Court Enforces Long Term Disability Policy’s Three Year Statute of Limitations

August 31, 2012 | Appeals | Employment & Labor | Insurance Coverage

The plaintiff in this case held a research position at Cornell University’s Weill Medical College (WMC) since at least 1997. On September 26, 2001, the plaintiff received a termination letter, effective as of September 28, 2001.

On March 26, 2002, the plaintiff submitted a claim for disability benefits under WMC’s group long term disability insurance policy, asserting that back pain from which he suffered had been “considerably aggravated” on September 11, 2001, when he allegedly walked for over seven hours from Manhattan to Brooklyn, and that after September 11, 2001, he had ceased working full time, had been out of the office for several days, and had left early on days when he was in the office. He claimed he had become totally disabled on September 27, 2001 – one day before he was terminated.

Cigna Life Insurance Company of New York denied the plaintiff’s claim on June 7, 2002, and then denied his appeal in February 2003. After the plaintiff sued Cigna for breach of contract on March 26, 2008, Cigna moved for summary judgment, arguing that the plaintiff’s lawsuit was barred by the contractual limitations period provision of the group insurance policy, which provided that “[n]o action at law or equity will be brought to recover on the policy until at least 60 days after proof of loss has been filed with the Insurance Company. No action will be brought at all unless brought within 3 years (Kansas: 5 years; South Carolina: 6 years), after the time within which proof of loss is required by the policy.” The claim file indicated that the “Proof of Loss Date” for the plaintiff’s claim was June 4, 2002; thus, the lawsuit he filed was well past the time permitted by the policy itself.

In response to this argument, the plaintiff contended that the policy provision was vague and that the statute of limitations for a breach of contract action in New York was six years, and that if the six year statute of limitations applied, rather than the three year period in the policy, his lawsuit was timely.

The court rejected the plaintiff’s argument, and then found that the meaning of the policy provision was “plain and unambiguous.” Indeed, it continued, a “reasonably intelligent person” could come to only one conclusion as to the provision’s meaning: legal actions had to be filed within three years of the date on which proof of loss was required under the policy, but there were exceptions to this rule in Kansas, where the period was five years, and South Carolina, where the period was six years. Moreover, the court added, given the different periods for Kansas and South Carolina, the natural reading of the provision was that there was no different period for New York, because such a New York exception was not expressed, and thus was excluded. In New York, the court found, suits under the policy therefore were subject to a three year limitations period.

After concluding that the three year limitations period prescribed by the policy was enforceable, and that the plaintiff’s lawsuit was filed well after that period had run, the court found that the plaintiff’s claim was barred.

The case is Chepilko v. Cigna Group Ins., 2012 U.S. Dist. Lexis 89451 (S.D.N.Y. June 27, 2012).

Insurer May Rescind “Key Person” Life Insurance Where Application Misrepresented Principal’s Income

In April 2009, Jeffrey Locker, a principal of The Locker Group, applied for a $4 million “key person” life insurance policy on his life on behalf of The Locker Group.  The insurer approved the application and issued its policy effective June 4, 2009. Mr. Locker was murdered on July 16, 2009. After The Locker Group filed a claim for the proceeds of the life insurance policy, the insurer conducted an investigation and determined that Mr. Locker had misrepresented his income, net worth, and the existence of additional life insurance in the application. On July 22, 2010, the insurer informed The Locker Group that the policy was void due to Mr. Locker’s material misrepresentations in the application.  The insurer then filed an action in federal court for rescission of the policy and moved for summary judgment.  In response, The Locker Group argued that the insurer had not established the materiality of the alleged misrepresentations; that Mr. Locker had misunderstood the income inquiry in the application; and that the insurer had failed to exercise its alleged right to rescission in a timely manner.

In its decision granting the insurer’s motion, the court explained that Mr. Locker had represented his annual income from his occupation as $400,000 and his other income as $400,000. His tax returns, however, demonstrated that his gross income in 2008 was $225,718 and that it had averaged $182,052.33 for the years 2006-2008. The court found, therefore, that he had misrepresented his income in the application.

Moreover, the court continued, in determining materiality, the question under applicable New York law was not whether it would have been prudent for the insurer to verify Mr. Locker’s stated income, but rather whether the insurer would have issued the policy had he truthfully disclosed his income. The court found that the insurer had demonstrated by its submission of an underwriter’s affidavit and portions of the insurer’s underwriting manual that if Mr. Locker had truthfully disclosed his income, it would not have issued the policy.

Finally, the court rejected The Locker Group’s argument that Mr. Locker had misunderstood the income inquiry in the application because it was ambiguous, ruling that “[n]o part of the relevant inquiry” was ambiguous. As the court explained, Question 7 in Part B of the application asked for Mr. Locker’s primary occupation and employer; he responded that he was a “Professional Business Coach” for The Locker Group. Question 8 asked for his annual income from his occupation, his other income, and the source of his other income; he responded that his annual income from his occupation was $400,000, his other income was $400,000, and the source of his other income was the “sale of related coaching products and services.” In the court’s view, each question was “clear,” and the responses given by Mr. Locker did not indicate otherwise. The court concluded that the company’s argument that Mr. Locker may have misunderstood Questions 7 and 8 lacked any foundation. Accordingly, the court granted judgment in favor of the insurer.

The case is Principal Life Ins. Co. v. The Locker Group, 2012 U.S. Dist. Lexis 83620 (E.D.N.Y. June 15, 2012).

ADA Does Not Require Employer To Accommodate Employee’s Commute

In this case, the plaintiff claimed that she began working for Faurecia Automotive Seating, Inc., an automotive supplier that specialized in designing and assembling seats for cars, in May 2005 as a temporary contract employee in the position of Prototype Seat Builder at the company’s facility in Troy, Michigan. In July 2006, the company hired the plaintiff for the same position as a permanent employee. At that time, the typical work hours for a Prototype Seat Builder were 6:00 a.m. to 3:00 p.m.

In 2008, however, the company’s director of engineering shared services determined that the work schedule in the plaintiff’s department – 6:00 a.m. to 3:00 p.m. – was not productive because the materials needed for the department’s work did not arrive from other departments until later than 6:00 a.m., thereby making the early morning schedule inefficient. Therefore, the department’s standard work hours were changed to 7:00 a.m. to 4:00 p.m., effective September 29, 2008.

The plaintiff suffered from narcolepsy, and told the company that her narcolepsy would make it difficult for her to work the new hours because she would be commuting in heavier traffic. She explained that she got tired more quickly driving in heavier traffic and, because she believed the commute would take longer because of heavier traffic, she would need to pull over and rest during the drive. She requested that she be able to continue working from 6:00 a.m. to 3:00 p.m. or to work from 7:00 a.m. to 3:00 p.m. without taking a lunch break. She was told that she could apply for eligibility to take leave under the Family and Medical Leave Act or quit.

The plaintiff, however, did not complete the FMLA paperwork and subsequently resigned, declaring that she was resigning because of the “tremendous consequence” the change in work hours would have on her narcolepsy. Thereafter, she sued the company, alleging that its refusal to let her work an altered schedule violated the Americans with Disabilities Act. The district court granted summary judgment in favor of Faurecia on all claims, finding that the plaintiff’s narcolepsy did not substantially limit major life activities to the degree necessary to qualify her as disabled. The district court also found that, even if the plaintiff were disabled, her request for an altered work schedule to minimize her commute time was not a required reasonable accommodation. The plaintiff appealed.

In its decision, the U.S. Court of Appeals for the Sixth Circuit explained that under the ADA, employers were prohibited from discriminating against a qualified individual with a disability because of his or her disability in employment matters, such as hiring, advancement, and discharge. Such discrimination included not making reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability who was an employee, unless the employer could demonstrate that the accommodation would impose an undue hardship on the operation of its business.

The Sixth Circuit then ruled that, even assuming that the plaintiff’s narcolepsy qualified her as disabled under the ADA, she had not presented evidence demonstrating that her request for an altered work schedule was a required reasonable accommodation. The circuit court explained that although the plaintiff had proposed that Faurecia let her work an earlier schedule so that she could commute in what she believed to be lighter traffic, she did not present evidence or argument supporting the theory that her proposed schedule would provide a commute with lighter traffic.

Therefore, the circuit court concluded, the plaintiff’s proposal of a modified work schedule for purposes of commuting during hours with allegedly lighter traffic was not a reasonable accommodation. It then affirmed the district court’s grant of summary judgment for Faurecia.

The case is Regan v. Faurecia Automotive Seating, Inc., 679 F.3d 475 (6th Cir. 2012).

Comment: Many courts have found that the ADA does not require an employer to accommodate an employee’s commute. See, e.g., Robinson v. Bodman, 333 F. App’x 205 (9th Cir. 2009) (“The [employer] was not required to accommodate [the plaintiff’s] inability to drive to work or use public transportation. Although an employer is required to make reasonable accommodations to eliminate barriers for a disabled employee in the workplace, the employer is not required to eliminate barriers outside the workplace that make it more difficult for the employee to get to and from work….”); LaResca v. AT&T, 161 F. Supp. 2d 323 (D.N.J. 2001) (“[T]he change to day shift sought by Plaintiff is not an ‘accommodation,’ that it is legally obligated to provide, but is simply a request for an easier, more convenient commute.”); Salmon v. Dade Cnty. Sch. Bd., 4 F. Supp. 2d 1157 (S.D. Fla. 1998) (rejecting plaintiff’s claims that employer “failed to accommodate her disability by transferring her to a school which afforded her a shorter commute [because] plaintiff’s commute to and from work is an activity that is unrelated to and outside of her job”); Schneider v. Cont’l Cas. Co., 1996 U.S. Dist. Lexis 19631 (N.D. Ill. Dec. 16, 1996) (finding employer is not required to eliminate an employee’s commute to accommodate the employee’s back injury); see also Chandler v. Underwriters Labs., Inc., 850 F. Supp. 728 (N.D. Ill. 1994) (employee’s inability to undertake a long commute because of back injury was not a disability for purposes of the employer’s benefit plan but instead a limitation within the employee’s control). Simply put, although employers are required to provide reasonable accommodations that eliminate barriers in the work environment, these decisions make it clear that they are not required to eliminate barriers relating to commuting that exist outside the work environment.

Circuit Affirms Termination of Former Employee’s Long Term Disability Benefits Based on Her Failure to Cooperate During Reevaluation

The plaintiff here, a former employee of Johnson and Johnson Care, Inc., began to receive long term disability benefits under the company’s long term disability plan in February 1996; the disabling diagnosis was bipolar affective disorder, depressed. In 2008, she was asked to submit to a neuropsychological evaluation. Although the plaintiff appeared for the examination, it was concluded that plaintiff’s test scores were invalid likely due to plaintiff’s malingering. The plan administrator determined that plaintiff had failed to cooperate during the evaluation, and notified her that her benefits were being terminated based on her failure or refusal to cooperate and to put forth her best effort during testing.

Plaintiff then sued for the restoration of her benefits and the district court ruled in favor of the plan administrator. The district court was of the opinion that the plaintiff’s long history of established disability on the basis of psychological and emotional impairments raised a question of fact about whether the plan administrator’s decision was de novo wrong. However, the district court concluded, even if it was de novo wrong, the plan administrator had not abused its discretion, and its decision had not been arbitrary and capricious. The plaintiff appealed, but the U.S. Court of Appeals for the Eleventh Circuit affirmed.

As the circuit court noted, the plan conditioned continued eligibility for disability benefits on compliance with recommended treatment and cooperation during evaluations requested pursuant to the plan. It said that it could not find that it was “unreasonable” for the plan administrator to have requested a comprehensive reevaluation of the plaintiff’s condition, given that the plaintiff’s physician had given notice that the plaintiff had failed to comply with treatment recommendations. The circuit court also declared that it could not say that the plan administrator had acted unreasonably or in an arbitrary and capricious manner when it determined that the plaintiff’s eligibility for benefits under the plan had been nullified by her non-cooperation during testing procedures. Accordingly, the circuit court affirmed the plan administrator’s termination of the plaintiff’s disability benefits.

The case is Smith v. The Pension Committee of Johnson & Johnson, 2012 U.S. App. Lexis 10755 (11th Cir. May 29, 2012).

Court Affirms Termination of Benefits Based on Record Review

The plaintiff in this case sued Hartford Life Insurance Company after it terminated her long term disability benefits, claiming that the decision was not supported by substantial evidence and that Hartford had failed to provide her a full and fair review of her claim as required by ERISA. Hartford’s motion for summary judgment was granted by the district court, and the plaintiff appealed.

The U.S. Court of Appeals for the Second Circuit affirmed, finding that Hartford’s decision to terminate the plaintiff’s disability benefits was reasonable and was supported by substantial evidence. It explained that Hartford had relied on the opinions of three independent physicians and one independent psychologist, all of whom had reviewed the plaintiff’s medical record and had independently determined that there was insufficient evidence to support a finding of total disability. Specifically, the circuit court continued, as all doctors found, virtually all of the plaintiff’s symptoms had been self-reported and had been supported by little, if any, objectively verifiable evidence. Moreover, the Second Circuit declared, the fact that Hartford chose to credit its own doctors over the plaintiff’s treating physicians was not, in and of itself, grounds for reversing the determination because nothing in ERISA suggested that plan administrators had to accord special deference to the opinions of treating physicians.

The Second Circuit also rejected the plaintiff’s contentions that several procedural irregularities evidenced that Hartford had failed to provide a “full and fair review” of her claim as required by ERISA.

First, the circuit court found, contrary to the plaintiff’s contention, that following the initial denial of long term disability benefits, Hartford had provided the plaintiff with “adequate notice in writing . . . setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant.” In that regard, the circuit court added that Hartford’s three page letter notifying the plaintiff of the denial of her long term disability benefits claim substantially complied with the ERISA notice requirements, observing that it made specific reference to the definition of “Total Disability” on which the denial was based, provided information as to how to appeal the denial of benefits, and explained that the plaintiff’s claim was denied because “the information provided did not support any restrictions/limitations from a mental/nervous condition.”

The circuit court next rejected the plaintiff’s argument that Hartford had improperly required objective evidence of her medical conditions.  According to the Second Circuit, given the statement in Hartford’s  denial letter that there was no data to support any long term cognitive or motor dysfunction “due to migraine headaches or any inability to sit and perform most fine motor and fingering activities,” Hartford had acted within its discretion in requiring some objective evidence that the plaintiff was totally disabled.

Third, the circuit court rejected the plaintiff’s argument that Hartford had failed to retain “appropriately qualified medical personnel.” ERISA regulations provide that a plan administrator must retain physicians with “appropriate training and experience in the field of medicine involved in the medical judgment,” and Hartford’s choice of independent physicians “clearly” satisfied this provision, according to the Second Circuit. It found that each independent consultant was licensed and/or board certified in the requisite field of medicine applicable to the plaintiff’s diagnosis.

Next, the Second Circuit decided, the plaintiff’s contention that Hartford failed to consider all of the evidence was “meritless.” Instead, the circuit court ruled, “[i]n its initial decision, and at each stage of appeal, Hartford set forth an exhaustive list of the evidence it had considered, and it also offered [the plaintiff] multiple opportunities to support her claim with additional objective evidence.”

Finally, the circuit court also found “no merit” to the plaintiff’s contention that Hartford failed to properly consider her disability award from the Social Security Administration (SSA), noting that although SSA awards may be considered when determining whether a claimant is disabled, a plan administrator was not bound by an SSA award and was not required to accord that determination any “special deference.” Although Hartford did not explain why it did not credit the SSA award, the Second Circuit concluded that it was not required to do so, especially in light of the “substantial evidence supporting its determination.”

The case is Testa v. Hartford Life Ins. Co., 2012 U.S. App. Lexis 9806 (2d Cir. May 16, 2012).

Reprinted with permission from the September 2012 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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