UNUM Life Insurance Company of America Sued in Pennsylvania for Fraud and Negligent Misrepresentation of Disability Insurance Policy Benefits

A Pennsylvania disability attorney recently filed a lawsuit on behalf of a disabled office furniture salesman against the UNUM Life Insurance Company of America (UNUM) at the District Court for the Middle District of Pennsylvania. In James E. Stone v UNUM Life Insurance Company of America, the plaintiff alleged that UNUM’s agent, servant or employee had fraudulently or negligently misrepresented benefits of the disability policy that its agent, servant or employee sold to the plaintiff.

The Nature of the Complaint

The plaintiff was working as a salesman and President of Stone Office Equipment Inc. The company was issued a group disability income policy by UNUM on June 1st 1998. Under the policy, the plaintiff is regarded as being “disabled” by UNUM when:

“You are limited from performing the material and substantial duties of regular occupation due to your sickness or injury and
You have a 20% or more loss in your indexed monthly earnings due to the same sickness or injury.

After 24 months of payment, you are disabled when UNUM determines that due to the same sickness or injury, you are unable to perform the duties of any gainful occupation for which you are reasonably fitted by education, training or experience.”

Representation by UNUM’s Agent

During the time when the disability policy was sold to the plaintiff’s employer, the plaintiff was informed by UNUM’s agent, servant or employee that the plaintiff would receive the full monthly income (66.66% of monthly income to the maximum of $6000.00) for total disability under the policy if the plaintiff was unable to be actively involved in the general duties of running his office furniture business. UNUM’s agent, servant or employee also stipulated that the disability policy provided for a residual disability if the plaintiff suffered a loss of income amounting to at least 20% of prior monthly earnings.

Partial Payment of Disability Benefits

As a result of the representation by UNUM’s agent, servant or employee, the plaintiff’s employer continued to pay all applicable premiums until March 2000. The plaintiff was later diagnosed as suffering from multiple sclerosis brought on by stress and the demands of his job and in March 2000 was disabled from managing and working his office furniture business. On the advice of the plaintiff’s doctor, the plaintiff reduced his workload by approximately 50%. Having fulfilled requirements of the disability policy, the plaintiff began receiving partial disability benefits from UNUM beginning from May 1st 2000.

Change of Residual Disability Benefits Calculation

On January 26th 2009, the Plaintiff was informed by UNUM of the change in the calculation of the Residual Disability Benefits that was different from what was stipulated in the clear and unambiguous language of the insurance policy. As a result of the change in the calculation of the Residual Disability Benefits, the plaintiff no longer became eligible for continuing long term disability (LTD) benefits.

In the lawsuit, the plaintiff argued that UNUM had terminated his LTD benefits based on a interpretation of the policy language that was inconsistent with the actual meaning of the policy language.

On April 24th 2009, the plaintiff appealed UNUM’s decision to terminate his LTD benefits and was informed by UNUM on June 22nd 2009 the plaintiff its decision to reaffirm its denial of the plaintiff’s LTD benefits.

In the lawsuit, the plaintiff argued that UNUM’s actions constituted a willful and wanton disregard of the plaintiff’s health in calculating the plaintiff’s claim for Residual Disability Benefits by including the profit and losses of a closely held corporation. In addition, UNUM’s action in terminating the plaintiff’s LTD benefits was arbitrary and capricious. It was further argued that because UNUM was both the claim’s determiner and payor, it had an inherent conflict of interest and should be held to a heightened level of scrutiny.

The plaintiff also alleged that because of UNUM’s agent, servant or employee fraudulent or negligent misrepresentations, the plaintiff and his employer were induced to purchase, continued paying the disability insurance policy’s premiums and also to the extent of replacing in part another disability insurance policy from another insurance company with that of UNUM’s policy.

Claim for Relief under the Lawsuit

Because of the actions of UNUM, the plaintiff is asking the Court for judgment in the plaintiff’s favor:

  • All residual disability benefits due and owning to the plaintiff plus interest since January 26th 2009;
  • Clarification of the plaintiff’s right to future benefits under the policy;
  • An award of reasonable attorney fees and costs;
  • Other such relief as the Court deem just and proper as stipulated under the Employee Retirement Income Security Act of 1974 (ERISA);
  • Damages for losses sustained by the plaintiff caused by UNUM’s agent, servant or employee fraudulent or negligent misrepresentations.