We’ve changed our mind. We don’t want to pay you anymore.

Rickey Thomas Sebo v. Metropolitan Life Insurance Company, Allstate Long Term Disability Plan, CV 99-10770 HLH; (9th Cir. Case No. 00-55765)

I hold a profound belief that “A is A”. For those who are not students of logic, that’s Aristotle’s “Law of Identity”. Simply put, it means A cannot be both A and not A. In metaphysical terms, “Existence Exists”. Something either is or it isn’t. Something or someone cannot be two things that are diametrically opposed to one another at the same time. The point seems almost beyond debate. Likewise, someone cannot be both disabled and not disabled at the same time. In order for a person found by an insurer to be “disabled” and then later to be “not disabled”, something would have to change. Simple logic, right? Wrong, at least not in the world of ERISA, particularly if the standard of review is the deferential standard.

Rick was in his late-40s, when he became disabled. He had worked as a casualty claims adjuster for Allstate Insurance Company for 20 years. His most recent position was “Sr. Staff Field Claims Adjuster”. He has had no training or work experience in the preceding 20 years beyond that which he acquired while working at Allstate. He suffered severe back problems, which eventually left him unable to work. He was examined by numerous physicians and it was well documented that he suffered degenerative disc disease, degenerative spondylosis, scoliosis, severe osteoarthritis of the lumbar spine, bilateral lumbosacral radiculopathy, post percutaneous discectomy failure, and possible disc herniation. It was undisputed that he could never go back to performing the duties of his old job. His activities were limited to less than 10-15 minutes at a time. He had to wear a back brace at all times. It took him 2-3 hours each morning to start moving and he had to lay down every afternoon for up to 2 hours for relief from the pain. The pain also affected his ability to concentrate.

He was covered under his employer’s Long Term Disability (LTD) plan, which was insured and administered by MetLife. MetLife approved his LTD claim for “Own Occupation” benefits, which were paid for two years. After that, following an initial round of litigation and a protracted investigation, it again approved his claim, finding that he was eligible for benefits under the plan’s “Any Occupation” definition of “disability”. MetLife then paid his benefits for additional two and a half years, before abruptly terminating them.

MetLife then notified Rick that it appeared he might be eligible for Social Security Disability (SSDI) benefits. It encouraged him to apply and offered assistance in that regard. (This is because any SSDI benefits awarded him would be deducted from the LTD benefit amount, thus benefiting MetLife more than Rick).

The “Case Management Specialist” from MetLife sent him for an Independent Medical Exam (IME). The objective findings set forth in the first IME report clearly supported his continuing disability status. Then the claims examiner sent the IME physician a second letter, asking that “In reference to our initial request . . . we had asked that you comment on whether Mr. Sebo was totally disabled . . . Please clarify with us regarding whether Mr. Sebo is disabled from performing any occupational duties.”

Contrary to the claims representative’s remark, nothing in her first letter asked the IME doctor to “comment on whether Mr. Sebo was totally disabled”. All that doctor was asked to do was state the “results of your physical examination, along with whether the claimant appears to be a suitable candidate for rehabilitation” to “help (MetLife) determine if the claimant is totally disabled”. Also, under the terms of the LTD plan, a disabled claimant did not need not be “disabled from performing any occupational duties” to be considered totally disabled under the plan. Therefore, the question posed to the IME doctor by the claims representative, provided insight as to her true objective, which was to intentionally supply the doctor with the wrong definition of disability.

The IME doctor, taking his cue from the insurance claims representative, wrote back, “The patient . . . is not totally disabled from all occupations. The patient does have a permanent disability . . . The patient has restrictions, and. . . he has evidence of disability, but is not totally disabled from any and all occupations.” The claims representative then sent a letter to Mr. Sebo’s treating doctor, along with a copy of the IME doctor’s comments and asked that he “Please provide us with your comments regarding this report.” The treating physician then did the worst thing any treating physician can do for a disabled claimant, he wrote back as follows, “I concur with (the IME doctor) that this patient is partially disabled. The patient insists that he is 100% disabled for all work, and of course, this is not true. This patient would be quite capable of performing a number of jobs.”

The MetLife claims representative was far from finished. She was just getting warmed up. Next came the coup de grace. Armed with these newly-prompted statements from the examining and treating doctors, she sent the claim file down the hall to MetLife’s in-house vocational “expert” and ordered that a “Transferable Skills Analysis” (TSA) report be prepared. The vocational consultant promptly cranked out a report identifying five jobs, which were said to be “consistent with (Rick’s) specific vocational preparation, general educational development, and require skills that he has exhibited the ability to perform in his past work experiences . . .” Those jobs were: (1) Credit Authorizer; (2) Dispatcher; (3) Employment Interviewer; (4) Taxicab Coordinator; and (5) Customer-Complaint Clerk. Rick had never worked in any field remotely similar to the five jobs identified and not one of those jobs was consistent with his specific vocational preparation, nor was any of those jobs consistent with his “general educational development”, nor he ever “exhibited” any ability to perform the required skills of any one of those jobs in his “past work experiences”.

The claims examiner then sent the inevitable letter to Rick, advising that his benefits were terminated, effective the very next day. In support of this termination, the she recited the opinions of the IME doctor, the treating doctor and the conclusions stated in the TSA report. I filed a lawsuit in the U.S. District Court. The arguments seem obvious enough to me. After all, MetLife had originally conducted a lengthy investigation before finding him eligible for “Any Occ.” LTD benefits and indeed it had paid such benefits for more than two and a half years. Absolutely nothing changed after that, except the volume of paperwork in MetLife’s files. In fact, there was no contention by MetLife that his physical condition had improved. Nor was there any change in his job skills, training, education, or experience. He had never returned to any kind of gainful employment. There was no allegation that he had misrepresented anything, relating to his claim or to his impairment.

Thus, the inevitable question arises -- If indeed Rick was eligible for “Any Occ.” LTD benefits for a two and a half year period, as determined by MetLife itself, then how did he suddenly stop being eligible? What changed? If in fact nothing changed, then it would be logically impossible for him to have been totally disabled during that two and a half year period and yet not be disabled after that period. The evidence in the administrative record clearly disclosed that the only things that had changed between the date MetLife initially approved his claim and the date it abruptly cut off benefits, were that his condition continued to grow worse and the amount of paperwork in MetLife's files continued to grow larger. Therefore, MetLife's determination that he suddenly failed to meet the plan definition of disability was tantamount to saying that he never met the definition in the first place, which not only defies logic and common sense but is contrary to the very purpose of ERISA. It was, in essence, a re-determination of his initial eligibility two and a half years after the fact.

Unfortunately, as obvious as the argument might seem, the courts in the Ninth Circuit have held that ERISA “welfare plan benefits”, such as LTD benefits, never vest. See Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (9th Cir. 2001). What that means is that no LTD claimant is ever completely safe from this type post hoc determination. And that was especially true in a case like Rick’s where the primary treating physician made comments that could be used by the insurer to support its claim denial. The trial judge applied a deferential (or abuse of discretion) standard of review and ruled in favor of MetLife. The judge decried from the bench the result he felt compelled to give and he opined that Congress should amend ERISA to raise the burden of proof to a “preponderance of the evidence”, in which case he would rule differently. Given the state of the law at that time, he felt his hands were tied. I appealed the case to the Ninth Circuit, but lost there as well..

If only Rick’s case had been brought ten years later. I would have far better ammunition in terms of case law to argue. Courts in the Ninth Circuit, applying the deferential standard have been fairly clear as to the necessity to show an actual change in a claimant’s condition, in order to change an insurer’s initial disability determination. See: Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 635 (9th Cir. 2009); and Saffon v. Wells Fargo & Co. Long Term Disability, 522 F. 3d 863, 871 (9th Cir., 2008).

Also, if the case had been brought today, the standard of review would be the de novo standard, since California has enacted a statutory ban on “discretionary” clauses, which allow insurers to invoke the deferential standard of review. See: California Insurance Code §10110.6. Several courts have since held that the de novo standard is basically the same as a preponderance of the evidence standard that the trial judge said would have resulted in a different outcome.

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