A hospital employee from Louisiana has filed a bad faith insurance lawsuit against Unum Life Insurance Company, claiming Unum improperly denied her claim for long-term disability benefits.

Background on Unum Lawsuit

Plaintiff Karen R. works as a lab assistant at Christus St. Francis Cabrini Hospital, a facility run by Christus Health. Christus provides long-term disability insurance to its employees through a policy issued by defendant Unum Life Insurance Company of America.

Karen says she suffers from “severe fatigue, fibromyalgia, body aches, memory loss, a weakened immune system that leaves her easily susceptible to infection, and generalized weakness due to Hepatitis C infection.” She says these conditions prevent her from being able to work not only at her current job but also at any alternative job that would pay comparable earnings. These conditions, she says, make her “disabled” under the terms of Unum’s disability insurance policy.

Despite having provided Unum with evidence of these disabilities and satisfactory “proof of loss” that would entitle her to long-term disability benefits, Karen says Unum denied her claim “without good reason or cause.” Karen went through Unum’s appeals process, submitting additional evidence supporting her claim, yet Unum denied that appeal.

Karen alleges that Unum’s denial violates both the terms of the insurance policy and sections of the Louisiana Insurance Code. She argues that Unum ignored a state law requirement that “alternative occupations identified by Unum must provide earnings that are substantially the same as her pre-disability earnings.” She alleges that Unum’s denial of her claim was “arbitrary and capricious, without good cause, and made in bad faith,” and that a reasonable and prudent businessperson would have paid benefits upon receiving the proof of loss that Karen had given Unum.

In addition to those arguments directly related to her denial, Karen also accuses Unum of making a regular practice of using its internal appeals process to rubber-stamp denials instead of giving those denials any meaningful, independent review. She alleges Unum operates through an inherent structural conflict of interest, in that the money to be paid or withheld subject to Unum’s claims decisions comes from Unum’s own funds. She also accuses Unum of failing to provide her and her attorney with copies of her claims file as requested.

Karen seeks payment of past and future denied benefits with interest, statutory penalties under state law, compensation for physical and emotional distress, and an award of attorneys’ fees and court costs.

The ERISA “Church Plan” Exception

In this Unum claim denial lawsuit, Karen mentions that the insurance policy in question is not covered by the federal Employee Retirement Income Security Act, or ERISA, because her employer Christus Health is a religious organization that is exempt from ERISA coverage. This exception is known in ERISA terminology as the “church plan” exception. While one might think a plaintiff would want the extra protection of federal law, ERISA in fact preempts certain state law remedies such as punitive damages, pain and suffering, and consequential damages. So in Karen’s case, the religious exception to ERISA coverage may allow her to bring her claims for physical and emotional distress and for statutory penalties under Louisiana law.

The Unum Claim Denial Lawsuit is Case No. 2:15-CV-01633, in the U.S. District Court for the Eastern District of Louisiana.