Courts interpret disability insurance limitations

Chicago Daily Law Bulletin

December 20, 2010

by MARK D. DEBOFSKY

A recent decision issued by a federal court in Wisconsin tackled a number of the most vexing issues facing the courts in adjudicating disability insurance claims.

In Weitzenkamp v. Unum Life Ins. Co., 2010 U.S.Dist.LEXIS 123207 (E.D.Wisc. Nov. 19, 2010), the court was called upon to interpret an insurance policy limitation applicable to disability claims where the primary limiting symptoms are pain, fatigue or dizziness.

The plaintiff, Susie Weitzenkamp, suffered from fibromyalgia, a mysterious syndrome whose cardinal symptoms are diffuse pain throughout the body and debilitating fatigue. Despite the severity of such symptoms, though, the disease can only be diagnosed by clinical examination; there are no blood tests or imaging studies yet known to medical science that are capable of diagnosing the condition or rating its severity.

Weitzenkamp was employed by Time Warner as a sales representative until she became disabled in 2005 and began receiving disability benefits from Unum. In 2007, Weitzenkamp was also awarded Social Security disability benefits based primarily on a diagnosis of a psychiatric disorder and secondarily due to fibromyalgia.

Although the insurer questioned the severity of the psychiatric condition, there was no dispute that Weitzenkamp's pain due to fibromyalgia was disabling. However, the Unum policy contained a limitation for unspecified "self-reported illnesses" that limited the duration of benefits to 24 months for such conditions, while benefits due to other conditions are payable until normal retirement age.

Unum invoked that limitation and notified Weitzenkamp that her benefits would expire after 24 monthly payments. Weitzenkamp disagreed and challenged Unum's determination, but Unum maintained that, in addition to the limitation, it no longer believed her condition was disabling. A consultant who reviewed the plaintiff's file reported that most individuals with fibromyalgia can work and he could find no objective proof that Weitzenkamp's case was an exception from the general rule.

The court was troubled by Unum's analysis. Although the insurer argued in court that it was not requiring objective proof that Weitzenkamp was experiencing pain, but was demanding objective proof of the impact of her symptoms on her ability to work, the court found Unum's analysis disingenuous based on the treating doctor's rationale explaining the impact of Weitzenkamp's severe pain on her ability to work.

Moreover, the court rejected Unum's argument that the doctor's opinion was not "objective" in view of the lengthy treatment relationship and repeated clinical examinations that informed the doctor's opinion.

Although the court acknowledged that in Williams v. Aetna Life Ins. Co., 509 F.3d 317 (7th Cir. 2007), the 7th U.S. Circuit Court of Appeals found that a physician offered inadequate objective proof that chronic fatigue syndrome resulted in disability, the court distinguished that ruling by noting:

The unstated but obvious premise of cases like Williams is that a properly completed disability questionnaire will often constitute adequate "objective" evidence of a disease, like fibromyalgia, that is subjectively experienced. Such a questionnaire represents a physician's opinions, based on examination of the patient, about the patient's limitations.

That such a questionnaire may be based on self-reported pain symptoms is simply a truism: If the disease itself is only subjectively experienced, then any medical assessment of the disease's limitations will necessarily be based on the patient's subjective reports of pain.

Although the 7th Circuit and other courts have made clear that an administrator is entitled to ask for "objective" evidence in fibromyalgia cases, when the patient provides as much such evidence as can reasonably be expected, the administrator cannot dismiss the evidence on the ground that it is based solely on self-reported symptoms, because to reject the claim on that basis is tantamount to objecting to the nature of fibromyalgia itself. Holmstrom v. Metropolitan Life Ins. Co., 615 F.3d 758, 769 (7th Cir. 2010) (reversing denial of benefits when patient provided functional capacity questionnaires filled out by physician) (emphasis in original).

Thus, the court found Unum had no reliable basis for rejecting the plaintiff's proof of disability. However, the court did agree with Unum as to the applicability of the policy's self-reported illness limitation as grounds for terminating Weitzenkamp's benefits.

The policy defines self-reported symptoms as "manifestations of your condition which you tell your doctor that are not verifiable using tests, procedures or clinical examinations standardly accepted in the practice of medicine."

The policy further offers examples of self-reported symptoms: "headaches, pain, fatigue, stiffness, soreness, ringing in ears, dizziness, numbness and loss of energy."

The court agreed with the plaintiff that fibromyalgia can be diagnosed through "tests, procedures or clinical examinations standardly accepted in the practice of medicine." Specifically, a physical examination that includes a trigger point test establishes the fibromyalgia diagnosis.

However, the court found that just because the disease may be objectively diagnosed, "the definition of self-reported symptoms does not cover the disease per se but the 'manifestations of your condition which you tell your doctor.'" (emphasis in original).

In other words, neither pain nor fatigue, the principal symptoms of fibromyalgia can be verified using tests. Even the trigger point test depends on what the patient tells the doctor - which the court acknowledged could be an exaggeration or outright lie.

Consequently, the court deemed Unum's actions consistent with the intent of the limitation - "to curtail the possible abuse and malingering that could occur for claims based on conditions that are, at their core, based on credibility rather than verifiable tests or procedures."

The court conceded that Unum could have written the limitation more clearly by specifying which conditions were limited; however, the court did not deem such a course necessary.

There were also several other issues discussed.

The first was the plaintiff's argument, which was apparently raised for the first time in her reply brief that the policy limitation was not included in the summary plan description and therefore could not be applied. Finding that there was no allegation of reliance on the SPD, the court dismissed that argument.

The court also rejected an argument that Social Security found Weitzenkamp disabled, ruling that Unum's benefit termination was based on different grounds. Finally, the court concluded that Unum had a right to recover an overpayment from the plaintiff based on her Social Security award.

This ruling raises a number of questions. While the issue about the absence of the policy limitation in the SPD may have been raised too late, a key aspect of the ERISA law is the requirement that summary plan descriptions contain a description of "circumstances which may result in disqualification, ineligibility, or denial or loss of benefits." 29 U.S.C. § 1022(b).

Since the failure to include the policy limitation in the SPD blatantly violates that provision, that alone should have barred its enforceability. However, the U.S. Supreme Court is set to hear a case this term, CIGNA v. Amara, which will have some bearing on whether reliance on the faulty SPD is required, as the court found here.

The court's interpretation of the self-reported illness limitation also raises questions. Nowhere in the opinion is it noted that the burden of proving the applicability of an insurance policy limitation falls on the insurer even in cases governed by ERISA.Ind. Funeral Dirs. Ins. Trust v. Trustmark Ins. Corp., 347 F.3d 652, 654 (7th Cir. 2003);Hurst-Rosche Eng'rs, Inc. v. Commercial Union Ins. Co., 51 F.3d 1336, 1342 (7th Cir. 1995); Glista v. UNUM Life Ins. Co. of Am., 378 F.3d 113, 127 (1st Cir. 2004); Caffey v. UNUM Life Ins. Co., 302 F.3d 576, 580 (6th Cir. 2002); Farley v. Benefit Trust Life Ins. Co., 979 F.2d 653, 658 (8th Cir. 1992); Fought v. Unum Life Ins. Co. of America, 357 F.3d 1173, 1185 (10th Cir. 2004).

The fact that other courts, such as the 8th Circuit in Chronister v. Baptist Health & UNUM Life Ins. Co., 442 F.3d 648, 656 (8th Cir. 2006), reached a different interpretation of the self-reported illness limitation suggests that burden cannot be met; or at the very least, reveals that the self-reported illness provision as written is ambiguous. Hence, under the rule of contra preferentem, the ambiguity should have been construed against the insurer.

The court's interpretation of the provision raises other concerns as well. A diagnosis is not a disability. Disabilities occur as the result of the manifestations of illnesses. The court's reading of the self-reported illness limitation would exclude the manifestation of conditions such as multiple sclerosis, lupus or herniated spinal disks after two years even though the conditions themselves are objectively diagnosable since the manifestation of those conditions is not verifiable on X-ray or MRI.

Therefore, the court was right that the language of the policy could have been written more clearly. If it was Unum's intent to limit fibromyalgia claims to two years, it could have specified that condition or any other condition it intended to limit so that claimants should not have to guess which conditions are excluded.

Finally, based on an aspect of ERISA that limits claims brought by plan fiduciaries to specific equitable remedies, the court's ruling on the counterclaim also raises questions. The counterclaim asserted a right to recovery an overpayment due to a Social Security award in accordance with policy provisions that reduce long-term disability benefit payments by the amount received in Social Security disability benefits.

The question is whether that claim is equitable or legal in nature. Although the Supreme Court's ruling in Sereboff v. Mid Atlantic Medical Services, Inc., 126 S. Ct. 1869 (2006), permits a claim for reimbursement so long as the policy grants a right to reimbursement, that ruling's applicability is dependent on the plan's ability to assert a lien upon the monies at issue.

However, no creditor is allowed to assert a lien over Social Security benefits based 42 U.S.C. § 407(a) that prohibits transfer, assignment, levy, attachment or garnishment against such benefits.

Although it could be argued that the reimbursement claim does not specifically seek recovery of Social Security benefits since those monies had already been paid out, there may be no valid distinction. As explained in Mote v. Aetna Life Insur.Co., 435 F. Supp. 2d 827 (N.D. Ill. 2006) , "the funds on which defendants seek to impose an equitable lien are exactly the same funds that the law labels and treats as Social Security funds that are taken out of reach by Section 407(a)." Id. at 830.

Mote further points out, "Section 407 (a), [ ], speaks of 'moneys paid' as well as 'moneys payable' - a clear reference to Social Security benefits already paid to the Social Security beneficiary. Not surprisingly, then, the case law dealing with that provision consistently treats, for example, an unsegregated bank account as 'consist[ing] of Social Security benefits.'" Id. at 829.

Mote followed Philpott v. Essex County Welfare Bd., 409 U.S. 413 (1973), where the defendant was barred from recovering Social Security benefits from a Social Security beneficiary's bank account under a reimbursement agreement.

The Supreme Court held: "The language in the Social Security Act in § 407 is all-inclusive: 'None of the moneys paid or payable … under this subchapter shall be subject to execution, levy, attachment, garnishment or other legal process …' Thus, the court explains that the moneys paid as retroactive benefits were 'moneys paid … under this subchapter'; and the suit brought was an attempt to subject the money to 'levy, attachment … or other legal process.' " Id. at 415-416.

Although the district court relied on Gutta v. Standard Select Trust Ins. Plans, 530 F.3d 614 (7th Cir. 2008), the reimbursement claim asserted in Gutta had to do with income paid from another disability policy - not Social Security disability benefits - therefore the court did not address whether § 407(a) of the Social Security Act precludes MetLife's counterclaim.

Note: I represented the plaintiffs in the Holmstrom, Williams, Mote, and Gutta cases discussed in this article.