For Immediate Release
December 20, 2004

Office of Financial and Insurance Services (OFIS) Commissioner Linda A. Watters today signed a settlement agreement with the three principal insurers of the UnumProvident Group, which are Unum Life Insurance Company of America, The Paul Revere Life Insurance Company, and Provident Life and Accident Insurance Company. This order will ensure that UnumProvident appropriately pays the claims to their customers.

“These companies took advantage of citizens with disabilities by inappropriately denying their claims,” said Watters. “This settlement provides compensation to vulnerable individuals harmed by these companies.”

This order is the result of a multi-state examination that Commissioner Watters participated in, which addressed claims handling practices for both long-term individual disability income (IDI) and group disability insurance (LTD) policies. The purpose of the examination was to determine if the disability income claims handling practices of UnumProvident reflected systemic “unfair claim settlement practices”.

The examination found several areas of concern including:

• excessive reliance on in-house medical professionals
• unfair construction of attending physician or independent medical examiner reports
• failure to evaluate the totality of the claimant’s medical condition
• inappropriate burden placed on claimants to justify eligibility for benefits

These concerns led to negotiations and a settlement with UnumProvident. The settlement includes a $15 million penalty, with at least $536,191 earmarked for Michigan. It also resulted in an extensive Plan of Corrective Action. If the terms of the Plan of Corrective Action set forth in the agreement are not met, a $145 million fine will be imposed.

The Plan of Corrective Action requires the claims that were denied or terminated based upon judgmental factors be re-evaluated. About 215,000 claimants (7,672 in Michigan) whose claims were submitted on or after January 1, 2000 will receive written notice of this option. Claimants will have 60 days to respond by mail, phone, or through the companies’ website.

Policyholders whose claims were denied or accounts closed between January 1, 1997 and December 31, 1999 will not receive written notice but can request a reassessment within 180 days from the implementation date. There are 3,982 of these claims from Michigan. OFIS will attempt to identify and alert these people to inform them of their rights under the settlement.

The Plan of Corrective Action portion of the settlement provides for changes in UnumProvident’s claim organization and procedures. These changes will:

• place increased emphasis on accountability for compliance
• create increased involvement of more experienced claim personnel at the earliest stages of claims
• create increased accountability of claim management for denial and closure decisions
• provide for additional training of claim staff

Failure to make the agreed changes will result in a $100,000 fine per day. The Plan of Corrective Action also includes changes to the corporate governance of the companies.

In addition to state action, the U.S. Department of Labor conducted a related investigation of UnumProvident’s practices involving employee benefit plans covered by the Employee Retirement Income Security Act. The Department is now also a party to the settlement agreements.

Consumers who think that they may be included in this group should contact UnumProvident toll-free at 866-278-4641.