A District Court ruling issued in New York’s Southern District Court illuminates the importance of understanding the meaning of an “occupation qualifier” and/or an “earnings qualifier” requirement in your long-term disability insurance policy. In general, to qualify for disability under a policy that requires these two prerequisites you must show that:
- During the elimination period as well as during the following 24 months that your disability causes you to be unable to continuously be unable to perform the regular duties of your job; and
- During the same period of time, you are not gainfully employed.
In the case, James E. Mugan v. Hartford Life Group Insurance Company, James Mugan suffered a heart attack on January 27, 2005 while traveling home on a train. At the time, Mr. Mugan worked for Cantor Fitzgerald as an equities trader. Thirty-four-year-old Mugan had worked for Cantor Fitzgerald since December 2001. At the time of his heart attack, Mugan was covered under a Hartford Financial Administered Group Long Term Disability Insurance Plan provided by his employer.
Mugan fileshis claim for disability insurance benefits
Upon returning to work in his previous position as an equities trader in September 2005, Mugan began experiencing frequent chest pain. And, in January of 2006, Mugan’s physician advised him to stop working; consequently, in March of 2006, Mugan did indeed stop working and submitted his claim for disability benefits to Hartford. Mr. Mugan’s medical condition at the time of his submission for disability benefits was documented as Mugan experiencing heart disease associated with “unstable angina, ventricular tachycardia, post cardiac arrest mild encephalopathy & cognitive impairment.”
As part of Mr. Mugan’s disability benefit application paperwork, Mr. Mugan signed a Long Term Disability Options and Reimbursement Agreement, which in essence said that should Mr. Mugan be eligible to receive other benefits in addition to his Hartford long term disability benefits that those other benefits would count towards the overall disability amount Hartford would provide to Mr. Mugan, and any benefits awarded over the qualifying amount would be considered an overpayment by Hartford and be retroactively due to Hartford as such.
Mugan’s application for long term disability benefits was approved by Hartford on September 12, 2006. Four months later, Mugan applied for and was denied Social Security disability benefits because according to SSDI, Mugan was “not disabled under our rules.” Mugan forwarded the denial letter to Hartford.
Mugan continued receiving medical treatment which included the implantation of a stent. Mugan and his doctor kept Hartford appraised of his condition and procedures, and in February of 2008, Mugan contacted Hartford to report a miscalculated underpayment of his monthly benefit by $500 per month. Hartford agreed with Mugan’s assessment, and adjusted Mugan’s benefit payment.
In March 2008, Hartford contacted Mugan to inform him his claim was under investigation due to a test change that had been put into effect in September 2008. Mugan complied with Hartford’s request by completing a questionnaire about his medical condition, work history, and education. Under the new test change, Hartford’s Rehabilitation Specialist determined that Mugan could return to work if he chose another occupation for which he was qualified. She determined that Mugan was qualified to perform some 62 occupations. A Harford examiner allegedly tried to call Mugan to inform him of this finding, but could not reach him by phone or voicemail. A letter was sent to Mugan informing him of termination of his disability benefits on September 2, 2008, along with a notification that he could appeal the decision so long as he filed his appeal within 180 days.
On December 10, 2008, Mugan and his disability attorney appealed Hartford’s decision. Mugan’s New York disability lawyer presented information and documentation showing that as a result of his heart condition, Mugan had a cognitive impairment. According to Mugan’s cardiologist, Mugan was a candidate for full disability status. A neuropsychological report was also submitted, confirming that Mugan was “totally disabled.” And, in the meantime, the SSA had reversed its previous assessment and reversed its previous denial of benefits to Mugan as well.
Relying on Hartford specialists’ opinions, Hartford denied Mugan’s appeal of his disability benefits on April 14, 2009, forcing Mugan and his disability attorney to the file a lawsuit against Hartford.
Mugan’s disability attorney files a complaint for unpaid disability benefits
Mugan’s New York disability attorney filed Mugan’s lawsuit to collect unpaid disability benefits on July 29, 2009 demanding his long-term disability benefits be continued and requesting that the Court award him his unpaid benefits as well. Hartford filed its answer and retaliated by filing a counterclaim to recover $86,016.00 in what they perceived as overpaid benefits to Mugan as Mugan had also received Social Security disability benefits while he was accepting Hartford’s disability benefits.
In response, Mugan’s disability attorney filed a Motion for Summary Judgment. Under ERISA, the Court had two issues to consider:
- Was Hartford’s denial of Mugan’s benefits arbitrary and capricious; and
- Does there exist a conflict of interest that led to an “abuse of discretion.”
According to Mugan’s disability lawyer, Hartford’s decision to deny Mugan’s long-term disability benefits was based on unreliable and inadequately-supported information. He alleged that Hartford’s denial was based on the reliance of information from only their own resources and ignored the opinions of Mugan’s primary care givers. As for the conflict of interest question, Mugan’s disability attorney argued that a conflict of interest existed because Hartford was both responsible for paying Mugan’s disability benefits and also was responsible for determining the validity of Mugan’s claim.
The Court’s decision concerning Mugan’s disability benefits
The Court noted that Hartford did indeed rely heavily on its own resources in its denial of Mugan’s disability benefits, but also pointed out that the insurance company presented several pertinent points made by Mugan’s own physicians, who agreed that Mugan’s heart condition was stable, that Mugan was capable of sedentary work and failed to prove that Mugan suffered disabling cognition.
The conflict of interest was determined by the New York District Court to hold little weight as the practice of providing benefits and determining validity of disability claims was a balance that all insurance providers had to cope with. The Court did not find that Hartford acted with case-specific bias toward Mugan and ruled that Hartford did not make its decision to deny Mugan long term disability benefits in an arbitrary or capricious manner.
Court Deny’s Hartford’s Attempt to Collect an $86,000 Overpayment for SSDI Benefits
One small consolation to these proceedings was that the Court denied the part of Hartford’s counterclaim requiring that Mugan repay Hartford some $86,000.00, ruling that the amount is not recoverable since Hartford “cannot impose a constructive lien on such benefits.”