Firm News Archives - Page 31 of 76

Group Life Insurer’s Literal Policy Interpretation Penalizing Insured for not working on Paid Holiday Rejected

Group life insurance policies often have confusing language about when they become effective. A trial court recently interpreted one to mean that the policy had not become effective to a full-time employee, though he was already eligible for the coverage, because he was not physically present at work when the policy was issued to his employer. Instead he was at home for a paid holiday and then in the hospital on sick-leave because of a sudden and fatal illness. The insurer and trial court penalized the employee for taking his paid holiday and sick-leave. They docked him the life insurance proceeds for which he had paid. The dispute centered around the policy’s “effective date of coverage” provision: whether being a full-time employee was enough to make the policy commence even if out for a sick-day. Or whether the employee had to be actively working in the employer’s building.

Fortunately for Michelle Sequeira, the California Court of Appeal, in Michelle Sequeira v. Lincoln National Life Ins. Co., — Cal. App. 4th — (Aug. 31, 2015), reversed the trial court’s draconian decision denying her life insurance benefits based on such a policy interpretation. The trial court had concluded Mrs. Sequeira was not entitled to receive the life insurance proceeds for which her husband had already paid premiums because the policy had not yet become “effective” when her husband died because he had yet to return to actual work from his paid holiday and sick-leave. The trial court got this wrong, buying the insurer’s literal interpretation of confusing policy language the insurer drafted. The Court of Appeal correctly noted that the trial court failed to interpret ambiguous policy language in favor of the insured, which has been the law in California for decades.

Mrs. Sequeira’s husband Donald Sequeira, like most of us, did not work on January 1, 2010 because it was a paid holiday. Tragically, he was hospitalized the next day, a Saturday, due to a sudden viral infection of his heart. He died four days later on Wednesday, January 6. He did not work during that period. But Mr. Sequeira had worked for his employer, the City of Vacaville since 1990. He had dutifully worked as a full-time employee for the City for two decades when his wife Michelle (the beneficiary of his group life insurance policy through the City) submitted a claim for his life insurance proceeds.

The insurer, Lincoln National Life Insurance Company denied the claim on a technicality. It argued under convoluted policy language that because Mr. Sequeira was not physically present at work on the day the policy incepted and he became eligible for coverage (nor any time before he died), the group policy was not yet effective as to him. Even though he was eligible for coverage, had paid premiums for the policy and had been a full-time employee for years before he died, the insurer still denied the claim contending the policy was not yet effective to him. Thankfully the appellate court rejected National Life’s and the trial court’s non-sensical, though technically feasible, policy interpretation. It just doesn’t make any common sense that a full-time employee eligible for group life insurance through his employer should be penalized because he did not work on a paid holiday or during his paid sick-leave.

Under the policy’s language, Mr. Sequeira became “eligible” for coverage on January 1, 2010 when the policy was issued by Lincoln National to his employer, the City. But the policy limited his “effective date of coverage” until “the day you resume Active Work, if you are not Actively at Work on the day you become eligible.” The policy defined “Active Work” and “Actively at Work” as “the full-time performance of all customary duties of an employee’s occupation at the EMPLOYER’S place of business . . .” Thus, Mr. Sequeira’s “effective date of coverage” was when he resumed performing his job-duties full-time at the City if he was not performing them full-time on January 1, 2010, the day he became “eligible” for coverage (or January 1 if he was performing his job duties full-time for the City on that date).

The insurer (and the trial court) determined the policy’s definition of Active Work unambiguously meant Mr. Sequeira had to be physically present at the City’s office building actually working on or after his date of eligibility for the insurance to kick-in, rather than merely having the status of a full-time employee like he did. Since Mr. Sequeira was not physically at the City’s office building working on January 1, 2010 and did not come back to work before he died, the trial court held the policy was not yet “effective” to him.

The Court of Appeal soundly rejected the trial court’s interpretation of the policy. It concluded the policy language was ambiguous, meaning it was susceptible to at least two reasonable interpretations and, therefore, under long-standing California law, had to be strictly interpreted against the insurer and in accordance with the insured’s reasonable expectations of coverage. The appellate court had no trouble at all finding what the insured would have reasonably expected:

We have no trouble determining that Sequeira reasonably expected that the supplemental policy was effective before his death. He enrolled in coverage in October 2009 and made premium payments for coverage later that year. Lincoln then issued a policy on January 1, 2010. Sequeira could reasonably expect that the supplemental policy was effective on January 1, 2010, and he certainly would not expect that the coverage he paid for would be ineffective because he took New Year’s Day off from work and became ill the next day. “An employee reasonably would expect his coverage to extend beyond the time periods that he is physically at work and to cover those hours and days when he is out of the plant due to an illness.” “Surely, employees are entitled to take their sick leave, vacations, and holidays without losing their status as full-time workers.” [Citations omitted].

The Court of Appeal concluded the policy’s definition of “Active Work” had two reasonable interpretations, the one advanced by the trial court and also the one advanced by Mrs. Sequeira, i.e. her husband only had to be a full-time employee to be considered “Actively at Work,” not actually perform his job duties while physically present at the City’s building. The Court looked at other parts of the policy to construe the phrase “full-time performance” in the “Active Work” definition in the context of the entire policy, as it must under the law. It noted the policy defined “full-time employee” to mean a worker that is permanent, not a temporary worker that has another job and regularly works limited hours for the City. Because that definition did not depend on the employee being physically present on the job at a given moment in time but on his employment status, the Court reasoned a reasonable insured could interpret “full-time performance” in the definition of “Active Work” to also refer to employment status.

The Court of Appeal also examined out-of-jurisdiction decisions that reached the same conclusion when interpreting similar policy provisions. And it applied the insurer’s interpretation of “Active Work” to other policy provisions that used the same policy definition. It concluded the insurer’s interpretation led to bizarre meanings to those provisions but the insured’s to far more sensible results. For example, the policy had a waiting period requiring “30 days of continuous Active Work.” Under the insurer’s interpretation of “Active Work,” an insured employee would have to actually work thirty days continuously including weekends and holidays to be eligible for coverage under the policy. The Court found that was a strained interpretation of the waiting period provision “as a matter of common sense.” It would cause an insured to jeopardize coverage by not working on a weekend or calling in sick, an absurd result not in accord with an insured’s reasonable expectations.

Luckily the Court of Appeal took a common sense approach when interpreting the policy. Had it not, employees purchasing group life insurance policies would be severely penalized for taking a vacation or not working on a paid holiday. That is just not the American way. The trial court even commented, “Although sympathetic to Plaintiff, the court cannot redraft this insurance contract.” Apparently the court was not well versed in the “black letter” insurance law that ambiguous policy provisions must be strictly construed against the insurer. That a policy provision must be interpreted in the context of the policy as a whole. And that a policy cannot be interpreted in a way that leads to absurd or unreasonable results. The Court of Appeal applied each of these well-known policy interpretation rules and arrived at the only sensible result.

By: Joe McMillen
McKennon Law Group PC
20321 SW Birch Street, Suite 200
Newport Beach, California 92660
877-MSLAW20
(877) 675-2920

The California Insurance and Life, Health, Disability Blog at www.californiainsurancelitigation.com and at www.mckennonlawgroup.com
All rights reserved

ERISA Will Not Pre-Empt State Law Claims Under an Individual Conversion Policy

In an important victory for claimants, a United States District Court recently determined that a plaintiff who obtained an individual disability insurance policy through a conversion provision in an ERISA plan can pursue remedies in a state court under the newly issued individual policy. This ruling is important because the range of damages available through a lawsuit containing state law claims is much broader than the range of damages available through ERISA, and includes emotional distress damages and punitive damages.

In Marshburn v. Unum Life Ins. Co. of America, the insurance company, Unum, argued that the plaintiff, Julie Marshburn, could not pursue state law remedies to recover long-term disability insurance benefits because her plan was subject to ERISA. However, even though her initial group coverage, offered through her employer at the time, Cedars-Sinai Medical Center, was governed by ERISA, she was eventually given the opportunity to obtain a Conversion Policy for an individual plan. In this case, the court rejected Unum’s argument that Ms. Marshburn’s state law claims under the Conversion Policy were preempted by ERISA because the Plaintiff validly converted her group policy to a conversion policy.

Ms. Marshburn was admitted to a medicine residency program at Cedars-Sinai Medical Center in Los Angeles. During her residency, which consisted of a series of clinical rotations, she injured her shoulder while lifting a patient. Initially, Ms. Marshburn continued to work, but after the injury did not heal on its own as she had previously been advised, she was placed on certain work restrictions. .

Nearly three years after her shoulder injury, Ms. Marshburn underwent surgery to repair the labrum tear in her right shoulder. During this surgery, she suffered another injury, this time a torn ligament in her right thumb. The Plaintiff was then placed on additional work restrictions “prohibiting her from pushing, pulling, or lifting with her right upper extremity.” Under these restrictions, Ms. Marshburn would potentially be prevented from completing her internal residency program. Following her injuries, Ms. Marshburn continued to work as a resident at Cedars-Sinai and received her full salary. Her work at Cedars Sinai was terminated in June 2006.

After her termination in June 2006, the Plaintiff was given the opportunity to convert her group long-term disability coverage to an individual policy. Despite initially being denied conversion coverage due to a dispute as to the date the Plaintiff received the option, Ms. Marshburn was eventually issued LTD benefits under the Conversion Policy as of her termination date. She submitted a claim for LTD benefits in January 2011 under the Conversion Policy. Ms. Marshburn also suffered other injuries including insomnia, depression, chronic headaches and was unable to perform basic tasks.

The Plaintiff sued for breach of contract and breach of the implied duty of good faith and fair dealing. Unum moved for summary judgment, claiming that the Plaintiff was ineligible to convert her ERISA plan to and individual policy, which would be governed by state law.

The court first determined that while ERISA governs the right to convert, it does not overn the actual conversion policy:

In the Ninth Circuit, ERISA governs the right to convert an ERISA-governed policy to an individual conversion policy, but not conversion policies themselves. See Waks v. Empire Blue Cross/Blue Shield, 263 F.3d 872, 877 (9th Cir. 2001). By contrast, “state-law claims arising under a converted policy—even though the policy has been converted from an ERISA plan—are not preempted by ERISA.” Id. Accordingly, the Court looks to ERISA to determine whether plaintiff validly converted her group policy to a conversion policy. See White v. Provident Life & Accident Ins. Co., 114 F.3d 26, 28 (4th Cir. 1997).

Using the principle, the court first made clear that the insurance company seeking ERISA preemption bears the burden of proof to show that the insured was “disabled” under the relevant terms of the Group Plan (i.e., pre-conversion). Importantly, the court found that the Plaintiff was not disabled under the terms of her ERISA plan before her ERISA plan was converted because she received her full salary until the end of her employment. So while her injury occurred when her coverage was governed by ERISA, her entitlement to benefits did not arise until after her plan had been converted. Thus, her claims under the Conversion Policy were not pre-empted by ERISA, allowing her to pursue state law claims under that policy.

ERISA Insurers’ Conclusory Medical Opinions Regarding Disability Status Will Not Carry the Day

An individual suffering from a disabling condition undoubtedly has many concerns. In addition to dealing with physical pain and emotional distress, there is always the thought of how to pay for medical bills and living expenses if the disability prevents the person from continuing work.

It can be stressful and time consuming for a disabled claimant to fight for long-term disability benefits (“LTD”) provided under an ERISA-governed employee benefit plan. However, a recent District Court case, Carrier v. Aetna Life Insurance Company, 2015 WL 4511620 (C.D. Cal. July 24, 2015), may help insureds by making it more difficult for insurance companies/claim administrators to summarily deny an insured’s claim without proof of specific findings and details as to how and why they reached their conclusion to deny benefits.

Gloria Carrier was employed by Bank of America as a Credit Administrator. Her job duties included clearly communicating risk analysis, identifying problems on credit-related issues, guidelines and policies, performing research on closed loans and supervising between twenty and 100 people across multiple states. After being diagnosed with uterine cancer, she had to have her uterus removed and subsequently underwent three cycles of chemotherapy. After her surgery and chemotherapy, her cognitive abilities were severely affected and, according to her treating physician, she suffered from severe depression and suicidal thoughts.

Carrier initially received short-term disability (“STD”) benefits under her employee benefit plan issued by Aetna Life Insurance Company. After the expiration of her STD benefits, she applied for LTD benefits under the plan. Although Carrier was initially awarded LTD benefits, Aetna decided to terminate them a few months later “based on its determination that she no longer met the definition of disability,” despite her treating physician’s opinion that she continued to suffer from major depression and cognitive disorder that prevented her from performing her normal job duties. Aetna’s decision was based on peer evaluations conducted by three Aetna retained doctors of the plaintiff’s treating physician’s records and office notes. Aetna then upheld the denial decision on appeal.

During litigation, the district court conducted a de novo review of the claim decision, and determined that Carrier’s benefits were improperly terminated. In finding that plaintiff’s claim for LTD benefits was wrongfully terminated, the court found that the opinions of Aetna’s physicians were “presented in a conclusory fashion, making it unclear how they reached such starkly contrasting results from those of [plaintiff’s treating physician], despite reviewing the same materials.” The court found the opinions of plaintiff’s treating physician that she suffered from severe depression and cognitive disabilities that prevented her from performing her job under the “own occupation” definition of “disability” to be more compelling. Although it indicated that there was no legal deference to the treating physician’s opinion, the court’s ruling demonstrates that insurance companies who rely upon peer-to-peer evaluations in evaluating and potentially denying a LTD claim must ensure that a detailed analysis has been conducted, rather than a simple blanket/conclusory conclusion made without meeting or treating the insured.

The court awarded Carrier LTD benefits for a portion of the period she was wrongfully denied benefits and remanded the action to the plan administrator to resolve a secondary issue regarding a change in the policy’s language from “own occupation” to “any occupation” that went into effect while the initial dispute was being litigated.

The Death of the Abuse of Discretion Standard of Review in ERISA Disability Insurance Cases in California

When an insured obtains his or her disability insurance coverage from an employer, more often than not, that claim is governed by Employee Retirement Income Security Act of 1974, also known as ERISA. Litigation under ERISA is very different from “normal” bad faith insurance litigation where the insured sues the insurer for breach of contract and breach of the implied covenant of good faith and fair dealing. Some of the differences favor the insured, while others favor the insurance company/claims administrator. However, thanks to the California Legislature and recent District Court rulings, one of the insurer’s asserted weapons is longer available.

In an ERISA case, the court reviews the claim decision by applying one of two different standards of review: the abuse of discretion standard of review or de novo review. Under the abuse of discretion standard of review, the Court is required to give some deference to the insurer’s decision. However, under the de novo standard of review, the Court does not give any deference to the insurer’s decision, but rather determines in the first instance if the claimant has adequately established that he or she is disabled under the terms of the Plan. Between these two options, obviously, the abuse of discretion standard of review could be viewed as more favorable to disability insurance companies. (We believe that in practice there is not much difference between them as the abuse of discretion standard of review gives a disability insurance claimant more access to good discovery from the insurer and we believe that if judges are convinced that a claimant is really totally disabled, they will rule in favor of the claimant no matter the standard). However, the abuse of discretion standard is no longer available to insurers in California.

An insurer can only reap the benefits of the abuse of discretion standard of review by pointing to language in the insurance plan/policy in which the insurer is specifically granted the “discretion” to make claim decisions and interpret the plan provisions. Such a provision is referred to the “discretionary clause.” California Insurance Code section 10110.6 has now completely foreclosed the inclusions (and effect) of any discretionary clause contained in an plan/policy with a “renewal date” of 2012 or later.

California Insurance Code section 10110.6 states in the relevant part:

(a) If a policy, contract, certificate, or agreement offered, issued, delivered, or renewed, whether or not in California, that provides or funds life insurance or disability insurance coverage for any California resident contains a provision that reserves discretionary authority to the insurer, or an agent of the insurer, to determine eligibility for benefits or coverage, to interpret the terms of the policy, contract, certificate, or agreement, or to provide standards of interpretation or review that are inconsistent with the laws of this state, that provision is void and unenforceable.

(b) For purposes of this section, “renewed” means continued in force on or after the policy’s anniversary date.

(c) For purposes of this section, the term “discretionary authority” means a policy provision that has the effect of conferring discretion on an insurer or other claim administrator to determine entitlement to benefits or interpret policy language that, in turn, could lead to a deferential standard of review by any reviewing court.

…

(g) This section is self-executing. If a life insurance or disability insurance policy, contract, certificate, or agreement contains a provision rendered void and unenforceable by this section, the parties to the policy, contract, certificate, or agreement and the courts shall treat that provision as void and unenforceable.

This section, by its own terms, applies to any policy or agreement that provides “disability insurance coverage” to “any California resident” regardless of where it was offered, issued, delivered, or renewed. Thus, when determining whether a subject policy is governed by this section of the California Insurance Code, the only issue is whether the policy was offered, issued, delivered, or renewed on or after January 1, 2012 and before the claim accrued. However, this is typically a minor hurdle for an insured to clear as, for the purposes of section 10110.6, a policy automatically renews every year on the policy’s anniversary date. See Cal. Ins. Code § 10110.6(b) (providing that “renewed” means “continued in force on or after the policy’s anniversary date”). Most Policies renew every year, which means, that as of now, a vast majority of disability insurance policies’ issuance dates (and renewal dates) fall within the relevant time period.

Indeed, numerous recent Court rulings establish that, even if the Policy contains a discretionary clause, per California Insurance Code section 10110.6, that language is unenforceable, and de novo is the proper standard of review. See Polnicky v. Liberty Life Assur. Co. Of Boston, 999 F. Supp. 2d 1144, 1148 (N.D. Cal. 2013) (applying de novo standard of review to ERISA claim for denial of benefits because “[t]he Policy was continued in force after its January 1, 2012 anniversary date, [so] any provision in the Policy attempting to confer discretionary authority to Liberty Life was rendered void and unenforceable”); see also Gonda v. The Permanente Med. Grp., Inc., 10 F. Supp. 3d 1091, 1093-1094 (N.D. Cal. 2014); Cerone v. Reliance Std. Life Ins. Co., 9 F. Supp. 3d 1145 (S.D. Cal. 2014); Curran v. United of Omaha Life Ins. Co., 38 F. Supp. 3d 1184 (S.D. Cal. 2014); Rapolla v. Waste Mgmt. Employee Benefits Plan, 2014U.S. Dist. LEXIS 87256, 2014 WL 2918863 (N.D. Cal. June 25, 2014); Snyder v. Unum Life Ins. Co. of Amer., 2014 WL 7734715 (C.D. Cal. Oct. 28, 2014); Jahn-Derian v. Metro. Life Ins. Co., 2015 U.S. Dist. LEXIS 28652, 2015 WL 900717 (C.D. Cal. Mar. 3, 2015).

Given these rulings, it appears that the abuse of discretion standard of review is now, more than three years after the effective date of the statute, dead in ERISA cases that are filed in Federal Courts in California.

If your claim for short-term disability insurance or long-term disability insurance has been denied, you can call (949) 387-9595 for a free consultation with the attorneys of the McKennon Law Group, several of whom previously represented insurance companies, who are exceptionally experienced in handling ERISA short-term and long-term disability insurance litigation.

Ninth Circuit Severely Limits Known-Loss Doctrine in Insurance Cases

Have you ever wondered whether the liability policy you purchased covers losses you already knew about before you bought the policy? How much do you have to know? What if you knew about certain property damage at a construction project you caused but not about other related damage your policy would otherwise cover? A recent case from the Ninth Circuit sheds light on these issues, and it is good news for policyholders.

In Kaady v. Mid-Continent Casualty Co., 2015 WL 3894394 (9th Cir. June 25, 2015), the Ninth Circuit, applying Oregon law, strictly construed the known-loss provision in a commercial general liability policy in favor of the insured. Despite that the insured subcontractor knew about property damage to his work before he purchased a policy to cover it, the Court held the provision did not preclude coverage. Namely, it did not preclude coverage for different property damage to the work of others the insured did not know about, though the damage resulted from the insured’s work.

In Kaady, the insured, a masonry subcontractor, was sued in a construction defect action because the wall sheathing and deck posts behind the manufactured stone he installed over them had deteriorated. He did not install the underlying wall sheathing and posts, which were installed by other subcontractors. He was sued in the construction defect case for wall and post deterioration caused by his defective masonry work.

The insured settled the construction defect case and then tendered to his commercial general liability insurer seeking coverage for the settlement. He claimed the wall and post deterioration of which he settled was “property damage” covered under his policy, defined as “physical injury to tangible property . . . .” The insurer denied his claim and the insured sued for breach of the policy.

The insurer argued the insured’s claim was barred because he purchased the policy after he already knew about the “property damage.” More specifically, the insurer contended the insured’s settlement of the construction defect case was not covered based on the policy’s known-loss provision. That provision states the policy “applies to ․.. ‘property damage’ only if ․.. no insured ․.. knew that the ․.. ‘property damage’ had occurred, in whole or in part.” The insurer argued that the manufactured stone and underlying structural components are the same “property” and part of the same structure, and, “so long as the insured knew about any damage to a structure, the known-loss provision bars coverage of any other damage to the same structure.”

There was undisputed evidence that the insured knew about some cracks in the manufactured stone he had installed. But he did not know about any of the property damage for which he sought coverage: the damage to the wall sheathing and deck posts behind the stone facade.

The insurer prevailed on summary judgment but the Ninth Circuit reversed. It rejected the insurer’s argument that it should treat components the insured provided and components provided by others as the same “property.” The Court reasoned that a commercial general liability policy, in the construction defect context, necessarily distinguishes between the two in every other policy provision and therefore should also in the known-loss provision.

Mid–Continent has offered no reason to treat the insured’s work and the work of others as different property in every provision of the policy except the known-loss provision. Thus, we conclude that the known-loss provision also distinguishes between them. The insured’s knowledge of damage to his own work doesn’t automatically constitute knowledge of damage to the components of the structure furnished by others.

The Ninth Circuit then soundly rejected the insurer’s next argument. Even if the insured’s masonry stone and the underlying walls and deck posts (furnished by others) were considered the same “property,” the Court concluded the known-loss provision still did not preclude coverage. It reasoned the provision does not preclude coverage for a different type of “property damage” than the type the insured knew about when he bought the policy, even if both types of damage were to the same “property.” In other words, the insured only knew about the cracks in the stone, not about the deteriorated walls and posts, which is a completely different type of “property damage.” Since the policy’s known-loss provision bars coverage for “property damage” if the insured “knew that the . . . ‘property damage’ had occurred,” the Court reasoned use of the definite article “the” particularizes the subject which it precedes and indicates “that the claimed damage must be the same as the known damage.”

The Court went on to explain that the insurer’s interpretation of the policy would eviscerate the known-loss provision’s “continuing property damage” language, which states that if the insured “knew, prior to the policy period, that the ․.. ‘property damage’ occurred, then any continuation, change or resumption of such ․.. ‘property damage’ during or after the policy period will be deemed to have been known prior to the policy period.” The Court correctly reasoned that “if the insured’s knowledge of any damage to any part of the structure automatically barred coverage of all damage to that structure, it wouldn’t matter whether the claimed damage was a ‘continuation, change or resumption’ of the known damage,” rendering that policy provision meaningless.

The Court summarized its holding as follows:

Applying our interpretation of the policy to [the insured’s] claim, we conclude that [the insured’s] knowledge of the cracks in the masonry before he bought the policy doesn’t constitute knowledge of the claimed “property damage” to the structural components. Not only are the wooden deck posts and wall sheathing different “property” than the manufactured stone . . ., the claimed damage is of a different type. We don’t think that the ordinary purchaser of the policy would interpret the known-loss provision as broadly as [the insurer] advocates.

Lastly, the Court concluded the insured’s knowledge of one type of “property damage” when purchasing the policy would only preclude coverage for different, unknown “property damage” under the known-loss provision if the latter was a continuation of the former. It stated,

the correct inquiry is whether the claimed damage to the structural components was a ‘continuation, change or resumption’ of the cracks. If it was, [the insured’s] knowledge of the cracks would bar coverage of the claimed damage; if not, his knowledge of the cracks wouldn’t bar coverage.

Courts regularly interpret policy provisions in favor of coverage, particularly where they are ambiguous or involve an exclusion. This case is no different. The Court looked at the policy and interpreted it as written, rejecting the insurer’s extremely broad reading of a provision limiting coverage. Just because an insured knows some facts about a potential loss when he buys a policy does not necessarily mean there is no coverage.

Court Confirms that Medication Side Effects Can Support a Disability Insurance Claim

When a person suffers from a disability caused by an injury or sickness, the resulting restrictions and limitations, be they physical or mental, can have a devastating impact on that person’s ability to return to work. What is often overlooked, is that the side effects of the medication prescribed to treat a medical condition can themselves also impede a person’s ability to perform in the work place, thus resulting in a long-term disability. Recently, Central District of California Federal Court Judge Percy Anderson, in Hertan v. Unum Life Insurance Company of America, 2015 WL 363244 (C.D. Cal. June 9, 2015), ruled that a long-term disability insurer had to consider how the side effects of an insured’s medication impacted her cognitive abilities, and therefore, her ability to perform her job.

In 2010, Plaintiff Gaye Hertan was diagnosed with a large brain tumor. At the time of her disability, Hertan was the partner in a law firm. Hertan underwent brain surgery to remove the tumor, and during the surgery plates and screws were inserted into her head. A couple of months after the surgery, Hertan returned to work on a part-time basis. While her doctors cleared her return to work, they also stated that she could work no more than 50-70% of the time. Following the surgery, Hertan experienced pain along the incision and under her scalp, for which her physicians prescribed endocet (Percocet). When the pain persisted, she was eventually also prescribed the pain medications of meloxicam, Lyrica and OxyContin.

Unable to return to work on a fulltime basis, Hertan filed a claim for long-term disability insurance benefits under the ERISA-governed long-term disability insurance policy provided by her employer. Hertan reported to Unum Life Insurance Company of America (“Unum”), the Plan’s claim administrator, that the medication made her tired, a little dizzy and made it hard to focus. Unum initially approved Hertan’s LTD claim. However, despite confirming that Hertan was still taking Percocet, and in fact was required to increase her dosage, which also increased the side effects, Unum eventually denied Hertan’s claim for further LTD benefits. On appeal, Hertan and her physicians again confirmed that Hertan’s pain was disabling, and also that the side effects of the pain medication included drowsiness, dizziness, reduced concentration and overall inability to think clearly. These side effects, obviously, negatively impacted Hertan’s ability to return to fulltime work as an attorney. Despite these reports, Unum again denied her disability claim.

Judge Anderson reviewed Unum’s claim decision under the de novo standard of review. In reviewing Hertan’s medical records and Unum’s claim decision, Judge Anderson determined that Hertan’s medical records, which included numerous references to her pain, pain medication and resulting side effects, supported her ongoing claim for LTD benefits, explaining that:

Throughout her claim, Hertan consistently explained that she could only work part-time because her pain would get worse throughout the day until it reached a point where she would need to take her narcotic pain medication. Once taking the medication, she was unable to work as an attorney because the medication made her tired, dizzy, and unable to focus. (AR 196, 248.) Dr. Jordan repeatedly confirmed that the pain medication impaired Plaintiff’s cognitive functioning to the extent that it prevented her from returning to full-time work as an attorney. (AR 1017.)

Judge Anderson criticized Unum for focusing on the physical requirements of an attorney, a sedentary occupation, rather than “address[ing] the cognitive demands of Hertan’s occupation as an attorney.” Finally Judge Anderson rejected Unum’s contention that the side effects of the Percocet might be minimized as she “may have become habituated to the Percocet,” noting that such a conclusion was not supported by the record. After reviewing the record, Hertan was awarded past-due LTD benefits and placed back on claim.

The lesson of Hertan v. Unum Life Insurance Company of America is that, when assessing whether a claimant meets an ERISA Plan’s definition of disability, the claim administrator must evaluate, not only how the underlying disability impacts a claimant’s ability to perform his or her job duties, but also whether the prescribed medication has side effects that might impede a claimant from returning to the work force. What is surprising is that although this decision is correct and logical, not many long-term disability insurance cases under ERISA have focused on the side effects of medication as being disabling, and that an insurer’s decision to discount them is inappropriate.

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