Last week the U.S. Court of Appeals for the Sixth Circuit decided Bennett v. Kemper Nat’ls Servs., Inc., ___ F.3d. ___, 2008 U.S. App. LEXIS 1252 (6th Cir. 2008). It follows the theme of a number of recent Sixth Circuit cases in focusing on the failure of an ERISA plan administrator to carry out a full and fair review of a disability claim.

Adrienne Bennett suffered from multiple sclerosis and related problems. The insurer initially paid benefits because she was disabled from her own occupation as project manager and master plumber. However, after the first two years she was required to demonstrate she was disabled from any occupation. The insurer denied Bennett’s claim at that point. The trial court ruled in the insurer’s favor but on appeal the Sixth Circuit reversed.

The court immediately took issue with whether the insurer’s denial was "the result of a deliberate, principled reasoning process" and was supported by substantial evidence. Failing those things, the decision could not stand. Although the court’s review was deferential, it was "no mere formality" and required an examination of both "the quality and quantity of the medical evidence and the opinions on both sides of the issues."

The first concern the court had was the insurer’s treatment of Bennett’s social security disability award. The insurer assisted Adrienne in obtaining disability benefits through the Social Security Administration. A financial incentive existed for the insurer to do so because for every dollar Bennett received in social security disability payments, the insurer was able to offset that money against its own obligation for Bennett’s disability payments. Given the similarity in the qualifications for disability payments under the Social Security Act and the private disability policy, the failure to explain why the social security disability award Bennett received did not call for the insurer to also pay Adrienne disability benefits caused the court to question the insurer’s procedural fairness and objectivity.

Another concern for the court was the fact that the file reviewers retained by the insurer failed to explain how their conclusionsthat Adrienne was not disability from any occupation could be reconciled with the unequivocal opinions of Bennett’s treating physicians and the social security disability determination. "Further, we will not credit a file review to the extent that it relies on adverse credibility findings when the files do not state that there is reason to doubt the applicant’s credibility." Although the policy terms gave the insurer the right to conduct its own medical examination of Bennett, it failed to avail itself of the opportunity.

Finally, the court was troubled by the fact that the final denial letter from the insurer failed to explain the reasons for its decision.  The only information that laid out the insurer's reasoning was the statement that it did not believe Adrienne had submitted "sufficient medical evidence . . . to substantiate a significant functional impairment that would prevent Bennett from performing the essential functions of any occupation."   The Sixth Circuit ruled that this was a conclusion rather than the product of a "deliberate, principled reasoning process . . . supported by substantial evidence" and supported its determination to send the case back to the insurer for additional proceedings.    

There is one additional noteworthy aspect of the decision: a remarkable concurring opinion from Judge Deborah Cook.  I'll have more to say about that tomorrow.  

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Don Levit 11/17/2008 01:47 PM
Brian: Thanks for posting this case. I found it interesting that some courts don't see an inherent conflict of interest, because why should it be assumed it would not be in the insurer's best interest, or the employer's best interest to pay the claim? I cannot remember seeing in court cases any thought given to the inherent conflict that the beneficiary wants to be paid. That we can assume is a given. If that is an inherent conflict, how does that impact on the defendant's decision? Don Levit
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Brian S. King 11/17/2008 01:47 PM
That's one of the things I'll comment on in connection with Judge Cook's concurrence.
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