A federal magistrate in a California disability case has ruled that lawyers can seek evidence, as part of the discovery process, as to a group disability insurer’s potential conflict of interest. The magistrate agreed with the view that the US Supreme Court’s decision in Glenn v. Metlife last year permits inquiry into a potential history of bias and whether an insurer has taken steps to wall off claims personnel from insurer’s financial personnel.

Evan Schwartz and Michail Hack of Quadrino Schwartz published an article in the wake of the Glenn v. Metlife decision arguing that the Supreme Court’s analysis authorized such investigations of insurer claims practices in ERISA cases. Click here for a description of the Schwartz and Hack Article>.

Many claimants have heard or read about the scenario: your disability insurer calls you on the phone, sends out a field agent, or sends a letter proposing a lump sum payment to “buy out” either the future of your disability claim, a disputed portion of unpaid past benefits, or both. In many instances a buy out can be a desirable outcome, but the claimant needs to understand the ramifications, have confidence that the proposed deal makes sense, and that it is the best deal available. Using experienced legal counsel can be an invaluable tool in assessing whether crafting a buyout deal is the right thing to do and in cutting the best deal possible.

One of the first considerations for a claimant already receiving benefits is to determine the likelihood of the claim being terminated if the buyout proposal is rejected. Some insurers use the fear of a claim termination as a tactic to convince the claimant to accept a lower than fair amount. If the claim may truly be on the verge of a termination, however, there needs to be an assessment of the potential costs of a lawsuit and the likelihood of winning or losing the lawsuit. Those factors are essential in arriving at a sensible buyout figure. There are tried and true methodologies we use at this stage, in order to provide our clients with the best chance of avoiding a lawsuit and securing their financial future. For more information, visit our website at: http://www.disabilityinsurancelawyers.com/practice_areas/more/negotiating-disability-settlements.

Another important piece of the puzzle is to have a realistic assessment of morbidity and mortality in order to make appropriate adjustments to the total future expected disability payments. Many claimants have missed the opportunity to receive a favorable lump sum by failing to have such an assessment. In addition, the claimant needs a thorough understanding of the “present value” concept in order to calculate the true value of the investment power of a current lump sum of future benefits.

It is also critical to know thine enemy: is the insurer testing the claimant’s mettle or really looking to buy out the claim? Different insurers use different techniques and thus having knowledge of the prior tactics of the insurer is invaluable.

When it comes to a buyout during litigation, the cost and risk factors for further litigation and the potential outcomes are much more prominent factors than in the claim context. Knowing how the litigation will play out under ERISA, for example, is critical, especially since there are land mines at every turn that can cause a claimant’s case to be dismissed entirely.

In summary, buyout strategies are complex and critical, and disability attorneys with years of experience can navigate the claimant to a successful outcome.

A federal appeals court has upheld a bad faith verdict and substantial awards to a disabled man victimized by UnumProvident Corporation and its subsidiary Provident Accident and life. Although portions of the damages awards had been reduced by the trial judge after the trial, the substantial sums of $3 million for punitive damages and $1.2 million for emotional distress and other harm were upheld and must now be paid by Unum to Bruce Leavey , the disabled claimant.

In early 2001 Leavey filed his long term disability insurance claim, along with proof that he was receiving appropriate care. His claim had initially been approved and paid on a monthly basis, as required under his disability insurance policy. However, the insurance company, UnumProvident (the parent company handling the disability claim), terminated the benefits.

When Leavey took Unum to court, he obtained a decisive victory. Because Arizona law applied, he was able to seek more than just the monthly disability benefits. The jury ruled in his favor on disability, but he was also awarded “bad faith” damages of $15 million in punitive damages and $4 million in compensatory damages for emotional distress and other harm. Based upon certain legal principles that limit the size of these awards, the trial judge reduced the awards to $3 million in punitive damages and $1.2 million in compensatory damages.

In ruling in Leavey’s favor on the appeal the Court concluded that Unum acted “not only in bad faith but also ‘with an evil mind’”, and that Unum had “sought to influence the opinions of independent medical examiners”. Furthermore, the Court found that Unum and Provident “misrepresented the opinions of those examiners”. In addition, the court found that “Unum. . . . subjected Leavey’s claim to a roundtable review, the sole purpose of which was to close expensive claims; that Unum sought to influence the opinions of independent medical examiners; that Unum misrepresented the opinions of those independent medical examiners in its letter to Leavey announcing the closing of his claim; and that Unum knew that Leavey was a vulnerable individual who suffered from anxiety and depression, was recovering from a serious drug addiction, and was at a high risk of relapse”.

Quadrino Schwartz has urged the New York Insurance Commissioner to act as quickly as possible to proceed with a rulemaking process to create a rule outlawing discretionary clauses in group long term disability policies. A series of regional law firms were asked to join with Quadrino Schwartz in sending a letter to the Insurance Commissioner. The response was impressive, and a formal letter signing ceremony was conducted at Quadrino Schwartz’ New York Offices.

Discretionary clauses have been used by group disability insurers as a way of shielding the insurance company from court scrutiny if a lawsuit is filed challenging the decision on an insurance claim. The clauses say, essentially, that a court must respect and defer to an insurance company’s decision to deny or terminate a disability claim. Disability lawyers have been fighting against the use of these clauses for years, and several States acted to ban the clauses, including New York, after the National Association of Insurance Commissioners urged action. New York pulled back from its original approach and decided to revoke its informal Circulation Letter and proceed instead with formal rulemaking, the process used to issue formal regulations.

Since the shift in approach by the New York State, however, no action was forthcoming. Led by attorney Michail Z. Hack, Quadrino Schwartz forged ahead with an effort to convince the Commissioner that with each passing month, the number of victims of these clauses mounts and thus this matter should be given priority within the Insurance Department. In recent weeks there has been additional momentum after the United States Supreme Court decision in the case of Metlife v. Glenn. It was hoped that the Court would abolish the use of these clauses. While the Court modified some of the rules and allowed disability claimants to obtain additional information in litigation to increases their chances of success, the clauses still remain in use, providing insurers with an effective obstacle to a claimant’s fair hearing on an ERISA governed disability lawsuit.

The Supreme Court struck a blow against insurance companies and in favor of workers with its ruling in the case of Metropolitan Life Insurance Co. v. Glenn (June 2008). The ruling states that “courts reviewing an employee’s denial of ERISA benefits should consider an insurer’s conflict of interest in deciding claims and paying for benefits.”

When Sears Roebuck & Co. employee Wanda Glenn was diagnosed with a heart condition and applied for plan disability benefits, Met Life initially concluded that Glenn’s claim was valid, and encouraged her to also apply for Social Security benefits. However, Metlife later reneged on that decision, claiming that Glenn was indeed able to perform sedentary tasks, and was therefore ineligible for long term disability benefits.

Evan S. Schwartz and Michael Z. Hack of Quadrino Schwartz published an article in the New York Law Journal entitled “’Met Life v. Glenn’: Innovative Worker Benefits Decision. In their article, Schwartz and Hack point out that a prior Supreme Court decision, Firestone Tire and Rubber Co. v. Bruch, actually made it more difficult for employee plan beneficiaries to demonstrate a conflict of interest, or self-interest, in the administrative authority of an insurance company when determining the validity of an employee’s claim. Establishing a conflict allows a court to level the playing field and more closely scrutinize the claims decision of a long term disability insurance company.

Met Life v. Glenn removes much of that difficulty by stating that a court must, at a minimum, take into consideration the following elements, among many others, in determining the severity of the financial conflict of interest:

1. The insurance carrier’s history of biased claims administration;

2. The quality of the firewalls, if any, erected between the claims administrators and those interested in the carrier’s finances;

3. The carrier’s reliance on evidence favorable to it to the exclusion of evidence favorable to the claimant;

4. The carrier’s insistence that the claimant apply for Social Security Disability benefits and, in the same breath, denying the claimant is disabled; and

5. The failure to provide evaluators with all the relevant evidence.

Based upon the existence of evidence as to the scheme of Unum, Unumprovident and its subsidiaries, claimants suing those companies may be placed on a more equal footing. Claimants pursuing benefits against other insurers may now be allowed to investigate further, to uncover biased claim administration and other conduct that would allow more scrutiny of the insurer’s claim decisions.

A Nevada jury has returned yet another bad faith disability verdict against Unum and Paul Revere in the amount of $60 million. In the same case, Merrick v. Paul Revere, a prior jury had returned a verdict of $11.65 million, but Unum appealed and a new trial was ordered based upon certain legal errors. The second trial focused upon the proper punishment for Unum and Paul Revere, based upon their longstanding scheme to improperly deny and terminate legitimate disability claims.

The jury in both trials heard evidence regarding the unethical practices of Provident Life and Accident Insurance Company that were merged into and became a part of Unum and Paul Revere. Stopping these practices is part of the relief sought in the disability class action commenced and being pursued by Quadrino Schwartz against Unum, Paul Revere, and Provident. The case was certified as a class action by a federal court in Tennessee in September, 2007 and is currently on appeal in a federal appeals court in Cinncinnati. For more information on the Quadrino Schwartz class action, visit our minisite at: http://unumprovidentclassaction.net

Several States, such as Arizona, Nevada, California, Pennsylvania, Florida, New Mexico, Montana and Vermont have viable “bad faith” laws or legal precedent that will allow a claimant to sue in court for additional financial damages, such as punitive damages. Quadrino Schwartz prosecutes bad faith cases long term disability cases in all States in which these damages can be sought. For more information, visit: http://www.disabilityinsurancelawyers.com/practice_areas/more/bad-faith-lawsuits

After Quadrino Schwartz obtained class certification in the first-of-its-kind national class action against disability insurer UnumProvident (Unum), the firm looks back at the long and hard fought battle that has preceded this critical court ruling.

When the case was filed in 2002, the attorneys at Quadrino Schwartz could hardly have predicted the course of events in their class action against UnumProvident, the disability industry giant. They knew this: the case was a serious and ground-breaking lawsuit that had a great chance to help thousands of disabled Americans. What they didn’t know was how many twists and turns there would be until that critical moment in the case: class certification.

In late 2002 and early 2003, the case was on a fast track in a federal court in Manhattan. A custom crafted evidence preservation order was obtained to preserve critical emails, yet as the order was being signed, emails were being destroyed. Those events culminated in a unique and important trial on evidence destruction in which Partner Richard Quadrino and a team of lawyers at Quadrino Schwartz took on one of the nation’s powerhouse law firms. The trial ended with critical findings of wrongdoing by UnumProvident and a massive effort to have thousands of emails restored for future use in the case.

The legal theories and approaches in the case were approved by the court when UnumProvident tried to get the case dismissed. The Court approved the method designed by Quadrino Schwartz to allow a class action aimed at reforming the practices of a Fortune 200 Company to comply with the law and stop its illegal use of financial budgets and targets in the claims process.

Another unprecedented move by Quadrino Schwartz was the seizure of files from the desks, credenzas and drawers of all of the company’s top officers to prevent further evidence destruction. A massive effort was ordered, as requested by Quadrino Schwartz, to box up and ship out 1,500 boxes of critical information to be preserved and used in the class action.

After the case was transferred to Tennessee and joined with a series of other similar cases filed in other parts of the country at a later date, the court in Tennessee tried on numerous occasions to get UnumProvident to engage in serious settlement discussions. The company refused, and the case dragged on for years.

Quadrino Schwartz never gave up the fight, however. The pressure applied by the case and the publicity from CBS 60 minutes and other media prompted a government investigation. That investigation culminated in a 48-State settlement in which UnumProvident agreed to some reforms of the company and it mailed notices to thousands of people to have their denied claims re-assessed.

The deal had significant shortcomings, however, and Quadrino Schwartz continued to push for the appropriate relief for all victims of the company’s bad faith practices. Even after many Plaintiffs settled and walked away, Quadrino Schwartz and its clients have stayed in the fight, believing that a better day was ahead and that persistence in seeking justice would see its rewards.

Now that a class is certified, Quadrino Schwartz will move into the next and critical chapter of this drama, undeterred and with a determination to see to it that complete justice is achieved for all disabled victims of UnumProvident’s profit-driven scheme. Unum has appealed the class certification decision and argument in the appeals court took place in September. A decision should be forthcoming soon.

For more information and links, visit our minisite at: http://unumprovidentclassaction.net