Two Chronic Fatigue Syndrome Victims Win Denied Disability Insurance Appeal

Sacramento, CAIn two recent and separate incidents, two people who were wrongfully denied disability insurance won their appeals in court. Coincidentally, they both suffer from Chronic Fatigue Syndrome (CFS).

Judi Peterson had her benefits terminated by her employer, AT&T, even though she was deemed completely disabled from CFS since 2006. This May, she won her wrongfully denied disability lawsuit against her employer and insurer in the U.S. District Court for the Northern District of California. The court (in a non-jury trial) found that AT&T Umbrella Benefit Plan No. 1 ("AT&T"), administered by third-party administrator Sedgwick CMS, abused its discretion and wrongfully terminated Peterson’s long-term disability benefits. Furthermore, the court ruled that AT&T’s benefits termination was “illogical and without support in inferences that may be drawn from the facts”.

Despite the fact that her condition did not get any better since 2006, AT&T terminated her benefits: their reasoning was “lack of objective evidence”, which is a common denial tactic. Although there are no objective tests for CFS, AT&T hired three independent medical examiners from Insurance Appeals, LTD (also known as Network Medical Review or NMR) and all three made incorrect diagnoses. AT&T also used documents that didn’t reflect CFS, specifically a medical record review and a Transferable Skills Analysis test.

The court further found that AT&T disregarded the law requiring it to ensure that the reasons for the termination of benefits actually had factual support. Brent Brehm, the lead trial attorney representing Peterson, said the court’s decision illustrates that policyholders cannot always rely on an 'unbiased' third-party administrator to make logical and fact-based benefits decisions. "Denials must be carefully scrutinized, and if the conclusions appear unfair, incorrect, or ridiculous, they probably are,” said Brehm.

(See more information about Peterson v. AT&T Umbrella Benefit Plan.)

In the second case, an Oregon court found in favor of former attorney Kenneth Ayers’ wrongful denial of benefits claim.

His employer had an ERISA-regulated health benefits plan maintained by the Life Insurance Co. of North America (LINA). Although LINA initially approved Ayers’ LTD and paid him $5,000 per month, they terminated his benefits five years later, in 2007, determining that Ayers suffered from depression and not CFS. The U.S. District Court for the District of Oregon determined otherwise.

In March 2008 Ayers appealed LINA's benefits termination, but LINA upheld its decision. Then in August 2008 Ayers was awarded a lump sum of more than $108,000 in SSDI benefits, retroactive from March 2002.

In September 2008 Ayers filed a claim for long term disability (LTD) benefits against LINA and the insurer counter-claimed, claiming that Ayers owed them $99,885 in allegedly overpaid benefits.

In Ayers v. Life Insurance Company of North America, the court ruled that Ayers indeed suffered from CFS and it had resulted in total disability. The district court found that Ayers’ documentation proved he was unable to work due to fatigue, muscle pain, sore throats, cough, headaches, poor sleep and chest pain. Although Ayers is suffering from depression, it is unrelated to CFS impairments. Medical experts testified that, although Ayers is suffering from depression, even severe depression could not result in his severe cognitive impairments. The court ruled out psychological issues at the time of his CFS diagnosis.

District Judge Ann Aiken raised another issue regarding whether LINA made fraudulent statements and commissioned false medical reports to facilitate termination of Ayers' LTD benefits. In conclusion, Ayers adequately supported his "unclean hands" defense to LINA's equitable claim asserting overpayment, and the court separately held that such a defense was not preempted under ERISA.