Washington National Insurance Lawsuit: Rancosky, Data Breach, Complaints

Washington National Insurance Company has been at the center of two notable lawsuits: Rancosky v. Washington National Insurance Company, a 2017 Pennsylvania Supreme Court decision that made it easier for policyholders statewide to win bad faith claims against insurers, and a pending class action filed in 2024 by a customer whose personal information was exposed in a SIM-swapping cyberattack on parent company CNO Financial Group. The Rancosky case is closed; the data breach case is in its early stages in federal court in Indiana.

The Rancosky Bad Faith Case

LeAnn Rancosky held a cancer insurance policy with Washington National. After her 2003 cancer diagnosis, she qualified for a waiver of premium benefit that let her stop paying premiums while disabled. When her cancer recurred in 2006, Washington National denied coverage, saying the policy had lapsed for non-payment. She sued in Washington County, Pennsylvania.¹

A jury found in May 2013 that Washington National had breached the policy, and the parties agreed contract damages came to $31,144.50. The bad faith portion of the case was tried separately before a judge in June 2014, and Rancosky lost. The trial court held that she had to prove the insurer acted with a “dishonest purpose” or “motive of self-interest or ill-will,” and she had not.²

The Superior Court reversed in December 2015, and the Pennsylvania Supreme Court issued its decision on September 28, 2017, adopting a two-part test for bad faith claims under 42 Pa.C.S. § 8371.³ A policyholder must prove by clear and convincing evidence:

The insurer lacked a reasonable basis for denying benefits. This is an objective question; the insurer’s state of mind is not part of it.
The insurer knew of, or recklessly disregarded, its lack of a reasonable basis.¹

The court rejected the idea that a policyholder must also prove the insurer harbored ill will or acted out of self-interest. Evidence of that kind can support the second element, but it is not required. The justices reasoned that requiring proof of subjective ill will would effectively demand a smoking gun and would frustrate the legislature’s purpose in creating the bad faith remedy.⁴

Section 8371, enacted in 1990, lets courts award interest at the prime rate plus three percent, punitive damages, and attorney fees when an insurer is found to have acted in bad faith. The Rancosky court confirmed that the same two-part standard applies whether a policyholder is seeking punitive damages or other relief under the statute.⁵

United Policyholders, a consumer advocacy nonprofit, filed an amicus brief opposing any additional element. The brief argued that a higher bar would let insurers “play the float,” holding money owed to policyholders during long litigation and earning interest on it, without meaningful consequence.³ One boundary worth flagging: the Rancosky standard governs bad faith claims under Pennsylvania law. Policyholders in other states are subject to their own state’s rules.

The 2023 Data Breach Class Action

On November 28, 2023, hackers ran a SIM-swapping attack on a senior executive at CNO Financial Group, Washington National’s parent. The attackers impersonated CNO tech support to persuade the executive’s mobile carrier to transfer the phone number to a device they controlled, then used that access to bypass security and enter CNO’s systems. CNO discovered the intrusion the next day.⁶

Roughly 66,000 CNO customers were affected: about 20,360 at Washington National and about 45,842 at the Bankers Life and Casualty unit. Exposed information included names, Social Security numbers, dates of birth, and policy numbers. CNO notified state officials in Maine and elsewhere in January 2024 and mailed letters to affected individuals.⁷

In February 2024, Jenny Chute, an Illinois resident, sued Washington National in the U.S. District Court for the Southern District of Indiana. Her complaint alleges the company’s breach notification was too vague and failed to tell customers the breach dates, the root cause, the specific vulnerabilities exploited, or the steps taken to prevent future incidents. Washington National said it does not comment on pending litigation.⁶ As of the most recent available reporting, Chute was seeking class certification to represent the broader group of affected customers.⁸

Other Complaints and Regulatory Findings

Washington National has drawn consumer complaints outside these two lawsuits. Better Business Bureau records show 73 complaints over a recent three-year period, with 23 closed in the most recent 12 months. Recurring themes include denied claims and administrative delays, unexpected policy cancellations, difficulty reaching customer service, and continued payroll deductions after customers requested cancellation. Some complainants alleged agents made promises about cash value accumulation that the company later disputed. In its BBB responses, Washington National cited privacy laws as the reason it did not answer publicly in detail.⁹

A 2016 Illinois Department of Insurance market conduct examination covering October 2013 through March 2015 found no violations in complaint handling but flagged several problems in claims processing. Examiners cited the company for failing to tell policyholders they could contact the Department of Insurance when claims were denied. Error rates ranged from about 3 percent in the Medicare supplement line to nearly 88 percent in one category of individual accident and health claims. Regulators also cited the company for failing to provide notice of non-forfeiture options on lapsed policies, a violation flagged in four consecutive examinations.¹⁰

1
Post & Schell LLP. Rancosky v Washington National Insurance Co Pennsylvania Supreme Court Finally
2
Findlaw. Rancosky v Washington National Insurance Company
3
United Policyholders. Rancosky v Washington National Ins Co
4
K&L Gates. Pennsylvania Supreme Court Rules in Favor of Policyholders on Bad Faith Standard
5
Pennsylvania General Assembly. 42 Pa.C.S. § 8371 Actions on Insurance Policies
6
ThinkAdvisor. Washington National Breach Victim Says Disclosure Was Too Vague
7
Bitdefender. US Insurance Firms Sound Alarm After 66000 Individuals Impacted by SIM Swap Attack
8
ClassAction.org. Washington National Insurance Company
9
Better Business Bureau. Washington National Insurance Company Complaints
10
Illinois Department of Insurance. Market Conduct Examination of Washington National Insurance Company