A man worked in the information technology division of a company. He assumed a high-pressure job, with responsibility for providing support for the server infrastructure at the company’s locations around the world 24 hours a day, 365 days a year. About 21 months after starting this new position, the man suffered the sudden onset of right side numbness, dizziness, and blurred vision. He was hospitalized and provisionally diagnosed with a stroke. Although this diagnosis could not be confirmed, some of his symptoms persisted and he did not return to work.
The man was eligible for disability benefits through an employee welfare benefit plan underwritten by an insurance company. The employer served as the plan administrator and the insurer served as the claims administrator. According to the terms of the plan, a plan participant is disabled on any day that the participant is not able to perform the material duties of his own occupation solely because of disease or injury and his work earnings are 80% or less of his adjusted predisability earnings. A participant’s material duties are those normally required for the performance of the participants own occupation so long as they cannot be reasonably omitted or modified. The plan defined a participant’s own occupation as the occupation routinely performed by the participant at the time the disability began as that occupation is normally performed in the national economy rather than how it is performed for the employer.
The man successfully applied for long-term disability benefits under the plan. From that point forward, he and his healthcare providers kept the insurer informed of his treatment and prognosis. Despite extensive therapy, the man continued to experience physical symptoms including sudden right side weakness and loss of balance. He also suffered from anxiety and panic attacks. His primary care physician referred him for mental health care. Some of his healthcare providers suggested that his physical symptoms might be a reaction to stress associated with the demanding nature of his job.
Ten months after the stroke, the man’s primary care physician reported that the man was continuing to experience right side weakness but had a sedentary level of functionality and could work five days a week and eight hours per day. Based on this report, the insurer began to evaluate the man’s continued eligibility for benefits. Soon thereafter, two of the man’s mental health providers jointly reported that he suffered debilitating panic attacks four to five times per week and projected that, due to a combination of these attacks, sleeplessness, and anxiety, the man would be unable to work for a year.
Eleven months after the stroke, the insurer informed the man by letter that his long-term disability benefits would be terminated at the end of that month. In the insurer’s judgment, the man no longer met the plan definition of disability. This judgment was premised in large part on his primary care physician’s conclusion that he could perform sedentary work 40 hours per week. The insurer discounted the contradictory report of the man’s mental health providers, concluding that it lacked examination findings sufficient to support a functional impairment from a clinical standpoint.
The man challenged the benefits termination decision through the insurer’s internal appeals procedure. In support, he submitted medical records from physicians, mental health providers, and physical therapists, highlighting the symptomology that precluded him from satisfying the physical and cognitive requirements of his job. The symptoms included right side numbness and weakness, which he said significantly impeded his fine motor skills for typing and writing. They also included anxiety, sleeplessness, and frequent panic attacks, which he said would impair his ability to cope with the stressful and time intensive nature of his position. He submitted a report by a vocational consultant who reviewed his medical records to assess his work capacity.
The insurer engaged four doctors, two specializing in occupational medicine and two specializing in psychology, to review the man’s medical records and other documents submitted in support of his appeal. In the written reports, each of the four evaluated the medical evidence in detail. All of them concluded that the man was no longer disabled, stating variously that the record failed to support functional impairment; that the man’s functional deficits did not preclude him from working in his own sedentary level occupation; that from a psychological/psychiatric perspective, the claimant was not impaired from working in his own job or any job; and that the medical evidence did not support a functional impairment, from a psychological perspective. These reports uniformly listed among the documents reviewed a job description, job analysis worksheet, and occupation description. None of the reviewers discussed either the demands of the man’s position as it normally was performed in the national economy or how his symptoms would affect his ability to meet those demands.
The insurer denied the internal appeal. The insurer determined that from an occupational medical perspective the man did not suffer from the long-term aftereffects of a stroke. While he had some functional impairment, his functional deficits would not preclude him from working in his own sedentary level occupation. The insurer acknowledged the reports of panic attacks and anxiety and the reported likelihood that the symptoms would cause the man to miss more than four workdays per month. The insurer concluded that the medical records did not warrant a finding that any of the man’s mental health problems were of a severity likely to have impaired his occupational functioning. The insurer’s denial letter did not discuss the requirements of the man’s position as it was normally performed in the national economy.
The man sued the insurer for wrongful termination of benefits. The man requested from his insurer and his employer a complete copy of his plan, summary plan description, policy, and any and all attachments and amendments related to his long-term disability plan. The insurer responded by providing documents entitled “Your Group Plan” and “Summary of Coverage.” As the deadline neared for filing summary judgment motions, the insurer disclosed for the first time the policy agreement between the insurer and the employer. Unlike the previously disclosed plan documents, the policy agreement contained language granting the insurer complete discretion over all benefits eligibility decisions. This language was important as it had the effect of altering the standard of judicial review. The man promptly amended his complaint adding a request for penalties for failure to produce all relevant plan documents within the statutorily prescribed time. The United States District Court for the District of Massachusetts granted summary judgment for the insurer on the benefits termination claim, but assessed a $5,000 penalty against the insurer for belatedly disclosing plan documents.
The First Circuit United States Court of Appeals affirmed in part, vacated in part, and remanded. The court held that the insurer was arbitrary and capricious in terminating the man’s long-term disability benefits and the $5,000 penalty fell within the district court's discretion.
The insurer was arbitrary and capricious in terminating the man’s long-term disability benefits. An Employee Retirement Income Security Act (ERISA) benefits determination must be a reasoned determination, and a benefits determination cannot be reasoned when the claims administrator sidesteps the central inquiry. According to the plain language of the plan, the key inquiry was whether the man was able to perform the material duties of his own occupation as normally performed in the national economy. The court reasoned that a reasoned determination of the existence of a disability required a review of the material duties of the man's particular position and an assessment of how those duties aligned with the position as it was normally performed in the national economy. None of the insurer's four internal reviewers compared the man’s symptoms or impairments to any description of the physical and cognitive demands of his own occupation, which entailed managing systems and employees providing support for server infrastructure at his employer's locations around the world. The court vacated the district court’s entry of summary judgment with respect to the termination of disability benefits and remanded that it issue for further consideration by the insurer.
The $5,000 penalty fell within the district court's discretion. The penalty for disclosing the policy agreement more than three years after the man demanded the plan documents fell within the court's broad discretion. Although the late disclosure implicated the standard of review and the maximum statutory penalty was $110 per day, that amount was the ceiling. The trial court concluded that the insurer’s late disclosure was due to inattentiveness, not bad faith. The man received the policy agreement before briefing on summary judgment began in his suit. The court affirmed the district court’s imposition of a $5000 penalty for the belated production of the plan document.
The First Circuit United States Court of Appeals vacated the district court’s entry of summary judgment with respect to the termination of disability benefits and remanded that it issue for further consideration by the claims administrator and affirmed the district court’s imposition of a $5000 penalty for the belated production of a plan document.
See: McDonough v. Aetna Life Ins. Co., 2015 WL 1684079 (C.A.1 (Mass.), April 15, 2015) (not designated for publication).
See also Medical Law Perspectives, December 2013 Report: Thicker Than Water: Liability When Blood Clots Cause Injury or Death
See also Medical Law Perspectives, June 2013 Report: Independent Medical Evaluations: Legal Risks and Responsibilities
See the Medical Law Perspectives December 18, 2014, Blog: Fourth Circuit Explains Non-Adversarial Duties of ERISA Plan Claims Administrators
See the Medical Law Perspectives October 3, 2014, Blog: Insurer Can Request Insured Appear for Examination Under Oath after Insured’s Benefits Denied Based on Independent Medical Evaluation