Class Action Status Sought in Detroit Against Sun Life of Canada Over Disability Insurance

DETROIT, Sept. 15 /PRNewswire/ -- Federal Court -- An occupationally disabled woman suffering from severe back injury has filed a motion seeking class action certification on behalf of fellow policyholders in a lawsuit against Sun Life Financial Assurance Company of Canada, claiming that Sun Life violated insurance reforms issued by the State of Michigan's Insurance Commissioner and applicable to disability insurance contracts delivered within the state.  The lawsuit seeks class action status for all persons who were covered under short and long-term disability contracts issued by Sun Life after June 1, 2007 and which contained so-called "discretionary proof" clauses, and had their claims denied by Sun Life.  

The lawsuit against Sun Life seeks to overturn all denied, suspended, or terminated claims, and require the company to reimburse policyholders for their lost benefits.  

The lawsuit was filed by Reyna Allen, a former hourly employee for a pharmaceutical company, whose disability claim was denied after several attempts to overturn the denial using Sun Life's mandated appeals process failed.  After Ms. Allen exhausted the company's internal appeals, Sun Life claimed that it was "not satisfied" that Ms. Allen's medical condition had caused a loss of income.

The 2008 disability insurance contract issued by Sun Life to Ms. Allen contained a discretionary proof clause requiring that "Proof must be satisfactory to Sun Life."  The lawsuit alleges that the contract was issued in violation of insurance regulations and that Sun Life was deciding claims using the illegal clauses.  For years, Sun Life maintained that the language "unambiguously conferred" it with the discretion to decide whose claims it would or would not pay.

Discretionary clauses have been the subject of intense scrutiny by state regulators and insurance commissioners.  The clauses provide that an insurer will pay a disability claim only if it is "satisfied" with the policyholder's proof.  Many insured persons claim that despite extensive proof of medical disability, including surgical reports, treatment records, and doctors' affidavits, Sun Life and other insurers are "never satisfied," leaving them without disability coverage.  Other states have called discretionary clauses "misleading" and say that they overwhelmingly favor the insurer against policyholders.

On June 1, 2007, the State of Michigan Insurance Commissioner outlawed the insertion of any discretionary clauses in disability contracts delivered within the state.  The insurance industry challenged the Michigan regulation, and on March 18, 2009, a federal appeals court decision found that the Michigan regulation was valid and lawful in American Council of Life Insurers v. Ross, 558 F.3d 600 (6th Cir. 2009).

"Discretionary clauses have been used by Sun Life and other insurance companies to wrongfully deny valid disability claims for many years," said John J. Conway, one of the attorneys representing Ms. Allen. "This is the reason that they were outlawed."

"Our litigation seeks to stop Sun Life from using these illegal clauses against hard-working people dealing with a medical condition and loss of their income.  When a person has private insurance when illness or injury strikes, they should not be forced onto public assistance," said Mr. Conway.

"The class we seek to represent are people who acted responsibly. They purchased insurance coverage in the event that they became sick or injured. The class action motion seeks to stop Sun Life from wrongfully denying claims by holding its policyholders to a higher level of proof than Michigan law requires," said Gerard Mantese, one of the attorneys representing Ms. Allen.

"Insurers, like Sun Life, are hurting our residents when they are most vulnerable. As a result, everyone in Michigan suffers because these individuals cannot pay their medical bills, their house payments, or car payments.  Often times, these residents file for bankruptcy, their homes fall into foreclosure, and the only place to turn is to public assistance.  All the while they had insurance that was supposed to protect them," said Mr. Conway.

"A class certification will force Sun Life to comply with Michigan law or stop selling their insurance contracts within our State," concluded Mr. Mantese.

The case is Allen v. Sun Life Assurance Company of Canada, United States District Court for the Eastern District of Michigan, Case No. 10-12043.  The case is before the Honorable John Corbett O'Meara.

SOURCE Mantese Honigman Rossman and Williamson, PC