UnumProvident Says Judge Asks for Drop in Award

A day after a Phoenix jury hit UnumProvident Corp. with an $84-million award in a bad-faith case, the nation’s largest disability insurer said Thursday that a Northern California judge had recommended that an earlier $31.6-million verdict be reduced to $5 million.

Unum acknowledged that it made the unusual announcement in an effort to balance news coverage of the Phoenix award, which is believed to be the largest of several recent verdicts against the company.

“We felt like we needed to get a headline out there so when these stories are reported, this case is put into its proper perspective,” said Thomas A.H. White, vice president of investor relations.

In January, a Marin County jury concluded that Unum had improperly denied disability benefits to Dr. Randall Chapman and awarded the Novato, Calif., eye surgeon $1.6 million in past and future benefits and $30 million in punitive damages.

In an order dated March 25, Superior Court Judge Lynn O’Malley Taylor called the punitive damage award excessive and recommended that it be scaled back to $5 million.

San Francisco lawyer Arnie Levinson, who represents Chapman, said his client will exercise his option to have a new jury decide punitive damages, and Levinson expects the award to be at least as large.

“We think it’s going to take more than $5 million to effect change in a company that’s worth nearly $7 billion,” he said. “That $84-million verdict shows how reasonable our jury was.”

The Chattanooga, Tenn.-based company is besieged by hundreds of suits from doctors and other professionals who were denied coverage after buying policies that promised to pay off if a disability or illness prevented them from practicing their chosen occupation.

The Phoenix case is the biggest verdict since two years ago, when a Florida jury awarded $36.7 million to an eye surgeon whose claim was denied even though Parkinson’s disease made his hands tremble. Last year, a federal judge in San Francisco upheld an $8-million award to a disabled chiropractor and ordered the company to stop denying legitimate claims.

The Phoenix award issued Wednesday includes $79 million in punitive damages. In that case, Dr. Joanne Ceimo, a cardiologist, had purchased her disability policy from General American Life Insurance Co., which later shared responsibility of the claims with Paul Revere Co., a Unum subsidiary.

Ceimo developed debilitating osteoarthritis and in early 1995 submitted a claim. It took her three years to obtain a decision denying her claim, according to her lawyers.

It was not clear how liability for the verdict is split between General American and two Unum companies, Paul Revere and Provident Life & Accident.

White said Unum plans to appeal the verdict and believes that the judge erred in allowing jurors to see documents that predate Unum’s involvement.

“If there is ever a situation that screams for tort reform, it’s this,” White said. “You have tire companies whose tires blow out and car companies whose cars roll over and people die in those situations, and you don’t see awards anywhere near anything like this for an individual who was partially disabled. It’s just absurd.”