Sun Life disability insurance benefit denial is reversed after 8 years

Eight years of battling Sun Life for long-term benefits and the claimant finally prevails. Sun Life should be ashamed for their lack of respect for this disability claimant and their unreasonable claim handling. Sun Life’s attempt to use hired gun doctors was shot down by the court. This case is an example of a situation where a person could be disabled yet continue to be at work until the day they are fired. This case created challenging contractual issues for the claimant as she claimed that she was disabled at the time she was fired.

The Sun Life disability policy and all ERISA governed disability policies require the claimant to be disabled while they are actively employed by their employer. In order to avoid this situation, a claimant should always try to stop working if they believe they will be fired due to their inability to perform their job.

It is always interesting when a long-term disability company appeals the decision of the District Court. This is not as common as the claimant appealing a court decision, but it does happen. In this case, the parties involved were Sherry DeLisle and Sun Life assurance Company of Canada (Sun Life). The District Court had found that Sun Life’s denial of DeLisle’s long-term disability benefits was arbitrary and capricious. In plain language “arbitrary and capricious” means that the disability insurance company acted unreasonably.

Sun Life appealed the decision in the U.S. Court of Appeals for the Sixth Circuit which covers the states of Kentucky, Michigan, Ohio and Tennessee. Here is why the Court of Appeals affirmed the decision of the District Court.

History of Sun Life Disability Claim

Sherry DeLisle had been the director of operations at Sidney, Krandall & Sons, a retail jeweler, from January 1996 through April 2002. One of her employee benefits was the ability to participate in a disability plan which was funded by a group long-term disability insurance policy issued by Sun Life.

DeLisle was involved in a car crash in 1998. Her injuries required a full anterior spinal fusion. Then she was involved in a second car crash in 2000. This accident reinjured her spine. She also suffered a closed head injury.

She continued working with the assistance of three separate healthcare providers. She continued to see a neurosurgeon, an osteopath and a licensed professional counselor trained in cognitive behavioral therapy. But this assistance proved to be inadequate. She was fired from her job at Krandall on April 17, 2002, because “she was not doing her job.”

She initially filed for state unemployment benefits. She was able to find another job, but was fired after only two weeks for not being able to work enough hours. Finally in December, DeLisle filed a claim for long-term disability benefits with Sun Life. She supported her claim by providing her medical records and five attending physician statements. Each of the statements supported her claim that she had already been disabled from performing her “own occupation” as of April 17, the last day she worked at Krandall.

She also applied for long-term disability benefits through the Social Security administration. She was approved in 2003, with Social Security determining that her disability became effective on April 17, 2002.

Sun Life found that DeLisle was not covered under its policy because she was not “actively at work” when her disability began. Thus the disability insurance company denied her claim. It upheld its decision following her ERISA appeal, which led DeLisle to file an ERISA lawsuit against Sun Life.

Sun Life Ordered to Reconsider Claim by District Court

The District Court found that Sun Life’s denial was arbitrary and capricious. It set aside the disability plan’s decision and ordered Sun Life to review the case again and determine whether DeLisle was disabled on the day she was fired by Krandall. On remand, DeLisle supplied additional medical evidence, including opinions from a chiropractor, a physician who specialized in pain management and a neuropsychologist. The combined evidence showed that DeLisle was suffering from “degenerative disc disease, radiculopathy, symptoms connected to closed head injury, chronic pain syndrome, post-traumatic syndrome, major depressive disorder, and a Class 5 mental impairment.”

These medical records were sent to a clinical neuropsychologist, a psychiatrist, an orthopedist and a rehabilitation consultant. Based on the conclusions of these experts, Sun Life once again denied her claim. This time the reason for the denial was the lack of medical evidence that she suffered from physical, psychological or cognitive conditions of sufficient severity to prevent her from working in her own occupation.

DeLisle submitted an ERISA appeal to Sun Life. Her file was sent to three different physicians for review. This time a neuropsychologist, a psychiatrist and an orthopedic surgeon reviewed her information. Their opinions supported Sun Life’s denial.

DeLisle was once again forced to sue Sun Life for second time and effort to obtain her long term disability benefits. Once again the District Court found that Sun Life’s denial of benefits was arbitrary and capricious. The Court ordered Sun Life to pay disability benefits. Then at a later date, the District Court ordered Sun Life to pay attorneys fees. This resulted in Sun Life appealing the District Court’s decision.

Sun Life Appeal of District Decision Granting Long Term Disability Benefits

Because Sun Life was vested with discretion to determine whether or not DeLisle qualified for long-term disability benefits, the U.S. Court of Appeals affirmed the District Court’s use of the arbitrary and capricious standard of review. This meant that there were four factors the Court would consider.

1. Did a conflict of interest exist?
2. Had Sun Life considered the Social Security Administration’s determination that DeLisle was disabled?
3. What was the quality and quantity of the medical evidence?
4. What was the quality of the medical opinions?

Sun Life’s Conflict of Interest

The United States Supreme Court Case of Glenn v. MetLife made it clear that a plan administrator who evaluates and pays benefit claims operates under a conflict of interest. DeLisle’s ERISA attorney was able to offer more than conclusory allegations that a conflict of interest existed. The disability attorney pointed to the fact that five out of the six physicians who reviewed DeLisle’s file were under regular contract with Sun Life.

When the Court looked at the administrative record, it revealed that Sun Life’s in-house attorney had informed some of its medical file reviewers that DeLisle had been “terminated for cause.” This was in contradiction to what Krandall had actually told Sun Life in a phone interview. The transcribed copy of that interview said she had been fired “because she was not doing her job.” Characterizing her termination as one with cause put DeLisle in a negative light and suggested that there wasn’t any real reason to determine if sickness of injury had left her unable to do her job.

This procedural irregularity was just one hint that DeLisle’s file had not received a full and fair review. It would give more weight to the importance of Sun Life’s conflict of interest.

Sun Life’s Consideration of the Social Security Decision

The Court recognized that just because Social Security had determined that DeLisle was disabled, Sun Life was not obligated to pay her long-term disability benefits. At the same time, Calvert established that a Social Security administration’s decision “is far from meaningless.”

Sun Life required DeLisle to apply for Social Security disability benefits. If Social Security denied her application, Sun Life required her to appeal the denial “to all administrative levels Sun Life deems necessary.” Upon approval of SSDI benefits, the Social Security disability payments would reduce the amount of monthly benefit payable by Sun Life. When these two factors apply, the Court expects a long-term disability coverage provider to specifically mention in its denial of benefits why the Social Security finding of disability does not apply to the claimant.

While the failure to express its opinion regarding the Social Security decision would not necessarily make a denial decision arbitrary, the Court found it one factor to consider in measuring how much conflict of interest had played a role in the decision to deny DeLisle’s application for long-term disability benefits.

The Quality and Quantity of Medical Evidence Available to Sun Life

Sun Life argued that it was impermissible for the District Court to require Sun Life to determine whether or not DeLisle was disabled as of April 17, 2002. The Court agreed that it was DeLisle’s responsibility to prove whether or not she was disabled on April 17. But at the same time, the District Court had found that Sun Life’s reasoning process had been faulty in concluding the DeLisle was not disabled on April 17. It was in this context that the Court had ordered Sun Life to review the evidence demonstrating that DeLisle was disabled at the time she was fired from her job.

The Court of Appeals found that the District Court had not erred when it had reviewed “the quality and quantity of the medical evidence and the opinions on both sides of the issues.” As established in McDonald, a review must inherently look into the quality and quantity of the medical evidence.

The Court had seen the therapy notes and medical assessments in her file predating the time that she was fired. These notes included complaints of anxiety and depression, tremors, fatigue, spasms and double vision, prescriptions for a full neck brace and a notation regarding increased neck pain. While it was evident that DeLisle wanted to work through her ailments, the fact that she was fired demonstrated that she was physically incapable of doing so. One of her physicians went so far as to state that “although the disability date is 4/17/2002, the period of disability could have been long before that.”

Interestingly enough the Court found that at least four of Sun Life’s experts agreed with her diagnoses. The only difference came in how these physicians weighed the impact of her symptoms on her ability to work. The all concluded that her symptoms were not disabling. Not one of the physicians who reviewed her file addressed the opinion of her treating physician that her condition was progressive in nature and had not manifested itself by a “significant change” on a particular date.

Another concern that the Court expressed was the fact that it was not apparent the file reviewers were aware of Social Security’s determination that DeLisle was disabled. When combined with the fact that Sun Life’s in-house attorney had mischaracterized the reason for DeLisle’s layoff, the Court saw in the review of the medical evidence a failure to review this information in a deliberate and principled fashion.

Court Considers Non-Medical Evidence

Sun Life pointed to the fact that DeLisle had continued to work until she was fired, and to the fact that it had taken her several months before she claimed to be disabled. This made her case very similar to Rochow v. Life Ins. Co. of N. Am. (CIGNA).

In Rochow, the claimant had been fired because he was unable to perform the material duties of his job due to short-term memory loss, occasionally chills, sporadic sweating and stress. Almost 11 months later, the claimant filed for long-term disability benefits. By this time the employer considered his coverage lapsed, but he successfully argued that he was disabled on the last day he was employed. In reaching this finding, the Court quoted from Hawkins v. First Union Corp. Long-Term Disability Plan. “There is no logical incompatibility between working full time and being disabled from working full time.”

Sun Life argued that DeLisle had told her physician that she was fired “based on personality issues versus job performance.” The Court found that this did not rule out the possibility that she was still disabled on the day she was fired or that she was fired because of performance related to sickness or injury.

Sun Life also argued that because she had been able to find employment for two weeks elsewhere, she was not disabled on April 17. The Court found that this also did not confirm her ability to work, because she was unsuccessful in her efforts to hold down a job.

Sun Life also pointed to the fact that she reported to unemployment that the reason she was fired was because of “lack of work.” This statement as well failed to negate, in the eyes of the Court, the possibility that her traumatic head injury and major depression at the time had not contributed to the fact that she was laid off.

Court of Appeals Issues a Split Decision

Two of the judges hearing Sun Life’s appeal upheld the District Court’s summary judgment in DeLisle’s favor. These two judges weighed the conflict of interest, the type of communication between Sun Life’s attorneys and the file reviewers, and the failure to acknowledge the Social Security determination of disability is strong factors favoring a finding that Sun Life had not been reasonable and deliberate in its reasoning process. The review of the medical evidence sealed the affirmation of these two judges that the District Court had reached the correct conclusion – Sun Life’s denial of DeLisle’s long-term disability benefits was arbitrary and capricious.

One of the judges dissented because she believed that the District Court had failed to apply the arbitrary and capricious standard of review appropriately. She pointed to the fact that under the arbitrary and capricious standard of review, the Court cannot weigh the conflicting evidence or substitute its judgment for that of the plan administrator. She cited Gismondi v. United Technologies Corp. and Whitaker v. Hartford Life & Accident Ins. Co. to support her position.

Sun Life’s Appeal Denied

Because a majority rules at the U.S. Court of Appeals, Sun Life’s appeal of the District Court’s decision was denied. The fact that this was a split decision highlights why both disability insurance companies and claimants turn to the Court of Appeals. When three judges review the evidence, it is far more likely that a decision consistent with prior case law will be reached. Finally after more than 8 years of battling Sun Life, Ms Delisle will receive her long term disability benefits. 8 years is an exceptionally long time for an ERISA disability case, but it is a practical example of one disability insurance wrongful denial of long term disability benefits.