Disability insurer UnumProvident was recently fined $15 million and ordered to reopen 115,000 claims in a multi-state regulatory settlement, and the California Department of Insurance separately fined Unum $8 million and ordered the insurance company to reopen an additional 26,000 claims. The fines against UnumProvident were the largest in insurance regulatory history. Now one of the San Francisco attorneys who assisted in the three-year investigation of Unum, Ray Bourhis, has petitioned California Insurance Commissioner John Garamendi to “make good on his promise to kick the Company the hell out of the largest insurance market in the world. And that’s what I’m calling on Garamendi to do. Period.”
Bourhis tells the Insurance Journal:
John Garamendi was right last October when he called UnumProvident an “outlaw company.” That’s exactly what they are. And Garamendi should make good on his promise to kick them out of California if they continue breaking the law.
The investigation of Unum concluded that the disability insurance company was engaged in widespread violations of state insurance regulations and bad faith claim denials and terminations. According to Bourhis, “The truth is that no matter how much you fine them, it still pays for them to do this. . . The company is making the disabled destitute, policyholders whose claims it was ordered to reopen, wait — often for years — for their reevaluations. This is despite the fact that the law requires claims to be handled ‘promptly, fairly and expeditiously.”
When the insurance commissioners of 48 states agreed to a $15 million multi-state settlement last year against Unum, California Insurance Commissioner John Garamendi rejected the settlement, stating that it did not go far enough to protect California insureds. This week, the California State Department of Insurance instead fined Unum $8 million, the largest settlement in the agency’s history, with Garamendi calling Unum an “outlaw company” that harmed consumers by denying their disability claims.
This company engaged in a strategy to increase its bottom line at the expense of its customers. — California Insurance Commissioner John Garamendi
State regulators determined that UnumProvident misinterpreted job classifications, improperly overruled doctors’ opinions and knowingly used incorrect insurance definitions to avoid payment of disability benefits owed to insureds.
While the multi-state settlement required Unum to reopen 215,000 claims and pay a fine of $15 million, the $8 million California settlement includes a third-party review by insurance experts, limits the discretion insurers have to interpret policy language and establishes a model policy that Unum and other disability insurers will be required to adhere to in California.
