A somewhat cynical but oft-repeated maxim is: "No good deed goes unpunished." That concept frequently appears in disability insurance claims where the insured heroically tries to keep working despite suffering from a severe impairment and the insurer concludes that the ability to perform some tasks suggests the ability to perform even more demanding work activities. Oster v. Standard Ins.Co., 2011 U.S.Dist.LEXIS 782 (N.D.Cal. Jan. 5, 2011), a recent ruling from a federal court in California, is a good illustration of how an insurer tried to avoid payment of a meritorious claim for disability benefits because the insured refused to surrender to his impairments.

Brent Oster was a high achiever by any measure. After receiving a degree in aerospace engineering and training as a fighter pilot in the Canadian air force, Oster went on to a brilliant career developing and designing computer games for LucasArts LLC. Unfortunately, that career was cut short when Oster's car was rear-ended while he was stopped at a red light, which resulted in Oster suffering post-concussion symptoms that interfered with his concentration and left him suffering from persistent headaches and dealing with cervical radiculopathy resulting from injury to the cervical spine in the neck and low-back pain due to injury to the lumbar spine. Despite certification of Oster's disability by several of his treating doctors, Standard Insurance Co. denied the benefit claim based on a file review performed by Dr. Elias Dickerman, a neurologist, who has been a regular file reviewer for Standard for several years. Oster appealed the denial, submitting additional medical records, earnings records and documentation of a successful Social Security claim adjudication. Nonetheless, upon a re-review of the file by Dickerman, he reaffirmed his conclusion; and Standard also received a report from another regular file reviewer, Dr. Linda Toenniessen, a psychiatrist, who concurred in supporting the claim denial.

By the time the claim appeal arose, Oster had started a new job, but at a substantially reduced salary, which would have entitled him to a reduced benefit under the policy's return to work provisions. However, as it turned out, Oster failed at that job and was demoted and ultimately terminated after only about six months of employment. During the appeal process, Standard made Oster undergo a neuropsychological evaluation which found him disabled for a time after the accident but not thereafter. Despite test results showing diminished ability to perform rapid data processing and reading recognition, spelling and math performance at levels weaker than anticipated, the examiner reported that most individuals suffering concussions make a full recovery within a few months.

A different neuropsychologist, William Horstman, critiqued the report, pointing out numerous deficiencies. Horstman described the significant cognitive demands of a computer game developer and he also challenged the assumption that people with brain injuries recover quickly, pointing to more recent and comprehensive literature indicating that even patients with mild brain injury had difficulty returning to work on account of cognitive deficiencies. In addition, Horstman was critical of Standard's examiner for failing to administer a test of divided attention, which he deemed critical in such cases. Horstman also noted that the examiner listed tests he claimed were administered yet failed to present any test results, raising a question as to whether such tests were even given. Standard requested its examiner to respond - and eight months after receiving Horstman's report, the examiner admitted that he did not administer two of the listed tests and that his report also exaggerated the amount of time spent in administering the testing.

Despite all of the foregoing, Standard denied the claim, although it did approve benefits for the period its examiner deemed Oster disabled. Nonetheless, only the minimum amount was paid based on Standard's assertion that Oster failed to provide adequate proof of his earnings during that period.

Although the court applied a deferential standard of review, it ruled in Oster's favor. The court ruled that in view of the conflict, Standard's reliance on Dickerman and Toenniessen, who are frequently retained and the frequently-utilized vendor that chose the psychologist hired to examine Oster "warrant[ed] a high level of skepticism." *33 (citing Caplan v. CNA Fin. Corp., 544 F. Supp. 2d 984, 991-92 (N.D. Cal. 2008) (finding Hartford demonstrated a strong conflict of interest by relying on a third party vendor UDC and peer medical reviewer "that Hartford knows benefits financially from doing repeat business with it")).

The court was also disturbed by Standard's consideration of Oster's unsuccessful work attempt, citing authorities holding there is no logical incompatibility between working and being disabled (Hawkins v. First Union Corp. Long-Term Disability Plan, 326 F.3d 914 (7th Cir. 2003)("A disabled person should not be punished for heroic efforts to work by being held to have forfeited his entitlement to disability benefits should he stop working."); Seitz v. Metropolitan Life Ins. Co., 433 F.3d 647 (8th Cir. 2006) ("adopting MetLife's position would unfairly punish individuals who test their limitations and attempt to keep working before seeking benefits.")).

The court was also critical of Standard's deviation from its own policies in assessing a claimant's return to work. The court explained, "Standard's own claim manual makes clear that if a claimant returns to work, Standard is still required to investigate whether the claimant is disabled from performing the duties of his own occupation with reasonable continuity." *35 (citing Dinh v. Standard Ins. Co, 2007 WL 2298319 at *8 (finding that Standard abused its discretion by asserting the claimant was not disabled because she could perform sedentary to light occupation, when it made no attempt to recognize the cognitive demands of the claimant's position as a professional executive recruiter)).

In addition, the court pointed out that the raw data from the independent psychologist's evaluation undermined his findings since the test results demonstrated "significant cognitive defects." The court also noted that Standard failed to comply with giving Oster a "full and fair review" by injecting new rationales for the benefit denial without giving Oster an opportunity to reply. Having Dickerman involved in both the initial assessment and the appeal also was found to have violated ERISA regulations.

In sum, the court concluded that Standard failed to meet "higher-than-marketplace quality standards" and disregarded its fiduciary obligations. Since the insurer was found to have acted as Oster's adversary during the claim process, it "cast[ ] doubt on the credibility of its decision on appeal." Thus, the court overturned the denial and awarded benefits.

The court's ruling highlights the subtleties in neuropsychological test results. The raw data are crucial in assessing functioning, because even "normal" findings can be devastating to a claimant's ability to work at a highly demanding occupation. Thus, it is important that the right tests be selected; and that the test results be interpreted in relation to pre-morbid functioning. But the biggest issue here is that the court saw through the insurer's failure to give a full and fair consideration of the claim. Just because a claimant is motivated to try working does not mean that individual can succeed. If anything, rather than undermining the claimant's credibility, Oster's failure to meet performance standards at a new job bolstered the opinions his doctors were expressing. Thus, the ruling here shows that sometimes bad deeds get the punishment they deserve.

I represented the plaintiff in the Seitz ruling cited in this case and also represented the plaintiff in Hawkins before the Social Security Administration.