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CCH® BENEFITS — 06/09/09

Insurer Properly Denied Claim For LTD Benefits Where Beneficiary Was Not “Disabled” Under The Plan

from Spencer’s Benefits Reports: An insurance company did not abuse its discretion when it denied a claim for long term disability benefits filed by a beneficiary who did not meet the LTD plan’s definition of “disabled.” This was the ruling of the Third Circuit U.S. Court of Appeals in Taylor v. Union Security Insurance Company and Titus & McConomy Long Term Disability Benefits Plan (No. 08-3692).

C. Richter Taylor Jr. was a partner in the Pittsburgh law firm of Titus & McConomy from 1989 to November 1995, when he was asked to withdraw from the partnership. While employed at Titus, Mr. Taylor participated in the Titus & McConomy Long Term Disability Benefits Plan, which was underwritten by Union Security Insurance Company (formerly known as Fortis Benefits Insurance Company). As specified by the terms of the plan, a participant could qualify for LTD benefits under either an “occupation test” or an “earnings test.” A participant satisfied the occupation test if the participant was required to be under the regular care of a physician and was unable to perform at least one of the material duties of his or her regular occupation. Under the earnings test, a participant was considered disabled if the participant was prevented from earning more than 80% of his or her monthly pay in any occupation for which he or she was qualified.

After being terminated by Titus, Mr. Taylor joined another law firm until he was terminated by that firm in 1999, and he then worked at the law firm of Plummer, Harty & Owsianyn from 1999 to 2001. While working for Plummer, Mr. Taylor suffered a manic episode and was prescribed medication to treat his symptoms. Notwithstanding the medication, Mr. Taylor’s job performance continued to deteriorate, and he was fired in 2001.

On May 29, 2002, Mr. Taylor suffered a severe manic episode and was admitted to Western Psychiatric Institute and Clinic (WPIC). During his inpatient stay at WPIC, Mr. Taylor was formally diagnosed with bipolar disorder, dysfunction of the frontal lobe of his brain, and sleep apnea. Then, on Feb. 15, 2003, Mr. Taylor filed a claim for LTD benefits with Fortis, claiming that he had been disabled due to bipolar disorder and frontal lobe dementia since Nov. 30, 1995. However, Fortis denied Mr. Taylor’s claim on the grounds that he was not disabled under the terms of the LTD plan.

Insurer Denies Appeal

Mr. Taylor appealed and submitted a report from Dr. Mark D. Miller, a psychiatrist who reported his own observations of Mr. Taylor, but who was unable to review medical records dating back to the relevant time period because those records were unavailable. Fortis then requested a peer review by Dr. Stephan Kruszewski, another psychiatrist, and Dr. Kruszewski concluded that “the records don’t support that bipolar disorder was present in 1995 such as to preclude working as an attorney.” Accordingly, Fortis denied Mr. Taylor’s appeal. Mr. Taylor then filed suit against Fortis and the plan in the U.S. District Court for the Western District of Pennsylvania, but both the district court and the Third Circuit ruled in favor of the defendants.

In rendering its decision, the Third Circuit initially explained, “A plan administrator’s decision is arbitrary and capricious if it is clearly not supported by the evidence in the record or the administrator has failed to comply with the procedures required by the plan. Based on the record, Fortis concluded that Taylor did not provide sufficient evidence that he was disabled, as of November 30, 1995, under the terms of the plan. He did not meet the occupation test because there was insufficient evidence that, by November 30, 1995, Taylor’s condition prevented him from performing any of the material duties of his occupation as a lawyer. He was employed as a lawyer for several years after 1995, and Fortis could properly look to that as evidence that he did not meet the occupation test.”

The Third Circuit went on to conclude, “Taylor also failed to meet the earnings test because there was insufficient evidence that, by November 30, 1995, his condition prevented him from making 80% of his earlier monthly pay. While Taylor asserts that he made less than 80% of what he had earned while he was a partner or shareholder in successful law firms—an assertion that Fortis notes is unsupported by record evidence—it was not arbitrary or capricious for Fortis to conclude that Taylor did not demonstrate that his reduced earnings were due to his mental illness. Untangling the causes of Taylor’s career decline is not the simple matter that Taylor now declares it to be. On the contrary, evidence in the record shows that Taylor had serious problems in his life aside from the mental and emotional challenges he faced. We conclude that, under the arbitrary and capricious standard we are bound to apply, and on this record, we cannot overturn Fortis’ conclusion that Taylor failed to demonstrate that his income loss was due to mental illness.”

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