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Federal judge orders Sun Life to re-evaluate long-term disability benefit denial

When Vickie Costello left work on May 19, 2006, after a stressful encounter with one of her co-workers, she had no idea that her problems were going to get even worse. In order to return to her job at Logan Aluminum, Inc., her employer required her to sign a “last chance agreement.” Already suffering from debilitating pain for which she had been under a physician’s care since 1999, Ms. Costello felt that this event marked the time to claim disability through her employer’s long-term disability plan with Sun Life Assurance Company.

Sun Life’s policy stated that if Costello became disabled and could not perform the “material and substantial duties of her occupation” that she would be entitled to  disability benefits for 24 months. At the end of 24 months, she would have to prove that she was “unable to perform the material and substantial duties of ‘any gainful occupation” in order to remain eligible for disability benefits.

She filed her claim with Sun Life for long-term disability on November 17, 2006. She also applied to Social Security for disability benefits. Social Security approved her application for disability.

In support of her application to Sun Life, she presented a written statement from a Dr. Simms, the doctor who had been treating her since 1999. In his statement, her doctor indicated that he had been treating her for rheumatoid arthritis, fibromyalgia, and chronic fatigue. Dr. Simms stated that Costello should not be required to grasp or manipulate objects with her hands, and that she could only be expected to engage in limited activities requiring bending, squatting, climbing, twisting, pushing, pulling, balancing, kneeling, crawling or lifting of weights of less than 10 lbs.

Sun Life denied Costello’s disability claim on January 16, 2007. The reason given? A Sun Life nurse determined that Dr. Simms had not adequately supported his claim that Costello was no longer able to work.

Costello appealed the denial, supplying notes from her December 14, 2006 appointment with Dr. Simms. She also supplied a letter from Simm’s qualified physician’s assistant, dated February 9, 2007, which stated that Costello did indeed have “severe rheumatoid arthritis” and that she “would be unable to return to any type employment.” She also presented a letter from another physician, Dr. Cudapagh, who was treating her for fibromyalgia and chronic fatigue. This letter, dated April 19, 2007, stated that the “demands of working full time” exceeded “her functional and cognitive abilities.”

In response, Sun Life hired a board certified rheumatologist, Dr. Ash, to review the documentation that Costello had provided. Dr. Ash concluded from the documents, that Costello didn’t have rheumatoid arthritis severe enough to prevent her working and that fibromyalgia would not be aggravated by her routine work duties, and that chronic fatigue was medical fiction. Based on Dr. Ash’s findings, Sun Life denied Costello’s appeal on June 1, 2007.

Ms. Costello had only one option remaining. File a lawsuit. In the suit, her attorneys argued that Sun Life had denied her claim for long-term disability benefits arbitrarily and capriciously.

  1. Sun Life had discretionary authority to both interpret and apply the plan, but failed to offer a reasonable explanation, based on the evidence for their denial of Costello’s claim.
  2. Sun Life had failed to recognize the acceptance of Costello’s disability claim with Social Security.
  3. Sun Life had used the opinions of two professionals who had never examined Costello, but rather accepted their evaluations of the information submitted by her physicians.

Here is how the court ruled

The courts found that Sun Life had acted in an arbitrary and capricious manner because:

  1. Sun Life’s position as both the administrator of the disability insurance plan and decision maker as to whether Costello qualified for disability insurance presented a conflict of interest.
  2. While Sun Life’s argument that the rules for acceptance to receive coverage under Social Security were different than the rules established for acceptance under their policy was recognized, the court felt that the discrepancy between the decisions was “far from meaningless” especially because Costello was required to apply for Social Security disability at the same time as she made her claim with Sun Life.
  3. Sun Life’s failure to require an independent examination into Costello’s condition suggested that Sun Life’s denial was arbitrary and capricious. While in many cases, a review of the claimant’s medical records might have been acceptable, because Dr. Ash discredited statements relating to Costello’s pain without examining her, the court found Sun Life’s decision was not reasonable.

The court found Sun Life’s explanation for why they denied Costello’s claim unreasonable. The court concluded that Sun Life’s argument that the evidence did not support that Costello had enough swelling or joint erosion to cause debilitating pain was faulty. The court ruled that Sun Life had been arbitrary and capricious in its decision and that the reasoning process for denying the claim had not been deliberated and principled.

At the same time, the court did not find the record clearly established Costello’s disability. As a result, the case was remanded back to Sun Life for a full and fair review. The decision making went back to the company that had a conflict of interest. Costello may have to file another suit if Sun Life denies her claim again.  Sadly, Costello won the battle, but she may lose the war if her claim is not approved.

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