Is There A Duty To Investigate?

By 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 . He can be reached at mdebofsky@debofsky.com.

The question of whether an insurer has a duty to investigate the legitimacy of evidence submitted by a spurned intimate acquaintance was presented in the recently decided case of Truitt v. Unum Life Ins. Co. of Amer., 2013 U.S.App.LEXIS 18639 (5th Cir. Sept. 6, 2013).

The plaintiff, Terri Truitt, had worked as an attorney in the area of oil and gas litigation, which required her to engage in substantial international travel to remote countries.

After struggling with lower back, left leg and foot pain for several years, Truitt stopped working in 2002 and applied for long-term disability benefits from Unum, which approved her claim.

However, over time, Unum questioned Truitt's disability - surveillance and an independent medical examination raised doubts as to whether Truitt was disabled. And a functional capacity evaluation performed in 2006 also produced findings that questioned the legitimacy of the claim.

Matters came to a head, though, when Unum received a call from a man who claimed he had been in a personal relationship with Truitt, that she had him "locked up" and deported and that he had photos, travel itineraries and other evidence disproving Truitt's disability that he would provide if Unum paid him for the information.

Unum refused to pay, but invited the submission of the documentation. In response, Unum was provided with 600 pages of e-mails, which included flight and hotel itineraries, e-tickets and other documentation showing that Truitt had traveled extensively in the U.S. and to foreign locations. The e-mails also indicated that Truitt had engaged in strenuous physical activities on numerous occasions.

After receiving the e-mails, Unum notified Truitt that it was suspending her benefits. Truitt responded with an affidavit recounting that the individual who had provided Unum information had assaulted her and pleaded guilty to the assault and that the informant was a computer hacker. Unum nonetheless upheld the termination and also demanded reimbursement of more than $1 million in benefits that were claimed to have been overpaid.

The U.S. District Court reinstated the benefits after finding Unum had engaged in procedural unreasonableness by relying on untrustworthy evidence. The court of appeals reversed, however, after rejecting the district court's findings that Unum's failure to investigate the accuracy of the information it received or to question the source of the information used to justify the overturning of the claim decision.

The appeals court determined that a prior precedent foreclosed imposing a duty of investigation on Unum. The 5 th U.S. Circuit Court of Appeals had previously rejected a "duty to conduct a good faith, reasonable investigation" on a plan administrator that had a conflict of interest, finding instead that a reviewing court's focus should be on whether the record adequately supported the conclusion reached.

Likewise, the 5 th Circuit ruled that Unum should not be faulted for its failure to consider the source of the information. The court found no case supported such a rule and the court concluded that such issues are resolved "in the context of ERISA [Employee Retirement Income Security Act], ... through a probing administrative process and that, in that process, issues of inauthenticity, contradiction, unreliability and bias all may be pertinent."

The court found that Truitt had submitted rebuttal evidence, which Unum considered and then rejected. As to the e-mails, the court agreed with Unum that, despite claims the e-mails had been hacked, the e-mails met certain indicia of reliability - they were facially legitimate and the activities described were consistent with a timeline that correlated with activities noted in the claim file.

Finally, the court rejected Truitt's claim that her "recreational" travel did not show that she could meet the travel demands of her occupation since the travel was extensive and rigorous. Truitt visited several far-flung countries for weeks at a time while claiming to be disabled.

Surveillance videos also showed Truitt engaging in activities that demonstrated she was physically capable of meeting her job demands.

Fom the account of the facts presented by the court, the plaintiff's claimed disability was questionable and Unum justifiably took action to terminate payments to an apparently undeserving claimant. However, the court's refusal to place a burden of investigation on the insurer raises a question, since the 5th Circuit's ruling appears inconsistent with Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 115 (2008), which found:

"ERISA imposes higher-than-marketplace quality standards on insurers. It sets forth a special standard of care upon a plan administrator, namely, that the administrator 'discharge [its] duties' in respect to discretionary claims processing 'solely in the interests of the participants and beneficiaries' of the plan, Section 1104(a)(1); it simultaneously underscores the particular importance of accurate claims processing by insisting that administrators 'provide a "full and fair review' of claim denials,'" Firestone, 489 U.S., at 113, 109 S. Ct. 948, 103 L. Ed. 2d 80 (quoting Section 1133(2)); and it supplements marketplace and regulatory controls with judicial review of individual claim denials, see Section 1132(a)(1)(B)."

The ruling in this case suggests that these issues are resolved through a "probing administrative process."

However, that process is not nearly as probing as a trial and since the majority of circuits have held the insurer gets the last word in the claims process, the claimant lacks any means of rebutting the evidence relied on in deciding the pre-litigation claim appeal. See Metzger v. Unum Life Ins. Co. of America, 476 F.3d 1161 (10th Cir. 2007); Glazer v. Reliance Standard Life Ins. Co., 524 F.3d 1241 (11th Cir. 2008).

Nor is discovery as to the merits, or even a trial, permitted in an ERISA action that is decided under a deferential standard of review, where claims are adjudicated based solely on a review of an "administrative record."

Thus, without a duty to investigate, insurers may not have any incentive to check the credentials of the doctors they hire. And without a duty to investigate, there is no reason for insurers to ascertain that the reports they receive possess scientific validity consistent with the weight of medical authority and are not the product of bias or simple incompetence.