Jury Finds Insurance Giant Unum Defrauded the U.S.

BOSTON, Oct. 23 /PRNewswire/ -- A Boston jury has found that Unum
(NYSE: UNM), the nation's largest disability provider, defrauded the United
States by forcing its customers to submit false claims for disability benefits
to the Social Security Administration (SSA), when Unum knew that they were not
eligible for government benefits.
By engaging in this fraudulent conduct, Unum imposed substantial burdens
on an already overwhelmed Social Security program and caused the taxpayers of
the United States to spend money to process and deny these false claims.
The jury reached its verdict late yesterday. The case was brought on
behalf of the government by a whistleblower, Patrick Loughren, under the
federal False Claims Act. Unum is based in Portland, Maine, and Chattanooga,
Tennessee.
"Unum's conduct in threatening people to apply for Social Security under
penalty of losing a significant portion of their private disability benefits
is wrong," said Loughren. "After five years of intense litigation during
which Unum refused to admit it was defrauding the United States, I am
gratified that a Boston jury has called them to account."
As part of its scheme, Unum compelled people seeking disability benefits
from Unum to apply for Social Security disability benefits even though its
customers often told Unum they were not eligible. Social Security has much
stricter criteria for disability benefits than private insurers like Unum. In
an attempt to enrich itself, Unum told thousands of claimants that it would
cut their private disability benefits in half -- or more -- if they did not
comply with Unum's directive that they must apply for Social Security
disability benefits.
Unum admitted during the trial that it had caused many of its customers to
apply for Social Security disability over the ten years covered by this case.
Unum had nearly 500,000 long-term disability claimants over this period. The
full extent and magnitude of Unum's conduct will be addressed in future
hearings.
Before the trial started, the federal judge ordered that the case proceed
in stages in light of the scope of the case. As a test case, the judge
submitted five people's disability benefits claims to the jury. After a
four-week trial, the jury found that Unum had defrauded the United States with
respect to two of those cases, was unable to decide a third, and found
insufficient evidence with respect to two others.
By its verdict, the jury rejected Unum's primary contention that it was
entitled to force people to apply for Social Security disability benefits
based on SSA's open-door policy, which encourages individuals to apply for
Social Security Disability benefits if they choose to do so. The jury found
that Unum had violated the False Claims Act, confirming the Court's earlier
ruling that "an open door to claimants who are unsure they are eligible does
not exonerate an insurer that knowingly causes ineligible insureds to apply."
The jury also rejected Unum's claim that it made people file frivolous
Social Security claims because employers who bought group disability benefits
from Unum wanted Unum to impose that requirement on their employees.
Loughren filed this "qui tam" (whistleblower) lawsuit in 2003. The False
Claim Act allows private individuals to sue companies that are defrauding the
government and to recover funds on the government's behalf.
As a result of this lawsuit and a New York Times story that looked into
this practice, Senator Charles Grassley (R-Iowa) sent a letter to Unum and
eight other private disability insurers asking for detailed information about
the very practices that have now been found to be unlawful.
Lead counsel for the whistleblower is Phillips & Cohen LLP, the largest
and most successful law firm that specializes in representing whistleblowers
in qui tam lawsuits. As a result of cases brought by Phillips & Cohen, the
U.S. Treasury has recovered nearly $3 billion. For more information about the
False Claims Act and qui tam lawsuits, see www.phillipsandcohen.com.
SOURCE Phillips & Cohen LLP

Colette Matzzie of Phillips & Cohen LLP, +1-202-833-4567