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Sun Life Appeal Denied – Company Must Pay Long-term Disability

18th January 2011
By Greg in Law
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The U.S. Court of Appeals does not see as many appeals from long-term disability companies as it does from claimants. It does happen, though, and the following case is an example. Sherry DeLisle and Sun Life Insurance Company of Canada (Sun Life) met in court for the third time on October 31, 2008.

The three judges who heard the appeal on the Sixth Circuit did not issue their decision until March 4, 2009. And when the final decision was reached, the decision was split - two in favor of upholding the decision of the District Court that found Sun Life's decision to deny DeLisle her long-term disability benefits had been arbitrary and capricious, and one judge dissenting.

A look at the history of the Liles Sun Life claim will provide insight into why two of the judges agreed that Sun Life had abused its discretion when it denied this disabled woman her rightful long-term disability benefits.

The Sun Life Claim

DeLisle had worked as a director of operations at a retail jeweler, Krandall & Sons. She began working for the company in January 1996. One of her employee benefits included participation in a group disability plan that was funded by Sun Life. Just two years after she was hired at Krandall, she was involved in the severe car crash. Treatment for her injuries included a full anterior spinal fusion.

A second car accident in 2000 reinjured her spine and involved a closed head injury. In order to continue working, DeLisle underwent treatment from three separate healthcare providers--a neurosurgeon, an osteopath and a licensed professional counselor.

Her medical records from this time forward indicated that she was undergoing various treatments, including pain management, treatment for the side effects of her closed head injury, etc. On April 17, 2002, Krandall & Sons fired her because, as they reported to Sun Life, "she was not doing her job."

DeLisle demonstrated that she was unwilling to consider herself disabled at this time. She filed for state unemployment benefits, reporting that she had been laid off for lack of work. She did find another job, but she was fired only two weeks after starting the job. She reported to unemployment that she had been unable to work the number of hours being required.

Finally in December, eight months after she had been fired, she applied for long-term disability benefits under the plan she participated in a Krandall. To support her claim that she had been disabled from performing her "own occupation" as of April 17, she provided Sun Life with her medical records and five attending physician statements. These statements clearly support her claim that she had been disabled at the time she was terminated.

As required by Sun Life, she also applied for long-term disability benefits through the Social Security administration. In 2003 she was approved for benefits, was Social Security making her disability payments retroactive to April 17, 2002.

Sun Life notified DeLisle that she was not covered under its policy, pointing to the fact that she was not "actively at work" when her disability began. DeLisle appealed this decision, and when Sun Life upheld its denial she hired a disability attorney to represent her ERISA claim.

After the first hearing by the District Court, in which the court use the arbitrary and capricious standard of review, the Court determined that Sun Life's denial was arbitrary and capricious. The court found that Sun Life had refused to recognize the evidence in DeLisle's medical records that showed that she was already disabled at the time she was fired. The court remanded the case back to Sun Life for another review.

For this review, DeLisle supplied additional medical evidence. This included opinions from a chiropractor, a physician who specializes in pain management and the neuropsychologist, in addition to the evidence already submitted from her neurosurgeon and other treating physicians. When all the evidence was considered, it showed the DeLisle suffered from "degenerative disc disease, radiculopathy, symptoms connected to closed head injury, chronic pain syndrome, posttraumatic syndrome, major depressive disorder, and a Class 5 mental impairment."

One of her treating physicians reported that "although the disability date is 4/17/2002, the period of disability could have been long before that." Another physician noted that she suffered from anxiety and depression, tremors, fatigue, spasms and double vision, all conditions that would severely impair her ability to perform her duties as a director of operations.

Ultimately, Sun Life sent her file to six different physicians, five of which the disability company used frequently for reviewing claimants files. This potential conflict of interest was a factor in determining that Sun Life had abused its discretion, because all six physicians concluded that the evidence in her medical file failed to show that she was disabled as of April 17.

Factors that Shaped the Court's Decision against Sun Life

Ultimately decision of the two judges who prevailed was based on several factors.

1.Sun Life failed to explain why Social Security's findings that DeLisle was disabled as of April 17 was ignored as evidence in her favor.

2.Sun Life failed to give appropriate weight to the opinions of her treating physicians whose diagnoses predated April 17, 2002.

3.An in-house attorney misrepresented the reason DeLisle was terminated in his communication with some of the physicians who reviewed her file. He said that she had been "terminated with cause."

4.The physicians who reviewed her file never addressed the opinion of one of her treating physicians that her condition was progressive in nature and had not manifesteded itself by a "significant change" that could be pinned to a particular date.

5.There was no evidence in the physicians comments that they were aware that Social Security had found DeLisle disabled.

Sun Life, of course, argued that DeLisle could not have been disabled from working, because she worked until she was fired. The long-term disability insurance plan also pointed to the fact that after she was terminated, she went on to work for another company. The company also argued that he had taken her months before she claimed that she was disabled.

The Court looked to a similar case, Rochow v. Life Ins. Co. of N. Am., as it weighed these arguments. In Rochow, the claimant's inability to perform the material duties of his job resulted in his being fired. He did not file a long-term disability claim for almost 11 months. Despite the passage of as much time, the court found that he had lost his job due to short-term memory loss, vocational chills, sporadic sweating and stress—all symptoms which could fit the definition of disability under the terms of the plan he participated in.

The court also looked to Hawkins v. First Union Corp. Long-Term Disability Plan. In this case, the Court had ruled that "There is no logical incompatibility between working full time and being disabled from working full time." An individual's heroic efforts to continue working could not be used against the claimant as proof that the individual was not disabled from working full time. The court recognized that many individuals continue working long past the point at which they would rightfully be considered disabled. The Court would not allow the fact that DeLisle had been fired after only two weeks of working at another job to be used against her as evidence that she was not disabled from working full time.

The primary reason there was a split decision centered on the fact that the District Court appeared to have evaluated the decision made by Sun Life. Under an arbitrary and capricious review, the Court is not allowed to determine if the decision is correct. Rather, it can only determine whether the decision was reasonable. This judge believed the District Court had overstepped that line.

Ultimately, three out of the four judges that reviewed Sun Life's denial of DeLisle's application for benefits found that Sun Life had abused its discretion and made an arbitrary and capricious decision. This means that DeLisle will be receiving long-term disability benefits and has the right to apply for attorney's fees as well.

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