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Sedgwick And AT&T Disability Denial Scheme Exposed In ERISA Lawsuit

On May 14, 2012, the U.S. District Court for the Northern District of California issued an order on a very hot topic for ERISA Disability Lawsuits. The issue concerns how much “Discovery” a denied person is able to obtain from the Disability Insurance Company while litigating a case.

Frequently, the lawyers for the disability insurance companies claim that the Plaintiffs should be allowed no discovery other than access to the administrative claim file. This old argument was turned on its head in 2008 when the U.S. Supreme Court ruled in Metropolitan Life Ins. Co. v. Glenn that limited discovery was allowed in ERISA cases. The recent ruling from the Northern District of California in John Doe v. AT&T Western Disability Benefits Program illustrates how courts are beginning to allow such discovery in today’s ERISA disability denial cases.

To first understand how this ruling and other recent rulings will affect our clients and others similarly situated it is important to understand what exactly discovery is. Very simply, “Discovery” is a pre-trial tool in which each party can obtain evidence from the opposing party using devices such as requests for the production of documents, requests for admissions, and requests that the opposing side answers interrogatories (written questions). The documents and answers provided to the questions posed in discovery can lead to evidence that can favor the plaintiff when the case goes before the Judge for trial.

In most ERISA disability cases, the Plaintiff / Claimant’s discovery request is restricted only to “unearth the existence of possible conflicts of interests under which the defendant may operate or of procedural errors that may have undermined the fairness of the plaintiff’s hearing.” What exactly the Plaintiff is allowed to ask for under these restrictions was the question that was answered in this recent California disability claim.

The Case involved a former employee of AT&T, Inc. who brought suit challenging his Short Term Disability Benefits denial under the AT&T Western Disability Benefits Program. The Disability Attorney representing the plaintiff desired answers and documents to determine if the defendant had a “conflict of interest.” For instance, the Plaintiff requested the number of claims and appeals in 2009 and 2010 that NMR (the “independent” company who provided the physicians who conducted the medical review of the medical documentation) had provided medical reviews for, as well as the total numbers that resulted with NMR approving and denying disability claims/appeals. The Plaintiff also requested the total amount of money that had been paid to the 3rd party administrator Sedgwick Claims Management as well as NMR in 2009 and 2010 for services related to the Disability Plan’s Administration. Finally, the Plaintiff sought any documents relating to the Plaintiff’s claim or appeal that was received or created by the Defendant, Sedgwick or NMR. Sedgwick has been hired by AT&T to administer all of the short term and long term disability insurance claims. Unfortunately the policy language in the AT&T policy is terrible and Sedgwick is notorious for denying numerous claims.

The Court found that each of these requests were relevant because it could show a stingy claims granting history as well as an economic interest in denying claims by AT&T, Sedgwick and NMR. The Court also found that the interrogatories posed must be answered as the Federal Rules of Civil Procedure “mandates that a party responds to interrogatories with ‘the information available to it.'” Likewise, the Court also found that the Federal Rules also requires that “a party produce relevant, non-privileged documents in its ‘possession, custody, or control.'” AT&T attempted to argue that some of these documents were not available to it or were not in its possession, custody or control. The Court, however, disagreed and pointed to the Agreement/Contract between AT&T and Sedgwick (and Sedgwick’s subcontractors) that granted “control” and “ownership rights over such information and documents” to AT&T.

While the outcome of this ruling is specific to the facts of this case, this ruling, like many others that have recently been issued by other courts, show that the Courts are slowly promoting the idea that discovery is reasonable in ERISA Disability Denial Cases.