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April 2017 Archives

Did the 2004 Multi-State Settlement Deter Unum Provident From Continued Bad Faith Claims Handling?

Almost fifteen years ago, Unum Provident entered into a historic multi-state settlement with 3 lead states, 46 other states and the District of Columbia, as well as the U.S. Department of Labor, that cost it in excess of $120 million to comply, required it to reassess claims it has denied dating back to 1997, and called for an additional $15 million in fines. Maine Superintendent at the time, Alessandro Iuppa, was quoted by the Insurance Journal as saying, "This action is one of the most significant multistate insurance regulatory actions in history, providing a uniform, verifiable and effective state-based settlement for the benefit of UnumProvident policyholders nationwide." But did the over $135 million paid by Unum and the substantial, extensive corrective action and requirements of Unum under agreement, along with risk of another $145 million or more in fines, deter UnumProvident from continued bad faith claims handling?

Third Circuit Court of Appeals Determines that the Department of Labor is Not Bound by the Results of an Private Lawsuit.

In a recent case, Sec'y United States Dep't of Labor v. Kwasny,
No. 16-1872, __F.3d__, 2017 WL 1244852 (3d Cir. Apr. 5, 2017), the Third Circuit Court of Appeals determined that held that the Secretary of the Department of Labor is not bound by the results reached in a private lawsuit, for purposes of claim preclusion. The Third Circuit reasoned that the Secretary's interest in maintaining the integrity and public confidence in the pension
system outweighs the interests of private litigants. Kwasny involved a managing partner in a law firm that has since dissolved. The partner was the trustee and a fiduciary of the firm's 401(k) profit-sharing plan. He violated his fiduciary duty to the plan by directing employee contributions into the firm's general assets ins tead of the plan. The Third Circuit remanded the case to the district court, for the lower court to consider whether the Secretary's judgment should be offset by the judgment obtained by the former employee.

Cognitive and Mental Health Conditions Are Not Always Subject to a 24 Month Maximum Benefit Cap

Many group Long Term Disability policies limit the payment of benefit to 24 months if the disability is "due in whole or part to mental illness." However, insurance companies can be quite liberal with this language and apply it to claims where there are cognitive limitations that may have an organic basis or to claims where depression and/or anxiety are a reaction to an insured's physical illness but not actually the disabling medical condition. In a recent 9th Circuit case from California, the Court found that Prudential should not have applied the mental illness limitation to John Doe's claim and ordered Prudential to reinstate benefits retroactively and ongoing.

The First Circuit Court of Appeals Determines that Standard Insurance Company Acted Unreasonably Denying a Claimant Benefits, Where it Failed to Consider the Claimant's Actual Occupational Duties.

In a recent case, the First Circuit Court of Appeals determined that Standard Insurance Company acted arbitrarily and capriciously when it denied an environmental attorney with severe depression Long-Term disability insurance benefits.

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