Case Story: Our Client v. Unum Life Insurance Company of America

We brought this action seeking judicial review of Unum’s termination of our client’s long term disability benefits. In connection with this claim, we sought various pieces of discovery to prove Unum’s improper policies and procedures through which it encouraged the termination of benefits. Id. This court rendered this opinion before its opinion in Myers v. Prudential Insurance Co. of America in which the court agreed with us that no initial showing of improper claims handling is necessary. 581 F.Supp.2d 904 (E.D. Tenn. 2008).  Under the court’s precedent prior to Myers, no case existed in the Sixth Circuit addressing when additional discovery outside of the administrative record is appropriate.

This court considered the policy rationales behind the two competing interests in deciding whether to grant our discovery requests. On the one hand, restricting review to the administrative record maintains ERISA’s goal of resolving benefit disputes expeditiously and inexpensively. On the other hand, ERISA’s purpose is to protect employees with respect to their benefits. Id. The court agreed with our position that conflict of interest discovery should be allowed and stated:

[A] rule requiring courts to ignore evidence of serious procedural irregularities solely because they are not apparent on the face of the record seems extreme and would unduly tie the courts’ hands in conducting its duties under ERISA. Furthermore, it would seriously undermine the public’s confidence in the Court’s fairness when reviewing actions filed under ERISA.” This court considered whether we had made an initial showing sufficient to justify granting our discovery request.

Id. at 931–32.

Given this reasoning, the court ruled that when a claimant “1) identifies specific procedural challenges concerning a fiduciary’s decision to deny or terminate ERISA benefits, and 2) makes an initial showing to the court that he has a reasonable basis to make such procedural challenges, then good cause exists to permit the plaintiff to conduct appropriate discovery.” Id. at 933. The scope of discovery is limited to the specific procedural defects alleged. Id.

We raised “serious and specific procedural challenges” to Unum’s claims handling that indicated a possible bad-faith claims management. Id. We brought forward former employees of Unum to testify to Unum’s practices encouraging employees to close claims based on current profit levels. Id. In fact, one of these employees testified to a bonus plan that incentivized boosting company profit by giving the very employees that review claims a percentage-stake in the profits. Id. at 933–34. To make matters worse, another employee testified that he destroyed notes and certain files so that Unum could more easily defend its decision to deny benefits. Id. at 934.

While the court did not opine on the credibility of our evidence at this stage, it did agree that we had shown that we were not merely seeking a fishing expedition with our discovery request. Id. at 936. We made a sufficient threshold showing that Unum’s own financial bottom line may have influenced its decision to terminate our client’s benefits, and this was in fact likely, given our threshold showing that Unum had “specific policies, procedures, and practices in place to promote its best interests at the expense of the claimants.” Id.

Given this finding, the court held that there was just cause to grant our discovery request. Id. With this, we explored whether Unum acted with a bias and conflict of interest in denying our client due process with regards to their claim.

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