UNUM Disability Claim Denials Attorney

UNUM Disability Claim Denials Attorney
At Eric Buchanan and Associates, we have helped many clients who have been denied benefits by The Unum Group, (formerly UnumProvident) and its family of insurance companies, including Provident, Unum, Paul Revere, and other affiliated companies.  As an UNUM Disability Claim Denials Attorney, Eric Buchanan, and his team, has handled many cases against the Unum companies, we have learned a lot about Unum’s history of denying disability benefits to their customers.  Below is an excerpt from a brief we recently wrote in federal court on behalf of a client, explaining to the court some of the history of Unum:

Unum’s History

Unum has an extensive and well-documented—some might say sordid—history of denying disability claims in order to save money.  For example, in Hangarter v. The Paul Revere Life Insurance Company, 236 F. Supp. 2d 1069 (N.D. Cal. 2002)—an insurance bad faith case involving the same group of companies as in this case—the plaintiff’s expert testified that Paul Revere had a time line for terminating claims. . . . The kinds of resolutions on the claims time line included: “return to work, pay enclosed, denial, termination, rescission, settlement, litigation, ongoing claim approval or other referrals.” Five out of eight specific goals were negative for claimants. . . .

Conclusion re bad faith— The jury heard ample evidence from multiple sources that Defendants set out to target claims such as Plaintiff’s with termination the goal, and that Defendants evaluated her claim with the purpose of terminating her benefits.

236 F. Supp. 2d at p. 1083 (internal transcript citations omitted).  The court also concluded that “Defendants had a bias against claims like [plaintiff’s].  They planned to save money by terminating claims like hers.”  (Id. at p.1084.)  Hangarter resulted in a finding of bad faith and a $5 million punitive damages award.

Four years after the jury verdict in Hangarter, insurance commissioners nationwide investigated Unum’s claims handling practices.  (See Complaint, ¶¶48-50.)  Unum was fined millions of dollars—$8 million in California alone—and agreed to reopen hundreds of thousands of disability claims, and agreed to change some of its claims handling practices.  (See Exhibit 17.)  Plaintiff alleges that Unum continues to engage in the same unlawful claims handling practices.

Later, in Merrick v. Paul Revere Life Ins. Co., 500 F.3d 1007 (9th Cir. 2007), the Ninth Circuit upheld another bad faith jury verdict against Unum for, inter alia, “biased claims investigation and misrepresentation of policy terms,” and affirmed that Unum’s conduct warranted an award of punitive damages.  Merrick, 500 F.3d at 1014.  The information sought by Plaintiff herein goes directly to the issue of the Unum’s biases, and both Merrick and Hangarter, supra, support discovery of the information and documents requested by Plaintiff.

Evidence from Merrick establishes the existence of employee compensation and incentives that link Unum’s prior and current conduct.  In Merrick the evidence showed that Defendants’ employees’ bonuses are based on several factors, including overall corporate success, and employees are rewarded based on that performance.  For example, the evidence established that to further pressure and give incentive to claims personnel to find reasons to terminate claims, stock boards were set up in the claims units and updated throughout the day so that claim personnel could see how their activities were contributing to the UnumProvident’s financial results.

594 F. Supp. 2d at 1171 (emphasis added).  The court also stated that:

encouraging claim handling employees to evaluate their performance based on their contribution to corporate stock price further supports the conclusion that Defendants were turning their claims handling operation into a profit center. This, despite the undisputed evidence, that it would be inappropriate to use the claims operation in such a manner. . . .

Id. p. 1173, n.7.  Furthermore,

the evidence also established that the Defendants set targets and goals beyond their actuarial expectations for claim closures based on these factors. The evidence established that Defendants went looking for ways and claims to close in order to meet their financial goals.

Id. at n.1. In affirming its award of punitive damages the Merrick court found, inter alia, that the evidence against this group of companies “clearly, convincingly and overwhelmingly,” supports a finding those companies “were engaged in a scheme to deny claims of their disabled policyholders.Id. at 1170 (emphasis added).   Finally, the court’s 2008 ruling tied such unfair and unlawful claims handling conduct by these companies as far back as 1994:

Not only did the evidence at trial establish the existence of a corporate scheme to augment profits without regard to the rights of their disabled insureds, it established that, in fact, Defendants profited immensely from their misconduct.  The evidence related to this issue extends from 1994 to the present.

Id. at p. 1174.

The Merrick court also found that the Defendants “set targets and goals for claim terminations to obtain financial gain and without respect to claim merit.”  Id. at 1171.  Of course, the Defendants denied the existence of such goals, as they have in the past, but the Merrick court found “the evidence at trial [of the existence of such targets and goals] was overwhelming.” Id.  The evidence established that these targets and goals were communicated to claim handling employees by such means as e-mails, and weekly staff meetings.

The court cited samples of some of the emails in the footnotes of its decision, including at 594 F. Supp. 2d n.3, n.4, n.5, and n.6.  For example, one, e-mail dated June 10, 2002 6:28 AM, stated:

“Beingness” is the state in which you are ever present in whatever activity you are engaged in; IE absorbed in what you are currently doing. That is better than being recoveryless….

594 F. Supp. 2d n.3.[1]  Another email was entitled “YIPPEEEEEE!!!.” It states in part:

We had yet another excellent week….No Reopens…. Month to date* * *

We are already at $608,000 in recoveries well ahead of schedule. We are still lagging with projections so we need to add more to the projection list.

Also, we don’t have any rtw success stories on the board yet. Overall, we are cranking…. Thank you!!!!!

594 F. Supp. 2d n.4.
  Another email, which the court characterized as “[a]n e-mail which reflects the pressure being put on claim personnel to find claims to close” states:


As luck would have it, we are running out of it….We are projected to have 1,800,000.00 in recoveries this month but are coming up short at 1,772,000.00 … this includes the following that I would like updates on today:* * *

Are there any other claims that are possible recoveries this week? ? ? ?

594 F. Supp. 2d n.4.

Unum’s Employees Receive Financial Rewards for Supporting Claim Denials

Unum has created a compensation program that supports its company-wide goal of denying legitimate claims to save money.  Unum’s claims handlers—the in-house personnel that assist with the handling of disability claims—are among those who are eligible for bonuses under a program called the Management Incentive Compensation Plan (MICP).  (Exhibit 16, pp. 226-287.)  These bonuses are based on a formula that takes into account both the company’s profitability (pp. 230-232), and the employees’ individual performance (pp. 233-236).  Under the MICP, individual “performance” included an evaluation of how much money they helped the company save by giving opinions that would help deny claims.  Id. Although the Defendants have provided Plaintiff with a copy of the basic plan documents covering both the MICP and the Stock Incentive Plan, they have refused to provide any information about the amounts of these bonuses, how these bonuses are calculated by taking into account the performance of claims personnel, and whether any of the claims personnel involved in this claim actually received any of these bonuses.

Former Unum medical director Dr. Patrick Fergal McSharry was deposed regarding the financial incentives Unum gave its staff to deny legitimate claims.  Dr. McSharry’s engagement letter from Unum explains that, as an Associate Medical Director, Dr. McSharry was “eligible to participate in the Management Incentive Compensation Plan (MICP) at a target level of 25% of your base salary earnings.  The MICP is based on the achievement of certain corporate earnings thresholds and the formula includes weights for both corporate and individual goals.”  (Exhibit 16 p. 22-24.)  Dr. McSharry explained that bonuses under the MICP could be as high as an additional 25% of an employee’s base salary. (Exhibit 16, p 3, depo p. 88.)  Since its inception, it is Plaintiff’s understanding that the MICP has since been broadened to include some non-management claims-handling employees, as well.

Dr. McSharry testified that the cases were assigned to different teams or offices. (Exhibit 16, p. 5, depo p. 143.)  The head of these teams encouraged the employees under them to make decisions in favor of the company.  The department heads “were responsible for the company making the profit, the profitability.  They were – you know, there’s two ways that an insurance company makes money.  One is from investments that they make on the claimant’s policies, and the second area is the claims management.  That’s the two areas, and these impairment heads were very responsible for getting results from claims management.” (Id.)

Unum’s CEO, Thomas Watjen, elaborated on the concept of how Unum makes money in a quarterly corporate earnings conference call with major investors.  (Exhibit X).  Answering a question about why the company had not been as profitable as investors expected, Mr. Watjen explained:

I don’t think it is about under pricing [of insurance policy premiums].  We have done a lot of work to get our business properly priced.  As you know, we put a lot of renewals into the marketplace.  We have terminated business that was unprofitable.  It is not about a book of business that is under priced.  It is about – it is not about that issue.  It is not about higher levels of incidence [i.e., more disability claims], and it is not about severity [i.e., disability claims that cost more].  It is really about the claim performance piece.

I think when people think about what is embedded in the projections and our outlook and things like that, I would say that is a big piece of it.  It is really very much on the back of claim recoveries, not around pricing, not around severity, not around (indiscernible) at this particular point.

Id. at 4 (emphasis added).  This is Unum’s CEO, explaining to its most important investors that the primary way this company makes money is “on the back of claim recoveries,” i.e., by denying more claims.

Reserve and Other Financial Information Was An Integral Component of Unum’s Claims Evaluation, Including Plaintiff’s Claim, and is therefore Discoverable

As to reserves, Dr. McSharry testified that employees kept track of the amount of money in reserves various claims handlers could “free-up” by denying cases.  Specifically, he obtained a spreadsheet showing the claim’s handler’s name, the claim number and the amount of reserve that would be released by closing the claim. (Exhibit 16, pp.6-7, depo pp. 150-157.) He explained that the employees who closed the most in claims were considered the “great performers.” (Exhibit 16 p.8, depo p. 160).  Plaintiff’s Document Production Request Nos. 31-41 seek the spreadsheets, reports and other metrics used by Unum when it denied Plaintiff’s claim.  Document Production Request No. 19 seeks related information concerning loss reserves.

A former Unum claims handler, Donna Wright, provided a sworn statement on August 21, 2003. (Exhibit 16, pp. 82 et seq.)  She testified that she was first an employee of Provident and then of UnumProvident after the merger, and handled Paul Revere claims while employed by UnumProvident.   (Exhibit 16, p. 84).  Ms. Wright testified that the amount of the reserves for each claim was on the computer system and “they were always there.”   (Exhibit 16, p. 104.)

Another Unum memorandum, dated March 30, 1995, regarding “Psychiatric claims – summary for first quarter 1995 closures” shows the total reserves, less costs and “savings” by month for claims that were closed in the psychiatric unit.  (Exhibit 16, p. 170.)  The second page shows all the closures for the month of March, by the reserves, costs, savings and status.  This is the same category of information Plaintiff seeks in his discovery requests.

Unum’s Claims Handlers were Pressured to Terminate Claims Based on Financial Goals Handed Down By Their Superiors

On the November 17, 2002 CBS’ 60 Minutes broadcast, former Unum employees spoke publicly. (Exhibit 16, pp. 115-120.)   Diane McGinnis had worked as a claims handler for three years.  She explained that claims handlers were given monthly goals to close a certain amount of claims.  She explained, “at the end of the month, the projections would come down from the directors or above, who would give a number as to the amount of money we would have to come up with at the end of the month in closures.” (Id. at p. 116.)  She explained that the policy was not based on a projection of a certain number of cases that should be closed based on the evidence of disability, rather “I don’t think it was about whether they deserved to be closed.  They had to be closed.  They needed to make these projections.”  (Id. at p. 117.)

Another former Unum claims handler, Angela Brackett, spoke on 60 Minutes.   She  stated that “about the middle of each month, they’d let us know if we were on track to meet our dollar amount for the month, and if we wouldn’t, they would really start pushing us to either find more or to get the one that we thought we could get closed.”  (Id.)

This further establishes that Plaintiff’s requests for reserve information, as well as other financial documents and communications between employees discussing terms relevant to the financial performance of the company are relevant and or are reasonably calculated to lead to the discovery of admissible evidence in this action.

Contact Eric Buchanan’s Disability Team Today

Our UNUM Disability Claim Denials Attorney and his team regularly fight for people just like you.  We understand the rules, how to identify bad faith practices, how to best present a denial defense, and how to fight for your rights in court.

We are a dedicated team of UNUM claim denial attorneys and will be happy to discuss any of these issues with you. For more information and assistance in collecting the full benefits from your insurance coverage, contact us today.

[1] A “recovery” appears to be any claim closure, although it is not clear whether the term comes from the “recovery” of the claimant from his medical disability, or from “recovering” the reserves set aside for that claim into the company’s general account.  It appears, though, that the term applied to all claim closures, not only those in which the claimant actually recovered sufficiently to return to work.