UnumProvident Faces Wave Of Attacks Over Handling Of Claims

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UnumProvident Corp. is fighting off a flurry of attacks on its disability insurance claims-handling practices.

The NBC series “Dateline” and the CBS series “60 Minutes” have both aired critical reports on the company in the past few weeks. Bourhis & Wolfson, a San Francisco law firm, recently publicized a federal court order affirming a $7.7 million verdict against the company by putting out a press release calling the ruling a “huge victory for all insureds.”

The consumers in the NBC and CBS reports, and Joan Hangarter, the plaintiff in the federal case, have accused UnumProvident and some of the insurers it has acquired over the years of using quotas and other unreasonable strategies to terminate benefits for valid individual disability insurance claims.

UnumProvident denies the allegations that it has been unreasonably aggressive about contesting claims.

“Any business involves expectations of performance, and ours is no exception,” Tom Watjen, UnumProvidents chief operating officer, says. “However, to suggest that the natural stresses of our business involve pressure of any kind to close claims inappropriately is absolutely false.”

UnumProvident points out that it will pay about $3.6 billion in claims this year alone, and that only 2% of the policyholders who filed a claim with the company in 2001 were found not to be disabled.

When disputes do go to court, the courts rule in UnumProvidents favor three-quarters of the time, and the number of judgments against UnumProvident amounts to only 0.01% of the number of new claims, the company says.

UnumProvident also argues that the recent media attacks on its claims-handling practices have been the result of the activities of a handful of plaintiffs attorneys and a few disgruntled former employees.

The plaintiff in the Hangarter case, Joan Hangarter, is a chiropractor who bought an individual disability insurance policy from Paul Revere Life Insurance Company in 1989. The policy protected her against any disability that prevented her from handling her job.

Hangarter filed a claim in July 1997, contending that shoulder pain, stiffness and weakness were preventing her from caring for patients.

Paul Revere approved a claim for total disability benefits in October 1997 and began paying the claim. But in May 1999, the company terminated benefits, arguing that an independent orthopedic surgeon believed Hangarter could overcome her disability.

Hangarter sued the company in a federal trial court in San Francisco in 1999.

A six-person jury returned a unanimous verdict in February awarding Hangarter $7.7 million in damages, including $5 million in punitive damages, $1.5 million in past and future benefits, $400,000 for emotional distress and $750,000 in attorneys fees

“There was testimony from experts and others that Defendants used a biased medical examiner, failed to advise its insured of covered benefits, targeted claims like hers for termination, failed to settle a claim when liability was clear, and forced its insured to litigate to obtain benefits,” U.S. Magistrate Judge James Larson wrote in an order upholding the verdict. “Based on the evidence presented at trial, this court concludes that Defendants have violated the Unfair Insurance Practices Act.”

But Larson rejected the plaintiffs requests that he increase the amount of the award and start an investigation of UnumProvidents business practices.

UnumProvident notes that the judge refused to increase the jury award.

“The company strongly disagrees with the courts finding and will aggressively continue the appeal process, filing a notice as soon as the judgment is final,” UnumProvident says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 25, 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.