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Federal Court in Massachusetts Delivers Stinging and Harsh Critique of UnumProvident

In a stinging and thorough opinion, a federal judge in Massachusetts awarded disability benefits to a law firm that had brought a claim on behalf of one if its former employees. In the decision, the Court noted that:

"First Unum's conduct in denying Doe's claim was entirely inconsistent with the company's public responsibilities and with its obligations under the Policy. This is not the first time that First Unum has sought to avoid its contractual responsibilities, and an examination of cases involving First Unum and Unum Life Insurance Company of America, which like First Unum is an insuring subsidiary of Unum Provident Corporation, reveals a disturbing pattern of erroneous and arbitrary benefits denials, bad faith contract misinterpretations, and other unscrupulous tactics. These cases suggest that segments that have run in recent years on "60 Minutes" and "Dateline," alleging that Unum Provident "regularly declines disability claims as a way of boosting profits," may have been accurate. See Edward D. Murphy, Unum Corp. Retirees Feeling a "Sense of Loss," Portland Press Herald, Apr. 29, 2003, at 1C. This Court cannot tell whether First Unum and other Unum Provident companies are considered pariahs in the industry, or whether their ability to retain customers is a result of low prices, market inefficiency, or other factors. In either case, employers have a duty to select insurers for their employees with care, and to avoid hiring insurers with reputations for shoddy and hostile claims administration, although it may well be that suits based on violation of this duty are preempted under ERISA."

The Court reviewed and surveyed many of the cases from around the United States in which judges have harshly criticized UnumProvident and its subsidiaries for flagrantly engaging in bad faith claims practices.

The Court also stated, as part of its decision, that:

"In this case, First Unum's denial was flagrant. The company adopted a patently unreasonable interpretation of the Policy and reached a decision that was plainly contrary to the facts in the record before it. First Unum's conduct also resulted in years of delay in distribution of Doe's benefits, and it is by no means clear that First Unum can be trusted fairly to adjudicate Doe's claim on remand. Even if the Court could trust First Unum, and even if the company had acted in good faith, further delay would merely have added to the injustice that Doe has already suffered."

In awarding legal fees to the Plaintiff, to be paid by UnumProvident, the Court said:

"As this Court has described, First Unum acted in bad faith in denying benefits to Doe, and while First Unum's position was entirely without merit, Radford's was essentially correct. The company can well afford to pay a fee award, and the awarding of fees against insurers acting in bad faith would deter similar conduct by other insurers in the future. The Court has no information before it as to whether the Policy is still in effect for Hawkins employees, but to the extent that other participants and beneficiaries exist, the decision that has resulted from the bringing of this case ought certainly change First Unum's practice of denying valid claims based on an erroneous and highly restrictive interpretation of the Policy. Moreover, participants and beneficiaries in other plans, particularly those administered by First Unum, will tend to benefit in a similar manner from this lawsuit."