Here, Kelly Ann Tyler (“Tyler”) filed a claim for a breach of disability insurance contract against United States Life Insurance Company and American General Life Insurance Company (together, “American General”). Further, she filed claims for a breach of the covenant of good faith and fair dealing by American General, seeking punitive damages.
Previously, Tyler submitted a group long-term disability (LTD) policy underwritten by American General. This policy defines “total disability” as “your complete inability to perform the substantial and material duties of your Current Occupation beyond the end of the Elimination Period, and you are not engaged in any other occupation.” “Current Occupation” is defined as “[t]he duties of the medical specialty then being practiced or of the occupation being performed immediately prior to the disability.” Tyler had been a psychiatrist for Veterans Affairs in the Phoenix area.
After Tyler began experiencing chronic pain, Mollarets meningitis, fatigue, post-herpetic neuralgia, and chronic migraines, she filed a claim for total disability. This claim was approved once she submitted further information. American General additionally explained that there might be several requests for updates over time to continue the evaluation of Tyler’s conditions.
Two years later, a case manager named Linda Donahue took over Tyler’s case. She reviewed the file and opined that Tyler’s claim was still supported by her medical records. Donahue did, however, request updates for the records. Among those records were a report from Dr. Crever, Tyler’s primary physician. He stated that she was physically unable to work as a result of the sporadic nature of her flare-ups which resulted in headaches.
After Donahue reviewed the updated records she received, she identified several inconsistencies. One of these is that Tyler did not utilize preventative therapy for her migraines while she attempted to become pregnant. Donahue then referred out Tyler’s case file for a third-party evaluation. Health Direct, Inc. (“HDI”) tried to reach out to several of Tyler’s doctors during its review but was unable to make contact.
While HDI identified that Tyler experienced frequent severe headaches, it also opined that “[Tyler’s] inability to [return to work] . . . [f]ull [t]ime does not appear supported based on the most recent medical exam findings” supplied by a rheumatologist and a neurologist that treated her. HDI suggested to Donahue that the case be peer reviewed by an independent medical provider. With Donahue in agreement, HDI forwarded the case file over to CompPartners, Inc. CompPartners, Inc. then passed the case off to Dr. Alberto Ramos who was board-certified in neurology.
Dr. Ramos stated that Tyler’s discontinued use of preventative therapy while attempting to become pregnant caused her level of disability due to migraines to be unclear. He further stated that at least one of the medications she was prescribed prevented her from driving. Dr. Ramos also opined that Tyler’s frequency of migraines had decreased since the filing of the claim was made. It was also Dr. Ramos’ opinion that there were “no gross motor or fine motor abnormalities that would limit [Tyler’s] ability to work” as well as “no side effects from medications that would impair the claimant.” Although Tyler’s headaches appeared to cause her some limitations, they were not affecting her ability to go back to work.
Donahue looked at the information provided by Dr. Ramos and HDI and decided that Tyler’s claim had no medical support at the time. Tyler received a letter that said American General “determined that there is no medical evidence to support any ongoing restrictions or limitations to your activity which would prevent you from performing the material and substantial duties of your regular occupation.”
Tyler had her attorney file a response to American General, explaining that her condition had worsened and even led to hospitalization. Donahue asked for updated records and once received, sent them back through the HDI and Dr. Ramos review processes. As a result of his review, Dr. Ramos said that Tyler could return to work if she had the flexibility to take leave for small amounts of time during a migraine, as well as if she had a dark, private place to recuperate when dealing with a workplace migraine.
Donahue passed Tyler’s file on to an in-house vocational rehabilitation counselor. This person opined that “Dr. Tyler currently does have the physical capacity to perform her Current Occupation” if the suggestions by Dr. Ramos were considered. Between the reports by Dr. Ramos and the comments by the vocational rehabilitation counselor, Donahue believed that Tyler could meet the essential functions of her regular occupation with her specific accommodations. She informed Tyler that she could appeal, but Tyler instead filed this action for bad faith and punitive damages claims.
For a bad faith claim, the court must ask two things: (1) did American General act unreasonably and (2) did American General know, or was it conscious of the fact that it was acting unreasonably? The court held that because of Tyler’s profession and the requirements of the accommodations suggested by American General, a reasonable juror could potentially find that those accommodations are unavailable and are not a good faith basis under which to have denied coverage for LTD benefits. As such, the court denied American General’s motion.
Regarding the punitive damages claim, the standard is “established by [clear and convincing] evidence that [the] defendant either (1) intended to injury plaintiff or (2) consciously pursued a course of conduct knowing that it created a substantial risk of significant harm to others.” By relying on case law, the court held that “[A] willful and knowing failure to process or pay a claim known to be valid” could support a punitive damages claim. The court further held that a jury could come to the conclusion that American General willfully failed to pay Tyler’s claim based on the evidence in her file. Therefore, the court denied American General’s second motion, as well. Overall, the denial of both of these motions simply means that American General could not get Tyler’s claims dismissed at this early stage in the proceedings.
[Note: this claim was not handled by the Ortiz Law Firm. It is merely summarized here for a better understanding of how Federal Courts are handling long term disability insurance claims.]
Here is a copy of the decision in PDF: