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Benefits Not Payable for Disabling Condition That Develops after Final Claim Decision

Benefits Not Payable for Disabling Condition That Develops after Final Claim Decision

ERISA and Life Insurance News
(May 11, 2012)

Lamb, a truck driver, was insured under a long-term disability plan sponsored by his employer, Wal-Mart. In June 2008, Lamb claimed disability due to a staph infection in his right elbow. Hartford approved the payments of benefits during the plan’s 12-month "own occupation" period, which ended in June 2009.

During the "own occupation" period, Lamb visited his physicians several times with complaints that included degenerative joint disease, difficulties with vision, a rotator cuff tear, radiculopathy, and pain in his back, knees, shoulder, and groin. The physicians provided updated information regarding Lamb’s functional restrictions and limitations.

In June 2009, Hartford obtained an employability analysis, which took into consideration Lamb’s functional capabilities, education, training, and work history. The analysis identified five semi-skilled and unskilled occupations that were a "fair match" for Lamb, meaning that he would be required to complete training in tools and/or materials to prepare for those jobs. Lamb’s treating physician also reported in June 2009 that Lamb was capable of sedentary work.

When Hartford denied Lamb’s claim for total disability benefits beyond the "own occupation" period, he submitted additional medical records. The records showed that in August 2009, two months after the payment of benefits ended, Lamb’s treating physician determined that he had necrosis in his left hip and required a total hip replacement. The physician reported that Lamb was not capable of even sedentary work, due to pain in his hips.

After reviewing this additional information, Hartford upheld its original decision because, as of June 2009, the end of the "own occupation" period, Lamb no longer met the definition of total disability.

Lamb sued. Using the six-step analysis applied by the Eleventh Circuit, the district court held that Hartford’s decision was not de novo wrong. The court rejected Lamb’s claim that his hip problems should have qualified him for additional benefits, stating that the hip problems were not apparent to Lamb or his treating physicians until well after the date his "own occupation" benefits had terminated.

Lamb argued that his hip problems should "relate back," because the medical records indicated problems with his hips during the "own occupation" period, but the court rejected this argument, stating that allowing symptoms to "relate back" would open legal floodgates, and insurance fraud would be rampant. Hartford’s decision was based on the information available in June 2009, which established that Lamb was not totally disabled at the time, but was capable of sedentary work.

Lamb next argued that Hartford’s decision was wrong, because the employability analysis did not accurately reflect his job opportunities. He claimed that the definition of "any occupation" should be read to mean that he must be able and ready to perform a job right away. Because the matches in the employability analysis were only "fair," that is, they identified jobs that required some training, Lamb argued that they could not be considered matches at all, and that Hartford was unable to identify any potential job opportunities.

The court disagreed, quoting the policy’s definition of "any occupation" as an occupation "for which you are qualified by education, training, or experience." Thus, the policy contemplated a situation in which an insured would need to undergo some training to be qualified to perform a new job.

Although under the Eleventh Circuit analysis, a court may conclude its review if it determines that a claim decision was de novo correct, the court went on to hold that Hartford’s decision was likewise reasonable, based on information in the administrative record.

The court also granted summary judgment to Hartford on its claim to recover overpaid benefits. Relying on Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006), Lamb argued that Hartford was not entitled to recover the overpayment, because the funds were not strictly traceable.

The court rejected this argument, stating that when there is an underlying agreement, payments need not be strictly traceable to be considered within the realm of equitable relief. "To find differently would be to set a dangerous precedent," the court said. "If funds were required to be strictly traceable, a plan participant who received an LTD benefit award could decline to deduct any amount for other future benefits and then could spend all money received, knowing that he would not be held responsible for any overpayment if the funds were dissipated. This result would be illogical."

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H. Sanders Carter
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