Have you ever had a benefit claim denied? If so, was the explanation thorough and well reasoned or did it state conclusions without explanation? A case from the 7th Circuit decided July 23, 2009 (Love v. National City Corporation Welfare Benefits Plan, No. 07 C 50048) reminds us that ERISA requires a claim denial to explain why the claim is denied.
Nancy Love worked for National City Corporation for 20 years before experiencing medical problems. She was diagnosed with multiple sclerosis and obtained short term disability and then long term disability benefits.
The plan had a two part definition of disability that is fairly typical. For the first two years, you only have to be disabled from performing your own job or another job with the company having equivalent duties. After two years, the plan required that the disability:
makes you unable to perform the duties of any other occupation for which you are, or could become, qualified by education, training or experience.
Ms. Love survived the application of this more stringent second prong of the disability definition, but not for long. After she received the disability benefit for three years, a doctor working for the claims administrator, Liberty Mutual, determined that she did not satisfy the plan's definition of disability. The first denial letter concluded there was no objective evidence showing that Ms. Love had a functional limitation. However, the Court noted that there was other evidence in the file, but that the denial letter failed to explain why that evidence was not probative.
Ms. Love filed an administrative appeal with the claims appeal committee. She also submitted additional evidence from three different doctors each asserting she had functional limitations. The claims appeal committee referred the claim and the additional evidence to a different doctor, whose conclusion agreed with the first doctor. The second denial again failed to explain why the appeal was denied and why the additional medical evidence submitted by Ms. Love was not convincing.
Ms. Love went to court and lost on summary judgment. She appealed to the 7th Circuit and received a better outcome, but still did not get complete satisfaction.
Ms. Love tried to convince the Court that the recent Supreme Court case of Metropolitan Life Insurance Co. v. Glenn, 128 S. Ct. 2343 (2008) changed the standard of review applicable to denied benefit claims. The Court explained that Glenn merely provided that when the identity of the claim payer and the claim decider is the same then that is a factor to consider. But the Court went on to indicate that:
We continue to apply an arbitrary-and-capricious standard to denial-of-benefits claims after Glenn.
Ms. Love also tried to use her approved Social Security Disability claim as leverage in her claim for her employer's long term disability benefits. The Court noted that the definition of disability in the plan was different from the definition of disability under Social Security. Therefore, Social Security Disability was not dispositive relative to her claim under the plan.
The Court did, however, rule that both claim denials failed to meet the ERISA standard under the statute and Department of Labor regulations to provide specific reasons for the denial. Therefore, the plan's decision to deny benefits was arbitrary.
Ms. Love still did not get full satisfaction. The Court determined that the evidence showed there was a possibility that the denial could be supported. Therefore, the Court remanded the case to the claims administrator for a more complete investigation of whether Ms. Love meets the plan definition of disability.
The moral of this tale is that a little exposition can save some time and effort in the long run - and result in compliance with ERISA.