.
The outcome of current suits or likelihood or outcome of future suits or governmental investigations cannot
be accurately predicted with certainty, and therefore, such legal actions and government audits and investigations
could have a material adverse effect on our financial position, results of operations, and cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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