Did Legal Maneuvering Work in Unum's Favor?

New York, NYA complicated series of events appears to have stymied what may have otherwise been a legitimate claim against Unum by a group of plaintiffs alleging the undue termination and denial of their claims due to the defendant's alleged quotas for revenue and profit. The class-action lawsuit was dismissed by a Federal Judge in New York, primarily due to the adoption of a Regulatory Settlement Agreement (RSA) that was put into place after the class-action lawsuit against Unum had already been launched.

Here's the story. The plaintiffs—Theresa Keir, Michelle Washington, Karen Gately and Thomas Rocco—brought a federal lawsuit against Unum Insurance and six of its subsidiaries after the plaintiff's claims for disability insurance benefits were denied or terminated.

At about the same time as the lawsuit was ongoing, in 2004 Unum and the US Department of Labor (DOL) entered into an RSA that required Unum to implement changes to its management and corporate governance. The agreement also mandated Unum to create a new unit of experienced claims handlers to reassess previously denied or terminated claims, and to implement procedures for processing claims that would make available to claimants properly trained personnel for fair and equitable handling of claims.

Unum Provident, which has since become known as Unum Group, was also required under the RSA to pay a fine totaling $15 million.

Four years later, in April 2008, regulators with the DOL had determined that Unum had met all requirements of the RSA. While Unum deserves credit for undertaking the provisions of the RSA as required, the existence of the RSA and the successful adoption of its tenets by Unum appears to have played a major role in the dismissal of the class-action lawsuit.

To wit, on June 18 of last year, the plaintiffs filed a motion for partial summary judgment on their breach of fiduciary duty claim under ERISA 502(a)(3) pertaining to the alleged existence of targets for terminating disability claims—targets that were apparently established in an earlier lawsuit. The plaintiffs also asked that their previously denied claims be reassessed.

Unum Life Insurance, conversely, filed a cross motion for summary judgment four days later, seeking dismissal of the lawsuit based on lack of evidence and the existence of the RSA that rendered the plaintiff's claims moot.

The Court agreed with Unum, pointing to the fact that Unum had successfully implemented procedures that were compliant under ERISA and, thus, an ongoing ERISA violation alleged by the plaintiffs was questioned.

Had the RSA not been implemented in the first place, might the plaintiffs have benefitted from a more favorable ruling? Was Unum, formerly known as First Unum, able to use the RSA as legal leverage to defeat plaintiff claims that may have had merit? Unum has been previously linked to bad faith insurance practices and the alleged denial of otherwise legitimate claims. There was no word if the plaintiffs were in a position to appeal the ruling.