Krupp v. Liberty Life Assur.Co. of Boston, 2013

Krupp v. Liberty Life Assur.Co. of Boston, 2013 U.S.Dist.LEXIS 41834 (N.D.Ill. March 25, 2013)(Issue: Pain).

Amy Krupp, who had worked as a design director for McGraw-Hill, won summary judgment in this ruling. Her claim was based on disability due to severe back, neck, and headache pain following a series of surgeries, primarily on account of cervical stenosis and myelopathy. As the court noted, the third surgery Krupp underwent failed to resolve her medical problems, leaving her unable to perform even basic household activities. Krupp was treated by a neurosurgeon, neurologist, and pain management specialist, none of whom could bring her pain under control despite the use of several medications, including narcotics. Other symptoms including difficulty speaking, bowel and bladder dysfunction, numbness, dizzy spells, and vomiting.

As part of the initial short-term disability benefit claim submitted upon Krupp's initial period of disability-related leave, Liberty referred Krupp's file to a neurologist, Joseph Jares, M.D. Based on his assessment, a vocational consultant determined that Krupp was unable to perform her occupational duties because she could not engage in fine hand and finger movement. As part of Liberty's ongoing verification of Krupp's activities, covert surveillance was performed over four days. She never left her home on the first three days; and on the fourth day, she drove her daughter to school, a trip lasting eight minutes. Additional surveillance over five more days revealed only 26 seconds of footage of Krupp outside her home - retrieving mail from her mailbox. Liberty then referred Krupp's file to Dr. David Carnow, who acknowledged that doctors at the Mayo Clinic had diagnosed Krupp with small fiber peripheral neuropathy; however, he nonetheless concluded that Krupp could perform an eight-hour-a-day sedentary occupation. Although Carnow spoke with two of Krupp's physicians, he did not contact the neurologist who was then treating her. Liberty followed up with an independent medical examination performed by Dr. Christopher Pasquale. During the 45-minute examination, Dr. Pasquale found a limited cervical range of motion and confirmed her diagnoses, but maintained that her complaints of pain, paresthesias, and fatigue were "subjective." He therefore concluded that Krupp was capable of sedentary work. In response, Krupp's treating neurologist, Benjamin Nager, M.D., submitted a rebuttal report disagreeing with Dr. Pasquale.

While all of this was going on, Liberty referred Krupp to a vendor to assist her in applying for Social Security disability benefits. That application was successful; and Liberty demanded reimbursement of over $50,000 in overpaid benefits as a result of coordination between LTD and SSDI benefit payments. However, prior to the Social Security determination, Liberty terminated Krupp's benefits.

Krupp appealed. Judith Willis, M.D. performed another file review at Liberty's request, and reported only minimal work restrictions. The next day, Liberty reaffirmed the benefit termination, finding Krupp was capable of returning to work at her regular occupation. The decision acknowledged the Social Security decision but dismissed it, stating that the "Social Security Administration (SSA) approves benefits based on their qualifications." The court overturned Liberty's determination despite utilizing an arbitrary and capricious standard of review.

The court agreed with Krupp that Liberty lacked a "reasoned basis" for terminating her benefits. Conclusions without adequate explanation will not suffice. The court agreed with Krupp that neither of Liberty's determination letters "adequately explained why Liberty Life was discrediting Krupp's treating physicians' conclusions or ignoring or rejecting evidence that was contrary to its determination that Krupp did not qualify for disability benefits." The court pointed to the treating neurologist's "attending physician's assessment of capacity" which was provided at Liberty's request. In his assessment, Dr. Nager explained Krupp's functional limitations and deemed her unable to perform her occupational duties based on clinical findings and objective testing. However, as the court noted, "Liberty Life ignored this evidence." That assessment was not even mentioned in the initial denial. Thus, the court determined,

Because Dr. Nager's written assessment spoke directly to whether Krupp was disabled, Liberty Life's failure even to address it suggests arbitrary and capricious decision-making. See Majeski, 590 F.3d at 483 ("[A] plan administrator's procedures are not reasonable if its determination ignores, without explanation, substantial evidence that the claimant has submitted that addresses what the plan itself has defined as the ultimate issue.") (emphasis added).

The court also criticized Liberty's arbitrary refusal to credit the treating doctor's rebuttal to Dr. Pasquale's IME in which he focused on Krupp's severe pain that made it impossible for her to perform even sedentary work. Although the letter was acknowledged, the court found that Liberty "unreasonably dismissed the letter's import by stating that Dr. Nager "did not submit any additional medical records or treatment notes to support his position [in his letter]." Admin. R. at LM100. The court conceded that a treating physicians unexplained or unsupported conclusions could be disregarded, but found:

Dr. Nager's determinations were anything but unsupported. To the contrary, Liberty Life requested and received medical records and opinions from Dr. Nager on eight separate occasions between December 2008 and August 2010. Among these submissions was Dr. Nager's attending physician's assessment of capacity, in which, as discussed above, Dr. Nager noted that Krupp's physical restrictions would last a lifetime and that she could not function in an occupational setting given her uncontrolled pain and minimal physical capabilities. These conclusions, Dr. Nager noted, were supported by diagnostic tests and clinical evaluations. Thus Liberty Life's argument that it reasonably discredited Dr. Nager's letter because it was "conclusory" does not carry the day.

The court also found the circumstances involving Liberty's request for comment on the IME report were "borderline adversarial" and contrary to Liberty's fiduciary duties requiring "higher-than-marketplace" standards (citing MetLife v. Glenn, 554 U.S. at 115). Liberty merely sent the IME report without a cover letter requesting a response and thus did not adequately notify Dr. Nager that it was seeking comment, so the report was initially placed in the patient's file and went unanswered. When Liberty contacted him later, Dr. Nager requested an extension of time to reply; however, Liberty refused. Liberty was also faulted for ignoring Dr. Jares's initial assessment and the initial vocational evaluation; and its selective reading of the vocational assessment was deemed evidence of arbitrariness. The subsequent file reviews, as well as the IME, were also deemed deficient because none of those reports gave any consideration to Krupp's chronic and debilitating pain. The court cited Seventh Circuit authority for the proposition that evidence of subjective pain cannot be discounted simply because it is "self-serving." Diaz v. Prudential, 499 F.3d at 645 (finding claimant's subjective complaints of pain disabling where corroborated by extensive treatment including heavy medication and repeated surgical procedures); Hawkins v. First Union Corp., 326 F.3d 914 (7th Cir. 2003) (complaints of pain cannot be dismissed out of hand because they are subjective). The court recounted that Krupp

had undergone four back surgeries, received five nerve blocks, and had been prescribed and taken numerous narcotic pain medications. She also submitted sworn witness statements prepared by her friends, family, and colleagues attesting to her changed lifestyle and inability to perform simple tasks due to pain. Liberty Life also had on file Dr. Nager's assessment, which detailed Krupp's functional limitations, as well as evidence from nine days of covert video surveillance that confirmed that she was leading an essentially inactive life.

Despite that evidence, Liberty's consulting physicians claimed a lack of "objective" support undermined her complaints. Hence, the court found, "Because none of Liberty Life's three consulting physicians considered how Krupp's pain might interfere with her ability to perform her job and thus failed to consider a relevant aspect of Krupp's medical condition, Liberty Life's reliance on their opinions was arbitrary."

The court also found the Social Security determination relevant evidence. The court recounted the ALJ's reliance on Krupp's subjective descriptions of her pain, which was corroborated by her lengthy treatment. And while Krupp was deemed capable of light work on an occasional basis, the Social Security judge found Krupp was "unable to sustain such activity, as well as being unable to sustain her attention and concentration for extended periods." Liberty's disregard of the Social Security finding and its superficial rationale for doing so was also deemed arbitrary based on Holmstrom v. MetLife, 615 F.3d 768, 773 (7th Cir. 2010), where the court ruled a plan administrator cannot simply reject a disability finding by the SSA out of hand but rather must provide a reasoned explanation for why it chose to disregard or discredit that finding (finding administrator's denial of disability benefits reflected arbitrary and capricious decision-making because it "never stated why it disagreed with the Social Security determination") (emphasis added).

The court also determined that Liberty's decision-making process was influenced by its conflict of interest: First, the court cited Liberty's selective consideration only of evidence that supported a denial and its failure to consider contrary evidence. Second, the disregard of the Social Security award also evidenced Liberty's conflict. Based on Glenn, the court found that Liberty's encouragement and support of Krupp's social security application, and its demand for repayment meant that "[u]nder the circumstances, disregarding the Social Security determination without adequate explanation not only suggests procedural unreasonableness, but also "[justifies] the court in giving more weight to the conflict (because [Liberty Life's] seemingly inconsistent positions were both financially advantageous)." 554 U.S. at 118. The court added,

For these reasons, Liberty Life's conflict would tip the balance in favor of a finding that it acted arbitrarily and capriciously if this were a close case. The case is not all that close, but the conflict and its impact on Liberty Life's decision making is an additional factor tending to show that it acted arbitrarily.

However, despite the court's conclusions, the court remanded the case to Liberty even though the court found that "Krupp has demonstrated convincingly that Liberty Life acted arbitrarily and capriciously."