Appeals Court Refuses to Reconsider Decision in First Unum Disability Denial Case

The Second Circuit U.S. Court of Appeals has denied First Unum Life Insurance Co.'s request to reconsider a decision in which it found the company arbitrarily denied long-term disability benefits to a tax attorney with colon cancer.

First Unum, a unit of Unum Group (NYSE: UNM), filed the petition for rehearing with the New York-based federal appeals court in January, saying that the court "misapprehended key facts and law" (BestWire, Jan. 9, 2009).

Attempts to speak with Unum Group to see if First Unum plans to appeal to the U.S. Supreme Court were not immediately successful.

According to the December 2008 decision, written by Circuit Judge John M. Walker Jr. for a three-judge panel, First Unum operated under a conflict of interest because it was both the claims administrator and payor of benefits (BestWire, Jan. 9, 2009).

John McCauley, the cancer sufferer, was a senior vice president and tax attorney at Sotheby's Service Corp. in April 1991, when he was diagnosed with advanced colon cancer. First Unum was Sotheby's disability insurer under an Employee Retirement Income Security Act-governed plan.

He sued First Unum in the U.S. District Court for the Southern District of New York, alleging bad faith denial of his claims under an original and conversion policy. The court ruled in favor of First Unum, but the Second Circuit reversed.

According to Anderson Kill & Olick, the law firm that represented McCauley, the Second Circuit cited the U.S. Supreme Court's new standard for assessing the impact of a plan administrator's potential conflict of interest as outlined in its 2008 decision, "Metropolitan Life Insurance Co. vs. Glenn" (BestWire, Jan. 9, 2009).

The Second Circuit, in the December ruling, sent the case back to the district court to enter summary judgment in McCauley's favor and to calculate benefits dating back to 1995, as well as costs and attorney fees.

Previously, First Unum said it thinks the negative comments included in the decision and the court's "reliance on old ...articles and television programs, to be in error, and we believe the court overlooked key facts and law" (BestWire, Jan. 9., 2009).

Unum Group was formerly known as UnumProvident Corp.

Shares of Unum Group were selling at $11.54 the afternoon of March 20, down 4.55% from the previous close.

First Unum Life Insurance Co. currently has a Best's Financial Strength Rating of A- (Excellent).

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])