Conflict of Interest in long term disability claim

Can Court ignore conflict of interest in the long term disability benefits denial decision process?

Kathreen M. Hackett worked for Mileage Plus Inc. (MPI) situated at Rapid City, South Dakota from last 14 years as a Customer Service Supervisor. She was covered by disability insurance offered by Standard. On September 28, 2002, she was disabled due to effects of brain hemorrhage. She underwent emergency surgery by a neurologist, Dr. James Nabwangu. After eleven days she was discharged with instructions to follow up.

On December 3, 2002, she complained that she was getting extremely tired after seven hrs of work. Although, she able to improve her ability to focus. She was able to work on computer.

Hackett’s internist Dr. James Bowman noted that she had slight headache problem in earlier days. But on January 15, 2003, Hackett stated to Dr. Bowman that when she worked on the computer, her problem of headache increased. On March 21, 2003, Dr. Bowman mentioned that she was unable to focus on her job. She still suffers from occasional headaches.

On February 28, 2003 Hackett applied for “own occupation” disability benefits because she was unable to perform her duties as a Customer Service Supervisor.  And same was approved by Standard on May 1, 2003 for the period from December 26, 2002 to January 17, 2003.

Situation turned on may 6, 2003, when Hackett ceased her employment with MPI as she was unable to perform her duties due to her intellectual impairment of some confusion etc. On June 17, 2003, Hackett was readmitted into hospital and diagnosed with Cerebralischemal and she got discharged after three days. She planned to take physical and occupational therapy and home medication.

Hackett submitted a report from Dr. Nabwangu to Standard in which it was mentioned that due to permanent impairment of her intellectual functions, she was unable to perform her regular duties. Based upon Dr. Nabwangu’s report, Standard reopened her file and found that she was disabled under “own occupation” as per the insurance policy on June 23, 2003.

Dr. Nabwangu referred Hackett to Dr. John E. Meyers, a Clinical Neurophysiologist and he conducted a battery of tests and noted that the scores were below her expected range of function. Hackett also consulted another Neurologist Dr. Steven Hata, he noted that she had recovered well but complained of headache due to use of computer. He also conducted Neuropsych testing which showed that her performance scores decreased compared to previous.

In August, 2003 he noted that her headache had decreased to every four days after change in her medication. In September, 2003, Standard advised Hackett regarding her ability for social security benefits and accordingly in August 25, 2005, she was declared disabled and awarded benefits by Social Security Administrator.

Another neurologist, Dr. Allen Gee, reported that she had constant headache. Hackett was also examined by Dr. Monte S. Dirks, who found that she had suffered a thirty eight percentage loss to her total visual system.

In late 2004, Standard reviewed Hackett’s disability claim under “any occupation” provision of the plan. Standard sent medical records to Dr. Lawrence Zivin, who was appointed by Standard. He opined that Hackett was able to perform sedentary to light job activity, with accommodation made to her left visual field and also mentioned that her cognitive ability was in the normal range. Standard also appointed a claim consultant who reported that she was able to drive, speak and answer in a clear and concise manner.

In June 2005, a Vocational Case Manager (VCM) was instructed by standard to conduct Hackett’s transferable assessment. Based upon Dr. Zivin’s report VCM held that Hackett had the ability to perform sedentary work with a possible vision accommodation and positions were available in her area that constituted gainful employment under “any occupation” definition of the plan. 

In August 11, 2005, Standard denied Hackett’s request for “any occupation” disability benefits. Based upon the report of Hackett’s physicians as well as Dr. Zivin, standard stated that VCM had found several positions which Hackett could perform and therefore she did not qualify for the “any occupation” benefits.

Hackett appealed and submitted additional records to Standard. Standard forwarded all the additional documentation to Dr. Elias Dickerman for independent medical review (IMR). In IMR, Dr. Dickerman found that Hackett had difficulty with specific restriction on Hackett’s occupational abilities. Therefore standard upheld its denial decision of “any occupation” disability benefits. It also noted that medical records did not demonstrate any specific cognitive or mental limitation due to brain hemorrhage. Her headache was under control and did not require further medical treatments.

One more time Hackett challenged the appeal and this time it was reviewed by Standard’s quality assurance unit who upheld standard’s denial decision of benefits.

Hackett sued Standard and argued that Standard was operating under a conflict of interest because of its dual role as a plan administrator and as a payer of the benefits. Standard has a discretionary authority to interpret and apply plan language of the insurance policy. The District court held that Hackett failed to prove any serious breach of Standard’s fiduciary duty. Therefore Standard did not abuse its discretion in denying Hackett’s claim in spite of conflict of interest.

In appeal Court, Hackett’s disability attorney argued that District Court improperly relied on Woo. When it was concluded the conflict of interest could not be considered. District Court also erred in concluding that Standard did not abuse its denial decision because District court already considered conflict of interest in determination of its decision.

Appeal Court reviewed the whole matter de novo. Appeal Court relied upon the Glenn in which Court concluded that a conflict of interest exists whenever the plan administrator was also the employer of the insurance company. In Glenn Supreme Court made clear the conflict did not changed the Standard of review applied by District Court. Instead of that conflict should be one of the weighed factor in determination of whether there was an abuse of discretion.

Because District Court failed to consider the conflict of interest in evolution of administrator’s decision, appeal Court reversed and remanded this matter to District Court to consider this matter in light of Glenn.

Disability attorney has to work hard for reversal of the District Court Judgment and he has to fight strongly for the right of claimant.