Settlement with UnumProvident could have broad ramifications for the industry
California Insurance Commissioner John Garamendi hopes to use his new settlement with UnumProvident Corp. to rewrite the rules governing all insurers that sell long-term disability insurance in California.
The California insurance department also has begun the process of establishing new policy forms and has requested that insurers provide regulators with their current disability policies.
The department said it will hold a meeting in San Francisco on Nov. 17 to discuss disability coverage issues with insurance companies.
“Our goal is that at the end of the process, provisions that are determined to be lawful and appropriate to be in existing policies that are being offered for sale in California will henceforth be approved in new policy forms filed with the Department, and provisions that are determined not to be lawful and appropriate will no longer be offered for sale in California,” the department said in a letter to insurers.
In November 2004, most state insurance regulators resolved complaints about LTD claims-handling practices at UnumProvident Corp., Chattanooga, Tenn., by signing on to a multistate settlement that was implemented in January.
California and Montana were the 2 states that opted out.
Montana is still talking to UnumProvident, but the company last week announced that it settled with California by agreeing to pay an $8 million fine and set aside $75 million to cover the cost of reassessing and, in some cases, paying old claims.
“We are pleased, after more than 2 years of discussions with California, to have reached a settlement that eliminates the regulatory uncertainty around claims handling in this important market,” says UnumProvident President Thomas Watjen in a statement.
The deal should help UnumProvident move beyond questions about past claims-handling practices, Watjen says.
The older, multistate deal required UnumProvident to pay $15 million in fines and reopen 215,000 cases involving claims that were terminated or denied between January 2000 and November 2004.
The deal with California provides a longer time period for claims reassessments.
Under the settlement, UnumProvident will send reassessment notices to about 26,000 California individuals whose claims were denied or terminated between Jan. 1, 1997, and Sept. 30, 2005.
If the California reassessment process upholds the original claim denial or termination, the claimant can ask for an independent review. The results of the independent review will not be binding on UnumProvident.
In addition, UnumProvident has agreed to extend the reassessment period for claimants in states other than California. UnumProvident now will send notices to claimants in the other states for claims denied or terminated in calendar years 1997 through 1999.