On December 11, 2019, the Ninth Circuit Court of Appeals (the federal appeals court with jurisdiction over Washington and other coastal and western states) decided Wagenstein v. Cigna Life Insurance Company. The decision is unpublished, meaning it is not binding on lower courts but may still be used as persuasive authority.
Lea Wagenstein sued to challenge Cigna’s termination of her long-term disability benefits under an ERISA-governed insurance policy. The district court dismissed Wagenstein’s case, agreeing with Cigna’s decision to terminate benefits.
The Ninth Circuit reversed the district court. The court emphasized that even Cigna’s own consultant, hired to examine Wagenstein at Cigna’s behest, determined Wagenstein’s disability precluded her from sitting more than 2.5 hours per day. As such, the Ninth Circuit noted that report showed Wagenstein could not perform sedentary work requiring sitting for most of an 8 hour workday.
The Ninth Circuit noted Cigna possessed a report from another consultant, hired by Cigna, who determined Wagenstein could actually sit for a full workday and thus could perform two sedentary jobs. Cigna relied on this report in concluding Wagenstein was not disabled. But Cigna hid the report from Wagenstein until Cigna’s final denial of her appeal of the termination of her benefits. That deprived Wagenstein of the opportunity to provide a response from her treating physicians, who agreed Wagenstein was disabled. Failing to provide Wagenstein the report violated ERISA’s rules requiring full and fair review of claims.
Because Cigna violated ERISA by withholding its physician’s report, the Ninth Circuit remanded the case back to the lower court with instructions to allow Wagenstein to submit statements from her doctors rebutting Cigna’s consultant in determining whether Wagenstein remained entitled to disability insurance benefits.
The Wagenstein decision, while not binding precedent, remains an important reminder that, where the insurer relies on consultants’ opinions in denying claims or terminating benefits, ERISA protects the claimant’s right to rebut the insurer’s evidence.
A recent decision from federal court in Oregon is an interesting example of how ERISA disability benefit disputes can arise where the claimant suffers from complex and hard-to-diagnose conditions such as fibromyalgia. Since conditions like fibromyalgia defy easy identification, these cases often turn on the claimant’s treating doctor’s documentation of the claimant’s symptoms.
Jane Medefesser sued her LTD carrier, MetLife, after MetLife denied her disability insurance claim. Medefesser suffered from a host of medical conditions including fibromyalgia and migraines. Medefesser’s doctors opined her medical conditions impacted her ability to function even in a sedentary job.
MetLife initially approved Medefesser’s disability claim. But MetLife subsequently changed its position and terminated Medefesser’s benefits after an “independent” doctor hired by MetLife determined Medefesser could perform sedentary work. MetLife also relied on opinions from its physicians that Medefesser’s doctors were, supposedly, exaggerating Medefesser’s symptoms.
The court disagreed with MetLife that Medefesser’s doctors were exaggerating her symptoms. To the contrary, the court noted that, given the complexity of Medefesser’s condition, the treating doctors who personally examined Medefesser were in the best position to reliably assess her disability.
This ruling is notable because it addresses a common issue in ERISA disability cases involving conditions like migraines or fibromyalgia. Where the claimant’s disability arises from complex conditions that defy easy diagnosis, disability insurers have an incentive to rely on the supposed lack of “objective” findings or review by “independent” consultants. These consultants’ opinions typically boil down to: “if it doesn’t show up on an x-ray, it’s not real.” The Medefesser decision is a great example of a judge rejecting such an argument.
ERISA-governed disability benefit claims are subject to the Department of Labor’s regulation requiring full and fair investigation of claims. The regulation includes rules requiring claims administrators apply plan provisions correctly and thoroughly investigate claims. A claims administrator’s failure to adhere to the rules expressed in the regulation can be the difference-maker if the benefit dispute proceeds to litigation. A recent unpublished Ninth Circuit Court of Appeals decision, Alves v. Hewlett-Packard Comprehensive Welfare Benefits Plan, emphasizes this.
Alves applied for short-term disability and long-term disability under his employee benefit plan. The plan’s claims administrator, Sedgwick, determined Alves’ condition did not render him disabled, i.e., that Alves could still perform his job duties. On that basis, Sedgwick denied both the short- and long-term disability claims. The federal district court agreed with Sedgwick.
The Ninth Circuit Court of Appeals reversed the district court. The Ninth Circuit agreed that Sedgwick’s decision Alves didn’t qualify for short-term disability benefits was adequately supported by Alves’ medical information. But the court found Sedgwick incorrectly evaluated Alves’ long-term disability claim. Sedgwick denied Alves’ long-term disability claim because Sedgwick concluded Alves failed to meet the plan’s one-week waiting period. The court concluded Alves’ clearly met this requirement. Accordingly, the court remanded Alves’ long-term disability claim to Sedgwick for further investigation. The Ninth Circuit admonished Sedgwick to follow ERISA’s rules requiring full and fair investigation of claims in reviewing Alves’ long-term disability clam on remand.
The Ninth Circuit’s opinion is unpublished, meaning it is only persuasive precedent. Lower courts may follow this decision if they find it persuasive, but they are not required to.
The Alves decision is an important reminder that ERISA claims administrators can be held accountable for failing to correctly apply plan provisions and failing to investigate claims in compliance with ERISA’s implementing regulation.
Let’s say you become ill and can’t work anymore. Fortunately, you have disability insurance coverage through your employer. You apply and get awarded benefits. The policy says your benefits are two thirds of your salary. But the insurance company is paying you less. They say that they can subtract from your benefits any money you are collecting from Social Security Disability.
Can they do that? Like many insurance questions, it depends on the insurance policy fine print.
Most disability insurance policies provide an offset for so-called “other income” or “deducible income” you receive because of your disability. For instance, if your monthly disability insurance benefit would normally be $1,000, and you have $300 in deductible income, the disability insurance benefit is reduced to $700. What counts as deductible income that counts against your benefits depends on the wording of the insurance policy.
Deductible income often includes:
- Social security disability payments;
- Workers’ compensation payments;
- Payments from other insurance policies; or
- Payments from the person who inflicted the injuries that made you disabled (if a third party is responsible for your disability).
Moreover, disability insurance policies often require you to apply for potential sources of deductible income. For instance, your disability policy may require you to apply for Social Security Disability benefits.
The key is that the insurance company can’t deduct income that isn’t specifically listed in the policy. If you are receiving benefits under a disability insurance policy and the insurer tries to reduce your benefit because you are receiving other disability income, consult a lawyer to review the policy and make sure you know your rights.