Accidental death & disability dismemberment; AIG reversed by Colorado Court

After Hans-Gerd Rasenack was struck by a hit-and-run driver he applied for benefits under the accidental death and dismemberment insurance he paid for through employee deductions. The policy was issued through AIG Life insurance Company (AIG) and administered by AIG Claim Services. The policy provided an accidental paralysis benefit which covered hemiplegia.

At issue before the U.S. Court of Appeals for the Tenth Circuit was the decision of the U.S. District Court for the District of Colorado. The matter before the court arose under the Employee Retirement Income Security Act (ERISA) which lays out the procedures the court must follow in evaluating a case.

What standard of review must a court apply?

Rasenack and his wife, joint plaintiff Jessica Tribolet, argued that the case should have been reviewed under the “de novo” standard instead of the arbitrary and capricious standard. What is the difference? And why did it matter?

“De novo” means to review a case again as if for the first time. In most cases, the review only includes the evidence before the lower court, commonly the Administrative Record used by the insurance company to make their decision to deny or approve benefits. There are six distinct steps the District Court generally follows.

  1. The Court applies the de novo standard to determine whether the claim administrator’s benefits denial was correct. If it was, the Court issues summary judgment for the insurance company, and the case proceeds no further.
  2. If the Court finds that the policy administrator’s decision was “de novo wrong”, then the Court determines if the policy administrator had discretion in the claims review process. If the Court finds that the administrator did not have discretion, the benefits denial is reversed by the court.
  3. If the Court finds that the policy administrator did have discretion in reviewing the claim, then the Court looks at whether the grounds supporting the decision were reasonable using the arbitrary and capricious standard. This standard is deferential to the policy administrator.
  4. If the Court finds that the denial was not based on reasonable grounds, then the administrator’s decision is reversed. If the grounds appear reasonable, the Court then seeks to determine if a conflict of interest existed that contributed to the administrator’s decision.
  5. Finally, if conflict of interest was present, then the next level of arbitrary and capricious review is applied, which is not as deferential to the administrator.

On the surface, it might not appear that reviewing a case under “de novo” versus “arbitrary and capricious” would make much of a difference, but for Rasenack and Tribolet it did. Let’s look at their case.

The facts

On May 21, 2003, Rasenack stepped outside his home to say goodnight to some friends. He was struck by a car and thrown approximately 25 feet. His injuries were severe enough to leave him in a coma for about three weeks. On July 7, 2003, he was admitted into a brain rehabilitation program at Craig Hospital where he remained until October. After his release, he continued treatment as an outpatient.

The lawsuit & policy language

On July 21, 2004, Rasnack’s wife and duly appointed guardian and conservator, filed a claim for accidental death and dismemberment (AD&D) under the policy issued to his employer, Marriot International, Inc. by AIG. Her claim was based on the hemiplegia provision of the policy. The policy defined “hemiplegia” as the “complete and irreversible paralysis of upper and lower limbs on the same side of the body.”

The policy defined a limb as the “entire arm or entire leg.” The policy did not define “paralysis.” The policy also stated that to cover the loss, it must occur within one year of the accident. In the event of accidental paralysis, the policy promised to pay 50% of the principle sum of the policy, $124,000 plus rehabilitation expenses of up to $10,000 during the first 2 years after the accident.

The policy also required that written proof be furnished within 90 days of the loss, though failure to do so would not invalidate or reduce the claim if “it was not reasonably possible to give proof within such time.” The outside time limit for filing a claim and providing proof was one year and 90 days. Tribolet had met the provisions of the extended deadline.

Sixteen months later, on November 15, AIG denied Rasenack/Tribolet’s claim. Their conclusion, Rasenack did not suffer from “hemiplegia” according to the policy definition. Tribolet submitted an administrative appeal on January 13, 2006. Based on the policy, she should have received a decision on the appeal within 60-120 days. Instead, AIG didn’t get back to her with its denial until August 31, 2006, over seven months later.

Meanwhile, Tribolet had filed a complaint earlier in August in federal district court. While the plan had two additional levels of administrative review, because AIG had not responded to the timely filing of Tribolet’s appeal, exhausting these levels was deemed unnecessary.

The District Court’s first impression of the complaint was that it fell under an arbitrary and capricious standard. Using this standard, the Court held that AIG’s interpretation of “hemiplegia” as complete paralysis of both limbs on the same side was reasonable. The complaint did not move past the third stage, and AIG’s decision was upheld.

On appeal, Rasenack argued that the correct standard of review should have been de novo and that the administrative record established that he suffered from hemiplegia as defined by the policy.

Court grants a de novo review

If there had been an ongoing exchange between AIG and Rasenack between the filing of the appeal and the rendering of the denial almost eight months later, de novo would not have applied. However, AIG’s failure to render a final decision within the limits stated within their own policy and demanded under ERISA guidelines, coupled with only one phone call in over seven months, entitled Rasenack to a de novo review based on failure of substantial compliance under ERISA.

Once de novo was accepted as the standard of review, the Court began to consider Rasenack’s eligibility for benefits. First, under consideration, whether the language in the policy was ambiguous, as claimed by Rasenack.

Rasenack produced the dictionary definition of paralysis from multiple sources. The consensus of the definitions could be summed up as “the loss of muscle function, loss of sensation or both” or “a complete loss of motor function.”

Because there is more than one reasonable interpretation for the word “paralysis”, the court found AIG’s hard-line definition of paralysis as “no movement at all” could not be supported by the definition of paralysis. Ambiguous language always favors the policyholder not the policy provider. The court found that “complete and irreversible paralysis” could mean complete and irreversible loss of muscle function or sensation, but not the absence of all movement.

The court then reviewed the administrative record. Before he was admitted to Craig Hospital, his preadmission assessment noted that his left side was “plegic.” Further, review upon admission to Craig found the same condition. A brain injury evaluation performed three months later stated that Rasenack required assistance with all mobility issues and had limited use of his left arm.

A physical therapy notation a few weeks later noted that Rasenack could use the left arm for stabilizing. A nurse hired by AIG interviewed Rasenack over a year later in December 2004. She observed that he remained strapped in a wheelchair during the interview. She observed no leg movement, though he did occasionally squeeze the therapy ball with his left hand.

Rasenack’s attending physician reported to AIG that Rasenack suffered hemiplegia, stating that “Mr. Rasenack’s paralysis does appear to be complete and irreversible, although from a quantitative standpoint, he has benefited from rehabilitation treatment.” AIG sought independent review of the file. The physician they chose preferred to define Rasenack’s condition as hemiparesis, which AIG used to deny the claim. This physician noted that he could not answer some of their questions because the details present were insufficient.

In response, Tribolet submitted a detailed affidavit regarding her husband’s condition. This description defined the level of paralysis present and how Rasenack used other muscle groups in the trunk to help him swing his left leg. AIG failed to investigate her claims through an independent medical evaluation. Instead, they sent the same file that had already been reviewed and found incomplete on to another physician. The court found this failure on AIG’s part demonstrated a failure of fiduciary duty. Without an accurate assessment of Rasenack’s specific functional abilities, AIG could not make a fair decision.

Because the administrative record was inadequate, the Appeals Court reversed the district court’s decision. They also instructed the District Court to supplement the record with additional evidence so that’s a proper determination regarding the extent of Rasenack’s disability might be reached.

DISABILITY INSURANCE COMPANY INFORMATION
Videos, Questions, Resolved Cases, Lawsuit Summaries & Company Reviews

disability insurance companies complaints

Leave a comment or ask us a question

There is one comment so far

  • AIG sucks, can’t believe that the laws let these insurance companies getting over on consumers.

    John DoeMar 13, 2015  #1

FAQ

Do you help AIG claimants nationwide?

We represent AIG clients nationwide and we encourage you to contact us for a FREE immediate phone consultation with one of our experienced disability insurance attorneys.

Can you help with a AIG disability insurance policy?

Our disability insurance lawyers help policy holders seeking short or long term disability insurance benefits from AIG. We have helped thousands of disability insurance claimants nationwide with monthly disability benefits. With more than 40 years of disability insurance experience we have helped individuals in almost every occupation and we are familiar with the disability income policies offered by AIG.

How do you help AIG claimants?

Our lawyers help individuals that have either purchased a AIG long term disability insurance policy from an insurance company or obtained short or long term disability insurance coverage as a benefit from their employer.

Our experienced lawyers can assist with AIG:

  • ERISA and Non-ERISA Appeals of Disability Benefit Denials
  • ERISA and Non-ERISA Disability Benefit Lawsuits
  • Applying For Short or Long Term Disability Benefits
  • Daily Handling & Management of Your Disability Claim
  • Disability Insurance Lump-Sum Buyout or Settlement Negotiations

Do you work in my state?

Yes. We are a national disability insurance law firm that is available to represent you regardless of where you live in the United States. We have partner lawyers in every state and we have filed lawsuits in most federal courts nationwide. Our disability lawyers represent disability claimants at all stages of a claim for disability insurance benefits. There is nothing that our lawyers have not seen in the disability insurance world.

What are your fees?

Since we represent disability insurance claimants at different stages of a disability insurance claim we offer a variety of different fee options. We understand that claimants living on disability insurance benefits have a limited source of income; therefore we always try to work with the claimant to make our attorney fees as affordable as possible.

The three available fee options are a contingency fee agreement (no attorney fee or cost unless we make a recovery), hourly fee or fixed flat rate.

In every case we provide each client with a written fee agreement detailing the terms and conditions. We always offer a free initial phone consultation and we appreciate the opportunity to work with you in obtaining payment of your disability insurance benefits.

Do I have to come to your office to work with your law firm?

No. For purposes of efficiency and to reduce expenses for our clients we have found that 99% of our clients prefer to communicate via telephone, e-mail, fax, GoToMeeting.com sessions, or Skype. If you prefer an initial in-person meeting please let us know. A disability company will never require you to come to their office and similarly we are set up so that we handle your entire claim without the need for you to come to our office.

How can I contact you?

When you call us during normal business hours you will immediately speak with a disability attorney. We can be reached at 800-682-8331 or by email. Lawyer and staff must return all client calls same day. Client emails are usually replied to within the same business day and seem to be the preferred and most efficient method of communication for most clients.

Reviews   *****

Lisa M.

Great to work with, very experienced at what they do and truly work for the client. Always were available for questions and it was great not having to deal with the insurance company any longer. You definitely have to have a lawyer on your side. It was such a relief after contacting Dell & Schaefer. They took over everything allowing me the time to focus on my multiple sclerosis.

Read 424 reviews

Speak With An Attorney Now

Request a free legal consultation: Call 800-682-8331 or Email Us