UNUM class action filed by New York disability insurance attorneys is dismissed by Federal Judge

A Federal District Court in New York recently dismissed the class action lawsuit of four individuals whose disability insurance claims were denied or terminated by the Unum Provident Corporation. The individuals filed the lawsuit because they believed that Unum denied or terminated their claims to meet expectations as to revenue and profit for the corporation. To understand the Court’s decision, we must look at the underlying facts of the case. It is unfortunate that after several years of litigation, the New York disability insurance lawyers and their clients were unsuccessful in obtaining long term disability insurance benefits. The court did not dispute Unum’s unreasonable claims handling tactics, rather the court dismissed the case because the Judge felt that any further action against UNUM in light of the RSA agreement would be moot. Let’s take a closer look at the facts.

Four individuals (Theresa Keir, Michelle Washington, Karen Gately, and Thomas Rocco) brought a federal lawsuit against Unum and six of its subsidiaries after their claims for disability insurance benefits were denied or terminated. Each of the Plaintiffs made claims for disability insurance benefits under employee welfare benefit plans that were established by their employers and administered by Unum. The Plaintiffs alleged that Unum wrongfully denied or terminated their claims by using a scheme which involved the use of budgets and targets to meets revenue and profit expectations.

Plaintiffs’ Claims

Plaintiffs first claimed a breach of the fiduciary duty by Unum pursuant to ERISA 502(a)(3). Secondly, the Plaintiffs claimed interference by UNUM with their attainment of benefits pursuant to ERISA 510. The Plaintiffs sought (1) an order from the Court that Unum cease engaging in the offending practices and institute new, national procedures that are in full compliance with ERISA; and (2) an order that Unum reevaluate all of the denied, terminated or suspended claims of the Plaintiffs in full compliance with the new appropriate procedures and render disability payments to all beneficiaries whose adverse claims decisions are reversed upon reevaluation. The Plaintiffs further requested that Unum be stopped from serving as claim fiduciaries and requested that a constructive trust be created over the trust assets controlled by Unum.

The Regulatory Settlement Agreement

In 2004, and while this lawsuit was ongoing, Unum entered into a Regulatory Settlement Agreement (“RSA”) with the United States Department of Labor (“DOL”). The RSA required Unum:

  1. to make changes to its corporate governance and management (hire three independent directors to its board and create a regulatory compliance committee to monitor its claims handling practices);
  2. to create a new unit comprised of experienced claim handlers to reassess previously denied/terminated claims;
  3. to set forth new procedures for processing claims (have sufficient training for all personnel, provide notice to claimants of the information it would collect, and to work with claimants to obtain any missing information); and
  4. to pay a $15 million fine.

By April 2008, the Lead Regulators for the DOL found that Unum had implemented all the required changes and that all the requirements set forth in the RSA had been met.

Motions for Summary Judgment

On June 18, 2010, Plaintiffs filed a motion for partial summary judgment. The Plaintiffs argued that they were entitled to summary judgment on their ERISA 502(a)(3) breach of fiduciary duty claim because the existence of the Unum’s alleged scheme to use budgets and targets to terminate disability claims was apparently established by the findings of fact in another lawsuit, Merrick v. Paul Revere Life Ins. Co. Furthermore, the Plaintiffs requested a reinvestigation and reassessment of their denied claims, as well as an injunction to prevent Unum from using the budgets and targets scheme.

Similarly, Unum filed a cross-motion for summary judgment on June 22, 2010, where the Unum sought the dismissal of all of the Plaintiffs’ claims. Unum argued that the Plaintiff’s contention regarding the application of the Merrick case is made moot because of the RSA between Unum and the Department of Labor. Unum further argued that there was no basis for the Plaintiffs’ request for reevaluation of their claim under ERISA 502(a)(3) because such relief is available under ERISA 502(a)(1)(B). Lastly, Unum argued that the Plaintiffs failed to produce sufficient evidence to support their ERISA 510 claim.

Plaintiff’s Claim for Injunctive Relief pursuant to ERISA 502(a)(3)

Section 502(a)(3) of ERISA provides that a civil action may be brought by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan. The Plaintiffs asserted a claim for breach of fiduciary duty and sought injunctive relief using 502(a)(3) to bring Unum’s policies and claims processing procedures into compliance with ERISA.

In light of Unum’s Regulatory Settlement Agreement (“RSA”) with the United States Department of Labor (“DOL”) and the Lead Regulators confirmation that the RSA was successfully implemented, the Court found that the Plaintiffs’ claim was moot. It was difficult for the Court to see how there could be an ongoing ERISA violation if Unum had already implemented ERISA-compliant practices and procedures for processing disability insurance claims. Accordingly, the Court granted Unum’s motion for summary judgment on the Plaintiffs’ request for prospective injunctive relief under ERISA 502(a)(3).

Plaintiff’s Claim for Re-Evaluation of Denied Claims pursuant to ERISA 502(a)(3)

Under 502(a)(3), the Plaintiff attempted to have the court order that Unum reevaluate all the denied/terminated/suspended claims under the new procedures and render payments to those who claims are reversed after the reevaluation. However, Unum pointed out that such form of relief is available under 502(a)(1)(B) and does not qualify as “other appropriate equitable relief” under 502(a)(3).

The Court stated that 502(a)(1)(B) specifically permits a plan participant or beneficiary to bring a civil action to recover benefits due to him under the terms of the plan, to enforce the rights under the terms of the plan, or to clarify the rights to future benefits under the terms of the plan. See, Wilkins v. Mason Tenders Dist. Council Pension Fund. In fact, the Court stated that the Plaintiffs requested relief under 502(a)(3) is precisely the type of relief that is available under 502(a)(1)(B). Because of this, the Court held that Plaintiff’s request for reevaluation and payment under 502(a)(3) is inappropriate and unnecessary. Accordingly, the Court granted Unum’s motion for summary judgment on the Plaintiff’s second claim.

Plaintiff’s Claim for Interference of Benefits pursuant to ERISA Section 510

Section 510 of ERISA provides in part:

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provision of an employee benefit plan… or for the purpose of interfering with the attainment of any right to which such participant may be come entitled under the plan.

The Plaintiffs argue that as claims administrators, Unum engaged in prohibited acts to interfere with the claimants’ right under the subject disability plans in violation of Section 510. Unum argued that this claim under 510 should be dismissed because the Plaintiffs fail to offer any evidence of interference by Unum with the Plaintiffs’ employment relationships.

The Court stated that Section 510 was designed primarily to prevent unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights. See, Dister v. Cont’l Grp., Inc. Because of this, the Court felt that the plaintiff must show evidence from which a reasonable jury could conclude that Unum took some adverse action that affected the plaintiff’s employment with the intent to interfere with the plaintiff’s benefits rights under ERISA. Since the Plaintiffs offered no such evidence, the Court granted Unum’s motion for summary judgment on the Plaintiffs’ Section 510 claim.


The Court ultimately dismissed the Plaintiff’s entire case. The disability insurance attorneys that filed this lawsuit should be applauded for their effort, however the Federal Court did not agree with their legal theory. Attorneys Dell & Schaefer represented numerous UNUM policyholders during the claim reassessment period and recovered millions of dollars for UNUM disability claimants.

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