Re-Determining ERISA Disability Decisions. (A Foolish Inconsistency is the Hobgoblin of an Evil Mind.)
By: Michael A. McKuin
I am a firm believer in Aristotle’s “Law of Identity”. “A is A”. Simply put, that means A cannot be both A and not A. In metaphysical terms, “Existence Exists”. Confused? Jeff Landauer and Joseph Rowlands on the “Importance of Philosophy” explain it, in part, this way:
“Everything that exists has a specific nature. Each entity exists as something in particular and it has characteristics that are a part of what it is. ‘This leaf is red, solid, dry, rough, and flammable’ ‘This book is white, and has 312 pages’. ‘This coin is round, dense, smooth and has a picture on it.’ In all three of these cases we are referring to an entity with a specific identity; the particular type of identity, or the trait discussed, is not important. Their identities include all of their features, not just those mentioned. . . . The concept of i identity is important because it makes explicit that reality has a definite nature. Since reality has an identity, it is knowable. Since it exists in a particular way, it has no contradictions.” 
Consistent with this concept, I would submit that something or someone cannot be two things that are diametrically opposed to one another at the same time. While I recognize there is a philosophical or spiritual dispute over the question of whether man can be by nature both good and evil. I believe he can, but not at the same time. Likewise, I believe someone cannot be both “totally disabled” and "not totally disabled” at the same time. In order for a disabled person to later be not disabled, something would have to change. It may be logical, but it isn’t always that way when it comes to the law, especially if you’re talking about ERISA.
The first time I encountered this issue in an LTD case was in the late 1990s and the point seemed to me to be beyond debate. I soon learned the bitter lesson that back at that time it was not. The case was Sebo v. Metropolitan Life Insurance Company.  Rick Sebo was in his late-40s, when disability struck, as a result of severe back pain. He had worked as a casualty claims adjuster for 20 years and had no training or work experience beyond that. 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 pain. After a protracted investigation, his LTD claim was finally approved. MetLife approved his LTD claim for “Own Occupation” (“Own Occ,”) benefits, which were paid for two years. After that, following an initial round of litigation and another protracted investigation, MetLife approved his claim again, finding that he was eligible for benefits under the plan’s “Any Occupation” (“Any Occ.”) definition of “disability” as well.
Shortly after MetLife approved his Any Occ. claim, it notified him that it appeared he might be eligible for Social Security Disability (SSDI) benefits. MetLife encouraged him to apply for SSDI and offered assistance in that regard. (That was because any SSDI benefits awarded him would be deducted from the LTD benefit amount, thus benefiting MetLife more than Rick). MetLife then paid his benefits for another two and a half years, before abruptly terminating them.
MetLife sent Rick for an IME. The objective findings set forth in the first IME report clearly supported his continuing disability status. Then the LTD 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 examiner’s remarks, nothing in her first letter asked that the IME doctor “comment on whether Mr. Sebo was totally disabled”. All he was asked to do was to 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 IME doctor was given the wrong definition of disability.
The IME doctor 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 examiner then sent a letter to Rick’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.” Without understanding the legal meaning of what “Any Occ.” disability is, the treating doctor 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 examiner then sent the claim file to MetLife’s vocational specialist and ordered that a “Transferrable Skills Analysis” (TSA) report be prepared. The vocational consultant promptly prepared a report identifying five jobs that 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 identified as: (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 them consistent with his “general educational development”; nor had 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 him, advising that his benefits were terminated, effective the very next day. In support of this termination, the claims examiner recited the opinions of the IME doctor, the treating doctor and the conclusions stated in the TSA report. I administratively appealed the decision, but MetLife upheld the claim denial on appeal.
I immediately filed a lawsuit in the U.S. District Court. The arguments seem obvious enough to me. After all, MetLife had conducted a lengthy investigation before finding that Rick met the “Any Occ.” definition of “disability” under the plan and it had paid his benefits under that definition for more than two and a half years. Absolutely nothing changed after MetLife made its origin determination. His physical condition had not improved. He had not returned to gainful employment. There had been no change in his job skills, training, education, or experience. In fact, MetLife didn’t even contend that anything had changed. It didn’t dispute any of these things. Nor was there any allegation that Rick had misrepresented anything pertaining to his impairment. So the inevitable question was -- If he was disabled and eligible for benefits for two and a half years, as determined by MetLife itself, then how did he suddenly stop being eligible? If nothing changed, then it would be logically impossible for him to have been disabled for two and a half years and then not disabled after that period. Therefore, MetLife's determination that he suddenly failed to meet the definition of disability was tantamount to saying that he never met it in the first place. That defied logic and common sense. It was, in essence, a re-determination of his initial eligibility two and a half years after the fact. It is one thing to reassess an LTD claimant, periodically, to assure that there has been no material changes in income or work impairment status, since the initial benefit determination. But it's another thing altogether to continue an investigation of a claimant's initial eligibility into infinity.
Unfortunately, as obvious as the argument might seem, courts in the Ninth Circuit have held that ERISA “welfare plan benefits” (such as LTD benefits) never vest.  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. I appealed the case to the Ninth Circuit, but lost there as well. Sebo v. MetLife was a textbook case for demonstrating just how unfair the deferential standard could be.
For example, the Sebo case was filed in the California Central District court in 1999 and decided by the Ninth Circuit in 2001. But an earlier 1997 case, brought in the same federal district reached an entirely different result, applying a de novo standard of review. In Dishman vs. Unum the court first observed that Unum had already determined that Mr. Dishman met the definition of disability under his policy. The court went on to state, “The Court does not believe that UNUM has the right to now question its own determination.” But then the court went even further and said, “The Court is appalled by how Unum handled Dishman’s claim. . . . It had received no information which suggested that his medical condition or his capacity for full time employment had changed since the date upon which his disability claim was allowed.”  And in 2004 the Northern District of California, in Blankenship v. Liberty Life Assur. Co. of Boston also applying a de novo standard followed suit, holding, “Although the burden of demonstrating the existence of the disability rests with the claimant, ‘one relevant consideration in determining the existence of a disability is whether any significant changes have occurred in the individual's condition since the insurer's initial determination that the covered individual was disabled.” “Liberty determined that Blankenship was ‘totally disabled’ in June 1998, at which time it began paying disability benefits. . . . Liberty has provided no evidence that Blankenship's condition has improved since June 1998.” (quoting Dishman, supra.). 
Although Liberty Life appealed the decision on other grounds, it didn’t even try to challenge the district court’s finding that Mr. Blankenship was entitled to a continuation of his LTD benefits.  In Porco v. Prudential Ins. Co. of America,  a 2010 California district court case, the court, applying a de novo standard said that in determining whether the claimant was totally disabled at the time Prudential decided to terminate his benefits, the court looked first at the fact that Prudential had already once found him to be disabled. In the decision, the court quoted McOsker v.Paul Revere Life Insur. Co., a 2002 case, where the conservative Eighth Circuit, also applying a de novo standard held, “. . . unless information available to an insurer alters in some significant way, the previous payment of benefits is a circumstance that must weigh against the propriety of an insurer’s decision to discontinue benefits.”  So I might have fared much better in the Sebo case today under the de novo standard of review that would apply here in California, given the state’s current ban on discretionary clauses in insurance policies, which didn’t exist back until 2012.
But even beyond that, if only Rick’s case had been brought perhaps ten years later. I would have even better ammunition in terms of case law to argue, even under a deferential standard of review. Courts in the Ninth Circuit, applying the that standard have been pretty clear as to the necessity to show an actual change in a claimant’s condition, in order for there to be any change in an insurer’s disability determination. In Saffon v. Wells Fargo & Co. Long Term Disability, that same court, addressing the same insurance company I lost the Sebo case to said, “After all, MetLife had been paying Saffon long-term disability benefits . . . which suggests that he was already disabled. In order to find him no longer disabled, one would expect the MRIs to show an improvement.” In Montour v. Hartford Life & Accident Ins. Co.,  the Ninth Circuit said, “Given that Hartford found Montour disabled . . . ‘[i]n order to find [him] no longer disabled, one would expect the MRIs to show an improvement, not a lack of degeneration.’” 
 © 2001 by Jeff Landauer and Joseph Rowlands.
 Rickey Thomas Sebo v. Metropolitan Life Insurance Company, Allstate Long Term Disability Plan, District Court Case No. CV 99-10770 HLH; (9th Cir. Case No. 00-55765)
 Sebo Declaration, P.4, Para.15, (ER 67), (9th Cir. Case No. 00-55765).
 See, e.g. Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (9th Cir. 2001).
 Dishman vs. Unum 1997 U.S. Dist. LEXIS 22676 at *17; 21 E.B.C. 2941 (CD Cal. 1997).
 Blankenship v. Liberty Life Assur. Co. of Boston, No. C-03-1132 SC. (N.D. Cal,, Aug. 20, 2004.) d (quoting Dishman).
 Blankenship v. Liberty Life Assur. Co. of Boston, 486 F. 3d 620, 624 (9th Cir. 2007).
 Porco v. Prudential Ins. Co. of America, 682 F. Supp. 2d 1057, 1077 (CD CA 2010).
 McOsker v. Paul Revere Life Insur. Co., 279 F.3d 586, 589 (8th Cir. 2002).
 Saffon v. Wells Fargo & Co. Long Term Disability, 522 F. 3d 863, 871 (9th Cir., 2008). See also: Porco v. Prudential Ins. Co. of America, 682 F. Supp. 2d 1057, 1077 (CD CA 2010) (“In determining whether Porco was totally disabled at the time Prudential decided to terminate his benefits, the court begins with Prudential's determination on July 7, 2004 that he was totally disabled under the terms of the plan. This is strong evidence that the medical evidence available to Prudential at the time indicated that Porco was totally disabled”; McOsker v. Paul Revere Life Insur. Co., 279 F.3d 586, 589 (8th Cir. 2002) (“ . . . unless information available to an insurer alters in some significant way, the previous payment of benefits is a circumstance that must weigh against the propriety of an insurer’s decision to discontinue benefits.”); Levinson v. Reliance Standard Ins. Co., 245 F. 3d. 1321, 1331 (11th Cir. 2001) (“Because Levinson satisfied his obligations under the terms of the plan, Reliance had to produce evidence that Levinson was no longer disabled in order to terminate his benefits”.); Dishman vs. Unum 1997 U.S. Dist. LEXIS 22676 at *17; 21 E.B.C. 2941 (CD Cal. 1997): (“The Court is appalled by how Unum handled Dishman’s claim. When Unum decided to discontinue Dishman's disability payments it had no concrete knowledge about his financial situation. It had no reason to believe that Dishman and his wife had any means of support other than his monthly benefit. It had received no information which suggested that his medical condition or his capacity for full time employment had changed since the date upon which his disability claim was allowed. The decision to suspend payments was made on such clearly pre-textual bases, that it is impossible to avoid the conclusion that it made in bad faith.” Id at *32-33); Blankenship v. Liberty Life Assur. Co. of Boston, No. C-03-1132 SC. (N.D. Cal,, Aug. 20, 2004.) (“Although the burden of demonstrating the existence of the disability rests with the claimant, ‘one relevant consideration in determining the existence of a disability is whether any significant changes have occurred in the individual's condition since the insurer's initial determination that the covered individual was disabled.’ Liberty determined that Blankenship was “totally disabled” in June 1998, at which time it began paying disability benefits. . . . Liberty has provided no evidence that Blankenship's condition has improved since June 1998..” (quoting Dishman, supra.)); Taylor v. SmithKline Beecham Corp., 629 F. Supp. 2d 1032, 1042-1043 (CD CA 2009) (“There is no evidence in the record that Plaintiff's medical condition has improved, or that SmithKline's prior determination to grant LTD benefits is no longer valid.)
 Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 635 (9th Cir. 2009).