For claimants, it is not easy to challenge an insurer’s denial of long-term disability benefits in court, particularly in an ERISA case. Courts review the insurer’s or administrator’s decision under an “arbitrary and capricious” standard meaning that they will uphold the decision as long as it was the result of a “deliberate, principled reasoning process.” To put it simply, a court will uphold a decision to deny long-term disability benefits even if it disagrees with it, so long as the insurer can point to some facts justifying the denial.
Because no two disability cases are alike, courts have not, and cannot, set out clear rules on what constitutes an arbitrary and capricious denial of benefits. However, a recent decision from the United States Court of Appeals for the Sixth Circuit (the circuit that includes all the federal courts in Tennessee) provides important guidance on when an insurer’s disability determination, under the arbitrary and capricious standard, will be reversed.
In Shaw v. AT&T Umbrella Benefit Plan No. 1 (2015), the court ruled in favor of the plaintiff and overturned a lower court’s judgment that the plan administrator’s decision to deny long-term disability benefits was not arbitrary and capricious. In Shaw, the claimant appeared to have a strong case that, because of the condition of his neck, he was disabled from his job as a customer service representative. In support of his claim, he was able to show the following:
- An MRI that demonstrated major problems and weaknesses with his neck, which were likely the source of the pain.
- Several physicians confirming that his neck was causing him considerable pain.
- His treating physician stating that he could not drive longer than a half-an-hour, and that he could only sit for 20 minutes.
- That he qualified for disability benefits from the Social Security Administration (SSA), after the SSA found that he was disabled, in part, as a result of degenerative disc disease. The SSA determined his statements concerning his pain, and the limiting effects of his condition were “credible.” (Courts have held that insurance companies cannot ignore a determination from the SSA that the claimant has a disability.)
In spite of the mountain of evidence the claimant had in support of his long-term disability claim, Sedgwick Claims Management Services (“Sedgwick”), the plan administrator, still denied him benefits. Remarkably, Sedgwick discounted the claimant’s evidence without even taking the time to examine him. One of Sedgwick’s hired physicians merely called and left messages for the claimant’s three physicians, and then requested that they call him back within 24 hours. The claimant’s three physicians did not meet that deadline, and Sedgwick denied the claim based solely on its review of the file.
The claimant then filed suit against Sedgwick in federal court. The lower court upheld Sedgwick’s determination, and the claimant appealed to the Sixth Circuit. The Sixth Circuit reversed the lower court and determined that Sedgwick’s decision to deny the claimant long-term disability benefits was “arbitrary and capricious.”
The court’s analysis of Sedgwick’s evaluation of the claimant’s medical condition is very helpful to disability claimants and their attorneys looking to challenge an insurance company’s denial of long-term benefits. For example, in explaining its ruling, the court was critical of Sedgwick’s haphazard review of the claimant’s condition. The court noted that Sedgwick ignored favorable evidence from the claimant’s physicians, and falsely stated that there were no specific measurements of the claimant’s range of motion. In fact, the claimants’ records showed that he had “significant” range of motion limitations, along with major functional limitations. The court also faulted Sedgwick for “summarily” dismissing the opinions of the claimant’s physician, without giving reasons for why it was adopting an alternative position.
The court also took issue with the Sedgwick’s medical expert giving the claimant’s physicians only 24 hours to return his call. Calling this deadline “unreasonable,” the court said that the cursory manner in which Sedgwick attempted to contact the claimant’s physicians showed that its decision was not made with care. In addition, Sedgwick’s failure to conduct its own evaluation of the claimant drew criticism from the court.
Notably, the court was critical of Sedgwick’s determination that the claimant was noncompliant with medical advice because he did not undergo surgery to address the problems with his neck. Although two of claimant’s physician recommended surgery, they also told him of the risks involved with the procedure, and recommended physical therapy as a more conservative option. The claimant opted for physical therapy. As the court noted, there was nothing in the claimant’s disability plan requiring him to pursue the most aggressive treatment to qualify for long-term disability benefits.
In ERISA cases, courts will give insurance companies the benefit of the doubt when they deny claims for long-term disability benefits. But that deference has its limits, as Shaw makes clear. If an insurance company unfairly turned down your disability claim without taking the time to examine you or interview your doctor, you should consult with an experienced disability attorney.