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Does Your Disability Insurer Have a History of Biased Claim Reviews?

L. Jason Cornell, Esq. Feb. 23, 2023

Does your disability insurer have a history of bias when it reviews claims? If it does have a history of bias, is that something courts take into consideration when determining whether a disabled employee is entitled to disability coverage? These questions were considered by an appeals court in a recent decision regarding a disability claim presented by a New Jersey nurse.

The employee in that matter was insured with a long-term disability policy through Unum Life Insurance Company of America.  She worked as an operating nurse for Thomas Jefferson Hospital when she was diagnosed with avascular necrosis (“AVN”) in both knees. AVN is a progressive disease that results from temporary or permanent loss of blood flow to the bones.  Without sufficient blood, the bone tissue dies and joints often collapse. MRI studies showed the employee’s reduction in joint space and large lesions within the knee.

Eventually the employee underwent knee replacement surgery, however, the first surgery was not successful resulting in her undergoing the procedure a second time. At the request of the disability insurer, one of the employee’s doctors prepared a report wherein he concluded the employee could not work in her traditional job full-time. The same doctor had previously concluded the employee could work no more than 10 hours per week and did not believe she would be able to remain gainfully employed in the future.

In a subsequent letter, the same doctor that concluded the employee could not be gainfully employed completed a form provided by the insurer stating that the employee could perform full-time sedentary activities. Even though the doctor’s opinions were clearly conflicted, the insurer jumped on the doctor’s latter conclusion that the nurse could work at a sedentary level.  Unum also ignored the reports of its own consultants who reviewed the case and found that the employee could work no more than ten (10) hours per week.

Unum, relying on the opinions that served it best, ultimately denied the employee’s claim for disability coverage. The employee took an internal appeal of the insurer’s decision; however, the insurer upheld its denial. The employee then sued Unum in federal court where a federal judge ruled in the insurer’s favor. The employee appealed to the Third Circuit Court of Appeals wherein the appellate court reversed the lower court, finding in part that questions existed whether Unum, the insurer, included false information in correspondence to various medical providers.

In its decision, the appellate court found that Unum operated under a conflict of interest as it was the entity that reviewed the employee’s claim and would have to pay benefits on the claim as well.  It is not uncommon for a disability insurer to have this type of conflict arising from its review of the claim and making a decision to pay a claim.  However, the court cited cases that hold that such a conflict should receive greater consideration “where an insurance company has a history of bias claims administration.”

The court then cited a Supreme Court decision where the Court cited a law review article detailing the history of biased claims review by Unum. Citing even more opinions, the court noted that Unum’s “history of deception and abusive tactics can be evidence that it was influenced by its conflict of interest as both plan administrator and payor.”  This is rather significant – a federal appellate court called out a disability insurer that has a history of “deception and abusive tactics.” 

After referencing the insurer’s history of bias in handling claims, the court turned to the facts of the case before it and noted how Unum “disregarded the well-reasoned opinions of two of its own consultants favoring the continuation of payments.”  The court went on to conclude that it was not deciding at this point whether Unum’s decision was arbitrary and should be reversed. Instead, the court sent the case back to the trial court to resolve factual issues which needed further consideration. 

This case illustrates how courts are mindful of the conflicts disability insurers have as well as abusive claims practices that may result in an improper claim denial. The takeaway from the decision is for disabled employees to always look for inconsistencies in an insurer’s review of a claim. If an insurer ignores the conclusions of its own experts, or disregards the records from a claimant’s treating doctors, such tactics may support a court’s decision in finding that the insurer has abused its discretion in administering a claim.  

The decision is Gardner v. Unum Life Ins. Co. of America, 354 Fed.Appx. 642 (3rd Cir. 2009).