The U.S. Department of Labor announced a settlement with Unum Life Insurance Co. of America, mandating the Portland, Maine-based insurer to modify its administration of the proof of good health requirement, also known as evidence of insurability, for participants in job-based life insurance plans.
The Employee Benefits Security Administration (EBSA) investigated Unum’s management of life insurance plans under the Employee Retirement Income Security Act (ERISA). The investigation revealed that Unum frequently accepted premiums without verifying participants' insurability, leading participants and their beneficiaries to believe they had coverage. However, benefits claims were often denied after a participant's death due to alleged lack of proof of insurability, leaving beneficiaries without expected life insurance benefits.
“The U.S. Department of Labor will take appropriate action against any insurance company that collects regular premium payments from plan participants and later tries to wrongfully deny benefits based on technicalities like ‘insurability’ after the participant passes away,” said Regional Solicitor Maia Fisher in Boston.
Further findings indicated that Unum provided coverage to dependents under certain policies without requiring evidence of insurability. However, if a dependent died within two years of policy issuance, Unum would review medical records to determine if they were disabled from enrollment until death. If found disabled at enrollment, coverage was denied due to a delayed effective date provision. Participants and dependents were not clearly informed about this potential delay in coverage.
Under the settlement terms, Unum is prohibited from denying benefits claims under an ERISA-governed group life insurance policy solely due to lack of evidence of insurability when premiums have been paid for 90 days or more. Additionally, the company must enhance transparency regarding delayed effective date provisions for dependents.
“People who pay life insurance premiums should feel secure that their beneficiaries will get the benefits for which they paid,” said EBSA Regional Director Carol Hamilton in Boston. “While Unum is changing its practices, we urge all insurers to examine their practices to ensure that they aren’t engaged in similar conduct.”
Unum has agreed to voluntarily re-process claim denials based on lack of evidence of insurability from January 1, 2018, onward and claim denials related to delayed effective dates from July 1, 2016, onward.
This settlement follows similar agreements with Prudential Insurance Co., United of Omaha Life Insurance Co., and Lincoln National Life Insurance Co., reached in April 2023, September 2023, and May 2024 respectively. Investigations into other life insurance companies' practices concerning evidence of insurability are ongoing.
EBSA’s Boston regional office conducted the investigation while attorneys Suzanne Reilly and Celeste Moran along with ERISA Counsel Christine Collins negotiated the settlement for the department.
Read the settlement agreement between the department and Unum Life Insurance Co. of America.
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