The plaintiff in this case initially became disabled in 1985 as the result of a work accident when a hydraulic door fell on him and fractured his C3 vertebra. Rehabilitation efforts were unsuccessful; and Sloan began receiving long-term disability benefits in the late 1980s. After 24 months, the definition of disability changed from one in which the insured had to show an inability to perform his ”own” occupation to the claimant’s inability to perform ”any” occupation. At that point, the insurer terminated benefits, but after Sloan appealed, benefits were reinstated with the insurer acknowledging:
”You have made a strong case for Total Disability, which could translate well into a Social Security pursuit. Our definition of Total Disability after 24 months is very similar to the definition used by Social Security. Since we are admitting Mr. Sloan as Totally Disabled from all occupations, he should reapply for Social Security Disability benefits and pursue it to all levels if necessary.”
Benefits continued until 2000, when Hartford, which had taken over the disability insurance coverage from Confederation Life, terminated benefit payments. A presuit appeal was denied in 2001. Thereafter, Sloan attempted to work as a courtesy driver from August 2001 until March 2002, but he was unable to continue at that job. Sloan then filed for Social Security disability benefits, which had previously been denied; and he was finally successful in securing an award of benefits in 2003 following a hearing before an administrative law judge at which additional evidence was presented that validated Sloan’s complaints of pain and deemed him credible. The ALJ placed great weight on the report of the plaintiff’s treating physician and found Sloan’s testimony at the hearing ”credible and persuasive.” Although the ALJ deemed Sloan disabled as of the date of his injury in 1987, he was unable to reopen prior Social Security applications and benefits were only retroactive to one year prior to the date of Sloan’s 2002 application for benefits.
After receiving the social security award, Sloan reopened his case against Hartford. The district court applied a de novo standard of review, and finding good cause to admit the social security determination and the medical reports on which it was based, the court ruled in Sloan’s favor, finding that because the evidence proved he was unable to work on a full-time basis, or even on a part-time basis, he was entitled to benefits due. The 8th U.S. Circuit Court of Appeals affirmed. Sloan v. Hartford Life and Accident Ins.Co., 2007 U.S.App.LEXIS 1884 (Jan. 29.)
The first issue the court discussed was the decision to admit the Social Security decision. The court explained the key to whether there exists good cause for admission of evidence not presented during the claim proceeding is ”whether the claimant had an opportunity to present the additional evidence during the administrative proceedings.” Here, there was no opportunity because the Social Security decision was not issued until after the claim appeal was concluded. The court added:
”A social security disability determination is generally admissible evidence to support an ERISA claim for long-term disability benefits. See Riedl v. Gen. Am. Life Ins. Co., 248 F.3d 753, 759 n.4 (8th Cir. 2001). In the absence of Sloan’s opportunity to present this relevant evidence during the administrative proceedings, we are hard-pressed to conclude the district court abused its discretion in considering it, especially when Hartford has not referred us to anything in particular about this case, which would make consideration of relevant evidence an abuse of discretion.
”In addition, because the parties agreed to forego a bench trial in favor of proceeding on the briefs and a stipulated fact record, we understand why the district court would consider the ALJ’s view of Sloan’s credibility to be highly probative, because the district court did not have its own opportunity to evaluate his credibility in a full bench trial.”
As to the district court’s ultimate finding that Sloan qualified for long-term disability benefits, application of the clearly erroneous standard of review from a bench decision revealed ”enough evidence to support the district court’s findings.”
Finally, the court rejected Hartford’s argument that it could offset Social Security benefits going back to 1987. Because Sloan did not qualify for disability payments any earlier than January 2001, Hartford could not offset benefits for any earlier dates.
Although the plaintiff was successful in this case, there is lurking in this ruling some very disturbing elements. The admissibility of the Social Security ruling and record evidence should not have been dependent on the standard of review. One has to ask whether it is more important for a court to be assured that a fair decision has been made on the merits or for a court to slavishly adhere to a ridiculous rule that limits the scope of the evidence reviewed by the court?
Once again, by misapplying administrative law, the federal courts have introduced confusion into the litigation of ERISA claims. Surprisingly, few courts have acknowledged the inappropriateness of an administrative law paradigm in ERISA claims. Since courts generally disallow discovery or an evidentiary hearing in resolving such cases, the inaptness of an administrative law framework is clear. One need only contrast ERISA cases to administrative cases such as Social Security disability disputes to see the protections afforded by the opportunity to present evidence and have the evidence and claimant’s credibility assessed by an impartial adjudicator. Moreover, Social Security disability cases preserve the claimant’s right to cross-examination adverse witnesses.
In ERISA cases, insurers can obtain medical reports from dubious sources (See, e.g., Gunn v. Reliance Standard Life Insur. Co., 407 F.Supp.2d 1162 (C.D.Cal. 2006) (doctor regularly retained by insurer characterized as ”man with a mission” – to deny claims) who are not subject to cross-examination and whose opinions are regularly deferred to under a deferential standard of review. Moreover, one can hardly deem insurers as impartial as Social Security administrative law judges. The courts need to seriously reexamine the framework they have created in ERISA cases and the basis for creating an administrative law framework without any corresponding due process protections.
This article was initially published in the Chicago Daily Law Bulletin.