According to the Supreme Court in MetLife v. Glenn, a conflict of interest may exist when an insurer serves in a dual role of deciding the validity of a claim and paying out on that claim. The Court stated that such a possible conflict of interest should be considered when determining the legality and propriety of the insurer’s denial of claims.

The MetLife case involved the denial of disability benefits to Wanda Glenn, a long-time Sears employee and manager of its women’s department, who was covered by the company’s long-term disability plan. In 2000, Glenn took medical leave due to a heart condition and filed a disability claim under her ERISA plan. Under ERISA law, fiduciaries are obligated to “discharge [their] duties with respect to a plan solely in the interest of the participants and beneficiaries and . . . for the exclusive purpose of . . . . providing benefits to participants and their beneficiaries . . . .”

MetLife, the insurance carrier, approved the claim and told Glenn to seek social security payments, which could then be deducted from her MetLife payments. After an administrative law judge determined that Glenn was disabled and eligible for social security payments, MetLife decided Glenn was no longer eligible for disability benefits and stopped paying on her claim.

Glenn sued MetLife in district court based on the denial of benefits, claiming that MetLife’s dual role as evaluator of and payor on disability claims created a conflict of interest . Glen lost her case and appealed to the U.S. Court of Appeals for the Sixth Circuit, which reversed, finding in Glenn’s favor. In deciding the case, the Court of Appeals took into consideration MetLife’s dual role, finding that it created a possible conflict of interest. MetLife sought Supreme Court review, noting that the various circuit courts were split on the issue of whether such a potential conflict should be considered when determining the validity of the insurer’s disability entitlement decision.

The Supreme Court determined that there was sufficient evidence to demonstrate that a strong conflict of interest existed and affirmed the Court of Appeal’s decision in Ms. Glenn’s favor. According to the Supreme Court, when an employer both funds the plan and evaluates the claims, there is a conflict of interest that must be considered when reviewing a denial of benefits. While the Supreme Court’s decision makes clear that the dual role should be considered as a factor, it did not indicate the weight that should be attributed to that factor.

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/

First Unum denied Mr. McCauley’s claim stating that it did not believe that his medical condition prevented him from working. McCauley appealed the denial and submitted additional medical support from his physician, which was ignored by First Unum.

Left without benefits, McCauley filed a lawsuit against the company in a New York District Court, which decided the case in favor of Unum. However, McCauley won his case on appeal to the Court of Appeals, which reversed First Unum’s denial of benefits finding “powerful evidence that First Unum’s denial of McCauley’s appeal was arbitrary and capricious.” In its decision, the Court of Appeals noted the evidence of First Unum’s long history of biased claims administration citing a Massachusetts District Court, which found that First Unum’s conduct “reveals a disturbing pattern of erroneous and arbitrary benefits denials, bad faith contract misinterpretations and other unscrupulous tactics.” Radford Trust v. First Unum Life Ins. Co., 321 F. Supp. 2d 226, 247 (D. Mass. 2004), rev’d on other grounds, 491 F.3d 21, 25 (1st Cir. 2007).

The court made note of more than thirty cases in which Unum’s denials of benefits claims were determined to be unlawful. “First Unum’s history of deception and abusive tactics [are] additional evidence that it was influenced by its conflict of interest as both plan administrator and payer in denying McCauley’s claim for benefits.” The court returned the case to the lower court ordering that court to find in Mr. McCauley’s favor and to calculate the benefits owed him. While Mr. McCauley eventually won his case, it took 13 years of fighting to do so.

First Unum’s outrageous schemes have been investigated on “60 Minutes” and “Dateline” and have been the subject of numerous other investigative reporting pieces, which have all determined that First Unum employs illegal and improper review procedures and engages in conduct intended to deny valid disability claims.

A federal appeals court in Arizona upheld a bad faith verdict and significant awards to a Brett Leavey, a disabled dentist victimized by Unum/Provident Corporation and its subsidiary Provident Life and Accident Assurance Company. Although portions of the damages awards were reduced by the trial judge post trial, Dr. Leavey still recovered $3 million in punitive damages and $1.2 million for emotional distress and other damages.

In 1990, while working as a dentist, Dr. Leavey, purchased an “own occupation” disability insurance policy from Provident, a subsidiary of Unum/Provident Corporation, in 1990. In 1998, Dr. Leavey became “totally disabled” under the terms of the policy due to chemical dependency and filed a claim for benefits. Provident initially approved Dr. Leavey’s claim and provided him with a monthly cash benefit. In 2001, Provident discontinued payments claiming that based on its own, independent investigation, Dr. Leavey did not qualify for benefits.

Leavey brought suit seeking benefits and punitive damages claiming that Provident acted in bad faith by discontinuing his benefits. He was able to do so because Arizona permits a claimant to seek more than just the monthly disability benefits. The court heard evidence demonstrating that Unum//Provident “instituted termination goals and used various tools to reach them, such as ‘top-ten’ lists of high-dollar claims to terminate and roundtable reviews, and [that the insurer] targeted psychiatric claims because of the subjectivity in assessing them.”

In ruling in Leavey’s favor on his entitlement to disability payments, the jury also awarded him $15 million “bad faith” punitive damages and $4 million in compensatory damages for emotional distress and other harm. The court found that Unum/Provident acted “not only in bad faith but also ‘with an evil mind’”, and that Unum/Provident had tried to influence the opinions of independent medical examiners and misrepresented the examiners’ opinions. In imposing punitive damages, the court considered Unum/Provident’s various schemes to improperly deny valid benefits claims and the company’s utter disregard of Leavey’s vulnerability and illness.

Certain legal principles impose a limit on the size of these awards so that the trial judge reduced the punitive damages recovery to $3 million and the compensatory damages recovery to $1.2 million.

The Leavey case is a further example of Unum/Provident’s use of unfair, deceptive and illegal practices in order to deny valid disability claims.

In an April, 2003 Phoenix, Arizona case, a jury returned unanimous verdicts against Paul Revere Life Insurance Company, Provident Life and Accident Insurance Company and General American Life Insurance Company for their breach of contract and bad faith denial of disability insurance benefits to Dr. Joanne Ceimo, a disabled cardiologist.

Dr. Ceimo had suffered a neck injury that prevented her from performing invasive surgical procedures. She filed a disability claim with Paul Revere, which was administering claims for her insurer General American Life Insurance. Under the terms of the policy, Dr. Ceimo could recover based on a full or partial disability. When her claim was denied, Dr. Ceimo sued General American, Paul Revere, and Paul Revere’s affiliated company Provident Life and Accident Insurance Company, alleging breach of contract and bad faith.

The jury found that Dr. Ceimo was totally disabled from her occupation as an invasive cardiologist, that the defendants intentionally denied Dr. Ceimo’s benefits claim without a reasonable basis for doing so, and that the defendants knew that they were actions were unreasonable.
Throughout the trial, the jury heard evidence establishing that the insurers formulated a plan to deny disability claims of thousands of policyholders. Based on its finding of bad faith, the jury awarded Dr. Ceimo $1.2 million in back benefits, $5.4 million damages for mental distress, and $79 million in punitive damages. On appeal, the district court reduced the punitive damages to $7 million, concluding that a ratio of approximately 1:1 is the maximum allowable given the high-level of compensatory damages granted and the award of $600,000 in attorneys’ fees. Both sides appealed the decision, which was later affirmed by the Ninth Circuit Court of Appeals.

This jury award was among the top-ten jury verdicts in 2003 and represents yet another case demonstrating the insurers’ use of illegal schemes and unfair tactics to deny valid disability claims.

Years later, Hangarter tore her rotator cuff and eventually stopped treating patients due to the severity of the injury. She filed a disability-insurance claim in May 1997, which was initially approved by UnumProvident (the insurer that acquired Paul Revere). However, after paying her $8,100 in benefits per month for a year and a half, the insurer terminated the payments, disputing Hangarter’s status as disabled and claiming that her attempted part-time return to work meant that she was not totally disabled. The insurer alternatively claimed that Hangarter could serve as a bookkeeper for her practice. Arguing that she was supposed to get paid as long as she was unable to work as a chiropractor, Hangarter successfully sued UnumProvident, and obtained a jury award of $7.67 million in benefits and punitive damages.

The court found that (1) Ms. Hangarter could not perform her substantial and material duties in the usual and customary manner and was, in fact, totally disabled; (2) her failed attempt to return to work did not prevent her from receiving benefits; and (3) that punitive damages were appropriate because UnumProvident unreasonably terminated her benefits acting with “malice, fraud and oppression.”

During the trial, evidence demonstrated that Hangarter’s case was not an isolated instance and that UnumProvident employees would regularly seek ways to terminate expensive claims and dispute doctors’ findings, often using budgets and targets and “net termination ratios” to maximize profits at the expense of vulnerable, disabled people. UnumProvident’s request for a new trial was denied by the U.S. District Court for Northern California, which found the insurer in violation of the California Unfair Insurance Practices Act. The court also ordered the company to stop “employing biased medical examiners.” The Court of Appeals affirmed the total award of $7.6 million.

California is one of several states in the country that allows plaintiffs to pursue punitive damages against an insurer for a bad faith claim denial.

When General American terminated Mr. McKendry’s long-term disability benefits, he sued claiming that the insurer’s termination was in bad faith. General American had terminated the long-term disability benefits of Mr. McKendry, a real estate professional who was suffering from Chronic Fatigue Syndrome, asserting that he was not disabled from working full-time. A federal jury in Phoenix, Arizona concluded that the benefits termination was in bad faith and awarded McKendry $350,000 in compensatory damages and $10.2 million in punitive damages against General American. The jury also imposed a $6.8 million punitive damages award against Paul Revere Life Insurance Company, which handled the claim for General American and made the decision to terminate his benefits. The punitive damages were awarded against Paul Revere because it encouraged General American to terminate valid disability claims in order to increase profits.

Dr. Chapman sued UnumProvident in 2001 after the insurer refused to pay the $11,600 monthly benefits under the doctor’s long-term disability policy purchased during the 1980s.

Dr. Chapman claimed that he was disabled as a result of a phobia he developed that caused him to shake, making it impossible for him to perform eye surgery. Initially, UnumProvident paid disability benefits for a period of three months before denying further payments based on the company’s doctor findings, which disagreed with the diagnosis. The $ 31.7 million judgment included $30 million in punitive damages. The award was granted based on evidence that demonstrated that Unum denied policyholders’ valid claims based on budgets and targets.