California fines big insurer $8 million|
UnumProvident was accused of trying to avoid disability payouts
Victoria Colliver, Staff Writer
San Francisco Chronicle
October 3, 2005
The state Department of Insurance issued an $8 million fine -- biggest in the agency's history -- against the nation's largest disability insurer as part of a landmark settlement reached Sunday.
UnumProvident Corp., based in Chattanooga, Tenn., misinterpreted job classifications, improperly overruled doctors' opinions and knowingly used incorrect insurance definitions to avoid paying benefits, state regulators said.
Insurance Commissioner John Garamendi called Unum an "outlaw" company and said the insurer harmed consumers by denying claims.
"This company engaged in a strategy to increase its bottom line at the expense of its customers," he said.
Unum spokesman Jim Sabourin said late Sunday that the company agreed to the settlement in order to eliminate the concerns raised by Garamendi's office.
"We certainly don't accept all of the allegations," he said. "We believe by settling we can remove this cloud of uncertainty around our claims practices and move forward with an eye toward serving our customers in California."
The corporation, which operates Unum, Provident and Paul Revere life insurance companies, has been for many years the subject of heavy criticism and several lawsuits across the country.
Insurance commissioners from 48 states agreed to a settlement last year against Unum. It required Unum to reopen 215,000 cases and fined the company $15 million, but found no wrongdoing on the company's part.
Garamendi rejected the multi-state settlement, saying it didn't go far enough to protect California consumers because it put Unum in charge of reassessing claims without third-party review. Montana, the only other state to reject the agreement, has yet to reach a settlement.
The California agreement includes a third-party review by insurance experts, limits the discretion insurers have to interpret policy language and establishes a model policy that Unum and other disability insurers will be required to adhere to in California.
The commission's investigation covers the period from Jan. 1, 2000, through June 2003, a span that Sabourin said "does not accurately reflect our company or our claims handling processes of today."
Sabourin said Unum has a new chief executive and has initiated changes designed to improve the quality of claims decisions.
Ray Bourhis, a San Francisco attorney who has won several multimillion dollar lawsuits against Unum, commended Garamendi for refusing to sign the multi-state agreement.
Bourhis said the commission's settlement resolves his main objections with the multi-state agreement, which he called a sham. He was pleased that the California agreement includes specific findings of wrongdoing against Unum, allows consumers to maintain their right to sue and does not permit the company to reassess its own claims.
"That's like asking the fox (guarding the henhouse) what's for dinner," he said.
Carol Tatum, former manager in San Francisco's Department of Public Works, was pleased to hear about the settlement.
Tatum, who suffered from an illness that prevented her from doing her job, filed a disability claim in November 2002 that was supported by two doctors. She said the company misinterpreted records to deny her claim.
"They attempted to prove I could work," she said. "They contacted the city of San Jose and compared my job with something that was totally different from what I did and they also denied me on that basis."
Tatum, who has since retired, settled a claim against Unum in May for an
amount she declined to reveal. She said she felt traumatized by being treated
like a nonentity by the company. "It furthers the debilitation and makes you
feel helpless," she said.