All disability insurance policies contain provisions requiring that insureds receive regular care from a physician. However, such clauses are usually liberally interpreted. For example in Heller v. Equitable Life Ins. Soc’y, 833 F.2d 1253, 1257 (7th Cir. 1987), the court ruled that such a clause could not be read to require an insured to undergo carpal tunnel surgery as a condition of receiving disability benefits.

In a recent ruling from the 6th U.S. Circuit Court of Appeals, McCandless v. Standard Ins.Co., 2012 U.S.App.LEXIS 26235 (6th Cir. Dec. 20, 2012)(unpublished), the court addressed the topic from a different perspective. The court reversed a lower court ruling that the plaintiff was not eligible to receive benefits due to her failure to seek treatment from a rheumatologist. As will be explained later, the court of appeals found the insurer abused its discretion and that its interpretation of the care of a physician clause in its policy was fraught with problems.

The plaintiff, Sandra McCandless, worked as a manager for Countrywide Home Loans until beginning a medical leave in 2005 on account of a variety of medical conditions including a swelling of the middle layer of the eye known as uveitis, along with ankylosing spondylitis (AS) (an inflammatory arthritis of the joints and spine) and severe depression.

Benefits were initially approved for depression, however, by characterizing the claim as psychiatric, Standard Insurance Co. maintained that benefits were subject to a two-year maximum benefit duration on account of policy provisions relating to psychiatric disorders. Although Standard was informed about all of the plaintiff’s medical conditions, the insurer denied it had overlooked her physical impairments and reaffirmed the 24-month benefit limitation.

McCandless appealed Sandard’s determination. According to the record, she discussed her case with one of Standard’s benefits review specialists who questioned why she was not receiving treatment from a rheumatologist. McCandless explained her reluctance to see a rheumatologist by pointing out that a rheumatologist was likely to prescribe a medication such as Enbrel, which she was unwilling to take due to numerous life-threatening side effects.

Standard had both a neurologist and a rheumatologist review the file – although both physicians concurred with the AS diagnosis, both maintained that a lack of clinical findings precluded a disability finding. Consequently, the appeal was denied. The insurer based its decision on the assertion that the plaintiff’s failure to see a rheumatologist meant she had failed to satisfy the “care of a physician” clause of her policy which required “appropriate specialist care.”

McCandless sued, while Standard counter claimed seeking reimbursement of an overpayment created when the plaintiff was awarded Social Security disability benefits. The court ruled for Standard on both claims. The court of appeals reversed.

The court of appeals quoted from the “care of a physician” provision in the policy, which provides:

“You must be under the ongoing care of a physician in the appropriate specialty as determined by us during the benefit waiting period. No [long-term disability benefits] will be paid for any period of disability when you are not under the ongoing care of a physician in the appropriate specialty as determined by us.”

The court found the insurer’s reliance on that provision “problematic” for several reasons. Although both the neurologist and rheumatologist hired by Standard faulted McCandless for failing to see a rheumatologist, Standard never informed her that she would forfeit her right to receive benefits if she failed to do so.

The record also showed that McCandless’ internist had advised her that there would be little difference between the treatment he prescribed and what she would receive from a rheumatologist other than the medications that McCandless was reluctant to take due to the risky side effects.

The court then turned its focus toward Standard’s structural conflict of interest, which it described as a “red flag that may trigger a somewhat more searching review.” Schwalm v. Guardian Life Ins. Co. of Am. 626 F.3d 299, 312-13 (6th Cir. 2010). Under that standard, the court concluded it could not “say that Standard’s benefit determination was the result of a deliberate and principled decision-making process.”

Instead, the court determined “that the decision to reject McCandless’ claim without having a rheumatologist conduct an independent medical examination was arbitrary and capricious.” Since the diagnosis was well established prior to the inception of the claim and was never questioned by Standard’s doctors, the issue of the degree of disability caused by AS was deemed “one of credibility.”

And under 6th Circuit standards, “where an administrator exercises its discretion to conduct a file review, credibility determinations made without the benefit of a physical examination support a conclusion that the decision was arbitrary.” Helfman v. GE Group Life Assur. Co. 573 F.3d 383, 395-96 (6th Cir. 2009); Calvert v. Firstar Fin., Inc. 409 F.3d 286, 295 (6th Cir. 2005) (“[T]he failure to conduct a physical examination – especially where the right to do so is specifically reserved in the plan – may, in some cases, raise questions about the thoroughness and accuracy of the benefits determination.”).

It is surprising that this decision was not recommended for publication since it offers a unique perspective on the “care of a physician” clause and advances the discussion that has been going on in the 6th Circuit since the issuance of Calvert.

As the court sensibly pointed out, if Standard deemed it so important that McCandless undergo a rheumatologic evaluation, it had the power to compel such an examination. By failing to do so, despite the policy language, the court refused to apply a mechanical interpretation, but sensibly interpreted the clause in the same manner as the 8th Circuit interpreted a comparable provision in Walke v. Group Long Term Disability Insurance. 256 F.3d 835 (8th Cir. 2001), which found the insured met a similar provision where it was shown that additional doctor visits would not “have influenced the progression of [Walke’s] disability.”

Here, too, because no benefit without significant risks was shown, the insurer’s invocation of the care of a physician clause was appropriately overturned.

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