Many people purchase accidental death and dismemberment insurance or disability insurance to protect themselves should they ever become injured and unable to work.  If they become injured, they file a claim with their insurance company, and, after a potentially lengthy process, the insurance company may start to pay disability or accidental death and dismemberment benefits.  Sometimes, however, after initially paying disability benefits, an insurer will suddenly change its stance on the insured’s disability and terminate the benefits.  But there is a problem: The insured has not recovered, and his medical condition has not become better.  The insured still cannot return to work.  If the insured was disabled, and nothing has changed, why the sudden termination of benefits?  Thankfully, courts also question such a change of position.

Many courts have questioned an insurers’ termination of benefits when the insurer lacks evidence that the insured’s health has improved.  For example, the Ninth Circuit Court of Appeals has criticized a termination of benefits because the benefits had already been paid for a year and the insurer lacked evidence that the insured’s health had improved.  See Saffon v. Wells Fargo & Co. Long-Term Disability Plan, 522 F.3d 863, 871 (9th Cir. 2008) (“After all, MetLife had been paying Saffon long-term disability benefits for a year, which suggests that she was already disabled.  In order to find her no longer disabled, one would expect the MRIs to show an improvement, not a lack of degeneration.”) (emphasis in original).  The Eighth Circuit also criticized an insurer for similar conduct.  In that case, the Eighth Circuit noted that “[n]othing in the claims record justified [the administrator’s] decision that a change of circumstances warranted termination of the benefits it initially granted.”  Walke v. Group Long-Term Disability Ins., 256 F.3d 835, 840 (8th Cir. 2001).

Courts view the failure to establish improvement as a factor in a larger assessment of whether the insurance company improperly terminated the insured’s benefits.  The case of Backman v. Unum Life Insurance Company of America, 191 F.Supp.3d 1053 (N.D. Cal. 2016), provides a good example of this analysis.  In Backman, Crosscheck, Inc. employed Janet Backman as an accounting manager.  Crosscheck, Inc. purchased a long-term disability plan with Unum Life Insurance Company of America.  The Employee Retirement Income Security Act of 1974 (“ERISA”) governed the plan.  Ms. Backman, who was covered under the plan, developed lower back pain and pain in her right leg.  The pain became so significant that she ceased working.  On February 16, 2012, she applied for long-term disability benefits.  In April 2012, Unum approved the claim based on Ms. Backman’s medical records, claim information and conversations with her doctors.  Ms. Backman also applied for Social Security Disability Insurance (“SSDI”) benefits.  The Social Security Administration awarded her SSDI benefits in November 2012.

After Unum terminated Ms. Backman’s benefits, Ms. Backman filed an administrative appeal with Unum.  Unum denied the appeal, concluding that her “report of pain and its limiting effects on [her] functional capacity [is] out of proportion to the clinical/diagnostic findings.”  Id. at 1057.  During the administrative appeal process, Unum’s medical examiners reviewed Ms. Backman’s medical records and concluded that she could return to work.  When denying the appeal, Unum placed heavy emphasis on its own medical consultants and gave little weight to the opinions of Ms. Backman’s treating physicians.  Unum also placed little weight on Ms. Backman’s subjective reports of pain.  Ms. Backman sued Unum in the Northern District of California.

The court ruled that Ms. Backman “continued to be disabled within the meaning of the LTD Plan as of December 2013, and was entitled to have the Plan disability benefits continue.”  The court based its ruling on a number of factors.  The court disapproved of Unum’s favoring of its experts over Ms. Backman’s treating physicians, the discounting of the award of SSDI benefits and the failure to place any significant weight on Ms. Backman’s subjective reports of pain.

In its analysis, the court also emphasized the “lack of evidence of a change in condition.”  Id. at 1070.  The court stated:

Unum’s justification for the 2013 termination of Backman’s benefits is further undermined by its initial 2012 disability determination, which included subjective reports of pain that were essentially unchanged at the time of the termination . . . the Plan here paid benefits for two years before determining that plaintiff was no longer disabled by her radiculopathy and back pain . . . [Another courts has] concluded it was not proper for [a] Plan to find the medical evidence was sufficiently objective proof for an initial award of benefits only to require “more objective” evidence of pain to avoid termination of those benefits.  [Here] the Plan’s termination of benefits appears particularly inappropriate given the lack of evidence suggesting that the claimant’s pain had improved or her admittedly degenerative condition had reversed course.  Though there are conclusory statements in the Unum consultants’ notes to the effect that Backman’s condition had improved since the disability determination, the Court’s review of the evidence does not support that conclusion. While Unum is not held to a particular standard to show changed conditions, the credibility of its consultants’ conclusions to terminate benefits are undermined when there is no evidence of improvement. (internal citations omitted)

As Backman shows, courts look to a variety of factors to determine whether an insurer has properly terminated an insured’s benefits.  The lack of evidence of improvement is one of those factors.  When an insurer terminates benefits without signs of the insured’s improvement, there are often other improprieties that, when viewed as a whole, will compel a court to reverse a termination of benefits.