Harper v. Reliance Standard Life Ins.Co.

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Harper v. Reliance Standard Life Ins.Co., 2008 U.S.Dist.LEXIS 36788 (N.D.Ill. May 8, 2008)(Issue: Administrative Appeal). This is a case that we litigated. After finding the insurer utilized the wrong definition of disability and that it impermissibly sought examinations after the time for adjudicating an appeal had already expired, the court nonetheless remanded the case to Reliance Standard without any direction or guidelines. A motion for reconsideration or clarification is pending and has already produced a provisional ruling that on remand the insurer is limited to an evaluation of the medical record currently in existence. The plaintiff, who worked as a medical surgical registered nurse, suffered from degenerative arthritis in her knees, shoulders, back and hips that was worsening over time. Although she struggled to keep working despite her medical condition, a leg injury resulting from an accident finally forced the plaintiff to cease working. Harper applied for disability benefits, and her treating physician unequivocally supported her inability to perform the duties of her strenuous job. Despite the chronic impairments, the nurse who initially reviewed the claim only focused on the injury and recommended the claim be denied because she reported that the normal recovery from such injuries would be from two to six weeks. Thus, the insurer concluded that the records did not support impairment through and beyond the policy’s 180 day elimination period.

The plaintiff appealed and submitted additional evidence including a co-worker’s statement as to the difficulties the plaintiff was having on the job even before her injury. Reliance then had the file reviewed by Dr. Anthony Margherita, who also focused on the injury rather than on the underlying impairments. Moreover, Dr. Margherita’s assessment described Harper as being capable of performing work "in a sedentary or administrative capacity." The doctor also suggested a formal functional capacity evaluation. It was not until more than 90 days elapsed since the submission of Harper’s claim appeal, however, that an FCE was requested. Harper refused to attend the FCE, though, asserting that it was unlawful and unreasonable to request the examination more than 90 days after the claim appeal; and the plaintiff also objected to the reliability of such testing. Reliance then requested that Harper be examined by a physician, but the plaintiff again refused, asserting the claim was "deemed denied" due to the passage of more than 90 days since the submission of the claim appeal. Two months later, Reliance denied the appeal, asserting plaintiff’s refusal to attend the examinations. Plaintiff filed suit three days later. Despite policy language giving Reliance discretionary authority to determine benefit eligibility and to interpret the plan langue, which triggered an arbitrary and capricious standard of review, the court found against the insurer. The court accepted both of the primary arguments advanced by the plaintiff: First, that the insurer assessed whether Harper could perform a sedentary occupation rather than her more strenuous medical-surgical nurse position. Second, that Reliance’s decision was procedurally deficient– the court found that Reliance had no basis for demanding examinations after the appeal time had run out. As to the first issue, the court criticized Reliance for focusing on the Dictionary of Occupational Titles rather than the job duties performed. Regardless, the court held:

By stating that Harper "should be at least capable of working in a sedentary or administrative capacity," Dr. Margherita failed to address the reality of Harper's "own occupation;" her job was neither sedentary nor administrative. Reliance then incorrectly based its denial of Harper's appeal on Dr. Margherita's assessment and the wrong DOT job description that did not accurately describe Harper's job. But even that DOT description does not use terms such as "sedentary" or "administrative." (AR 196-97.) The DOT describes the physical demands of the "Nurse, General Duty" position as requiring "medium" strength. (AR 197.) Even viewing all inferences in favor of Reliance, Reliance's review and denials did not consider Harper's actual job requirements, and, accordingly, Reliance did not provide a reasoned explanation for the denial of her claim. *23-*24.

The insurer was also sharply criticized for violating the ERISA claim regulations which allow 45 days to decide a claim with a permissible exception allowing for one 45 day extension. 29 C.F.R. § 2560.503-1(i)(3)(i). The court also noted that 29 C.F.R. § 2560.503-1(i)(4) starts the clock when the appeal is filed, "without regard to whether all the information necessary to make a benefit determination on review accompanies the filing." Despite application of the doctrine of "substantial compliance" in the Seventh Circuit, the court relied heavily on Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 631 (10th Cir. 2003), as the basis for its conclusion that Reliance’s behavior did not fall within the range of "substantial" compliance. Just as in this case, in Gilbertson, the insurer requested an examination well after the deadline for decided the appeal; and the Tenth Circuit determined the request was impermissible. The court also relied on Sidou v. UnumProvident Corp., 245 F. Supp. 2d 207 (D. Me. 2003), which held:

Although the rules of administrative claim review are sufficiently loose to permit supplementation of the record during the course of a review, it is simply unreasonable to request that a claimant submit to medical examination after the applicable deadline for ruling on her appeal has expired when the sole reason for the independent medical examination can only be to supplement a final decision that has already been made.

245 F. Supp. 2d at 216 (emphasis in original). In addition, the court cited Tomassi v. Prudential Ins. Co. of Am., 2007 WL 1772117 (N.D. Ill. June 19, 2007), where the court held that the claimant had fulfilled his duty to exhaust his administrative remedies by filing his lawsuit 45 days after the initial appeal, where the administrator failed to notify the claimant that it would need additional time. The court rejected the administrator's argument that the clock restarted when the claimant submitted updated medical records that were not available when he filed the appeal. The rationale was that allowing the clock to be restarted "would allow insurers to extend the time for decision endlessly and discourage claimants from submitting updated information." Id. at *4.

The court thus concluded that while it is questionable whether the insurer even has a right to request an examination during the appeal, there is no right at all to make such a request after the time for deciding the appeal had expired. Notwithstanding the foregoing, though, the court decided that the appropriate remedy was a remand. The court cited Hackett v. Xerox Corp. Long-Term Disability Income Plan, 315 F.3d 771 (7th Cir. 2003) which found:

In a case where the plan administrator did not afford adequate procedures in its initial denial of benefits, the appropriate remedy respecting the status quo and correcting for the defective procedures is to provide the claimant with the procedures that she sought in the first place. . . .

315 F.3d at 776 (internal citations omitted).