Unum 2009 Annual Report Download - page 149

147
Unum 2009 Annual Report
Broker Compensation, Quoting Process, and Other Matters
Examinations and Investigations
Beginning in 2004, several of our insurance subsidiaries’ insurance regulators requested information relating to the subsidiaries’ policies
and practices on one or more aspects of broker compensation, quoting insurance business, and related matters. Additionally, we have
responded to investigations about certain of these same matters by state attorneys general and the U.S. Department of Labor. The National
Association of Insurance Commissioners (NAIC) has undertaken to provide a uniform Compensation Disclosure Amendment to the Producer
Licensing Model Act that can be adopted by states in an effort to provide uniform guidance to insurers, brokers, and customers relating to
disclosure of broker compensation. We expect there may be continued uncertainty surrounding this matter until clearer regulatory guidelines
are established.
In November 2009, we were contacted by Florida state insurance regulators to discuss a resolution of their investigation of our
compliance with state and federal laws with respect to producer compensation, solicitation activities, policies sold to state or municipal
entities, and information regarding compensation arrangements with brokers. This investigation had been commenced in 2005, and, until
this most recent contact, we had received no communications from the regulators regarding this matter since December 2007.
Broker-Related Litigation
We and certain of our subsidiaries, along with many other insurance brokers and insurers, have been named as defendants in a series
of putative class actions that have been transferred to the U.S. District Court for the District of New Jersey for coordinated or consolidated
pretrial proceedings as part of multidistrict litigation (MDL) No. 1663, In re Insurance Brokerage Antitrust Litigation. The plaintiffs in MDL
No. 1663 filed a consolidated amended complaint in August 2005, which alleges, among other things, that the defendants violated federal
and state antitrust laws, the Racketeer Influenced Corrupt Organizations Act (RICO), ERISA, and various state common law requirements by
engaging in alleged bid rigging and customer allocation and by paying undisclosed compensation to insurance brokers to steer business to
defendant insurers. Defendants filed a motion to dismiss the complaint on November 29, 2005. On April 5, 2007, defendants’ motion to dismiss
was granted without prejudice as to all counts except the ERISA counts. Plaintiffs were granted a last opportunity to file an amended complaint,
and they did so on May 22, 2007.
On August 31, 2007 and September 28, 2007, plaintiffs’ federal antitrust and RICO claims were dismissed with prejudice. Defendants’
motion for summary judgment on the ERISA counts was granted on January 14, 2008. All pending state law claims were dismissed without
prejudice. Plaintiffs have filed an appeal with the Third Circuit Court of Appeals of the order dismissing their federal antitrust and RICO claims.
We are a defendant in an action styled, Palm Tree Computers Systems, Inc. v. ACE USA, et al., which was filed in the Florida state Circuit
Court on February 16, 2005. The complaint contains allegations similar to those made in the multidistrict litigation referred to above. The
case was removed to federal court and, on October 20, 2005, the case was transferred to the District of New Jersey multidistrict litigation.
Plaintiffs recently renewed a motion to remand the case to the state court in Florida, and that motion was denied without prejudice.