The overwhelming majority, over 90%, of the cases decided by the three judge panels at the U.S. Circuit Court of Appeals level are unanimous opinions. As a result, you don’t often see how the same set of facts can cause completely different interpretations of what is the proper legal ruling. The U.S. Court of Appeals for the Seventh Circuit decided a case earlier this month, Mote v. Aetna Life Ins. Co. ____ F.3d ____, 2007 U.S. App. LEXIS 21825 (7th Cir. 2007), featuring a dissent involving ERISA disability benefits that helps to focus and sharpen the disputes that often arise in these types of cases. Brenda Mote was a human resources specialist with Arthur Anderson LLP. She received disability insurance benefits through her work. In 1997 she was involved in an accident that caused significant back pain and triggered fibromylagia and other illnesses. She was entitled to disability benefits for five years if she was unable to perform the material duties of her own occupation. She applied for those benefits in 1998 and received them until 2003. At that time her right to disability benefits ceased unless she demonstrated that she was disabled not only from the material duties of her own job but from any occupation for which she was fitted by education, training or experience. Aetna evaluated Mote’s claim under this “any occupation” language. Aetna sent Mote’s medical records out to a number of physicians regularly retained by Aetna for their review. It also hired a video investigator who, over several days, compiled several hours of video tape. After editing, Aetna had highlights of Mote’s activities that Aetna believed demonstrated Mote’s disabilities were not as significant as she claimed and that were inconsistent with her assertion that she could not work under the “any occupation” criteria. Aetna told Mote it was denying her claim and Mote appealed, providing reports from her treating physicians that supported her. Aetna then sent the file out to a new reviewing physician, Dr. Hall, for additional consideration. Dr. Hall supported Mote’s claim that she was disabled from working in any occupation. After receving his report, Aetna sent Dr. Hall selected portions of the surveillance video tape. It showed Mote running errands, driving an elderly relative to doctors’ appointments, and loading groceries into her car. This caused Dr. Hall to change his mind and opine that Mote was not disabled after all. Aetna informed Mote that it was denying her appeal and Mote filed suit. After the trial court granted Aetna’s Motion for Summary Judgment, Mote appealed. The Seventh Circuit first established that, based on boilerplate language in Mote’s insurance policy, it would review Aetna’s decision under the highly deferential “arbitrary and capricious” standard of review. This required that the court uphold Aetna’s decision unless it was “downright unreasonable.” The playing field was tilted against Mote from the beginning. Mote presented a number of arguments on appeal and I’ll not go over all of them. One argument was that the court should give greater weight to Mote’s treating physicians than to Aetna’s reviewers. Mote’s treating doctors had examined Mote, treated her over time and knew her condition to a much greater degree than any of Aetna’s doctors who had simply looked at the medical records. But the court rejected this argument: “most of the time, physicians accept at face value what patients tell them about their symptoms; but insurers . . . must consider the possibility that applicants are exaggerating in an effort to win benefits (or are sincere hypochondriacs not at serious medical risk.” Mote also argued that Aetna’s reviewing physicians were suspect because they were hired by Aetna or had a longstanding relationship with the insurer as reviewing physicians. The court rejected this argument saying, “most insurers are well diversified, so that the decision in any one case has no perceptible effect on the bottom line,” and thus “[t]here is correspondingly slight reason to suspect that they will bend the rules . . ..” It is interesting to compare the credit the majority opinion in Mote gives to insurers and their hired reviewing physicians to the skepticism the judges demonstrate toward claimants’ credibility. And any economist would laugh at the idea that a business is not concerned about the financial effect of any particular transaction. The idea that, the profit or loss associated with one particular exchange of goods or services in a stream of similar or representative exchanges, has no effect on decision making in a business context is simply absurd. Ordinarily, I would not expect the average federal judge to be sensitive to this type of microeconomic theory, integral as it is to understanding basic business behavior. But in Mote, one of the two panel judges (albeit not the author of the opinion) is Frank Easterbrook, well known in legal circles for his reliance on economic analysis of the law. This comment shows a misunderstanding of some basic economic principles. Mote also argued that the way Aetna compiled and used the surveillance video tape was improper. Selecting snippets of information only highlighting a few of Mote’s activities over several days was an unfair presentation of her activities. In addition, Aetna improperly extrapolated from that information Mote’s capacity to work at a full time job. The majority opinion likewise rejected this argument, stating that the video tapes were “merely . . . one piece of the puzzle in the deliberative process and, while they may have altered the outcome, they were not the sole basis for the Plan’s denial of Mote’s claim.” The dissent, by Judge Diane Wood, focused on two concerns, either one of which, in her opinion, justified reversing Aetna’s denial. The first was that in denying Mote’s claim, Aetna claimed her self-reported pain and limitations could not be relied on as a basis to consider Mote disabled. Judge Wood noted this statement was at odds with the language in the insurance policy defining what it meant to be disabled. The policy language took a “functional approach to disability.” Had Aetna wanted to include an exclusion in its policy for disabilities based on self-reported symptoms, it could have done so but it did not. Judge Wood felt that Aetna and the majority opinion read requirements for proving her claim into the policy language that were not there. This, without more, was arbitrary and capricious: “[a]lthough . . . [Aetna] was entitled to credit evidence other than Mote’s own reports of pain, it cannot begin with the premise that reported pain can never be enough.” The second basis for Judge Wood’s dissent occupied more space and seemed to concern her more. It was the idea that Aetna could reasonably or fairly rely on the surveillance video. She did not dispute that Aetna could surveil Mote and gather video tape. But Aetna provided to Dr. Hall only two hours of pre-selected video winnowed down from several days of surveillance. “No one disputes that . . . [Dr. Hall] never saw the vast majority of the evidence that was collected. One might just as well view a two-hour snippet of Mote sitting on a sofa, and conclude that this was all she ever did. Dr. Hall’s opinion was based on inherently unreliable evidence and thus should not have been entitled to any weight.” This lack of context was troubling to Judge Wood because she noted that prior decisions in the Seventh Circuit made clear that it was not necessary for individuals to be bedridden or immobile before they were entitled to disability benefits. In addition, Judge Wood faulted the majority for failing to recognize that the highlights compiled by Aetna did little to shed light on the issue before the insurer: whether Mote could carry out full time employment. The fact that Mote could, over several days, spend a couple of hours doing some light activities was, without more, simply insufficient in Judge Wood’s mind to establish a reasonable basis for Aetna’s denial.