Texas to Receive $1M from Multi-State Settlement with Disability Insurers

The Texas Department of Insurance announced its participation in a nationwide settlement with three disability insurers owned by UnumProvident Corp. over allegations of improper claims handling practices.

The settlement was reached by lead insurance regulators in Maine, Massachusetts and Tennessee on behalf of policyholders in 47 states and the District of Columbia. The settlement calls for Unum to pay a fine of $15 million and to reassess the claims of more than 200,000 policyholders going back to 1997.

The three insurers in question are Unum Life Insurance Company of America, The Paul Revere Life Insurance Company, and Provident Life and Accident Insurance Company. The U.S. Department of Labor, which conducted a related investigation of UnumProvident’s practices involving employee benefit plans covered by the Employee Retirement Income Security Act, is also a party to the settlement agreements.

Texas will receive approximately $1 million of the $15 million fine. In addition, every Texas resident whose disability claim was denied by the companies after Jan. 1, 2000 (26,584 individuals) will receive a notice giving them the option to effectively start their claim process over again.

All Texas residents whose claims were denied between Jan. 1, 1997, and December 1999, (7,980 individuals) will also have the option to have their claims re-examined, and their employers will be notified of this option. TDI will also place the claim form documents on the TDI Web site. The lead states will closely monitor the reassessment process, and the penalties for improperly denying claims are stiff.

The multi-state market conduct examination identified several claims handling practices of concern to the state insurance regulators, including:

· excessive reliance on in-house medical staff to support the denial, termination, or reduction of benefits;
· unfair evaluation and interpretation of attending physician or independent medical examiner reports;
· failure to evaluate the totality of the claimant’s medical condition; and
· an inappropriate burden placed on claimants to justify eligibility for benefits.

Texas Insurance Commissioner José Montemayor signed a Consent Order accepting the settlement terms on behalf of Texas policyholders.

“This is one of the largest multi-state regulatory actions to date and we’re proud to be part of it,” Montemayor said. “The settlement will benefit Texas consumers whose claims may have been improperly denied.”