Many disability insurance policies evaluate an insured’s earning capacity to determine entitlement to benefits. For an insurance company to be able to assess earning capacity, the insured’s education and work experience are critical factors.

A recent ruling from the federal court in Chicago, Contreras v. United of Omaha Life Insurance Co., 2017 WL 1493701 (N.D. Ill., April 25), overturned a disability benefit denial when it found United of Omaha failed to properly address Ramona Contreras’ potential earning capacity.

After reviewing the evidence, the court entered findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52.

Contreras sought disability benefits after she could no longer perform her factory job due to arthritis and nerve damage in her back, shoulders and arms. Although Contreras’ ensuing claim for benefits was initially approved, after an initial benefit period, the payments were terminated after the insurance company obtained a transferable skills analysis showing that she could perform a “gainful occupation.”

That term was defined in the policy to mean “an occupation, for which you are reasonably fitted by training, education or experience, [and] is or can be expected to provide you with current earnings at least equal to 85 percent of basic monthly earnings within 12 months of your return to work.”

The defendant’s vocational consultant reviewed Contreras’ educational background and work history and found her capable of working as an “order clerk,” which was deemed to be both a job for which she possessed transferable skills and that purportedly met the 85 percent wage threshold.

The plaintiff obtained her own vocational assessment, though. In contrast to United’s evaluation, the plaintiff’s vocational rehabilitation consultant determined that Contreras lacked relevant transferable skills and that her physical work limitations would either preclude employment or necessitate her starting in a position that would pay her an entry-level wage. For the “order clerk” position, research revealed the entry-level wage was approximately $600 per month less than the wage requirement under the policy.

The position was also listed in the Dictionary of Occupational Titles as having a specific vocational preparation level of 4; however, none of the jobs Contreras held throughout her work history required an vocational preparation level above 3. “Specific Vocational Preparation” is a term used in Appendix C to the U.S. Labor Department’s Dictionary of Occupational Titles (4th ed. 1991) and is defined as “the amount of lapsed time required by a typical worker to learn the techniques, acquire the information and develop the facility needed for average performance in a specific job-worker situation.”

By definition, a job with a performance level of 3 requires one to three months to learn the job, while an performance level of 4 requires three to six months to learn. Typically, the higher the performance level, the greater the required education or experiential background.

Although the court determined that it was a close question as to whether Contreras was reasonably fitted to work as an order clerk, the court decided it did not have to explicitly address that specific issue.

The reason being the record failed to support a finding that Contreras could be expected to meet the policy’s wage requirement within 12 months of commencing work as an order clerk.

Even though the median monthly wage for an order clerk met the earnings requirement, the defendant’s vocational consultant did not offer any opinion as to when Contreras would receive such earnings, and there was no support for a conclusion that she would be paid that wage within one year of starting work.

Based on the opinion of the plaintiff’s vocational consultant as to the entry-level wage for the job in question, the court deemed it “highly unlikely [ ] that Contreras would receive a cumulative 23 percent raise during her first year on the job to bring her from the $2,271 starting monthly salary to a $2,808.17 monthly salary [the necessary wage requirement].”

The court added that the plaintiff’s vocational history reinforced its conclusion since Contreras’ prior work was at both a lower skill level and paid significantly lower wages.

“Even if the cashier jobs Contreras held several years ago prepared her to perform the duties of an order clerk,” the court ruled, “they would be highly unlikely to motivate an employer to pay her at least $2,808.17 per month – approximately double her earnings as a cashier – within her first year working as an order clerk.”

The court distinguished a recent appeals court decision, Geiger v. Aetna Life Insurance Co., 845 F.3d 357 (7th Cir. 2017), that addressed a similar issue by pointing out that in Geiger, there was no time limitation in the policy as to when the insured needed to achieve the target wage. This policy, in contrast, required the requisite earnings needed to be achieved within 12 months.

Thus, because there was no evidence that Contreras could achieve such earnings within 12 months of starting as an order clerk, United of Omaha lacked any evidence supporting its conclusion.

The policy requirement of needing to reach the target earnings within 12 months made the difference in this case. The court obviously grasped the problem with the disability insurance company’s conclusion that someone with a work background as unskilled as Contreras could achieve the necessary earnings.

The court recounted that Contreras historically earned wages of $8 an hour and would thus be unlikely to be hired for a job requiring a higher level of vocational preparation than any job she had previously held. Without any additional education or training, it was improbable that Contreras could earn double the wage she had previously been paid.

This ruling illustrates the importance of giving the vocational issues in a disability benefit case just as much consideration as the medical evidence. In cases such as this, where clear-cut medical evidence of total disability is lacking, an analysis of vocational issues dictates the correct outcome.

I represented the plaintiff in the Geiger v. Aetna case.

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

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