A district court in New York recently overturned a disability benefit termination decision by MetLife, citing a number of reasons and highlighting several issues that frequently arise in disability claims. In Solomon v. MetLife, 2009 U.S.Dist.LEXIS 51507 (S.D.N.Y. June 18), Judge Robert W. Sweet from the Southern District of New York, presented a thoughtful analysis worthy of discussion. The plaintiff, a nurse, had worked for Oxford Health Insurance Company as a medical claim case manager until she had to cease working on 1999 due to back pain following a fall along with fibromyalgia. After a rocky course consisting of an initial approval of the claim, followed shortly thereafter by termination and then reinstatement of benefits in 2001, MetLife terminated benefit payments again in 2004 following a file review performed by Amy Hopkins, M.D. Solomon appealed, and submitted additional documentation including a report from an infectious disease specialist who had diagnosed chronic fatigue syndrome in addition to her other medical problems, and Solomon also notified MetLife that she had been approved to receive Social Security disability benefits.

On appeal, MetLife sent the claim to Dr. Joseph Jares (neurology) for review, along with Dr. Elinor Mody (rheumatology). Both doctors were affiliated with Network Medical Review/Elite Physicians; and the court noted that in the year 2004, NMR received over $800,000 from MetLife for performing file reviews, which was 11.57 percent of its gross income for that year. The court also indicated that Jares performed 603 reviews for NMR in 2004, none of which involved direct patient examinations. Not surprisingly, both Jares and Mody disagreed with the treating physicians and reported that Solomon was capable of returning to work. Based on their findings, MetLife upheld the denial of benefits.

Solomon then brought suit under ERISA, claiming an entitlement to ongoing benefits. MetLife counterclaimed, alleging the award of retroactive benefits from the Social Security Administration meant that Solomon had been overpaid nearly $30,000 due to coordination of benefits provisions in the policy allowing MetLife to reduce its disability payments by the amount of Social Security disability benefits being paid.

Although the policy contained language that would accord MetLife discretion, the court was cognizant of its duty, following MetLife v. Glenn, 128 S.Ct. 2343 (2008), to take into consideration the structural conflict of interest created by MetLife’s dual role as claim administrator and the party responsible for paying benefits. The court determined there was “no evidence that MetLife separated its financial interests from the claim determination process.” Indeed, the court pointed out that there were notations in the file as to the reserves set on the claim. The court was also troubled by MetLife’s disregard of the Social Security award after the insurer had encouraged Solomon to apply for benefits, a factor present in Glenn as well. And the court seemed shocked by evidence that the appeals specialist assigned to the case stated “that she had been trained by MetLife to disregard SSA decisions, and that the decision was only relevant if MetLife was paying benefits and could use it for an offset.” Thus, the court determined the conflict was a significant factor.

The court also found MetLife’s decision was unsupported by substantial evidence. The initial decision terminating benefits was based on a report prepared by Dr. Hopkins, who was characterized by MetLife as “independent.” However, discovery revealed “she derived 99% of her income in the years 2002-2004 from paper medical reviews for third parties, 58% to 63%, or over $100,000, of which was derived from reviews for MetLife. To the extent Dr. Hopkins relied on MetLife for over half of her income, she was not “independent” at the time she reviewed Solomon’s file.”

Nor did the court find the opinions of the other reviewing physicians sufficient to constitute substantial evidence. Two of the reviewing doctors based their conclusion on an opinion that fibromyalgia is not generally disabling, a point of view rejected in Hawkins v. First Union Corp. Long-Term Disability Plan, 326 F.3d 914, 919 (7th Cir. 2003) (describing “the fact that the majority of individuals suffering from fibromyalgia can work” as “the weakest possible evidence that [the claimant] can”). The court also rejected MetLife’s position that Solomon’s claim was not supported by “objective” evidence since fibromyalgia cannot be diagnosed by objective evidence, and the court cited other objective evidence including “34 medical updates … [consisting of] clinical examinations, laboratory reports, and various test results.” Hence, the court found plaintiff presented sufficient proof of her claim.

The court also determined that MetLife denied Solomon a full and fair review of her claim by not conducting its review in accordance with the claim regulations promulgated by the U.S. Department of Labor. The court found, “A fair review necessarily requires an opportunity to review and rebut the basis of the denial determination. See Crocco v. Xerox Corp., 137 F.3d 105, 108 (2d Cir. 1998) (affirming district court’s judgment, based on Grossmuller v. Int’l Union, United Auto. Aerospace & Agric. Implement Workers of Am., U.A.W., Local 813, 715 F.2d 853 (3d Cir. 1983), that “full and fair review” was not provided).” However, despite expressing its view that evidence developed during the claim appeal must be shared with the claimant, the court acknowledged that two circuits have ruled to the contrary: Midgett v. Wash. Group Int’l Long Term Disability Term, 561 F. 3d 887, 895 (8th Cir. 2009) and Metzger v. Unum Life Ins. Co. of Am., 476 F.3d 1161, 1166 (10th Cir. 2007). Nonetheless, the court was persuaded not to follow Midgett and Metzger, and ultimately concluded that benefits be reinstated, finding that a remand to the insurer would constitute a “useless formality.”

Turning to the counterclaim, the court found that factual issues precluded summary judgment on MetLife’s request that the court impose a constructive trust over the overpayment created by the Social Security award or to fashion other equitable relief. The court rejected plaintiff’s argument that granting relief on the counterclaim would impose an unlawful lien on plaintiff’s social security benefits in violation of 42 U.S.C. § 407 since the counterclaim asserted an interest in the overpayment rather than the social security benefits. The court did note, though, that MetLife would violate § 407 if it tried to impose a lien on Solomon’s current income if that income is derived solely from Social Security benefits. The court also found disputed issues of fact as to the amount of the overpayment, the basis of MetLife’s calculations, and as to the plaintiff’s equitable defenses of laches and unclean hands.

Although some courts have differed on this issue, there is an element to the objection based on section 407 that the court could have discussed further. In Sereboff v. Mid-Atlantic Med. Servs., Inc., 547 U.S. 356 (2006), the Supreme Court ruled that a health insurer could obtain reimbursement of moneys paid out from a personal injury recovery because its right of reimbursement stated in the policy essentially created a lien upon that money. Based on that lien right, the insurer would not have to strictly trace the monies over which it sought equitable restitution, the only available remedy under ERISA. However, while a lien may be asserted over monies recovered in a personal injury action, section 407 of the Social Security law expressly precludes a creditor from obtaining a lien over Social Security payments.

As to the underlying merits, though, Sweet exposed a practice in disability claim operations that has heretofore been hidden due to restrictions on discovery in ERISA cases based on courts’ insistence that their adjudicative powers in such cases are limited to a review of a so-called “administrative” record. Where the abuse of discretion standard applies, courts have been resistant to allowing discovery, confining the scope of review to the claim file. Here, though, the fruits of discovery are apparent. The physicians relied on by MetLife can hardly be characterized as independent, and there is no reason to believe that the practice of relying on similarly biased reviewing doctors is restricted solely to one insurer. The statistics presented by the court are shocking and show that doctors who merely review files and write reports should not be accorded the same evidentiary credibility as doctors who possess percipient clinical knowledge. The Mississippi Supreme Court could not have put it better when it found:

“It is quite likely that the bench and bar would be scandalized if this Court should approve the receiving in evidence of ex parte, unsworn statements of persons other than doctors, even in Workmen’s Compensation cases.

“While doctors occupy an important role in our scheme of things, they are, after all, merely human, and may not be considered wholly free from the frailties that beset the rest of us. There is nothing, therefore, in the fact that a witness may be a member of the medical profession that reasonably may be said to justify his exemption from the requirements and restriction which would apply to others giving testimony in an adversary proceeding. The admission of the reports constitutes reversible error.” Georgia-Pacific Corp. v. McLaurin, 370 So.2d 1359, 1362 (Miss. 1979).

Hence, efficiency and expediency need to give way to the level of fairness needed to meet the “higher-than-marketplace quality standards” that the Supreme Court in Glenn found were required in ERISA claims in order to achieve accuracy in determining claims for benefits.

This article was initially published in the Chicago Daily Law Bulletin.

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