Reciting First Unum's long history of abusive and deceptive claims-handling practices, as well as its conflict of interest as both claims decider and payor, the Second Circuit Court of Appeals has ruled that First Unum acted arbitrarily and capriciously in denying the claim and awarded back benefits, interest, attorney's fees and costs to the claimant. McCauley v. First Unum Life Insurance Company, No. 06-5100 (December 24, 2008).
The claimant, McCauley, worked as a tax attorney and developed advanced colon cancer. He received radical treatments in 1991 that saved his life. McCauley suffered additional medical problems over the next few years including liver cancer and the cancer treatments inflicted quite a toll. He attempted bravely to continue working before realizing that he could not continue. McCauley applied for long-term disability benefits to First Unum, which provided disability insurance to McCauley's employer and served as both its administrator and payor of benefits.
First Unum denied McCauley's claim on May 19, 1995. He appealed and submitted additional medical information. Nonetheless, First Unum again rejected McCauley's claim on September 14, 1995. McCauley then attempted to resume employment and converted the disability insurance policy by assuming payment of its premiums. McCauley's health problems again proved insurmountable and he again filed a claim for long-term disability benefits which First Unum denied in 1996. McCauley then filed suit.
The Court ruled that McCauley was entitled to benefits, although it ruled that First Unum's initial denial of his claim was not arbitrary and capricious based on the limited medical information presented in support. That medical information indicated only that McCauley's cancer had been successfully treated and that his restrictions were only against very long hours and physical exertion.
In support of his appeal from First Unum's denial of his claim, McCauley submitted a memorandum listing his medical conditions as (1) chronic diarrhea, (2) chronic and acute renal impairment, (3) progressive vascular sclerosis, (4) high cholesterol, (5) insomnia, and (6) incisional scarring and pain. The memorandum detailed how these conditions affected McCauley on a daily and continuing basis, at times leaving him unable to function in any capacity and in constant and substantial pain.
The Court observed that the memorandum "flatly contradicts First Unum's finding that McCauley was capable of performing a sedentary occupation and completing the ordinary tasks of a tax attorney." While First Unum claimed that the information in McCauley's memorandum had been considered in the initial denial of McCauley's claim, the Court asserted that "the record plainly reflects that they were not." The Court also criticized First Unum's argument that the memorandum was not signed by McCauley's doctor, a deficiency it had never informed McCauley of until he filed suit.
The Court strongly criticized First Unum's failure to consider McCauley's memorandum:
This kind of wholesale embrace of one medical report supporting a claim denial to the detriment of a contrary report that favors granting benefits was determined in Glenn to be indicative of an administrator's abuse of discretion.
First Unum lied to McCauley that an on-site physician had reviewed his claim and supporting information. "In fact, the court observed, "no records were reviewed by a physician at First Unum." This lie was additional evidence supporting McCauley's claim.
The Court also cited First Unum's long history of abusive and deceptive practices as further support of McCauley's claim:
First Unum is no stranger to the courts, where its conduct has drawn biting criticism from judges. A district court in Massachusetts wrote that "an examination of cases involving First Unum ... reveals a disturbing pattern of erroneous and arbitrary benefits denials, bad faith contract misinterpretations, and other unscrupulous tactics. Radford v. First Unum Life Ins. Co., 321 F.Supp.2d 226, 247 (D. Mass. 2004), rev'd on other grounds, 491 F.3d 21, 25 (1st Cir. 2007). That court listed more than thirty cases in which First Unum's denials were found to be unlawful, including one decision in which First Unum's behavior was "culpably abusive." Id. at 247 n.20. Also, First Unum's unscrupulous tactics have been the subject of news pieces on "60 Minutes" and "Dateline," that included harsh words for the company. Id. at 248-49. First Unum has fared no better in legal academia. See John H. Langbein, Trust Law as Regulatory Law: The Unum/Provident Scandal and Judicial Review of Benefit Denials under ERISA, 101 Nw. U. L. Rev. 1315 (2007). In light of First Unum's well-documented history of abusive tactics, and in the absence of any argument by First Unum showing that it has changed its internal procedures in response, we follow the Supreme Court's instruction and emphasize this factor here. Accordingly, we find First Unum's history of deception and abusive tactics to be additional evidence that it was influenced by its conflict of interest as both plan administrator and payor in denying McCauley's claim for benefits.
