Disability Insurer Loses Court Decision In New York
A New York state court has upheld a jury verdict against First Unum Life Insurance Company that awards $2.8 million in past and future disability benefits and legal costs to Dr. Peggy Wurm, a dentist injured in 1988.
The attorneys fees and other legal costs could add up to $1.2 million, according to Michael Hiller, Wurms lawyer.
The original jury agreed with the plaintiff that First Unum had terminated her benefits in “bad faith.” But it rejected allegations of deceptive trade practices.
Earlier New York insurance cases suggested awards could include attorneys fees and lump-sum future benefits, but Wurm may be the first disability claimant in the state who has received such an award, according to Hiller.
If the award survives appeals, insurers “are going to have to change their practices,” Hiller says.
Up till now, Hiller says, the risk of terminating disability benefits appeared to be lower, because insurers worried mainly about having to pay past benefits in lump-sum form. Insurers assumed they could pay any future benefits according to the original, annuitized schedule.
Representatives for First Unum, a unit of UnumProvident Corp., Chattanooga, Tenn., were not immediately available for comment.
First Unum argued in court documents that the jury had no right to award attorneys fees or lump-sum future benefits, but New York Supreme Court Judge Emily Goodman ruled the jury had the authority to award attorneys fees if it believed the insurer had acted in “bad faith,” and lump-sum future benefits if it believed the insurer had acted as if it were “repudiating” the policy.
Testimony that First Unum had stopped sending Wurm premium statements for a year and placed her under surveillance 15 times are examples of evidence that could support the jury award, Goodman writes in an opinion on the case.
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 7, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.