A Colorado court recently brought down a very harsh ruling against Northwestern for blatantly abusing its discretion in denying long-term disability benefits to a Colorado Family Law Attorney (Mr. M) who suffered congestive heart failure and underwent aortic valve replacement surgery and thoracic aortic aneurysm repair.
Two interesting issues were addressed by the Court in its ruling. The first is the applicability of a certain Colorado statute (Colo. Rev. Stat. § 10-3-1116), and the second is Northwestern’s interpretation of the plan’s own occupation definition of disability in the context of Mr. M being an attorney specializing in the practice of Family Law.
Colorado law does not permit plan or claim administrators to reserve discretion to interpret the terms of the policy or determine eligibility for benefits
Colo. Rev. Stat. § 10-3-1116 states in pertinent part that:
- A first-party claimant… whose claim for payment of benefits has been unreasonably delayed or denied may bring an action in a district court to recover reasonably attorneys fees and court costs and two times the covered benefit.
- An insurance policy, insurance contract, or plan that is issued in this state that offers health or disability benefits shall not contain a provision purporting to reserve discretion to the insurer, plan administrator, or claim administrator to interpret the terms of the policy, contract, or plan or to determine eligibility for benefits.
- An insurance policy, contract or plan that is issued in this state shall provide that a person who claims health, life or disability benefits, whose claim has been denied in whole or in part, and who has exhausted his or her administrative remedies shall be entitled to have his or her claim reviewed de novo in any court with jurisdiction and to a trial by jury.
This statute went into effect in August 2008. Mr. M’s policy with Northwestern became effective on March 1, 1995. The Colorado Supreme Court holds clearly that this statute will not apply retroactively. However, Mr. M argued that, because his firm renewed the policy in 2009, the renewed policy is subject to the terms and conditions of the statue.
Unfortunately, the Court did not agree with Mr. M. It found that to apply this statute to the renewal of a 13 year old policy would impose new obligations and restrictions that were not considered when the parties originally executed the policy. Parties should know and understand their obligations under a policy at the time it is issued and it would not make sense for policies to be automatically altered based on the “whim” of Colorado’s legislature.
Northwestern was wrong in its interpretation of the policy’s “own occupation” definition of disability
In its letter upholding the denial of Mr. M’s claim for long term disability benefits, Northwestern explained that it was not required to consider Mr. M’s occupation specifically as a Family Law attorney or “Divorce Law Litigator”, nor was it limited to considering the types of cases he handled as “high conflict/high asset/children with special needs litigation” cases. Northwestern stated that the Own Occupation definition was not workplace or employer specific, but rather, it referred to a set of duties as they are performed in a typical industry setting. Accordingly, Northwestern analyzed whether Mr. M was disabled based on the general duties of a lawyer and did not take into consideration his specific duties in practicing family law.
The Court determined that Northwestern was wrong by not taking into consideration Mr. M’s specific duties as a family law attorney. In oral argument, Northwestern argued that Mr. M chose not to return to work in the practice of family law and that he could have chosen to practice law in another area because he was qualified to do so as a “general practitioner”. The Court states that, while attorneys are not technically permitted to “specialize” in certain areas of law, the reality is that most do practice within a narrow field and this serves to allow the attorney to hone his/her knowledge of the subject matter over years of practice so that he/she is competent in that area and can effectively litigate claims when presented with diverse and complicated sets of facts patterns. The Court goes on to state that it would be “counterintuitive to hold that an attorney such as [Mr. M], who has practiced family law his entire legal career, could immediately switch to and successfully practice in another area of the law without serious malpractice concerns.”
The Court determined that Northwestern’s denial of benefits based on its interpretation of the “own occupation” definition was unreasonable and that, “To believe Northwestern’s argument, I would have to disregard: (1) the inherent difficulties involved with practicing law; and (2) [Mr. M]’s physical condition after heart surgery. I will not do so.”
Northwestern also abused its discretion by ignoring the medical evidence
Mr. M’s policy provided that the insured shall receive disability benefits, if disabled, on the 91st day of disability. Northwestern denied his claim stating that he did not qualify for benefits because he was not disabled for the required 90 day period. However, upon review of the administrative record, the Court found that Mr. M attempted to return to work in a limited capacity but that the effects of congestive heart failure prevented him from working and, even in a low stress position, he experienced chest discomfort, tightness and some anxiety. One of Mr. M’s treating physicians stated that, “it does not appear to me that [Mr. M]’s heart has reverted to normal”, and that, “we know that [Mr. M]’s heart is still structurally abnormal”¦”.
A second treating physician initially stated in 2009 that Mr. M was able to return to full-time work. However, that physician subsequently, in 2010, wrote a letter which stated, “[Mr. M] is currently enrolled and taking part in a cardiac rehabilitation program. Due to his commitment to his recovery he is unable to work during his treatment period. Mr. M is due to complete his program June 13, 2010.” Northwestern, in its review of Mr. M’s claim, discounted the subsequent letter from this physician because it contradicted the previous opinion. However, the Court found that the 2010 opinion coincided with the first physician’s opinion, and that “two doctors state that [Mr. M] is not able to return to work.”
The Court ruled that, starting on his date of disability, Mr. M had a physical injury/illness that impaired his ability to perform the material duties of an attorney as it is usually performed in the general economy and that he was disabled for the required 90 day period under the policy. Further, Northwestern’s decision to uphold its denial of Mr. M’s LTD claim was an abuse of discretion and that such decision “does not lie anywhere on the ‘continuum of reasonableness.'” The Court ordered that Northwestern pay the maximum amount of benefits available to Mr. M under the terms of his policy.
Attorneys Dell & Schaefer did not represent Mr. M in his disability claim, appeal or lawsuit. If you have questions regarding your claim for disability benefits, or if your disability claim has been denied, feel free to call Disability Attorneys Dell & Schaefer for a free consultation.
On our website, you can read more about Northwestern Mutual disability claims, user comments and case summaries by clicking here.