Suits plague giant disability insurer

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http://www.bayarea.com/mld/cctimes/4773035.htm

Thu, Dec. 19, 2002

Suits plague giant disability insurer

Complaints from hundreds of ill or injured UnumProvident policyholders mount

as firm regains profitability

By Liedtke

ASSOCIATED PRESS

SAN FRANCISCO - When the nation's largest disability insurer set out in 1994

to cut its losses from expensive long-term claims, it created a " Hungry

Vulture " award to honor its most relentless employees.

The award, handed out by the company that became UnumProvident Corp., bore a

ruthless motto: " Patience, my foot ... I'm gonna kill something. "

The insurer scrapped the Hungry Vulture several years ago, but hundreds of

unhappy policyholders allege the Chattanooga, Tenn.-based company still puts

profits before the welfare of seriously ill and badly injured people.

The complaints come from people like Loretta Hale, a once-successful

Danville real estate broker who has been fighting to collect her disability

benefits for the past 51/2 years while dying of cancer.

A Contra Costa Superior Court jury returned a $1.5 million fraud verdict

against UnumProvident in July 2000, but the company is pursuing an appeal

that may outlive Hale.

" It's a strange feeling knowing someone wants you to die because of money, "

said Hale, 49.

UnumProvident dismisses most of allegations as the sour grapes of a

relatively few duplicitous and uncooperative policyholders. The company

maintains that customer complaints have been overblown by opportunistic

lawyers and sensational media accounts, including stories on CBS' " 60

Minutes " and " Dateline NBC. "

" We are 100 percent proud of our customer care organization, " said

White, the company's vice president of corporate relations.

However, a federal judge in San Francisco last month concluded that the

company had engaged in a wide range of shady activity to avoid paying

legitimate disability claims. U.S. Magistrate Judge Larson criticized

UnumProvident's business practices as he upheld a jury's $7.67 million

penalty for mistreating former Berkeley chiropractor Joan Hangarterand

ordered the company to " obey the law. "

Hangarter, 53, said UnumProvident left her bankrupt and suicidal after

terminating her $8,150 monthly benefit for joint and muscle injuries that

prompted her to stop treating her chiropractic patients in 1997.

UnumProvident and Hangarter have been fighting over the severity of her

injuries since 1999.

The legal victories have done Hangarter and her two children little good so

far.

A self-described " welfare millionaire, " Hangarter commutes to her

$12-per-hour bookkeeping job in a well-worn 1981 Volvo. Before she got hurt,

Hangarter charged $350 per hour at her chiropractic practice, helping to

lift her income to $110,000 in her best years.

" What (UnumProvident) is doing is fraud, " Hangarter said. " The management

deserves to be thrown in jail. "

Much of the judge's stinging 62-page rebuke in Hangarter's case echoes the

allegations of misconduct made against UnumProvident in lawsuits that have

flooded the nation's courts over the last five years.

In a September court filing, UnumProvident listed more than 2,500

policyholder lawsuits accusing the company of fraud or breach of contract.

The suits were filed between January 1997 and August of this year.

The biggest judgment against UnumProvident so far occurred last year when a

jury in a Florida federal court awarded $36.7 million to Tedesco. The

former ophthalmologist alleged a UnumProvident-owned disability carrier

refused to pay his benefits after Tedesco was diagnosed with Parkinson's

disease and a herniated disk.

A federal lawsuit filed last month in New York seeks to represent tens of

thousands more UnumProvident policyholders as part of a class-action

complaint against the company. Insurance regulators in California, Georgia

and Tennessee also say they will investigate policyholder complaints.

UnumProvident says the complaints represent a small fraction of the roughly

400,000 disability claims it processes annually. The company says it rejects

less than 2 percent of those claims.

" Disability is UnumProvident's primary business, so integrity in claims

paying and helping people return to work is essential to the company's

long-term economic success, " the company said in a statement.

Most of suits against UnumProvident revolve around expensive long-term

disability policies sold to affluent doctors, lawyers and small-business

owners during the 1980s and early 1990s. Although expensive, the policies

proved popular because they couldn't be canceled and the premiums couldn't

be raised, assuring injured or ill workers income comparable to what they

made before a career-debilitating setback.

A confidential 1994 company memo produced in one of the court cases said

these policies " were poorly underwritten and underpriced. "

The company, then known as Provident, sold more than 600,000 of these

" own-occupation " policies and consistently made money on them until the

early 1990s, the memo said.

With its losses mounting in 1993, the company set aside $275 million to

cover future claims on the noncancelable policies.

Provident's intensifying concerns about its disability losses coincided with

the November 1993 hiring of a former South Carolina banker, J. Harold

Chandler, to revive the company.

Chandler engineered a turnaround that has produced $1.4 billion in profits

since 1999. While recovering, the company became an even bigger force in

disability insurance by buying two of its major rivals, Revere and Unum

Corp.

For his efforts, Chandler collected $43.9 million in salary, bonuses and

gains from exercising stock options from 1998 through 2001, according to

documents filed with the Securities and Exchange Commission.

With her cancer in remission, Hale is determined to live long enough to see

UnumProvident punished. There are still days Hale can't muster the strength

to get out of bed and she isn't certain her sickness is to blame.

" How many people can take the mental duress that it takes to fight a company

like this? " she wondered. " Sometimes, I think this has been more stressful

than cancer. "