Unum’s claim handling exposes them to a multi-million dollar bad faith disability lawsuit

Ronnie Hogan sued Provident Life & Accident Insurance Company (Provident) and Unum Group Corp. (Unum) asserting claims under Florida law that the insurance companies had failed to attempt in good faith to settle his claim. Hogan also accused the insurance companies of making misrepresentations that would have made a settlement less favorable for him. He accused them of exercising general business practices that involved mishandling claims, breaching their fiduciary duty, common law fraud, negligence and even conspiracy to commit statutory violations. Provident and Unum asked the judge to dismiss Hogan’s case based on a failure to state his claim or at least to pass judgment based on the pleadings presented by the two sides.

Case History

Before we look at how Judge Patricia Fawsett made her decision, let’s look at the background for this case. Hogan began receiving long-term disability benefits in October of 2001. Provident discontinued making payments at the end of February 2004. On August 27, 2006 Hogan sued Provident for reimbursement of past-due disability benefits, but Provident replied that he was no longer disabled, and was no longer was entitled to receive benefits under the policy.

On June 27, 2007, Hogan filed a civil remedy notice of insurer violation with the Florida Department of Financial Services. Provident responded by stating that Hogan was no longer disabled and thus as not entitled to benefits. Despite this assertion, Provident went ahead and paid the benefits demanded by Hogan on January 30, 2008.

When Hogan filed his suit against Provident, he included Unum Group Corp., Provident’s holding company since 1999. He did this because he claimed that Provident used Unum employees to adjust, review, evaluate, handle, approve and deny his long-term disability insurance benefits. (The judge would rule that he failed to demonstrate this connection).

In his initial complaint, Hogan cited violation of five Florida statutes. The first involved Provident’s failure to attempt in good faith to settle Hogan’s claims. He also accused Provident of violating state law by making false statements and sharing false information. Hogan claimed that Provident made material misrepresentations to him that would have provided less favorable terms to him than the policy provided for. He went on to claim that it was Provident’s general business practice to mishandle claims, and that Provident had breached its fiduciary duty.

Provident asked the court to dismiss all five allegations, claiming that Hogan had failed to state a claim. Hogan asked to amend his complaint, and the court allowed him to do so. The amended complaint included seven points but failed to transfer some of the documentation from the original complaint to the amended complaint. This would undo part of Hogan’s claim, because an amended complaint must be complete by the rules of the Middle District of Florida. Anything that is not present in the amended complaint cannot plead for the validity of matters brought up in the complaint.

The only things the court could use in ruling on the new complaint were the complaint itself, the attachments to the complaint that proved its validity, and any documents that were referenced in the complaint. The court had to assume that the allegations were true, but reciting the reasons for the accusation, supported by mere conclusionary statements would not be adequate. If Hogan failed to provide sufficient facts to support his claims, he would not be entitled to the assumption that his allegations were true.

The court’s findings

The court found that Hogan successfully proved that he had a bad faith claim against Provident because he was able to cite evidence that established Provident’s lack of good faith through its policy of terminating claims for financial gain. But his claim that Provident had made misleading statements, etc. was not backed up by a record of precise statements or documents that supported this claim. Hogan’s amended complaint did not include documentation that recorded the time and place of these statements. He didn’t say who had made the representations. Without this evidence, this portion of his claim was not feasible.

The evidence demonstrating that Unum and Provident had routinely pursued a policy that denied insurance policyholders benefits, despite the fact that this could cause injury to the policy holder, was significant enough to allow Hogan to pursue punitive damages on his charge of bad faith.

In conclusion, Hogan was given 11 days to file a second amended complaint on only those points which had been argued convincingly in his first amended complaint. These were:

  1. His complaint that Provident had failed to attempt in good faith to settle his claim, and
  2. Provident had failed to adopt and implement standards for the proper investigation of claims.

This is a case we will discuss again in the future. Unum’s attempts to dismiss a complaint for bad faith and punitive damages were defeated. This case will likely continue for the next 2 years and it is hopeful that a jury will award millions of dollars in bad faith and punitive damages due to their long-standing unreasonable claims handling procedures.

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