Unum 2009 Annual Report Download - page 148

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146
Notes To Consolidated Financial Statements
Unum
2009
Other Claim Litigation
We and our insurance subsidiaries, as part of our normal operations in managing disability claims, are engaged in claim litigation
where disputes arise as a result of a denial or termination of benefits. Most typically these lawsuits are filed on behalf of a single claimant
or policyholder, and in some of these individual actions punitive damages are sought, such as claims alleging bad faith in the handling of
insurance claims. For our general claim litigation, we maintain reserves based on experience to satisfy judgments and settlements in the
normal course. We expect that the ultimate liability, if any, with respect to general claim litigation, after consideration of the reserves
maintained, will not be material to our consolidated financial condition. Nevertheless, given the inherent unpredictability of litigation, it is
possible that an adverse outcome in certain claim litigation involving punitive damages could, from time to time, have a material adverse
effect on our consolidated results of operations in a period, depending on the results of operations for the particular period.
On June 13, 2005, following a trial in the U.S. District Court of Nevada in the matter of G. Clinton Merrick vs. UnumProvident Corporation,
Paul Revere Life Insurance Company, et al., judgment was entered in plaintiff’s favor on his breach of contract and bad faith claims, and the
plaintiff was awarded contract, emotional distress, and punitive damages, as well as attorneys’ fees. We appealed that judgment. The Ninth
Circuit Court of Appeals reversed that portion of the judgment that awarded attorneys’ fees and punitive damages award and remanded
for a new trial on the issue of punitive damages that should be awarded, if any. We thereafter paid the portion of the verdict that had been
upheld and proceeded to a second trial on the limited issue of the amount of punitive damages to be awarded against Unum Group and
one of our insurance subsidiaries, if any. A second jury verdict was entered on July 3, 2008, in the amount of $24.0 million as to one of our
insurance subsidiaries and $36.0 million as to Unum Group. Following post trial motions, the trial court affirmed the judgment as to our
insurance subsidiary and reduced the judgment as to Unum Group to $26.4 million. We have appealed the amended judgment to the Ninth
Circuit. We believe that we have strong legal arguments to raise on appeal that create significant uncertainty regarding the ultimate outcome
of this matter. However, since our efforts to reduce or overturn this award are at an early stage in the appeals process, an estimate of the
liability to resolve this matter was established in 2008. The accrual was not material to our operating results.
From time to time class action allegations are pursued where the claimant or policyholder purports to represent a larger number of
individuals who are similarly situated. Since each insurance claim is evaluated based on its own merits, there is rarely a single act or series
of actions, which can properly be addressed by a class action. Nevertheless, we monitor these cases closely and defend ourselves
appropriately where these allegations are made.