Source: https://abelllaw.typepad.com/kentucky_employment_law/long-term-disability-benefits/
Timestamp: 2019-04-21 15:14:57+00:00

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While there is "nothing inherently improper with relying on a file review," we have observed that "the failure to conduct a physical examination, where the Plan document gave the plan administrator the right to do so," as Reliance's Plan expressly does, "raises questions about the thoroughness and accuracy of the benefits determination."
File reviews are particularly "questionable as a basis" for an administrator's determination to deny benefits where the claim, as here, involves a mental illness component. Evaluation of mental health necessarily involves "subjective symptoms," which are most accurately ascertained through "interviewing the patient and spending time with the patient," such that a purely record review will often be inadequate where a disability claim includes a mental component.
Another deficiency in Reliance Standard's file review is its "failure to consult with medical professionals with relevant expertise. See 29 CFR § 2560.503-1(h)(3)(iii)(requiring plan administrators, "in deciding an appeal of an adverse benefit determination that is based in whole or in part on a medical judgment" to "consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.").
While ERISA does not demand an examination by the narrowest of specialists, we have noted its requirement that administrators retain health care professionals in the specific field of medicine at issue. ... Reliance's failure to consult with a mental health expert -- particularly when it denied Okuno benefits on the basis that her disability included a psychiatric component -- indicates a lack of deliberate and reasoned decision-making.
The record contains no indication that Reliance's reviewing health care professionals ever consulted with Okuno's treating physicians, the only doctors to actually examine her. ... While Reliance was not required to accord special deference to the opinions of Okuno's own doctors, "by the same token, it may not arbitrarily repudiate or refuse to consider the opinions of a treating physician."
In sum, a file review is not per se inadequate but its use raises questions where the claim has a psychiatric component. The disability insurance company should use medical consultants with expertise in the relevant medical field. Finally, there should be some communication with the claimant's treating physicians and there should be some reasoned discussion of their opinions.
For further reading: Has Your Claim for Disability Insurance Benefits Been Denied Based on a Preexisting Condition? and Has Reliance Standard Denied Your Disability Insurance Benefits Claim Based on a Mental Disorder or Condition?
Reliance Standard, as do many disability insurers, has a mental and nervous disorders limitation that restricts payment of disability insurance benefits to 12 months where a claimant's disability is "caused by, " "contributed to by," or "resulting from" mental or nervous disorder. This language imposes a "but for" causation standard the Sixth Circuit held recently in Okuno v. Reliance Standard Life Ins. Co., joining the Fifth, Ninth and Third Circuits in so ruling.
The claimant, Patti Okuno, was diagnosed with narcolepsy, Crohn's disease and Sjogren's syndrome, an autoimmune disorder, after struggling for years with fibromyalgia and degenerative disc disease. Okuno went through a total of three administrative appeals, while the insurance company determined that her disability benefits would be limited to 12 months because of anxiety and depression diagnoses in addition to her physical maladies. The benefits limitation was based on Eventually she filed suit and the district court, Hon. Gregory L. Frost of the Southern District of Ohio, ruled on the administrative record for the insurance company.
Okuno argued that the mental or nervous disorders limitation did not apply where "the evidence establishes that a claimant is 'disabled by physical conditions alone, then the mere presence of a 'psychiatric component' does not justify application of the one-year mental health limitation."
The Sixth Circuit accepted this argument noting the Fifth Circuit's recent observation "that every federal circuit to consider the meaning of phrase 'caused by or contributed to by,' in the Mental or Nervous Disorders Limitation, has read it 'to exclude coverage only when the claimant's physical disability was insufficient to render him totally disabled." This "but for" test led the Sixth Circuit to conclude that "an application is not appropriately denied on the basis that a mental or nervous disorder 'contributes to" a disabling condition; rather the effect of an applicant's physical ailments must be considered separately to satisfy the requirement that review be reasoned and deliberate." This standard joined rulings by the Fifth, George v. Reliance Standard Life Ins. Co., 776 F3d 349 (5th Cir 2015), Ninth, Maurer v. Reliance Standard Life Ins. Co., 500 Fed.Appx. 626 (9th Cir. 2012), and Third Circuits, Michaels v. The Equitable Life Assurance Long-Term Disability Plan, 305 Fed.Appx. 896 (3d Cir. 2009).
A disability insurance company is required by ERISA to provide a reasonable explanation for its decision on a claim and must address any reliable, contrary evidence the claimant presents. The failure to explain why it is discounting or disregarding a claimant's evidence is arbitrary and capricious. The Seventh Circuit made this ruling recently in Love v. National City Benefits Plan, No. 08-1722 (July 23, 2009).
In fact, every doctor that personally examined Love concluded that she was unable to work more than a few hours a day and that she could no stand, sit or walk for more than an hour at a time. Dr. Sands did not address any of these reports in his cursory report, which dedicated less than half a page to its analysis and recommendation.
Love appealed the termination of her long-term disability benefits. She submitted further evidence supporting her claim including a physical therapy evaluation, a functional-capacity evaluation and a vocational evaluation. The court noted that "these reports showed that Love had significant impairments." This evidence too was disregarded by Liberty Mutual, which hired another medical consultant, a Dr. Winkler, who "did not address the opinions of these other physicians."
The court ruled that Liberty Mutual's claims process was arbitrary and capricious and violated ERISA. First, the court noted that ERISA required an insurance company to provide "a reasonable explanation for its determination and must address any reliable, contrary evidence presented by the claimant." Liberty Mutual failed to do so because it "did not explain why it chose to discount the near-unanimous opinions of Love's treating physicians." Therefore, the court concluded that Liberty Mutual "acted arbitrarily by terminating Love's benefits without sufficiently explaining its basis for doing so."
After paying disability benefits for five years to a OB/GYN doctor whose diminished use of her left arm left her unable to perform surgery and uninsurable, Unum terminated her benefits. This decision was reversed by the Sixth Circuit in Kramer v. Paul Revere Life Insurance Company, No 07-1557 (April 8, 2009). The court observed that "there is no explanation for the decision to cancel benefits that had been paid for some five years based upon the initial determination of total disability in the absence of any medical evidence that the plaintiff's condition had improved during that time."
Dr. Lois Kramer, an OB/GYN, had disability insurance policies with Paul Revere Life Insurance Company and Provident Life and Accident Insurance Company (which later were acquired by Unum). Beginning in the mid-1990's Dr. Kramer began experiencing back and spinal cord problems, eventually undergoing a C6-C7 laminectomy. Further treatment including nerve root injections proved ineffective and she eventually lost full use of her left arm. As a result, she struggled to perform routine office tasks and could not perform surgery and related procedures. Her claim was approved and she began receiving disability benefits in late 1998.
Unum paid the benefits through 2003. In the interim, at least two medical file reviewers reviewed Dr. Kramer's file and affirmed that she remained disabled and entitled to benefits. Nonetheless, in late 2003, Unum terminated payment of the benefits based on two more reviews, one by a Dr. Phillip Mayer and another by a Dr. Geron Brown, both of whom opined that Dr. Kramer could resume working as a OB/GYN. Dr. Kramer appealed the termination of her benefits, presenting additional medical evidence along with evidence that she could not obtain medical malpractice insurance because of her disability.
Kramer filed suit for reinstatement of her benefits. The district court ruled applied a de novo standard of review to the termination of benefits under the Provident policy and reinstated her benefits. However, the district court applied an arbitrary and capricious standard to the Paul Revere policy and affirmed the termination of benefits.
there is no explanation for the decision to cancel benefits that had been paid for some five years based upon the initial determination of total disability in the absence of any medical evidence that [Kramer's] condition had improved during that time. The best that can be said of the opinions of Dr. Mayer and the other company consultants is that they support the proposition that Dr. Kramer was, in fact, never disabled from her 'own occupation.' But that conclusion flies in the face of all the other evidence in the record, and the plan administrator's reliance upon it can only be described as arbitrary and capricious.
Reciting First Unum's long history of abusive and deceptive claims-handling practices, as well as its conflict of interest as both claims decider and payor, the Second Circuit Court of Appeals has ruled that First Unum acted arbitrarily and capriciously in denying the claim and awarded back benefits, interest, attorney's fees and costs to the claimant. McCauley v. First Unum Life Insurance Company, No. 06-5100 (December 24, 2008).
The claimant, McCauley, worked as a tax attorney and developed advanced colon cancer. He received radical treatments in 1991 that saved his life. McCauley suffered additional medical problems over the next few years including liver cancer and the cancer treatments inflicted quite a toll. He attempted bravely to continue working before realizing that he could not continue. McCauley applied for long-term disability benefits to First Unum, which provided disability insurance to McCauley's employer and served as both its administrator and payor of benefits.
First Unum denied McCauley's claim on May 19, 1995. He appealed and submitted additional medical information. Nonetheless, First Unum again rejected McCauley's claim on September 14, 1995. McCauley then attempted to resume employment and converted the disability insurance policy by assuming payment of its premiums. McCauley's health problems again proved insurmountable and he again filed a claim for long-term disability benefits which First Unum denied in 1996. McCauley then filed suit.
The Court ruled that McCauley was entitled to benefits, although it ruled that First Unum's initial denial of his claim was not arbitrary and capricious based on the limited medical information presented in support. That medical information indicated only that McCauley's cancer had been successfully treated and that his restrictions were only against very long hours and physical exertion.
In support of his appeal from First Unum's denial of his claim, McCauley submitted a memorandum listing his medical conditions as (1) chronic diarrhea, (2) chronic and acute renal impairment, (3) progressive vascular sclerosis, (4) high cholesterol, (5) insomnia, and (6) incisional scarring and pain. The memorandum detailed how these conditions affected McCauley on a daily and continuing basis, at times leaving him unable to function in any capacity and in constant and substantial pain.
The Court observed that the memorandum "flatly contradicts First Unum's finding that McCauley was capable of performing a sedentary occupation and completing the ordinary tasks of a tax attorney." While First Unum claimed that the information in McCauley's memorandum had been considered in the initial denial of McCauley's claim, the Court asserted that "the record plainly reflects that they were not." The Court also criticized First Unum's argument that the memorandum was not signed by McCauley's doctor, a deficiency it had never informed McCauley of until he filed suit.
This kind of wholesale embrace of one medical report supporting a claim denial to the detriment of a contrary report that favors granting benefits was determined in Glenn to be indicative of an administrator's abuse of discretion.
First Unum lied to McCauley that an on-site physician had reviewed his claim and supporting information. "In fact, the court observed, "no records were reviewed by a physician at First Unum." This lie was additional evidence supporting McCauley's claim.
First Unum is no stranger to the courts, where its conduct has drawn biting criticism from judges. A district court in Massachusetts wrote that "an examination of cases involving First Unum ... reveals a disturbing pattern of erroneous and arbitrary benefits denials, bad faith contract misinterpretations, and other unscrupulous tactics. Radford v. First Unum Life Ins. Co., 321 F.Supp.2d 226, 247 (D. Mass. 2004), rev'd on other grounds, 491 F.3d 21, 25 (1st Cir. 2007). That court listed more than thirty cases in which First Unum's denials were found to be unlawful, including one decision in which First Unum's behavior was "culpably abusive." Id. at 247 n.20. Also, First Unum's unscrupulous tactics have been the subject of news pieces on "60 Minutes" and "Dateline," that included harsh words for the company. Id. at 248-49. First Unum has fared no better in legal academia. See John H. Langbein, Trust Law as Regulatory Law: The Unum/Provident Scandal and Judicial Review of Benefit Denials under ERISA, 101 Nw. U. L. Rev. 1315 (2007). In light of First Unum's well-documented history of abusive tactics, and in the absence of any argument by First Unum showing that it has changed its internal procedures in response, we follow the Supreme Court's instruction and emphasize this factor here. Accordingly, we find First Unum's history of deception and abusive tactics to be additional evidence that it was influenced by its conflict of interest as both plan administrator and payor in denying McCauley's claim for benefits.
The United States Court of Appeals decision in Iley v Met Life, No 06-2589 (January 18, 2008) illustrates just how easy it is for insurance companies to get out of paying benefits to disabled persons on long-term disability insurance policies that they received through their employment.
Iley was employed by the Kroger company and through Kroger was covered by a long-term disability insurance policy issued by Met Life, which was also the benefit administrator.
Iley hurt her back, underwent two back surgeries and was paid benefits for 24 months. Met Life then terminated Iley's benefits, although Iley's doctor had just reported that Iley suffered from the precise condition -- radiculopathy -- that Met Life asserted there was no medical evidence that she suffered from. Iley appealed the termination of her benefits "and her physicians submitted statements regarding Iley's disability in conjunction with her appeal." Met Life denied Iley's appeal, claiming that her claim file had been reviewed by a "health care professional." Iley then filed suit and a federal district court ruled that she was entitled to benefits.
The appeals court criticized the district court for not giving "any deference to Met Life's decision" and for conducting an "in-depth review of the record." In addition, even though Met Life, as both the insurer and the benefits administrator, was responsible for deciding whether Iley qualified for benefits that it would then have to pay her, a dual role that is ordinarily considered a "conflict of interest," the appeals court ruled that "it was improper to find that Met Life acted under a conflict of interest." Finally, when it turned out the "health care professional" that reviewed Iley's claim file on appeal was a nurse, the appeals court failed to consider whether a nurse's opinion based on only a review of Iley's claim file not an actual examination of her could or should be given more weight than the opinion of her doctors who had performed two surgeries and treated her for many years and instead asserted that "this court has never held that a file review by a nurse is an insufficient form of review."
This case is a disturbing illustration of how empty is the promise of long-term disability insurance that many workers obtain through their employment. These insurance policies are almost always governed by ERISA. And under ERISA insurance companies, as the Iley case shows, can disregard the opinions of doctors who have performed multiple surgeries and treated an insured for many years in favor of an opinion from a nurse based only on a review of the claim file, not an actual examination.

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