First, claimants must put together a solid medical record, especially for self-reported, intermittent symptoms. Second, they should be prepared to argue about offsets. Third, they should exhaust plan appeals before going to court or be ready to show why that would be futile; and finally, the conflict of interest argument may eventually prove to be a winner.
Background of Barber v. Lincoln National Life Insurance
Oliver H. Barber III was a business litigator with the firm of Stites & Harbison. In November 2014, he was diagnosed with Parkinson’s disease and was approved for benefits under the firm’s LTD plan in December 2015.
The plan, issued by Lincoln National Life Insurance Co., provided that a participant was entitled to full disability benefits when he or she could not continue in his or her own occupation. Unlike some other plans, eligibility was not later re-determined under an “any occupation” standard. Thus Barber should not have had to be concerned that he would lose his benefits if it were later determined that he could work at some job other than business litigation.
After his benefits were approved, Barber disclosed that he was also an independent contractor for a political campaign. Lincoln then began reducing his monthly benefit based on his other source of income.
Barber ultimately filed a lawsuit in the Western District of Kentucky against Lincoln. That court granted Lincoln’s Motion for Summary Judgment. Barber appealed to the Sixth Circuit and lost again
Lesson One: Be Prepared with Medical Documentation when Symptoms “Wax and Wane”
The question of whether Barber’s symptoms made it impossible for him to continue to work as a business litigator was not actually argued in this case. But Parkinson’s disease can be hard to diagnose, especially in the early stages. No specific test is dispositive and symptoms can vary considerably from day to day.
In this, Parkinson’s disease is like other disabling conditions including fibromyalgia or chronic fatigue syndrome, where diagnoses can depend on self-reported symptoms, which come and go. Long term disability insurers are notorious for denying these claims.
The best defense is to have a thoroughly developed medical record and to ensure, as far as possible, that medical providers respond in a timely way to requests for information.
Lesson Two: Watch Out for Offsets from Other Income Sources
Many LTD plans contain income or Social Security offsets that ensure employees will actually collect little or nothing from the plan. In Barber, the offset was against outside income. More usually, plans require LTD applicants to apply for Social Security Disability benefits, and then reduce the employer’s obligation by actual or anticipated SSDI payments. This can happen even before a claimant receives any SSDI payments.
There are several things wrongly denied disability claimants can do. The first and most important is to know whether the LTD plan’s benefit formula contains an offset provision. Defensive planning begins with this. The paths then diverge, depending on what kind of offset is at issue.
Barber made two arguments. The first was that his political consulting income should not be used to replace benefits due because he could not practice law. He essentially applied the “own occupation” standard to the outside income. The second was to argue that the offset had been incorrectly calculated because it was based on voluntary reporting rather than tax information. Neither argument worked in the eyes of the court, but might be worth trying again on the basis of slightly different facts.
If the situation had involved an SSDI offset, it would have been important to understand whether the plan required an applicant to apply for Social Security benefits, whether it could offset anticipated, but unreceived SSDI benefits and whether a participant whose SSDI application was denied (as many are at first) was required to appeal. In Bowlin v. The Prudential Life Insurance Company of America, one of the reasons the plaintiff ultimately won was because her LTD plan did not require an appeal.
Lesson Three: Be Ready to Argue about Exhaustion of Administrative Remedies
The usual rule is that LTD claimants must exhaust all internal administrative appeals before filing a lawsuit, unless they can clearly show that any further internal action would be fruitless. Barber argued that internal appeals would have been futile because the offset provisions of the plan were impermissible under ERISA. The court disagreed on the basis of the facts.
However, the court did seem willing to accept the distinction between an illegal plan provision and faulty administration of a legal plan. As above, with slightly different facts, the argument might have succeeded.
This is an area where the law seems to be changing. Federal circuit courts are divided about whether a claimant must exhaust internal remedies where plan provisions violate ERISA. The Department of Labor and the Third, Fourth, Fifth, Sixth, Ninth, Tenth and DC circuits have held that the exhaustion requirement does not apply. The Seventh and Eleventh circuits have held otherwise.
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Lesson Four: The Elephant in the Room is the Plan Administrator’s Conflict of Interest
This is another area where the law may be changing. The Ninth Circuit, for example, recognizes that there is an inherent conflict of interest when the plan administrator both decides on a claimant’s eligibility for benefits and must pay those benefits. As a result, the court tends to subject benefit denials to more rigorous scrutiny than is the case in some other circuits. Even in those jurisdictions that have not yet adopted the Ninth Circuit’s approach, the argument may be worth pursuing.
The Sixth Circuit’s decision was a setback for Oliver Barber, but it was a well-argued case and may be full of good ideas for future LTD plaintiffs.