Plaintiff Wanda J. Stup, who suffers from lupus and fibromyalgia, won affirmance of a judgment holding that defendant Unum Life Insurance Company of America abused its discretion in denying her request for disability benefits. Although Unum did not dispute the plaintiff's diagnoses, it had rejected the claim based on its determination that the plaintiff could work within her restrictions. The district judge and appeals court disagreed. Stup v. Unum Life Insurance Company of America, 2004 U.S. App. LEXIS 24754 (4th Cir., Dec. 1).

The plaintiff, who had worked as an administrative assistant for the president of her company since 1984, struggled to work with her condition for several years, and even worked for a period of time despite her doctor's medical advice that she restrict her activities.

However, debilitating fatigue and pain eventually caused Stup to cease working in 1998 and to apply for disability benefits at that time. In support of the claim, the plaintiff submitted medical reports that included an estimate of functional capacity completed by the treating rheumatologist, which advised that the plaintiff could not perform sedentary activities more than two hours per day.

Unum's in-house doctor reviewed the medical evidence and suggested that functional capacity evaluation, or FCE, testing be performed. Stup exhibited pain behavior during the FCE and ''gave out'' before any strength testing could be performed. Nor could aerobic capacity be assessed; Stup was also unable to complete positional tolerance testing. Nonetheless, despite only 2 hours of testing, the physical therapist reported that Stup could perform sedentary work, with the caution that the evaluation may not have been ''truly indicative'' of her functional capacity.

Unum's in-house physician read the FCE report as being ''thorough and valid,'' and he concluded that the plaintiff did not put forth her best effort; thus, he found she was capable of even more strenuous work than sedentary labor, the least strenuous category of work requiring sitting for most of the day and lifting no more than 10 pounds.

Stup appealed, and she submitted an affidavit describing her markedly constricted daily activities. Stup also offered to complete the FCE. In addition, Stup's rheumatologist submitted a detailed report limiting his patient's activities and advising that unpredictable flare-ups were expected. He also explained that symptoms would be exacerbated if she engaged in work activities. Unum rejected the report as unsupported by new objective testing, and upheld its denial. Litigation ensued, which resulted in judgment for the plaintiff.

Although a deferential arbitrary and capricious standard of review applied, the 4th U.S. Circuit Court of Appeals upheld the District Court's judgment for the plaintiff, ruling that the insurer's decision was not ''supported by substantial evidence or the product of a principled reasoning process.'' The court found that Unum did not dispute the diagnoses; the insurer merely challenged the functional impact of fibromyalgia and lupus. However, the appeals court ruled that Unum had no grounds for disputing the medical records and opinions of the treating rheumatologist, which detailed the effect of each of Stup's symptoms on her work ability.

The court noted:

''Unum maintains that it acted reasonably in denying benefits because the record contains conflicting medical evidence as to Stup's ability to work. But Unum ignores that while an administrator does not necessarily abuse its discretion by resolving an evidentiary conflict to its advantage, the conflicting evidence on which the administrator relies in denying coverage must be 'substantial' — especially when, as in this case, the administrator has an economic incentive to deny benefits. [Note 5.] See Ellis, 126 F.3d at 233-34 (finding administrator with incentive to deny benefits acted reasonably in doing so because even though several doctors said insured was disabled, it had 'substantial evidence' that her doctors did not agree on the proper diagnosis and three independent medical panels 'concluded that there was no conclusive diagnosis'). For example, an administrator operating under a conflict of interest does not act reasonably in denying benefits if faced, on the one hand, with substantial evidence of disability and, on the other, with only tentative and ambiguous evidence that might, or might not, favor denial of benefits. This is precisely the situation at hand.''

In note 5, the court explained, ''Unum confuses this substantiality requirement with the 'treating physician' rule outlawed in Black & Decker Disability Plan v. Nord, 538 U.S. 822, 123 S.Ct. 1965, 155 L.Ed.2d 1034 (2003). Unum argues that the District Court 'erroneously applied' the treating physician rule. The argument is meritless. The District Court did not 'require' Unum 'to accord special weight to the opinions of [the] claimant's physician,' which Nord prohibits. Id. at 1972. Rather, the District Court simply concluded that Unum failed to adhere to the substantiality requirement by arbitrarily disregarding Stup's reliable evidence, including the opinion of her treating physician, relying instead on ambiguous and insubstantial evidence favoring Unum's own economic self-interest. It is thus Unum, not Stup, that has failed to follow an instruction of the Nord court, i.e., that 'plan administrators may not arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of a treating physician.' Id.

The court also determined that the FCE failed to support Unum's conclusion. The court disagreed with Unum's contention that the FCE ''unequivocally'' showed Stup's capability to perform sedentary work, finding, ''But there is nothing unequivocal about the results of Stup's FCE — indeed, the physical therapist explicitly equivocated, noting the inconsistency of the test results, in the course of ultimately offering her negative interpretation. Upon examination, it is clear that the FCE test results either supported Dr. Wei's assessment or were, at the very least, ambiguous; the results certainly do not provide substantial evidence that Stup could perform sedentary work.''

The court added that the testing only lasted 2 hours, which failed to ''necessarily indicate Stup's ability to perform sedentary work for an eight- (or even four-) hour workday, five days a week.'' Moreover, the pain performance exhibited during the testing session was consistent with the treating rheumatologist's remarks about how pain would affect functionality. Other than a physical therapist's ''equivocal and tentative interpretation of the FCE results'' and the Unum doctor's concurrence, the court found that such conclusions failed to afford substantial evidence, or evidence of a principled, deliberative process, to support the denial of benefits.

The court explained:

''An equivocal opinion — especially one based on ambiguous test results — simply does not provide 'substantial evidence.' Here, the physical therapist herself twice expressly recognized the ambiguity of the FCE results and hedged her negative interpretation of them. Initially, she warned that Stup's inconsistent test results 'may not be truly indicative of the client's functional capabilities.' And in conclusion, the therapist cautioned, 'it would not be prudent to make recommendations regarding specific job duties that this client can or cannot perform due to a lack of consistent and true information.' ''

Even more damning, though, was the court's comment that Unum's reviewing physician's opinion was neither ''deliberate'' nor ''principled.'' The court explained that the FCE findings were consistent with other test results that would lead to an expectation that limiting behaviors would prevent full performance on the FCE.

This is a thoughtful opinion that does a thorough job analyzing the limitations of functional capacity evaluation testing and the reviewing doctor's analysis. FCE testing has frequently been criticized as not being indicative of full time work capacity. See Ballinger v. Eaton, 2002 U.S. Dist. LEXIS 14433 (S.D. Iowa 2002); Edgerton v. CNA Insurance, 2002 U.S. Dist. LEXIS 15490 (E.D. Pa. 2002); Pelchat v. Unum Life Insurance Company of America, 2003 U.S. Dist. LEXIS 8095 (N.D. Ohio, March 25, 2003); Barnes v. Bellsouth Corp., 2003 U.S. Dist. LEXIS 18766 (W.D. N.C., Oct. 20, 2003); and Brown v. Continental Casualty Co., 2004 U.S. Dist. LEXIS 19164 (E.D. Pa., Sept. 10). In addition, the overall scientific validity of such testing has been questioned in published literature in the field. See, King, et al., ''A Critical Review of Functional Capacity Evaluations,'' Physical Therapy 1998; 78:279. The King article questions the ability of FCE testing to generate results that can reliably be extrapolated to predict an individual's ability to work over the course of a workweek or month.

However, this is the first federal appellate ruling that has picked up on the themes stated in the District Court cases; and it goes even further by pointing out the bias of the in-house reviewer's acceptance of the FCE results despite objective test results explaining why the claimant could not complete the testing on the functional capacity evaluation. The indictment of Unum's failure to employ a ''principled'' reasoning process is devastating because it goes directly to the standards and practices of the entire organization and suggests a pattern or practice of unconscionable conduct.

This fits in with a recent report of a multistate market conduct investigation of the UnumProvident Corp. issued on Nov. 18, which expressed numerous concerns about the company's claim operations. Specifically, the report focused on problems shown by review of a random sampling of claim files, which included excessive reliance on in-house reviewing physicians in place of independent medical examinations, unfair construction of medical records and reports received from treating physicians and other examining doctors in a manner showing bias in favor of claim denial, failure to evaluate the totality of the claimant's medical condition, and by placing an inappropriate burden on claimants to submit evidence not required by the policy such as objective test results.

The market conduct examination resulted in an agreement by the UnumProvident Corp, and its component companies (Unum Life, First Unum Life, Paul Revere Life and Provident Life and Accident insurance companies) to pay a fine of $15 million. In addition, the companies agreed to reevaluate more than 200,000 claims that were denied or terminated between 1997 and the present.

In conducting the reevaluation, UnumProvident agreed to changes in corporate governance and to the establishment of a special unit to conduct the reevaluation made up of experienced claims personnel. The reevaluation requires a complete review of the claim and also mandates that significant weight be given to the results of favorable Social Security disability benefit adjudications (which signify a determination of the claimant's inability to engage in any work activity whatsoever). The reevaluation process is also required to take into consideration the areas of concern found by the regulators to ensure a more fair and objective evaluation of claims.

In addition to this ruling, Radford Trust v. First Unum Life Insurance Company of America, 321 F.Supp.2d 226 (D. Mass. 2004), was also extremely critical of the UnumProvident Corp. and catalog every ruling in which Unum's conduct has been found arbitrary and capricious.