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 .
Nolan v. Heald College, 2010 U.S.Dist.LEXIS 53997, 2010 WL 1837805 (N.D.Cal. May 6, 2010)(Issue: Pain). Following a remand by the Ninth Circuit, this report and recommendation issued by a magistrate judge constitutes a solid victory for the plaintiff. The court began its ruling by distinguishing Conkright v. Frommert, 2010 WL 1558979 (2010) by noting that Conkright involved a "single honest mistake," while this case involved "a number of deliberate actions by the plan administrator." The court then set forth the abuse of discretion standard of review it was applying after considering the insurer's inherent conflict of interest:
This more stringent standard of review does not permit total deference to the plan administrator where evidence contradicting the propriety of the decision exists. In addition, the administrator must justify its decision by explaining why it disregarded or acted contrary to a finding of disability by the Social Security Administration and the court should also consider whether the administrator has adequately considered the medical record when it does not conduct its own medical examination. Montour v. Hartford Life & Acc. Ins. Co.,588 F.3d 623 (9th Cir.2009).
The court concluded that Nolan submitted ample proof of disability due to radiculopathy, which is an exception to the 24 month limit on benefit payments due to back pain. Although the plaintiff, Jeanne Nolan, who had served as executive director for Heald College prior to suffering a back injury, received benefits from MetLife, the insurer refused to pay more than 24 months of benefits, contending the disability fell within the "neuromusculoskeletal disorder" limitation in the policy. A review by Network Medical Review (NMR) could not deny the existence of radiculopathy, so the file reviewer deemed Nolan "not disabled." However, the court concluded: "The seriousness of Nolan's injury, coupled with her extensive work history as well as her and her doctors' consistent and truthful statements demonstrates that MetLife's argument lacks merit and underscores Nolan's credibility."
The court then turned to the evidence of MetLife's conflict of interest and found no evidence of MetLife having taken "active steps to reduce potential bias." A review of an affidavit from Laura Sullivan submitted by MetLife led the court to conclude Sullivan's declaration "actually supports an inference of biased decision-making." The Sullivan declaration was initially filed in another unrelated case and was intended to prove NMR's neutrality. However, despite the procedural irregularities involved in the submission of that declaration, the court found the declaration:
actually supports a finding that NMR makes medical recommendations that are in MetLife's financial interest. Although Defendants break down the number of claims NMR reviewed into many groups (Opp. Br. at 4:2-12), its analysis cannot disguise the overall figure: according to the Sullivan Declaration, MetLife either never pays or stops paying benefits on 81-91% of the claims that NMR reviews for it. MetLife obfuscates the facts with vague explanations of its different categories, but when the categories are examined closely, as follows, they reveal a pattern of sending claims to NMR in order to justify the cessation of benefits.
- MetLife states that of the 9,056 claims sent to NMR in a two-year period, 18% were never paid. In practical terms, this means that MetLife denied the initial claim, sent the file to NMR for a records review, received a "favorable" review from NMR, and therefore never paid benefits at all.
- MetLife states that half were paid for some period, but benefits stopped prior to the referral. For these 4,528 claims, such as Nolan's, MetLife initially approved benefits, then decided to terminate benefits at a later date. When the participant appealed, MetLife sent the file to NMR for a records review, and the decision came back "favorable" to MetLife, so that benefits never commenced again.
- MetLife states that 13% were paid for some period, then benefits stopped after the referral. This means that MetLife initially approved benefits, then sent the file to NMR for a records review. Again, the review came back favorable to MetLife's financial interest, and benefits were discontinued as a result of the NMR review.
- MetLife states that it is "unclear" what happened to 10% of these referrals, but, based on its and NMR's track record, one can make an educated guess that most, if not all, of these reviews were in MetLife's favor as well.
In sum, the Sullivan declaration only supports Nolan's contention that NMR is in the business of rendering determinations favorable to MetLife, in that of the 9,056 claims that MetLife claims to have sent to NMR, it used their conclusions to justify closing approximately 7,335 to 8,240 claims, thereby saving itself millions of dollars. (emphasis added)
The court added that the Ninth Circuit ruling, which was the law of the case, "permitted an inference that Network Medical Review and Drs. Silver and Jares were biased in favor of MetLife." Nolan v. Heald College,551 F.3d 1148, 1154 (9th Cir.2009).
The court also looked at two additional key factors: the importance of the Social Security award and the lack of an independent medical examination. As to the Social Security finding, the court explained:
Glenn is binding authority for the proposition that where, as here, MetLife benefitted financially from a Social Security award, which has a more stringent standard for a finding of disability than the Plan's, then ceasing to pay benefits out of its own pocket, it is evidence of both procedural unreasonableness and MetLife's conflict of interest, which reduces the deference owed and increases the skepticism to be applied to its adverse decision.
The Montour ruling also supports that conclusion since that decision places a discrete burden of explanation on the insurer to justify why it reached a conclusion differing from the Social Security finding. Here, neither Dr. Jares nor Dr. Silver (the NMR reviewers) even mentioned the Social Secrity determination.
The failure to perform an independent medical review was also a determinative factor to the court. Compounding that failure, the court determined that there was extensive evidence that MetLife's doctors failed to consider relevant evidence. The court pointed to a chart in the summary judgment briefing documenting all the medical findings that were ignored by the two reviewing doctors. The court also cited Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F.3d 863, 870 (9th Cir.2008) as standing for the proposition "that a plan administrator is required to explain whyit believes a claimant's submitted medical evidence is inadequate, beyond the mere conclusion that it is." (emphasis in original). In addition, the court cited Saffon to castigate MetLife for disregarding complaints of pain, noting that ruling "emphasized that pain cannot be gauged by objective evidence, because pain is inherently subjective. 522 F.3d at 872-73 ("individual reactions to pain are subjective and not easily determined by reference to objective measurements.")
This note appeared in the Disability E-News Alert! For subscription information, please go to www.disabilityenewsalert.com .