October 28, 2005
UNUMPROVIDENT NEMESIS FILES FOR CLASS ACTION
By John Roemer
Daily Journal Staff Writer
Veteran insurance industry attack dog Ray Bourhis of San Francisco has escalated his long-running war against UnumProvident Corp. with a fresh lawsuit intended to net billions, not the mere millions he has won in earlier cases.
Bourhis and law partner Alice J. Wolfson filed a class action complaint in San Francisco County Superior Court late Wednesday, claiming the big disability insurer defrauds its customers. Hangarter v. The Paul Revere Life Insurance Co., 05-446073.
Their firm, Bourhis & Wolfson, has long faced off in court with UnumProvident and its Paul Revere subsidiary.
The lead plaintiff, Joan Hangarter, is a former Berkeley chiropractor who won a unanimous $7.67 million federal jury award after she became disabled by tendonitis and Paul Revere denied her benefits. The verdict included $5 million in punitives.
The new suit seeks billions of dollars in premium refunds and damages for claims denied to California policyholders, who Bourhis says number in the millions. He asserts they were victims of a predatory UnumProvident “bait and switch” scheme to avoid paying claims.
The lawsuit filed Wednesday piggybacks on a recent major blow struck by state insurance regulators against UnumProvident.
On Oct. 3, California Insurance Commissioner John Garamendi branded UnumProvident “an outlaw company” and announced a settlement that requires it to pay the state $8 million in fines, reconsider thousands of claim denials and change the way it processes claims.
It was the largest civil penalty California’s insurance regulators have ever imposed.
The Associated Press quoted Chattanooga, Tenn.-based UnumProvident’s president, Thomas Watjen, as disagreeing with Garamendi’s allegations but deciding to settle to “remove the regulatory cloud hanging over us.”
Like Garamendi, Bourhis has long maintained that the company “systematically” sought ways to avoid paying claims.
That argument figures into a number of lawsuits he has filed on behalf of individual policyholders. One of Bourhis’ plaintiffs was Susan McGregor, a former court reporter for San Francisco County Superior Court Judge Alfred G. Chiantelli. After Paul Revere denied her severe repetitive stress injury claim on the theory she could still work as a proofreader, a federal jury awarded McGregor $1.2 million.
With the new class action case, Bourhis said he expects Garamendi will be a star witness at trial – or at least that the court will take judicial notice of the state Department of Insurance settlement with UnumProvident.
On Thursday, a UnumProvident spokeswoman said the company had anticipated Bourhis’ suit, but that its settlement with Garamendi foreclosed the claims.
The suit “doesn’t surprise us, coming from Mr. Bourhis,” said Mary Clarke Guenther, the company’s media relations manager. “We find his latest complaint completely without merit and believe the recent settlement with California makes Mr. Bourhis’ charges moot.”
Guenther supplied statistics to demonstrate her company’s improved track record. According to a UnumProvident fact sheet, 91 percent of the half million new claims submitted in 2004 were paid, for a total of $5.9 billion in benefits.
Lawsuits against UnumProvident declined 45 percent and 26 percent respectively over the past two years, the fact sheet stated. The company also reported that customer satisfaction ratings are at record highs. Ninety-eight percent of UnumProvident customers agree they would recommend the company to others, according to a company-sponsored 2005 survey.
Even so, the Garamendi investigation provided damning evidence that Bourhis is eager to use in court.
Garamendi said at his Oct. 3 Los Angeles press conference that UnumProvident “has a corporate policy established at the highest level to systematically deny legitimate claims.”
The insurer settled similar allegations with 48 other states in 2004 for $15 million, a sum Bourhis said was far too low.
Bourhis’ complaint mirrors Garamendi’s statements.
Wednesday’s suit claims that UnumProvident customers were promised total disability payments if they became unable to perform their jobs because of injury or illness. But the company in 1993 began secretly reducing amounts it planned to pay by reinterpreting policies to eliminate coverage, according to the complaint.
Even UnumProvident customers who never made a claim are victims who deserve refunds, Bourhis said. Those who have been wrongly denied claims should get even more, he added.
That would include customers like Hangarter. When she became unable to work as a chiropractor, the insurer paid her benefits for 18 months, then reclassified her occupation as “business owner” and ruled she was not disabled because she could perform bookkeeping tasks.
According to a claim denial letter UnumProvident sent Hangarter, the company tried to persuade her that her claim fell under the Employee Retirement Income Security Act of 1974, the federal law that bars damages awards or attorney fees for insurance bad faith practices. Claimants’ recoveries are limited to the amounts they should have been paid under policy limits, an amount often too small to litigate.
But Bourhis points out that ERISA pre-emption applies only to employer-sponsored insurance policies, not to individual insurance contracts purchased by the self-employed, such as Hangarter.
Bourhis said he intends to wield the lawsuit and his newly published book, “Insult to Injury,” to promote a larger agenda: congressional reform of ERISA.
The book is subtitled “Insurance, Fraud and the Big Business of Bad Faith.”
Bourhis wants Congress to rewrite the law to allow bad faith lawsuits against insurers. He said Wednesday that he has Sen. Ted Kennedy, D-Mass., on his side and is negotiating with Arizona Republican John McCain to attain a bipartisan approach.
Kennedy wrote a back cover blurb for “Insult to Injury,” lauding Bourhis’ “strong commitment to justice by successfully taking on the insurance industry and criminal fraud.”
The Associated Press contributed to this story.