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Disability cases - Unum-Provident's Own Occupation Disability Policies

DISABILITY CASES
Lee S. Harris

The following is a discussion of some issues regarding INDIVIDUAL and ERISA DISABILITY insurance cases.

UNUM-PROVIDENT'S OWN OCCUPATION DISABILITY POLICIES

There have been a large number of own occupation disability insurance bad faith lawsuits between UNUM-PROVIDENT and its policy holders. Each case includes a combination of facts unique to the individual policy holder as well as broader issues involving company policy. Many of the suits filed include allegations of a corporate program to boost profits at the expense of a fair evaluation of policy holder claims.

The suits allege that UNUM aggressively marketed and sold insurance policies known as "own occupation" individual disability insurance policies. These polices were designed to be sold to highly compensated professionals such as doctors, senior executives and lawyers. Agents promoted these polices as income protection in the event the policy holder was unable to do the work in their own occupation. If a doctor could no longer practice as a heart surgeon but could do general office work they would still be considered disabled from their "own occupation". In addition to insuring for specific occupations, these policies were non-cancelable and premiums could not be raised. The allegations state that due to competition in the market, UNUM and its predecessor companies reduced underwriting standards on, and under priced, this block of business. These policies became a significant problem for UNUM. In a 10-K report an UNUM predecessor company (Provident) described how it had underestimated its exposure on "own occupation" policies. It is also explained that its assumptions regarding interest rates had been incorrect and that it could no longer obtain high investment returns on the premiums it collected for these policies.

Many claims alleged deliberate plans to increase profits by reducing claim payments to solve this problem.

Some of the past practices investigated include claims that:

  • It targeted for termination “high end” policyholders from the key growth states of Florida and California.
  • It instructed field adjusters that recommendations and/or conclusions should not be put in written reports in direct violation of California law including section 2695.3 of the California Insurance Regulations. 
  • It instructed adjusters to make sure that claims files were documented in such a way as to prove whatever the company was saying, and to eliminate anything in the claims files that could be used against the company if the file wound up in court.  This is also a direct violation of California law.
  • It directed adjusters to shred sensitive papers concerning claims investigations and to destroy drafts, reminder notes, worksheets and personal memoranda, also in violation of California law. 
  • It established weekly “roundtable” meetings to search for new ways to target, terminate and deny claims.  Each adjuster was required to maintain a Top 10 List, a list of claimants targeted for “intensive effort” with the “goal” of terminating the claim.
  • It targeted cases to be reviewed, not on the basis of valid factual criteria, but on the basis of amount of benefits owed, specific occupations, specific states and other irrelevant and discriminatory criteria.
  • It deliberately kept no notes on those insured’s whose claims were sent to the “roundtable.”
  • It set goals for the number of terminations in the abstract without having reviewed the claim files individually.
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