NU Online News Service, Jan. 4, 12:05 p.m.
A state trial court in New York City has upheld a jury verdict against First Unum Life Insurance Company that awards legal costs as well as $2.8 million in past and future benefits to a dentist.
The attorney’s fees and other legal costs could add up to $1.2 million, according to Michael Hiller, a New York lawyer who represents the dentist, Dr. Peggy Wurm.
Damages and legal costs together could amount to $4 million, Hiller says.
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Wurm, who was injured in a horseback riding accident in 1988, has accused First Unum of terminating her benefits in 1994 without good cause.
First Unum will definitely appeal the Wurm ruling, according to Chris Collins, deputy general counsel at UnumProvident Corp., Chattanooga, Tenn., First Unum’s parent company.
“This ruling is just so contrary to the law,” Collins says. “It can’t stand.”
Collins says he worries media coverage in publications such as National Underwriter could give the trial court ruling temporary influence that it ought not to have.
If the ruling survives appeals and becomes a precedent, it could increase the financial risks insurers face when handling disability benefits cases in New York state, Hiller says.
Earlier New York state cases have suggested that an insured could collect attorney’s fees and a large, one-time payment to cover future benefits under certain strict conditions, but Wurm may be the first disability claimant in the state who has received an award that actually includes attorney’s fees and a lump-sum future benefits payment, Hiller says.
Up till now, Hiller says, insurers in New York state have operated under the assumption that the worst outcome of losing a disability benefits dispute would be the need to pay past benefits in the form of a large, one-time cash payment, and future benefits in the form of a stream payments complying with the original benefits payment schedule.
If insureds have an easier time collecting attorney’s fees and lump-sum future benefits payments, losing a claims dispute with an insured could lead to a bigger immediate outlay of cash, Hiller says.
The plaintiff in the disability case, Peggy Wurm v. Commercial Insurance Company of Newark et al., bought a long-term disability policy in July 1988 from a company that was eventually acquired by First Unum. The policy covered Wurm against disabilities that would prevent her from returning to her own occupation, according to court documents.
Wurm says she was injured in horseback riding accident in November 1988. She collected disability benefits until 1994, when First Unum cut off payments.