Unum 2007 Annual Report Download - page 135

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Unum 2007 Annual Report 133
Claims Handling Matters
Multidistrict Litigation
On September 2, 2003, the Judicial Panel on the Multidistrict Litigation entered an order transferring more than twenty putative
class actions and derivative suits, described below, filed in various courts against the Company, several of its subsidiaries, and some of
our officers, to the U.S. District Court for the Eastern District of Tennessee for coordinated or consolidated pretrial proceedings. The
defendants strongly deny the allegations in each of these actions and will vigorously defend the substantive and procedural aspects of
the litigations, except as noted below with respect to settlement discussions.
Shareholder Derivative Actions
On November 22, 2002, the first of five purported shareholder derivative actions was filed in the Tennessee Chancery Court. Between
December 27, 2002 and March 11, 2003, four additional purported derivative actions were filed in state and federal courts in Tennessee.
The defendants removed each of the actions that were filed in Tennessee state court to the U.S. District Court for the Eastern District
of Tennessee.
Each of these actions purports to be brought on behalf of the Company against certain current and past members of our Board of
Directors and certain executive officers alleging breaches of fiduciary duties and other violations of claims paying law by defendants.
Plaintiffs allege, among other things, that the individual defendants breached their duties of good faith and loyalty by establishing or
permitting to be established an unlawful policy of denying legitimate disability claims and improper financial reporting, and that certain
defendants engaged in insider trading.
The district court consolidated these actions under the caption In re UnumProvident Corporation Derivative Actions. The plaintiffs
then filed a single consolidated amended complaint. We deny the allegations of the complaint and will vigorously contest them.
Federal Securities Law Class Actions
On February 12, 2003, the first of six virtually identical putative securities class actions was filed in the U.S. District Court for the
Eastern District of Tennessee, later consolidated under the caption In re UnumProvident Corp. Securities Litigation.
The Lead Plaintiff filed a consolidated amended complaint alleging claims under Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and Rule 10b-5 on behalf of a putative class of purchasers of Unum Group stock between March 30, 2000 and April 24, 2003.
The amended complaint alleges, among other things, that we issued misleading financial statements, improperly accounted for certain
impaired investments, failed to properly estimate our disability claim reserves, and pursued certain improper claims handling practices.
On July 30, 2007, we entered into a Stipulation of Settlement with the plaintiffs to resolve the litigation. Under the terms of the
settlement, which is subject to, among other things, approval by the court, we have agreed to pay $40.0 million to settle all claims that
were or could have been asserted by the class in the action. After the receipt of insurance proceeds, the net cost to us was $11.6 million
before tax and was included in our second quarter of 2007 operating results.