Maine-based life insurer mishandled claims, investigation finds

Federal officials have reached a settlement with a Maine division of the insurance company Unum Group over allegations that it did not fully vet participants in its job-based life insurance plans, resulting in their claims being inappropriately denied.

As part of the settlement , the company — which is headquartered in Tennessee but employs more than 2,000 people in Portland — is updating its enrollment process and reviewing claims that may have been mishandled.

An investigation by the U.S. Department of Labor found two problems with the way that Unum Life Insurance Co. — a part of Unum Group which the agency says is based in Portland — has handled group life insurance policies administered through employers.

Unum often accepted premiums from participants in those plans without verifying whether they were eligible for the coverage, the Department of Labor said in a press release . Then, while participants believed they were covered, Unum often denied claims after policyholders had died, claiming it hadn’t received proof of insurability.

“This left people without the life insurance that their loved ones had paid for,” the agency said in a press release.

In other cases, Unum covered dependents in those plans without collecting proof of their insurability. But if a dependent died within two years, it would go back and determine whether they had been disabled at the time the policy was issued, according to the Department of Labor. If they were, the company allegedly denied coverage, citing a delayed effective date.

“Unum did not clearly inform participants or dependents at enrollment that coverage would be delayed in these circumstances,” the agency said.

It’s not clear how many claims Unum denied because of those errors. A Department of Labor spokesperson said since the investigation is ongoing, it cannot provide the number of claims that will be reprocessed. The investigation is being conducted by the Boston office of the agency’s Employee Benefits Security Administration.

It’s also unclear whether anyone in Maine may have been affected. Because the settlement involved group policies, the state Bureau of Insurance did not have data on how many residents were covered under Unum, said Nathan McIvor, public information and consumer outreach specialist.

Unum has told the U.S. Department of Labor that it will voluntarily reprocess claim denials based on lack of evidence of insurability from Jan. 1, 2018, to the present and claim denials based on the delayed effective date provision from July 1, 2016, to the present, the agency said.

The settlement prohibits Unum from denying benefits to customers in a group life insurance policy based on lack of evidence of insurability if the customer paid premiums for more than 90 days, the agency said. And, Unum must make its delayed effective date of coverage for dependents more transparent to its customers.

In a statement, Unum spokesperson Dottie McCallen said that the company has made changes to the administration of its group life policies that clarify when claims will be paid out under certain circumstances.

“The resolution Unum has reached with the U.S. Department of Labor acknowledges these changes, which include working alongside our clients to further improve the enrollment process, and which are consistent with our commitment to help provide peace of mind for workers and their loved ones through financial protection,” McCallen said.

Unum isn’t the only company that’s gotten in trouble over the denial of group life insurance claims. The Department of Labor says that it has reached similar settlements with Prudential Insurance Company, United of Omaha Life Insurance and Lincoln National Life Insurance Company, and that more investigations are ongoing.