Unum 2010 Annual Report Download - page 154

Notes To Consolidated Financial Statements
152
Unum
2010
Miscellaneous Matters
In September 2003, United States of America ex. rel. Patrick J. Loughren v. UnumProvident Corporation and GENEX Services, Inc.
(GENEX) was filed in the United States District Court for the District of Massachusetts. This is a qui tam action to recover damages and civil
penalties on behalf of the United States of America alleging violations of the False Claims Act by us and our former GENEX subsidiary. In
accordance with the False Claims Act, the action was originally filed under seal to provide the government the opportunity to investigate
the allegations and prosecute the action if they believed that the case had merit and warranted their attention. The government declined
to prosecute the case, and the case became a matter of public record on December 23, 2004. The complaint alleged that we defrauded the
government by inducing and or assisting disability claimants to apply for disability benefits from the Social Security Administration (SSA)
when we allegedly knew that the claimants were not disabled under SSA criteria. Relator identified 95 individual claims that he alleged to
be false and sought to present expert testimony from a statistician who would say that each of those claims found to be false could be
extrapolated to support a finding of a much larger number of false claims. We filed a motion for summary judgment which was denied on
September 15, 2008. The case proceeded to trial at which seven out of the 95 claims were adjudicated. We prevailed on four of the claims,
the Relator prevailed on two of the claims, and the jury could not reach a verdict on one of the claims. The jury awarded the Relator $850 in
damages which was trebled. The court also assessed a penalty of $11,000 for each of the two claims. On February 24, 2009, the court also
ruled that the testimony of the Relator’s expert in support of extrapolation would be excluded. We filed an appeal with the First Circuit
Court of Appeals on the two claims which Relator prevailed. On July 29, 2010, the Court of Appeals vacated the jury verdict on the two
claims and remanded the case to the trial court. On August 12, 2010, we filed a petition with the First Circuit Court of Appeals seeking
clarification and/or rehearing en banc of the court’s July 29, 2010 opinion. On October 7, 2010, this petition was denied without comment
and the case was remanded back to the trial court. An estimate of the liability to resolve this matter was established in the fourth quarter
of 2010. This accrual was not material to our operating results.
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.
In July 2010, we received a subpoena from the Office of the New York Attorney General requesting documents and information
relating to certain group life insurance policies wherein we paid life insurance proceeds by establishing interest-bearing retained asset
accounts. We are cooperating with the investigation.
In October 2010, Denise Merrimon, Bobby S. Mowery, and all others similarly situated vs. Unum Life Insurance Company of America,
was filed in the United States District Court for the District of Maine. 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. We intend to vigorously defend the action.