ERISA disability benefits denied by Lumbermens Mutual casualty due to lack of objective evidence

Wangenstein v. Equifax, Inc., 2006 WL 2220822 (11th Cir. Aug. 4, 2006)

ERISA plans often deny claims for disability benefits based on a lack of objective evidence. The plans argue that claimants must provide objective test results or verifiable data to establish their impairments. This issue becomes more complex, however, when a medical condition cannot be readily confirmed by a test result. This situation results in disputes, and many times litigation, over the proof required in light of the specific plan provisions. In Wangenstein v. Equifax, Inc., 2006 WL 2220822 (11th Cir. Aug. 4, 2006), the 11th Circuit Court of Appeals addressed this very issue.

Susan Wangenstein worked for Equifax as a customer service representative until 1999, when she was diagnosed with cervical-spine problems and migraine headaches. She filed a claim with Equifax’s long-term disability plan, which was insured by Lumbermens Mutual Casualty Co. and administered by Kemper National Services. Under the plan, disability benefits were payable for the first 24 months after the qualifying period if claimants were unable to perform their “Regular Occupation.” (In ERISA circles, this is known as an “own occ” period.) Beyond that point, claimants continued to receive benefits if they were unable to perform “any Gainful Occupation” based on their training, education, and experience. (This is referred to as the “any occ” period.) The plan required “written proof of [the claimant’s] Disability that we determine to be satisfactory.”

Wangenstein’s treating physician, Dr. Jayam Iyer, reported to Kemper that her MRI showed multiple disc abnormalities. Finding Wangenstein to be “totally and permanently disabled,” Dr. Iyer noted that she suffered from muscle spasm, chronic pain, cervicogenic headache, and migraine problems. Over time, Kemper received opinions from four physicians hired to review medical records and obtained another opinion from a neurologist (Dr. Harish Patel) who personally examined Wangenstein. The reviewing physicians hired by Kemper shared the view that Wangenstein had not provided objective evidence of her disability. One of the reviewing physicians recommended certain testing that was apparently not performed. Dr. Patel, the examining physician, found that Wangenstein was “partially disabled” and “may be able to perform part-time work as tolerated.”

Kemper terminated her disability claim, and Wangenstein appealed. Dr. Iyer maintained that the MRI documented her cervical problems and that no diagnostic tools existed to confirm her migraine condition. Kemper denied the appeal, and Wangenstein filed suit. The federal district court granted summary judgment to Kemper. The court ruled that while Kemper may have ignored the reviewing physician’s request for certain tests, and although another reviewing physician had not reviewed the MRI results, Wangenstein failed to provide objective proof of her disability. Wangenstein appealed to the 11th Circuit.

In upholding the denial of benefits, the 11th Circuit first addressed the standard of review that should apply. The Court found that the regular arbitrary and capricious standard should apply, rather than the heightened arbitrary and capricious standard, because Kemper was not sufficiently conflicted in its decision-making. Because Lumbermens was obligated to pay any benefits owed, the Court reasoned, Kemper was not conflicted in denying benefits. This was true even though Lumbermens was the parent corporation of Kemper. The Court said: “Even where the party making the benefits determination is the wholly-owned subsidiary of the insurance company responsible for paying the claims, the heightened arbitrary and capricious standard would not apply unless ‘the plan-payout funding source retains ultimate control over the pay-out decision.'”

The Court then applied the procedure used in the 11th Circuit to evaluate an ERISA benefits denial. The Court found that even if it determined that Kemper was wrong in its denial – and it did not – the Court would still need to conclude that Kemper acted arbitrarily and capriciously in denying the benefits. On this issue, the Court held as follows:

Given that KNS has discretion in terms of what it considers adequate ‘proof’ of continuing disability, we cannot say that it is unreasonable for KNS to demand objective evidence. Thus, we hold that KNS was not arbitrary and capricious in requiring objective evidence of disability and crediting the opinions of the four peer review physicians over those of Drs. Iyer and Patel.

The Court rejected Wangenstein’s argument that the opinions of Dr. Iyer and Dr. Patel should have been given greater weight than those of the four reviewing physicians. The Court found that Kemper did not refuse to credit the views of Dr. Iyer and Dr. Patel, but instead gave greater weight to the contrary opinions of the four reviewing physicians. The Court did not find this decision amounted to an abuse of discretion.

For these and other reasons, the Court affirmed the denial of disability benefits.