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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 .

Loucks v. Liberty Life Assur.Co. of Boston, 2004 U.S.Dist.LEXIS 19664 (W.D.Mich. 10/1/2004)(Issue: Fibromyalgia; Scope of Review).  This ruling begins with the following paragraph:

Caveat Emptor! This case attests to a promise bought and a promise broken. The vendor of disability insurance now tells us, with some legal support furnished by the United States Supreme Court, that a woman determined disabled by the Social Security Administration because of multiple disabilities which prevent any kind of work cannot be paid on the disability insurance she purchased through her employment. The plan and insurance language did not say, but the world should take notice, that when you buy insurance like this you are purchasing an invitation to a legal ritual in which you will be perfunctorily examined by expert physicians whose objective it is to find you not disabled, you will be determined not disabled by the insurance company principally because of the opinions of the unfriendly experts, and you will be denied benefits. Fortunately, the law, though left moribund by the Supreme Court's legal interpretations, does not allow the purveyor of such empty promises to win the day. *1-*2.

The plaintiff, who worked for Steelcase for approximately 15 years as a sales assistant, struggled to keep working despite multiple illnesses including fibromyalgia and osteoarthritis.  When she could no longer continue working, Loucks applied for benefits and her claim was initially approved under an own occupation standard.  Subsequently, a functional capacity evaluation was performed which concurred with the treating rheumatologist’s opinion that the plaintiff was completely unable to engage in any occupation.  Nonetheless, despite other evidence showing that plaintiff’s condition was worsening and that she had applied for Social Security benefits, the insurer insisted that the plaintiff be examined by an internist.  That doctor dictated his findings, but never read them to confirm their accuracy; and the examiner merely reported in generalities which the court deemed “consistent with either a cursory examination and/or the use of rote language.”  The plaintiff also complained that the examination only lasted five minutes; and the report itself never stated the length of examination.  The report also failed to consider the American College of Rheumatology’s criteria for fibromyalgia.  A record review by a second physician, also failed to consider ACR criteria.  However, Liberty relied on the two doctors’ reports as the basis for terminating benefits. Simultaneously, although Social Security had initially denied Loucks’s claim for disability, benefits were ultimately approved.  The court considered that finding, even though it was outside of the claim record “because it tends to demonstrate a due process problem” with respect to Liberty’s evaluation of Loucks’s claim. *9.

Loucks appealed Liberty’s determination and noted significant errors in the claim file.  In response, Liberty had Gale Brown Jr., M.D., a frequently-retained reviewer for Liberty and Prudential, review the file.  Although Dr. Brown credited the fibromyalgia diagnosis and deemed Loucks limited in many respects, he recommended denial based on inconsistent reported activities.  However, Dr. Brown appeared to have borrowed an error contained in the Social Security record about Loucks engaging in golfing.  Rather than currently golfing, she golfed in the past.  Dr. Brown also disregarded the opinions of two ophthalmologists that plaintiff’s eye condition was inconsistent with sedentary work.

Although the court found the Liberty plan contained language that would trigger a deferential standard of review, the court explained that a deferential review

is not abject, though, and "inherently includes some review of the quality and quantity of the medical evidence and the opinions on both sides of the issues." McDonald v. Western-Southern Life Ins. Co., 347 F.3d 161, 172 (6th Cir. 2003). See also Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461 (7th Cir. 2001); Gallo v. Amoco Corp., 102 F.3d 918, 922 (7th Cir. 1996). *12.

The court further noted,

While a claim administrator and the independent physicians of the claim administrator need not specifically address the opinions of a treating physician, the administration of the claim must be principled, unbiased and above abject standards. In this case, the claim administration failed to meet even those basic standards. *14.

The court found “the claim administration displayed was unprincipled, bias[ed] and craven” based on the following rationale:

As can be seen readily from the claim history, this claim was not selected for review because of questions about Plaintiff's ability to work. The claim was initially paid precisely because there was little question that Plaintiff was disabled at the time. It was later selected for review because Plaintiff had not yet qualified for social security benefits-meaning that Defendant's liability exposure was much greater given that those benefits could not be offset against the promised disability payments. To say otherwise is to simply ignore the record of claim administration. The claim administrators not only failed to appreciate the significance of the medical findings of Plaintiff's treating specialists, they defamed Plaintiff by inaccurately labeling her an HIV patient and thereby completely misunderstanding her claim status. The claim administration was both grossly negligent and driven by financial motives irrespective of the binding contract/benefit language. *14-*15.

The court characterized the examination of the plaintiff by the “independent” physician as “so fleeting that it was purposeless.”  The examining physician, as well as the initial reviewing doctor, disregarded the criteria for fibromyalgia and failed to consider any other disabling condition; and they simply ignored the treating doctors’ opinions.  Hence,

There was no substantial evidence to support the conclusions of Defendant that Plaintiff did not suffer from fibromyalgia and other chronic conditions which, when considered together, disabled her from any occupation by any reasonable standard. This case is similar to the Sixth Circuit's recent decision in McDonald in which the Circuit reiterated that "arbitrary and capricious" review is not a rubber stamp for any decision of the claim administrator. McDonald, 347 F.3d at 172. In McDonald, as in this case,  there was an independent medical review which unreasonably disregarded the opinions of treating physicians and lacked a rational basis for a finding other than disability. Id. at 170-72; see also Finazzi v. Paul Revere Life Ins. Co., 327 F. Supp. 2d 790, 794 (W.D. Mich. 2004). Although this Court regularly upholds claim determinations under the "arbitrary and capricious" standard, in this case the claim administration was precisely that. *16-*17.

Discussion:      Judge Enslen’s patience was obviously tested by this case.  It is plainly apparent that he is fed up with ERISA and insurers’ efforts to use the arbitrary and capricious standard of review as a shield to avoid paying meritorious claims.  He also sent an important message to insurers that they have an obligation to conduct a full and fair review of claims even if they retain discretion to determine benefit eligibility, which involves just a few simple rules:

§         Employ physicians with expertise appropriate to the condition at issue and instruct them in what needs to be included both in the examination and in the report of the physician’s findings

§         Read the records and reports carefully and make sure that any conclusions are supported by the evidence

§         Do not simply ignore the treating physicians’ opinions; if there is disagreement, provide a rationale for why the treating doctors’ opinions are not accepted

Liberty’s failure to comply with these elementary rules and its pursuit of a biased, result-oriented review entirely justified this ruling.

This note appeared in the Disability E-News Alert! For subscription information, please go to www.disabilityenewsalert.com .