Disability Insurer Prevails: Pre-Existing Condition Justifies Denial, Federal Judge Rules


HARRISBURG, June 21 — A Pennsylvania federal judge has granted a disability insurer’s summary judgment motion, finding that a refusal of long term disability (LTD) benefits was neither arbitrary nor capricious, because the denial properly relied on a pre-existing condition exclusion in the policy.

In Yvonne Hilbert v. The Lincoln National Life Insurance Co., 15-471, M.D. Pa., 2017 U.S. Dist. LEXIS 93424), U.S. District Judge Sylvia Rambo ruled that Lincoln National Life Insurance Co., did not violate or abuse its discretion under the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (1974) (ERISA), when it found that Ms. Hilbert’s claim was not covered under a LTD policy it issued to Delta Dental, covering her as an employee.
Hilbert worked at Delta Dental and received benefits under the company’s short term disability policy (STD) for back and leg pain, and depression, claiming she was unable to work.   When Lincoln reviewed her claim for LTD status, the LTD policy in question barred coverage for any condition for which the employee was treated within 3 months of her hire.  Lincoln determined that Hilbert received treatment for depression  during her “look back” period of  Aug. 1, 2011 to Nov. 1, 2011, and eventually denied Hilbert’s claim for LTD benefits pursuant to the pre-existing condition exclusion.  Lincoln contended that Hilbert did not prove she was unable to work independent of her depression.
Following the denial of her administrative appeals, Hilbert sued Lincoln in the Eastern District of Kentucky, but the case was moved by Lincoln to the Middle District of Pennsylvania on grounds that  that it was a more convenient forum.
Following transfer, the parties filed cross motions for summary judgment..Judge  Rambo granted Lincoln’s motion and denied Hilbert’s motion , ruling that Lincoln’s denial of LTD benefits was not arbitrary and capricious.  She rejected Hilbert’s argument that the grant of STD benefits undercut the denial — the STD policy did not have a pre-existing condition exclusion.  She also found that Hilbert failed to prove her inability to work was wholly divorced from her depression:
“[the record] demonstrates that Lincoln considered the relevant medical evidence and supports Lincoln’s decision that Plaintiff was not totally disabled due a physical condition as of September 18, 2012…Lincoln did not act in an arbitrary and capricious manner in characterizing the principal duties and responsibilities of Plaintiff’s occupation…Significantly, although Plaintiff treated with several medical providers, not a single physician — not even her primary care physician or her pain physician — supported her claim… Here, Lincoln’s decision to deny Plaintiff LTD benefits is supported by substantial evidence in the record, and without substituting the court’s judgment for that of the defendant in determining eligibility for plan benefits, the court concludes that Plaintiff is not entitled to benefits under the terms of the LTD Policy and that Lincoln’s decision was neither arbitrary nor capricious.”
The judge also found that Hilbert’s receipt of Social Security disability benefits did not entitle her as a matter of course to LTD benefits under the Lincoln policy, observing that SSDI rules do not bar coverage for pre-existing conditions.

3rd Circuit: Termination of Disability Benefits Proper


PHILADELPHIA,  July 11 — The Third Circuit U.S. Court of Appeal found no ambiguity in a residual disability policy’s definition of the  term “occupation” and as a result held that the insurer’s termination of benefits was proper.

Daniel Bowerman, a chiropractor, sued National Life Insurance Co., claiming that benefits were improperly terminated under the  Employee Retirement Security Act.   Bowerman suffered a bike-riding injury to his shoulder, and had been receiving benefits for twenty one  years. After the accident, however, Bowerman continued his chiropractic practice and also worked as a consultant.

In 2011, National Life sent Bowerman a letter to terminate partial disability benefits as of his 55th birthday, and asserted he no longer was disabled as defined in the policy.  The insurer claimed that Bowerman’s full time consulting work for Independence Blue Cross took him outside of the definition of disabled as written in the policy, as he was performing his occupation.

After Bowerman filed suit to overturn the determination, the parties filed cross-motions for summary judgment. The District Court granted summary judgment to National Life, rejecting Bowerman’s argument that the terms of “occupation,” and “insured’s occupation,” were ambiguous.

After Bowerman appealed to the Third Circuit, the Third Circuit Panel of  Circuit Judges Julio M. Fuentes, D. Brooks Smith and Richard L. Nygaard affirmed the summary judgment for National life, ruling that the  “plain language of the [policy] Rider tied the definition of occupation to the Policy.”

In a footnote to the opinion, Circuit Judge Smith noted he would have vacated the District Court’s judgment  for subject matter jurisdiction, because Bowerman’s individual policy was not within the coverage of ERISA, therefore not presenting a federal question.

Daniel S. Bowerman D.C. v. National Life Insurance Co., No. 15-1129, 3rd Cir.; 2016 U.S. App. LEXIS 12503.


3rd Circuit Rules Discovery Conduct Not Basis for Bad Faith Claim, Distinguishes Hollock


PHILADELPHIA, May 10 – The U.S. Court of Appeals for the Third Circuit has affirmed the dismissal of a disability insurance breach of contract and bad faith case, ruling in part that the insurer’s discovery practices in the case could not serve as the basis for a valid claim under the Pennsylvania Bad Faith Statute.

Dr.  John Duda  sued Standard Insurance, his disability insurer, claiming a wrist injury prevented him from performing the functions of his job as an orthopedic surgeon.  Duda conceded that he could still perform many functions, such as minor surgeries, office consults, and serving as an independent medical examiner.  He also failed to produce sufficient medical documentation, claiming that he was either self-treating for the injury, or treated by partners in his medical practice as a professional courtesy.

The Third Circuit affirmed the District Court’s dismissal of Duda’s breach of contract and bad faith claims.  Regarding the latter claim the Court held:

Duda attempts to prop up his insurance-based bad faith claim under 42 Pa. Cons. Stat. § 8371 by claiming that Lincoln engaged in bad faith during the discovery stage of the instant litigation.  However, Pennsylvania courts have held that § 8371 “clearly does not contemplate actions for bad faith based upon allegation of discovery violations.”  O’Donnell ex rel. Mitro v. Allstate Ins. Co., 734 A.2d 901, 908 (Pa. Super. Ct. 1999).  Although the Hollock v. Erie Insurance Exchange case, upon which Duda relies, allowed for the possibility that an insurer’s actions during litigation, at least in some circumstances, may be admissible evidence in support of the underlying bad faith claim, 842 A.2d 409, 414-15 (Pa. Super. Ct. 2004), it also emphasized that a bad faith claim is still established upon a showing that the insurer “refused to pay the proceeds of [the] policy” because of “a frivolous or unfounded reason,” id. at 416.

The three judge panel concluded that Standard had a reasonable basis to deny Duda’s claims for coverage.

Duda v. Standard Ins. Co. et. al., (3rd. Cir., May 10, 2016)

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