Unum 2008 Annual Report Download - page 150

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In May 2007, Roy Mogel, Todd D. Lindsay and Joseph R. Thorley individually and on behalf of those similarly situated v. Unum Life
Insurance Company, was filed in the United States District Court for the District of Massachusetts. This is a putative class action alleging that
we breached fiduciary duties owed to certain beneficiaries under certain group life insurance policies when we paid life insurance proceeds
by establishing interest-bearing retained asset accounts rather than by mailing checks. Plaintiffs seek to represent a class of beneficiaries
under group life insurance contracts that were employee welfare benefit plans under ERISA and under which we paid death benefits
pursuant to a retained asset account. Plaintiffs seek to recover on behalf of the class the difference between the interest paid to them and
amounts alleged to have been realized by us through our investment of the retained assets. On February 4, 2008, the court granted our
motion to dismiss all claims, but on November 6, 2008 the First Circuit Court of Appeals vacated the District Court’s order. Our petition for
rehearing in the First Circuit Court of Appeals was denied on January 21, 2009, and the case is now being remanded to the district court,
where we intend to answer the complaint and contest both the request for class certification and the merits of the claims.
On May 16, 2008, we were added as a party to a case styled, Public Service Company of Colorado; P.S.R. Investments, Inc.; and Xcel
Energy, Inc. v. Theodore J. Mallon; Transnancial Corporation; and Provident Life and Accident Insurance Company, filed in the District Court,
County of Boulder, State of Colorado, alleging among other things breach of contract, unjust enrichment, breach of duty of good faith and
fair dealing, fraudulent concealment, negligent misrepresentation and non-disclosure, fraud, civil conspiracy, violation of the Colorado
Consumer Protection Act, violation of the Colorado Organized Crime Control Act, and conspiracy to violate the Colorado Organized Crime
Control Act. These claims arise from the sale of corporate-owned life insurance policies to Public Service Company of Colorado by Mallon in
1984 and 1985. These policies were reinsured to Reassure America Life Insurance Company, a subsidiary of Swiss Reinsurance Company,
as of July 2000. In response to the complaint, we filed a motion to dismiss all counts of the complaint asserted against us. On October 22,
2008, the District Court granted in part and denied in part our motion to dismiss, thereby dismissing all claims against us for violation of the
Colorado Consumer Protection Act, violation of the Colorado Organized Crime Control Act, and conspiracy to violate the Colorado Organized
Crime Control Act. The plaintiff has been granted leave to file an amended complaint, and we will be filing another motion to dismiss. We
deny the allegations of the amended complaint and plan to vigorously contest them.
In September 2008, we received service of a complaint, in an adversary proceeding in connection with the bankruptcy case In re
Quebecor World (USA) Inc., et al. entitled Official Committee of Unsecured Creditors of Quebecor World (USA) Inc., et al., v. American United
Life Insurance Company, et al., filed in the United States Bankruptcy Court for the Southern District of New York. The complaint alleges that we
received preference payments relating to notes held by certain of our insurance subsidiaries and seeks to avoid and recover such payments
plus interest and cost of the action. We deny the allegations in the complaint and will vigorously contest them.
Summary
Various lawsuits against us, in addition to those discussed above, have arisen in the normal course of business. Further, state insurance
regulatory authorities and other federal and state authorities regularly make inquiries and conduct investigations concerning our compliance
with applicable insurance and other laws and regulations.
Given the complexity and scope of our litigation and regulatory matters, it is not possible to predict the ultimate outcome of all
pending investigations or legal proceedings or provide reasonable estimates of potential losses, except where noted in connection with
specific matters. It is possible that our results of operations or cash flows in a particular period could be materially affected by an ultimate
unfavorable outcome of pending litigation or regulatory matters depending, in part, on our results of operations or cash flows for the
particular period. We believe, however, that the ultimate outcome of all pending litigation and regulatory matters, after consideration of
applicable reserves and rights to indemnification, should not have a material adverse effect on our financial position.