As state regulators scrutinize the claims practices of disability-income insurer UnumProvident Corp., a document obtained by policyholders’ attorneys shows the insurer’s intent to use a law meant to protect workers’ retirement savings to help it save money on claims, Thursday’s Wall Street Journal reported.
The memo, written in 1995, says Provident Corp., which merged with Unum Corp. in 1999, had formed a “task force” to identify policies covered by the Employee Retirement Income Security Act of 1974. “The advantages of ERISA coverage in litigious situations are enormous,” reads the memo, written by Jeff McCall, at the time an assistant vice president in the claims department at Provident. ” There are no jury trials. There are no compensatory or punitive damages.”
UnumProvident said the memo was merely an attempt by the company to better comply with Erisa, which governs many of its claims practices. But the memo, a copy of which was reviewed by The Wall Street Journal, adds fuel to critics’ complaints UnumProvident in some instances has been overzealous in denying claims.
The insurer says it pays all legitimate claims and that critics, including some former employees who recently have given sworn statements to plaintiffs’ lawyers, have distorted its approach, which is geared toward getting employees back to work. The Chattanooga, Tenn., company’s claims-handling procedures are being scrutinized by state insurance regulators in Georgia and California.
Erisa long has been a frustration for plaintiffs’ lawyers. Under the law, a policyholder who sues an insurer alleging a claim was mishandled can’t collect any court award other than restoration of policy benefits and in some cases attorneys’ fees. Erisa doesn’t allow awards for punitive damages.