A class action lawsuit was filed against UnumProvident, Unum, Paul Revere, First Unum, Provident, and other UnumProvident subsidiaries. The lawsuit aims to stop and correct their illegal disability claims practices and help for the thousands of people who obtained their disability coverage through their employers and have had claims denied or terminated.
A new class action has been filed against Chattanooga-based UnumProvident – this one in the United States District Court for the Southern District of New York.
It is brought on behalf of purchasers of UnumProvident Corporate-Backed Trust Securities (“CorTS”) Certificates (NYSE: KVN) pursuant to an initial public offering on or about April 18, 2001 and/or in the aftermarket for CorTS through and including March 24, 2003 (the “Class Period”).
The complaint charges CorTS Trust II for Provident Financial Trust I, UnumProvident, Salomon Smith Barney and certain UnumProvident officers with violations of the Securities Exchange Act of 1934 and with violations of the Securities Act of 1933.
According to the CorTS IPO prospectus, UnumProvident Corporation guaranteed the payment of distributions on the Underlying Capital Securities but only to the extent that the Underlying Issuer had funds legally and immediately available therefor, the suit says. On April 18, 2001, the first day of the class period, the CorTS were issued pursuant to the Prospectus and Registration Statement and began to publicly trade. The trust consisted of a single class of certificates, which represented interests in the trust and the certificates would only be paid through the trust. Therefore, the CorTS would only be paid if UnumProvident paid the original trust, it was claimed.
The class action lawsuit charges that during the Class Period, UnumProvident falsely reported financial results because it did not properly account for the long-term impairment of its investments. The suit says “the financial information was inflated due to UnumProvident’s overzealous denial of legitimate claims of its insureds through, what one federal judge deemed ‘a comprehensive system for targeting and terminating expensive claims.’ The financial statements and related press releases by UnumProvident identified above contained statements that were materially false and misleading when made.”
On March 24, 2003, UnumProvident issued a press release in which they stated their intentions to restate financial statements from previous years. This put the payments of the CorTS in jeopardy and caused the CorTS to lose almost 50% of their value, it was stated.
Several other class action lawsuits have been filed in recent months against UnumProvident, which ousted its CEO and has taken steps to shore up its financial position.