KY prisons’ health care provider declares bankruptcy. Some lawsuits accuse it of fraud

But just as the case was about to be settled, according to court documents, it came to an abrupt halt.

Wellpath, the health care company that insures the prison against such lawsuits, filed for bankruptcy last November. All pending lawsuits against the company — 471 across 27 states, as of March 13, court records show — were paused as a result.

Some of those suits accuse the company of fraud, prompting questions about whether people awarded money for wrongful prison deaths in Kentucky and other states nationwide will ever receive compensation from Wellpath.

In Georgia, for example, lawyers claimed Wellpath lied to county officials about the type of coverage they offered. As in Kentucky, in addition to providing medical coverage for inmates, the company was on the hook if a prison had to pay out a lawsuit related to medical negligence.

And the company was required to have insurance of its own to pay out those lawsuits, in case it filed for bankruptcy.

But the sheriff’s office in Cobb County, Georgia, near Atlanta, claims in a lawsuit filed Feb. 18 that Wellpath didn’t actually have such insurance. When Cobb County corrections officials were sued for medical negligence, Wellpath failed to pay up, the suit says.

Cobb County accused the company of obtaining an insurance contract through “false pretenses, a false representation, or actual fraud.”

Paul Rosenblatt, lawyer for the Cobb County Sheriff’s Office, declined to comment.

In another lawsuit, filed Feb. 12, Illinois resident Thomas Freeman claimed Wellpath agreed to settle his claim of medical negligence at an Illinois prison for $75,000.

Just days before Freeman was going to receive the first installment, Wellpath filed for bankruptcy, halting the payments.

Freeman claimed Wellpath’s actions were fraudulent as the company agreed to settle despite knowing it was planning to file for bankruptcy.

“At the time (Wellpath) negotiated and executed the settlement agreement, (Wellpath) had already undertaken extensive bankruptcy preparations and knew that it would not fulfill its payment obligations and never intended to fulfill its payment obligations,” Freeman’s lawsuit reads.

Wellpath admitted last year in court documents that some of the accusations in lawsuits against the company were true — it said it maintained policies to comply with wording in state contracts, but it didn’t actually have insurance coverage of its own to pay out claims of negligence or wrongful death.

Wellpath representatives did not respond to multiple phone and email requests for comment.

In Kentucky, Wellpath remains the health care provider for Kentucky’s 14 prisons. The department has contracted with Wellpath, formerly Correct Care Solutions, since 2014.

Morgan Hall, spokesperson for the Kentucky Department of Corrections, said state officials have worked with the company to “ensure services are not disrupted” during the bankruptcy proceedings.

“According to discussions with Wellpath, it has been determined the bankruptcy does not affect their ability to meet the terms of the contract,” Hall said in an emailed statement.

Hall did not comment on the alleged discrepancies of Wellpath’s insurance coverage, nor who is responsible for the oversight of insurance contracts.

The next court date for Wellpath’s bankruptcy case is April 22, according to federal court documents.

What is Wellpath?

Based in Nashville, Tenn., Wellpath is a health care company that provides medical and mental health services to people in correctional facilities and treatment centers.

Formerly known as Correct Care Solutions, Wellpath was once one of the nation’s largest for-profit health care providers for prisoners. But Wellpath is the second corrections health care system to file for bankruptcy in the past two years, following Tehum Care Services in 2023, reports show.

When Wellpath signed a contract to provide health care for prison inmates in Kentucky, it assured the state it had third-party insurance to pay out lawsuits related to claims of negligence and wrongful death.

But James Seitz, the company’s director of insurance, wrote in bankruptcy filings that Wellpath’s insurance was merely a “fronting policy” that did not appear to provide actual coverage against lawsuits.

Seitz wrote that the fronting policies were submitted solely to gain contracts and imposed “no risk or liability on any third party.”

Fronting policies — which don’t require proof that a company can pay out lawsuits, but instead assure the policyholder that the company will be able to pay out if it comes to that — meet requirements set by state lawmakers that prisons have coverage from a licensed insurer, Seitz wrote.

Greg Belzley, the lawyer for Jones, whose brother died in an Eastern Kentucky prison, argued such policies amount to fraud.

“It is beyond outrageous to find out — for Wellpath to blindly admit — on an issue of this importance that there is no there, there,’” Belzley said in an interview with the Herald-Leader. “Someone at Wellpath knew what they were doing, and it is incumbent in the state of Kentucky to find out who that was and throw the damn book at them.”

Court documents show Wellpath discussed a plan to declare bankruptcy as early as January 2024, six months before the Kentucky Department of Corrections extended its contract with the company into 2026.

Kentucky paid Wellpath $59 million for insurance services in 2023, Hall said. That number increased to $62 million last year.

Of the 45 resolved federal lawsuits filed against Wellpath in Kentucky since 2019, only four received settlements, court documents show.

Wellpath’s bankruptcy

Wellpath was deep in medical malpractice and wrongful death claims when it sought Chapter 11 protection last year, in a move that prompted prisoner rights advocates and Sen. Elizabeth Warren, D-Mass., to express concerns about the use of bankruptcy address mass litigation, Bloomberg Law reported.

Between 2019 and 2023, Wellpath litigated several lawsuits, resulting in about $110 million worth of settlements, according to Bloomberg Law.

A search of federal court records shows five active cases pending against Wellpath in Kentucky. None of those can be resolved until the bankruptcy case is finalized.

In the meantime, prisons that have contracted with Wellpath to provide health insurance continue to incur lawyer’s fees and other expenses related to defending lawsuits, even if Wellpath won’t recoup those costs.

And families like Jones’ are left in financial limbo.

Jones said in an interview with the Herald-Leader that her goal of suing Eastern Kentucky Correction Complex was not about money. Rather, she wanted accountability for the systems she said contributed to her brother’s death.

She remembered her brother, 31-year-old Chad Raymond, as funny, charismatic and someone who loved kids.

“No amount of money is going to bring Chad back. There is not a number for what his life was worth,” she said. “I would much rather have him back than any money. This is about accountability and raising awareness.”