American Specialty Health Inc. has filed a suit against Chubb Corp., the company that issued its subsidiaries’ managed care organization errors and omissions liability coverage.[@@]

American Specialty, San Diego, a company that has organized an alternative health insurance business, says in the suit, filed in the U.S. District Court in San Diego, that Chubb, Warren, N.J., has failed to pay claims related to a dispute with the California Chiropractic Association, Sacramento, Calif.

American Specialty has accused Chubb of false advertising and failing to act in good faith in the claim-handling process.

A Chubb spokesman declined to comment on the suit.

American Specialty says Chubb advertised on its Web site that a policy American Specialty bought for its subsidiaries included “broad coverage for managed care activities” and “defense expense coverage.”

The chiropractic association sued in state court in San Diego in 2001 over allegations that American Specialty subsidiaries had failed to live up to the terms of its provider contract. A state court dismissed 15 of the 18 charges in December 2004 but let the chiropractic association press ahead with 3 charges contending that American Specialty subsidiaries refused compensation for medically necessary chiropractic services.

In April 2003, Chubb refused to help American Specialty pay for its defense or to investigate American Specialty’s claims in a proper fashion, American Specialty says.

In April 2004 and March 2005, Chubb failed to respond to letters from American Specialty, American Specialty says. American Specialty says Chubb violated California fair claims settlement standards by failing to respond to the letters within 15 days.