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.[@@]
Most state insurance regulators resolved complaints about LTD claims-handling practices at UnumProvident Corp., Chattanooga, Tenn., by signing on to an earlier, multistate settlement.
California and Montana were the 2 states that opted out.
Montana is still talking to UnumProvident, but UnumProvident today announced that it has 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.
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“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,” UnumProvident President Thomas Watjen says 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 new deal 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.
Although the multistate agreement gave 1997-1999 claimants the right to ask for a reassessment of their claims, UnumProvident was not required to send those claimants notices.
For insurers, the most important aspect of the California settlement may be provisions that will require UnumProvident to change many of the definitions it uses in LTD contracts.