In Kelly Ann Tyler v. United States Life Insurance Company in the City of New York, et al., United States Life Insurance and American General Life Insurance company (together, “American General”), terminated Plaintiffs total disability benefits. Instead of filing a second administrative appeal, Plaintiff filed this ERISA lawsuit alleging, among other things, American General breached the disability contract and the covenant of good faith and fair dealing. She also sought punitive damages.
American General filed a motion seeking a Partial Summary Judgment on these issues. The U.S. District Court for the District of Arizona carefully analyzed each individual issue and held that there were material issues of genuine fact on each one so that summary judgment was not appropriate.
In March 2012, Plaintiff, a psychiatrist with the VA, was awarded total disability benefits. She was informed that her case would be periodically reviewed and that she would need to provide updated medical records when requested to do so. In July 2014, a new case manager took over for American General who requested updated records.
The case manager found inconsistencies in the records, so hired Health Direct, Inc. (HDI), a third-party medical services provider, to provide an independent review of the medical records. HDI tried unsuccessfully to contact some of Plaintiff’s treating physicians and although it did not believe the records supported Plaintiff’s claim, it recommended a second review by an independent board-certified neurologist, Dr. Ramos.
Dr. Ramos concluded Plaintiff’s claim was no longer supported by her medical records. As a result, her total disability benefits were terminated. Plaintiff then sent updated medical records to American General. After another review, the plan administrator determined she could work with accommodations. Plaintiff disagreed and filed this ERISA lawsuit.
Breach of Contract and Bad Faith Claim
Although the disability plan, as written, had no provision for excluding those from coverage who are able to work with accommodations, American General determined that Plaintiff could return to work if:
- she be given flexible leave not to work if she contracted a migraine headache for up to two hours at a time for up to four times a month;
- be given a dark place to rest when experiencing a migraine;
- avoid severe stress-related work.
The Court held that, according to established precedent, to require a person covered under the plan to work with accommodations is “effectively rewriting the plan.” In addition, a reasonable jury might find the accommodations not reasonably realistic and thus the denial of benefits was not made in good faith. As such, summary judgment was not appropriate.
Punitive Damages Claim
The Court held that there was reasonable evidence in the record that could allow a jury to conclude that American General “willfully and knowingly failed to pay a valid claim.” Therefore, summary judgment on this issue was inappropriate.
This case was not handled by our firm, but we believe it can be instructive to those who feel their insurance plan provider acted in bad faith when denying disability benefits. If you have questions about this case, or any question about your disability claim, contact one of our disability attorneys at Dell & Schaefer for a free consultation.