Articles Tagged with long-term disability benefits

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In a dispute over long-term disability benefits, it’s important to determine if the disability policy falls within the scope of the Employee Retirement Income Security Act of 1974 (ERISA).

ERISA is a federal statute that applies to claims for employee benefits, including disability benefits.  All else being equal, a claimant will have an easier time overturning a denial of disability benefits if the employee’s disability plan is not governed by ERISA. That is because claimants making claims under policies governed by ERISA face significant hurdles not faced by claimants who have non-ERISA policies.

The most consequential difference between ERISA and non-ERISA disability cases is that federal courts decide ERISA cases under the “arbitrary and capricious” standard of review.  What that means is that courts will not overturn a denial of disability benefits unless they find that the denial was without a factual basis.  This is a highly deferential standard of review and requires a court to uphold a plan administrator’s denial of benefits if it is supported by only modest evidence in the record.

As well, ERISA claimants cannot recover extra-contractual damages that otherwise may be available under state law.  In addition, ERISA claimants typically cannot avail themselves of discovery to learn more about their denial of benefits.  Rather, they can only rely on what is in the administrative record, or the claim file, in arguing that they are entitled to long-term disability benefits.

Because it is so important to know if a disability case will be subject to ERISA, one would think that it would be relatively easy to figure out if the policy at issue is subject to ERISA.  Unfortunately, that’s not always the case.  For example, in Alexander v. Provident Life & Acc. Ins. Co (E.D. Tenn. 2009), the plaintiff’s policy bore the hallmarks of both an ERISA and a non-ERISA policy. In that case, the plaintiff, a doctor, had an individual disability policy through his employer, a medical practice. After he left the medical practice that employed him, he continued the policy and paid all the premiums.

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Under many disability policies, claimants must show that they cannot perform the material and substantial, or the important duties of their occupations in order to qualify for long-term disability benefits.  Although these terms are essential to the determination of a disability claim, most insurers do not define the terms “material and substantial” or “important” in their policies.  Nor do they provide guidance in their policies about what guidelines or factors they will use to determine the material and substantial or important duties of an insured’s occupation.

Our firm confronted this first-hand in a case in which we represent a gynecologist in a lawsuit against Unum Life Insurance Company of America and Paul Revere Life Insurance Company (collectively, “Unum”) for long-term disability benefits.  Our client lacerated her tendon during a procedure and is now unable to perform major surgeries, including hysterectomies.  She does, however, maintain a clinical practice in which she is able to bill for routine, simple procedures like lab work and office visits.

Our client’s income disability policies with Unum do not define the terms “material and substantial” or “important,” and provide no guidance on the factors Unum may employ to interpret those terms.  So then what exactly are the “material and substantial” and “important” duties of our client’s occupation?  Commonsense would tell you that people who purchase income disability policies intend to insure against a risk of an injury that would lead to a loss of income or a loss of earning potential.  In our case, our client asserted that the material and substantial and important duties of her occupation were serving as a lead surgeon on major, invasive surgeries, because those procedures resulted in higher billings, clinical referrals, and post-surgical visits.  These procedures were also vital in safeguarding her patients’ health.

Unum, however, did not view it that way.  As a part of our lawsuit, we deposed Melissa Walsh, the corporate representative designated by Unum in response to our deposition subpoena. In her deposition, Ms. Walsh discussed a 13-page-document Unum prepared when it evaluated our client’s initial claim for disability benefits. (For your reference, we have attached a transcript of Ms. Walsh’s deposition transcript here.  We’ve also attached a copy of Unum’s 13-page document here, which was exhibit 4 to the Ms. Walsh’s deposition.)    The document contained all the procedures for which our client billed prior to her disability.  Referred to by Ms. Walsh throughout her deposition, Unum’s billing document listed our client’s pre-disability duties, how often they were performed, and their total charges. (see pages 71-73, 92-93 and Exhibit 4 to the deposition.)

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If you’re applying for long-term disability benefits, not much of your private life is off limits. Whether you’re mowing your lawn or posting on your Facebook page, your disability insurer can monitor your activities in search of any reason to deny your claim for benefits.  And, it may well do so.

In O’Bryan v. Consol Energy, Inc., (2012), the Sixth Circuit (which includes all federal courts in Tennessee) held that there is nothing improper with a plan administrator conducting surveillance on a claimant for long-term disability benefits.  In that case, Liberty Life Assurance Company (“Liberty”) paid an investigator to put a disability claimant under surveillance.  The investigator then observed the claimant performing common daily tasks, such as getting in and out of his vehicle, putting fuel in his vehicle, and mowing the lawn. Because of the investigator’s findings, Liberty denied the disability claim.  When the Plaintiff challenged the company’s decision, the court upheld Liberty’s decision to deny benefits, specifically citing Liberty’s argument that the investigator’s surveillance report contradicted the symptoms the claimant reported to his medical examiners.

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In lawsuits challenging an ERISA plan’s denial of long-term disability benefits, can claimants who have qualified for Social Security disability benefits use that as evidence in their case?  Or, to put it another way, can a decision from the Social Security Administration (SSA) on a claimant’s disability status be a factor in a court’s overall analysis of whether an ERISA plan improperly denied long-term disability benefits?

The answer to both questions is “yes,” although with caveats.  Courts are mindful that the standards for determining disability under the Social Security requirements may vary considerably from the standards for determining disability under a private ERISA plan.  However, as noted by the district court in Gellerman v. Jefferson Pilot Fin. Ins. Co.  (S.D.Tex.2005) “no court has held that an SSA determination is completely irrelevant” in an ERISA dispute over disability benefits.

In Glenn v. Metlife (2006), the Sixth Circuit found that the insurer’s failure to give any weight to the claimant’s SSA disability determination was “perplexing” and a “significant factor” in its analysis of the claimant’s claim for long-term disability benefits.  (The Sixth Circuit includes the federal district courts in Tennessee.)

In Glenn, the claimant qualified for the first phase of long-term disability benefits under her ERISA plan after she showed that she could not complete the material duties of her regular job.   In order to reduce the amount of disability payments it had to make to the claimant, the insurer hired a law firm to help her with her disability claim with the SSA.  The claimant then qualified for total disability benefits through the SSA, and the insurer deducted those government benefits from the disability payments that it was obliged to pay, as provided for under the policy.  (All long-term disability policies this author has seen and is aware of allow the insurance company a credit for Social Security benefits.)

After receiving long-term disability benefits for two years, the claimant then had to meet the more difficult standard in phase two of her disability plan.  Now, she had to show that she could not perform the material duties of any gainful occupation, as opposed to the specific material duties of her prior job.  Despite receiving repeated and detailed correspondence from her physician supporting her claim, the insurer determined that she failed to meet the “any gainful occupation” standard and terminated her benefits.  The claimant filed a lawsuit in district court challenging the decision, and the district court ruled in favor of the insurer.  She then appealed her case to the Sixth Circuit.

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