A recent U.S. District Court decision sheds light on what transpires when benefit claims are remanded by courts for reconsideration by the insurer that initially denied benefits. In Kelly v. Reliance Standard Life Ins. Co., 2011 U.S.Dist.LEXIS 147133 (D.N.J. Dec. 22, 2011), the court was called upon to reconsider a case it had remanded after it found benefits were improperly denied.
The plaintiff, Thomas Kelly, who worked as a management employee of Penn Mutual Insurance Co., applied for disability benefits after suffering a spinal cord injury in a 2005 car accident. Reliance Standard, which underwrote Penn Mutual’s group long-term disability program for its employees, denied the ensuing long-term disability benefit claim on vocational grounds. When the matter was initially before the court, Reliance was found to have based its decision on an incorrect job description so the court remanded the case to Reliance to redetermine the claim utilizing the correct job description.
However, on remand, Reliance denied the claim again and the matter ended up back in court. Although the court acknowledged it was obligated to apply the arbitrary and capricious standard of review, it noted that despite the deference due Reliance’s decision, the court remarked that its “assessment involves evaluating ‘the quality and quantity of the medical evidence and the opinions on both sides of the issues. Otherwise, courts would be rendered to nothing more than rubber stamps.'” *12 (citing Glenn v. MetLife, 461 F.3d 660, 674 (6th Cir. 2006), aff’d by Metropolitan Life Ins. Co. v. Glenn. 554 U.S. 105 (2008)).
The court also took Reliance’s inherent conflict of interest as both claim payer and claim administrator into consideration. Applying those standards, the court found three problems with Reliance’s decision: “1) an inappropriately selective evaluation of the evidence, 2) the rejection of self-reported and subjective evidence while relying on a claimed lack of objective evidence and 3) an absence of any substantive evaluation of material job duties and the claimant’s ability to perform them.”
The court relied heavily on Schwarzwaelder v. Merrill Lynch & Co., Inc., 606 F. Supp. 2d 546 (W.D.Pa. March 9, 2009), which was critical of an insurer’s over-reliance on file-reviewing consultants in place of firsthand clinical assessments, particularly since the policy gave the insurer the right to demand the claimant undergo an examination. The court also cited Kinser v. Plans Admin. Comm. of Citigroup, Inc., 488 F. Supp. 2d 1369, 1382-83 (M.D. Ga. 2007), which concluded it was unreasonable for the plan administrator to ignore the treating physician’s “clearly stated and supported opinion” and rely instead on “a cold record file-review by a non-examining” consultant. Applying those rulings as guidance, the court found that Reliance’s consultants simply rejected the treating doctors’ findings without explanation and their reports selectively ignored information in the treating doctors’ notes that supported the claimant. That court was particularly disapproving of one of Reliance’s reviewers, finding his report was “at best, speculation” and lacked any medical basis for its dismissal of the treating doctor’s findings. Compounding the error, the court was troubled by the insurer’s blind acceptance on its consultant’s report while giving no “independent weight” to the treating doctor’s findings.
The court also found unreasonable Reliance’s blanket rejection of Kelly’s pain reports as “self-reported” and “subjective.” The court said that the policy did not limit proof to “objective evidence”; and the insurer’s “decision to accept the conclusions of one physician’s paper review and to discount Kelly’s account of his pain which is supported by the observations of the treating physician and physical therapist, further demonstrates that its exercise of discretion in deciding Kelly’s claim was arbitrary and capricious.”
Finally, the court criticized Reliance for conducting a deficient vocational assessment, since its vocational specialist failed to “determine[ ] which duties were material duties of Kelly’s job, which duties could be delegated, what degree of physical exertion was required to complete the material duties and whether Kelly could, during the Elimination Period, complete those tasks.” Thus, the court again found that Reliance acted arbitrarily and awarded benefits.
Unfortunately, the tactics exposed by the court in Kelly are far too common. For example, in Diaz v. Prudential Ins.Co., 499 F.3d 640 (7th Cir. 2007), the court rejected an insurer’s denial of benefits based on an assertion that pain complaints were “self-reported” and that objective evidence was required. There, too, the court noted that the policy did not impose the onerous requirements insisted upon by the insurer and found the plaintiff’s pain complaints were consistent with the clinical findings.
But it should not have taken two separate proceedings for the court to have finally issued a substantive remedy. Courts hearing benefits disputes under Employee Retirement Income Security Act (ERISA), unlike Social Security disability claims, lack statutory authorization to permit remands. The judicial review provision of the Social Security Act, 42 U.S.C. Section 405(g), explicitly authorizes remands to administrative law judges employed by the Social Security Administration. Nowhere in ERISA is there any comparable provision. While courts may be loath to determine whether someone is disabled from reading a cold record, ERISA grants claimants the right to bring a civil action which, in accordance with Rule 43(a) of the Federal Rules of Civil Procedure, entitles them to a trial with testimony offered in open court subject to the Federal Rules of Evidence.
In addition, since the courts of appeals are evenly split on whether remands are final orders subject to appellate review, remands are incompatible with Article 3 of the U.S. Constitution, which requires the issuance of “specific relief through a decree of a conclusive character.” Preiser v. Newkirk. 422 U.S. 395, 401-402 (1975). Therefore, there needs to be more attention paid to how ERISA cases can be resolved with finality since “allowing [a] case to oscillate between the courts and the administrative process prolongs a relatively small matter that, in the interest of both parties, should be quickly decided.” Vega v. Nat’l Life Ins. Servs., Inc. 188 F.3d 287, 302 n. 13 (5th Cir. 1999).
I represented the plaintiff in the Diaz case cited in this article.