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UnumProvident Hit With $84.5M Verdict

Apr 3, 2003 | AP

A federal jury in Arizona has slapped disability insurer UnumProvident Corp. with an $84.5 million verdict for mistreating an injured policyholder, marking the latest rebuke of the company's business practices.

The jury ordered the award, including $79 million in punitive damages, on Wednesday after concluding that two UnumProvident subsidiaries and another insurer, General American, acted in bad faith in its handling of a claim by Scottsdale, Ariz. cardiologist Joanne Ceimo.

The verdict is the largest award so far in an onslaught of lawsuits that accuse Chattanooga, Tenn.-based UnumProvident of brushing aside legitimate injury claims as part of a long-running campaign to boost profits.

Evidence from previous policyholder cases against UnumProvident, the nation's largest disability insurer, helped pave the way for the latest verdict, said Steve Dawson, Ceimo's attorney.

"As more of this story sees the light of the day, there is no way these practices will be condoned," Dawson said.

UnumProvident plans to appeal the verdict, said spokesman Thomas White. The company believes the jury was prejudiced by General American documents that had nothing to do with the way UnumProvident's subsidiaries, Paul Revere and Provident Life, processed claims.

General American sold the policy to Ceimo and then hired the UnumProvident subsidiaries to manage claims. The companies later worked out an arrangement that required Paul Revere to cover 80 percent of the claims with General American paying the remainder, Dawson said.

Under her policy, Ceimo was entitled to a monthly benefit of $12,000 for the rest of her life if she became permanently disabled. She had to curtail her activities as a cardiologist after a neck injury caused her hand to shake, preventing her from performing delicate procedures such as angioplasty.

The jury verdict continues a long stretch of adversity for UnumProvident, including hundreds of policyholder lawsuits that have attacked the company and prodded insurance regulators in several states to investigate its practices.

Georgia fined UnumProvident $1 million last month for its claims handling practices.

UnumProvident raised new worries last week by warning that it will restate its earnings for the past three years to resolve Securities and Exchange Commission concerns about its investment disclosures.

The headaches contributed to the firing of UnumProvident's chief executive, Harold Chandler, earlier this week.

The Arizona verdict followed a bit of good news for UnumProvident from California. In a decision released earlier this week, a Marin County Superior County judge reduced a $31.7 million verdict against UnumProvident to $6.1 million.

In her decision to lower the amount due an injured eye surgeon, Judge Lynn O'Malley Taylor still scolded UnumProvident for setting up a system that appears to put more emphasis on company profits than policyholder claims.

"There is clear and convincing evidence that (UnumProvident's) bad faith was part of a conscious course of conduct firmly grounded in established company policy," O'Malley Taylor wrote.

UnumProvident hasn't decided whether it will pursue further appeals of that case, White said.

Randall Chapman, the Novato eye surgeon who sued after UnumProvident rejected his claim, plans to seek a new trial because the reduced damages ordered by the judge "represents a license to steal," said Arnold Levinson, Chapman's attorney. "If that is the highest penalty the company has to pay, then (management) will just keep doing what they have been doing."

If the verdict in her case withstands appeal, Ceimo plans to donate half the amount to students who need economic aid. "This was never about the money," she said. "It was always about stopping these insurance companies from intentionally hurting people."


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