This disability insurance case against Liberty Life Assurance is an example of the type of fight that a disability insurance company will engage in once a disability lawsuit is filed. It is often surprising that disability insurance companies will claim they are acting fairly, yet when you ask them to provide claims handling information they will aggressively object.
Disability Attorney Sues Liberty Mutual
Antonio Prado filed a lawsuit against Liberty Life Assurance Company of Boston (“Liberty Life”), administrator of the Allied Domecq Spirits and Wine Group Disability Income Policy, in the United States District Court for the Northern District of California. As an employee of Allied Domecq Spirits and Wine (“Allied”), Prado was a qualified participant of his employer’s disability insurance plan with Liberty Life.
Prado was injured on September 2, 2003 while employed and subsequently applied for long-term disability under Allied’s disability plan. Under the plan, claimants receive funds for up to twenty-four months if an injury renders them unable to work in their “own occupation,” and receive payments beyond that time period if they are unable to work in “any occupation” for which they are reasonably qualified.
Liberty denied Prado’s claim and in 2005, Prado filed a disability insurance lawsuit.
Court finds that because Liberty acted both as the plan administrator and the funding source for benefits, it operated under a structural conflict of interest.
The court found that Liberty’s conflict of interest, in addition to other factors, supported its finding that Liberty abused its discretion in denying Prado’s claim. However, despite the courts conclusion that Prado was unable to perform his “own occupation” for the first 24 months of his injury, Liberty Life again denied Prado’s claim, finding insufficient objective evidence of a disability.
Prado brought a second suit alleging three causes of action:
- review of denial of ERISA benefits;
- violation of California Insurance Code Section 10111.2; and
- failure to produce records under 29 U.S.C. § 1332.
Court holds that Plaintiff is entitled to conduct limited discovery into the nature, extent, and effect of Liberty’s conflict of interest on its decision-making process.
During Liberty’s assessment of Prado’s appeal, Prado made several requests for additional information from Liberty to “prepare an appropriate appeal.” Liberty denied Prado’s request arguing Prado was requesting “private, trade secret, proprietary and/or confidential commercial information regarding [Liberty’s] processes, operations, work, or apparatus which has not been made public and may have the effect of causing harm to [Liberty’s] competitive position. A second request by Prado was also denied.
Prado’s requests for additional documents were aimed at obtaining information relevant to show the nature, extent and effect of Liberty’s conflict of interest. The court was not convinced by Liberty’s claims and allowed Prado to conduct a limited discovery into the Liberty’s conflict of interest on its decision-making process.
Plaintiff argues Liberty was obligated to produce certain documents during its claim assessment.
In addition to documents evidencing the effect of Liberty’s conflict of interest, Prado argued that he was entitled to receive certain documents during the claim determination process under Department of Labor regulations. Among the requested documents were: The Long Term Disability Plan and amendments thereto; The insurance policy issued by Liberty Mutual to insure the Plan; All writings which establish that the Plan has complied with 29 C.F.R. § 2560.503(b)(5); etc.
The court concluded that it needed the requested documents and all relevant information to determine if Liberty abused its discretion in denying Prado’s claims and for that reason granted Prado’s requests.
The court granted Prado’s Motion for Order Directing Liberty to Augment the Administrative Record and for Leave to Conduct Discovery.
Generally, claims denials reviewed by a court are limited to the administrative record available to the administrator at the time it rendered its decision when the administrator is found to have been granted discretion to interpret the policy. However, a court may allow limited discovery when it deems appropriate.