Boston Personal Injury Attorney Reviews Federal Decision Acknowledging Conflict of Interest when Disability Insurer Reviews Request and Also Pays Employee Benefits

This is the first of a two part Blogpost, where Massachusettts Personal Injury Attorney, the attorney, reviews and analyzes a recent First Circuit U.S. Court of Appeals decision. The case involves an employee disability claim and issues pertaining to a perceived conflict of interest.

In this case, the U.S. First Circuit Court of Appeals remanded a case to the District Court, where an employee challenged the denial of her request for long-term disability benefits. The Plaintiff alleged that the employer’s insurer, who denied her benefits, both reviewed and decided on her eligibility and was responsible for the payments, which was a conflict of interest. She also alleged that a physician referral service the insurer utilized was biased, given it generated large revenues from its reviews, and usually recommended in favor of the employer.

The Court justified the remand, based on a recent decision of the United States Supreme Court in Metropolitan Life Insurance Co. v. Glenn , 128 S. Ct. 2343 (2008). The Supreme Court had previously reviewed a denial of benefits by an administrator that passed judgment upon and paid claims under an ERISA-regulated plan.  It concluded that courts should recognize that a conflict exists whenever a plan administrator, whether an employer or an insurer, is in the position of both adjudicating claims and paying awarded benefits.

In this case, in 1996 a primary care physician had diagnosed the plaintiff employee as suffering from fibromyalgia, which is a disorder involving muscle and connective tissue pain. Patients note heightened and painful response to gentle touch, as well as debilitating fatigue, sleep disturbance, and joint stiffness. The plaintiff was a group leader employed by GenRad, Inc. In spite of the diagnosis, she continued to work. At the time she was covered under a short-term and a long-term disability insurance plan supplied by Defendant, Liberty Life Assurance Company (Liberty), who also administered both plans.

The employer self-funded the short-term plan. However, Liberty provided initial claims review and benefits determination. Its decisions were appealable to the employer, which paid approved claims from its own accounts. Liberty both administered and underwrote the long-term plain. Liberty reviewed all claims, made initial benefits determinations, adjudicated any appeals, and paid approved claims from its own coffers.

The plaintiff stopped working in October, 2001, and applied for short-term benefits. Disabled was defined under the policy to include a person who wass “unable to perform all of the material and substantial duties of [her] occupation . . . because of an Injury or Sickness.” The plaintiff submitted reports from three doctors: her primary care physician, a cardiologist, and a rheumatologist in support of her claim. After reviewing these medical records and a job description, a nurse employed by Liberty, requested that a physician conduct a peer review. Based on his assessment, Liberty denied the claim.

The plaintiff appealed this decision to her employer. The appeal papers included a response from her primary care physician disputing the peer reviewer’s conclusions. The employer asked another physician to perform an independent medical examination (IME). He determined that the plaintiff was disabled, and the employer agreed to pay her benefits.

Denmark v. Liberty Mutual Insurance Company of Boston

(This Blogpost to be continued in the next days)