Unum announced that Jack McGarry, will be taking over Unum’s closed block of business in the United States. Unum’s closed block of business includes Unum’s individual disability policies issued almost two decades ago. It is important to understand that Unum no longer sells these types of policies, which are often referred to as “Cadillac” disability policies due to the liberal language they contain. The reasoning behind Unum’s decision to have McGarry manage its closed block of business was explained by Thomas Watjen, Unum’s Group CEO:
“Our closed block of business represents over 25 percent of our capital, and I’m confident that Jack’s significant financial and operational expertise will help us improve the performance of this business.”
Unum provides no details on how McGarry intends to improve the performance of the closed block of business or how his success will be measured by Unum. However, as explained previously, the policies McGarry will be overseeing are no longer sold by Unum. Accordingly, McGarry cannot improve Unum’s closed block of business’ performance by making alterations to those policies or how they are sold. Likewise, Unum cannot legally reduce the amount of benefits that it is required to pay under the existing policies to increase profitability. Thus, the question remains – how will McGarry be able to improve the performance of a section of business that involves policies no longer sold by Unum?
Of particular concern is that one clear way for McGarry to attempt to improve the closed block of business’ performance would be to concentrate on finding ways to avoid the payment of new claims and discontinue payment of existing claims. This would certainly increase the profitability of the closed block of business and the company as a whole. You may recall that Unum has a long and nefarious history of bad faith claims practices and in November 2004, the U.S. Department of Labor and the state insurance regulators forced Unum and its related companies to enter into a settlement agreement that required it to reassess approximately 200,000 disability benefit claims that it previously denied or terminated and required Unum to pay a $15,000,000.00 penalty (one of the largest fines paid by an insurance company in history). Unum’s improper management of both individual and group claims was featured on 60 Minutes and Dateline NBC, was the subject of numerous articles and books, and was discussed in multiple Senate hearings. Following the multi-state reassessment, Unum was supposed to install new claims procedures to ensure fair and objective claims handling practices. However, it has long been a concern that Unum has just become better at cloaking its activities. As such, Unum’s statement that it anticipates that McGarry will be able to improve the performance of its closed block of business is particularly alarming. For this reason, the disability insurance attorneys at Disability Insurance Law Group will continue to follow Unum and McGarry’s activities.