Disability benefits lawsuit against Fortis Benefits Insurance Company dismissed by West Virginia Federal Court

Failing to comply with administrative requirements in a timely manner as specified by Fortis Benefits Insurance Company resulted in Elizabeth A. Bailey being denied benefits from her deceased husband’s short-term disability benefits, long-term disability benefits and life insurance policies. Having neglected to follow proper ERISA procedures in pursuing long-term disability and life insurance benefits from Fortis Benefits Insurance Company (a wholly owned subsidiary of Assurant) as specified in Fortis’s policy requirements, Elizabeth Bailey forfeited her opportunity to present her case to a federal court when her complaint was dismissed by the Court’s ruling on two motions for summary judgment filed by Fortis’s disability defense attorneys.

While the complaint filed by Bailey and her disability attorneys addressed her husband’s denied short term disability benefits as well, the shocking outcome of her complaint lies in the denial of a widow’s benefits because of a paperwork requirement she failed to comply with.

The United States District Court in the Southern District of West Virginia dismissed Bailey’s complaint on February 2, 2011 due, primarily, to an ERISA requirement that participants in disability insurance policies that fall under ERISA can only appeal to a federal court when the participant has exhausted all administrative remedies to resolve a dispute previous to filing a complaint in federal court. Ms. Bailey and her deceased husband had not taken advantage of these options beforehand and consequently, the Southern District Court of West Virginia dismissed Ms. Bailey’s claim with prejudice. Most ERISA governed policies only allow 180 days to submit an appeal of a benefits denial.

Ms. Bailey was unable to provide factual proof that she had properly applied for Mr. Bailey’s long-term disability or life insurance benefits. For instance, Fortis requires written proof of death of the plan-holder along with a completed claim form. Ms. Bailey faxed a copy of her husband’s death certificate, but did not supply Fortis with a completed claim form for its administrative record. In addition, Fortis requires claimants to provide a completed written form for long-term disability benefits, and unfortunately, there was no evidence that either Ms. Bailey or Mr. Bailey had met the requirements of this specification.

Adrian Bailey’s disabling condition

Employed as a case worker, Adrian Bailey began suffering from severe depression in 1992. Bailey began seeing a psychiatrist in 1996 to battle his symptoms of anxiety and constant worrying, was prescribed an antidepressant, and advised to pursue psychotherapy. December 24, 1996, approximately one month after his appointment with a psychiatrist, Bailey ceased working; and on December 30, 1996, he made an emergency appointment with his psychiatrist to address his consumption of two-weeks-worth of his antidepressant which he attributed to an “amnesic episode” as opposed to a suicide attempt. At this appointment, Bailey complained that he was unable to concentrate at his job and was too stressed to continue working as a social case worker.

In January 1997, Mr. Bailey applied for short-term disability benefits, supported by the findings of his psychiatrist and was granted short term disability benefits by Fortis. A few months later, in March of 1997, Bailey’s psychiatrist informed Fortis that Bailey was improved and was capable of working on a limited basis, but the psychiatrist did not clear Mr. Bailey to return to work yet. A couple of months later, the psychiatrist completed a supplementary report and stated that Bailey had no physical limitations, but felt Bailey would benefit from psychiatric rehabilitation services.

In June of 1997, Fortis suspended Bailey’s short-term disability benefits pending a review by Fortis’s Clinical Services Department. In one conversation with Bailey’s psychiatrist, Fortis reported that the doctor stated that Bailey was no longer disabled and could return to work. Upon learning of this conversation, Bailey requested that Fortis hold off a benefits decision until he could provide Fortis with his psychologist’s records. Bailey’s psychologist determined that Bailey showed signs of suffering from bipolar and paranoia, but she also insinuated that Bailey might be malingering in an attempt to continue receiving benefits. She recommended, among other things, “possible hospitalization.” Soon after this recommendation, Bailey was admitted to Thomas Memorial Hospital on June 27, 1997. Again it was noted by the attending physician that Bailey was fixated on re-obtaining his disability benefits.

Following his hospitalization, Bailey was shuffled between appointments with his psychologist and psychiatrists, and their comments of Bailey’s malingering and Bailey not being disabled, resulted in the conclusion by Fortis in August of 1997 that Bailey was no longer disabled and suggested that Bailey look for work in another occupation or at another facility from the one where his problems had developed.

Elizabeth Bailey’s disability attorney files complaint in District Court

In September of 1997, Bailey’s wife filed a complaint claiming that Bailey’s psychiatrist had never informed Bailey that he could return to work, which triggered a formal appeal to Fortis concerning its decision to deny disability benefits to Bailey. Fortis submitted Bailey’s medical records for evaluation and determined that Bailey was no longer an eligible member for disability benefits under its Short Term Plan with his previous employer and thus, was not eligible for disability benefits from Fortis. Bailey’s short term disability appeal was denied.

After being awarded Social Security disability benefits in September of 1998, Bailey again filed a second complaint to the West Virginia Office of the Insurance Commissioner which triggered a second appeal of Fortis’s decision to deny Bailey disability benefits. Bailey’s medical history was again reviewed by yet another in-house physician and Fortis upheld its previous decision to deny benefits to Bailey.

While the appeal was pending, Bailey died on April 17, 1999, and in September 2001, his widow, Elizabeth Bailey, as the personal representative of Bailey’s estate, filed the ERISA lawsuit discussed here.

Bailey’s Appeal to the Southern District Court of West Virginia

Elizabeth Bailey felt she was entitled to an award of her deceased husband’s short-term disability benefits, long term disability benefits, and his life insurance benefits. Ms. Bailey claimed that the administrator of Bailey’s ERISA benefit abused its discretion.

Standard of Review

West Virginia District Court had two things to consider in deciding if ERISA abused its discretion in relation to Mr. and Mrs. Bailey and the denial of Mr. Bailey’s disability benefits. An ERISA plan can confer discretion in two ways:

(1) by language which ‘expressly creates discretionary authority,’ and
(2) by terms which ‘create discretion by implication.’

The Court’s mandate was to determine if Fortis abused its discretionary role and, in this case the Court determined that Fortis did not abuse its discretion and used the “appropriate standard of review” in making its decisions concerning Bailey’s short term disability benefits, long term disabilities benefits and life insurance benefits.

The Court’s Analysis

The United States District Court of West Virginia determined:

1. In relation to Bailey’s Short Term Plan, the Court determined that there was sufficient evidence to suggest that Bailey was fit to return to work as early as May 22, 1997.
2. In relation to Bailey’s Long-Term Disability and Life Insurance Benefits, the Court determined that the Baileys failed to “fully exhaust” the administrative means for procuring Bailey’s long-term disability and life insurance benefits; and thus, Elizabeth Bailey was not entitled to these benefits.