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Another Chance after LTD Denial? Arbitrary and Capricious Standard Continues to Crumble in MetLife Lawsuit

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It’s tough to win an appeal of an LTD denial, but shabby legal drafting may keep one worker’s case alive. Is it a trend?

New York, NYAlexander Sigal was deeply depressed and, after a period of hospitalization, found himself unable to work as a computer programmer. Benefits under his employer’s MetLife long term disability plan were eventually terminated, and his administrative appeal was denied. His ensuing MetLife LTD lawsuit, however, revealed a fatal flaw in the denial of his appeal.

The all-important legal language requiring deference to the plan administrator’s initial denial was not where it should have been. Therefore, the administrator should, the District Court decided, have taken a fresh look at his evidence.

It seems a miniscule point. Mr. Sigal may still lose his MetLife LTD payments. But the decision may be signal a trend toward a fairer day in court for workers who are denied their LTD benefits.

Did MetLife Cherry-pick the Evidence?

There are a lot of facts in any medical evaluation, and what any of it means is subject to expert interpretation. This is especially true in cases involving pain or mental illness, where the diagnosis depends largely on self-reported evidence.

Sigal’s treating psychiatrist described his depression as severe and noted that his symptoms worsened after his discharge from the hospital. The doctor also reported that Sigal's Global Assessment of Functioning ("GAF") score was low (ranging from 25 to 50, with an average of 45-50) and that his patient was experiencing suicidal ideation. The psychiatrist reaffirmed this evaluation several times over a period of months.

Three years later, MetLife requested an updated evaluation. Sigal’s doctor had retired, however, and his new doctor described his ability to return to work as “indeterminate.” She thereafter noted that, during an interview, Sigal “appeared neat and clean, behaved appropriately and cooperatively, demonstrated normal psychomotor activity, spoke articulately, and displayed a congruent mood with a coherent and goal-oriented thought process.”

MetLife's Psychiatric Claims Specialist thereafter concluded, at least partially on the review of written records, that Sigal was fit to return to work.

Sigal filed an appeal with the plan administrator. Yet another new set of treating doctors failed to respond to the plan’s requests for information. The appeal was denied and his MetLife LTD benefits ceased. Sigal brought a MetLife LTD lawsuit.

”Arbitrary and capricious” vs. “de novo”

Courts do not want to second-guess doctors and insurance company medical experts. Nonetheless, the potential for a conflict of interest is clear when the plan, which may be obligated to pay out benefits, is also in charge of determining whether benefits are due to a claimant.

The Supreme Court decision in Firestone Tire & Rubber Co. v. Bruch tries to split the baby. It establishes that a plan administrator, when evaluating an appeal, must consider the claimant’s evidence with fresh eyes (the “de novo” standard) unless specific plan language requires the administrator to defer to the initial benefit denial unless it is clearly wrong (in legal terminology, “arbitrary and capricious”).

The problem is that the exception swallows the basic rule. Almost all ERISA plans now include the all-important language about the standard under which administrative appeals should be decided, meaning denied.

People who lose LTD benefits almost never get them back through the internal appeals process. They have to go through that step, however, in order to bring a lawsuit. Courts then look only at the process through which the decision was made rather than any underlying medical evidence. They routinely affirm the initial benefit denial. Claimants may be forgiven for feeling that the deck is stacked.

Magic Language, Wrong Page

Benefit denial lawsuits thus become an exercise in finding a flaw in the administrative process. In Sigal, the Southern District of New York found that the reasons for the initial benefit termination were at least plausible. The fatal flaw was in the appeal process.

The language requiring deference to the initial plan denial was on the wrong page. It was included in a supplementary explanatory section, not in the insurance certificate which technically constituted the plan document.

This is the sort of maddening detail that makes people howl in despair at the law’s ability to do justice. In this case, though, it may actually signal a trend away from decades of legal decisions favoring employers and insurance companies.

A Fairer Day in Court for LTD Appeals?

Several recent District Court decisions, including Westfall v. Liberty Life Assurance Company have affirmed LTD claimants’ rights to a full and fair review of administrative appeals. The issue is not always shoddy legal drafting. It may be a question of selective or inadequate review of medical evidence in the initial denial. It is tempting to speculate that some courts may be reaching for reasons to give plaintiffs a second chance.

New Department of Labor rules, effective as of April 1, also affirmatively require that, “Claims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the benefit determination.”

These developments are still too new for their full potential impact to be clear. They may signal a change, however, in the ability of LTD claimants, like Alexander Sigal, to access the benefits that are due to them.


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