UNUM Disability Decision Not Supported by Substantial Evidence
A federal judge in Massachusetts has reversed a denial of disability benefits by First Unum Life Insurance Company in an ERISA lawsuit. The case, Host v. First Unum Life Insurance Company and UNUM Group, involves a claim by Brian Host, a highly paid executive who worked for Deutsche Bank. UNUM denied his claim for disability benefits following a back injury in 2009.
Back Injury Disability Prevented Duties of Job
Mr. Host’s back injury was so bad that he was no longer able to engage in air travel, a requirement of his job before he was injured. Host attempted to work despite his back disability, but had to stop traveling completely to continue in the job. This impacted his revenue production. Months after his injury, Deutsche Bank notified him that he would not receive a bonus for 2009 (the year he was injured), and that he was going to be terminated. He filed a claim for disability benefits, but UNUM denied the disability claim, taking the position that Host’s injury was not causing his decreased revenue production and he was not disabled.
ERISA Standard of Review – How the Court Looks at ERISA Claims When They Get to Court
In Massachusetts, along with other states in the federal court system’s First Circuit, a court does not hold a full trial to decide ERISA claims. Instead, the court’s job is to evaluate the information in the file of the ERISA claim administrator (usually the insurance company, like UNUM in this case), and to decide “whether a plan administrator’s determination is plausible in light of the record as a whole, or, put another way, whether the decision is supported by substantial evidence in the record.” (quoting the First Circuit Court of Appeals decision in Colby v. Union Sec. Ins. Co. & Mgmt. Co. for Merrimack Anesthesia Assocs. Long Term Disability Plan, 705 F.3d 58, 61–62 (1st Cir. 2013)).
So what is “substantial evidence” in Massachusetts and the rest of the First Circuit? “Evidence is substantial if it is reasonably sufficient to support a conclusion, and the existence of contrary evidence does not, in itself, make the administrator’s decision arbitrary.” Gannon v. Metro. Life Ins. Co., 360 F.3d 211, 213 (1st Cir. 2004). That last phrase is important. Courts in the First Circuit are quick to point out that evidence does not become insufficient just because contradictory evidence exists.
Court Finds UNUM Lacked Substantial Evidence to Deny the Disability Claim
First UNUM relied upon statements they received from someone named Shari Goldfarb, a Human Resources employee at Deutsche Bank to conclude that Host had not suffered loss from disability, but instead from reasons unrelated to his disability. Ms. Goldfarb had 3 phone conversation with UNUM claim representatives, and told them somewhat conflicting reasons why Host’s income dropped.
First, she said that Host’s job would be eliminated, and he was working full-time so was not disabled. Second, she said that his bonus decreased because of the economy, not his injury. Finally, she told UNUM that Host was to be part of a restructuring before his injury, and Host’s business sector did not perform well.
Host provided UNUM with detailed evidence to rebut what Goldfarb told UNUM. He showed how he had been a top producer, and then dropped off. He also showed that he had filed a charge of disability discrimination against Deutsche Bank.
The Court found Host’s detailed evidence significant, and concluded that UNUM did not have substantial evidence to support its disability denial, stating:
In light of the significant differences between Host’s and Deutsche Bank’s versions of the bases for the denial of a bonus and his later termination, Unum’s reliance on the perfunctory explanations offered by Goldfarb in three telephone conversations to determine the basis of Host’s loss of income was not reasonable. …
The information supplied by Goldfarb was not sufficiently reliable on its face to justify Unum’s decision when that information was contradicted or impeached by Host’s generally more detailed information.
For the judge, UNUM’s failure to press the employer for more information was also significant. The judge concluded that UNUM had not investigated the claim well enough, and ordered that the claim be sent back to UNUM for more evidence to be obtained to determine whether the true reason for Host’s loss of income was his back injury or not.
TAKEWAY: UNUM and disability insurance companies like it that insure group ERISA plans have a duty to properly investigate claims. UNUM did not have a right just to blindly accept conclusory statements from the employer in the face of conflicting evidence.
CASE: Host v. First Unum Life Insurance Company and UNUM Group, Civil Action No. 13-11578-GAO, 2016 WL 3814807 (D. Mass. 7/13/2016).