Linnen v. Hartford Life and Accident Insur. Co.

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Linnen v. Hartford Life and Accident Insur. Co., 2006 U.S.Dist.LEXIS 81294 (N.D.Ohio 11/7/2006)(Issue: Earnings Capability).  The interesting aspect of this case is the court’s consideration of the claimant’s earnings ability.  The insurer (initially CNA, then Hartford after that company took over CNA’s disability insurance business) determined that Linnen was capable of working at an occupation and therefore discontinued benefits.  The definition of total disability in the policy was one that required the insured to be “continuously unable to engage in any occupation for which the Insured Employee is or becomes qualified by education, training or experience.”  Another section of the policy states that eligibility to receive benefits requires that an insured be “unable, solely because of injury or illness, to engage in any substantially gainful occupation for you which you are or may reasonably become qualified by education, training, or experience, and be under the care of a licensed physician.”  Yet another section reads: “you must be unable--solely because of your illness or injury-- to engage in any substantially gainful occupation for which you are, or may reasonably become, qualified by your education, training or experience.”

Although the term “substantial gainful occupation” is undefined in the policy, the court interpreted the policy, when read in its entirety, as follows:

Historically, the phrase first appears in statutes related to disability benefits for veterans, see 38 U.S.C. Section 5102. Although not defined in the statute, the expression "substantially gainful occupation" has come to mean "when that occupation provides annual income that exceeds the poverty threshold for one person." Bowling v. Principi, 15 Vet. App. 1, 7 (2001).

In Doyle v. Nationwide Ins. Companies & Affiliates, 240 F.2d 328 (E.D. Pa 2003), the phrase "substantial gainful employment" was defined in the policy to be employment that would result in earnings of 50% or more of the employee's former base salary excluding benefits and bonuses. The court referred to the definition of "substantial gainful employment" as the "linchpin" for the definition of what it means to be long term disabled. Doyle, 240 F.2d at 346. The district court found the plan administrator's decision to deny long term disability benefits to be arbitrary and capricious because there were no findings in the administrative record on appeal that would support the determination that, in fact, the claimant's alternative employment would yield 50% or more of his prior earnings. Id. at 348.

In Wade v. Life Insurance Co. of North America, 271 F. Supp.2d 307 (D. Me. 2003), the long term disability policy at issue that case defined "substantially gainful occupation" as "one which provides the income required to support the standard of living reasonably approximating the standard maintained prior to the disability." Wade, 271 F.Supp. 2d at 310.  *16-*17.

The court added the following observations:

Contrary to what Defendant argues, from the context of the agreement, the Court concludes that "substantially gainful" means more than Plaintiff's ability to work at any occupation or to be able to find any gainful employment. The modifier "substantially" when placed in front of the word "gainful" demonstrates a promise by the writer of the policy that one will not lose long term disability benefits simply because a long term disabled individual could work at any employment. Such a result could lead to insecurity and financial hardship for the insured. The income gap between the long term disability benefits paid as a percentage of income from former factory type employment and the wages that may be paid from any employment, including minimum wage work, could be significant. A fair reading of the policy does not lead to the conclusion that a person found to have a long term disability could lose those benefits simply because he was later found to be able to engage in any employment.

However, if other employment becomes available that provides approximately or substantially the same wages and benefits, or in other words not simply gainful employment but substantially gainful employment, Plaintiff is found capable by competent medical analysis of working at that substantially gainful employment notwithstanding his disability, then Plaintiff may be found to be no longer disabled for purposes of receiving long term benefits. *18-*19.

In view of that interpretation, the court found the insurer’s conclusion arbitrary and capricious.

Discussion:      The court’s viewpoint represents the majority of the rulings among jurisdictions that have considered this issue.  Erreca v. West. States Life Ins. Co., 19 Cal.2d 388, 394-395, 121 P.2d 689, 141 A.L.R. 68 (1942) and Moore v. American United Life Ins. Co., 150 Cal.App.3d 610 (1984) have made California instrumental in interpreting “any occupation” provisions of disability insurance policies to consider the insured’s ability to earn a living comparable to his or her predisability earnings.  However, California does not stand alone.  In Peterson v.Continental Casualty Co., 116 F.Supp. 2d 532 (S.D.N.Y. 2000)(vacated on other grounds not relevant to this holding in 2002), the court ruled,

“Courts have determined that the ‘reasonably fitted by training, education or experience’ language contained in the Plan requires the claim administrator to demonstrate the existence of a job which the claimant is capable of, and qualified to, perform and which is comparable in terms of remuneration. See Mossa v.
Provident Life and Cas. Ins. Co.,
36 F. Supp. 2d 524, 531 (E.D.N.Y. 1999).”

Also see, Lavoie v. Betz Laboratories, Inc., 2002 U.S.Dist.LEXIS 13083 (D.N.H. 2002); Hoffert v. Commercial Ins. Co. of Newark, 729 F.Supp 201 (S.D.N.Y. 1990)("economic recompense is a primary consideration in "suitability of other employment for which he is "fitted by reason of education, training & experience."); Minn.Mutual v. Lawson, 377 F.2d 525 (9th Cir. 1967); Minn.Mut. v. Wright, 312 F.2d 655 (8th Cir. 1963); Weum v. Mut.Benefit Health and Accident, 54 N.W.2d 20 (Minn.); Blackwell v. Prudential Life Ins. Co. of America, 34 S.E.2d 57 (S.C. 1945); Metropolitan Life Ins. Co. v. Hawley, 198 SW2d 171 (Ark. 1947).  For a collection of cases on the issue, 21 A.L.R.3d 1155, catalogues all of the major rulings.

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