More Heat For Insurer on Hot Seat

U.S. Magistrate James Larson has dropped a 62-page grenade on the nation's largest disability insurer in a first-of-its-kind order that could add fuel to a firestorm of suits against it.

The strongly worded injunction tells Tennessee-based UnumProvident Corp. to stop using biased medical examiners, targeting categories of claimants for review, destroying medical reports and withholding benefits information. If it doesn't, the company could be subject to a contempt order.

Larson upheld a $7.67 million jury verdict awarded to a chiropractor whose long-term disability benefits were cut off by the company. The verdict includes $5 million in punitive damages.

"Despite conclusive evidence that plaintiff was unable to work as a chiropractor and that her other attempts to work had failed, after one-and-a-half years of paying benefits, defendants subjected her to a biased medical examination, then recharacterized her occupation as a business owner, rather than a chiropractor, and claimed she was not totally disabled because she could perform bookkeeping or teach a class or see two patients per hour," Larson wrote.

Berkeley chiropractor Joan Hangarter filed for disability benefits after experiencing severe pain and a degenerative cervical disk disease that prevented her from treating patients. She was forced to file for bankruptcy after Paul Revere Life Insurance Co., a subsidiary of UnumProvident, rescinded her benefits. She and her two children eventually began receiving food stamps.

UnumProvident on Thursday released a three-page response blasting Larson's interpretation of the evidence. The company vowed to appeal the case to the Ninth Circuit U.S. Court of Appeals.

The order comes at a bad time for UnumProvident, which issues one out of every four disability policies in the country and faces a slew of litigation over its practices.

NBC's "Dateline" recently ran a highly critical piece on the company's practices, and the CBS program "60 Minutes" will air its own story Sunday. Georgia Insurance Commissioner John Oxendine is investigating the company, which also faces a suit by its own former medical director alleging he was fired for not denying legitimate claims.

California Insurance Commissioner-elect John Garamendi was interviewed for the "60 Minutes" story. He could not be reached for comment.

Larson's order is the first to find that the company engages in unfair business practices under California law. The company said "the opinion colors and misstates the facts in several respects."

It offered a 12-point rebuttal to various findings by Larson, including the use of biased doctors and a policy of shredding potentially explosive records.

"The company does not engage in any of the acts from which it has been enjoined," the company said. "UnumProvident and its subsidiary companies will abide by the law and the proud tradition of serving its policyholders as it has done for the past century, and will continue to do so for the next century."

A spokesman for the trade organization Health Insurance Association of America said that because of UnumProvident's pre-eminence in the industry, it has become a "natural target for the plaintiffs bar."

"For the most part, companies that are offering that product" -- high-risk disability insurance -- "are anxious to pay off legitimate claims," said Larry Ackey, HIAA's communications director. "They don't want to get a reputation as someone who doesn't pay up."

Hangarter's lawyer, Raymond Bourhis of San Francisco's Ray Bourhis, has sued the company several times. He said the company routinely finds illegitimate reasons to deny costly claims.

"What I would have thought would be a reasonably intelligent approach on their part was to say that they're going to take what [Larson] said very seriously, and will begin implementing it immediately," Bourhis said. "Instead it's more of the same … they're attacking Judge Larson. It's unbelievable."

Evan Tager, a partner at Mayer, Brown, Rowe & Maw in Washington, D.C., represented the insurer.

Bourhis said he will follow up his win in Larson's court with a class action, which he said will be filed "soon."

Another class action was recently filed against the company in New York on behalf of all policyholders who obtained the insurance through their employers -- a potential class which runs into the millions.

Evan Schwartz, at Garden City, N.Y.'s Quadrino & Schwartz, is one of the plaintiffs lawyers involved in the case. He said he's already seen the order Larson released Wednesday in Hangarter v. Paul Revere Life Insurance, 99-5286.

"We're actually engaging in a debate as to how it impacts our particular case," Schwartz said, adding that such findings by any judicial body are bound to help.

During a recent conference call with Wall Street analysts, UnumProvident CEO J. Harold Chandler was quizzed about the allegations.

He said the company has become a target for plaintiffs lawyers, but according to news reports added that if mistakes were made, the company will correct them.

"We have and will continue to learn from this experience," Chandler said. "The lessons will not go unheeded


UNUMPROVIDENT UNDER FIRE AS NBC'S DATELINE INTRODUCES STARTLING CHARGES
In Spite of Extensive Damage Control Efforts, Segment Aired As Lead Story on Sunday Night, Says Ray Bourhis

SAN FRANCISCO, Calif., - October 15, 2002 -The following statement was released by Ray Bourhis:

While representing UnumProvident claimants in dozens of individual disability cases where benefits were wrongfully terminated, San Francisco attorney[s] Ray Bourhis [], uncovered clear evidence of unfair termination practices at UnumProvident, the nation's largest disability insurer. After obtaining unanimous Federal jury verdicts involving millions of dollars, these startling disclosures led to the development of segments for both CBS' 60 Minutes and NBC's Dateline.

When hearing of the impending 60 Minutes piece, UnumProvident and its newly appointed team of public relations firms, along with its internal lawyers, issued a press release boasting of the claims the company actually does pay. "The claims UnumProvident pays are irrelevant if they are terminating valid claims pursuant to a company policy to increase their bottom line, moreover, the majority of claims paid are for short-term disabilities such as broken wrists and fingers." UnumProvident has terminated claimants with cancer, heart disease, spinal injuries, repetitive stress injuries, Parkinson's disease, AIDS and other conditions. Several of these permanently disabled people were interviewed for both the 60 Minutes and Dateline segments.

While jockeying to position the company in the midst of increasing pressure, company officials could not derail Dateline as it released its findings on UnumProvident in a segment on October 13, 2002. "You cannot dispute the facts as semantics or perception. We have thousands of documents outlining a company-wide policy for canceling claims. The documents prove that UnumProvident executives planned to cut claims to save $132 million a year. UnumProvident's statements are akin to Jesse James naming all the banks he hasn't robbed," said Ray Bourhis.