Victory for employee in overturning insurer's denial of long-term disability
In Degennaro v. Liberty Life Assurance, Judge Robert Jonker of the Western District of Michigan overturned Liberty's denial of long term disability (LTD) to Ms. Degennaro. She worked for Spectrum Health and had a number of serious medical problems. Because her LTD policy was provided through her employment, the terms of the policy were governed by Federal ERISA law. Liberty had granted her LTD benefits in 2004, however, in a manner typical of insurers, it tested her persistence and resources by "reevaluating" and denying her benefits in 2006. She fought, and in 2008, the Court ruled that Liberty's decision was arbitrary and capricious. It did not reinstate her benefits immediately, however.
The Court noted that Liberty's decision was based on an incomplete review of Degennaro's medical file and relied too heavily upon the opinions of its captive doctor, Robert Millstein. Millstein's sole medical vocation is consulting with Liberty and he maintains no patient practice: his "raison d'etre" is to help Liberty deny benefits to claimants, and the judge interpreted his credibility accordingly. The Court noted that Millstein did not consider Degennaro's family doctor's complete opinion regarding her disabling condition, and that he apparently cherry-picked the record for findings he preferred.
Sadly, when an ERISA plan accords discretion to the "plan administrator" in deciding who should recieve benefits, the federal courts have accorded the administrator broad discretion, and will overturn its decision only when the decision is "arbitary and capricious". Nevertheless, the Sixth Circuit has at least acknowledged that when the "administrator" is also the insurance company that pays benefits, it has an inherent conflict of interest and the court must do more than simply "rubber stamp" the insurer's decisions. To fulfill the appropriate fiduciary standard, the court must confirm that the medical evidence reasonably supports the insurer's decision to deny benefits.
Relying on these legal benchmarks, the judge held that Liberty's denial of LTD benefits in the instant case was arbitrary and capricious. The victory for Degennaro may be pyrrhic, however, as the case was merely sent back to Liberty with instructions to reconsider its decision. Most likely, it will issue a new decision, if at all possible, that more thoroughly rationalizes the same outcome it reached initially.