Legal Summary: Bailey v. United of Omaha Life Insurance Company

938 F. Supp. 2d 736 (W.D. Tenn. 2013)

United of Omaha paid short-term disability (“STD”) benefits for the maximum amount of time but denied the claim for long-term benefits (“LTD”). Bailey v. United of Omaha Life Ins. Co., 938 F. Supp. 2d 736, 739 (W.D. Tenn. 2013).  United of Omaha had her file reviewed by a doctor shortly before the end of the STD benefits when LTD should have started.  During the LTD appeals, United of Omaha had the claim reviewed by two different nurse case managers.

United of Omaha upheld its denial after two appeals of the LTD claim.  We then filed suit to help our client get her LTD benefits.

Since the plan gave United of Omaha discretion to interpret the plan requirements, the court reviewed Omaha’s actions under the arbitrary and capricious standard of review. Id. at 744-45 (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Perez v. Aetna Life Ins. Co., 150 F.3d 555 (6th Cir. 1998)).  However, since United of Omaha both determines eligibility and pays benefits, it has a conflict of interest such that its decision must be viewed “with some skepticism.” Bailey, 938 F. Supp. 2d at 745-46. (citing Helfman v. GE Grp. Life Assurance Co., 573 F.3d 383, 392 (6th Cir. 2009); Black & Decker Disability Plan v. Nord, 538 U.S. 822, 832 (2003); Moon v. Unum Provident Corp., 405 F.3d 373, 382 (6th Cir. 2005)).

Taking into account the inherent conflict of interest, and considering the way United of Omaha considered the evidence, the court found several problems with the decision by the insurance company.

First, the insurance company had the right under the policy to have the claimant examined, but chose not to.  The court held that United of Omaha’s reliance on file reviewers who did not physically exam Mrs. Bailey was arbitrary and capricious under the circumstances. Bailey, 938 F. Supp. 2d at 746-49.  Although there is nothing inherently improper about using file reviewing experts to evaluate claims, sole reliance on file reviews with no physical examinations can “raise questions about the thoroughness and accuracy of the benefits determination.” Id. at 747 (quoting Calvert v. Firstar Fin., Inc., 409 F.3d 2866, 295-96 (6th Cir. 2005); citing Helfman, 573 F.3d at 393)).  Here, the plan gave Omaha the right to conduct a physical examination, but Omaha did not do so. Bailey, 938 F. Supp. 2d at 747.  The court held that Omaha’s reliance on the file reviews alone was questionable considering Omaha’s conflict of interest. Id.

Second, the court found the conclusory opinions of the physician who first reviewed the claim did not contain an adequate explanation for saying the claimant could work.  Also, that same doctor hired by United of Omaha reported that the claimant’s treating doctor said the claimant could work when that treating doctor’s report said the claimant could not, and United of Omaha’s doctor did not reconcile the different reports.  Ultimately, United of Omaha’s doctor’s reasoning was short, “underdeveloped and therefore unclear.”  Id., at 748.

Third, the court found that the report from United of Omaha’s nurse case manager (used at the LTD level) “contained little information explaining her recommendation.” Id.  Further, the nurse case manager did not “provide a description of how she came to” the conclusion that the claimant’s restrictions and limitations were not supported by the medical evidence, nor did “she reconcile this conclusion with contradictory medical evidence.” Id.

Fourth, the last review for United of Omaha by the second nurse case manager, “contain[ed] many of its predecessors’ flaws,” according to the court. Id. She did not state why the restrictions and limitations were not supported and rejected the claimant’s pain reports as “inconsistent with physical examination,”  while the nurse case manager to “simultaneously acknowledge[ed] that neither she nor any other reviewer was privy to those physical examinations.” Id.

Ultimately, the court found the three reports that United of Omaha relied on, from a doctor and two case managers who never examined the claimant, did “not evidence a deliberative and principled reasoning process on the part of United of Omaha.” Id.

Finding United of Omaha’s decision-making process to be arbitrary and capricious, the court remanded the claim to the insurance company to conduct a proper evaluation of its merits. Id. at 749 citing Elliot v. Metro. Life. Ins. Co., 473 F. 3d 613, 622 (6th Cir. 2006) (When “the problem is with the integrity of [the plan’s] decision-making process…the appropriate remedy generally is remand to the plan administrator.”).