A whistleblower lawsuit against private insurance giant Unum Group began on September 22, 2008, and will investigate the company’s handling of disability insurance claims. The lawsuit alleges Unum is costing the government millions of dollars by dumping tens of thousands of disability claims onto the Social Security system, which is overburdened and has a backlog of claims to address.

Unum is accused of requiring claimants to file for Social Security Disability Insurance before filing a claim with the company, even when it was obvious the claimant did not qualify with the Social Security system. Unum would allegedly cut benefits of claimants who did not apply to Social Security.

Private insurers have less strict criteria for disability benefits than Social Security. A claimant must be unable to perform his current job to qualify for disability payments from private insurers; to qualify for Social Security benefits, claimants must be unable to work at all.

An attorney who represents the whistleblower said this practice is creating an additional burden on the Social Security program. A whistleblower filed the lawsuit on behalf of the federal government under the False Claims Act. Companies that are found to be liable are required to pay three times the government’s losses and $11,500 for each false claim.

The filing of the lawsuit has prompted a U.S. Senate Finance Committee investigation into private insurers’ handling of disability claims.

Source: “Trial against Unum over handling of disability insurance claims opens today,” Yahoo! Finance, September 22, 2008.