This month’s Friday Five discusses cases that address the meaning of “active, full-time employee,” whether remand is required where an improper standard of review was applied, the standard for capacity in reference to a dispute between beneficiaries to a life insurance policy, a successful claim that a “change in condition” warranted termination of benefits and when extra-record discovery may be appropriate to interpret a claimant’s “own occupation.”
1. What does “active, full-time employee” mean? The Tenth Circuit Court of Appeals upheld a district court’s decision, which found that Reliance improperly denied plaintiff’s claim for long-term disability benefits and ordered an award of benefits, attorney’s fees, and costs (instead of remanding). Notably, the merits below turned not on whether the plaintiff was disabled, but on whether he met the plan’s “active, Full-time Employee” requirement. This phrase was at issue because of a time gap between plaintiff’s notice of termination (due to a reduction in force) and his actual termination. During the gap, the plaintiff was diagnosed with disabling prostate cancer and he filed a claim for LTD benefits. Reliance denied the claim on the basis that the plaintiff’s participation in the disability plan had terminated and he was no longer an “active, Full-time Employee.” The district court disagreed and the Tenth Circuit upheld that decision. At both levels, it turned on the word, “active.” That is, although the policy defined “Full-time” to mean “working for [the employer] for a minimum of [thirty] hours during a person’s regular work week,” it did not independently define the word “active.” Indeed, the court rejected the notion that the policy phrases “Actively at Work’ and ‘Active Work” could be used to define “active.” As a result, the court deemed the term “active” ambiguous. It then construed the term in plaintiff’s favor, and concluded that it means a person who is merely employed—which the plaintiff was in this case because his termination was not yet effective. Accordingly, because the plaintiff was deemed active under this definition and because his regular work week prior to termination had involved working at least thirty hours per week, he was entitled to LTD benefits. Additionally, because Reliance did not actually challenge whether the plaintiff was disabled—and, in fact, expressly stated that it did not dispute he was totally disabled—both the district court and the Tenth Circuit found remand was unnecessary. Carlile v. Reliance Standard Life Ins. Co., Nos. 19-4123 & 20-4005, 2021 WL 671582 (10th Cir. Feb. 22, 2021).
2. If a claims administrator applies the incorrect occupational standard, is a court required to remand the case? The Ninth Circuit upheld a district court’s decision – following a bench trial – that concluded the plaintiff could perform light work and therefore was not totally disabled under his disability policy with Unum Life Insurance Company of America. On appeal, the Ninth Circuit faced two issues: (1) whether the district erred in failing to remand the case so that the claims administrator, Unum Life, could apply the correct occupational standard (of light work), which had not occurred below; and (2) whether the district court’s own factual finding—that the plaintiff’s medical evidence failed to satisfy his burden of showing he was totally disabled—was clearly erroneous. In a decidedly short opinion, the Ninth Circuit, on the first issue, held that because the district court was conducting a de novo review it had authority to apply the light-work standard and determine, in the first instance, whether the plaintiff was “totally disabled” under his policy with Unum Life. On the second issue, the Ninth Circuit again upheld the district court’s decision because it did not have “a definite and firm conviction” that the district court “committed a mistake.” Luzzi v. Unum Life Ins. Co. of Am., No. 20-55293, 2021 WL 531298 (9th Cir. Feb. 12, 2021).
3. Is a declaration evidencing a previous dementia diagnosis sufficient evidence to render a power of attorney invalid in an interpleader action? The Eleventh Circuit upheld a district court’s decision finding an underlying power of attorney valid, despite claims of mental incapacitation. Specifically, Jayson Tucker appealed the district court’s entry of judgment in favor of his brother, Shane Tucker, in an interpleader action filed by Metropolitan Life Insurance Company pursuant to 28 U.S.C. § 1335. The dispute between Jayson and Shayne concerned the proper beneficiary of the life insurance policy of their mother, Marjorie Tucker, a former General Electric employee. Originally, Jayson was named the sole beneficiary of the life insurance policy in 1979. In January 2014, however, Ms. Tucker executed a durable power of attorney (POA) that appointed her daughter, Karen Tucker, as her attorney-in-fact. Pursuant to the POA, Karen named her and Jayson’s brother, Shane, as the sole beneficiaries. On appeal, Jayson, proceeding pro se, challenged his mother’s capacity at the time she executed the 2014 POA, arguing that her 2013 dementia diagnosis precluded her from having the requisite capacity to make the POA valid. In support, Jayson submitted his own declaration and a letter from a doctor reflecting the 2013 diagnosis. As is relevant here, however, Georgia law presumes that every individual is of sound mind, and the burden is on the party attacking a contract to show the incompetency of the signer at the time of the execution. As a result, the Eleventh Circuit concluded that the district court’s finding regarding Ms. Tucker’s capacity was not clearly erroneous because “nothing in the record conclusively reflected her lack of mental capacity” at the time she executed the 2014 POA. Specifically, the physician’s letter from 2013 indicating a diagnosis of mild senile dementia “did not necessarily indicate Ms. Tucker’s mental state” in January 2014. Accordingly, because Georgia presumes competence, the power of attorney was valid, and Shane was the beneficiary. Metropolitan Life Ins. Co. v. Tucker, No. 20-11106, 2021 WL 531302 (11th Cir. Feb. 12, 2021).
4. How can a claims administrator support a “change in condition” sufficient to support a short-term disability benefits termination? Plaintiff Craig Canter was a premises technician with Illinois Bell Telephone Company. In February 2017, he submitted a claim for STD benefits based on headaches and dizziness. Sedgwick, the third-party claims administrator, awarded benefits. It continued to award benefits until a change in the medical records, at which time it discontinued STD benefits. The plaintiff filed suit, claiming that Sedgwick’s decision was arbitrary and capricious on four grounds: (1) there was no change in his condition; (2) Sedgwick discounted plaintiff’s own complaints of dizziness with exertion; (3) the independent reviewers did not try hard enough to reach plaintiff’s providers; and (4) Sedgwick failed to overturn its decision after plaintiff’s leave-of-absence accommodation was approved. Rejecting the third and fourth grounds as seeking to introduce information outside of the administrative record, which could not be considered on deferential review, the court set aside those arguments swiftly. As for the remaining two points, the court disagreed with plaintiff. First, the court found that “two things changed,” namely that the plaintiff’s neurology provider had stopped saying that plaintiff should be off work due to dizziness and expressly stated that the plaintiff’s “persistent dizziness had resolved.” (The headaches had resolved previously). Second, the court concluded that the plaintiff’s complaints of dizziness with exertion was “a subjective symptom,” but the “SPD requires objective evidence,” which was not evident in the “battery of tests his various providers ordered” all of which came back normal. As a result, the court concluded that the undisputed facts showed that the decision to terminate plaintiff’s STD benefits was not arbitrary and capricious. Canter v. AT&T Umbrella Benefits Plan No. 3, No. 18 C 7375, 2021 WL 663178 (N.D. Ill. Feb. 19, 2021).
5. When can a plaintiff support extra-record discovery as to the meaning of the phrase, “own occupation”? Plaintiff Erasmo Serrano claimed he was unable to work as an emergency room physician, because of a condition related to his shoulder. He applied for long-term disability benefits, but his claim was denied and he filed suit. In his action, plaintiff alleged that the term “own occupation” in the applicable policy was vague and ambiguous, and served discovery relating to the definition of that term. Standard Insurance objected, contending that the information sought was irrelevant because when reviewing whether its interpretation was arbitrary and capricious, the court must limit its review to the documents contained in the administrative record. The court agreed, focusing also on the fact that the plaintiff made no showing of exceptional circumstances to justify this discovery (failing to even file a reply brief). In making its finding, the court also noted that, “[w]hen a plan administrator is given authority to interpret the plan language, and more than one interpretation is rational, the administrator can choose any rational alternative.” (internal citations omitted). Serrano v. Standard Ins. Co., No. 20-2364-JAR-KGG, 2021 WL 602673 (D. Kan. Feb. 16, 2021).