Approach clarifies benefit claim determinations

December 21, 2011
By Mark D. DeBofsky
Mark D. DeBofsky is a name partner of Daley, DeBofsky & Bryant. He handles civil and appellate litigation involving employee benefits, disability insurance and other insurance claims and coverage, and Social Security law.

A recent opinion issued by the 1st U.S. Circuit Court of Appeals suggests a new approach for assessing the reasonableness of benefit claim determinations under the Employee Retirement Income Security Act (ERISA) abuse of discretion standard of review.

In Maher v. Massachusetts General Hospital Long Term Disability Plan, 2011 U.S.App.LEXIS 24205 (1st Cir. Dec. 7, 2011), the court addressed a situation involving a claimant, Deborah Maher, a nurse at Massachusetts General Hospital, who ceased working on account of severe pain attributed to chronic pancreatitis, chronic pain syndrome or fibromyalgia - an exact diagnosis could not be made.

After five years of receiving benefit payments, the plan's claim administrator, Liberty Life Assurance Co. of Boston, advised Maher that it determined she was no longer disabled and terminated her benefits. Liberty never had Maher examined; the decision was based on the results of covert surveillance and a physician file review. Although Maher was unsuccessful both in her presuit appeals and in the district court, the 1st Circuit thought otherwise.

Although the court of appeals applied a deferential standard of review, an abuse of discretion was found. What troubled the court was that Liberty's doctors all emphasized what they believed to be a discrepancy between the reported symptoms and the surveillance video. However, the court determined it was not apparent that any inconsistency existed.

Maher reported variability in the level of activity she could perform, but claimed she was mostly confined to her bed. The insurer conducted about 90 hours of surveillance, however, the most damning evidence was 15 minutes during which Maher carried a bucket or flower pot and 30 minutes during which she played with her child in the park. On 10 of 19 days of surveillance, Maher engaged in no activity outside her home and, on other days, she was shown either sitting or standing just outside her home.

Consequently, the court determined the surveillance "seems to confirm [Maher's] lifestyle as generally housebound with occasional, limited activity." On the occasions when she was active, the court found she may have "premedicated or may have simply been having a 'good day.'"

Hence, the court concluded, "even according deference we are also not confident that [Liberty's] analysis has fully justified its decision." However, the court requested further review and explanation from the insurer.

A dissenting opinion by Judge Kermit Lipez would have awarded benefits outright, finding Maher's pain complaints were well-documented in the record and were convincing. The dissent also agreed that the surveillance was not an adequate basis to terminate benefits and asserted that the plan's failure to conduct an independent medical examination was troubling. Maher had herself volunteered to undergo an examination but the plan chose not do perform one.

Lipez also relied heavily on a Social Security ruling issued by the 7th U.S. Circuit Court of Appeals, which looked to the consistency of pain treatment and certification of disability by multiple medical professionals. In Carradine v. Barnhart . 360 F.3d 751, 755 (7th Cir. 2004), the 7th Circuit explained:

"What is significant is the improbability that [the claimant] would have undergone the pain-treatment procedures that she did, which included ... heavy doses of strong drugs ... merely in order to strengthen the credibility of her complaints of pain and so increase her chances of obtaining disability benefits; likewise the improbability that she is a good enough actress to fool a host of doctors and emergency room personnel into thinking she suffers extreme pain; and the (perhaps lesser) improbability that this host of medical workers would prescribe drugs and other treatment for her if they thought she were faking her symptoms. Such an inference would amount to an accusation that the medical workers who treated [the claimant] were behaving unprofessionally."

That ruling also pointed out that even where a claimant may "occasionally run errands, contribute to household chores or even recreate with her family for short periods of time, there is a sharp 'difference between a person's being able to engage in sporadic physical activities and her being able to work eight hours a day five consecutive days of the week.'" Id.

Putting aside the merits of the dissent, which made a number of valid points, the majority opinion went to great lengths to implement what the Supreme Court appeared to mandate in Metro.Life Ins.Co. v. Glenn. 554 U.S. 105 (2008). Twice in the Glenn ruling, the court cited Universal Camera Corp. v. NLRB 340 U.S. 474 (1951) as a guide for review of ERISA fact-finding. That ruling teaches that in administrative reviews ... courts must now assume more responsibility for the reasonableness and fairness of (administrative) decisions than some courts have shown in the past.

Reviewing courts must be influenced by a feeling that they are not to abdicate the conventional judicial function. Congress has imposed on them responsibility for assuring that the (agency) keeps within reasonable grounds. That responsibility is not less real because it is limited to enforcing the requirement that evidence appear substantial when viewed, on the record as a whole, by courts invested with the authority and enjoying the prestige of the courts of appeals. The board's findings are entitled to respect, but they must nonetheless be set aside when the record before a court of appeals clearly precludes the board's decision from being justified by a fair estimate of the worth of the testimony of witnesses or its informed judgment on matters within its special competence or both.

Consistent with that viewpoint, the 1st Circuit markedly departed from prior rulings giving excessive leniency to ERISA benefit plan determinations under a rubric that upholds the decision so long as it appears "reasonable."

By questioning whether a decision that appears reasonable was truly reasonable, the 1st Circuit has imposed a new, fairer approach to benefit claim determinations.