Court reverses CIGNA disability denial for man with knee disorder

When Life Insurance Company of North America (LINA / CIGNA) terminated Dale W. Gordon’s long term disabilities benefits in June 1, 2006, Gordon sought the help of a disability attorney to get his status of disabled person back. The Court issued its judgment on the matter almost 1-1/2 years after Gordon’s disability attorney first filed legal action against CIGNA.

As is typical of many claims filed under the Employer Retirement Income Security Act (ERISA), both parties cross moved for summary judgment, asking the Court to validate their side of the lawsuit to the exclusion of opposing side.

In Gordon’s case the main question before this Court was “How should the court interpret the standards of review that applied in this case?” There were two standards for the Court to consider: 1) Summary Judgment; 2) Federal Court review of ERISA decision.

Summary Judgment in a Long-Term Disability Suit

The Court determined that summary judgment would be appropriate where there was no dispute relating to the facts. If Gordon, the party who brought the suit, was entitled to judgment as a matter of law, then summary judgment could be issued in his favor. The Court committed itself to considering the evidence and making inferences from the evidence in the record before deciding the matter under dispute, LINA’s termination of Gordon’s long-term disability benefits under the “Any Occupation” definition of his disability plan.

Impact of ERISA on Federal Court Review of Long-Term Disability Suit

When an insurance plan authorizes the plan administrator to decide eligibility for benefits, ERISA mandates the type of review. As per the language of the plan, LINA had the power to decide the validity of a participant’s claim for disability benefits. Even though Gordon’s disability attorney asked the Court to disregard the provision and review his claim de novo, the Court found the attorneys’ arguments for a de novo review had no merit. The Court would review LINA’s decision under the abuse of discretion standard.

Application of the abuse of discretion standard requires the Court to review for reasonableness. Such a review is limited to the evidence in the administrative record. An insurance company’s decision need not be correct. It just needs to be reasonable.

Man’s capacity to work is the main question before the Court.

LINA argued that Gordon was not disabled. The disability insurance company pointed to a TSA report showing that he could do six jobs. Gordon’s disability attorneys replied that Gordon was not able to perform any of the six jobs mentioned in the TSA. She also submitted before the Court the information that the jobs did not satisfy a wage threshold that was implicated in the policy.

Three physical ability assessments (PAAs) had been prepared by one of Gordon’s treating physicians. The first two PAAs submitted appeared to show that Gordon could perform sedentary or light occupations. Yet the third PAA prepared in May 2006 reflected a correction in which the doctor made it clear that Gordon was only able to sit occasionally and could no longer sit continuously as previously stated.

LINA based its decision to terminate Gordon’s disability benefits on the basis of its interpretation of the earlier PAAs, and argued before the Court that the change in the final PAA was unexplainable. The Court found that this wasn’t the first time LINA had discounted a doctor’s opinion, or even gone so far as to mischaracterize information so it looked like the doctor said something contrary to what was actually stated.

In Gordon’s case, the mischaracterization began in August 2006, when the nurse case manager handling his file wrote that Canfield’s PAA outlined “sedentary to light capacity.” When his claim was referred to the medical director for review, the nurse informed him that the medical evidence showed Gordon could perform at a sedentary to light demand level.

Others who reviewed his file never contested the factual nature of this assertion. When he was sent the final denial letter which precipitated his lawsuit against LINA, the LINA claims handler informed him that all of his PAAs supported the fact that he was able to perform well “beyond the requirements of sedentary work.” He was told that there was “no medical information that would support his impairment to perform any occupations at the sedentary level.”

The question before the Court was whether these assertions were true. A review of the final PAA from May 2006 contradicted these conclusions. Even though his doctor had stated that Gordon’s ability for lifting, carrying, pushing, and pulling were sedentary, elsewhere in the form he had noted the continuous pain in Gordon’s left knee that limited standing, walking, bending and kneeling .

The Court caught serious contradictions in LINA statements. On one side, LINA argued that the May 2006 PAA showed Gordon had the capacity for sedentary work. Yet, this same PAA also stated that Gordon could not walk, sit or stand more than 2-1/2 hours per day. So how it was possible that a person, who could not sit, walk or stand for more than 2-1/2 hours per day, could do sedentary work which assumes an ability to alternate between these activities for 8 hours a day?

The Court turned to the Social Security Administration’s definition of sedentary work. This definition states that a person who cannot sit for more than 2-1/2 hours per day is not capable of doing sedentary work.

The Court found that LINA’s interpretation of the PAAs suggested LINA had abused its power in determining that Gordon could do sedentary work.

Importance of Transferable Skills Analysis on Long-term Disability Decision

The transferable skills analysis (TSA), which provided a basis for LINA’s benefits termination decision, suggested six jobs which Gordon could perform. The TSA considered only whether identified jobs were compatible with Gordon’s skill, education, experience. The person preparing the TSA did not consider whether jobs were compatible with Gordon’s physical restriction or limitations.

LINA also abused its power when it relied upon the TSA for another reason. LINA’s outside vocational consultant found that Gordon had no transferable skills that matched his physical limitations. Another one of LINA’s vocational rehabilitation counselors remarked that Gordon had no transferable skills. Both of these consultants were working for LINA, not for Gordon.

Wrong Wage Threshold Used?

Gordon’s disability attorney argued that LINA had used the wrong wage threshold when identifying jobs that qualified for the TSA. LINA had identified jobs that met a 60% wage threshold as compared to his predisability wages. His attorney argued that this should have been 80% instead. LINA’s response was that a wage threshold had never been stipulated in the policy. For this reason, the disability insurance plan had no obligation to use a threshold.

The main point put forward in the Court by Gordon’s disability attorney was that the policy internally contradicted itself. LINA promised to provide disability benefits to those who could not earn more than 80 percent of income through work incentive benefits. But if an employee had earnings from some occupation during the “Any Occupation” period, then how could the employee be disabled under the any occupation definition of disability? There was a contradiction between the work incentive benefits provision and any occupation definition of disability. These contradictions were irreconcilable.

The Court found that LINA’s policy was poorly drafted with internally conflicting terms. As Gordon’s disability attorney argued, LINA’s definition of disability only made sense in the context of an 80% wage threshold. Why else would the disability insurance plan be willing to provide work incentive benefits to employees during the “Any Occupation” phase of the plan? To turn around and deny benefits for an individual who could earn nothing at all under the “Any Occupation” phase was an even greater contradiction.

The Court held that LINA had abused its discretion by failing to apply an eighty percent wage threshold in determining Gordon’s disability. For the above mentioned reason Court agreed with Gordon that LINA erroneously used a sixty percent wage threshold in this case.

None of the jobs identified in the TSA paid eighty percent of Gordon’s indexed pre-disability earnings even if he was physically capable of doing those jobs. This was a second and concrete reason to support the Court’s finding that LINA abused its discretion when it denied Gordon’s long term disabilities benefits.

Court pronounced its judgment in favor of Gordon’s continuing status as a disabled person. In addition to issuing summary judgment in Gordon’s favor, the Court found that an award of pre judgment interest was necessary to provide appropriate relief to Gordon.

It had been a long battle between Gordon’s disability attorney and LINA’s counsel, but Gordon was successful in securing his rightful long term disability benefits. If you find yourself in a similar situation, an experienced ERISA disability attorney is invaluable. Hiring a long-term disability insurance attorney to represent him/her in a lawsuit against one of the disability insurance plans is vital for securing your rights.

Comments (2)

  • JR,

    This is definitely the type of case that we would like to take a look at. You are in a typical situation where we see claims denied. We have handled hundreds of claims with Reassure and are familiar with their claims department and tactics. We would appreciate if you could contact us privately so that we can discuss your claim in greater detail. You may also find our video on the most common reasons for claim denials informative.

    Gregory Dell Sep 21, 2012  #2

  • I originally purchased a plan from Royal Macabee’s which was bought by Reassure. I paid for the plan for some 12-13 years.

    In January 2005, I underwent bypass heart surgery. After a brief fight, and threats of a law suit, Reassure agreed to pay the benefits.

    In December 2009, I underwent a “stent” procedure, as that three of four bypasses had failed, and the stent was able to savage two of three.

    This last month Reassure informed me that September would be my “last check”, as that in the opinion of their staff cardiologist, I could return to work.

    The policy had the “Similar” Occupation rider, along with the “Residual Income” rider. When I spoke with them, after they ignored it in their letter, they informed me that the Rider was based on my ability to work. The rider states that if I do not make 80% of my previous income they have to pay the benefit. They don’t think so. They say “it is based on my disability”.

    I am 61, I have to keep a “dummy” corporation open to obtain Health Insurance, and the corporation is subsidized by loans from my personal savings. The corporation has shown losses since 2006, (the IRS Audited the returns in 2010, and found them to be clean) and can not be revived due to changes to the banking business. Reassure has told me, “Too bad, you can start your business again. The economy is not our problem”.

    I have notified them of their responsibilities under the Residual Income Rider (who is going to hire a 61 y\o in Las Vegas and pay him at least $84K for a middle management job, when he hasn’t effectively worked for seven years?), and even if the business were able to restart tomorrow, it would take at least an influx of $200K in working capital, and 5 years to show a profit.

    I have threatened legal action in California. I’m not just going to write the Board a letter, and get a form letter in return.

    Do you think they will back down and finish the benefit, or continue to use intimidation tactics with my doctors and myself? Their exposure is only
    $230,000 over 4.3 years, and in my estimate, it may cost them almost $100,000 to defend themselves.

    What do you think? If they suspend benefits, are you interested in this case?

    JR Sep 19, 2012  #1

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