High Court Sides With Plaintiff in Unum Lawsuit

San Francisco, CAAn Unum lawsuit that originally went in favor of the defendant was reversed by a higher court, which found fault with some of the practices and procedures of Unum insurance, and remanded the case in favor of the plaintiff.

Plaintiff Leah Bilyeu was employed by Morgan Stanley, but alleging she suffered from various medical conditions that prevented her from performing adequately in any meaningful occupation, Bilyeu had filed for long-term disability benefits through her employer. First Unum Life Insurance Company was identified as the plan administrator for the Morgan Stanley Group Insurance plan.

According to Insurance Law & Litigation Week (7/23/12) Bilyeu's personal physician dutifully forwarded an expert medical opinion on behalf of his patient to Unum disability insurance. However, Unum determined Bilyeu's claim was subject to a two-year limitation, informing its client that she had the option of submitting a written appeal within 180 days.

Dr. Kenneth Proefrock forwarded an appeal on behalf of his patient within the mandated time frame. Unum Group allegedly failed to acknowledge receipt of the appeal document, nor did the insurer submit a reply, it is alleged.

Bilyeu, in turn, launched a Unum lawsuit against the insurer claiming wrongful termination of her long-term disability benefits under ERISA. Unum countered that Bilyeu had not fully exhausted all of her administrative remedies as required under ERISA. The insurer also sought restitution of overpaid benefits, according to the report.

While the district court found in favor of Unum, Bilyeu appealed to a higher court and the United States Court of Appeals, Ninth Circuit vacated the lower court's ruling on grounds that Bilyeu, in the Court's view, had acted reasonably in the face of what were described as ambiguous communications on the part of First Unum, and the insurer's apparent failure to engage in a meaningful dialogue with Bilyeu. While the Ninth Court recognized that Bilyeu might, indeed have failed to exhaust all of her administrative remedies under ERISA, the exhaustion requirement should be excused in light of Unum's actions.

Unum Group, known at one time as Unum Provident, had sought to make a case for denial of benefits due to the exhaustion requirement. The Ninth Circuit Court disagreed—as it did over Unum's assertion that Bilyeu had been overpaid benefits. In the Ninth Court's view, the lower court erred in awarding damages to Unum.

Unum, one of the largest providers of insurance in the world, has long suffered a dubious reputation equating to denial of benefits even though claims are legitimate and policies are in good standing. Various allegations have surfaced accusing Unum of systematically targeting policyholders at random for denial of Unum disability claims in an effort to avoid payouts.

Former Unum employee Linda Nee—today a consumer advocate and consultant—maintains she was mandated to deny legitimate claims as part of her job with Unum Group. Many disgruntled Unum policyholders have filed a Unum lawsuit alleging bad faith insurance practices. This case is Bilyeu v. Morgan Stanley LTD Plan, No. 10-16070, United States Court of Appeals, Ninth Circuit.