How CIGNA handles or mishandles disability claims
Chicago Daily Law Bulletin
March 1, 2010
by MARK D. DEBOFSKY
The case of Cox v. CIGNA Group Insurance, 2010 U.S.Dist.LEXIS 17164 (E.D. Ky., Feb. 24), is illustrative of a pattern suggestive of possible systematic maladministration of disability claims, a finding also made by the California Department of Insurance.
California conducted a market conduct study of CIGNA's disability claim handling and found numerous examples of unfair claims handling by CIGNA in its administration of disability claims. See www20.insurance.ca.gov/epubacc/REPORT/106849.htm.
In addition to the California study, numerous recent federal court rulings have also accused CIGNA of mishandling disability claims. See, Alfano v. Cigna Life Ins.Co. of N.Y., 2009 U.S.Dist.LEXIS 7688 (S.D.N.Y. Jan. 30, 2009)(finding CIGNA's internal reviews flawed as inconsistent with medical findings and test results); MacNally v. Life Ins.Co. of North America, 2009 U.S.Dist.LEXIS 44423 (D.Minn. May 26, 2009)(questioning CIGNA's bias or incompetence); Gordon v. Northwest Airlines, Inc. and Life Ins.Co. of North America, 606 F. Supp. 2d 1017 (D.Minn. 2009)(finding CIGNA misrepresented evidence and accusing CIGNA of bias); and Juszynski v. Life Insurance Company of North America,2008 U.S.Dist.LEXIS 24928 *25 (N.D.Ill. 3/28/2008)(suggesting CIGNA acted pursuant to a financial motivation rather than out of fairness to a claimant).
Cox illustrates the same pattern. The plaintiff, Ronald Cox, was a repairman and tradesman for a division of Phillips Electronic North American Corp., a job that required him to repair and maintain plant facilities and equipment, necessitating significant physical exertion. Cox, 55, never completed high school, although he received a GED; and he worked for Phillips for nearly 25 years before ceasing work in November 2007, claiming disability on account of neck, shoulder, back and hip pain.
Cox applied for total and permanent disability benefits that required him to meet the following disability definition: "An employee is permanently totally disabled if, because of injury or sickness, he or she is determined by the insurance company to be unable to do any work for wage or profit for the rest of his or her life."
Although Cox's claim was supported by a company physician who had treated him for more than six years, as well as the findings of a chiropractor, the insurer denied his claim following a nurse review. Cox appealed twice before filing suit - each time the claim denial was upheld based on cursory reviews by CIGNA medical directors. The court overturned the denial despite the applicability of ERISA's highly deferential abuse of discretion standard of review.
The court described the initial consideration of the claim as lacking "any meaningful analysis." The court found CIGNA's review of a lumbar MRI misquoted the radiologist's findings, and the insurer never even commented on a cervical spine MRI or on opinions rendered by one of the treating doctors on forms supplied by CIGNA. Instead, all of the supporting evidence was dismissed in one sentence: "According to the medical information on file, the medical evidence submitted does not support an impairment to preclude you from working for wage or profit for the rest of your life as defined in the policy." The court further noted there was no discussion of the opinions rendered by the treating doctors or any explanation as to why those opinions were summarily rejected.
The court then turned to what it described as the only evidence that plausibly conflicted with the treating doctors - a functional capacity evaluation. Although the summary of the FCE report indicated work capability, the insurer simply accepted the summary finding without explaining why it credited that report over the diametrically opposed treating doctors' findings. The court was particularly critical of both CIGNA medical directors who reviewed the claim file - one doctor wrote a short paragraph of roughly 40 words, while the second doctor wrote an approximately 35-word report. The court found neither doctor offered a "reasoned" analysis of the evidence; and both doctors' reports left uncertainty as to what evidence was reviewed and how it was considered. Citing a growing skepticism in recent court opinions about the "thoroughness and accuracy" of reviewing doctors' findings, the court deemed the medical directors' "limited commentary" problematic. The court also found that comments in the medical directors' reports such as the lack of "any documented motor, strength, sensory, or range of motion deficits, and no abnormalities noted with your upper or lower extremities" as justification for the claim denial was simply contrary to the evidence in the record. Nor was the court satisfied with the conclusory explanation stated in the final CIGNA denial: "[a]lthough you have complaints of pain, there are no exam findings or test results to preclude you from performing in any occupation." The court determined that CIGNA's explanations "raise several unanswered questions regarding how LINA reached its decision." None of the reviewing doctors addressed the treating physician findings, nor did CIGNA give any indication of what work it believed Cox was capable of performing. Hence, the court returned the case to CIGNA for a "full and fair inquiry."
The Supreme Court made it clear in Metro.Life Ins.Co. v. Glenn, 128 S.Ct. 2343, 2350 (2008) that insurers administering benefit claims under ERISA are subject to "higher-than-marketplace quality standards" to assure that they act in an appropriate fiduciary capacity in order to achieve an accurate claim determination.
This ruling illustrates conduct that falls well below those requirements, but what is puzzling is why the court gave the insurer a second opportunity to reassess the claim after finding so many flaws in CIGNA's decision-making process. This was not a case where the decision was simply procedurally unreasonable such as a case where an insurer fails to comply with the detailed claim regulations promulgated by the U.S. Department of Labor, 29 C.F.R. § 2560.503-1. Rather, the opinion was focused on the claim decision itself. The court makes it clear that Cox submitted adequate proof of his disability and that CIGNA lacked substantial evidence to reject the claim. Under a Rule 56 summary judgment analysis, as well as under ERISA's de novo standard of adjudication, the resolution would have been for the court to hold a trial. See, Krolnik v. Prudential Ins.Co., 570 F.3d 841 (7th Cir. 2009). The result should be the same under the arbitrary and capricious standard. In the initial review, the court gave deference to CIGNA's decision, but upon a finding that the insurer abused its discretion, there is no longer any application of discretion to be considered. All that remains is the determination of an entitlement to benefits. Such an approach would, in fact, be constitutionally mandated in order to achieve an "immediate and definitive determination of the legal rights of the parties in an adversary proceeding upon the facts alleged." See, Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241 (1937)(discussing Article III constitutionality requirements of final judgments).
ERISA lacks any statutory basis for remands to plan insurers, and as several courts have determined: "[A] remand of an ERISA action seeking benefits is inappropriate where the difficulty is not that the administrative record was incomplete but that a denial of benefits based on the record was unreasonable." Zervos v. Verizon New York, Inc., 277 F.3d 635, 648 (2d Cir. 2002) (internal quotation marks omitted). Indeed, "a plan administrator will not get a second bite at the apple when its first decision was simply contrary to the facts." Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1163 (9th Cir. 2001). Here, too, there was no justification to allow "'Mulligans' to sloppy plan administrators -- at the expense of both the courts and plan participants and beneficiaries." Fleet v. Indep. Fed. Credit Union, 2005 U.S. Dist. LEXIS 11778, *8-*9 (S.D. Ind. May 18, 2005). The 7th Circuit has also cautioned against such a risk: "It would be a terribly unfair and inefficient use of judicial resources to continue remanding a case to [the plan administrator] to dig up new evidence until it found just the right support for its decision to deny an employee her benefits." Dabertin v. HCR Manor Care, Inc., 373 F.3d 822, 832 (7th Cir. 2004). Accordingly, if the court found Cox was not clearly entitled to an award of benefits, rather than a remand, a trial was necessary in order to resolve the matter.
Note: I was counsel in the Juszynski case cited above, and have been and am currently engaged in pending litigation against CIGNA and its subsidiaries on behalf of clients.