The casenote of the month is from the Disability E-News Alert! a monthly newsletter describing new disability insurance developments. For subscription information, e-mail Mark DeBofsky or visit www.disabilityenewsalert.com .
Fairbaugh v. Life Ins.Co. of North America, 2010 U.S.Dist.LEXIS 83337 (D.Conn. August 16, 2010)(Issue: Scope of Review). The plaintiff, Paige Fairbaugh, began working as a corporate event planner for UBS in 1997 and was diagnosed with multiple sclerosis the following year. She continued to work, though, until 2007 when her condition forced her to cease working and apply for short-term disability benefits which she received. Fairbaugh was able to return to work for a short period of time; however, her condition worsened; and in 2008, she went back on disability, initially receiving six months of short-term disability and then long-term disability benefits at a rate of $5,300 per month. She simultaneously applied for Social Security disability benefits, which were initially denied. Shortly thereafter, in May 2009, LINA terminated the long-term disability insurance payments based on a neuropsychological evaluation finding only subtle to mild cognitive deficits, as well as a determination that the MS had not worsened and that Fairbaugh's EDSS score (Expanded Disability Status Scale) was not indicative of more than minimal disability. The court noted, though, that the neuropsychological test results found Fairbaugh could function and compensate under optimal conditions free from stress or multi-tasking; and the court further pointed out that the EDSS score is not sensitive to cognitive dysfunction, pain, fatigue or stress. In addition, Fairbaugh's EDSS score was the same when benefits were terminated as it was when the benefits were initially approved.
Fairbaugh appealed the termination and submitted a detailed narrative from her treating neurologist explaining the basis for his conclusion that his patient was unable to perform her occupational duties. However, upon review by a CIGNA associate medical director, R. Norton Hall, M.D., who determined that Fairbaugh should be able to function at a light level of activity and there were no measured functional limitations, the benefit termination was upheld and litigation ensued.
During the litigation, Social Security approved Fairbaugh's benefit claim and the plaintiff sought to supplement the record to include the determination. The court allowed for consideration of the fact of the approval because LINA had argued the prior denial supported its determination. However, the court did not rely on the determination, noting it had preliminarily reached a decision in plaintiff's favor before learning of the social security finding.
After some internal debate about the proper procedural mechanism for resolving the claim, the court decided the case on summary judgment, applying the arbitrary and capricious standard of review. The court also determined that LINA's findings were clearly arbitrary and capricious irrespective of any analysis of the influence of a potential conflict of interest. The court then detailed a number of issues that formed the basis for its conclusion:
Absence of Improvement. The court first pointed out that LINA approved both claims for short-term disability and long-term disability, finding Fairbaugh was unable to perform her regular occupation. Yet the insurer ostensibly relied on the same evidence to justify terminating benefits. As the court noted, "It is unclear how a neuropsychological evaluation performed in 2007, which was already on file when both Plaintiff's short and long term disability claims were approved in 2008, could possibly provide a rational basis for revoking Plaintiff's disability benefits in 2009." *28. The court further remarked that nothing in the neurologist's records documented an improvement in Fairbaugh's condition. If anything, it worsened since the EDSS score went from 2.0 when benefits were approved to 2.5 when they were terminated. The court found LINA's conduct arbitrary, citing Connors v. Conn. Gen. Life Ins. Co., 272 F.3d 127, 136 (2d Cir. 2001), where the Second Circuit held that the administrator's "finding of ineligibility was not in response to an application for benefits, but rather a reversal in policy preceded by no significant change in Connors's physical condition." Id. at 136 (emphasis added). Although Conners was decided on the de novo standard, the court found, "absent some type of fraud, it is the very definition of arbitrary and capricious to determine that the medical evidence shows someone to be disabled, and then to determine, in the absence of any significant change in that person's physical condition, that they are not disabled." *30. While finding that the insurer had every right to continue to monitor the claim and request updated information, if such information showed no improvement, the court deemed it "difficult to see how Defendant's reaching a different result in the face of substantially unchanged medical information could be anything but arbitrary and capricious." The court added that LINA compounded its arbitrary behavior by suggesting in the termination letter that the decision was based on the absence of progression of functional loss or impairment despite the fact that "nothing in the Plan that requires a person who has been judged disabled to prove that their disability continues to worsen simply in order to remain eligible for benefits."
Failure to Adequately Medically Support Decision. The court found Dr. Hall's file review gravely deficient. The court cited his handwritten paragraph, noting that Hall had never examined, interviewed or met the plaintiff, and found the report inadequate and contrary to the record. In contrast, the treating neurologist was the director of the MS treatment center at a hospital in Derby, Connecticut, had treated the plaintiff for seven years, and provided a detailed and thorough rationale for his opinion. The court cited other cases in which several doctor reviews had taken place - here, however, the claim was terminated based on a nurse's review and Dr. Hall was not involved until after the termination had already taken place. Although the court found that an independent medical examination was not required, the failure to obtain one "diminished" the weight of defendant's medical evidence. Although the court acknowledged that it could and would not give deference to the treating physician's report, it pointed out:
Defendant dismissed the reports of a physician specializing in multiple sclerosis, who had been treating Plaintiff for that condition and seeing her regularly for many years, in favor of a single review of her file by a single doctor who had never met or examined Plaintiff. Furthermore, the six sentence report that doctor produced, after being referred Plaintiff's file for the first time upon appeal, contains a factual error with respect to the medication she was taking, suggesting that he conducted a less than thorough review of the file. While Defendant has significant discretion, relying on such a cursory review of Plaintiff's medical condition in deciding to terminate her benefits is an arbitrary and capricious exercise of the discretion with which Defendant has been entrusted under the Plan.
Applying the Wrong Standards. The court also faulted LINA for not considering the plaintiff's actual job when it terminated benefits during the "own occupation" period. The court pointed out that key aspects of the job included extensive travel, long hours, sustained walking and standing for extended periods of time, and stressful time-sensitive multi-tasking. The court deemed it arbitrary and capricious to disregard such duties and to focus solely on the exertional requirements of a "light" occupation, finding "it was a misapplication of the Plan's "regular occupation" standard to imply that Plaintiff was not disabled because she might be able to perform sedentary jobs, and to fail to take into consideration the true nature of Plaintiff's job, as demonstrated in the administrative record." The court also criticized LINA's argument that the initial Social Security decision supported its determination since Social Security applied a more restrictive "any occupation" standard.
The court then addressed two other issues - a claim for reinstatement of life insurance under a waiver of premium as well as a claim for reinstatement of medical insurance. The court found the life insurance claim was not properly pled or before the court (the court was also apparently confused about the waiver of premium claim since it did not understand the basis of the claim since the policy required active employment). As to the medical insurance, though, the court found that since UBS continued eligibility for medical insurance based on disability insurance benefit, Fairbaugh was entitled to reinstatement. Finally, the court found LINA's conduct showed culpability entitling the plaintiff to attorney's fees as well as prejudgment interest.
Discussion: Although there has been some question about how courts should weigh an insurer's history of biased claims adjudication, this is yet another example of what appears to be CIGNA/LINA's systematic bias in its claims administration. Other cases that have reached similar conclusions include: Juszynski v. Life Insurance Company of North America, 2008 U.S.Dist.LEXIS 24928 (N.D.Ill. 3/28/2008); MacNally v. Life Ins.Co. of North America, 2009 U.S.Dist.LEXIS 44423 (D.Minn. May 26, 2009); Alfano v. Cigna Life Ins.Co. of N.Y., 2009 U.S.Dist.LEXIS 7688 (S.D.N.Y. January 30, 2009); Cox v. CIGNA Group Ins., 2010 U.S. Dist. LEXIS 17164, *7, 11 (E.D. Ky. Feb. 24, 2010); and Gordon v. Northwest Airlines, Inc. and Life Ins.Co. of North America, 606 F. Supp. 2d 1017 (D. Minn. 2009). In addition, the California Insurance Commissioner found systematic bad faith claims handling - http://www20.insurance.ca.gov/epubacc/REPORT/106849.htm and Good Morning America has profiled CIGNA as well - "Denied: Fighting for Insurance Coverage," June 27, 2008 (http://abcnews.go.com/GMA/story?id=5257491&page=1); and "GMA Gets Answers: Insurer Delays Long Term Benefit Coverage," April 25, 2008 (http://abcnews.go.com/GMA/story?id=4724106&page=1).
This note appeared in the Disability E-News Alert! For subscription information, please go to www.disabilityenewsalert.com .