Legal Summary: Goetz v. Greater Georgia Life Insurance Company

649 F. Supp. 2d 802 (E.D. Tenn. 2009)

Our client served in a C-suite position at an organization when he suffered a physical injury that left him disabled. Goetz v. Greater Georgia Life Ins. Co., 649 F. Supp. 2d 802, 805–07 (E.D. Tenn. 2009). Prior to developing his disability, he had enrolled in long term disability (LTD) insurance through Greater Georgia Life (GGL). Id. at 806.

GGL admitted to the court that our client could not perform his job following his injury, but yet, it had denied his request for benefits. Id. at 807, 809–11. GGL claimed our client’s disability was caused by a pre-existing condition that was excluded from coverage under his policy. Id. at 810-11.

Considering the evidence, however, GGL’s pre-existing condition theory was problematic. Leading up to GGL’s denial, multiple people reviewing our client’s claim on behalf of GGL noted the lack of evidence related to the alleged pre-existing condition during the relevant time period. Id. at 809-10.

It was clear that the facts supporting GGL’s denial were shaky, and our client did not appear to have received a fair review process. Upon that belief, our client appealed the denial decision but was denied again, so we requested a second appeal on our client’s behalf, which GGL also denied. See id. at 811. After that, we sued GGL and the case was transferred to the federal district court. Id. We requested judgment on the pleadings and so did GGL; the court ruled in our favor. Id.

The court began its analysis by deciding the appropriate standard to apply when reviewing GGL’s decision. Id. at 811. Under ERISA law, courts will review insurance companies’ decisions under a deferential review standard, called arbitrary and capricious review, if the insurance company clearly granted itself “discretionary authority to determine benefits” decisions under its policy. Id. at 812.

Here, GGL granted itself discretionary authority in the policy. Id. at 815. However, the court explained that it would consider the fact that GGL both decides claims and pays benefits, which creates a conflict of interest that incentivizes it to decide against insured individuals, such as our client. Id.

Having decided the appropriate review standard, the court then assessed GGL’s denial of benefits in our client’s case. Id. at 815. The court noted that our client’s GGL policy excluded coverage for disabilities resulting from pre-existing conditions, so it had to determine whether the alleged condition “constitute[d] a ‘pre-existing condition’ under the terms of the Policy which ‘caused, contributed to or resulted’ in the Plaintiff’s disability.” Id. at 816. To do that, the court reviewed, first, cases with facts similar to our client’s case, then, Sixth Circuit law on interpretation of ERISA plans, and lastly, definitions of relevant GGL plan terms. Id. at 816–823.

Based on those materials, the court made various findings in favor of our client. Id. at 823–26. To start, the court found that GGL’s application of its policy to the facts of our client’s case was deficient. Id. at 823-24. Indeed, “the record supporting [our client’s alleged condition was] vague, scant, and somewhat speculative,” and “GGL also [did] not attempt to tie its loose term [for our client’s alleged condition] to its definition of sickness as ‘illness or disease’” in the policy. Id. at 824.

The court further explained that “a plain reading of [the pre-existing condition] provision suggests that the pre-existing condition should at least be somewhat foreseeable in that the claimant received some kind of medical attention directly related to the sickness or injury or to a necessary precursor of the sickness or injury at issue.” Id. But here, GGL failed to explain how our client’s treatment for a subdural hematoma could be considered treatment for the alleged pre-existing condition. Id. at 824.

Next, GGL was at fault for never explaining the “chain of causation any further than to state that,” the alleged condition was in its view the pre-existing condition for our client’s subdural hematoma. Id. In sum, GGL’s reasons for denying our client benefits were largely conclusory and the only explanations offered were insufficient based on the terms of the policy.

The court also criticized GGL’s interpretation of “contribute” in the policy’s definition of “pre-existing condition.” Id. at 825–26. The court instructed GGL “that there is a limit under ERISA to the extent to which the term ‘contributed to’ may be stretched.” Id. at 825. Indeed, simply “play[ing] a role in an outcome” is not enough. Id. at 824–25.

Based on precedent, the court determined that where “necessary precursors evolved into more specific diagnoses requiring more aggressive treatment,” then courts find pre-existing conditions. Id. at 825. But, as with our client, where a medical issue is not a necessary precursor to a particular condition, the medical issue is not considered a pre-existing condition if it develops into a disabling condition. See id. at 825.

With that understanding, the court found that the alleged condition, assuming it existed, may have in some way “contributed” to the ultimate subdural hematoma but could not be considered a “pre-existing condition.” See id. GGL’s attempt to deny our client’s claim on that basis was therefore “arbitrary and capricious because it rest[ed] on attenuated extensions of contributing factors to injuries that ERISA itself does not permit.” Id. at 826.

Lastly, the court decided that the appropriate remedy was to award our client benefits rather than remand to the insurance company: “there [was] no need to remand this matter to the plan administrator for further consideration,” because “Plaintiff was clearly entitled to an award of benefits under GGL’s LTD Policy.” Id.