Unum Settlement Agreement History: Multi-State, DOL, Loomis

Unum Group’s settlement agreement history centers on four major deals: a 2004 multi-state regulatory settlement that forced the disability insurer to pay $15 million and reassess hundreds of thousands of denied claims, a broader 2005 California settlement adding an $8 million penalty and stricter claim-handling rules, a 2024 U.S. Department of Labor agreement covering group life insurance practices, and a $14.8 million wage-and-hour class action settled in 2025. Each addressed a different problem, and several remain legally relevant today.

The 2004 Multi-State Regulatory Settlement

On November 18, 2004, UnumProvident Corporation (now Unum Group) signed a regulatory settlement with insurance regulators from 48 states, the District of Columbia, American Samoa, and the U.S. Department of Labor. The examination behind it had begun in September 2003 and was led by Maine, Massachusetts, and Tennessee.¹ Maine Insurance Superintendent Alessandro Iuppa called it “one of the most significant multistate insurance regulatory actions in history.”²

Regulators had found excessive reliance on in-house medical staff, unfair treatment of treating physicians’ reports, failure to consider the totality of a claimant’s medical condition, and inappropriate burdens placed on claimants to prove eligibility.²

Fines and Financial Penalties

Unum Life Insurance Company of America, Provident Life and Accident Insurance Company, and The Paul Revere Life Insurance Company jointly agreed to a $15 million fine, divided among participating states based on 2003 long-term disability premium volume.¹ The agreement carried a $145 million contingent penalty if the company failed to comply with the corrective plan, plus $100,000-per-day fines for missing implementation deadlines.³ Total compliance and oversight costs were estimated at more than $120 million.²

The Claims Reassessment

The centerpiece was a mandatory reassessment of previously denied or terminated long-term disability claims. A dedicated Claim Reassessment Unit was required to conduct fresh, from-scratch reviews. The pool of potentially eligible claims was approximately 215,000, covering denials and closures back to January 1, 2000, with a request-based process reaching back to 1997.⁴ Eligible policyholders were to be notified within 15 days of the settlement’s approval.⁵

Reviewers were required to give “significant weight” to any Social Security disability award unless there was compelling evidence that the Social Security decision was legally flawed or inconsistent with the medical record.¹ The company committed to finishing the process by December 31, 2006, and to reporting quarterly to the lead regulators.

UnumProvident anticipated a $127 million pre-tax loss to cover settlement costs, including $44 million for benefit costs and reserves from reopened claims and $41 million in additional reserves on claims already in inventory.⁴

Claims Handling Reforms

The Plan of Corrective Action required structural changes to claim processing. Experienced personnel had to be involved at the earliest stages of review, management-level sign-off was mandated for denial and termination decisions, and a separate compliance and accountability function was created. Claims staff were prohibited from influencing the appeal process. The company also had to fairly interpret independent medical evaluations and functional capacity assessments, and was barred from attempting to influence the professionals conducting them.¹ Three new independent directors with insurance or regulatory experience joined the parent board, and a Regulatory Compliance Committee and Regulatory Compliance Unit were established to oversee market conduct and operate a claimant hotline.³

The 2005 California Settlement

California Insurance Commissioner John Garamendi opted out of the multi-state deal and pursued a separate agreement with broader protections for California policyholders.⁶ It was signed on October 3, 2005, and imposed an additional $8 million civil penalty plus $598,503 in attorney’s fees to the California Department of Insurance.⁷

The agreement incorporated the multi-state corrective plan and added California-specific requirements. Unum was ordered to stop using “discretionary authority” clauses in new California contracts, discontinue limiting benefits based on “self-reported conditions” such as pain and weakness, and revise how it applied 24-month mental health benefit caps so they would not run concurrently with physiological disability benefits. The company also had to give significant weight to attending physicians’ opinions, inform claimants in writing of their right to request an independent medical exam before any denial, and add a Quality Compliance Consultant review before a claim could be denied.⁷

The California reassessment reached further than the national one. About 26,000 people whose California claims had been denied or terminated between January 1, 1997, and September 30, 2005, received notices, and those whose denials were upheld could request an independent review at the company’s expense. The California deal also amended the multi-state agreement to send notices to roughly 29,500 additional individuals whose 1997–1999 claims had not been reached earlier, and to offer reassessment to about 24,000 private-label and acquired-block claims.⁸ Unum took a $75 million pre-tax charge for the third quarter of 2005.

Why the California Settlement Still Matters

The 2005 agreement continues to shape disability litigation. In February 2021, the Ninth Circuit ruled in Cox v. Allin Corporation Plan that the settlement’s prohibition on self-reported symptoms limitations applies to any disability policy subject to the jurisdiction of the California Department of Insurance, regardless of whether the policy states it is governed by another state’s law.⁹ The court found it “irrelevant” that the plan at issue stated it was governed by Pennsylvania law.¹⁰

The 2024 Department of Labor Settlement

On June 11, 2024, the U.S. Department of Labor announced a separate settlement with Unum covering a different line of business: ERISA-governed group life insurance. The Employee Benefits Security Administration found Unum had been collecting premiums from plan participants without verifying whether they were insurable, then denying death benefit claims on the ground that it had never received proof of insurability. For dependents, the company would retroactively review medical records if a dependent died within two years of policy issuance and deny coverage based on a “delayed effective date” that had not been clearly disclosed.¹¹

Under the settlement, Unum is prohibited from denying benefit claims solely for lack of evidence of insurability if the participant has paid premiums for 90 days or more. If a claim is denied and premiums were paid for fewer than 90 days, those premiums must be refunded. Delayed effective date provisions must be made more transparent, and policyholders must be notified that premiums should not be collected for coverage requiring evidence of insurability until Unum has approved it. Unum agreed to voluntarily reprocess claims denied for lack of evidence of insurability back to January 1, 2018, and claims denied under the delayed effective date provision back to July 1, 2016.¹¹ The company did not admit that it acted as an ERISA fiduciary or failed to discharge fiduciary duties.

The Unum agreement was part of a broader DOL enforcement effort on evidence-of-insurability practices, alongside similar settlements with Prudential in April 2023, United of Omaha in September 2023, and Lincoln National in May 2024.¹¹

The 2025 Loomis Overtime Class Action Settlement

In April 2025, a federal court in the Eastern District of Tennessee granted final approval to a $14.8 million class action settlement in Loomis v. Unum Group Corp. The suit alleged Unum had misclassified its disability benefits specialists as exempt from federal and Maine state overtime laws. The settlement covers 910 class members, with an average recovery of more than $10,000; 52 members received more than $30,000. Checks were scheduled to be mailed in early June 2025.¹²

The Bad-Faith Verdicts Behind the Regulatory Settlements

The 2004 and 2005 settlements did not appear out of nowhere. They followed a run of jury verdicts that put the company’s internal claims practices on the record.

In Hangarter v. Paul Revere Life Insurance Co., a federal jury in Northern California in 2002 found that Unum’s subsidiary had acted in bad faith when it terminated benefits for chiropractor Joan Hangarter. Evidence showed the company had used a “net termination ratio” policy to target expensive claims and relied on a medical examiner who had rejected every disability claim he reviewed. The jury awarded $7.67 million total, including $5 million in punitive damages, $1.52 million in benefits, $400,000 for emotional distress, and $750,000 in attorneys’ fees.¹³ The Ninth Circuit affirmed on June 25, 2004, holding that an insurer cannot hide behind a “genuine dispute” defense if its investigation was biased.¹⁴

In Chapman v. UnumProvident, described as the largest disability insurance bad-faith verdict in California history, a Marin County jury found clear and convincing evidence that the company had used an “unreasonably restrictive interpretation” of policy language and created claims procedures “designed to avoid performing a thorough, competent, and objective investigation.” In March 2003 the trial judge reduced the punitive damages from $30 million to $5 million and the emotional distress award from $125,000 to $15,000, conditional on the plaintiff’s acceptance.¹⁵

In 2008, a Nevada federal court in Merrick v. Paul Revere Life Insurance Co. awarded $36 million in punitive damages, later reduced to $26 million, citing a corporate “scheme engaged in to augment profits at the expense of insureds,” along with “unrepentant conduct” and “document destruction.”⁶ The case settled out of court on April 30, 2010.¹⁶

1
State of Maine Bureau of Insurance. Unum Regulatory Settlement Agreement
2
Tennessee Department of Commerce and Insurance. UnumProvident Multistate Settlement Press Release
3
State of Maine Bureau of Insurance. Questions and Answers Regarding the UnumProvident Settlement
4
Unum Group Investor Relations. UnumProvident Announces Settlement of Multistate Market Conduct Examination
5
Claims Journal. UnumProvident Multistate Settlement
6
Plaintiff Magazine. Unum Group: Is Everything Old New Again
7
U.S. Securities and Exchange Commission. California Settlement Agreement
8
Unum Group Investor Relations. UnumProvident Reaches Settlement with California Department of Insurance
9
Justia. Elgin Cox v. Allin Corporation Plan
10
FindLaw. Cox v. Allin Corporation Plan
11
U.S. Department of Labor. DOL Settlement With Unum Life Insurance
12
MSE Labor Law. Unum Disability Benefits Specialists Settle Overtime Lawsuit
13
FindLaw. Hangarter v. The Paul Revere Life Insurance Company
14
Justia. Hangarter v. Provident Life and Accident Insurance Company, 373 F.3d 998
15
Disability Counsel. UnumProvident Presentation
16
U.S. Chamber of Commerce. Merrick Jr. v. The Paul Revere Life Insurance Company et al.