U.S. Second Circuit rules against First Unum in disability coverage dispute
12/29/2008
New York, NY (Dec. 29, 2008) -- Citing "First Unum's well-documented history of abusive [claims handling] tactics," the U.S. Court of Appeals, Second Circuit reversed a District Court decision in favor of First Unum in John E. McCauley v. First Unum Life Insurance Co., finding "powerful evidence that First Unum's denial of McCauley's appeal [for disability benefits] was arbitrary and capricious." The decision was handed down on Dec. 24.
Citing the Supreme Court's new standard for assessing the impact of a plan administrator's potential conflict of interest laid down in Metropolitan Life Insurance Co. v. Glenn (2008), Circuit Judge John M. Walker, Jr. found that "the plan administrator abused its discretion in denying plaintiff's claim" and sent the case back to the District Court for calculation of benefits, costs and attorney's fees.
The plaintiff in this case, John McCauley, was a Senior Vice President at Sotheby's Service Corporation when he was diagnosed with advanced colon cancer in 1991. First Unum based its initial disability coverage denial on a brief statement from McCauley's doctor that detailed only limited physical impairment from the cancer itself. Invited to submit further information on appeal, McCauley provided a memorandum, submitted with his physician's full knowledge and approval, detailing an array of disabling effects of the intense chemotherapy he underwent. First Unum, the Court found, by various devices unreasonably disregarded the information in the memorandum:
Hiding behind a terse initial response to a set of questions it posed three months earlier, First Unum blithely ignored detailed descriptions constituting clear proof of total disability--apparent even to a lay person--purporting to be the views of McCauley's physicians.
Judge Walker concluded:
It was unreasonable for First Unum to conclude that the conditions described in the memorandum were equivalent to those described in McCauley's first application. It was also unreasonable for First Unum to conclude that the conditions described in the memorandum did not render McCauley disabled from performing his regular occupation. In sum, we do not believe that a rational claims administrator could have reviewed the limitations and symptoms listed in the memorandum and found that the physician's earlier narrative comported with those medical conditions.
The decision cited Glenn to bring First Unum's "history of biased claims administration" to bear, referencing the "more than 30 cases in which First Unum's denials were found to be unlawful" listed in Radford Trust v. First Unum Life (D. Mass. 2004) as well as news reports and academic studies detailing First Unum's "unscrupulous tactics" before concluding:
In light of First Unum's well-documented history of abusive tactics, and in the absence of any argument by First Unum showing that it has changed its internal procedures in response, we follow the Supreme Court's instruction and emphasize this factor here. Accordingly, we find First Unum's history of deception and abusive tactics to be additional evidence that it was influenced by its conflict of interest as both plan administrator and payor in denying McCauley's claim for benefits.
Eugene R. Anderson of Anderson Kill & Olick, counsel to John McCauley, said, "The Second Circuit cleared the cobwebs from this case, detailing and denouncing the arbitrary and capricious nature not only of Unum's tactics against Mr. McCauley, but of its claims handling practices generally. This decision should hearten the many Unum policyholders who are still fighting unfair coverage denials."
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