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Sixth Circuit Overturns Denial of ERISA Disability Benefits After Plan Administrator Failed to Consider the Demands of Claimant’s Job

Published on: January 21, 2020 | by Matt Pulle

It seems like a matter of common sense: Plan administrators should evaluate the physical and cognitive demands of a claimant’s occupation when reviewing a claim for disability benefits. Too often, however, our clients show us denial letters from plan administrators that fail to discuss the unique aspects of their jobs and whether our clients can still perform them.

A recent case decided by the United States Court of Appeals for the Sixth Circuit (“Sixth Circuit”) sharply criticized that practice, while offering favorable guidance to disability claimants and attorneys alike.

In Card v. Principal Life Ins. Co. (October 2019), the plaintiff (“Plaintiff”) was a nurse at a long-term care and skilled rehabilitation center when she was diagnosed with chronic lymphocytic leukemia in February 2013. She continued to work until December 2013 when she had to end her employment due to feelings of fatigue and weakness. Later that month, Plaintiff filed a claim for short-term, long-term and total disability benefits with Principal Life Insurance Company (“Principal Life”), the plan administrator.

Principal Life denied Plaintiff’s disability claims. After the Plaintiff filed a lawsuit challenging the denial of disability benefits in federal district court, the court sided with Principal Life finding “substantial evidence in the record” supporting the denial. The Sixth Circuit disagreed and overturned Principal Life’s denial of disability benefits.

As a part of its analysis in the Card case, the Sixth Circuit observed that Principal Life did not follow the “plain language” of its own plan’s terms. Under the plan, Principal Life had to consider whether each claimant could perform the specific duties of his or her job or occupation before making a decision regarding short-term and long-term disability benefits.

In Card, Plaintiff’s nursing job was not a sedentary position. Rather, her job required her to stand, walk, push/pull, lift and bend frequently. On occasion, Plaintiff also had to exert 50 to 100 pounds of force. Plaintiff’s job also entailed “frequent” exposure to infections and exposure to infectious waste, diseases and blood-borne pathogens. To put it simply, this was not an ordinary desk job.

The Admissibility of Evidence of the Amount of Premiums Paid for a Disability Policy

Published on: June 15, 2018 | by Matt Pulle

In a trial contesting an insurer’s denial of total disability benefits, jurors, in some cases, might think that an award of total disability benefits would be an unfair windfall for the plaintiff.

To address a hidden bias like this, plaintiff’s attorneys may try to admit into evidence the amount of insurance premiums the plaintiff paid over the life of the policy. In many cases, the amount the plaintiff has paid in disability insurance policy premiums over a number of years is quite significant. Our firm has had focus group participants provide us with feedback that convinces us that many jurors are less likely to think that awarding total disability benefits to the plaintiff is undeserved if they understand how much the plaintiff paid for this type of coverage.

Can plaintiffs maintain that the amount of premiums they paid constitutes relevant evidence, if this fact is not in dispute? To put it another way, why should this evidence be admitted if the jury does not need to hear it to determine liability?

Whether courts will admit evidence of premiums paid depends on the court. We are not aware of precedent on this issue which is binding in a district court in Tennessee. What we have are unpublished (which are non-binding) cases from federal district courts outside of the Sixth Circuit (the circuit in which Tennessee is located) that go both ways.

The Substantial Compliance Test: What Happens When the Insured Meant to Change His or Her Beneficiary, But Did Not Follow the Life Insurance Policy’s Procedures

Published on: April 11, 2017 | by Matt Pulle

What happens in life insurance policy litigation when an insured intended to change the beneficiary of his or her policy from an ex-spouse to a current spouse, but did not correctly fill out and/or submit all the necessary paperwork before his or her death? Can the current spouse make a successful claim to the life insurance policy proceeds? Or, can the ex-spouse prevail by arguing that the insured cannot change his or her beneficiary without following all of the life insurance policy’s procedures?

In the Sixth Circuit (the circuit which includes Tennessee), courts will usually recognize a change in beneficiary even when the insured did not “strictly comply” with all of the life insurance policy’s rules on how to designate a new beneficiary. Still, courts will not award proceeds to a current spouse if he or she can do no more than show that the insured merely intended to designate a new beneficiary. The general rule in the Sixth Circuit, and in Tennessee state courts, is that the insured must be in “substantial compliance” with the terms of the life insurance policy for the beneficiary change to be effective.

The courts in the Sixth Circuit have admitted that there is no easy definition for the term “substantial compliance.” Making matters even more confusing, courts in the Sixth Circuit usually, but not always, apply the substantial compliance test in examining an insured’s flawed beneficiary designation for life insurance policies governed by ERISA. That complexity aside, this much is clear: If the intended beneficiary seeks to collect policy proceeds, he or she will have to establish that the insured completed several critical steps in designating a new beneficiary.

Life Insurance and Divorce, Part 2: Why Ex-Spouses Should Formalize Any Post-Divorce Agreement to Modify Their Rights to the Proceeds of the Other Party’s Life Insurance Policy

Published on: November 3, 2016 | by Matt Pulle

Ex-spouses often enter into informal post-divorce arrangements intended to alter obligations set out in their marital dissolution agreements (MDAs). Such arrangements, whether they include an actual agreement or merely a pattern of conduct, can impact Tennessee life insurance policy cases involving the policies of deceased ex-spouses.

Sometimes, post-divorce agreements involve life insurance policies. These types of agreements are not automatically valid or invalid. As explained in Holland v. Holland (Tenn. Ct. App. 2001), whether such agreements are enforceable must be determined by applying contract law principles. The Holland court made it clear that post-divorce agreements can be enforceable, even if they conflict with the MDA.

What if there’s no evidence of a binding agreement to modify the terms of the MDA or no evidence of a binding agreement that is otherwise contrary to the MDA? In such a case, an ex-spouse may still be able to persuade a Tennessee court to set aside provisions of the MDA. For example, in Puckett v. Harrison (Tenn.Ct. App. 1998), the trial court held that the provisions of an MDA were not binding because the deceased ex-husband intended to forgo the property settlement provisions of the MDA in order to allow his ex-wife to retain her interest in the property. The trial court based its ruling on the testimony of numerous witnesses about the ex-husband’s intent. In Puckett, there was no evidence of any agreement. Puckett was affirmed on appeal.

Conversion Clauses in Life Insurance Policies

Published on: October 11, 2016 | by Matt Pulle

Many life insurance policies include a conversion clause. A conversion clause provides a policy owner with the contractual right to update or to convert a policy. The primary benefit of a conversion clause is that the person whose life is insured does not have to undergo medical underwriting for an updated policy to issue. In Tennessee life insurance policy cases, a policy owner’s rights under a conversion clause may be important to understand.

Underwriting classes are determined based on the medical history, physical condition, habits, and smoking status of the life of the person insured by the policy. Sometimes though, an insurance company will change the names of its underwriting classes so that there is no underwriting class by the same name or description as the underwriting class which applied to the first policy. If that occurs, what type of underwriting class, and thus, premium rate, should apply when the policy is converted? The classification of the life of an insured can mean thousands, or tens of thousands, of premium dollars.

A couple of federal cases provide some guidance.