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Denied Claims Blog
Do Unum Lawsuits Prove ERISA Needs an Overhaul?
April 1, 2011
Unum Insurance has become notorious for denying long-term disability claims that should be paid. When insurance fails the individual, the government and taxpayers are often stuck paying the bill. Some Unum lawyers argue that the Employee Retirement Income Security Act of 1974 (ERISA) must change to protect the disabled and US taxpayers.
Unum Dominates the Market
The problem with Unum extends farther than many realize. The company is so large that millions hold policies and could therefore be subject to unfair denials. Few Unum lawsuits have been successful because ERISA allows plan administrators to tell the courts how they should interpret claim denials. As a result, disability plans tell courts that they must assume denials are correct. Denials must stand unless the disabled claimant can prove the denial was grossly unfair or capricious.
Unum is Probably Not Alone
It is likely that many other disability companies deny claim unfairly too. They just have not been as clumsy as Unum and have not yet been caught. The law needs to change to give all disabled individuals protection against unfair claims denials. The disabled often have difficulty with the simplest of tasks. Fighting an insurance company is an undue burden on them.
Litigation Not Working
Litigation alone cannot protect the masses harmed by unfair claims practices. The amount of money disability companies save by arbitrary denials is substantially larger than the cost of court awards paid out to persistent claimants. A stronger review process on denied claims would help more individuals collect the benefits they are rightly owed.
A moral hazard exists when one party is tempted to act improperly for monetary gain. Disability insurers often site this problem when arguing against laws that might benefit claimants. However, this type of hazard exists in two ways. An injured person may be tempted to exaggerate the injury to gain a larger settlement, but Unum Insurance may deny claims unfairly in order to save money as well.
Enacted in 1974, the ERISA law extended protections to the disabled that allowed for judicial review of denials. Unfortunately, the law did not specify what approach courts should take in these reviews. Courts could assume the insurance company is in the right or look at all the facts with anew under a “de novo” review. This requires the court to look at the case with new eyes, weighing all evidence equally.
The Supreme Court rightly ordered that disability claims should fall under de novo judicial review to protect disabled claimants. Inexplicably, however, the court also gave plan administrators the power to specify in the benefit plan if it preferred deferential review instead, which required courts to assume the denial is correct. Because of this decision, bad faith claims became much harder to prove. The court is required to uphold the benefit denial unless the claimant can show the denial was whimsical, random or unreasonable.
If you or someone you love was denied disability benefits unfairly, contact our office. Experienced attorneys are waiting to offer a free evaluation of your case. We will help you recover the benefits you are owed under your disability insurance policy.