Appellate Court finds Wachovia and Liberty Mutual's review of objective evidence of disabling migraine headaches was unreasonable (Part II)

A decision reached in the Eleventh Circuit of the U.S. Court of Appeals highlights the on-going legal battle that a disability claimant can experience if their claim for long term disability insurance benefits is denied. Sharon Creel had been a group product manager at Wachovia Corporation before her hospitalization for an attack of chest pain and partial paralysis on July 15, 2002. She applied successfully for short-term disability benefits under her employee disability benefit plan. These benefits lasted for 26 weeks.

She then went on to apply for long-term disability benefits. These also were approved and continued for 24 months. At the end of the 24 months, Creel’s disability benefits were terminated on the basis of a 24 month “mental limitation” clause. Her appeals were unsuccessful, so she filed a lawsuit in the Middle District Court of Florida seeking summary judgment against Wachovia for wrongfully denying her disability benefits. For an extended history of this case please read Part I: Liberty Mutual and Wachovia interpret migraine headaches to be psychiatric and not disabling.

This suit proved unsuccessful because the District Court ultimately determined that Wachovia’s decision was reasonable, even when considered under a heightened conflict of interest standard. Creel and her disability attorney determined that this finding was faulty and chose to pursue the matter again before the U.S. Court of Appeals, Eleventh Circuit.

Before considering the specific details of this ERISA disability insurance lawsuit, certain facts pertaining to Wachovia’s long-term disability plan must be considered.

1. The disability benefits plan, which was governed by the Employee Retirement Income Security Act of 1974 (ERISA), designated Wachovia’s Benefits Committee as the “Plan Administrator” and granted sole discretion to this committee in the interpretation of both terms and provisions provided by the Plan.
2. The disability benefits plan designated a third-party, Liberty Life Assurance Company of Boston (Liberty Mutual), as the party who would make initial the claims evaluations and recommend whether a claimant qualified for disability benefits or not.
3. The Plan required claimants prove they fit the Plan’s description of “disabled.” Proof was described as 1) evidence in a form or format acceptable to the Claims Administrator, (2) a signed attending Physician’s statement in a form or format acceptable to the Claims Administrator, and 3) medical records such as the attending Physician’s standard diagnosis, chart notes, lab findings, test results, and x-rays. Other forms of objective medical evidence could also be required by the Claims Administrator.
4. The Plan also gave the Plan Administrator or Claims Administrator authority to discover and develop its own evidence of disability, or lack thereof.
5. The Plan had two tiers – an initial 24 months in which the current job duties provided the standard against which a claimant’s disability would be weighed and a heightened disability requirement after the 24 months in which a claimant had to prove inability to work in any profession.
6. The Plan also contained a mental disability clause, limiting the Plan’s coverage to 24 months for mental illness such as “mental, nervous or emotional diseases or disorder of any type.” The Plan included an exemption if the Claimant was hospitalized or confined for treatment for fourteen days straight after the expiration of the 24 months.

Each one of these factors would play a role in evaluating the District Court’s decision. While the Court of Appeals would assess the District Court’s decision de novo (from a fresh perspective), it would also apply the same standard used by the district court unless the wrong standard had been used.

The first detail established the standard of review the Court should apply when reviewing ERISA disability claim denials. In this case, because Wachovia had discretion, the District Court had correctly chosen to use the arbitrary and capricious standard. Because Wachovia also operated under a conflict of interest, the Court had required the disability insurance company had to prove that it’s conflict of interest had not influenced its decision to deny Creel’s extension of benefits.

Both Courts looked to Williams v. BellSouth Telecommunications for guidance. In this case, Williams used language similar to the third detail mentioned above. Because this decision had focused on the “proof” standard within the policy, the District Court found that Creel had been required to provide the kind of proof asked for by Wachovia. Wachovia claimed she had failed to do this. Wachovia’s disability attorneys pointed to this requirement as evidence of how the disability insurance plan protected plan participants from illegitimate claims. The District Court found this argument plausible. Once this conclusion was reached, granting summary judgment to Wachovia was the natural result.

Fortunately for Creel, the Supreme Court issued the MetLife v. Glenn decision before her appeal came before the Court. This meant that Wachovia’s conflict of interest now became a factor to be considered under ERISA, not just a part of a formula that heightened the level of the arbitrary and capricious standard.

Creel’s disability insurance attorney raised four issues on appeal that arose from the six facts presented above.

1. Whether the Court was correct in permitting Wachovia to require objective medical evidence for a condition that involved subjective symptoms.
2. Whether the Court was correct in allowing Wachovia to interpret the mental disability clause against his client.
3. Whether his client had received a full and fair review of the new medical evidence she presented to the Wachovia Benefits Committee.
4. Whether the Court should have applied the heightened arbitrary and capricious standard of review.

Let us look at each issue as the Court of Appeals did.

Creel’s disability attorney pointed to the flaw of allowing the Plan to permit claims administrators the power to determine what evidence it deems necessary for different types of claims. The wording allowed the Plan to require evidence which it was unreasonable to expect.

While Creel had initially been diagnosed with depression and anxiety disorder (mental disorders), by the time she appealed the termination of benefits, she was suffering from debilitating migraine headaches on average 10 days a month. In general, migraines are subjective in nature. Rarely can a specific cause be identified. And the level of incapacity is clearly subjective in nature.

Despite this, Creel had produced objective evidence in the form of office notes, attending physician statements and opinions. She had also kept a headache diary at Liberty Life’s request, yet this was not considered objective evidence.

Wachovia’s disability attorneys argued that it was reasonable to interpret the Plan’s language as mandating objective evidence to make a claim good. They claimed that to do otherwise would open the floodgates to subjective claims without evidence to support them.

The Court of Appeals looked to a series of cases which had addressed denials for subjectively disabling conditions such as migraines, fibromyalgia and chronic pain syndrome. In the Doyle case, the Court had upheld a Plan’s right to require objective medical evidence when the plan language required it. Only in the absence of such a requirement could a plan be held accountable for reasonableness in the light of significant subjective evidence. A Plan was then required to inform the claimant of exactly what medical evidence it required to perfect the claim. The Oliver case established that to deny benefits for a subjective condition when ample evidence had been provided and the disability insurance plan failed to request specific evidence was arbitrary and capricious.

Applying this information, the Court of Appeals agreed that Wachovia’s decision was arbitrary and capricious. While the Plan mandated evidence, it failed to mandate specific evidence. A randomized list of possible types of evidence in the plan provided a catch-all that allowed the Plan to pick and choose from all kinds of evidence. Creel’s disability insurance attorney was correct in accusing Wachovia of failing to identify the specific objective evidence necessary to prove her disability. She had provided a significant volume of subjective as well as objective evidence.

Unfortunately, the Court of Appeals found that despite the volume of evidence in Creel’s administrative record, it failed to prove that her headaches would prevent her from working in the broader parameters of any kind of work. So even though the Appeals Court found that Wachovia had abused its discretion, it did not have sufficient medical evidence in the record to award disability benefits to Creel.

Rather than evaluate whether the opinions of her treating physician’s were adequate objective evidence, the Court chose to send Creel’s claim back to the Middle District Court, where this issue could be investigated. The Middle District Court could also consider Wachovia’s claims that Creel was now self-employed, which would allow her to earn a living despite any days in which her headaches incapacitated her. The issue of whether Wachovia’s use of the mental health limitation and charges that Creel did not receive a full and fair review were likewise remanded to the District Court to be reconsidered once the issue of objective findings was addressed.

Since court remanded the case back to the district court, this case is far from over. Unfortunately as this case continues, Creel continues to live without receiving any disability benefits for the past several years. It may now take another six months to a year of continued litigation before the Middle District Court renders decision based upon the instruction from the Appellate Court. Hopefully, Creel will be able to provide additional medical support which will satisfy Wachovia and Liberty. I have a strong feeling that we will see more litigation on this case in the near future. Much will depend upon whether Wachovia provides clear instructions regarding the evidence it requires and whether Creel can provide the necessary evidence to prove that her headaches impair her function enough to prevent her from pursuing her self-employment ventures.