Employee Retirement Income Security Act (ERISA) cases are difficult at best. But finally, here is a win in the courts. The 5th Circuit issued a ruling on June 13, 2018, in favor of a claimant. The case is styled, Ester Hill White v. Life Insurance Company of North America.
Among other issues, the Court first addressed whether LINA had a conflict of interest. This issue arises when the insurer of the plan also determines whether the claimant is entitled to benefits. A conflict of interest, such as the one in this case, should prove more important where circumstances suggest a higher likelihood that it affected the benefits decision.
The Court was concerned with LINA’s failure to address Dr. Fochtman’s report in its denial of life insurance benefits. White argues that such failure amounts to procedural unreasonableness. Procedural unreasonableness is important in its own right and also justifies the court in giving more weight to the conflict.
In the case, Schexnayder v. Hartford Life, the Social Security Aminstration (SSA) had determined that Schexnayder was “fully disabled” and unable to perform any work. The SSA had issued disability payment to him, who in turn had reimbursed the plan administrator, Hartford, for payments Hartford had already made to him. When Hartford later terminated his benefits on the ground that he was not disabled, Hartford’s denial did not mention the SSA’s determination of disability. Because Hartford failed to acknowledge an agency determination that was in direct conflict with its own determination, its decision was procedurally unreasonable. The court stated, “We do not require Hartford to give any particular weight to the contrary findings; indeed, Hartford could have simply acknowledged the award and concluded that, based on the medical evidence before it, the evidence supporting denial was more credible. It is the lack of any acknowledgement which leads us to conclude that Hartford’s decision was procedurally unreasonable and suggests that it failed to consider all relevant evidence.” Thus, “although substantial evidence supported Hartford’s decision, the method by which it made the decision was unreasonable.”
Here, as in Schexnayder, it is undisputed that LINA did not address Dr. Fochtman’s report. LINA argues that Achexnayder is distinguishable because the SSA determination in that case was in direct conflict with the administrator’s findings, whereas in this case, Dr. Fochtman’s report was favorable toward LINA’s findings that Mr. White’s death was caused by his intoxication or drug abuse. The Court disagreed.
Dr. Fochman’s report effectively stated that the level of the drugs in Mr. White’s system could not be determined, and thus whether the cause of Mr. White’s death was due to intoxication or drug abuse could only be speculative. The inability to determine the level of drugs in Mr. white’s system was critical to the application of the “intoxication” exclusion because Arkansas defines “intoxicated” as being influenced by alcohol or drugs “to such a degree” that the driver is “a clear and substantial danger” to himself and those around him. The inability to determine whether Mr. White was under the influence of alcohol or drugs at the time of the accident does not afford a reasonable conclusion that his death was caused by intoxication or drug abuse.
Thus, LINA should have at least addressed the report in its denials, especially because Dr. Fochtman’s report was the only expert opinion in the record.