LOS ANGELES (AP) – California insurance regulators said Monday they settled a three-year probe of UnumProvident Corp., ordering the nation’s largest disability insurer to pay an $8 million fine, reconsider thousands of claims and change the way it handles future claims.

The settlement with the Chattanooga, Tenn.-based insurer follows a review of 1,000 claims by policyholders in the state, which led regulators to find the insurer was “systematically” finding ways to get out of paying on disability claims.

“UnumProvident is an outlaw company,” Insurance Commissioner John Garamendi said during a news conference here. “It’s a company that has a corporate policy established at the highest level to systematically deny legitimate claims.”

Thomas Watjen, the company’s president and chief executive officer, said in a statement Monday that the company did not agree with allegations that claims were wrongly denied but agreed to the settlement to “remove the regulatory cloud that has been hanging over us.”

The insurer settled similar allegations with 48 other states last year.

Garamendi said he planned to force every other disability insurance company operating in California to comply by new standards meant to make it harder for insurers to reject policyholder claims.

Some 600 disability insurers covering Californians will be asked to submit their policies for review, Garamendi said.

“Their policies will have to be rewritten to conform to this new program that UnumProvident has agreed to,” Garamendi said. “Bottom line: No more slow pay, no more low pay. Honor your commitments or get out of California.”

As part of the settlement with UnumProvident, reassessment notices will be mailed to about 26,000 California customers whose claims were denied or terminated between Jan. 1, 1997, and Sept. 30, 2005, the company said Monday.

Those policyholders will be able to have an independent, third-party medical review of their claims. The company will have to reinstate or begin paying claims if the independent review sides with the policyholder, who will also be able to file an appeal if their claim is denied.

UnumProvident’s agreement with California regulators includes provisions of the multistate agreement.

Under that settlement, the insurer agreed to pay $15 million, reconsider more than 200,000 claims and make changes in claims reviews. The deal provides for a $145 million fine if the company fails to meet terms of the agreement.

Garamendi has said he did not sign on to the multistate deal because it didn’t go far enough, such as giving policyholders the opportunity to have an independent medical review of their claims.

UnumProvident provides coverage for more than 2 million Californians and last year paid benefits totaling more than $600 million.

Watjen said the company since 2003 has “undergone significant financial and operational restructuring, built a new management team and improved many of our business processes.”

Georgia’s insurance commissioner fined the company $1 million in March 2003 after he said regulators found a UnumProvident mind-set of looking “for every technical legal way to avoid paying a claim.”

The company also said Monday it would amend the multistate settlement agreement to include mailing notices of the claim reassessments to about 29,500 customers whose claims were denied or terminated between Jan. 1, 1997, and Dec. 31, 1999.

Based on the California agreement and related matters, the company said it will record a charge of $75 million before tax, or $51.6 million after tax (16 cents per share) for the third quarter of 2005.

UnumProvident was created through the 1999 merger of Provident Cos. of Chattanooga and Unum Corp. of Portland, Maine. It has about 12,000 employees and last year paid more than $6 billion in benefits.

Shares of the company rose 10 cents to close at $20.60 on the New York Stock Exchange Monday.

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Associated Press writer Bill Poovey in Chattanooga, Tenn., contributed to this report.

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On the Net:

http://www.unumprovident.com

AP-ES-10-03-05 1705EDT