Oct, 2007 – A California jury’s $31.7 million verdict against UnumProvident, the nation’s largest disability insurer, is just one of a number of legal problems the company faces. More than 2,500 policyholders have sued the company, accusing it of fraud and breach of contract. There is at least one class-action suit pending and regulators in two states are conducting inquiries.
The Case of Dr. Randall Chapman
On Jan. 24, a jury in Marin County returned a $31.7 million damage verdict against UnumProvident after a three-month trial. The jury found in favor of Dr. Randall Chapman, a Novato, California eye surgeon. He sued in 2001 after UnumProvident refused to pay the $11,600 monthly benefit called for in a long-term disability policy Chapman had purchased during the 1980s.
Chapman said he had developed a phobia that caused him to shake, making him unable to perform eye surgery. The company’s doctors disagreed with the diagnosis. They terminated his benefits in September 2000 after making payments for only three months.
Many of the policy holders suing UnumProvident are doctors, lawyers, and small business owners who, like Chapman, wanted to protect themselves and their families if they became disabled and unable to work. Many bought policies that could not be canceled with premiums that could not be raised.
Last year a federal judge in San Francisco upheld a jury’s $7.67 million verdict against the company in a case filed by former Berkeley chiropractor Joan Hangarter. U.S. Magistrate James Larson upheld the verdict. Judge Larson said the company had engaged in a wide range of questionable activity to avoid paying legitimate claims and ordered it to “obey the law.”
In 2001, a federal court jury in Florida ruled in favor of John Tedesco. Tedesco is a former ophthalmologist who said the company denied his disability claim. The insurance company denied him even though he had been diagnosed with Parkinson’s disease and a herniated disc. Tedesco received $36.7 million from that case.
A class action suit filed in New York last year charges that UnumProvident operates “disability denial factories,” wrongly denying claims from its policy holders. The class action alleges that UnumProvident “has illegally victimized, and continues to victimize, many thousands of disabled Americans.” It seeks unspecified damages and asks the courts to order the company to re-evaluate all of the claims it has denied in recent years.
State insurance regulators in Tennessee and Georgia say they are presently reviewing policy holder complaints against the company.
The company issued a statement saying it insures 25 million people and has a complaint rate below the national average. It says it denied “only 1.5 percent” of 421,000 disability claims filed last year.
In 1999, the merger of The Provident Companies, based in Chattanooga, Tenn., and the Unum Corp. in Portland, Maine created UnumProvident as it exists today. It has about 5,700 employees in the two cities.