Disability Insurance Archives - Page 40 of 44

Claim Administrator’s Failure to Contact Treating Physicians Found To Be An Abuse Of Discretion Under ERISA

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.

Exhaustion of Administrative Remedies Under ERISA Not Required If Exhaustion Would Have Been Futile

Terrance Burnett was eligible for short-term disability (“STD”) benefits and long-term disability (“LTD”) benefits through employee welfare benefit plans funded by his employer, The Raytheon Company, and administered by Metropolitan Life Insurance Company (“MetLife”). After his doctors stated that Burnett’s psychiatric condition prevented him from performing his job duties, he filed a claim for STD benefits. While, MetLife denied his claim for STD benefits, in Burnett v. Raytheon Co. Short Term Disability Basic Benefit Plan, 2011 U.S. Dist. LEXIS 40725 (C.D. Cal. Apr. 14, 2011), Judge Dolly Gee ruled that MetLife abused its discretion when it denied Burnett’s claim, and awarded him the STD benefits he sought. In addition, the court held that Burnett was eligible for some LTD benefits, even though he had yet to file an LTD claim.

In ruling that the medical records supported Burnett’s claim, the court Gee criticized the findings of MetLife’s so-called “independent” expert Dr. Mark Schroeder, a psychiatrist. Specifically, the court determined that “Dr. Schroeder arbitrarily discounted the opinion of Dr. Friedman, the treating physician whom Burnett saw weekly, and distorted the importance of the progress reports submitted by Dr. Anderson. Further, the court held that Dr. Schroeder “overemphasized the significance of Dr. Anderson’s February 20 and March 19 progress reports to the exclusion of the overwhelming weight of the evidence in the record, including the characteristics of the job that Burnett previously occupied and the corroborating results of the MMPI-2.”

Overall, the court classified Dr. Schroeder’s findings as “unreasonable” and awarded Burnett “STD benefits for the maximum 10-week period—from February 15 through April 25—because the evidence clearly shows that Burnett qualified as fully disabled during that time period.”

In addition, the court held that Burnett was entitled to LTD benefits, despite the fact that because he had yet to file a claim for LTD benefits, he could not have met ERISA’s requirement that a claimant exhaust his administrative remedies. The court ruled that requiring Burnett to exhaust his administrative remedies with respect to his LTD claim would have been futile:

17. The general exhaustion rule covering ERISA claims requires a claimant to “avail himself or herself of a plan’s own internal review procedures before bringing suit in federal court.” Diaz v. United Agr. Employee Welfare Benefit Plan & Trust, 50 F.3d 1478, 1483 (9th Cir. 1995) (citing Amato v. Bernard, 618 F.2d 559, 566-68 (9th Cir. 1980)). The general rule of exhaustion, however, is not a statutory requirement, and a court “may waive the exhaustion requirement, and should do so when exhaustion would be futile.” Horan v. Kaiser Steel Ret. Plan, 947 F.2d 1412, 1416 (9th Cir. 1991) (citing Amato, 618 F.2d at 568).

18. The Court finds that, under the facts of this case, Burnett’s exhaustion of the LTD administrative remedies would have been futile for the following reasons. First, the definitions for “fully disabled” for purposes of STD benefits and LTD benefits are substantially the same. (A.R. 7, 39.) Second, the STD and LTD plans are integrated, such that they rely on and refer to each other. (A.R. 40.) MetLife’s termination of Burnett’s STD Plan benefits essentially doomed any claim he might have to LTD Plan benefits. Finally, because MetLife is the designated Claim Administrator under both the STD and LTD plans (A.R. 6, 38.), the plans are administered by the same entity. In light of the foregoing—considered together with MetLife’s unwavering denial of Burnett’s post-March 13 STD benefits—MetLife likely would have denied any LTD benefits claim Burnett submitted for the same reasons it terminated his STD benefits claim.

19. Finally, the Court considers the policy implications of the exhaustion doctrine, which include “the reduction of frivolous litigation, the promotion of consistent treatment of claims, the provision of a nonadversarial method of claims settlement, the minimization of costs of claim settlements and a proper reliance on administrative expertise.” Diaz, 50 F.3d at 1483. None of these policy considerations preclude the Court from applying the futility exception to the facts of this case. To require Burnett to submit a written claim for LTD benefits—which would be subject to a denial similar to that of his STD benefits claim—only then to require him to exhaust his administrative appeals and then possibly return to this Court, would exalt form over substance and defeat the fair and efficient administration of justice.

The court therefore awarded Burnett LTD benefits through July 1, 2008, the date of the more recent medical record in the Administrative Record.

Finally, the court’s ruling in also interesting for its analysis of MetLife’s conflict of interest. Previously, courts generally held that if a plan was self-funded – that is, benefits were paid by the employer, not the insurer/claims administrator – then there was little danger that the administrator’s claim decision was improperly impacted by an interest in reducing the amount of claims it paid out. Here, however, the Court noted that:

Although no structural conflict of interest exists, MetLife does maintain a contract with Raytheon to provide claim administration services under Raytheon’s disability benefit plans. Thus, MetLife has an incentive to maintain that contract by keeping the cost of Raytheon’s disability benefit program low. This is but one factor the Court weighs in determining whether MetLife abused its discretion in terminating Burnett’s STD benefits beyond March 13. See Abatie, 458 F.3d. at 967 (noting that the Court’s abuse of discretion review is to be informed by the nature, extent, and effect on the decision-making process of any conflicts of interest).

Thus, claimants must always be aware that a claims administrator’s decision could be improperly influenced, not only by a desire to pay our less in claims, but also to keep the employers as a customer.

Fighting An Insurance Claim Denial Will Often Pay Off

It will not be surprising to many readers of this blog that insurance companies often deny life insurance, health insurance and disability insurance claims. Many times, insurance companies are wrong in their decisions. And, sometimes they acknowledge their mistakes. The question becomes: what are the odds of an insurance company changing its mind and reversing the decision? Our firm knows firsthand that the odds are extremely good when a reputable and respected law firm is involved in representing the policyholder’s interests. But that is just our experience. What is the overall experience when a health insurance claim is denied and a subsequent appeal is filed? We now have our answer.

In his article entitled “Don’t take a health insurer’s rejection as the final word on your medical claim,” Tom Murphy of the Associated Press cites a recent report from the Government Accountability Office which found that overall, appeals have an approximately 50% success rate. The article lists a number of actions policyholders can take to increase the likelihood of success on appeal. Murphy mentions obtaining and submitting copies of the entire medical file, enlisting a treating doctor to write letters explaining the policyholder’s relevant medical history, understanding policy language, writing a detailed letter with supporting records and information and complying with all deadlines.

The article does not mention that the Employee Retirement Income Security Act (“ERISA”) covers most health insurance appeals. ERISA requires that a plan participant meet certain deadlines in order to qualify for benefits, and also requires that a plan participant appeal a claim denial before he or she may sue. Often times, a plan participant will want to “pad” the administrative record with records and information in support of the appeal and which will be helpful in a later lawsuit, should one be filed. It is often critical that a plan participant hire an attorney to help with this process, as knowing and citing to pertinent federal ERISA law can be the difference between winning and losing an appeal.

Here is Murphy’s article verbatim:

FIGHTING AN INSURANCE CLAIM DENIAL CAN PAY OFF

By Tom Murphy, The Associated Press
Published Friday, April 8, 2011

INDIANAPOLIS — Don’t take a health insurer’s rejection as the final word on your medical claim.

Appeals can have a surprising success rate if patients shape a good argument with help from their doctor, some research and a healthy dose of persistence. Insurers always offer at least one chance to appeal when they deny a claim. Here’s how to make your case.

For starters, what are the odds of success?

A recent report from the Government Accountability Office found a 50 percent success rate of appeals to insurers in some states.

Insurance companies often make the initial decision to deny a claim based limited information like a diagnosis or procedure code from a claim form the doctor submits. They rarely see a patient’s file for that first decision, said Jennifer Jaff, executive director of Advocacy for Patients with Chronic Illness Inc., a non-profit that helps patients with claim denials.

“When you provide them with additional clinical information … it may turn out to be a very easy decision for them,” she said.

What are the first steps to take after receiving a rejection?

Learn as much as you can about the reason. Get the policy language and any information the insurer used to make its decision. Patients are entitled to this, so persist if the insurer moves slowly.

It’s also important to know the insurer’s appeal process. This should be laid out in the letter you receive telling you about the rejection. Understand the deadlines for appealing.

“These deadlines are serious,” Jaff said. “I’ve never seen an insurance company grant an extension.”

How do you build your case?

Write a detailed argument with records backing up your claims. Enlist your doctor’s help.

If the insurer says it doesn’t have to pay because your condition existed before your coverage began, a doctor may be able to argue otherwise.

The insurer may say the treatment isn’t medically necessary. Your doctor can illustrate how all alternatives were exhausted before you started receiving the treatment in question.

Rely on more than just a doctor’s statement.

“Insurance companies do not assume everything a doctor says in a letter is 100 percent true and accurate,” Jaff said. “What they really want to see are the medical records.”

Patients should be prepared to send their insurer any of those confidential records that would support their case.

If the insurer deems a treatment experimental, some additional research may be needed, and your doctor can help there as well. Medical journal articles can show an insurer that your treatment is a widely accepted practice.

If the doctor is unwilling or unavailable for help, Jaff recommends for research the National Institutes of Health website www.pubmed.gov . Patients can use it to search medical journals around the world for articles on their treatment.

Abstracts, summaries and some articles are free. Those that are not can be pricey, costing between $30 and $50 to buy online. But patients also can check with a medical library near them for copies.

Asking for a compassionate allowance can be another strategy for patients. Some insurance policies will make exceptions to cover something if it could be lifesaving.

An employer that offers a self-funded plan also might be persuaded to overrule the insurer and permit coverage, but Jaff said this is rare. Self-funded plans are generally used by big employers. In those cases, they provide the actual insurance and the managed care company just administers the plan.

Ask your human resources department if your company plan is self-funded.

What are the keys to a successful appeal?

Keep your emotions out of the argument and give the insurer something new to consider. Avoid rehashing information the company already has.

“It’s a business decision, it’s not personal on the insurer’s side,” said Pat Jolley of the Patient Advocate Foundation, another non-profit that helps people handle payment problems.

Know your insurer’s appeal process. Some may offer a couple rounds of internal reviews and provide a specialist to examine your claim. That means you can have an oncologist review your claim for cancer treatment.

Keep detailed notes of your contact with the insurer, including which representative you spoke to and when.

Send appeals by certified mail to document when an insurer receives them in case the company later claims you missed a deadline.

Communicate in writing whenever possible. This keeps you from having multiple phone conversations with different insurance representatives who provide different answers.

Ninth Circuit Clarifies ERISA’s Full and Fair Review Standard by Imposing New Requirements on Plan Administrators in Salomaa Case

ERISA requires that an administrator provide a claimant with a “full and fair” review of a denial decision. In a recent ruling entitled Salomaa v. Honda Long Term Disability Plan, __ F.3d __, 2011 U.S. App. LEXIS 4386 (9th Cir. Cal. Mar. 7, 2011) the Ninth Circuit Court of Appeals imposed a new requirement that an insurer must meet in order to conduct a full and fair review. Specifically, an administrator must provide a claimant with copies of the internal medical reports it generated and relied upon when making the decision when it denies a claim. The Ninth Circuit held that the failure to provide the claimant with copies of the medical reports, and also to sufficiently explain what additional information might be needed to support the claimant’s claim for benefits, constituted a violation of ERISA’s full and fair review requirement.

Samuel Salomaa was an employee of the American Honda Motor Company, Inc. for more than twenty years. His supervisor described him as “the best employee to have worked for me” and Salomaa never called in sick, never left work early and never came in late. Unfortunately, in October 2003 Salomaa developed what he thought was the stomach flu. However, this “flu” was followed by grossly excessive fatigue, headaches, insomnia and excessive sensitivity to stimuli.

Before his illness, Salomaa used to jog the two miles to and from work. However, because getting up and getting dressed for work often left Salomaa too exhausted to even drive to work, he began to stay home. When he did make it to work, his severe fatigue rendered him only able to “do paperwork for a few minutes.” Salomaa underwent a battery of tests and examinations at Kaiser Permanente and was eventually diagnosed with Chronic Fatigue Syndrome (“CFS”).

Because he was no longer able to perform his job duties, Salomaa filed a claim for disability benefits with Life Insurance Company of North America, which is a wholly owned subsidiary of CIGNA. Salomaa made his claim though the ERISA-governed disability insurance plan offered by his employer. However, his claim for benefits was denied after CIGNA concluded that because his “thyroid, calcium, albumin, serum electrolytes, and CBC results were normal,” his medical records contained “no positive objective physical findings” supporting disability.

With their decision, CIGNA ignored the explanation by Salomaa’s physicians that for those suffering from CFS “laboratory tests are always normal and there is no test that is available at the present time for chronic fatigue syndrome.” CIGNA’s decision to ignore this explanation was especially egregious given that both the Center for Disease Control and CIGNA’s own health care guidelines explain that there are no specific diagnostic studies specific to the diagnosis of CFS and that chronic fatigue syndrome is diagnosed by excluding other underlying diseases.

After CIGNA denied his claim for disability benefits, Salomaa filed a lawsuit. In reviewing CIGNA’s decision, the Ninth Circuit noted that because CIGNA both administers the insurance plan and pays benefits out of its own pocket it is operating under a conflict of interest and “has a financial incentive to cheat” Salomaa and other claimants.

While the district court upheld the CIGNA’s claim decision, the Ninth Circuit ruled that CIGNA’s decision was “illogical, implausible and without support.” In holding that CIGNA abused its discretion, the Ninth Circuit noted that every doctor who personally examined Salomaa determined that he was disabled and that CIGNA unreasonably demanded objective tests to prove the existence of a condition for which there are no objective tests.

The Ninth Circuit also determined that CIGNA failed to provide Salomaa with a full and fair review of his claim. Specifically, while CIGNA’s internal physicians concluded (without examining Salomaa) that he was not disabled, CIGNA did not “give Salomaa and his attorney and physician access to the two medical reports of its own physician upon which it relied.” The Court also criticized CIGNA for telling Salomaa that he should provide “x-rays, CT, MRI reports, etc. that support your physician’s assessment,” but failing to tell him exactly what tests it wanted. Indeed, the Ninth Circuit classified this request as “absurd” since CIGNA was well aware that x-rays, computerized tomography and magnetic resonance imaging are not used to diagnose CFS. The court explained:

The plan evidently based its denial in large part on review of Salomaa’s file by two physicians, one for the first denial, another for the final denial. They both wrote their appraisals for the plan administrator. Yet the plan failed to furnish their letters to Salomaa or his lawyer. The regulation, quoted above, requires an ERISA plan to furnish “all documents, records, and other information relevant for benefits to the claimant.” A physician’s evaluation provided to the plan administrator falls squarely within this disclosure requirement. The disclosure requirement serves the purpose of facilitating what the regulation also requires, providing claimants “the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits.” Had the plan met its duty of providing copies of its physicians’ evaluations, then Salomaa’s treating physicians could have provided such comments and performed such additional examinations and tests as might be appropriate. By denying Salomaa the disclosure and fair opportunity for comment, the plan denied him the statutory obligation of a fair review procedure.

As stated by the Salomaa court, in order to “conform to the claim procedure required by statute and regulation,” a plan administrator is required to “explain, upon denial, any additional ‘information needed’” to support a claim for benefits. The Salomaa court concluded:

The administrator’s procedural violations are similar to those in Saffon v. Wells Fargo & Company Long Term Disability Plan and Boonton v. Lockheed Medical Benefit Plan. There, as here, the administrator did not provide material sufficient to meet the requirement of “meaningful dialogue.” We held in those cases, where the denials were based on absence of some sort of medical evidence or explanation, that the administrator was obligated to say in plain language what additional evidence it needed and what questions it needed answered in time so that the additional material could be provided. An administrator does not do its duty under the statute and regulations by saying merely “we are not persuaded” or “your evidence is insufficient.” Nor does it do its duty by elaborating upon its negative answer with meaningless medical mumbo jumbo. In this case, the skeptical look required by us in a case of a conflicted administrator requires us to conclude that the administrator acted arbitrarily and capriciously, both procedurally and substantively, thereby abusing its discretion in the denial of Salomaa’s claim.

Finally, the Ninth Circuit criticized CIGNA for failing to consider Salomaa’s Social Security disability award and for shifting the reason for its denial decision after Salomaa and his physician’s refuted CIGNA’s initial denial decision.

After concluding that CIGNA abused its discretion, the Ninth Circuit remanded the case to the district court with instructions that Salomaa be awarded the disability benefits he initially sought.

Plan participants will certainly want to use this decision as a key component of their arguments that plan administrators/insurers did not give them a full and fair review.

Dental Hygienist Wins Large Jury Verdict in Disability Insurance Lawsuit

In 1996, Plaintiff Laura Kieffer developed carpal tunnel syndrome and severe cervical pain which forced her to stop working as a dental hygienist. Thereafter, Kieffer started receiving disability payments under an individual disability insurance policy she purchased from Paul Revere Life Insurance Company and its parent company the Unum Group Corporation. Even though she had been receiving disability payments for nearly ten years, Unum terminated her benefits in March of 2008. As a result, Laura sued in Los Angeles Superior Court alleging that Unum had unreasonably terminated her benefits. She sued for breach of contract, insurance bad faith and for punitive damages. This week, a jury awarded her $4.2 million in compensatory and punitive damages. Unum intends to appeal the verdict.

Ninth Circuit Holds Tight to ERISA Interpretation Rule That Courts Will “Not Artificially Create Ambiguity Where None Exist”

In 1987 Robert Fier started working for the Boyd Group (“Boyd”) as a casino slot repairman. After a promotion to management, Fier subsequently enrolled into Boyd’s two benefits programs: a Long Term Disability (“LTD”) Policy and an Accidental Death and Dismemberment Insurance (“AD&D”) Policy. Both policies are maintained pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.

In 1992, as a result of a shooting, Fier became permanently quadriplegic (i.e. the loss of both arms and legs). In 1993, Fier returned to work in a new job specifically tailored to his physical limitations where he earned the same salary as he had prior to the accident. In 1997, Fier’s salary was reduced by $20,000 when he was assigned to a new position at Boyd. In early 1997, Fier submitted a claim for benefits under the LTD policy, and received benefit payments from UNUM. Between 1997 and late 2004, UNUM paid Fier $152,069.02.

In late 2004, UNUM informed Fier that regarding his 1997 LTD claim, it should have ceased payments in 1998 because Fier left Boyd to take another job. At the new job, Fier was earning approximately the same salary he had earned before the accident. The rationale for UNUM’s decision was based upon the LTD policy which stated:

Disability benefits will cease on the earliest of:

The date the insured is no longer disabled;

The date the insured dies;

The end of the maximum benefit period;

The date the insured’s current earnings exceed 80% of his pre-disability earnings.

Fier filed suit against UNUM in the District Court of Nevada for both a declaratory judgment entitling him to continued payment of benefits, and for four years of benefits from 1993 until 1997. The Nevada district court found Fier was not eligible for benefits between 1993 and 1997 because he was working at his full salary and that he was not entitled to benefits after 1998 when he began his new job with a salary at the pre-disability level. The district court also held Fier was no longer covered under the LTD policy because he no longer was employed by Boyd. Lastly, the district court rejected Fier’s claim for benefits under the AD&D policy because his feet and hands had not been severed from his body.

On appeal with the United States Court of Appeals for the Ninth Circuit the lower court correctly determined Fier’s ineligibility for benefits from 1993 to 1997 and from 1998 forward under the LTD policy. The policy was not ambiguous as to when benefits would terminate. In addition, the Ninth Circuit court also held the district court correctly determined that Fier’s LTD benefits terminated in 1998 when Fier left his employment with the Boyd.

With respect to the AD&D policy, Fier appealed the district court’s determination that to be eligible for any AD&D benefits; he had to have suffered dismemberment by “severance.” The Ninth Circuit, not having had to construe this term before, relied upon Cunninghame v. Equitable Life Insurance Society of the Untied States, 652 F.2d 306 (2d Cir. 1981). In Cunninghame, the Second Circuit held the policy’s definition of ‘loss’ was not ambiguous, and interpreted the terms ‘dismemberment by severance’ by stating:

The word ‘dismemberment’ itself implies actual separation; the noun derives from the transitive verb ‘dismember’, defined as meaning ‘to cut or tear off into pieces; take apart roughly or divide (a whole) into sections or separate units’ or, obsoletely, to ‘lop’ or ‘sever’. “Dismemberment” as a noun, therefore, refers to “the act of dismembering or the state of being dismembered: division into separate parts or units.”

Therefore, the Ninth Circuit concluded that Fier was not owed any benefits under the AD&D policy because he “did not suffer the physical detachment of his limbs.”

The Court applied long-standing law in the Ninth Circuit that if there is no ambiguity to the interpretation of a policy provision, courts will not create one, and will “interpret terms in ERISA insurance policies in an ordinary and popular sense as would a [person] of average intelligence and experience.” Evans v. Safeco Life Ins. Co., 916 F.2d 1437 (9th Cir. 1990).

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