Source: https://www.debofsky.com/Articles/Judge-takes-aim-at-disability-insurers-ERISA.shtml
Timestamp: 2019-04-23 04:18:35+00:00

Document:
In a stinging decision against an arm of the major worker disability insurer Unum Provident Corp., a federal judge charged that the Employee Retirement Income Security Act falls well short of its goals.
The plaintiff, Radford Trust to which a worker's claim was assigned, brought an ERISA claim on behalf of the trust's beneficiary, identified as ''Doe,'' a former employee of a New York City law firm, alleging a wrongful denial of long term disability benefits. Reviewing the claim as a ''case stated'' based on the parties' stipulation that it could do so, the court reviewed the claim record as an evidentiary submission, weighing the evidence and drawing reasonable inferences in order to render findings of fact and conclusions of law in accordance with Federal Rule of Civil Procedure 52. Radford Trust v. First Unum Life Insurance Company of America, 321 F.Supp.2d 226 (D. Mass. 2004).
The claim related to disability due to schizophrenia. During a period of remission in that illness, Doe successfully completed law school and began working as an associate at a law firm in 1998.
Shortly after he began work as an attorney, however, the symptoms returned, and Doe was unable to perform his work satisfactorily. Consequently, Does employment was terminated in April 1999, although he remained on the payroll through June 30, 1999, which included payment of premiums for long-term disability through that date.
However, Unum disputed whether Doe remained an active employee through the end of June, although time sheets showed both billable and non-billable hours through May 21, 1999. As a result, the court determined that Doe was actively employed through May 21, 1999.
There was also a dispute as to whether the plaintiff's symptoms were sufficiently acute to cause disability while he was still employed. The plaintiff contended that his schizophrenia prevented him from working; however, he did not mention his schizophrenia to a doctor until May 1999, when he visited his internist to complete immunization forms; actual psychiatric treatment did not start, though, until late June 1999, and Unum contended that the June 22, 1999, date was the first date he could be considered disabled, which was after Doe ceased active employment. However, the court determined that disability began by April 20, 1999; and that Doe was unable to work due to his disability.
Unum conducted two medical reviews of the claim: both of which concluded that while a current disability was supported, Doe was not under the care of a doctor on the alleged date of onset; and coverage had terminated by the date disability was supported. Doe's appeals were unavailing.
On judicial review, the court first explained the standard of review. Following Recupero v. New England Telephone & Telegraph Co., 118 F.3d 820 (1st Cir. 1997), the court explained that all ERISA benefit decisions are reviewed de novo; however, where the plan grants discretion, the question is whether the decision was reasonable. If no discretion is granted, the question is whether the decision was correct.
Turning to the merits, the court first rejected Unum's claim that Doe's release of his employer released his benefit claim as well. First, the defense of release was not pleaded as an affirmative defense; thus, it was waived. However, the court also found the defense without merit as a matter of law since Unum was not a party to the settlement between Doe and his employer.
''First Unum's conduct in denying Doe's claim was entirely inconsistent with the company's public responsibilities and with its obligations under the policy. This is not the first time that First Unum has sought to avoid its contractual responsibilities, and an examination of cases involving First Unum and Unum Life Insurance Company of America, which like First Unum is an insuring subsidiary of Unum Provident Corp., reveals a disturbing pattern of erroneous and arbitrary benefits denials, bad-faith contract misinterpretations, and other unscrupulous tactics. These cases suggest that segments that have run in recent years on '60 Minutes' and 'Dateline,' alleging that Unum Provident 'regularly declines disability claims as a way of boosting profits,' may have been accurate. See Edward D. Murphy, 'Unum Corp. Retirees Feeling a ''Sense of Loss,'' ' Portland Press Herald, Apr. 29, 2003, at 1C.
The court also rejected Unum's request for a remand. Following Cook v. Liberty Life Assurance Co., 320 F.3d 11 (1st Cir. 2003), the court held it had ''remedial discretion [regarding remand] regardless of whether the case involves denial or termination of benefits.'' Accordingly, benefits were awarded along with prejudgment interest at the state statutory rate, along with attorney fees.
This ruling is a potent indictment of the Unum Provident Corp., although the decision offers even a stronger criticism about the failures of the ERISA law to promote social welfare. Chief U.S. District Judge William G. Young was obviously incensed by what he viewed as improper conduct by a particular insurance company, though, and his catalog of cases raising similar concerns will no doubt be cited with frequency by plaintiff attorneys.
One of the cases mentioned by the court as an example of prior Unum bad-faith conduct was Newman v. Unum, 2000 WL 1593443 (N.D. Ill. 2000), which bears great similarity to Radford Trust. There, too, Unum attempted to argue that because the insured was not being treated for a mental disorder at the time of his alleged onset of disability (the day of Newman's job termination), the claim was not covered. However, U.S. District Judge Robert W. Gettleman ruled that since all of the evidence pointed to an onset of disability as of that date, the plaintiff satisfied the ''care of a physician'' clause because he was being treated by a doctor when he submitted his disability claim.
A similar conclusion was reached in Kaplan v. Northwestern Mutual Life Insurance Co., 115 Wn.App. 791, 65 P.3d 16, 2003 Wash.App.LEXIS 270 (Feb. 24, 2003) (published in part), as well as in Eichhacker v. Paul Revere Life Insurance Co., 354 F.3d 1142 (9th Cir. 2004), where the court held that due to an unbroken chain of causation, the insured's initial treatment by a psychiatrist after the alleged disability onset date did not disqualify the plaintiff from receiving benefits.
The most interesting part of the ruling, though, was the court's discussion about the social value of disability insurance and the function of the judiciary in overseeing the behavior of private disability insurers. The court's open questioning of a deferential standard of review and an unjustifiable denial of a jury trial right will perhaps open a debate on these issues, which are both creations of the courts, even though Judge Young only blamed the judiciary for denial of jury trials.
Because the ERISA law is silent about standards of review or court procedures, it is obvious that the wholesale importation of administrative law was a mistake that needs to be fixed since, as the court pointed out, insurers lack the expertise and accountability of administrative agencies, nor are claimants afforded the same due process protection that they would receive before an agency such as the Social Security Administration.
Young quite appropriately expressed doubts about what other courts have too easily accepted. Perhaps more judges will join him in asking the same questions, including the fundamental question as to why persons insured under ERISA plans receive significantly less security than they receive under privately purchased policies when the ERISA law was enacted to provide even more protection.

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