CIGNA fined in Multi-State Regulatory Settlement Agreement Re Group Long-Term Disability Claims Handling; Some CIGNA Claims to be Re-Evaluated

Following a Targeted Market Conduct Examination of CIGNA’s disability insurance claims handling practices, CIGNA companies — Life Insurance Company of North America, Connecticut General Life Insurance Company, and Cigna Health and Life Insurance Company (fka Alta Health and Life Insurance Company) — entered into a Regulatory Settlement Agreement in May 2013 with the California Department of Insurance, the Connecticut Department of Insurance, the Maine Bureau of Insurance, the Massachusetts Division of Insurance, and the Pennsylvania Insurance Department.  Insurance regulators of other states may adopt the terms by becoming a Participating State.  As of this time, Arizona is not amongst the Participating States.

The targeted market conduct examinations were initiated by the Maine Superintendent of Insurance and the Massachusetts Commissioner of Insurance in 2009 to investigate whether CIGNA’s claim handling practices conformed with the standards upheld by the National Association of Insurance Commissioners.  The regulatory concerns raised by the initial examinations prompted Connecticut and Pennsylvania’s insurance commissioners to open similar examinations and for the California Department of Insurance to reopen its 2006 examination.

As a result of the examination, the CIGNA companies were ordered to pay fines in the amounts of $500,000.00 to the California Commissioner of Insurance, $175,000.00 to the Maine Superintendent of Insurance, and $250,000.00 to the Massachusetts Commissioner of Insurance, and to take certain corrective actions in the handling of group disability insurance claims, to include:

Does Your Unum Claims Handler Have a Personal Financial Incentive to Deny or Terminate Your Disability Claim?

The transcript of Unum Group’s May 23, 2013 Annual Shareholder Meeting provides some disturbing insight into what may motivate claims personnel at Unum to deny or terminate a legitimate disability claim.

Unum’s Chief Executive Officer, President and Director, Thomas R. Watjen reported to the shareholders that they had “overwhelmingly approved” an employee cash incentive system based on performance:

The fourth item of business is the approval of our annual incentive plan, which provides employees the opportunity to earn cash incentive awards based primarily on the company’s performance each year. Our company performs well, employees get treated well from a financial standpoint. Our company doesn’t perform well, employees don’t get treated as well. . . . So our shareholders see, as we as directors and managers see, how to run the company successfully by creating an incentive system based on performance. So that has been overwhelmingly approved.

Later in the meeting, Unum’s Chief Financial Officer, Richard P. McKenney, spoke about the performance of Unum’s “closed block of business,” which includes its individual disability policies issued prior to the mid-1990s–the type of policies that Unum no longer sells.

We do have our Closed Block business. These are policies which are written some time ago. We serve those customers equally as well. But the returns in these businesses are lower.

Taken together, the two statements paint a picture of claims personnel handling the closed block of business under pressure to improve the returns, or else they “won’t get treated as well” or receive as sweet an incentive bonus.

We often hear from claimants who are incredulous that their claims have been denied or terminated despite a mountain of evidence of their disability.  This may be one explanation, and having an attorney to advocate for you as a claimant can be essential when you have a financially-motivated adjuster reviewing your claim.

The full transcript of the Unum Annual Shareholder Meeting is available at Seeking Alpha.

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Case Study:
Berkshire Attempts to Use the “Dual Occupation Defense”

When a professional that owns her own business files a disability insurance claim, the insurer will often try to exploit the claimant’s ownership status to deny total disability benefits.  The insurance company will argue that the professional has not one, but two occupations: 1) professional and 2) business owner.  The disability insurer will argue that the claimant isn’t actually disabled because she can still perform administrative or managerial functions, even if she can’t do the duties of her actual profession.  This is sometimes called the “dual occupation defense.”

For example, in Shapiro v. Berkshire Life Insurance Company, Berkshire attempted to use the dual occupation defense to deny total disability benefits to a dentist.  The dentist, Paul Shapiro, had an own-occupation policy, with “total disability” defined as “the inability to perform the material and substantial duties of your occupation.”

Dr. Shapiro owned his own practices, but spent the overwhelming majority of his time and effort doing clinical work.  He spent 90 percent of his time in chairside dentistry, working on patients, and just 10 percent of his time doing the administrative work that any practice owner needs to accomplish.   In fact, in the year before he became disabled, Dr. Shapiro saw nine to eleven patients each day, and performed an average of 275 dental procedures per month, working 40 to 45 hours each week.  He only spent one and a half to four hours each week attending to various administrative and managerial duties like personnel decisions, staff meetings, and computer troubleshooting.

After progressive osteoarthritis and spondylosis of the elbow, neck and other joints left Dr. Shapiro unable to perform chairside dentistry, he filed for total disability benefits with Berkshire.  Rather than paying him total disability benefits, however, Berkshire determined that Dr. Shapiro was only entitled to partial disability benefits:

Berkshire’s coverage position was that Shapiro’s occupation immediately preceding the onset of his disability was as an administrator and manager of his various dental practices as well as a practitioner of chair dentistry; because the disability did not prevent Shapiro from doing his administrative or managerial work, Berkshire reasoned, Shapiro did not satisfy the policies’ definition of total disability: “the inability to perform the material and substantial duties of your occupation.”

Dr. Shapiro brought a suit against Berkshire in the United States District Court for the Southern District of New York for breach of contract, among other things.  That court found in his favor on the breach of contract claim, but Berkshire appealed.  The Second Circuit Court of Appeals agreed with the lower court and affirmed the decision in Dr. Shapiro’s favor.  The Court of Appeals determined that Dr. Shapiro “spent the vast majority of his time performing chair dentistry,” and that his administrative work was merely incidental to his material and substantial duties as a full-time dentist.

Though Berkshire’s attempt at the dual occupation defense was unsuccessful in this case, the Court of Appeals indicated that there could be some situations in which it might work:

At some point, a medical entrepreneur’s administrative and managerial responsibilities may well become the material and substantial duties of the insured’s occupation.

The message for disability insurance policyholders that own a business is to be careful how much time you spend in administrative tasks, and how you explain your occupation to your insurer.  Otherwise, you could be inadvertently setting your claim up for denial.

Berkshire Criticized by Maryland Insurance Commissioner for “Artful Neglect”

Disability insurers have a duty to fully investigate claims for benefits, as the insurance companies are well aware.  Unfortunately, some claims departments may focus their efforts on looking like they are investigating and considering information rather than actually doing so.

Berkshire, a disability insurance company that sells own-occupation policies to dentists and doctors, has garnered criticism from at least one state’s insurance commissioner for this very practice.

In Berkshire Life Insurance Company v. Maryland Insurance Administration, 142 Md. App. 628, 791 A.2d 942 (App. 2002), Berkshire attempted to claim that its insured was only partially disabled, and therefore it was only obligated to pay a fraction of the total benefits that were payable under the policy.  In finding that Berkshire’s conduct was “arbitrary and capricious” in violation of Maryland’s insurance statutes and ordering it to pay restitution to the policyholder, the Maryland Insurance Commissioner also found:

Overall, Berkshire’s actions here represent what may be termed as “artful neglect.”  Berkshire gives the appearance of investigating a claim in order to render a good faith claims determination.  As part of this appearance, Berkshire timely requests financial information from its insured and then timely requests more information from its insured.  In direct contrast to this “appearance,” however, Berkshire does not analyze the information at all, much less use an analysis in a cogent and rational way to support a proper claims determination.

In a more recent Arizona case, Nunley v. Berkshire Life Insurance Company of America, 2009 WL 529901 (D. Ariz. 2009), Berkshire tried to have the United States District Court rule that it could not be subject to punitive damages in a case involving a disabled dentist’s total disability claim.  The Court, however, denied Berkshire’s motion, finding that Berkshire might have to pay punitive damages because it did not investigate the dentist’s claim adequately or in a timely fashion.

This “artful neglect” is unlawful, and may subject a disability insurance carrier to bad faith liability.  A disability insurance claimant who thinks her insurer is not adequately investigating the claim should contact an attorney to help protect her rights.

Unum Plays Semantic Games in Denying Benefits for a “Heart Attack”

We have previously blogged that even Unum’s U.K. CEO agrees that Unum’s policies contain confusing language.   Recently, Unum took advantage of its unclear disability policy language — in this case, a policy containing the layman’s term “heart attack” — to deny benefits to the widower of a policyholder who had died, in medical terms, of “atheroscopic coronary artery disease.”

Annette Frie’s disability insurance policy from Unum stated that a $30,000.00 benefit would be paid to her spouse if she were to die from a “heart attack.”  However, because “heart attack” is not a medical term likely to be used on a death certificate, her husband Jim Frie suspects Unum deliberately used that term on its policy in order to deny claims by splitting semantic hairs.

When Mr. Frie submitted his claim, Unum sent him a letter offering its condolences but denying the claim on the basis that it “didn’t meet the definition of the specified illness covered by the policy.”  The medical examiner who had signed Mrs. Frie’s death certificate then sent two letters to Unum explaining that Mrs. Frie’s coronary artery disease had caused the heart attack.  In response, Unum denied the claim two more times.

The Minnesota State Commerce Department subsequently opened an investigation, but when Mr. Frie became impatient with the pace of the state’s investigation, he contacted FOX-9 investigators.  Within 24 hours of being contacted by the news station about their investigation to expose this “fist-pounding outrage,” Unum called Mr. Frie with the news that the decision had been made to pay the claim.

Even commonly-used words and phrases can take on unexpected meanings within the context of a disability insurance policy, so it is important to consult an experienced disability insurance attorney to interpret the policy language when filing a claim.


Unum: Celebrating More than a Century of Claim Denials

Looking back at old disability insurance cases can be just as fascinating as reading old newspapers. Unum, the largest disability insurer in the U.S., is the product of numerous mergers. Unum’s corporate history (available on its website) proudly traces its lineage, which includes the Masonic Protective Association, later acquired by Paul Revere, which was subsequently acquired by Unum. Under a heading of “The company with a heart,” Unum notes that “The Masonic Protective Association, which later became Paul Revere, traded on its reputation of paying claims quickly and without fuss to become a powerhouse in providing accident insurance to members of the Brotherhood.”

For an example of Unum’s predecessor “paying claims quickly and without fuss,” examine the 1901 case of Scales v. Masonic Protective Association, 48 A. 1084 (N.H. 1901). The insured’s disability policy required that “disability, to constitute a claim for sickness, shall require absolute, necessary, continuous confinement to the house.” The insured became sick and incapacitated for 67 days. He spent the first five days entirely inside his house. As his physician had suggested fresh air to assist his recovery, he spent a portion of each subsequent day in his yard, either sitting in a chair or lying in a hammock.

Though the insurer admitted that the insured had been sick, it denied the insured’s claim for disability benefits on the grounds that the insured was not “confined to the house” under the terms of the policy. The Supreme Court of New Hampshire held that it was unreasonable to suppose that the insured could not sit in his yard for the purpose of recovery. It noted that the insurer’s interpretation of the policy would lead to the inference “that the [insurer] intended to deceive the insured.”

In what seems woefully naïve in light of what we know today regarding Unum’s claims practices, the court went on to state: “It cannot be presumed that an association of the character of the defendant association would be capable of such intent.” The court then applied a strict interpretation of the policy language and, finding “to a house” different in meaning from “in a house,” held that the insured had been confined to his house within the terms of the policy, and awarded him benefits.

What can we learn from a 110 year old case? Some things never change. Though the victorious attorney who represented the insured against Masonic Protective Association is long gone, today’s insureds should still consult an experienced disability insurance lawyer when considering filing a claim.

A Case Study in Benefit Denial

We frequently emphasize how important it is to consult with a disability insurance law firm before filing a claim. But what about at the moment when you realize that you’re too sick to work? It is vitally important to consult with a disability insurance attorney specializing in disability law as soon as possible. A recent case in which the insured was denied disability benefits illustrates the importance of consulting with an attorney from the very beginning of your illness. There are often clauses in your disability policy which require up-front strategic planning to preserve your claim. In the below case study in benefit denial, the insured found himself possibly covered by two plans but ultimately unable to collect from either.

Paul McKay was employed beginning in 1999 as an attorney at U.S. Xpress, which provided a long-term disability plan to its employees. Prior to January 1, 2004, this plan was provided by Unum. On that date, U.S. Xpress switched disability insurance providers to Reliance. Insurance coverage was supposed to be uninterrupted with employees retaining continuous disability insurance, and in fact it was. But McKay fell between the cracks due to disparate language in the policies.

During his employment, McKay developed significant cervical spine problems, and he eventually underwent surgery in June 2003. Unfortunately between September through December 2003, his condition continued to worsen. At that point he had severe cervical and lumbar disc disease, was frequently absent, and his medication made mental concentration more difficult. His last day of work at the office was December 19, 2003. He intended to work from home during January 2004, but there was no evidence that he was able to do so. U.S. Xpress continued paying McKay his usual salary until January 16 and then fired him on January 19, 2004.

McKay filed a disability claim with Unum (the insurer prior to January 1, 2004) for disability benefits, contending that he was disabled under the policy. Unum denied the claim. The court affirmed the denial. The problem for McKay was that his Unum policy contained a clause requiring a 20% loss in monthly earnings as a qualifying condition for disability benefits. Unum successfully argued that through December 31, 2003, McKay had not had any loss of earnings as U.S. Xpress had in fact paid him his full salary into January 2004. McKay argued that he may have received his salary but he was incapable of earning it. The court followed the plain language of the policy and regardless of whether McKay earned his keep in December, found no loss and ruled that he was ineligible for benefits.

Reasonably enough, McKay rationalized that if Unum wouldn’t cover him, then he must be covered by Reliance (who took over on January 1). He filed a claim with Reliance, only to discover that Reliance’s policy had two important but often-overlooked requirements: To be eligible for insurance without the usual 60-day waiting period (which would have started coverage on March 1), McKay had to be “actively at work” as of January 1 and his disability had to begin on or after January 1. Reliance denied the claim, asserting that McKay wasn’t “actively at work” because he was not working full-time (at least 33 hours per week) as of January 1. Recall that McKay had attempted to establish his eligibility under Unum by arguing that he had suffered a loss in earnings in December because after December 19 he wasn’t actually earning—just receiving—his salary. McKay’s statements, which had been made in support of his Unum claim, were outrageously used by Reliance to deny him benefits under Reliance’s plan.

The injustice gets worse. As a second reason for denying the claim, Reliance argued that since McKay had asserted a December disability date to Unum, had left the office after December 19, and had since received Social Security disability benefits based on a December 2003 disability date, McKay’s disability began before January 1. Thus, he was ineligible for benefits under Reliance’s plan. The court agreed with Reliance’s reasoning.

On appeal, the Circuit Court affirmed the lower court’s rulings. The Court noted that “McKay argues that because U.S. Xpress maintained uninterrupted LTD insurance coverage during the time period in which he sustained his disability, he must be covered by one of the two policies. McKay’s argument, while somewhat logical, is incorrect. Whether he is covered by either Unum or Reliance, or both, turns on the terms of each policy.” (emphasis added). And so it ends. Paul McKay, who was always “covered” by long-term disability insurance, turned out to not be covered at all. He receives no benefits from either policy, thanks to a coincidence of timing. Each insurer used his statements to the other to deny coverage, leaving him in a no-win scenario.

What can be done differently? Paul McKay should have immediately consulted a disability insurance attorney as soon as he suspected that he might become too ill to work. The attorney could have examined the policies and the upcoming switch in coverage and worked with Paul to develop a strategy to preserve his claim, such as resigning in December and immediately applying for benefits. This case underscores the importance of coordinated planning with an experienced disability insurance attorney.

Dental Hygienist Awarded $4.2 Million in Disability Insurance Lawsuit Against Unum

A jury in the Los Angeles Superior Court has awarded dental hygienist Laura Kieffer $4.2 million in damages against Unum Group for wrongfully terminating her disability benefits.   Ms. Kieffer purchased her individual disability insurance policy from Paul Revere in 1988.  In 1996, she developed disabling conditions, including carpal tunnel syndrome and severe cervical pain.  By 1999, she had to stop working.  After paying her disability benefits for nearly ten years, Unum terminated her claim despite recommendations from Ms. Kieffer’s treating physician.

Ms. Kieffer sued for breach of contract, insurance bad faith, and for punitive damages.  The $4.2 million jury verdict included compensatory and punitive damages.

Update (April 18, 2011):  The Los Angeles Superior Court upheld the 4.2 million verdict and denied Unum’s motion for a new trial.

Disability Insurance: Who Gets Denied?

Answer:  Individuals with neck and back pain.

Musculoskeletal disorders make up 23 percent of new disability claims each year, says the Council for Disability Awareness, an insurance industry trade group.  You can expect extra scrutiny if you file a claim for disability benefits, says Arizona disability insurance attorney Ed Comitz.   The challenge with musculoskeletal claims  is that there may be  little objective evidence to verify the pain.   Most insurers conduct surveillance on individuals with neck and back problems, attempting to portray them in the worst light notwithstanding the varying nature and severity of pain.

Claim Analytics, a provider of predictive modeling solutions to the insurance industry, published the results of its “2010 Long Term Disability Benchmarking Report.”  The results show significantly varying results (a 22% difference) when it comes to dealing with claims,especially those based on back injuries.  According to Claim Analytics, this reflects on the claim management practices employed by each carrier, and specifically how different carriers treat back pain.

Insurers Use High-Pressure “Return to Work” Programs to
Terminate Disability Insurance Benefits

A personal return to work plan can be useful and empowering when it is the product of careful consideration between a disability insurance claimant, his doctor, and his attorney.

In the hands of a disability insurer, however, a return to work strategy is simply a means of beefing up the bottom line by pushing a claimant to give up his benefits and return to work before it’s safe.

To compound the problem, insurers increasingly market their return-to-work pressure methods to employers who seek to minimize disability-related absenteeism, dubbing the relationship a “strategic partnership.”  Prudential, a major provider of disability insurance policies, offered its approach at the annual Disability Management Employer Coalition (DMEC) Conference in San Diego.  In describing its methods, Prudential argued that “[s]ome disability absences are driven by subjective feelings about work,” a problem best solved by “an environment that breeds commitment.”  Unum, one of the nation’s largest disability insurance providers, has given similar presentations, including one on strategies for managing employees’ chronic pain conditions—callously titled “A Pain in the Workplace.”

The unfortunate outcome is that the claimant faces pressure from both her employer and her insurer to return to work prematurely, often on a “trial” basis—a decision that can lead to forfeiture of benefits, aggravation of medical problems, and other complications.

Consult your doctor and a reliable, knowledgeable attorney before you consider returning to work, even for a “trial” period.  The effect on your benefits and health could be profound.

Unum Profits While Ailing Workers “Gut it Out”

In an interview with Andrew Frey of Bloomberg Businessweek, Unum Group CEO Thomas Watjen said that the economic slump has resulted in fewer disability claims being filed, with workers suffering from lower back pain, nervous conditions and other “more discretionary” conditions more likely to “gut it out” than they would in better economic times.

You can’t make a windfall on these products.  It’s not like you can go on claim and make an enormous amount of money.

While workers are gutting it out, Unum has reported five straight quarterly profit increases.

Why Is It So Hard to Collect on My Disability Insurance Policy?

Attorney Ed Comitz’s article, Why Is It So Hard to Collect on My Disability Insurance Policy? Avoiding Mistakes when Filing a Claim, was published by Whitehall Management in its May/June 2010 Newsletter magazine. The article explains why dentists and other healthcare professionals have such a difficult time collecting disability insurance benefits and advises against some common mistakes often made when filing a claim.

Colorado Bill Aims to Prevent Unum-like Denials

In an April 1, 2010 article appearing on, Gordon Gibb reports:

With an eye towards preventing the kinds of practices once employed by Unum over the years and under a variety of names, including First Unum, Unum Insurance and Unum Provident, the Colorado Senate in early March passed a bill that would prohibit the payments of bonuses or financial incentives by insurance companies to adjusters who deny or delay meritorious claims or medical care.

. . .

The legislation was proposed to protect consumers from past and current practices of insurance companies that put profit over the welfare of their policyholders. A number of documented examples were provided, including the exposure of $18 million in bonus payments by Unum to insurance adjusters to deny long-term disability and various other claims.

It was reported that Senate Republicans refused to support the legislation, claiming that the bill was unnecessary and that no evidence demonstrative of such practices existed. This, in spite of a widely distributed report from “60 Minutes,” the investigative unit of CBS that provided stunning evidence of such practices.

In a broadcast aired November 17, 2002 the late Ed Bradley conducted interviews with a number of adjusters who worked for Unum Provident. They all stated unequivocally that adjusters were offered financial incentives to close claims.

UPDATE MAY 17, 2010:   Colorado Governor Bill Ritter signed Senate Bill 76 into law.  The bill’s sponsors, Sen. Carroll and Rep. Primavera are quoted in the Governor’s Press Release as follows:

“Wrongful denials and delays of medical claims have been the top complaints against insurance companies for five years running,” Sen. Morgan Carroll said. “Senate Bill 76 protects consumers from insurance companies actually paying financial incentives to encourage denial of those claims and prohibits companies from putting profits over people’s health.”

“The only thing worse than being sick and having your health care coverage canceled, is the idea that some claims-employee on the other end of a phone was given a bonus to make that decision,” said Rep. Primavera.  “This bill is so obviously the moral and right thing to do.”

The Insurer Who Spied on Me – ABC News Investigation

Good Morning America recently reported on The Hartford going too far in their surveillance of some people with disability insurance claims, then unfairly cutting off  benefits based on the video surveillance.

Read the full article here:  The Insurer Who Spied On Me

Too Sick to Work? They Disagree

In the February 10, 2010 edition of SmartMoney Magazine, Brad Reagan writes:

Once employees go on disability, critics say, insurers today are more likely to require hour-long chats on the phone, hound patients for medical updates and push them back to work as soon as possible—often clashing with doctors who think the workers need more recovery time.  “These claims are now managed, whereas they used to just be monitored.  It can be very intrusive,” says Terry Smith, a principal in Mercer’s health and benefits practice.

To be sure, the disability battle is complex . . . . In 2004 and 2005, insurer Unum Group agreed to pay $24 million in fines to various state regulators over its handling of disability claims.  In addition, the company agreed to review previously denied claims between 1997 and 2004—and ultimately reversed 42% of them in the patient’s favor.

. . . In 2004 and 2005, insurer Unum Group agreed to pay $24 million in fines to various state regulators over its handling of disability claims.  In addition, the company agreed to review previously denied claims between 1997 and 2004—and ultimately reversed 42% of them in the patient’s favor.

Disability Benefits Terminated Due to Facebook Photos

The Canadian Broadcasting Corporation has reported that Nathalie Blanchard, who had been on long-term disability leave from her job at IBM due to depression, had her benefit payments terminated after she posted photographs of herself on Facebook that depicted her vacationing, having fun at Chippendale’s and enjoying her birthday party.  Her insurer, Manulife, confirms that it uses Facebook as a tool for investigating its insureds.   Ms. Blanchard contends that her doctor advised her to engage in fun activities to combat depression.   The story is a reminder to insureds to be aware of insurance company surveillance.  The CBC’s full article can be read here:

New York Times Exposes Biased and Incompetent “Independent Medical Examiners”

A New York Times article published March 31, 2009, exposes the biases and lack of competency of certain “independent medical examiners” used to deny disability claims.  The article is available here.

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ABC News: Man With MS Fights for Long-Term Disability Insurance

Good Morning America recently featured a story about an accountant from Florida, Chris Tucker, who had been diagnosed with Multiple Sclerosis by 11 doctors, having difficulty collecting his long-term disability insurance benefits from Standard Insurance Company because Standard’s doctor – who had never even met Mr. Tucker — did not believe there was sufficient evidence to support the MS diagnosis.

Chris Cuomo of Good Morning America investigates the story, and the issues surrounding doctors on insurance company payrolls, in the ABC News article below.

$60 Million Verdict Against Unum and Paul Revere

In Merrick v. Paul Revere, a Nevada jury returned a bad faith disability verdict against Unum and Paul Revere in the amount of $60 million.  The prior jury had returned a verdict of $11.65 million, but Unum appealed and a new trial was ordered.  The second trial focused on the proper punishment for Unum and Paul Revere, based on an alleged longstanding scheme to improperly deny and terminate legitimate disability claims.  Like Nevada, many states (including Arizona, California, Pennsylvania, Florida, New Mexico, Montana and Vermont) have viable “bad faith” laws  that allow claimants to sue in court for extra-contractual damages, including punitive damages.

AAJ Names Ten Worst Insurers

The American Association for Justice (AAJ) recently released the report The Ten Worst Insurance Companies in America. The AAJ reached its conclusions after a comprehensive investigation of insurers’ legal and financial filings.

Read the entire report here: