When the nation’s largest disability insurer set out in 1994 to cut its losses from expensive long-term claims, it created a “Hungry Vulture” award to honor its most relentless employees.
The award, handed out by the company that became UnumProvident Corp., bore a ruthless motto: “Patience, my foot I’m gonna kill something.”
The insurer scrapped the Hungry Vulture several years ago, but hundreds of unhappy policyholders allege the Chattanooga, Tenn.-based company still puts profits before the welfare of seriously ill and badly injured people.
The complaints come from people such as Loretta Hale, a once-successful San Francisco Bay area real estate broker who has been fighting to collect her disability benefits for the past 5 1/2 years while dying of cancer.
A Contra Costa Superior Court jury returned a $1.5 million fraud verdict against UnumProvident in July 2000, but the company is pursuing an appeal that may outlive Hale.
“It’s a strange feeling knowing someone wants you to die because of money,” said Hale, 49.
UnumProvident dismisses most of the allegations as the sour grapes of a relatively few duplicitous and uncooperative policyholders. The company maintains that customer complaints have been overblown by opportunistic lawyers and sensational news media accounts, including stories on CBS’ “60 Minutes” and “Dateline NBC.”
“We are 100 percent proud of our customer care organization,” said Thomas White, the company’s vice president of corporate relations.
However, a federal judge in San Francisco last month concluded that the company had engaged in a wide range of shady activity to avoid paying legitimate disability claims. U.S. Magistrate Judge James Larson criticized UnumProvident’s business practices as he upheld a jury’s $7.67 million penalty for mistreating former Berkeley chiropractor Joan Hangarter, and ordered the company to “obey the law.”
Hangarter, 53, said UnumProvident left her bankrupt and suicidal after terminating her $8,150 monthly benefit for joint and muscle injuries that prompted her to stop treating her chiropractic patients in 1997.
UnumProvident and Hangarter have been fighting over the severity of her injuries since 1999.
The legal victories have done Hangarter and her two children little good so far.
A self-described “welfare millionaire,” Hangarter commutes to her $12-per-hour bookkeeping job in a well-worn 1981 Volvo. Before she got hurt, Hangarter charged $350 per hour at her chiropractic practice, helping to lift her income to $110,000 in her best years.
“What [UnumProvident] is doing is fraud,” Hangarter said. “The management deserves to be thrown in jail.”
Much of the judge’s stinging 62-page rebuke in Hangarter’s case echoes the allegations of misconduct made against UnumProvident in lawsuits that have flooded the nation’s courts over the past five years.
In a September court filing, UnumProvident listed more than 2,500 policyholder lawsuits accusing the company of fraud or breach of contract. The suits were filed between January 1997 and August of this year.
The biggest judgment against UnumProvident so far occurred last year when a jury in a Florida federal court awarded $36.7 million to John Tedesco. The former ophthalmologist alleged a UnumProvident-owned disability carrier refused to pay his benefits after Tedesco was diagnosed with Parkinson’s disease and a herniated disk.
A federal lawsuit filed last month in New York seeks to represent tens of thousands more UnumProvident policyholders as part of a class-action complaint against the company. Insurance regulators in California, Georgia and Tennessee also say they will investigate policyholder complaints.
UnumProvident says the complaints represent a small fraction of the roughly 400,000 disability claims it processes annually. The company says it rejects less than 2 percent of those claims.
“Disability is UnumProvident’s primary business, so integrity in claims paying and helping people return to work is essential to the company’s long-term economic success,” the company said in a statement.
Most of the suits against UnumProvident revolve around expensive long-term disability policies sold to affluent doctors, lawyers and small-business owners during the 1980s and early 1990s. Although expensive, the policies proved popular because they couldn’t be canceled and the premiums couldn’t be raised, assuring injured or ill workers income comparable to what they made before a career-debilitating setback.
A confidential 1994 company memo produced in one of the court cases said that these policies “were poorly underwritten and underpriced.”
The company, then known as Provident, sold more than 600,000 of these “own-occupation” policies and consistently made money on them until the early 1990s, the memo said.
With its losses mounting in 1993, the company set aside $275 million to cover future claims on the noncancelable policies.
Provident’s intensifying concerns about its disability losses coincided with the November 1993 hiring of a former South Carolina banker, J. Harold Chandler, to revive the company.
Chandler engineered a turnaround that has produced $1.4 billion in profits since 1999. While recovering, the company became an even bigger force in disability insurance by buying two of its major rivals, Paul Revere and Unum Corp.
For his efforts, Chandler collected $43.9 million in salary, bonuses and gains from exercising stock options from 1998 through 2001, according to documents filed with the Securities and Exchange Commission.
UnumProvident’s shareholders haven’t fared so well. UnumProvident’s shares have been trading in the $16 range, approximately 70 percent below their value in June 1999, when Provident joined forces with Unum.
With her cancer in remission, Hale is determined to live long enough to see UnumProvident punished. There are still days Hale can’t muster the strength to get out of bed and she isn’t certain her sickness is to blame.
“How many people can take the mental duress that it takes to fight a company like this?” she wondered. “Sometimes, I think this has been more stressful than cancer.”