The United States Court of Appeals for the Fifth Circuit, which rules on the cases decided in Texas, Louisiana, and Mississippi, recently affirmed that Hartford Life and Accident Insurance Company ("Hartford") had abused its discretion in denying long-term disability benefits. The claimant, "Kelvin" sued Hartford under the Employee Retirement Income Security Act of 1974 ("ERISA"). Kelvin asserted that Hartford wrongly denied him disability benefits.
Kelvin worked as a chemical operator when severe back and leg pain forced him to cease working. Although doctors performed back surgery on Kelvin, he continues to suffer from recurrent pain in his back and extremities, rendering him at least partially disabled.
Kelvin was covered by a Long Term Disability Insurance Plan (the "Plan") sponsored by his employer for its employees and underwritten by Hartford. After Kelvin ceased working and filed for benefits under the Plan, he was entitled to receive up to twenty-four months of disability payments if Hartford determined that he was unable to perform his regular occupation. After this initial period, Kelvin was entitled to disability benefits only if he was unable to engage in any occupation for which he was or became qualified. Concluding that Kelvin was disabled from his regular occupation as a chemical operator, Hartford paid Kelvin disability benefits under the Plan for his initial, twenty-four month "regular occupation" period. During this period, the Social Security Administration (the "SSA") determined that Kelvin was totally disabled, meaning that he could not perform any work, and it authorized him to receive disability payments. After receiving this award, Kelvin promptly reimbursed Hartford for the disability payments he had received through the SSA.
After his "regular occupation" period ended, Hartford decided Kelvin would receive no further benefits under the Plan because the medical and vocational information it had examined did not support the conclusion that Kelvin remained disabled from any occupation. Kelvin appealed this decision through Hartford's internal appeals process. Hartford upheld its decision to terminate benefits because Kelvin was functionally capable of performing a number of occupations requiring only a sedentary level of exertion.
Kelvin then filed suit in federal court seeking review of Hartford's decision to terminate his disability benefits. The court concluded that Hartford abused its discretion in terminating Kelvin's disability benefits. In addition to reinstating Kelvin's benefits under the Plan, the court ordered Hartford to pay past long-term disability benefits retroactive to the termination date (including pre-and post-judgment interest), and Kelvin's attorneys' fees and costs. Hartford appealed.
The Court of Appeals for Texas, Louisiana, and Mississippi reviewed the medical evidence of Kelvin's chronic degenerative disc disease, carpel tunnel syndrome, and spinal stenosis. Holding that a plan administrator, "may not arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of treating physicians", the court was compelled by the opinions of Kelvin's treating physicians who found that Kelvin's physical conditions caused him debilitating pain. Moreover, the medical evidence showed that Kelvin had significant spinal stenosis and elevated spinal fluid protein, both of which supported Kelvin's complaints of pain.
However, Hartford's reviewing physicians concluded that Kelvin was capable of employment in a full-time, light-demand, or sedentary occupation. Hartford credited these conclusions as well as the results of a Functional Capacity Evaluation ("FCE"), which indicated that Kelvin was capable of performing light sedentary work. In addition, Hartford found that Kelvin's subjective complaints of pain, relied upon by the treating physicians and noted in the FCE report, were "not consistent" with the objective medical evidence.
The court held that, "because the circumstances suggest procedural unreasonableness, we believe that Hartford's financial bias may have played a part in its decision, and therefore the conflict is a more significant factor." The "conflict" the court was speaking of was that Hartford both administered and paid for the Plan. Thus, a decision to pay benefits affected Hartford's bottom-line, because benefits payments came directly from Hartford. "Hartford, as the administrator and insurer of the disability plan, potentially benefits from every denied claim", the court said.
The court further held that, "failure to address a contrary SSA award can suggest 'procedural unreasonableness' in a plan administrator's decision." This procedural unreasonableness was found to be important in its own right and also "justified the court in giving more weight to the conflict." "[A]n ERISA plan administrator's failure to address the Social Security Administration's finding that the claimant was 'totally disabled' is yet another factor that can render the denial of further long-term disability benefits arbitrary and capricious."
The SSA determined that Kelvin was fully disabled and unable to perform any work, but Hartford did not address the SSA award in any of its denial letters. Because Hartford failed to acknowledge an agency determination that was in direct conflict with its own determination, its decision was procedurally unreasonable, the court concluded.
This case presents a classic example of an LTD carrier with a financial incentive to deny claims, picking and choosing only evidence that supports its conclusion of "no disability" and ignoring all evidence that conflicts with its conclusion, such as an SSDI decision. Unfortunately, we have seen this pattern with Hartford not only in Texas, Louisiana, and Mississippi, but across the Country.
Alan C. Olson practices disability law from his offices in New Berlin, Wisconsin, and throughout the United States. AOlson@GetMyLTDbenefits.com
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