Hangarter v. Provident Life & Accident Insurance Co.

Joan Hangarter (plaintiff), a self-employed chiropractor, had disability insurance with Paul Revere Life Insurance Company (Paul Revere) (defendant), owned by Provident Life & Accident Insurance (Provident) (defendant) and later UnumProvident Corp. (defendant). Hangarter injured her shoulder, elbow, and wrist. Treatment failed, and Hangarter filed a claim for total disability. Paul Revere hired Dr. Aubrey Swartz, an independent medical examiner (IME), to examine Hangarter and her medical records. Swartz found no injury, which contradicted Hangarter’s treating medical providers and Dr. Edward Katz, who examined her in 2001. Paul Revere repeatedly employed Swartz as an IME, potentially causing bias. Swartz rejected all total-disability claims she examined. Paul Revere terminated Hangarter’s benefits after 11 months. Hangarter filed a federal diversity action against the insurers, alleging breach of the covenant of good faith and fair dealing and other unfair-competition and tort claims. At trial, an expert witness testified that Paul Revere’s benefits-termination letter was misleading, deceptive, and fell below industry standards. The letter falsely claimed that Hangarter was working in violation of the policy, but the letter also acknowledged that she had sold her business, which it said made her ineligible for residual benefits. Hangarter was erroneously told she was not eligible for rehabilitation benefits. Experts testified that Provident had instituted unethical roundtable claim reviews that had the goal of achieving net termination ratios. In 1997, the insurer subjected Hangarter’s case to a roundtable. The roundtable process denied claimants an objective, case-by-case review in violation of industry standards. The jury awarded Hangarter $7,670,849, including $5,000,000 for punitive damages. The district court denied a motion for a new trial or a judgment as a matter of law (JMOL). The insurers appealed.