Court gives insurer another bite at the apple

Mark D. DeBofsky

Mark D. DeBofsky is a name partner of DeBofsky, Sherman & Casciari, PC. He handles civil and appellate litigation involving employee benefits, disability insurance and other insurance claims and coverage, and Social Security law. He can be reached at mdebofsky@debofsky.com.

Despite advances in medical science, many medical conditions such as tinnitus - a ringing or buzzing in the ears that afflicts millions of Americans - cannot be objectively diagnosed or verified.

The case of Miles v. Principal Life Ins.Co., 2013 U.S.App.LEXIS 13065 (2nd Cir. June 26, 2013), which involved a partner in a major law firm who had to cease working on account of tinnitus accompanied by ear pain, hearing loss, headaches and vertigo, presents an interesting study of disability benefits involving that frustrating condition.

Although Ralph Miles' insurer denied his claim for disability benefits, and the district court upheld that decision, the court of appeals reversed.

The court determined that Principal Life denied Miles a full and fair review of his claim, which was supported by his treating doctors' findings and corroborated by a favorable Social Security disability determination. The 2nd U.S. Circuit Court of Appeals deemed the primary failing in Principal's evaluation was its failure to consider the plaintiff's subjective complaints.

Citing Connors v. Conn. Gen. Life Ins. Co., 272 F.3d 127, 136 (2d Cir. 2001), the court explained that subjective complaints are an "important factor to be considered in determining disability." Connors found that courts may not "dismiss complaints of pain as legally insufficient evidence of disability." Id. at 136. More recently, Thurber v. Aetna Life Ins. Co., 712 F.3d 654, 660 (2d Cir. 2013) reiterated that the plan administrator must give "sufficient attention to ... subjective complaints." Hence, the court held: "Looking to the record before us, we conclude that Principal did not give adequate attention to Miles' subjective complaints, as it failed to either assign any weight to them or to provide specific reasons for its decision to discount them."

Since there was no reason given as to why Miles' subjective complaints were discounted, the court deemed Principal's rejection of those complaints arbitrary. The court added, "Principal has identified nothing in the present record that would support a rejection of Miles' subjective complaints." Moreover, although medicine offers no objective test specific for tinnitus, that condition is consistent with hearing loss and the objective evidence verified Miles' complaints of hearing loss. The court also noted the plaintiff's long and successful work history supported his credibility.

The court then turned to Principal's demand for objective evidence, deeming that demand unreasonable and explaining:

"A claimant bears the burden of proving that a disability is covered, see Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 765 (2d Cir. 2002), but plan administrators may not impose unreasonable requests for objective evidence. Here, the record suggests that there is no objective test to prove the presence of tinnitus. It was unreasonable for Principal to request objective evidence of impairment when it had not identified any such test that exists. Accordingly, we conclude that Principal arbitrarily and capriciously relied on Miles' failure to provide objective evidence of tinnitus as a reason to deny his LTD [long-term disability] claim without specifying the objective evidence it would expect to see."

In support, the court cited Magee v. Metro. Life Ins. Co., 632 F. Supp. 2d 308, 318, 321 (S.D.N.Y. 2009) (ignoring "MetLife's erroneous objective evidence requirement" where "in a catch-22, MetLife acknowledges that there is no test for [chronic fatigue syndrome]," but MetLife nevertheless rejected plaintiff's claim because he "failed to provide 'objective evidence,' establishing that he was suffering from a disabling impairment").

The court also concluded that Principal was selective in its consideration of the evidence and mischaracterized the record. However, instead of awarding benefits outright, the court remanded the claim to the insurer since it could not "conclude that there is no possible evidence that could support a denial of benefits." Miller v. United Welfare Fund, 72 F.3d 1066, 1074 (2d Cir. 1995). The court then finished with a comment on an Employee Retirement Income Security Act plan administrator's fiduciary duty:

"A benefit determination is a fiduciary act, and Principal owes plan beneficiaries a special duty of loyalty. Glenn, 554 U.S. at 111. This duty requires Principal to interpret and apply plan terms 'solely in the interest of the participants and beneficiaries and ... for the exclusive purpose of ... providing benefits to participants and their beneficiaries.' 29 U.S.C. ß 1104(a)(1)(A)(i). While this fiduciary obligation 'does not necessarily favor payment over nonpayment,' Varity Corp. v. Howe, 516 U.S. 489, 514 (1996), Principal is reminded that it may not adopt an adversarial approach toward Miles in the benefits determination."

There are many useful legal conclusions in this opinion. The court's reinforcement of the principle that benefits may not be denied by dismissing the claimant's supporting evidence as "subjective" is a critical consideration in disability benefit claims adjudication. The court's criticism of the insurer's demand that the claimant subject objective evidence that is impossible to obtain is also a finding that will no doubt be frequently cited. However, the inherent weakness in Principal's use of reviewing doctors in a case such as this could have garnered further mention. There is a growing body of case law, starting with the 6th Circuit, which has issued a host of rulings critical of reviewing doctors in cases such as this where critical credibility findings are required. Cases such as Calvert v. Firstar Finance, Inc., 409 F.3d 286 (6th Cir. 2005) and Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (9th Cir. 2011) are illustrative of this principle; and Holmstrom v. Metro. Life Ins. Co, 615 F.3d 758 (7th Cir. 2010) points in that direction as well.

The remand is also frustrating, given the absence of statutory support for remands, and particularly since that part of the opinion preceded the court's reminder to Principal of its fiduciary obligations.

Because Principal was found to have blatantly disregarded its fiduciary duties, given the supporting medical evidence and the corroborative Social Security finding, offering the insurer another bite at the apple further delays an already lengthy process and suggests that further litigation is likely to occur if Principal denies the claim again.

Editor's note: DeBofsky represented the plaintiff in the Holmstrom ruling cited in this column.