SACRAMENTO, Calif.—UnumProvident Corp. will pay a record $8 million fine, improve claims handling and change the definition of “total disability” in policies sold in California, the company announced today.
The measures are part of an agreement reached with California Insurance Commissioner John Garamendi, who opted out of a $15 million settlement that Chattanooga, Tenn.-based UnumProvident reached last fall with 48 other states over its claims handling practices.
While the other states merely identified areas of concern with UnumProvident’s claim practices, California regulators said they uncovered 25 state law violations. They include knowingly applying the wrong definition of total disability in claims settlements and improperly using independent medical exams to the company’s advantage.
In a statement, UnumProvident said it does not agree with California regulators’ allegations and characterization of its past claims handling. The company also said that since 2003, it has restructured, hired new management and improved its business process.
The terms of California’s agreement with UnumProvident apply to thousands of claimants denied benefits between Jan. 1, 1997, and Sept. 30, 2005. They can have their claims reassessed under California standards if they previously joined the multistate agreement.
The $8 million fine against the nation’s largest disability insurer represents the largest ever levied by the California Department of Insurance. All other disability insurers doing business in California eventually will have to adopt model policy language that UnumProvident has agreed to implement, according to regulators.
