On April 22, 2015, the United States Court of Appeals for the Ninth Circuit issued a decision affirming the district court’s decision to award McKennon Law Group PC’s client, an attorney (“insured”), his past-due ERISA plan benefits, as well as attorneys’ fees, costs and interest against Sun Life & Health Insurance Company in connection with his short-term and long-term disability insurance claim. 

In reaching this unpublished decision, the Ninth Circuit ruled that the district court correctly found that Sun Life  “abused its discretion” in denying the insured’s claim for long-term disability benefits, because the record established he became disabled prior to the termination of his employment, and although his symptoms improved, it was not by enough for him to be able to return to work.  The brief holding also noted that Sun Life acted with bias, as evidenced by its failure to correct an error caused when another patient’s record was mixed with the insured’s, its reliance on a purely paper review, its failure to reconcile its findings with those of the insured’s physicians and its own psychiatrist’s earlier contrary determination and its demand for objective evidence despite the psychiatric nature of the disability.  Finally, while, post-trial, Sun Life attempted to introduce evidence not contained in the Administrative Record to support its decision, the Ninth Circuit stated that the district court did not abuse its discretion by not expanding the record.

For the McKennon Law Group PC’s client, the Ninth Court’s holding signals the end of every insured’s worst nightmare.  For the insured, this nightmare began over seven years ago, when he became disabled following a nervous breakdown in December 2007.  While Sun Life paid his claim for short-term disability benefits, Sun Life subsequently denied the insured’s claim for long-term disability benefits in December 2008 and upheld that decision in March 2010.  The McKennon Law Group argued, and both the district court and Ninth Circuit agreed, that Sun Life’s denial decision was flawed for many reasons, including that it was based in part on a defective report by a physician reviewer who never spoke with the insured and considered medical records for another, younger female patient mistakenly provided to the reviewer.  Further, Sun Life improperly imposed an impossible requirement that the insured provide “objective” evidence of his psychiatric conditions, even though such a requirement was not included in the Plan.  Sun Life also failed to explain to the insured what medical evidence was needed to establish his disability, as is required under ERISA.

After Sun Life denied the insured’s claim, the McKennon Law Group filed suit against Sun Life in September 2011.  The parties scheduled a mediation in October 2012, but negotiations were fruitless, as Sun Life only offered the insured a trivial amount to end the litigation.  After discovery and extensive trial briefing, the district court conducted a bench trial in November 2012 and in its Memorandum of Decision, District Judge Cormac J. Carney explained:

[Sun Life’s] decisions that Mr. Evans was not disabled until December 13, 2007 and that Mr. Evans was not disabled throughout the elimination period were illogical, implausible, and without support in inferences that could reasonably be drawn from facts in the record because: (1) every doctor who personally examined Mr. Evans concluded that he was disabled and unable to return to his regular work; (2) Sun Life did not subject Mr. Evans to an in-person medical evaluation; (3) Sun Life relied almost exclusively on the deeply flawed assessment by Dr. Himber; (4) and Sun Life failed to engage in a “meaningful dialogue” with Mr. Evans.  (Emphasis added.)

Moreover, Judge Carney also identified flaws in Sun Life’s review and commented that they “raise[] serious questions about the quality of the process Sun Life used in making its determination.”  Accordingly, in April 2013, the court ruled in favor of the insured and awarded him $480,682.52 – $217,068.00 in past due benefits plus $20,882.69 in pre-judgment interest, $212,400.00 in attorneys’ fees and $2,355.69 in costs.  The Ninth Circuit affirmed this Judgment, and the McKennon Law Group expects to be awarded attorneys’ fees and costs associated with the appeal.

The Ninth Circuit’s decision serves as both a cautionary tale and a beacon of hope for insureds – insurers may fight tooth and nail to avoid paying claims, but tenacious insureds with strong, aggressive legal representation can prevail – and may even receive their full benefits and attorneys’ fees and costs paid by the insurer causing this hardship.