Unum denies disability benefits to a Minnesota legal secretary with pre-existing condition

This is a case in which Unum’s decisions to deny benefits was consistent with the policy language. Employer-provided group disability insurance plans are different from individual plans. An employer-provided disability plan depends upon the employer/employee relationship. If something happens to interrupt this employer/employee connection it can have consequences, as Carol Jones discovered.

Jones had been a legal secretary with Fabyanske, Westra and Hart, P.A. when she was hospitalized in January 2004 for major depression. She filed a claim for disability benefits under the firm’s group long-term disability insurance policy issued by Fortis Benefits Insurance Company (Fortis). Fortis found that Jones was disabled, and after the three month qualifying period began paying long-term disability benefits.

She was cleared by her treating psychiatrist, Dr. Paul Richardson, to return to work after June 4, 2004. She disagreed with Dr. Richardson’s recommendations and notified Fortis that she was seeking a different psychiatrist. Meanwhile, Fortis suspended benefit payments on June 8 and notified Jones that they were going to review her eligibility. The disability insurance provider also asked for additional medical information.

Dr. Richardson modified Jones release to work. The modified work release recommended part-time beginning June 28 and full-time starting July 26. Jones returned to work part-time on the 28th as recommended, but she also scheduled initial appointments with two other psychiatrists, both of whom had refused to support her claim of continuing long-term disability without an office visit. She chose not to see these doctors a second time.

She stopped working on July 15 with the support of a third psychiatrist, Dr. John Heefner. She sent records from her visits to Dr. Heefner and the other two psychiatrists, to support her qualification for long-term disability benefits. Fortis notified Jones on August 26 that it was denying her long-term disability claim for benefits after June 7. The disability insurance company based the denial on her failure to satisfy the test of disability present in the Fortis policy.

Jones chose not to appeal this adverse decision and returned to work part-time on September 20, 2004. She began working full-time on October 4.

The Fabyanske firm changed their group disability insurance provider to Unum on January 1, 2005. Toward the end of February 2005, Jones quit working because of an infected dog scratch. She was terminated by the firm in mid-March. Later that same month, she filed a long-term disability claim with Unum. She gave her major depression and other ailments as the basis for her claim.

Unum denied the claim, using the pre-existing condition clause which stated that “in order to receive the payment you must satisfy the pre-existing condition provision under: 1. the Unum plan; or 2. the prior carriers plan, if benefits would have been paid had that policy remained in force.”

Unum had based its decision on the fact that Jones satisfied neither of these conditions. First she had received psychiatric treatment within the three months prior to the effective date of Unum’s policy, January 1, 2005, and her disability began within the first 12 months of that date.

Then Unum had looked at the Fortis policy to see if she qualified for coverage under its terms. Unum found that the Fortis policy defined a pre-existing condition as one that was diagnosed or treated during the three months before the claimant became insured. The policy also denied coverage for any disability that was caused by a pre-existing condition during the first 12 months after coverage under the policy commenced. And finally, Unum determined that Jones’ coverage under the Fortis policy had lapsed on August 26, 2004, the date that Fortis had issued its final decision that Jones was no longer disabled.

The insurance company deemed that her disability coverage had not resumed until she returned to work full-time in October 2004. Because Jones had received psychiatric treatment within three months of that date, Unum concluded that Fortis would not have paid benefits under the pre-existing condition clause of their policy.

Jones appealed. Unum contacted Fortis about the apparent lapse in coverage. After speaking with the Fortis claims agent who handled Jones’ prior disability claim, Unum adjusted the date when the policy lapsed to June 8. Unum called Jones and informed her that their decision to deny her claim was based on information gained from Fortis. They recommended that she contact Fortis, and let her know that their decision could change if Fortis changed its position.

Jones apparently contacted Fortis as recommended, because a Fortis agent called Unum and confirmed that Jones had fallen out of an eligible class when her disability ended, and she failed to return to full-time work. Based upon this information, Unum affirmed its decision to deny long-term disability benefits.

Unum long-term disability claim denial comes before District Court.

With the assistance of long-term disability attorneys, Jones took her case before the U.S. District Court of Minnesota, claiming she had been wrongfully denied benefits under the Employee Retirement Income Security Act (ERISA). Justice Joan M. Erickson granted summary judgment to Unum, finding that Unum had not abused its discretion in determining that Jones is coverage under the Fortis policy had lapsed between June 8 and October 4, 2004.

Justice Erikson issued her ruling based on what she felt was clear policy language. A covered person’s insurance ended when the person was no longer in an eligible class or when the person stopped active work. The policy went on to define what made a person eligible. An employee had to be working full-time, and as long as an employee worked at least 30 hours per week, the person would be considered full-time. Because Fortis had determined that Jones was no longer disabled on June 8, 2004, and she did not return to full-time work for almost 4 months, her insurance coverage under the Fortis plan had clearly lapsed.

District Court affirmation of Unum disability denial goes to Court of Appeals.

Jones’s disability insurance attorneys appealed the decision. For the most part, the Court of Appeals agreed with the District Court’s analysis, but this higher Court did observe some areas which they felt both Unum and the District Court had overlooked. Because Dr. Richardson had re-issued a limited release for work that began on June 28, and Jones returned to work on this date, her coverage under the Fortis policy would have remained in effect until she quit working entirely on July 15. Because she would have been released to work full-time on July 26, her lapse of coverage would have begun on that date.

The billing records reflected that Fortis had waived premium payments for Jones up until their final decision on August 26 to deny her long-term disability benefits. She was added back as an employee after she returned to work full-time in October. These records confirmed that her coverage had lapsed.

Disability insurance attorney presents arguments to refute lapse of insurance policy.

As part of the appeal, Jones disability insurance attorneys argued that her coverage had begun on April 2001, and that there was no lapse of coverage in 2004 because Fabyanske had continued to consider her a full-time employee on medical leave until she returned to work full-time. The Court found that while some insurance policies allow coverage until an employee is formally terminated, the Fortis policy clearly stated that disability insurance coverage ended when an employee was no longer an active, full-time employee. It was impossible to consider an employee who had not worked for several months as an active, full-time employee.

Jones’ disability attorneys argued that interpreting the 30-hour per week requirement literally would lead to absurd results, because an employee taking a day off for a vacation, a holiday or illness would lose coverage and be subject to the pre-existing condition provision upon returning to work. The Court saw no evidence that either Fortis or Unum applied such hard-line restrictions. In fact the record demonstrated otherwise. Jones had missed a week of work in November 2004 due to illness, and this was not counted against her.

Finally, Jones’ disability insurance attorneys argued that Unum had ignored the continuance of insurance clause in Fortis’ policy. This clause allowed Fabyanske to continue coverage for a person who was unable to perform active work because of a covered disability. In considering this argument, the Court noted that the clause expressly stated that “continuance must be based on a uniform policy, and not individual selection.” Unum had looked into this. Fabyanske informed Unum that the only formal leave of absence policy within the company was a family and medical leave policy.

In addition to this, the record indicated that Fabyanske was uncertain as to whether Jones was returning to work. A letter dated August 13, 2004 asked if Jones was returning. She stopped by the office several weeks later on September 3, saying she would attempt to return to work on the 8th, then left a message later, saying she wouldn’t be able to do so. The Court found that Jones’ disability insurance attorneys had failed to prove that Fabyanske had requested her coverage be continued or that it was Fabyanske’s uniform policy to do this.

Court chooses the familiar abuse of discretion standard to review Unum disability denial.

The policy granted Unum discretion to determine Jones’ eligibility for benefits and to interpret the terms and provisions of the policy. This meant that the proper standard of review was abuse and discretion, even if Jones’ disability attorneys argued for a heightened standard of review because of Unum’s past history. First, the Court found that Unum’s record had been clean for the two years following the agreement to review claims practices prior to 2003.

The Court also found that Unum had thoroughly investigated Jones’ claim twice, making every effort to apply the policy language from both its plan and the Fortis plan it had inherited. The Court agreed that the policy had lapsed by at least six weeks before Jones returned to work in October 2004, and the under the 12-month pre-existing condition clause, Jones was not covered under either the Fortis or Unum policies. The judgment of the District Court was affirmed.

This is one of the unfortunate situations that can arise because of the confusing and complex language insurance companies use in their plans. Before stopping work as Ms. Jones did, contact a disability insurance attorney. The extensive knowledge available from an experienced attorney could make the difference between retaining your disability insurance coverage and losing it.