Dan Buckle blogged earlier this month about the State of Tennessee’s report on the results of the efforts by UNUM, the country’s largest disability insurer, to reevaluate its claims practices. The reassessment was required as part of UNUM's settlement of claims brought by various states against it for improper claims practices. The reassessment caused 45.1% of group long term disability claims UNUM had previously denied to be reversed. Dan puts it as succinctly as I could: "when you reverse 45.1% of your group LTD claim decisions on appeal you have a fundamentally flawed claim process."
Another piece of information from the report Dan links to reinforces the problem ERISA creates for the participants and beneficiaries it was designed to protect. For individual disability insurance policies, only 22.1% of the claims involved in the reassessment were reversed. This difference between 45.1% and 22.1% is significant. What could account for it? There may be a number of things. But one of them is almost certainly the fact that only the group long term disability claims are subject to ERISA. ERISA prohibits courts from awarding to claimants with wrongfully denied claims any consequential or punitive damages. For many, perhaps most, of the individual disability claimants, state laws governing insurance provide the possibility of claimants recovering consequential or punitive damages if claims are denied without adequate basis. Not so for ERISA.
These statistics pretty clearly demonstrate that UNUM was more aggressive in denying disability claims when it knew its insureds would have no ability to sue it for anything beyond the amount of the benefits at issue. The information in the infamous Provident Insurance Company memorandum has spread throughout the insurance industry and emboldened insurers to engage in overreaching, abusive practices in the ERISA arena. Provident was purchased by UNUM soon after it issued its memorandum.
Dan goes on to tie the report on UNUM into the oral argument in MetLife v. Glenn last month. Like just about everyone I’ve heard from who listened to or read the transcript of the argument, it struck me as an unenlightening mess. I’m not so sure that quagmire is the fault of either counsel or the Justices. The whole area of conflict of interest analysis in ERISA is very muddied up. It piques my interest in how the Court will attempt to sort out the muck when it issues its opinion in Glenn.