Former UnumProvident Employee Details Company's Bad Faith Policy

Portland Press Herald Writer
By EDWARD D. MURPHY, Portland Press Herald Writer

Wednesday, September 25, 2002

Doctor: Unum denies claims

UnumProvident has a policy of summarily denying disability claims and using its medical staff to back up the denial, a former employee charges in a lawsuit.

Dr. Patrick F. McSharry claims he was fired in January as a medical director at the company's headquarters in Chattanooga, Tenn., after he refused to go along with the policy.

Linnea Olsen, a spokeswoman for UnumProvident, characterized McSharry's allegations as "absolutely false." He levied the charges only after "certain job-related contentions" arose, she said.

The charges in the lawsuit, which has been assigned to federal court in Chattanooga, are serious. If substantiated, the accusations could open a floodgate of liability problems for UnumProvident. If disproved, the insurer strengthens its image as a company that is fair in determining whether a claim is valid.

That outcome could have significant financial implications for the firm and, by extension, for southern Maine. UnumProvident is Portland's largest employer with about 3,600 workers in the city.

The company is the country's largest disability insurer and was created from the 1999 merger of the former Unum Corp., founded in Portland, and The Provident Cos., based in Tennessee. Since the merger, the headquarters have moved to Chattanooga, where most the company's senior executives are based.

McSharry's claims represented something of a bombshell for lawyers who are suing UnumProvident on behalf of policyholders who claim the company has unfairly denied their disability claims. More than 60 lawyers contacted McSharry's attorney, asking to depose him for their lawsuits, after he filed his suit against UnumProvident this summer in Tennessee.

A federal judge narrowed the field to six cases where discovery periods were expiring, and McSharry testified for three days in private for those lawyers earlier this month. Much of the deposition was either blacked out from the record or sealed by the court to protect confidential medical information.

McSharry was one of the doctors hired "for the ostensible purpose of providing needed medical guidance in reaching benefit decisions, (but) the medical personnel were not truly utilized for that purpose," his lawsuit claims.

The doctors' real purpose, his suit says, was "to provide language and conclusions supporting denial of claims."

McSharry also charges that nurses and non-medical employees made medical decisions and that doctors had a quota of claims to review daily, "precluding meaningful analysis."

The doctors were not allowed to suggest additional tests, he said, and were barred from helping policy holders prove their claims.

McSharry said he told his supervisors that he could no longer in good conscience continue to operate under rules that he believed violated federal laws. After that, McSharry said, his supervisors retaliated with write-ups and warnings and eventually fired him for "disruptive behavior."

"We deny what he is accusing us of," Olsen said. If UnumProvident had a policy of denying claims, "we wouldn't be in business."

Olsen said UnumProvident will spend $60 million on its claims-handling operation this year. She said the company handled 400,000 new disability claims in 2001 and 90 percent of those were approved and benefits were paid.

Only 0.4 percent of all claims ended up in litigation, she said, a figure that has remained fairly constant over the last few years.

McSharry, a family practitioner, has an unlisted phone number at his Tennessee home and could not be contacted. His lawyers did not return phone calls seeking comment.

Caryn Montague, a Florida-based expert witness and insurance claims consultant, has testified both for and against insurance companies. She said it's hard to tell if UnumProvident has a disproportionate number of claim denials, but "there are a lot of cases that I've seen that seem to fit a pattern where the company has not proceeded in a fashion that meets the test of good faith."

However, Montague added that she's "not sure if he (McSharry) is a disgruntled employee or if there's a lot of weight in his argument."

Montague said that UnumProvident, and all insurers, are operating in a tough financial market. Competition has kept premiums down, she said, and insurers are seeing losses in their investment portfolios because of the stock market decline and corporate scandals.

Disability insurers, in particular, are having a tough time because it's a relatively new business. Early policies, written 25 or 30 years ago, were not as clear on what was covered as they are now, leaving a lot of room for interpretation and lawsuits, Montague said.

In addition, doctors are more likely to classify mental and nervous disorders as disabling now, she said, leaving insurers potentially liable for millions in unanticipated claims.

"Insurance premiums should include (allowances for) social changes and changes in the economy" that can affect the interpretation of disability, Montague said, but many of those early policies did not. That could increase the pressure on companies to play hardball on claims, she said.