A class action lawsuit has been filed in New York against Chattanooga-based UnumProvident Corporation, the nation’s largest disability insurer, Bloomberg.com reported.
The suit claims UnumProvident has been systematically denying claims for long-term disability insurance by thousands people too sick or too injured to work.
The suit says the firm violated its duty under federal insurance laws by paying bonuses to its workers based on the number of claims they denied and that it operated “long-term disability denial factories,” where in-house doctors rubber stamped decisions made by non-physicians.
UnumProvident has denied the charges.
Dr. Patrick McSharry, a former UnumProvident medical director, filed suit here.
He was among former and current UnumProvident employees appearing on a recent Dateline report on NBC TV about alleged abuses at the firm.
Disability insurers have started focusing their claims handling strategies to root out fraud. During economic downturns UnumProvident and other disability insurers have to watch for customers who may try to stretch their benefits or file fraudulent claims, insurance industry analysts said.
The suit follows a report last month on General Electric Co.’s NBC about improper denials of coverage by UnumProvident. McSharry was among several ex-employees who were interviewed in the “Dateline” broadcast.
A UnumProvident spokesman, Thomas White, said the company hadn’t seen the suit and couldn’t immediately comment. Shares were down 45 cents, to $20.58, at 3:09 p.m., in trading on the New York Stock Exchange.
In a statement issued about two weeks before the “Dateline” broadcast, the company said it paid more than $3.6 billion in disability-related claims last year.
“The company is proud of its record in paying claims and of the more than 3,000 people who work in the company’s claims area,” the statement said.
The class action lawsuit was filed in federal court in New York.
It asks that UnumProvident be ordered to review claims it denied and to change its practices. It does not seek damages.