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UnumProvident Corp., the nation’s largest disability-income insurer, has been sued hundreds of times by claimants who say benefits were wrongfully cut off. In some cases, plaintiffs’ lawyers have hit it big. Last month, a California jury awarded $31.7 million. In 2001, a Florida jury awarded $37 million. Last November, a federal magistrate in San Francisco excoriated the company’s practices and upheld a $7.67 million verdict. In each case, the plaintiff had an individual policy, paying his or her own premiums. But there is no such mother lode for those covered for long-term disability through a group plan with their employer. The plans are governed by the federal Employee Retirement Income Security Act, which pre-empts state statutes and common law and bars punitive damages. Now, encouraged by recent case law, some plaintiffs’ lawyers are searching for a way around the pre-emption. Lawyers at Mandelbaum, Salzburg, Gold, Lazris, Discenza & Steinberg in West Orange, N.J., filed a complaint accusing UnumProvident of violating the federal and state Racketeer Influenced and Corrupt Organization Acts. They say the company and some employees fit RICO’s definition of an enterprise engaging in, among other things, mail and wire fraud. If they prevail, their client could win treble damages plus attorney fees and prejudgment interest, and Mandelbaum Salzburg counsel Gail Cookson freely acknowledges that is the motive. “They almost killed my client when they terminated his benefits, and they know he can never work again,” she says. In an answer filed Feb. 4, UnumProvident lawyer Steven Del Mauro says such a “transparent effort to circumvent the strictures of ERISA” is a “preposterous … expansion of RICO liability.” The maneuver has not succeeded before, though UnumProvident quickly and quietly settled a similar case filed in the Eastern District of New York last October. The carrier did not file an answer or a motion to dismiss the RICO claims. U.S. District Judge Garrett Brown has set a tight calendar for the New Jersey case, Richard Weiss v. First Unum Life Insurance Co., 02-4249. Oral argument is set for March 19. Cookson and Mandelbaum Salzburg partner Avrom Gold are pinning their hopes, in part, on Humana Inc. v. Forsyth, 525 U.S. 299 (1999). There, the U.S. Supreme Court held that RICO could be used to sue the Humana insurance carrier for state fraud claims. The Court found that the federal McCarran-Ferguson Act, which says no federal law can supersede a state’s regulation of the business of insurance, did not block the beneficiaries’ recourse to RICO. STARTED BY HEART ATTACK In January 2001, Richard Weiss, then 51, was an investment banker for Tucker Anthony Inc. in Morristown, N.J., managing several billion dollars and earning about $250,000 annually. He had a heart attack and took sick leave, and in May he filed for long-term disability, due to the “permanent and debilitating nature of his medical condition.” He was covered under Tucker Anthony’s policy with First Unum Life, one of many subsidiaries of Chattanooga, Tenn.-based UnumProvident, which grossed $9.4 billion in 2001. He made supplemental contributions and began receiving $11,673 a month. According to Cookson and her court papers, Tucker Anthony fired Weiss in August 2001, concluding he could no longer perform his job. Then in October 2001, First Unum informed him by letter that his benefits were being terminated. In court papers, First Unum attorney Del Mauro, of the Morristown firm of Del Mauro, DiGiaimo, Knepper & Heck, says Weiss’ medical records showed he was no longer permanently disabled. Cookson and Gold counter that Weiss almost died from his heart attack and that it left him with only half a heart and blood pressure so low that he “experiences frequent episodes of lightheadedness, fatigue, weakness and shortness of breath.” The papers say he could not even travel to work. Asked last week if Weiss could drive, Cookson says, “Yes, he’s finally been able to do that.” Weiss underwent two angioplasties, and had stints and a pacemaker inserted. His main problem is fibrillation. Weiss, using Cookson, appealed First Unum’s decision in January 2000, but the termination of payments was upheld. He was turned down again when he appealed again that April. Meanwhile, he was granted disability benefits of just under $22,000 annually, plus benefits for three children by the Social Security Administration, which, his papers say, found Weiss was “totally and permanently disabled.” The defense counters that such a declaration is irrelevant because the standards are very different. Weiss then sued First Unum in state court, alleging bad-faith termination, intentional infliction of emotional distress, and consumer fraud. First Unum had the case removed to federal court. Then, last October, after no payments for a year, Unum reinstated Weiss and sent him $94,000 in back benefits. In his papers, Del Mauro says the carrier reinstated Weiss not in response to the suit, but in response to Weiss’ counsel argument that “this litigation is killing their client.” Cokson and Gold did argue that the termination of benefits almost killed Weiss, saying it not only damaged him physically but also drove him into great anger and depression. To counter, First Unum requested that Weiss be examined by a psychiatrist. Weiss refused, saying he could not drive. First Unum offered him a limousine service, but Weiss said he couldn’t afford it. Unum offered to reimburse Weiss, but again Weiss refused to go. The reinstatement wasn’t unencumbered. First Unum requested a cardiac examination. Among the plaintiff’s charges are that Weiss was cut off without First Unum conducting an independent exam or speaking with his personal cardiologist. Del Mauro’s papers say Cookson and Avrom responded to the request for a cardiac exam by demanding more than $28,000 in fees and that they were not willing to dismiss the suit. Negotiations followed, aided by U.S. Magistrate Freda Wolfson, leading to a deal on fees for plaintiff counsel. LET’S TRY RICO Then, in late November, Cookson and Gold filed an amended complaint, adding the RICO counts. Del Mauro claims that the plaintiffs’ attorneys had promised the litigation would be over with the reinstatement, back payments and fee payments. He chides his adversaries for allegedly claiming the litigation would kill their client, yet still filing an amended complaint. But Cookson says Weiss has to continue the litigation to protect himself from being cut off in the future. She is concerned because under the policy, he could be ineligible for benefits if he did not accept a job in the general financial sector, not necessarily his specific investment-banking job. The amended complaint alleges that the employees engaged in RICO-covered acts when they schemed to defraud Weiss by terminating his payments without cause. Several whistleblowing current and former employees have alleged in other suits that UnumProvident uses incentives, including promotions and bonuses, to encourage nonmedical staffers to find ways to terminate benefits of highly paid professionals. Moreover, two in-house UnumProvident doctors have testified that they were pressured to rubber-stamp termination decisions to reduce the company’s reserve requirements. UnumProvident vehemently denies all the charges, countering that of 400,000 claims annually, only 2 percent are denied, and $3.6 billion is paid out. Cookson and Gold identify the predicate acts in the RICO conspiracy, in part, as the letters and telephone calls between the company and Weiss and his counsel. The letters are described as mail fraud, the calls as wire fraud. Del Mauro ridicules these allegations, saying the plaintiffs do not identify inaccuracies or fraudulent statements in the letters or calls. He argues that the actions and decisions of the staffers and doctors at the company are routine insurance work, and that a charge of improper denial is routine. He says use of RICO would open a Pandora’s box of litigation, “eviscerate the carefully crafted remedies” in ERISA and conflict with ERISA’s purpose to avoid long and costly litigation in federal court. Cookson says she is bolstered by the case filed last October in New York’s Eastern District, which used RICO claims. The case, Christopher Lipowski v. Unum, 02-CV-05327, was settled quickly; UnumProvident did not file an answer or a motion to dismiss. Cookson, citing the many verdicts against UnumProvident due to the whistleblowers and internal memos as well as the quickly settled Lipowski case, speculates that the carrier may settle to avoid discovery under the RICO rubric. Michael Hiller of New York’s Weiss & Hiller, who filed the action, says only that it was settled and that Unum was represented by Del Mauro’s firm. Del Mauro says he does not recall the case. Hiller, who won a $4 million verdict, when fees are added, against Unum in May 2001, says the Humana decision is the spark for plaintiffs’ attorneys to look at RICO as a way to get around ERISA restrictions. Del Mauro, in his reply brief, says “the expansion of civil RICO to the extremes proposed by Weiss’ counsel falls so far outside of a paradigmatic civil RICO case that it borders on the absurd.”

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