Sun Life Insurance Co. wrongfully denies disability insurance benefits following disability claimant’s failure to respond timely

It isn’t always the claimant who appeals a District Court decision. The District Court may rule in favor of the claimant and have its decision challenged by the disability insurance provider. Wenner v. Sun Life Assurance Company of Canada is just such a case. Arguments were heard in the U.S. Court of Appeals, Sixth Circuit, located in Cincinnati, Ohio. The case arose from Nashville, Tennessee. This entire disability claim could probably been avoided had the claimant hired a disability insurance attorney to manage his disability claim on a monthly basis. The denial of this claimant’s claim resulted in more than 4 years of delay before the claimant was able begin receiving monthly benefits again.

Thomas Wenner served as the Chief Operating Officer of Orchid Manufacturing Group (Orchid). He suffered a heart attack and had to undergo heart bypass surgery in January 2001 and applied for disability benefits under Orchid’s long-term disability benefit plan with Sun Life. Sun Life approved benefits, and he began receiving a $7000 check every month.

In order to continue receiving benefits, Wenner was required to submit periodic medical updates and personal activity reports. Sun Life requested an update in October 2002, but sent the letter to the wrong address. When the disability insurance company did not receive a reply, they called and left a voicemail message and sent a second letter, which also was also posted to the wrong address. When this second request failed to elicit a response, Sun Life sent out a termination notice. The date was February 21, 2003.

The termination notice informed Wenner that his benefits had been terminated because “the materials requested had not been received.” He had 180 days to submit an ERISA appeal of his denial. He could submit written comments, documents, records or other information relating to his claim. Sun Life assured him that they would review this claim on receipt of his written request for review. He was also informed that he could bring a civil action under ERISA, if Sun Life issued an adverse determination.

This third letter was also misaddressed, but Wenner did receive it. He appealed the termination, claiming that he had not received the other written or voicemail requests. He then submitted the materials that Sun Life had requested.

Upon review by two doctors of Wenner’s updated information, Sun Life concluded that Wenner was capable of working in his own occupation. One physician claimed that the health record suggested he was capable of doing the work of a lumberjack or heavy labor. This resulted in Sun Life affirming its termination of disability benefits, this time based on the fact it had found him no longer disabled. He was informed that he had no further administrative remedies available.

Wenner’s disability insurance attorney filed a judicial complaint against Sun Life in Davidson County, Nashville Tennessee. Sun Life removed the case to the U.S. District Court for the middle District of Tennessee, noting that ERISA preempted state law. The District Court found that Sun Life’s decision to terminate benefits was arbitrary and capricious, because Sun Life had misaddressed its correspondence to Wenner. To terminate his benefits based on a failure to receive a response was arbitrary and capricious. Sun Life did not argue with this finding.

But the court went on to conclude that Sun Life’s finding that Wenner was not disabled was wrong. Sun Life appealed this finding, claiming that the court had failed to follow the appropriate standard of review. Sun Life claimed that the District Court had unfairly laid the burden of proof that Wenner was disabled upon Sun Life, rather than on Wenner were it properly belonged.

Wenner’s disability insurance lawyer pointed to the fact that Sun Life had failed to comply with the notice requirements stipulated by ERISA. His client had been unable to appeal Sun Life decision based on its finding that the medical information he provided prove that he was no longer disabled. Even though Sun Life informed him of why it was terminating his benefits as required by §1133(1), Sun Life had failed to comply with §1133(2) which required the disability insurance company to give him an opportunity to appeal the changed reason for denying his benefits.

In McCartha, a similar situation had arisen where the plan administrator initially based its termination of benefits on one reason, then used a completely different basis for denying benefits in its final decision letter. The Court found in this case that the disability insurance plan’s decision violated ERISA §1133, because McCartha was denied the right to provide current medical opinions that could have changed the decision.

In the case of McCartha, the Court chose not to remand the case back to the insurance company because one of the reasons given by the disability insurance company survived §1133 scrutiny. The second reason given that violated §1133 didn’t destroy the legal validity of the original reason the disability plan had given for denying benefits.

Wenner’s claim differed. While Sun Life had not violated §1133 for the first reason it had given Wenner for terminating his benefits, Sun Life had violated §1133 when it gave a second and completely different reason for not restoring his benefits without giving Wenner an opportunity to appeal the decision.

The Court of Appeals determined that the District Court’s finding that Wenner’s benefits should be reinstated was a correct decision, even if the basis of its decision was different. While the Court of Appeals did not conclude that the medical record failed to prove that Wenner was not disabled, it found that Sun Life’s decision to deny Wenner any appeals was arbitrary and capricious.

As found in Sanford v. Harvard Indus., Inc., the Court found that Wenner’s benefits had “never been properly revoked.” Until Sun Life could demonstrate that Wenner no longer qualified for benefits, he was entitled to them. The Court ordered Sun Life to reinstate Wenner’s benefits.

One of the judges sitting on the bench dissented. While the judge agreed that Sun Life had violated ERISA §1133, the judge argued that the correct remedy for the violation would have been to remand the case to Sun Life for reconsideration, not reinstatement of Wenner’s disability benefits. This voice of dissent should be informative in any future cases that arise around the issue of ERISA §1133 violations by disability insurance plans.

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