Under ERISA, insurers/claim administrators are required to give every insurance claim a full and fair review. Courts in the Ninth Circuit have construed this requirement in a manner that requires insurers/claim administrators to do more than simply have an in-house physician or nurse conduct a paper review of medical records.  This trend continues with the decision in Galloway, et. al. v. Lincoln National Life Insurance Company, 2011 U.S. Dist. LEXIS 45866 (W.D. Wash.  April 28, 2011).

From 2000 to 2008, Galloway worked as a machinist for Turbine Engine Components Technologies Corporation (“TECT”).  On January 1, 2002, Lincoln National issued a group life insurance policy to TECT and on October 14, 2004, Galloway, a TECT employee at the time, enrolled in the policy.  The policy contains a provision ensuring continued coverage, without payment of premiums, if a participant becomes totally disabled.

In January 2008, Galloway stopped working at TECT due to Achilles tendonitis.  In July 2008, Galloway requested that Lincoln National grant him a waiver from paying premiums on his life insurance policy due to his total disability.

Lincoln National investigated Galloway’s claim of total disability relying on primarily the medical reports provided by Galloway’s podiatrist.  Lincoln National did not request additional information regarding the restrictions Galloway reported on his Rehabilitation Survey, nor did it ask Galloway when the self-reported restrictions began, which would have been necessary information for it to determine whether he satisfied the relevant elimination period.  The only additional information Lincoln National requested from Galloway, before denying his claim, was an Educational Assessment.  The record indicated, however, that Lincoln National intended to deny his claim even before sending him the Educational Assessment form.

After litigation ensued, the court granted the Estate’s motion to supplement the administrative record with the declaration of Dr. Robert T. Fraser, Ph.D., who was the Estate’s vocational assessment expert.  In doing so, the court held that the Fraser declaration evidenced Lincoln National’s failure to conduct a proper vocational assessment of Galloway’s self-reported limitations.  The court held that this failure prevented the full development of the administrative record, relying on Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 973 (9th Cir. 2006).

The court decided to remand the matter back to Lincoln National so that the parties could conduct a “meaningful dialogue” about Galloway’s self-reported symptoms.  Lincoln National once again conducted a cursory review of Galloway’s claim – primarily limited to asking an independent expert to review reports from his podiatrist – but made no attempt to secure additional information regarding Galloway’s reported restrictions and limitations.  The limited nature of Lincoln National’s investigation did not prevent it from denying Galloway’s waiver of premium claim again after remand.

The court reviewed Lincoln National’s decision under the abuse of discretion standard of review and ruled that Lincoln National abused its discretion because it failed to conduct an adequate investigation into the basis for Galloway’s request for a premium waiver in large part because it failed to contact Galloway’s treating physician.  Specifically, the court ruled:

Here, the legal question before the court is whether Lincoln National abused its discretion in denying Mr. Galloway a waiver of premiums.  This determination depends on whether Lincoln National requested the needed information and offered a rational reason for its denial of Mr. Galloway’s claim.  See Booton v. Lockheed Med. Benefit Plan, 110 F.3d 1461, 1463 (9th Cir. 1997).  If Lincoln National meets this standard its decision to deny benefits would be given substantial deference.  Id.  After a review of the record before and after remand, the court finds that Lincoln National failed to follow-up with Mr. Galloway, or any medical expert, regarding the limitations Mr. Galloway listed in his self-assessment that, if true, rendered him completely disabled during the elimination period.

Thus, Lincoln National’s denial of benefits was not based on a full and fair review of the record as required by ERISA and Ninth Circuit authority.  See id.  (“Lacking necessary—and easily obtainable—information, [the plan administrator] made its decision blindfolded.”); see also Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F.3d 863, 870-71 (9th Cir. 2008) (the plan administrator must give a “fair chance” to the beneficiary to present evidence to support her claim); see also Kunin v. Benefit Trust Life Ins. Co., 910 F.2d 534, 538 (9th Cir. 1990) (holding that to deny the claim without explanation and without obtaining relevant information is an abuse of discretion).  As it turned out, the opportunity for Lincoln National to engage in a meaningful dialogue with Mr. Galloway, before or after it made the initial denial decision, was cut short by the death of Mr. Galloway only a month later.

On remand, Lincoln National was given a second opportunity to attempt a full and fair review of Mr. Galloway’s claimed restrictions.  The evidence actually garnered during remand, however, only further exemplified why a meaningful dialogue is required in the first place.  On remand, the information provided by the treating physicians supported the claimed restrictions in Mr. Galloway’s self-assessment.  These restrictions should have formed the basis of Lincoln National’s original review but, due to its failure to consider fully the claims made by Mr. Galloway before denying his claim, it never contacted his treating physicians.

Lincoln National’s decision to deny Mr. Galloway’s claim without obtaining all the required information and without engaging in a meaningful dialogue with him was an abuse of discretion.  Moreover, had it engaged in any dialogue with Mr. Galloway, Lincoln National would have learned that two of his treating physicians believed him to be unable to perform any work, including sedentary work.  Based on the record before the court, and on its finding that Lincoln National abused its discretion in denying Mr. Galloway the requested waiver of premiums for his life insurance policy, the court orders Lincoln National to pay life insurance benefits to the Estate of Mr. Galloway.  (Emphasis added.)

Thus, because Lincoln National failed to contact Galloway’s treating physicians and otherwise failed to properly gather medical information related to Galloway’s claim, he was denied a full-and-fair review owed to all ERISA claimants.  The court determined that Lincoln National’s failure to conduct an adequate investigation and failure to engage in a “meaningful dialogue” with Galloway regarding the claim resulted in an abuse of its discretion, and order Lincoln National to pay the full death benefits due under the policy.

If you believe you have an individual or ERISA-governed life insurance, health insurance or disability insurance policy issued by Lincoln National, or any other insurer, for which you have failed to properly receive benefits, contact McKennon Law Group PC for a free consultation.