Nickola v. CNA Group Assurance Co., 2005 U.S. Dist. LEXIS 16219 (N.D. Ill. 8/5/2005)(Issues: Combination of Impairments, Effect of Medications, Continuing Disability Reviews, Prejudgment Interest).  The district court took CNA to task in this case which was handled primarily by Marcie Goldbloom of our office.  The claim involved a HVAC technician who became disabled due to spinal, gastrointestinal and pulmonary impairments.  CNA initially approved the claim, and continued paying benefits for several years.  However, despite consistent statements from the treating physicians reaffirming Nickola’s disability, including reports that GI problems caused unpredictable and intermittent diarrhea and vomiting and that narcotic pain medication prevented the plaintiff from working normally and functioning at a job, CNA terminated benefit payments without an examination or even a physician review.  After the termination decision, however, the insurer referred the claim to Dr. Eugene Truchelut for review; and he furnished a report that justified CNA’s actions.  Consequently, CNA upheld the claim denial and plaintiff filed suit. 

In resolving the case, the court acknowledged discretionary language that was added to the policy after Nickola first became disabled; and the court mentioned several arguments challenging the appropriateness of a deferential standard of review; however, the court found “no need to attempt to resolve all of these issues and sub-issues (for some of which there seems to be little relevant precedent to guide the analysis) because Defendant's process and analysis in terminating Plaintiff's long-term disability benefits is so defective that it fails arbitrary and capricious review.” *20. 

The court itemized at least three independent bases for reversal.  First, the defendant failed to consider and explain the effect of the narcotic medication Nickola had to take.  The court explained, “Defendant was required to make a meaningful and reasoned assessment of what impact that drug use would have on Plaintiff's ability to obtain and hold a job.” *24.  Because it was evident that Nickola’s medications impeded him from performing and keeping a job, the court found CNA’s decision to terminate benefits arbitrary and capricious. 

Second, the court found the decision was defective because CNA “failed to justify its decision to depart from its prior conclusion that plaintiff was entitled to long-term disability payments.” *24-*25.  The court added, “as common sense also would suggest, if an insurer has already admitted that someone is so incapacitated that they are entitled to long-term disability payments, one can reasonably view the failure to produce evidence of improvement as a suspicious failing if the insurer decides that LTD benefits are no longer warranted.” *25.  The court found no evidence of improvement in Nickola’s condition that justified CNA’s decision. 

Further, in a related issue, the court took notice of the fact “that Defendant initially decided to terminate Plaintiff's LTD benefits without even having a physician look at whether termination was appropriate. Put differently, Defendant did not have an MD look at whether termination was appropriate until after Plaintiff had appealed the termination of his prior LTD benefits.” *28.  The court found that this course of conduct meant “Defendant's decision to terminate Plaintiff's benefits without even initiating an MD review raises questions about the sincerity of Defendant's benefits review.” *29.  The court added that “an insurer's decision to reverse its prior decision without even having a medical review of the file raises commonsense doubts about the bona fides of the review process and decision to terminate LTD benefits.” *29.

Third, the court found the decision was arbitrary and capricious due to the defendant’s failure to consider all of Nickola’s impairments in combination with one another.  Put another way, the court ruled, “Precedent teaches that an administrator making a disability determination must make a reasoned assessment of whether the total combination of a claimant's impairments justify a disability finding, even if no single impairment standing alone would warrant the conclusion.” *30.  In a footnote, the court added that such a conclusion is nothing more than a “commonsense proposition that the combined impact of a number of negative health conditions can be greater than the impact of any one of them. Accordingly, even if one single impairment might not be debilitating, the combined force of multiple impairments might be, and that subject merits a reasoned assessment.”

The court also found that a determination plaintiff could hold other jobs was inadequately reasoned and explained.  The court noted the record was silent as to the qualifications of CNA’s vocational resource to furnish such opinions, but also added the report displayed an “utter lack of reasoning.”  The court found no support for defendant in a social security decision denying benefits, in no small part due to a subsequent court ruling finding the ALJ’s decision flawed.  The court added that the ALJ’s decision was never relied on by CNA; thus, “Defendant cannot seek to patch over its faulty analysis in the first instance … by reference to the ALJ's assessment now.” Likewise, the court headed a section of the opinion, “Reasoned Decisionmaking Requires More Effort and Documentation Than Just Skepticism.”  The court found Dr. Truchelut “never undertook any meaningful analysis of how Plaintiff’s claimed diarrhea problems would impact his ability to maintain other employment.”  Instead, the doctor merely speculated.  Nor, according to the court, can being skeptical about a claimant’s degree of impairment suffice for a reasoned decisionmaking process: “Defendant's skepticism, cursory analysis, and ipse dixit are not enough to justify reversal of its prior decision to award LTD benefits to Plaintiff. Reasoned decisionmaking demands more to avoid the conclusion that Defendant acted arbitrarily and capriciously.” *44.  The court also seemed particularly troubled by CNA’s complete disregard of reports from Nickola’s employer describing the difficulties plaintiff had on the job. 

As a consequence of CNA’s downright unreasonable determination, the court awarded reinstatement, prejudgment interest utilizing the prime rate plus a modest premium to account for risk of default (6.6%), and attorneys’ fees.  In finding a fee award appropriate, the court ruled:

In this case, the Court finds that an award of reasonable attorney's fees and taxable costs is appropriate. Reviewing the typically employed five-factor test, the Court finds that the Defendant has substantial culpability in terms of its deficient treatment of Plaintiff's LTD claim and benefits stream. As explained at length above, Defendant's analysis of the propriety of terminating Plaintiff's LTD benefits was deficient in a number of significant and often independent respects. Relatedly, the fifth factor, the relative merits of the parties' positions, also militates in favor of an award. There also is no dispute that the second factor--i.e., Defendant's ability to pay--also cuts in favor of an award. The third factor--the degree to which such an award would deter other persons acting under similar circumstances--also cuts in favor of an grant of fees and costs. To be sure, the fourth factor--the amount of benefit conferred on all the plan members--is functionally non-existent. (This was not a suit designed to confer benefits generally to all plan participants, and if a plaintiff's simply prevailing were sufficient to satisfy the fourth factor, then this factor would be close to meaningless in terms of trying to make a discretionary assessment.) Nonetheless, the absence of this single factor does not change the bottom-line analysis, particularly given the modest presumption in favor of an award of fees applicable here. Accordingly, based on an overall review of the five factors, the Court finds that an award of fees and taxable costs is justified.