California Unveils $8M Disability Settlement with UnumProvident

October 3, 2005 ( - California Insurance Commissioner John Garamendi on Monday announced an $8 million deal with UnumProvident Corporation calling for the company to change the way it does business in the Golden State.

A Garamendi Web statement said the fine was assessed against the nation’s largest disability insurers, Unum Life, Provident Life & Accident, and Paul Revere.

According to Garamendi, the agreement settles a dispute over thousands of claims by California policyholders who he said were unfairly denied benefits. As a result of the deal, UnumProvident will change its policy language and claims handling procedures in dealing with those disputed claims and all future claims in the state, the regulator said.

The announcement said that the terms of the agreement with UnumProvident will apply to California claimants who were denied benefits between January 1, 1997 and September 30, 2005. They are now eligible to have their claims reassessed, and if necessary are entitled to a review of the reassessment by an independent expert.

Garamendi said that the settlement includes provisions requiring that:

  • California claimants who opted in under the recent multistate settlement with UnumProvident will be reassessed under California settlement standards. Last year, UnumProvident signed a settlement with 48 other states over some of the same practices, in addition to paying a fine of $15 million (See  State, Federal Regulators Crack Down on Insurance Firms  ).
  • a higher standard must be met for the insurer to reject a claimant’s doctor’s opinion on disability, and the reasons must be documented in claim files
  • claimants or their doctors may request an independent medical examination
  • all other claims handling changes implemented in the multistate settlement are incorporated within the California settlement.

“This is a new day for policyholders whose disability insurance claims have been wrongly denied by insurance companies,” said Garamendi in the statement. “I am making it clear today that policies sold in California will deliver what they promise. In this state, insurers will live up to their end of the bargain.”

The case stems from a Department investigation begun in 2003 into allegations of unfair claims settlement practices by the Tennessee-based UnumProvident. The investigation uncovered more than 25 business practices that violated California law, including  knowingly applying the wrong definition of “total disability” in claims handling, selectively and inappropriately using independent medical exams and other medical information to the company’s own advantage and misharacterizing certain non-sedentary nursing occupations as sedentary, which required policyholders to find sedentary nursing work instead of receiving the disability benefits to which they were entitled
Garamendi noted that many of the provisions of this agreement will eventually apply to all other disability insurers operating in the California market. “Today’s action goes beyond UnumProvident,” he said. “California’s disability insurers now have a new standard, one that will provide a better sense of security for policyholders, which is what disability insurance is really all about.”

To ensure that all insurers are in compliance with the standards set by the agreement, Garamendi will issue a data call for purposes of reviewing all outstanding policies of other carriers writing disability insurance in California, he said in the statement.

More information about the pact is  here .