Disability Claimant Alleges Disturbing Claim Processing Practices

A disability-insurance claimant filed a lawsuit last week that contains alarming allegations of insurance company claims processing practices based on profit motives, rather than on good-faith efforts to determine whether claimants are disabled under the terms of their policies.

On May 14, former law firm employee Janet Mitchell sued Unum and her employer in federal court in Tennessee after the insurer terminated her short-term disability benefits and denied her claim for long-term disability benefits. In her complaint, she alleges:

• She stopped working because of disability based on a combination of many impairments: coronary artery disease, chronic obstructive pulmonary disease, fibromyalgia, insomnia, osteoarthritis, depression, lumbar radiculopathy, tendinitis, hypertension, carpal tunnel syndrome, trochanteric bursitis of the hip and renal insufficiency.
• She had received STD benefits for about half the 180-day maximum, when she was terminated. Her STD plan is governed by state law, under which she alleges breach of contract and bad faith.
• Her LTD application was denied. She requests back benefits under ERISA.
• Both claims were again denied on appeal within the insurance company.

Mitchell first explains a practice that courts tend to frown upon. While her own doctors supported her disability claim, Unum relied on the opinion of its own medical expert who reviewed the paper file, but did not conduct a medical examination, as the basis for denying her claim. The insurer did not order an Independent Medical Examination or IME to settle the question.

Second, the plaintiff describes a classic institutional conflict of interest. When Unum decides that a disability claim is valid, it also assigns potentially costly monetary liability to itself, which in turn cuts into the company’s bottom line.

Third, the complaint details an internal practice that sets monthly financial goals that are met by denying or terminating enough claims to meet the targeted dollar amount, a practice called claim recovery. Specific accounts are selected for denial based on this financial incentive, rather than on the merits of the claims. The practice is formalized within the business and involves selection of “recoverable claims” at the vice president level, passed down the line to claims administrators, called directors.

The lists of accounts targeted are either communicated verbally or on paper, which is then shredded. Performance goals and bonuses are linked to meeting daily claim recovery numbers.

Accordingly, Mitchell alleges that Mitchell’s claim was “target[ed] for denial,” rather than decided on “impartial weighing of the evidence.” Further, the complaint asserts that the denial violates ERISA as arbitrary and capricious and not supported by substantial evidence.

(The complaint in Mitchell v. Unum Life Insurance Company of America is available on Westlaw at 2018 WL 2213236.)