Myrtle McGee worked as a restaurant general manager.  She received short-term and long-term disability benefits under her employer’s ERISA plan.  The long-term disability portion of the plan paid benefits during the first 24 months under an “own occ” standard and afterwards under an “any occ” standard.  The plan also limited benefits to 24 months for disabilities caused or contributed to by a mental or nervous condition.

Near the end of the 24-month benefit period, the claims administrator, VPA, Inc.,  hired an outside physician to perform an evaluation of McGee.  The physician apparently concluded that McGee was able to perform sedentary work.  VPA also obtained a “Functional Capacity Evaluation” and an “Employability Assessment” that supported VPA's position that McGee was capable of performing sedentary work.

Based on these opinions, VPA terminated McGee’s benefits, stating that after the initial 24-month period she would no longer meet the plan’s definition of “totally disabled.”  VPA denied McGee’s internal appeal, and she filed suit in federal court.

Applying the arbitrary and capricious standard of review, the federal district court ruled in favor of the plan.  The court analyzed the case as follows: 

VPA obtained three separate evaluations: the IME performed by Dr. Changaris; the Functional Capacity Evaluation performed by Healthsouth, and the Employability Assessment performed by CorVel.  The IME concluded that Plaintiff was incapable of light duty, but it did not rule out occupations requiring only the sedentary physical demand level.  The Functional Capacity Evaluation concluded that Plaintiff was capable of performing occupations requiring a sedentary physical demand level, and the limitations it found were consistent with those recommended by the IME.  Finally, the Employability Assessment concluded that Plaintiff could find jobs with low physical demands.  These evaluations strongly support VPA's decision to terminate benefits under the Plan's specific guidelines.  Plaintiff does not argue that this Court should ignore or completely discount these evaluations due to any independent circumstances.

 

Plaintiff's only submission in support of her claim for continued benefits was a letter from her treating physician dated January 26, 2005 stating his belief “that the patient is totally disabled.”  However, her treating physician provided no explanation whatsoever for the opinion that she was totally disabled and his opinion is not stated to a reasonable degree of certainty within the medical profession.  Plaintiff does not make a persuasive argument that this brief letter overcomes the weight of Defendant's evidence supporting its decision to deny benefits.

The cite is McGee v. YUM!Brands, Inc., 2006 WL 2631976 (W.D. Ky. Sep. 12, 2006).

The claimant, Rose Wood, left work in 1999 due to carpal tunnel syndrome.  She began to receive short-term disability benefits under her employer's plan.  Her condition continued to worsen.  She later had surgery on her back, leading to a number of additional complications.  After exhausting her short-term benefits, she transitioned to the long-term portion of the plan. 

The long-term disability plan consisted of two phases.  Under the first phase, claimants were entitled to benefits for seven months if they were unable to perform one or more of their essential duties and continuing benefits from months seven through twenty-nine if they were unable to perform any substantial gainful work.  Then, under phase two (an optional coverage that employees could elect and that was insured by Prudential), claimants were entitled to continuing benefits beyond twenty-nine months if they were unable to perform the material and substantial duties of any job for which they were reasonably suited.

The claims administrator initially denied Wood's claim for benefits during the first phase, citing the opinion of a consulting physician.  However, the plan eventually agreed to pay benefits during that period.  Prudential then denied benefits to Wood under the second phase of the plan.  After two internal appeals, Wood sued in federal court.  The court previously ruled that the de novo standard applied to the decision to deny benefits.  The parties filed cross-motions for summary judgment on the merits.

Ruling on the cross-motions, the court held that any "reasonable trier of fact would find Wood to be disabled."  The court analyzed the evidence as follows:

There is no factual dispute that Wood was diagnosed with carpal tunnel syndrome in 1999, that she underwent spinal surgery in 2000, and that she continues to suffer pain and numbness in her hands to this day.  The reports of all of the physicians who actually examined or treated her support her disability claim, with the exception of the report of Dr. Teitel, who examined Wood at the Plan's request when she sought first phase LTD benefits.  Even Dr. Teitel did not find that Wood was malingering or exaggerating her symptoms.  He stated that the recommendations of Wood's treating physicians were 'appropriate in terms of limiting her discomfort but not an absolute limitation because it is not clear that these activities will produce damage to tendons, joints, muscle or nerve.'  The policy's definitions do not, however, exclude disability on the basis of pain and do not require that activities cause damage to tendons, joints, muscle or nerve before they qualify as limitations.

Dr. Ito, the Plan's consulting doctor who did not examine Wood, did not dispute Wood's diagnoses or the findings of pain, weakness and numbness documented by numerous doctors over time.  However, Dr. Ito apparently discounted Wood's pain limitations on the basis that they were not supported by objective testing. The policy's definitions do not require the type of direct test support that Dr. Ito apparently required to support Wood's pain complaints and other limitations.

The only vocational counselor who actually met with Wood, Sandra Richter, concluded that she is totally disabled.  Ms. Richter met with Wood during the evaluation process for first phase LTD benefits.  The two vocational reports that were generated during the evaluation process for second phase LTD benefits were prepared without meeting with Wood.  One of those reports concluded that Wood could perform her own job, while the other report concluded that she could perform other occupations.  Both reports were prepared based upon limitations that did not include limitations on use of extremities.  It appears that the decision to omit limitations on use of extremities was made by a physical therapist who reviewed Wood's file but did not actually examine Wood.  Neither of the vocational reports upon which Prudential relied contained any analysis of the “gainful employment” language in Prudential's policy, which provided that “gainful occupation” means an occupation that provides at least sixty percent of pre-disability earnings.

in addition, the court rejected Prudential's attempt to limit the claims file to the materials relating specifically to phase two benefits.  The court agreed with Wood that the plan “should have reviewed Wood's entire claim file in order to make a full and fair determination regarding her disability claim, and that the documents in question thus properly are part of the administrative record even if the plan administrator chose not to review them.  Moreover, the Court concludes that Wood's entire file, including all of her medical records, are necessary to conduct an adequate de novo review of the benefits decision.”

The cite is Wood v. Xerox Corp. Long-Term Disability Income Plan, 2006 WL 2595950 (N.D. Cal. Sep. 11, 2006).  

Carla Pippin stopped working due to a medical condition in January 2002.  She began receiving ERISA disability benefits from her employer’s plan.  The third-party claims administrator, Broadspire Services, terminated Pippin’s benefits approximately two years later under the plan’s “any occ” definition of disability. 

After Broadspire denied Pippin’s internal appeal, she filed suit seeking past-due and future benefits from the plan.  Broadspire moved to dismiss, arguing that it was not a proper defendant under ERISA because it did not shoulder any financial responsibility for paying claims under the plan.  Broadspire contended that the employer and the plan itself were the proper defendants.  Pippin asserted that Broadspire was a proper party because it had authority to accept and deny claims under the plan.

The court denied Broadspire’s motion to dismiss, holding in part as follows:

The proceedings in this case are at a very early stage.  Having accepted all well pleaded facts, made all reasonable inferences in plaintiff's favor, and made a liberal reading of the complaint, we do not find that dismissal of the lawsuit would be proper.  Indeed, we must accept Pippin's assertion that Broadspire had the authority to determine the final review of her claim for disability benefits.  As Pippin contends that Broadspire maintains discretionary authority over the plan, Broadspire is a fiduciary to the plan, and therefore was properly named as a defendant.  Accordingly, the defendant's motion to dismiss the plaintiff's complaint against the plan administrator should be denied because the defendant as movant for dismissal under Rule 12(b)(6) has not met its burden to prove that the plaintiff ‘can prove no set of facts in support of his claim which would entitle him to relief.’

The cite is Pippin v. Broadspire Services, Inc., 2006 WL 2588009 (W.D. La., Sep. 8, 2006).

In Tabatabai v. Hewlett-Packard Co. Disability Plan, 2006 WL 2547762 (N.D. Cal. Sep. 1, 2006), a federal court in California clarified the standard of review that applied to the defendant’s decision to deny ERISA benefits.  As discussed several times on this blog, the selection of the standard of review is an important, and often litigated, aspect of ERISA benefit litigation.

Here, after the plan administrator denied Tabatabal’s claims for disability benefits, she filed suit under ERISA.  By way of a motion filed by the plan, the court considered the parties arguments regarding the applicable standard of review.

Quoting the U.S. Supreme Court’s decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), the court stated that a denial of benefits is “to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.”   Tabatabai did not dispute that the plan vested discretionary authority to the administrator, but argued that the denial of her appeal was untimely, thus triggering the de novo standard. 

The court quoted the Ninth Circuit’s recent decision in Abatie v. Alta Health & Life Ins., 2006 WL 2347660 (Aug. 15, 2006), for the proposition that “a procedural irregularity does not usually justify de novo review.”  Instead, the Abatie court held that a procedural irregularity, “like a conflict of interest, is a matter to be weighed in deciding whether an administrator’s decision was an abuse of discretion.”  According to the Abatie court, only when “an administrator engages in wholesale and flagrant violations of the procedural requirements of ERISA, and thus acts in utter disregard of the underlying purpose of the plan as well,” is de novo review appropriate.

Although the administrator took more time than the plan allowed to decide the appeal, the court concluded that the administrator’s delay was not a “wholesale and flagrant” violation.  Instead, the administrator acted in good faith.  The administrator apparently had difficulty reaching Tabatabai during the appeal and suspended the appeal while seeking additional information.  In addition, Tabatabai informed the administrator that she would not be able to communicate with the administrator for several months.  In the words of the court, the administrator “was faced with a situation in which a claimant appealed and then disappeared.” 

In Richardson v. Foundation of Health, 2006 WL 2524176 (D.N.J. Aug. 30, 2006), a federal court in New Jersey upheld an ERISA plan’s termination of benefits.  The claimant, Ann Richardson, applied for long-term disability benefits after a car wreck.  Her treating physicians diagnosed her with herniated discs at the C3-C4 and C5-C6 levels, radiculopathy, post-traumatic carpal tunnel syndrome, and other problems.  The plan, in turn, obtained reports from three physicians who examined Richardson for purposes of the claim.  The plan discontinued benefits after receiving the reports from these evaluating physicians.

Richardson appealed the termination of benefits, but did not submit additional information as part of the appeal.  The plan denied her appeal, stating that the “duration of symptoms without objective evidence to support them does not support the inability to function at a sedentary level occupation.”  The plan later reopened the claim when Richardson submitted information that her vision has worsened as a result of diabetic retinopathy and macular edema.  She also submitted additional evidence regarding her spinal condition, including an MRI that showed central spinal stenosis and bilateral spondyloarthritis.  The plan continued to deny benefits, concluding that there was no objective proof of functional limitations. 

Richardson also received an award of Social Security disability benefits.  After receiving evidence of the award, the plan sent Richardson’s claim file to the Medical Review Institute, which concluded that the records did not show that Richardson was unable to perform her prior job. 

Richardson filed suit in a New Jersey state court.  The plan defendants removed the case to federal district court under ERISA.  Applying the arbitrary and capricious standard of review, the district court held as follows: 

After its review of the record, the Court is unable to conclude that Defendants' decision was unreasonable or unsupported by the record.  Defendants complied with the terms of their policy, considered each of Plaintiff's submissions appealing their decision, and gave reasons for their findings based on evidence in the record. Defendants were not bound by the opinion of Plaintiff's treating physician.  Black & Decker Disability Plan v. Nord, 538 U.S. 822, 825 (2003) (holding “that plan administrators are not obliged to accord special deference to the opinions of treating physicians”).  Nor were Defendants bound by the determination of the Social Security Administration.  Russell v. Paul Revere Life Ins. Co., 148 F.Supp.2d 392, 409 (D.Del.2001) (noting that a “plan administrator is in no way bound by the determination of the Social Security Administration”).  As a result, the Court grants summary judgment to Defendants.

The claimant, Deborah Donovan, left work in 1993 due to back pain and degenerative disc disease.  Her employer’s ERISA plan paid her long-term disability benefits for ten years.  The Social Security Administration awarded her disability benefits in 1994.  The claim administrator for the self-funded plan eventually terminated her disability benefits, stating that there was insufficient objective evidence to support her claim.  Donovan’s internal appeals were denied, and she filed suit under ERISA.

The federal district court reversed the plan’s decision to terminate benefits and ordered the plan to reinstate benefits.  On appeal, the Fourth Circuit affirmed the judgment of the district court, holding that the plan had abused its discretion in terminating benefits.  In its analysis, the Court weighed the various evidence contained in the claims file, including test results and affidavits from treating providers. 

As an example, the Court found that the plan disregarded a treating physician’s affidavit stating that Donovan’s Functional Capacity Evaluation was “not an accurate indicator of her ability to work on a consistent basis” and confirming that Donovan was totally disabled.  The Court concluded that the plan instead latched onto that same physician’s earlier statement that Donovan could perform sedentary work with limitations.  The Court reasoned that the physicians’ earlier statement was based on incomplete information and that his later affidavit was supported by other medical evidence.

The cite is Donovan v. Eaton Corp. Long Term Disability Plan, 2006 WL 2530393 (4^th Cir. Sep. 5, 2006).  Click here to read the opinion.

In McNerney v. Safeway, Inc., 2006 WL 2506399 (W.D. Wash. Aug. 28, 2006), the plaintiff asserted a number of employment-related claims against the defendants (including apparently her employer), including gender and disability discrimination, hostile work environment, and retaliation.  McNerney also alleged that the defendants were liable for breach of contract, fraud, misrepresentation, and negligence with regard to her long-term disability insurance coverage.  She claimed that the defendants stopped making premium payments on her disability coverage without giving her notice.  She argued that the defendants lied to her about the purported lack of disability coverage and that she had no choice but to accept a severance agreement based on the defendants' misrepresentations.  

After the defendants removed the case to federal court, based on their argument that ERISA preempted her disability insurance claims, McNerney filed a motion to remand the case back to state court.  The federal court agreed with McNerney, analyzing the preemption issue as follows:

ERISA preemption is based on the following provision: “[e]xcept as provided in subsection (b) of this section, the provisions of this subchapter … shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by the statute.  29 U.S.C. § 1144(a).  None of the subsection (b) exceptions are at issue here.  With regard to this “related to” provision, the Supreme Court has clarified that state laws are not preempted if they have only a “‘tenuous, remote or peripheral’ connection with covered plans.” New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645, 661 (1995).  ERISA preemption analysis begins with the presumption that Congress did not intend to supplant state law.  Id. at 654.  In considering whether state law claims are preempted, this Court should focus on the “objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive.” Id. at 656.

Following Travelers, the Ninth Circuit analyzed the “relates to” criterion by determining whether a state law has a “connection with” or a “reference to” employee benefit plans.  Southern California IBEW-NECA Trust Funds v. Standard Industrial Electric Co., 247 F.3d 920, 925 (9th Cir.2001).  In determining whether a connection exists, the Ninth Circuit looks to the objectives of ERISA and the “nature of the effect of the state law on ERISA plans.”  Id.  The following factors were identified as significant to the determination as to whether a state law is “connected with” an ERISA plan: (1) whether the state law regulates the types of benefits; (2) whether the state law requires the establishment of a separate employee benefit plan to comply with the law; (3) whether the state law imposes reporting, disclosure, funding, or vesting requirements for ERISA plans; and (4) whether the state law regulates certain ERISA relationships, including the relationship between the ERISA plan and the employer. Operating Engineers Health and Welfare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 678 (9th Cir.1998); quoting Aloha Airlines, Inc., v. Ahue, 12 F.3d 1498, 1504 (9th Cir.1993).

....

The state law claims of breach of contract, fraud, misrepresentation, and negligence regarding the long term disability insurance are in no way related to or connected with the terms of the benefit plan itself.  None of the four factors enumerated above is present; the state law claims here do not in any way implicate the funding, disclosure or regulation of the benefits plan. In considering the claims, the Court need not even look at the disability insurance plan itself.  Plaintiff simply claims that defendants improperly and without notice stopped deducting the payments to fund her coverage, and then lied or misrepresented the status of her coverage.  These claims have only a “tenuous, remote or peripheral' connection” with the terms of the disabilty insurance plan.  Travelers Insurance Co., 514 U.S. at 661. These are thus not within the scope of state laws which Congress intended to supplant by ERISA.  Id. at 654.  Indeed, the objective of the ERISA statute to provide coverage for employees is furthered by application of the state's tort and contract laws here. Id. at 656. These claims are thus not preempted.

Litigants in ERISA cases often dispute the standard of review that the court should apply in evaluating a plan’s denial of benefits.  Under the seminal case of Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989), the U.S. Supreme Court held that the de novo standard applies “unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.”  In Ushakova v. AIG Life Ins. Co., 2006 WL 2473473 (W.D. Wash. Aug. 28, 2006), an ERISA case decided this week by a federal court in Washington State, the defendant argued that plan language requiring "due written proof of the loss" was sufficient to trigger the arbitrary and capricious standard of review.  The federal court disagreed, holding as follows:

The administrator has to show that the plan unambiguously gives it discretionary authority in order to get judicial deference to its decision.  Kearney v. Standard Insurance Co., 175 F.3d 1084, 1089 (9th Cir.1999) (en banc).

Although Defendant does not clearly identify itself as the as the plan's administrator, the letters denying Plaintiff initial claim and appeal make comments from which this is reasonably implied.  For example, Defendant's letter denying Plaintiff's appeal states that the “denial of this appeal is a final plan administration decision.”  The first step in resolving these motions, then, is to determine whether the plan confers discretion on Defendant, and thus what standard of review is appropriate.

Defendant does not point out, nor is the Court aware, of a provision in the plan conferring discretion on defendant to “determine eligibility for benefits or to construe the terms of the plan.”  Firestone at 115.  The plan's “Claims Provisions” section provides that “[b]enefits payable under this Policy for loss other than loss for which this policy provides any periodic payment will be paid immediately upon the Company's receipt of due written proof of the loss.”  The phrase “due written proof of the loss” is subject to various interpretations, and the plan does not indicate who judges whether the proof of loss is    adequate.  The phrase is therefore ambiguous, and does not grant the Defendant discretion either to “determine eligibility for benefits or to construe the terms of the plan.”  See Kearney v. Standard Insurance Company, 175 F.3d 1084, 1089 (9th Cir.1999) (finding the phrase “satisfactory written proof” in ERISA plan ambiguous and therefore did not grant administrator discretion).  Accordingly, review of Defendant's decision to deny Plaintiff's claim will be reviewed de novo.

(Docket citations omitted.)  The court went on to deny the defendant’s motion for summary judgment as to whether benefits were payable under the accidental death and dismemberment plan.  The court found that there were disputed questions of material fact as to the cause of the decedent’s death.

In Trustees of the Construction Industry and Laborers Health and Welfare Trust v. Redland Ins. Co., 2006 WL 2494038 (9^th Cir. Aug. 30, 2006), the Ninth Circuit addressed whether fees generated by non-lawyers, such as paralegals and law clerks, can be recovered by pension trustees that prevail in lawsuits to collect past-due benefit contributions under U.S.C. § 1145.  ERISA provides for the mandatory award of “reasonable attorney’s fees and costs” to pension plans who recover under § 1145.

In this case, after prevailing on the merits, the joint trustees sought to recover their “reasonable attorney's fees and costs of the action” under § 1132(g)(2)(D).  The district court granted part of the fees, but did not permit recovery for work done by non-lawyers.  The court also did not allow recovery of expenses arising from the litigation.  The joint trustees appealed these rulings. 

In reversing the district court, the Ninth Circuit quoted with approval the U.S. Supreme Court holding in Missouri v. Jenkins, 491 U.S. 274 (1989):

Clearly, a “reasonable attorney's fee” cannot have been meant to compensate only work performed personally by members of the bar.  Rather, the term must refer to a reasonable fee for the work product of an attorney.  Thus, the fee must take into account the work not only of attorneys, but also of secretaries, messengers, librarians, janitors, and others whose labor contributes to work product for which an attorney bills her client; and it must also take account of other expenses and profit.

Based on the Jenkins decision, the Ninth Circuit reasoned as follows:

If the attorney's hourly rate already incorporates the cost of work performed by non-attorneys, then courts should not compensate for these costs as an additional “reasonable attorney's fee.”  The key, wrote the [Jenkins] Court, is the billing custom in the ‘relevant market.’ [Jenkins] at 288.  Thus, fees for work performed by non-attorneys such as paralegals may be billed separately, at market rates, if this is ‘the prevailing practice in a given community.’ Id. at 287.  Indeed, even purely clerical or secretarial work is compensable if it is customary to bill such work separately, id. at 287 n. 9, though such tasks ‘should not be billed at the paralegal rate, regardless of who performs them.’ Id. at 288 n. 10.

The Ninth Circuit thus concluded as follows:

If fees for work performed by non-attorneys are customarily billed separately in the relevant market, those fees are recoverable as “reasonable attorney's fees” under 29 U.S.C. § 1132(g)(2)(D).  Similarly, if the expenses specified by the Joint Trustees in this case are customarily billed separately, they are recoverable as “reasonable attorney's fees” under the same section.  We therefore reverse the judgment of the district court and remand for further proceedings consistent with this opinion. 

This is an interesting ERISA disability case out of Wisconsin.  The plaintiff, Mark Holoubek, suffered from the effects of fibromyalgia and chronic headaches diagnosed by his physicians.  He eventually left his job as a materials manager for Johnson Controls, Inc. 

Holoubek engaged in a lengthy battle with Unum Life Insurance Company of America, the plan administrator, over his entitlement to benefits.  Unum paid Holoubek for over two years, but then terminated his disability claim.  Unum relied on opinions from its in-house physician, a clinical consultant, and a nurse.  The company obtained surveillance that it claimed showed Holoubek performing activities that were inconsistent with his reported limitations.  Holoubek submitted several internal appeals before filing suit in federal court.

The court held that Unum's termination of benefits was arbitrary and capricious.  It reasoned that the contents of the record at the time of the initial denial actually supported the continued payment of benefits.  Moreover, although surveillance showed Holoubek doing things such as operating a forklift at an apartment construction worksite, the court found that the surveillance did not provide a justification for claim termination.  During the appeals process, Holoubek described his situation as "desperate" and explained that he had worked because he feared losing his financial investment in the apartments under construction.  Statements of persons from the worksite indicated that Holoubek had doubled-up on his medication and that, while working, he would lose his place in discussions, repeat himself, and suffer muscle spasm, dizziness, and headaches.  

Quoting Hawkins v. First Union Corp. Long-Term Disability Plan, 326 F.3d 914, 918 (7th Cir. 2003), the court ruled that a desperate person might "force himself to work despite an illness that everyone agree[s] [is] totally disabling."  The court stated that "even a desperate person may not be able to maintain such a level of effort indefinitely.  Accordingly, [Unum's] four days of surveillance is of little value because it fails to demonstrate that [Holoubek] could sustain such a level of activity on a continuous basis."

The court ordered Unum to pay Holoubek’s past-due benefits and reinstate his ongoing benefits.  The court dismissed Unum's counterclaim to recover an alleged overpayment of benefits resulting from his receipt of Social Security disability benefits.  The court concluded that Unum was impermissibly seeking legal relief, rather than equitable relief, under ERISA. 

This case is worth reading in its entirety.  The cite is Holoubek v. Unum Life Ins. Co. of Amer., 2006 WL 2434991 (W.D. Wis. Aug. 22, 2006).

James O'Rear, a 63 year-old former employee of Lockheed Martin, submitted a claim for long-term disability benefits under his employer's ERISA plan.  He had physical problems due to a spinal-related condition.  The insurer paid disability benefits for approximately two years, during the "own occ" period, but then determined that O'Rear did not qualify under the “any occ” definition.  After exhausting the internal appeals process, O’Rear sued the insurer.  (The case caption identifies the defendant as "Unum Life Insurance Company of America," but the opinion refers to the defendant as "Paul Revere Life Insurance Company.")  The insurer moved for summary judgment. 

The court discussed the history of the claim: O”Rear had back surgery shortly after his “own occ” period began.  His treating doctor submitted three “Attending Physician Statements” stating that O’Rear could not work.  After the third Statement, the insurer began a vocation evaluation and determined that O’Rear could perform one of three occupations given his education, training, experience, and physical abilities.  In his appeal, O’Rear submitted a fourth statement from his doctor stating that O’Rear had constant hip pain and back pain and could not work.  In an “Estimated Functional Abilities Form,” the doctor also reported that O’Rear had increasingly worsening pain and that his condition was unlikely to get better.   

The insurer obtained an in-house medical review of the materials.  The reviewer found that no diagnostic tests or office notes existed to support the treating doctor’s conclusions.  The reviewer stated that the Estimated Functional Abilities Form showed “physical functional ability within the expected range for his [O'Rear's] clinical history.”  As a result, the insurer determined that there was inadequate evidence to reverse its decision.

Based on the contents of the claims file, the court summarily concluded that the insurer’s termination of benefits was not arbitrary and capricious.  In a footnote, the court stated that “the only evidence the court may consider are the contents of the administrative record.  [Citation omitted.]  O'Rear failed to reply to Paul Revere's Motion for Summary Judgment and thereby identify any favorable evidence contained in the record. In addition, despite several requests by Paul Revere to supply additional diagnostic and treatment information, O'Rear took no action.” 

The cite is O'Rear v. Unum Life Ins. Co. of America, 2006 WL 2457096 (W.D. La. Aug. 21, 2006).    

Shortly after Michael Kehoe was diagnosed with prostate cancer, he elected to increase the amount of his life insurance benefits offered through his employer's plan.  He selected “additional life insurance 2 x the earning,” doubling the basic life insurance coverage that he already had in place.  His employer began deducting premiums each month for the supplemental coverage.

After Mr. Kehoe died a few months later, his wife made a claim for the life insurance proceeds.  Unum Life Insurance Company agreed to pay the regular benefit, but refused to pay the supplemental benefit.  Among other things, Unum Life claimed that it did not owe the additional benefit because Mr. Kehoe had not provided "evidence of insurability" as required by the plan.  

Mrs. Kehoe sued Unum Life and others to recover the supplemental benefit.  She argued that her husband’s employer knew about his prostate cancer and had received a physician's statement addressing the cancer diagnosis.  As a result, she argued that Unum Life did have evidence of insurability.  Unum Life countered that general knowledge about his cancer or the doctor's report did not equate to evidence of insurability.

The federal district court in Louisiana first considered the plan language regarding insurability.  The plan defined “evidence of insurability” as a “statement of your . . . medical history which Unum will use to determine if you . . . [are] approved for medical coverage.”  In addition, the Summary Plan Description stated that evidence of insurability is the same as “proof of good health.”  Based on this language, the court held in favor of the defendants:

Based upon the explicit language in the Plan and the Summary Description of the Plan, the Court is compelled to find that Unum did not abuse its discretion in determining that the evidence submitted by Mr. Kehoe was insufficient to qualify as “evidence of insurability.”  Essentially, evidence of insurability is evidence which suggests that Mr. Kehoe's health was sufficient to qualify him for additional coverage.  [Mr. Kehoe’s treating physician’s] report does not provide documentation of Mr. Kehoe's physical condition; rather, the report is brief and is limited to Mr. Kehoe's diagnosis with metastatic prostate cancer and his diminishing health.  The report details Mr. Kehoe's recent hospitalizations resulting from his condition, and further, notes his indefinite release from work.  This report does not reflect on Mr. Kehoe's “good health” and cannot qualify as evidence of insurability.  It is unreasonable to infer that Unum, as both insurer and claims administrator, would provide Mr. Kehoe with supplemental life insurance following his cancer diagnosis.

Similarly, Unum's alleged general awareness of Mr. Kehoe's diagnosis is insufficient to qualify as proof of good health. In effect, plaintiff's argument would shift the good health burden to Unum to prove Mr. Kehoe was not in good health. 

(Citations and footnotes omitted.)  For these and other reasons (including the finding that Unum Life also did not  approve any purported evidence of insurability as required by the plan), the court concluded that the denial of the supplemental life insurance did not constitute an abuse of discretion.  The cire is Kehoe v. Ryder Truck Rental, Inc., 2006 WL 2414197 (E.D. La. Aug. 17, 2006).