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Oklahoma federal court weighs LTD insurer conflict of interest

On August 17, the U.S. District Court in the Northern District of Oklahoma issued an opinion reversing a long-term disability insurer’s denial of benefits, ordering that the insurer pay the claimant 24 months of benefits based largely on mental-health impairments. In Redden v. Aetna Life Insurance Company, the judge explained the inherent conflict of interest that a LTD insurer has when it has both the role of discretionary decision maker on the question of claimant eligibility and is in the position of financial responsibility when it finds for the claimant. 

In other words, if the insurer decides for the claimant it is also on the hook to pay benefits, sometimes for years. This dual role of the insurance provider has given courts reason to look at the decision-making process with more skepticism.

The Redden facts 

Shirley Redden was a sales representative for a dental equipment company for several years. After her job became more highly automated with technology, it became difficult for her to complete the work given her visual, hearing, cognitive and mental health diagnoses. Eventually her employer terminated her. 

The claimant submitted extensive medical records and opinions from her treating doctors. These records provided details about her conditions and medical opinions suggesting significant limitations. 

Peer review process 

The insurer had two different teams of its own hired doctors conduct peer reviews of these medical records. The first team reviewed a closed period of time during which the company had previously found her disabled for purposes of short-term disability. Despite the earlier finding, the reviewers this time found Redden not disabled and Aetna denied the LTD claim. 

The second team of reviewers looked at medical records after the STD period and largely minimized conclusions of treating doctors, so Aetna denied the claim again on appeal. 

Court granted benefits 

The court found that Aetna’s denial of benefits was arbitrary and capricious and not supported by substantial evidence. 

In discussing the conflict of interest, the court explained that it must weigh the conflict as a factor in asking whether the company abused its discretion. The Tenth Circuit (the federal circuit that includes Oklahoma) has a “sliding scale approach” for how much weight to give the conflict of interest factor. The court “decreases the level of deference given in proportion to the seriousness of the conflict of interest.” 

The judge wrote that the reviewers’ rationale for minimizing or ignoring the findings of treating doctors was weak and arbitrary. Specifically, the insurer used “non-treating, non-examining physicians whose opinions contradicted — without explanation — the opinions of Redden’s treating physicians” and other important evidence. 

Finally, the court noted that the “conflict of interest at play here further tips the balance in favor of Redden.” 

The case is available on Westlaw at 2018 WL 3954849.