U.S. District Court Affirms $50
Million Award Against Unum and
Paul Revere Based on the
Company’s Bad Faith Denial of
Benefits

Merrick v. Paul Revere Life Ins. Co., 594 F. Supp.2d 1168 (D. Nev. 2008).

A federal court in Las Vegas, Nevada affirmed $50 million in damages awarded by a jury in a June 2004 case against Paul Revere and its parent, Unum Group, in a partial retrial of a lawsuit brought by disabled venture capitalist G. Clinton Merrick. The case was based on the insurers’ bad faith denial of disability benefits to Mr. Merrick.. Merrick was able to establish that the insurance companies used financial targets and goals to terminate claims and that the insurers engaged in an overall scheme to augment profits by denying benefits.

Merrick had purchased a noncancellable, guaranteed renewable, “own occupation”, disability insurance policy from defendant Paul Revere in 1989. Under the policy’s terms, Merrick was entitled to benefits of $12,000 per month for as long as he was disabled or until age 65, whichever came first, if he was unable to perform the material and substantial duties of his occupation due to illness or injury. When Merrick began to suffer from a chronic low-grade illness that substantially impacted his ability to work as a venture capitalist, he sought recovery under his disability policy. Unum and Paul Revere denied Merrick’s claim based on an alleged “lack of objective evidence” as to his condition, although the policy did not contain such a requirement and Merrick’s condition could not be diagnosed or measured through objective testing.

At the first trial, the jury found that both defendants breached the insurance contract, lacked reasonable grounds to deny Merrick’s claim, and acted in bad faith, knowingly, oppressively or maliciously, and recklessly denying the claim.

The jury also found that the insurer was in breach of contract by denying the claim as it did and awarded $1.6 million in compensatory damages and $10 million in punitive damages. The insurer appealed and the punitive award was eventually retried before a new jury.

On retrial, the second jury ordered Paul Revere to pay $24 million and Unum to pay $36 million for a total award of $60 million. Merrick established that his claim was mishandled in a manner consistent with the scheme to use budgets and targets to deny disability claims.

The federal district court affirmed the jury’s findings that both Paul Revere and Unum had engaged in improper claims practices in an attempt to cheat people out of their entitled disability benefits. Although the district court agreed with the jury’s findings that insurance companies acted reprehensively, it had to reduce the total jury verdict on constitutional grounds, but the judge hit Unum and Paul Revere with the full amount allowable under the law, thus upholding a total award of $50 million. The Merrick case is yet another cases demonstrating Unum’s outrageous use of budgets, targets, and “net termination ratios” to deny valid disability claims. This award was among the top jury verdicts of 2008 and the largest award ever against Unum and/or its subsidiaries.

Several States, such as California, Arizona, Nevada, New Mexico, Montana, Pennsylvania, and Vermont have viable “bad faith” laws or legal precedent that will allow a claimant to sue in court for extra financial damages, such as punitive damages.  Quadrino Schwartz prosecutes bad faith cases, along with local or co-counsel, in all States in which these damages can be sought.

We are the premier disability insurance law firm in the United States. To see how we can help you, click here to contact us:  http://unumprovidentclassaction.net/contact_us/