Wednesday, September 12, 2012

Ninth Circuit: ERISA insurer “relied on ERISA’s deferential standard of review to avoid detection and liability”

The Ninth Circuit today issued its opinion in Stephan v. UNUM, reversing a summary judgment in UNUM’s favor and sending the case back to the district court for further proceedings.  Along the way the court described the sort of conduct UNUM has been engaging in, and the manner in which ERISA enables this unlawful behavior:

Numerous courts, including ours, have commented on
Unum’s history “ ‘of erroneous and arbitrary benefits denials,
bad faith contract misinterpretations, and other unscrupulous
tactics,’ ” McCauley v. First Unum Life Ins. Co., 551 F.3d
126, 137 (2d Cir. 2008) (quoting Radford Trust v. First Unum
Life Ins. Co.,
321 F. Supp. 2d 226, 247 (D. Mass. 2004), rev’d
on other grounds, 491 F.3d 21, 25 (1st Cir. 2007)). Indeed, in
Saffon, we attributed the trend of state prohibitions on discretionary
provisions in insurance contracts to “the cupidity of
one particular insurer, Unum-Provident Corp., which boosted
its profits by repeatedly denying benefits claims it knew to be
valid. Unum-Provident’s internal memos revealed that the
company’s senior officers relied on ERISA’s deferential standard
of review to avoid detection and liability.” 522 F.3d at
867; see also Radford Trust, 321 F. Supp. 2d at 247 n.20 (collecting
cases). Moreover, the CSA [California Settlement Agreement] notes that Unum was subject to “a multistate targeted examination” of its “claims handling practices,” which resulted in a settlement agreement similar to the CSA. And the CSA was the product of investigations by the State of California into Unum’s claims handling

Erroneous and arbitrary benefits denials.  Bad faith contract interpretations.  Other unscrupulous tactics.  Boosting profits by repeatedly denying claims it knew to be valid.  All the while relying on ERISA’s deferential standard of review to avoid detection and liability.  And these are the people we are supposed to trust because, after all, they are fiduciaries.