Sun Life Abused It’s Discretion in Terminating Claim

Case Name: Wilkinson v. Sun Life and Health Insurance Company, d/b/a Sun Life Financial

Court: U.S. Court of Appeals for the Fourth Circuit, on appeal from the U.S. District Court for the Western District of North Carolina.

Date of Decision: January 5, 2017

Note: This case is “Unpublished”. Unpublished opinions are not binding precedent in the Fourth Circuit.

Type of Claim: Long Term Disability pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq.

Insurance Company: Sun Life and Health Insurance Company (U.S.) (“Sun Life”).

Claimant’s Employer: Dolan & Traynor, Inc. (“D&T”).

Claimant’s Occupation / Job Position: Vice president of sales, operations, and distribution.

Disabilities: Cardiomyopathy

Definition of Disability in the Plan/Policy: Importantly, Sun Life’s “assessment of total disability [was] based on one’s occupation [as a vice president] in the national economy, not by the job requirements of a particular employer.” Sun Life claimed that although D&T described Wilkinson’s “job as heavy duty,” a vice president in the national economy fits “closer to the light physical demand level.”

Other Key Definitions in the Plan/Policy: The terms of the Policy limit coverage to “ACTIVE FULL-TIME EMPLOYEES WHO SATISFY THE COVERAGE ELIGIBILITY REQUIREMENTS.” The Policy further provides: “You are an Active Full-time Employee actively at work on any day if on that day you are: . . . [p]erforming all of the duties of your job on a Full-time Basis and working on a regular work schedule of at least 30 hours per week . . . .”

Benefits Paid? After approving the benefits claim under a policy that Sun Life issued to Wilkinson’s former employer, Sun Life terminated benefits on the grounds that Wilkinson was not an active full-time employee when the policy took effect.

Basis For Denial / Termination of Benefits: Sun Life sent Wilkinson the first denial letter on July 29, 2008, stating that he no longer qualified for long-term disability benefits. This denial letter noted that Sun Life had recently learned of the New Jersey Lawsuit, and that Sun Life believed Wilkinson may have resigned from D&T because of disagreements with the partners, rather than medical reasons. Regardless, Sun Life justified the first denial because it “concluded that there was no medical evidence to continue to support [Wilkinson’s] claimed restrictions and limitations.”

Sun Life sent Wilkinson a second denial letter on May 13, 2009. This letter noted that a physician described Wilkinson’s “cardiac status as causing only slight limitation in physical activity.” The letter also stated a functional capacity evaluation revealed that Wilkinson “had the capacity to perform his occupation as it is typically performed in the national economy.” Nevertheless, Sun Life expressly stated that it was “not addressing any question of Disability at this time,” and that it was denying coverage on different grounds. Sun Life found Wilkinson ineligible for coverage under the Policy because, in its view, two declarations filed in the New Jersey Lawsuit indicated Wilkinson “was not meeting the requirements of an Active Full-time Employee at the time coverage became effective . . . on May 1, 2004.” Thus, five years after Wilkinson left D&T, Sun Life asserted a new theory for why Wilkinson did not qualify for coverage.

Sun Life sent Wilkinson a third denial letter on July 12, 2010. The sole issue at that point involved whether Wilkinson was “[p]erforming all the duties of [his] job on a Full-time Basis and working on a regular work schedule of at least 30 hours per week” when the Policy took effect.

Wilkinson filed suit in Federal Court.

Ultimately, the district court found that Wilkinson met his burden to show that he was covered under the Policy, and that Sun Life abused its discretion by denying benefits.

Procedural history: On cross-motions for summary judgment, the district court granted judgment in favor of Wilkinson.

Key Physician Opinions: As part of Wilkinson’s administrative appeal, a physician hired by Sun Life provided medical findings indicating that “Wilkinson would be precluded from the duties of his ‘Regular Occupation’ and was ‘Totally Disabled.’” This finding essentially foreclosed Sun Life’s denial of benefits based on medical grounds.

Issues: The key issue presented is whether the district court erred in holding that Sun Life, the administrator of an employee welfare benefit plan governed by ERISA, abused its discretion when it terminated Wilkinson’s benefits.

Holdings: The Fourth Circuit held that Sun Life abused its discretion when it terminated Wilkinson’s benefits because he provided sufficient evidence to support his eligibility for coverage, and because Sun Life’s decision to terminate benefits was not the result of a principled reasoning process and not supported by substantial evidence. The Fourth Circuit therefore affirmed the district court’s decision.

The facts relevant to this appeal are those probative of whether Wilkinson worked at least 30 hours per week as an active employee on May 1, 2004, when the policy at issue took effect.

Sun Life frames Wilkinson’s evidence as relevant to the time period when he received compensation, not when he actually worked. Nevertheless, Wilkinson met his burden to provide sufficient evidence of his eligibility for coverage when the Policy took effect on May 1, 2004 (i.e., by providing evidence that he worked at least 30 hours per week). First, the FMLA Form indicates that D&T expected Wilkinson to take leave beginning “on or about May 10, 2004.” Second, a Sun Life letter acknowledges: “[D&T] indicated May 7, 2004 as the last day that Mr. Wilkinson worked and that his work schedule at the time of the disability was 5 days per week, 8 hours per day.” Third, notes dated August 2004 from Wilkinson’s physician lists May 7, 2004 as the “Date patient-ceased work because of disability.” Fourth, an April 2004 email from Wilkinson to his business partners “expressed [his] desire to work 30–40 hours a week,” which at least implies his business partners wanted him to work more than 30 hours. Fifth, Wilkinson filed an unrelated insurance application with Security Mutual listing May 7, 2004 as the “Date [he] stopped work.”

Summary: In sum, several Booth factors show that Sun Life abused its discretion, including: (1) the “language of the plan”; (2) the “adequacy of the materials considered”; (3) Sun Life’s “decision-making process”; and (4) the indicators that Sun Life’s conflict of interest played a role in its review process. See Booth, 201 F.3d at 342–43. Because Sun Life’s coverage determination was not reasoned and principled and not supported by substantial evidence, the Court holds that Sun Life abused its discretion.