Sixth Circuit Reverses Denial of LTD Based on File Reviews That Questioned Claimant’s Credibility and Mental Health

Last week, the Sixth Circuit reversed the denial of the first year of LTD benefits to a Central Ohio employee when the denial was based entirely on reviews of the medical file which questioned the lack of an objective cause for the claimant’s back pain and the subjective evaluation of his mental impairments.  Javery v. Lucent Technologies Inc. Long Term Disability Plan for Management or LBA Employees, No. 12-3834 (6^th Cir. 2-3-14).  The LTD Plan utilized two standards for benefits depending on whether the claim encompassed the first year (a lesser standard) or thereafter.  The employee’s LTD application, which was filed in November 2005, involved a long and tortuous history through the internal review process and two appeals to federal court.  One of his attorneys neglected to include the claim in his 2007 bankruptcy petition, but the federal courts declined to apply the judicial estoppel doctrine to bar his ERISA appeal.  The LTD Plan Administrator relied on file reviews by a staff nurse, staff physician and independent physicians to deny the employee’s application under the lesser first-year standard.  Ultimately, the Sixth Circuit concluded that the rationale for Plan’s decision lacked sufficient weight to counter the overwhelming medical evidence provided by the employee showing that he was unable to work due to a combination of his mental and physical impairments. File reviews are rarely appropriate or sufficient when the Plan is evaluating mental health or questions the claimant’s credibility.

According to the Court’s opinion, the plaintiff began working for the employer in 1998 as a software engineer and his job required him to sit for 8-10 hours/day and about 70 hours/week. By 2005, his physician advised him to stop working because of significant back pain for which he was taking medication.  He received STD and then applied for LTD under his employer’s plan, which provided that for the first year he would be considered to be disabled if was unable (for other than an injury covered by workers compensation) to engage “in his  . . .  occupation or employment at the Company, for which the eligible employee is qualified, based on training, education or experience.” (emphasis added).  After his initial claim was denied, he submitted medical documentation concerning his degenerative diseased discs and how the medication disoriented him and impaired his cognitive abilities.  While his physician believed returning to work would be in his best interests, he could not sit for prolonged periods.   An IME revealed no neurological basis for the pain, but suspected psychogenic factors.  

The Plan Administrator’s nurse manager reviewed the file and denied the appeal because that the plaintiff should be able to perform a sedentary occupation. The Plan Administrator explained that his claim was denied because his back pain did not make him unable “to work throughout your entire Benefit Waiting Period.”   At this point, the plaintiff retained an attorney and appealed again.  Additional medical evidence was submitted, as well as an explanation that the employer refused to provide certain accommodations (such as reduced working hours, etc.).  A physician employed by the Plan Administrator reviewed the file and saw no clinical basis to support his claimed back pain.  The Plan Administrator again denied the appeal and noted, among other things, that no mental status tests had been administered to document a cognitive impairment.  Again, the plaintiff appealed and submitted detailed psychological records.  After his final appeal was denied in January 2007, the plaintiff filed for bankruptcy 10 months later and in January 2009 sought review under ERISA of his LTD application in federal court.

 

The district court reviewed the plaintiff’s file de novo and in March 2011 remanded it back to the Plan Administrator for reconsideration of his mental impairment.  The plaintiff again submitted additional medical records concerning his sleep apnea and hospitalizations for mental illness, MRIs, CT scans, and a determination by the Social Security Administration that he was totally disabled from working at any job.  The Plan Administrator hired an independent neurologist and psychiatrist to review his files, but, although it had the right, did not request a medical evaluation.  Again, the Plan Administrator denied the plaintiff’s claim, and he re-activated the federal action for another appeal under ERISA.  This time, the court granted summary judgment to the Plan Administrator and the plaintiff appealed.

 

On appeal, the Plan argued that the plaintiff should be precluded from pursuing the appeal because his bankruptcy petition did not list the claim on his schedule of assets. The plaintiff showed that the mistake had been inadvertent because he had communicated the claim to his bankruptcy attorney.  The trial court refused to apply the judicial estoppel doctrine, which precludes a party from taking contradictory positions in different litigation.  Although the Sixth Circuit noted there was some authority that judicial estoppels should be reviewed on an abuse of discretion basis, it applied a de novo review. “We have made clear that “judicial estoppel does not apply where the prior inconsistent position occurred because of ‘mistake or inadvertence.’”  Moreover, in this case, the plaintiff lacked a motive to conceal the LTD claim from creditors: “[U]nder Ohio laws, proceeds from a disability insurance policy are completely exempt from a debtor’s estate (i.e., set aside for the benefit of the debtor) to the extent that they are necessary for the support of the debtor and his family.” 

The trial and appellate courts applied a de novo standard of review of the plaintiff’s LTD claim in this case because, as the Plan’s attorneys conceded at oral argument, the Administrator’s decision was not entitled to deference.  The Court concluded that the plaintiff had proved that he was unable to work as a software engineer for the first year of his LTD application based on a review of his job and the medical evidence.

 

Both parties agree that Plaintiff’s job as a software engineer was technically and intellectually demanding and required sitting for prolonged periods of time.

 . . . The medical evidence in the administrative record indicates that a combination of extreme pain, and mental illness, and the effects of pain medication made it exceedingly difficult for Plaintiff to concentrate, handle stress, stay awake during the day, remember things, relate to co-workers, make decisions, or sit for any extended period of time.

Three treating physicians concluded he was unable to work. In addition,  

[o]f the two psychiatrists who evaluated Plaintiff in 2006, one determined that he was seriously mentally ill and incapable of working, and the other found substantial impairment in Plaintiff’s ability to sustain the stress and pressure of day-to-day work. Their diagnoses were confirmed shortly thereafter by Dr. Borders, a psychiatrist at Shepherd Hill behavioral health facility, when Plaintiff was hospitalized for twelve days for mental illness in an acute in-patient unit in September 2006.

The Court found that the opinions of the Plan’s medical experts were insufficient to counter the plaintiff’s medical file.  While none of them found an objective basis for the plaintiff’s back pain, one of them suspected a mental cause.  Another physician complained about the lack of objective evidence and then overlooked such evidence in the file.  For example, he complained about the lack of psychological tests and then overlooked such a test that had diagnosed severe depression.  He also noted that non-mental health providers had not provided information about his mental health when, in fact, they had.  Finally, he had ignored the requirements of the plaintiff’s software engineer position.

First, file reviews are questionable as a basis for identifying whether an individual is disabled by mental illness. See Smith v. Bayer Corp. Long Term Disability Plan, 275 F. App’x 495, 505–09 (6th Cir. 2008) (noting that “[c]ourts discount the opinions of psychiatrists who have never seen the patient for obvious reasons”).  Second, reliance on a file review is inappropriate where a claims administrator disputes the credibility of a claimant’s complaints.

 . . . .

Plaintiff submitted medical evidence from numerous doctors and therapists who directly treated or examined him and concluded that he was unable to work due to a combination of his physical and mental conditions. He visited over a dozen medical experts. Those doctors who knew him best concluded, unequivocally, that he was unable to work at the relevant time.  Defendant offers little to contradict this evidence. Accordingly, Plaintiff is entitled to disability benefits for the relevant period.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Supreme Court Upholds Less Deferential Standard of ERISA Review Against TPA Insurance Company.

On June 19, 2008, the Supreme Court affirmed the Sixth Circuit Court of Appeals in Metropolitan Life Ins. Co. v. Glenn, No.. 06-923. In that case, Sears purchased long-term disability insurance from MetLife and appointed MetLife as the Third Party Administrator of the LTD claims of Sears’ employees. Sears’ LTD Plan also gave MetLife discretionary authority to determine employees’ eligibility for benefits. When the plaintiff applied for LTD, MetLife initially granted her application for 24 months of benefits. However, after encouraging her to apply for SSI benefits (which she obtained), it then determined that she was ineligible for extended benefits in that one of the medial reports submitted indicated that she was capable of performing sedentary work.

The Supreme Court had previously noted in Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101, the proper judicial standard of review for ERISA benefit claims under §1132(a)(1)(B). First, courts should be "guided by principles of trust law," analogizing a plan administrator to a trustee and considering a benefit determination a fiduciary act. Next, the principles of trust law require that de novo review be utilized unless the terms of a benefits plan provide otherwise. Finally, if the terms of the benefit plan grant the administrator or fiduciary discretionary to determine the participant’s eligibility for benefits, the court should utilize a deferential standard of review as appropriate. However, if the administrator or fiduciary with such discretion "is operating under a conflict of interest, that conflict must be weighed as a 'facto[r] in determining whether there is an abuse of discretion.’”

In Glenn, the Court determined that this analysis from Firestone applied equally to an insurance company acting as both the insurer and the TPA and not just an employer who acts as both the fiduciary evaluating the claims and the employer which funds the benefits. That "[e]very dollar provided in benefits is a dollar spent by ... the employer; and every dollar saved ... is a dollar in [the employer's] pocket" is equally applicable to this situation. Nonetheless, the Court reiterated that the TPA was still entitled to a deferential standard of review pursuant to the terms of the LTD plan, but that – in light of the conflict of interest inherent in an insurance company deciding for itself whether to award benefits out of its own accounts -- the reviewing court was permitted to consider a number of factors, including ”(1) the conflict of interest; (2) MetLife's failure to reconcile its own conclusion that Glenn could work in other jobs with the Social Security Administration's conclusion that she could not; (3) MetLife's focus upon one treating physician report suggesting that Glenn could work in other jobs at the expense of other, more detailed treating physician reports indicating that she could not; (4) MetLife's failure to provide all of the treating physician reports to its own hired experts; and (5) MetLife's failure to take account of evidence indicating that stress aggravated Glenn's condition.”

Insomniacs can read the full decision at http://www.supremecourtus.gov/opinions/07pdf/06-923.pdf.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.