Unum 2013 Annual Report Download - page 164

162 / UNUM 2013 ANNUAL REPORT
Notes To Consolidated Financial Statements
Beginning in 2011, a number of state regulators began requiring insurers to cross-check specified insurance policies with the Social
Security Administration’s Death Master File to identify potential matches. If a potential match was identified, insurers were requested to
determine if benefits were due, locate beneficiaries, and make payments where appropriate. We initiated this process where requested, and
in 2012 we began implementing this process in all states on a forward-looking basis. In addition to implementing this on a forward-looking
basis, in 2013 we began an initiative to search for potential claims from previous years. During the fourth quarter of 2013, we completed
our assessment of benefits which we estimate will be paid under this initiative, and as such, established additional reserves of $95.5 million
for payment of these benefits. Similar to other insurers, we are undergoing an examination by a third party acting on behalf of a number
of state treasurers concerning our compliance with the unclaimed property laws of the participating states. We are cooperating fully with
this examination, as well as with a Delaware Market Conduct examination and a Voluntary Disclosure Agreement process with the state of
Minnesota. The legal and regulatory environment around unclaimed death benefits continues to evolve. It is possible that the current
examination and/or similar investigations by other state jurisdictions may result in additional payments to beneficiaries, the payment of
abandoned funds under state law, and/or administrative penalties, the total of which may be in excess of the reserves established. See
Note 6 for further information concerning the reserve for unclaimed death benefits.
In December 2012, State of West Virginia ex rel. John D. Perdue v. Provident Life and Accident Insurance Company and State of West
Virginia ex rel. John D. Perdue v. Colonial Life & Accident Insurance Company were filed in the Circuit Court of Putnam County, West Virginia.
These two separate complaints alleged violations of the West Virginia Uniform Unclaimed Property Act by failing to identify and report all
unclaimed insurance policy proceeds due to be escheated to West Virginia. The complaints sought to examine company records and assess
penalties and costs in an undetermined amount. In December 2013, the court dismissed both complaints, holding that the West Virginia
Uniform Unclaimed Property Act does not require insurance companies to periodically search the Social Security Administration’s Death
Master File or escheat unclaimed life insurance benefits until a claim has been submitted. In January 2014, the plaintiff appealed the
dismissal of both complaints.
In May 2013, a purported class action complaint entitled Ruben Don v. Unum Life Insurance Company of America, Wedner Insurance
Group, Inc. dba The Morton Wedner Insurance Agency, and Does 1-30 was filed in the Superior Court of California, County of Los Angeles.
The plaintiff seeks to represent a class of California insureds who were issued long-term care policies containing an inflation protection
feature. The plaintiff alleges we incorrectly administer the inflation protection feature, resulting in an underpayment of benefits. The
complaint makes allegations against us for breach of contract, bad faith, fraud, violation of Business and Professions Code 17200, and
injunctive relief. In June 2013, we removed the case to the United States District Court for the Central District of California. We are in the
process of preparing our response to this complaint.
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 if 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.