Court questions insurer’s about-face on paying disability benefits

This article was published in the Chicago Daily Law Bulletin on June 8, 2017.

By Mark D. DeBofsky
Mark D. DeBofsky is a name partner of DeBofsky, Sherman & Casciari P.C. He handles civil and appellate litigation involving employee benefits, disability insurance and other insurance claims and coverage . He can be reached at [email protected].

Although the approval of a claim for disability benefits does not guarantee payment of the claim forever, a recent federal case illustrates the problems insurers may experience when they attempt to terminate benefits without evidence that the claimant’s medical condition has improved.

The case of Hart v. Unum Life Insurance Company of America, 2017 WL 2265395 (N.D. Calif., May 24, 2017), involved Nancy Hart, a licensed registered nurse with more than 25 years of experience working as a nurse and a nurse supervisor-manager, who had to stop working in 2004 due to a chronic back condition.

Hart applied for and qualified to receive disability benefits under her employer’s group long-term disability insurance plan. Thereafter, she received benefits continuously through 2012 even though she had returned to part-time employment as a school nurse in 2007.

That job ended a year later, although the reason was unclear. Unum maintained that Hart’s position was eliminated, while Hart asserted that the school district could not accommodate her restrictions. Regardless, Hart’s condition worsened in 2008. In 2011, Unum offered to buy out the remainder of Hart’s claim. She, however, declined the offer.

Shortly after Hart rejected Unum’s settlement proposal, Unum held a "roundtable review" of her claim, which began the course of events that ultimately led to the termination of her benefits. Despite Unum basing its decision on an "independent" medical evaluation and a labor market survey, the court rejected Unum’s determination.

The court was heavily swayed by Unum’s prior approval and continuation of benefits for several years. Relying on Saffon v. Wells Fargo & Company Long Term Disability Plan, 522 F.3d 863 (9th Cir. 2008), which questioned a disability benefit termination in the absence of evidence showing improvement in the claimant’s condition, the court observed:

"Here, like the plaintiff in Saffon, there are objective MRI images confirming Hart’s back problems. These MRIs show disc bulges and annular tears in Hart’s back and, while they may not be recent, they confirm she has degenerative disc disease — a fact Unum does not dispute.

"Similarly, Unum has been paying Hart LTD [long-term disability] benefits for almost eight years. Furthermore, throughout this period, Unum has repeatedly sought continuing proof of disability, including a field visit. Each time, Unum approved Hart’s benefits.

"Therefore, for Unum to now claim Hart was not disabled at the time her benefits were terminated in June 2012, one would expect Unum to provide some evidence of plaintiff’s medical progression at the time her benefits were terminated."

The court was also persuaded by the findings made by one of Hart’s treating doctors. Although the doctor was not a specialist, the court found her opinions were credible due to the frequency of visits and the overall consistency between the doctor’s findings, objective MRI evidence, observations of other examining doctors and Hart’s own statements. The court also questioned Unum’s claim that the treating doctor no longer believed Hart was disabled, pointing out:

"First, although Dr. Nishio never replied to Dr. Lyons letter, there is no evidence showing Dr. Nishio ever received the letter. Indeed, Unum never confirmed that Dr. Nishio received the letter via fax, and rather than mailing the letter to Dr. Nishio’s office, Unum sent it to a separate facility. Thus, under these circumstances, Dr. Nishio’s failure to rebut Dr. Lyons’ account is not conclusive, or even persuasive, evidence that she agreed with his summary.

"In addition, Dr. Nishio’s alleged statements are completely at odds with years’ worth of her treatment notes, and with notes from her most recent exam of Hart. Only five months earlier, Dr. Nishio had examined Hart and noted that Hart ‘still ha[d] all the limitations of the [degenerative disc disease],’ and ‘[s]till [had] lower back tenderness especially late in the afternoon.’"

The court was also unimpressed with the independent medical examination, finding it deficient due to its failure to give sufficient weight to Hart’s MRI findings or to her history of pain. The court deemed Hart’s symptom complaints credible, finding:

"Here, where there are objective MRIs confirming Hart’s back problems and where there are several years’ worth of records documenting Hart’s pain and her regular use of pain medications, there is ‘substantial objective and reliable medical evidence in the record to support the severity of plaintiff’s disabling pain allegations.’ Jahn-Derian v. Metropolitan Life Insurance Co., 2016 WL 1355625, at *8 (C.D. Calif., March 31, 2016) (finding objective evidence of pain where a plaintiff diagnosed with degenerative disc disease provided several documented instances of pain)."

The court further noted: "Clearly, it is puzzling how a single 25-minute physical examination can so easily displace years of documented pain without further explanation, testing or evidence."

Finally, the court concluded the plaintiff was unable to perform any occupation since she could not maintain any work requiring "continuous periods of intermittent sitting, standing, walking, climbing stairs or keyboarding."

The court was clearly skeptical of an insurer’s decision that overturned nearly eight continuous years of benefit payments for a chronic, degenerative medical condition. Although the case was not entirely clear-cut, the actions taken by Unum following Hart’s rejection of a buyout offer were suspicious and resulted in the court’s determination that there was no reasonable basis for Unum’s findings.

While the court made several important findings, the court’s specific comments about the unreasonableness of an abrupt change in position by the insurer, and the court’s rationale for rejecting the content of the claimed call with the treating doctor are the most important observations made in this opinion.