Disability Insurer Loses Court Decision In New York

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.

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