Northern District of Illinois Finds that Liberty Life’s Termination of Disability Benefits was Arbitrary and Capricious

The Northern District of Illinois recently ruled in favor of the Plaintiff’s summary judgment motion in a long term disability lawsuit. In Krupp v. Liberty Life Assurance Company of Boston, the court found that Liberty Life’s termination of Ms. Krupp’s long term disability benefits was arbitrary and capricious. Krupp’s long term disability benefits were provided through her employee benefit plan and accordingly, the case was examined under the rules and regulations of the Employee Retirement Income Security Act (“ERISA”). To read the full opinion, see the link here.

Krupp was a design director for McGraw-Hill from 2002 to 2008. During her employment, she underwent multiple surgeries to her cervical spine. After three surgeries, she still experienced pain at the back of her head, burning down her spine, muscle spasms, tightness, dizziness, nausea, constant weakness, decreased range of neck motion, and shortness of breath. She took powerful medications to attempt to manage her pain, but this was not successful. Krupp described her severe pain as a 9 out of 10 at its worst and 5-8 out of 10 on average.

In 2008, she underwent a fourth surgery and eventually stopped working on November 17, 2008. When she stopped working, she applied for disability benefits from Liberty Life, who insured disability benefits for employees of McGraw-Hill. She received short term disability benefits for a couple of months, but then attempted to return to work. Unfortunately, her severe pain and other disabling symptoms forced her to stop working again and she was placed back on short term disability. On May 20, 2009, her short term disability benefits met the maximum duration and she transitioned to long term disability. Krupp received long term disability benefits until Liberty Life notified her on November 8, 2010 that her benefits had been terminated.

In support of its termination of benefits, Liberty Life relied upon the opinions of two peer reviewing physicians, a vocational expert, and an independent medical evaluation. Liberty Life also performed a total of 9 days of surveillance of Krupp in an attempt to prove that her limitations were exaggerated. However, 9 days of surveillance resulted in less than 9 minutes of video showing Krupp outside her home.

Prior to the termination of her disability benefits, Krupp’s treating physicians provided Liberty Life with information that supported her claim of disability. Her neurologist, neurosurgeon, pain management specialist, and other treating physicians provided Liberty Life with objective test results, office visit notes with positive signs on examination, consistent documentation of her reported symptoms and limitations, and reports of aggressive medical treatment. In addition, Krupp’s neurologist rebutted the opinion of Liberty Life’s independent medical evaluation, which claimed that Krupp could perform sedentary work.

Krupp appealed Liberty Life’s termination and in support of her appeal, she submitted updated treatment notes; sworn statements from her family, friends, and colleagues attesting the validity of her claims; and a copy of the Social Security Administration’s (“SSA”) award of disability benefits. In regard to the SSA’s award of benefits, Liberty Life actually referred Krupp to a lawyer to assist her in obtaining Social Security disability benefits. Despite this supportive information, Liberty Life denied Krupp’s appeal on May 10, 2011. In support of its denial of Krupp’s appeal, Liberty Life utilized yet another peer reviewer who concluded Krupp could work in a sedentary capacity.

When the court reviewed Krupp’s case for its summary judgment determination, it did so under an “arbitrary and capricious” standard of review because the McGraw-Hill benefit plan granted Liberty Life discretionary authority to determine disability claims. That means that Krupp had to show Liberty Life’s claims determination to be arbitrary and capricious in order to win summary judgment.

Even under this deferential standard of review, the court found that Liberty Life’s claims determination was arbitrary and capricious for several reasons. First, the court found that Liberty Life failed to explain its rejection of the opinions of Krupp’s treating physicians. Among those opinions, Krupp’s neurologist, Dr. Nager, provided an attending physician’s assessment that fully supported her claim for disability benefits. Yet Liberty Life did not even mention this assessment in its initial termination letter. The court held that “because Dr. Nager’s written assessment spoke directly to whether Krupp was disabled, Liberty Life’s failure even to address it suggests arbitrary and capricious decision-making” (citing Majeski).

Another example of Liberty Life’s arbitrary decisionmaking was its requirement for Krupp’s treating physicians to respond to a copy of the independent medical examination within 11 days. When Liberty Life imposed this deadline, it failed to provide an explanatory cover letter notifying the treating physician of instructions to respond within 11 days. Krupp’s treating physician requested an extension of time to submit a response, but Liberty Life refused. The court stated that “this sort of borderline adversarial behavior on the part of Liberty Life is contrary to its fiduciary duty to act in the interest of plan participants and is further evidence supporting a finding that the plan’s determination was arbitrary and capricious.”

The way Liberty Life selectively read the evaluations of its own peer reviewers also illustrated the capriciousness of Liberty Life’s termination. The court found that Liberty Life omitted the peer reviewer’s conclusion that Krupp could only occasionally perform fine hand and finger movements on her right side. By cherry picking evidence that only supports Liberty Life’s termination of benefits, the termination of Krupp’s benefits were arbitrary (citing Leger v. Tribune Co. Long Term Disability Ben. Plan).

The court found that Liberty Life appeared to rely entirely on peer record reviews and an independent medical examination. However, Liberty Life’s physicians failed to consider the effects of Krupp’s chronic and debilitating pain on her ability to perform her job. In this case, Krupp provided evidence that she had undergone four back surgeries, received five nerve blocks, and had been prescribed and taken numerous narcotic pain medications. The court concluded that “because none of Liberty Life’s three consulting physicians considered how Krupp’s pain might interfere with her ability to perform her job…Liberty Life’s reliance on their opinions was arbitrary.”

Finally, the court determined that Liberty Life’s failure to explain its rejection of the SSA’s fully favorable decision was arbitrary and capricious. In this case, Liberty Life merely stated that the SSA “approves benefits based on their qualifications.” Citing the Seventh Circuit’s decision in Holmstrom, the court found that a “plan administrator cannot simply reject a disability finding by the SSA out of hand but rather must provide a reasonable explanation for why it chose to disregard or discredit that finding.”

Because the court found Liberty Life’s termination of Krupp’s long term disability benefits to be arbitrary and capricious, it remanded the case to Liberty Life for further proceedings consistent with the court’s decision. The court’s decision in Krupp is another great example of how disability insurance companies may try to ignore favorable evidence while selectively relying upon information that supports a denial of benefits. If you would like to speak with the O’Ryan Law Firm about the denial of your insurance benefits, contact us today.