CHATTANOOGA, Tenn. – UnumProvident, which one year ago fired Harold Chandler as president and chief executive to restore investor confidence, increased his severance package to $20.2 million to settle a lawsuit.

The nation’s largest disability insurer fired Chandler in March 2003 as the company faced lawsuits by investors and hundreds of customers with claims-handling complaints.

After the company calculated a $17.3 million severance package, Chandler sued in July 2003, contending that was less than a promise that he would get the same deal as a predecessor.

His firing followed Georgia’s insurance commissioner fining the company $1 million in response to claims-handling complaints. Tennessee and more than 40 other states have ongoing investigations of UnumProvident’s claims handling.

The company’s stock price last spring dropped below $6 a share, down from $58 a share in 1999. The share price has rebounded, closing Thursday at $15.30.

Chandler’s attorney, William Horton, could not be reached for comment Friday about the settlement.

UnumProvident spokesman Jim Sabourin said Friday that the board decided that settling the lawsuit was “in the company’s best interest.”

“While going to trial was an option, our board felt this settlement was the better course of action,” he said.

UnumProvident, created by the 1999 merger of the Unum Corp. of Portland, Maine, and The Provident Companies, based in Chattanooga, claims about 30 percent of the nation’s disability insurance business.

Nell Minow, editor of The Corporate Library, a Portland, Maine-based independent research firm that specializes in corporate governance, said that “in this case where the company’s performance has not been good and where there have been questions about the accounting, it seems to me the board could have made a case for firing the CEO for cause.”

Minow said CEOs are unlike highly compensated coaches, who are “pay-for-performance people. If they don’t perform they are booted.”

She said the payout is a contradiction to corporate boards “trying to assure investors that they have gotten the message on corporate governance. It shows boards still are not strong enough to say no to CEOs.”

UnumProvident, in a proxy statement released ahead of its May 13 annual stockholders meeting at Portland, Maine, also said Chandler’s successor, CEO Thomas R. Watjen, received an $891,000 bonus in March, in addition to his $900,000 annual salary.

The company has about 13,000 employees, including about 3,000 at its public headquarters in Chattanooga and about 3,500 employees in Portland.