Litigating an Insurance Bad Faith Case Based on a Denial of Disability Benefits

Litigating an insurance bad faith case based on a denial of disability benefits has become increasingly complex in an age where mergers and acquisitions may put distance between your defendant and your ability to prove a company-wide plan to deny benefits in order to increase profits-a clear necessity of you hope to obtain a punitive damage award.

Key to proving your case is a carefully constructed discovery plan. This includes knowing what documents to ask for, knowing who to depose and knowing the defenses you are likely to face. In addition, it will be important to be able to use past deposition and trial testimony obtained in other cases against the same or related entity.

Take, for example, UnumProvident Corporation and its group of companies. In the early 1990s there were three major competitors in the individual disability insurance business: Provident Life and Accident of Chattanooga, Tennessee; Paul Revere of Worcester, Massachusetts and Unum of Portland Maine. In 1993, following $423 million in losses that resulted from the unpredicted plummeting of interest rates, Harold Chandler, a banker, was selected to take over as President of Provident Life and Accident Insurance Company. Not long thereafter a Provident tax specialist who had never before handled a claim, Ralph Mohney, was tapped to head the entire individual disability claims department. Chandler and Mohney set in motion a series of “claims initiatives” aimed at increasing profitability by terminating claims. Memo after memo was generated documenting the tens and hundreds of millions of dollars that Provident was saving as a result of these “initiatives.” These efforts were so successful financially, that in 1997 Provident took over its former competitor Paul Revere and assumed control of its claims department. The resulting company was named the Provident Companies. Chandler remained as President and Mohney remained as the head of claims. Provident Companies then merged with Unum in 1999, and the resulting company was named UnumProvident. The same thing happened again. Now Chandler was the President and Mohney the head of claims for UnumProvident. Throughout all of this it was clear that Chandler, Mohney and their claims philosophy were carried over.

This may seem like a simple path to follow but UnumProvident is very adept at distancing itself from the companies it controls, and therefore, distancing themselves from the smoking gun documents that can be so convincing to a jury.

Connecting these dots is imperative especially when you consider that 792 cases were filed in Federal Courts naming Unum or UnumProvident in the 192 days preceding July 9, 2002. This number does not incude cases filed in State Courts or cases in which an entity other than Unum or UnumProvident was named. Convincing a judge and jury that a claims philosophy memorialized by a “smoking gun” document in 1995 was used in the denial of your client’s claim in the year 2000 can make the difference between obtaining damages for a simple breach of contract and obtaining a verdict for bad faith and punitive damages.

Ray Bourhis and Alice J. Wolfson have been litigating on behalf of policyholders for over thirty years. In the last year and a half Bourhis & Wolfson have obtained unanimous plaintiff’s verdicts in McGregor v. Paul Revere and Hangarter v. Paul Revere, UnumProvident Corp. et al.. In Hangarter, Bourhis & Wolfson secured the largest punitive damage award in California against these companies.