In a significant development, the U.S. Department of Labor has reached a settlement with Unum Life Insurance Co. of America, headquartered in Portland, Maine, regarding its administration of proof of good health requirements for participants in job-based life insurance plans. The agreement mandates reforms in Unum’s practices following an investigation by the Employee Benefits Security Administration (EBSA).
EBSA’s inquiry uncovered unsettling practices within Unum’s administration of life insurance plans governed by the Employee Retirement Income Security Act (ERISA). It was revealed that the insurer frequently accepted premiums without ensuring participants’ insurability, leading to a misleading impression of coverage. Subsequently, Unum would deny benefits claims after a participant’s demise, citing a lack of proof of insurability, thereby depriving beneficiaries of rightful insurance benefits.
Regional Solicitor Maia Fisher, based in Boston, emphasized the Department’s commitment to take action against any insurance company engaging in such practices, which exploit technicalities to wrongfully withhold benefits from plan participants and their beneficiaries.
Moreover, the investigation disclosed instances where Unum extended coverage to dependents without requiring evidence of insurability. However, in cases where a dependent passed away within two years of policy issuance, Unum would retroactively assess their eligibility based on medical records, often leading to coverage denial on the grounds of a delayed effective date, a condition not adequately communicated to participants or policyholders.
As part of the settlement, Unum is obligated to refrain from denying benefits claims solely due to a lack of evidence of insurability after 90 days of premium payments by a plan participant. Additionally, the company must enhance transparency regarding delayed effective date provisions for dependents.
EBSA Regional Director Carol Hamilton underscored the principle that individuals paying life insurance premiums deserve assurance that their beneficiaries will receive the intended benefits. While Unum has committed to rectifying its procedures, Hamilton urged all insurers to scrutinize their practices to ensure compliance and fairness.
Unum has pledged to voluntarily reassess claim denials based on insufficient evidence of insurability dating back to January 1, 2018, and those stemming from delayed effective date provisions since July 1, 2016.
This resolution follows similar agreements reached by the Department with other insurers, including Prudential Insurance Co. in April 2023, United of Omaha Life Insurance Co. in September 2023, and Lincoln National Life Insurance Co. in May 2024. Investigations into similar practices at other life insurance companies remain ongoing.
The Department’s Boston regional office led the investigation, with attorneys Suzanne Reilly and Celeste Moran, along with ERISA Counsel Christine Collins of the Boston Regional Solicitor’s Office, negotiating the settlement on behalf of the Department.
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