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Standard denies disability insurance benefits to woman with brain hemorrhage and headaches

Over 14 years, Kathleen M. Hackett worked her way up through the ranks at Mileage Plus Inc. (MPI) a Rapid City, South Dakota business. When she finally left the company’s employ for disability reasons, she had worked her way to Customer Service Supervisor.

She was covered by disability insurance offered by Standard Insurance Company (Standard). On September 28, 2002, she was disabled due to the side effects of a brain hemorrhage. She underwent emergency surgery by a neurologist, Dr. James Nabwangu, and was released from the hospital after eleven days.

In November 5, 2002, Dr. Nabwangu noted that she was doing exceptionally well. He approved her return to work on November 7, 2002. She was able to focus on her job duties as long as she wasn’t distracted, but on December 3, 2002, she complained that she was getting extremely tired after seven hrs of work.

Hackett’s internist Dr. James Bowman noted that she had a slight headache problem when he saw her in early 2003, but was otherwise doing well. But on January 15, 2003, Hackett told Dr. Bowman that when she worked on the computer, her problem of headaches increased, especially when she was working with numbers. On March 21, 2003, Dr. Bowman mentioned that she was unable to focus on her job. On April 21, he noted that she still suffered from occasional headaches.

On February 28, 2003 Hackett applied for “own occupation” disability benefits because she was unable to perform her duties as a Customer Service Supervisor. Benefits were approved by Standard on May 1, 2003 for the period from December 26, 2002 to January 17, 2003. Standard found that she was able to return to work on January 17, 2003, so it terminated her long-term disability benefits as of that date.

The situation turned for Hackett on May 6, 2003, when Hackett ceased her employment with MPI. She saw Dr. Nabwangu the same day, complaining that she was unable to perform her duties any longer due to intellectual impairment and confusion etc. Just over a month later, Hackett was readmitted into hospital and diagnosed with Cerebralischemal. Three days later she was discharged with plans to take physical and occupational therapy and home medication.

She had taken a part-time job as a receptionist, but was terminated because her physical and occupational therapy schedule didn’t allow her to work every day. This encouraged Hackett to reapply for benefits. She submitted a report from Dr. Nabwangu in which he mentioned that due to permanent impairment of her intellectual functions, she was unable to perform her regular duties. Based upon Dr. Nabwangu’s report, Standard reopened her file and found that she was disabled under the “own occupation” definition of the insurance policy on June 23, 2003.

Dr. Nabwangu referred Hackett to Dr. John E. Meyers, a Clinical Neurophysiologist. He conducted a battery of tests and noted that the scores were below her expected range of function.

Hackett also consulted another Neurologist, Dr. Steven Hata. He noted that she had recovered well but complained of headaches when she used the computer. He also conducted neuropsychic testing which showed that her performance scores decreased compared to previous scores.

In August, 2003. Dr. Hata noted that her headaches had decreased to every four days after change in her medication. In September, 2003, Standard advised Hackett regarding her ability to apply for Social Security benefits, and accordingly in August 25, 2005, she was declared disabled and awarded benefits by the Social Security administrator.

Another neurologist, Dr. Allen Gee, reported, in July 2004, that she had constant headaches. He recommended that she start keeping a headache diary.

Hackett was also examined by Dr. Monte S. Dirks in July 2004. He found that she had suffered a thirty eight percentage loss to her total visual system.

In late 2004, Standard reviewed Hackett’s disability claim under the “any occupation” provision of the plan. Standard sent medical records to Dr. Lawrence Zivin, a physician in Standard’s employ. He issued his opinion that Hackett was able to perform sedentary to light job activity, with accommodation made to her left visual field and also mentioned that her cognitive ability was in the normal range. Standard also set up an interview with a claim consultant, who reported that Hackett was able to drive, speak and answer in a clear and concise manner.

In June 2005, a Vocational Case Manager (VCM) prepared a Hackett’s transferable sklls assessment. Based upon Dr. Zivin’s report, the VCM held that Hackett had the ability to perform sedentary work with a possible vision accommodation and positions were available in her area that constituted gainful employment under the “any occupation” definition of the plan.

Standard Denies Any Occupation Long-Term Disability Benefits

In August 11, 2005, Standard denied Hackett’s request for “any occupation” disability benefits. Based upon the report of Hackett’s physicians as well as Dr. Zivin, Standard stated that the VCM had found several positions which Hackett could perform and therefore she did not qualify for the “any occupation” benefits.

Hackett appealed and submitted additional records. Standard forwarded all the additional documentation to Dr. Elias Dickerman for independent medical review (IMR). Dr. Dickerman found that Hackett’s headaches weren’t severe enough to warrant restriction on Hackett’s occupational abilities, nor were her cognitive scores too low to fill the occupations identified by the VCM. Therefore Standard upheld its denial decision of “any occupation” disability benefits. It also noted that medical records did not demonstrate any specific cognitive or mental limitation due to brain hemorrhage. Her headache was under control and did not require further medical treatments.

One more time Hackett challenged the decision with an appeal and this time it was reviewed by Standard’s quality assurance unit which also upheld Standard’s denial decision of benefits.

Disability Attorney Takes Up Suit Against Standard

Hackett hired a disability attorney and sued Standard. Her ERISA attoreny argued that Standard was operating under a conflict of interest because of its dual role as a plan administrator and as a payer of the benefits. Under ERISA, Standard had discretionary authority to interpret and apply plan language of the insurance policy.

This first effort was unsuccessful. The District Court held that Hackett failed to prove any serious breach of Standard’s fiduciary duty. Therefore Standard did not abuse its discretion in denying Hackett’s claim in spite of the conflict of interest.

Disability Attorney Appeals District Court Ruling in Favor of Standard

In Appeals Court, Hackett’s disability attorney argued that District Court improperly relied on a decision known as Woo, when it was concluded the conflict of interest could not be considered. The ERISA attorney also argued that the District Court erred in concluding that Standard did not abuse its discretion through its denial decision.

Court of Appeals Considers Case Law for Conflict of Interest

The Court of Appeals reviewed the District Court’s ruling de novo. This time the Court relied upon Glenn, in which the Supreme Court concluded that a conflict of interest exists whenever the plan administrator is also the employer or the insurance company. In Glenn, the Supreme Court made it clear the conflict did not change the standard of review applied by District Court. Instead, Glenn determined that conflict of interest should be one of the factors weighed in determination of whether there was an abuse of discretion.

Because District Court failed to consider the conflict of interest in its evaluation of the administrator’s decision, the Court of Appeals reversed the District Court’s decision, and remanded the case back to the District Court to consider in light of Glenn. Woo’s requirement that Hackett’s disability attorney had to “present material, probative evidence demonstrating that (1) a palpable conflict of interest or a serious procedural irregularity existed} which (2) caused a serious breach of the plan administrator’s fiduciary duty” no longer applied, and the District Court needed to consider conflict of interest before it ruled in Standard’s favor.

Hackett’s ERISA attorney had several options before him which Glenn had opened up for him. See our discussion regarding specific discovery request sent to Standard.

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