Insurance claims settlement announced

Claims processors at the Glendale office of UnumProvident Corp. might

have their hands full after Monday’s historic announcement that could

force the nation’s largest disability insurer to reassess up to

26,000 California claims.

The Tennessee-based corporation, which has about 2.4 million

policyholders in California, agreed to pay an $8-million fine and

reopen up to 26,000 denied claims made since Jan. 1, 1997, said State Insurance Commissioner John Garamendi Monday at two separate press

conferences.

The first news conference was conducted at the Glendale Adventist

Therapy and Wellness Center -- a branch of the hospital in Eagle Rock

-- and the second was in San Francisco.

Eligible policyholders “have the right to have their cases

reassessed by Unum and if they are denied again then a mutually

agreed upon third party will decide” the claim, Garamendi spokesman

Norman Williams said.

UnumProvident provides income protection for policyholders whose

claims are granted during rehabilitation while the policyholder

cannot work.

The $8-million fine goes into the state’s general fund and does

not directly affect any claimants, Williams said.

Irvine attorney Bob Scott, who represents clients who were denied

claims by insurance companies, said UnumProvident’s claim practices

have been suspect since Jan. 1, 1997, shortly after its ownership

changed hands.

Scott praised Garamendi for negotiating the settlement.

Unum “only got bad when they were taken over in 1996 and they

tried to be a different kind of company,” Scott said. “(Garamendi)

was able to level the playing field through use of his authority and

to get them to follow the rules, which have been in force since the

40s.”

Scott said the denial or outright ignoring of certain claims left

his clients without income protection that caused significant

hardships.

Kurt Weissenbach, of Moreno Valley in Riverside County, owned two

tire shops for more than 25 years, but after he injured his back he

filed a claim with UnumProvident in 2003 that is still unsettled,

Scott said.

Because of his shortage of income and no insurance compensation,

Weissenbach, who is in his 50s, was forced to close one of his shops

and will be requesting a reassessment of his case.

He paid premiums for more than 10 years, Scott said.

Scott expects Garamendi to continue reviewing other disability

insurers in the future.

The important thing is Californians have the peace of mind that if

they buy a disability policy and can’t work they will be protected,”

Scott said. “This is big. It is now the new standard.”

UnumProvident paid more than $600 million to California

policyholders in 2004, said Jim Sabourin, vice president of corporate

communications. UnumProvident will send letters notifying the 26,000

eligible policyholders that they can have their cases reassessed. It

is too early to determine how many reassessments the company will

have to perform or how long it will take, he said.

“It was a settlement, definitely,” Sabourin said. “That means both

parties agreed to specific terms and by doing so concludes the market

conduct examination.”

The examination started more than two years ago.

UnumProvident President and Chief Executive Officer Thomas R.

Watjen released a letter Monday to Garamendi in response to the

announcements.

“Our company has undertaken significant change over the last

several years, and we set a very aggressive agenda to both improve

all that we do and put issues of the past behind us,” stated the

letter in part. “With this in mind, although we disagree with much of

the exam report, we felt it was important to eliminate the

uncertainty this ongoing exam creates with customers, employees and

investors by entering into a settlement with the California

Department of Insurance.”

* VINCE LOVATO covers business and politics. He may be reached at

(818) 637-3215 or by e-mail at vince.lovatolatimes.com.