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UNUM Life Insurance Company Fined 15 Million Dollars and Ordered to Reconsider Cases

Written by AMLO.

Press Release by Mehr Fairbanks Trial Lawyers, P.S.C.

The Insurance Commissioners for the states of Tennessee, Massachusetts, and Maine, along with the insurance regulators of each of the states including District of Columbia and American Samoa began an investigation called a Multi-State Targeted Market Conduct Exam of Unum Life Insurance Company of America (UNUM).

The purpose of this targeted exam was to investigate all fifty (50) states of the claims handling practices of UNUM to see whether it reflected "systemic," unfair claim settlement practices. The other forty seven (47) state insurance commissioners joined in this examination. The lead commissioners raise the following regulatory concerns:

1. Excessive reliance of in-house medical professionals:

The regulators found that in many such instances, UNUM discounted or disputed the opinions of claimants' attending physicians, but chose not to invoke the requirement that the claimant attend an independent medical examination.

2. Unfair construction of attending physician or IME report:

Regulators made it clear that UNUM's excessive reliance upon in-house medical professionals also suggests UNUM's employment of such professionals often resulted in a company-biased and the inappropriate interpretation or construction of medical reports, to the detriment of claimants. In other instances in which the companies had obtained an independent medical exam, the reports supplied by the independent medical exam providers were narrowly or even incorrectly construed. The bias of the in-house medical professionals was also reflected in attempts to focus upon any apparent inconsistencies in the medical records or other information supplied by the claimants, rather than attempt to derive a thorough understanding of the claimant's medical condition.

3. Failure to evaluate the fatality of the claimant's medical condition:

In some instances, UNUM's failure to properly evaluate such "co-morbid" conditions appeared to stem from an excessively narrow-focus upon the specific medical condition for which benefits had originally been sought by the claimant.

4. Inappropriate burden placed on claimants to justify eligibility for benefits:

In general, the examination team found evidence of UNUM's effort to "shift" the burden of responsibility to the claimant to provide medical or other records in support of the claim, rather than obtain such records through the use of authorizations executed by the claimant. The examination team identified a significant number of instance in which benefits were denied by the companies on the grounds that the claimant had failed to provide "objective evidence " of a disabling condition.

On November 18, 2004, UNUMProvident, along with its affiliates, reached an agreement which provides a penalty of $15,000,000.00 and provides for the assessment of substantial additional fines or other significant regulatory actions should UNUM and its affiliates fail to comply with the terms of the Agreement.

5. Terms of the Agreement:

The most significant terms of the Agreement are as follows:

a. Claim Reassessment Process. UNUM and its affiliates will form a new Claim Reassessment Unit located in Worchester, Massachusetts and Portland, Maine for the purposes of providing a " de novo " review of claims previously denied or terminated. With notice of this reassessment process will be provided to eligible claimants representing approximately 215,000 claims. These individual disability income or long-term disability insurance claims were denied on or after January 1, 2000.

b. UNUM and its affiliates will implement changes with claims organization and claim procedures with the following objectives.

  • The engagement of experienced claim personnel at the earliest possible state of claim reviews;
  • Increased emphasis upon claims staff accountability for compliance with the terms of insurance policies and applicable law;
  • Increased involvement of higher level claim management staff at each claim denial or claim termination decision.
  • Creation of a separate compliance/accountability function at the claim denial and claim termination level;
  • Assurance that co-morbid conditions are properly evaluated at every level of claim review;
  • Increase utilization of IMEs;
  • Additional compliance training for all claims staff with emphasis on the results of the multi-state exam, the plan, and the NAIC unfair claim settlement practices; and
  • Additional training for group policyholders human resources personnel so as to better facilitate the process for LTD claims.

c. Changes in corporate governance: The board of directors of the parent company is expanded to include members with regulatory experience and the companies will also create a regulatory compliance unit.

d. There will be quarterly meetings between the lead-regulators, (Tennessee, Maine, and Massachusetts) insurance commissioners/superintendents and the companies.

UNUMProvident anticipates recording a loss of $127,000,000.00 before tax on obtaining consent of two-thirds of the forty seven (47) other states and two jurisdictions.

Along with the affiliated company Provident Life and Accident Insurance Company, Provident Life and Casualty Insurance Company, The Paul Revere Life Insurance Company, all of which are subsidiaries of UNUMProvident Provident Corporation.