A recent ruling issued by U.S. District Judge Carlton W. Reeves of the Southern District of Mississippi described a history and pattern of bad-faith disability benefit claim denials.
The case of Nichols v. Reliance Standard Life Insurance Co., 2018 WL 3213618, 2018 U.S. Dist. LEXIS 109526 (S.D. Miss., June 20, 2018), involved Juanita Nichols, a 62-year-old inspector in a chicken processing factory where temperatures were maintained at 8 degrees above freezing.
In 2016, Nichols was diagnosed with multiple circulatory system impairments that were exacerbated by exposure to cold. The conditions at work forced her to stop working.
When Nichols subsequently applied for long-term disability benefits, her claim was denied. Although Reliance acknowledged that Nichols’ condition prevented her from working in a cold environment, the insurer’s vocational evaluator defined her “occupation” as “sanitarian,” a position that generally did not require exposure to cold temperatures. Thus, benefits were denied.
Although Nichols protested the occupational classification, Reliance reasserted that exposure to cold was job-specific rather than a duty of the plaintiff’s regular occupation. Hence, the denial was reaffirmed.
Nichols then filed suit under the Employee Retirement Income Security Act. The court applied a deferential standard of review, but nonetheless ruled for Nichols. Although the policy specified that an insured’s “regular occupation” is determined in relation to how the duties are “normally performed in the national economy,” rather than “the unique duties performed for a specific employer or specific locale,” the court found Reliance Standard’s denial was an abuse of discretion.
Although the court agreed that some of Nichols’ duties related to sanitary practices, most of her work duties involved inspecting meat products and packaging and shipping such products.
“Common sense,” the court found, “says that an occupation involving inspection and packaging of meat products would require exposure to refrigeration and low temperatures. This common sense is reflected here.
“The plant where Nichols worked was kept near freezing. It is also reflected in the Dictionary of Occupational Titles, the source Reliance used to define the duties of Nichols’ regular occupation. While no single title covers all three categories of Nichols’ job duties, those that include meat inspection and meat packaging duties appear to require work in refrigerated environments.
“Indeed, the title that best captures Nichols’ meat inspection and packaging duties – with duties like ‘[e]xamin[ing] carcasses to determine condition of ‘meat’ and putting ‘information’ on ‘inspection tag[s],’ ‘[s]tamps’ and ‘date tags’ to prepare ‘meat cuts’ for ‘shipping … and … delivery’ – has cold temperatures built into its name: ‘Cooler Room Worker (Meat Products).'”
The court found that Reliance had no evidence supporting its conclusion that Nichols was “employed as a sanitarian,” with duties identical to those within the “Sanitarian (Any Industry)” title (Dictionary of Occupational Titles 529.137-014). The court explained the cited occupational dictionary title captured only one aspect of Nichols’ job and had no relationship to meat packaging.
Hence, the court concluded: “There is no justification for fitting the square peg of Nichols’ job into the round hole of ‘Sanitarian (Any Industry).’ As many courts have recognized, it is ‘unreasonable’ for a vocational expert to define occupational duties by relying exclusively on a single [d]ictionary [t]itle ‘that does not refer’ to important job duties.”
The court faulted both of Reliance’s vocational reviews and found the insurer’s denial “was unsupported by any evidence, let alone substantial evidence.”
The court went even further, though, by examining Reliance Standard’s litigation history, citing more than 100 opinions critical of the insurer’s behavior in disability cases and concluding from its review that, “Courts often conclude that Reliance’s denials are ‘greatly impacted’ by ‘self-interest,’ making it ‘clear that Reliance put[s] its own financial interest above its fiduciary duty.'”
Many of the cases the court examined were identified as demonstrating the same arbitrary classification of occupations as what the court criticized. The court explained that its criticism was not over Reliance’s use of the Department of Labor’s Dictionary of Occupational Titles, but was focused on “the way Reliance uses the dictionary” and observed that “Reliance has been admonished for ‘reflexively using’ the dictionary while having ‘clearly ignored the actual duties of [a claimant’s] job.'” (Emphasis in original.)
“The court further found that Reliance had failed to take any steps to remedy its behavior. Thus, the court concluded, “In sum, the judicial record establishes an unmitigated pattern of arbitrary and wrongful behavior by Reliance. The insurer indisputably has a history of biased claims administration.”
The court further ruled that benefits should be awarded outright rather than issuing a remand, which it deemed “unwise.” The court also held that a fee award was appropriate.
The court concluded with an admonition: “Many courts have, after recounting Reliance’s abuses, ordered the insurer to pay benefits and attorney’s fees. Apparently these costs have not caused Reliance to change course, as it has spent decades ignoring them with impunity – perhaps treating them as the price of doing business.
“In future cases, courts may be asked to order further relief to curb Reliance’s perceived abuses. That relief can be quite broad.”
This ruling sends a powerful statement – abuse of discretion review is not a rubber stamp. Moreover, just because a benefit plan permits the use of the Dictionary of Occupational Titles does not grant a license to the insurer to select an occupation bearing no resemblance to the occupation the claimant was actually performing. Reeves is absolutely correct – Reliance has been repeatedly criticized for the same misconduct, yet it persists.
Why? And why can’t something be done about it?
More cases like this will eventually open the door to extracontractual remedies. When the breach is so flagrant and repeated so frequently, the only way to make it stop is with a powerful sanction.
This article was initially published in the Chicago Daily Law Bulletin.