At our law firm, we represent long-term disability claimants whose claims have been denied or whose benefits have been terminated. If the LTD coverage is provided through a group policy taken out by the claimant’s employer, normally, the claim’s process is governed by ERISA, a federal law that imposes standards of fairness on the insurer’s claims-processing practices and procedures.
Under ERISA, if the policy language properly provides the plan administrator with “discretion” to decide LTD eligibility, a U.S. District Court reviewing a denial or termination will often ask the legal question: Did the administrator abuse its discretion?
In a new federal case out of Colorado, the judge elaborated on what the abuse-of-discretion standard means.The Paquin Case
Paquin v. Prudential Insurance Company of America (available on Westlaw at 2018 WL 3586397) involves Michael Paquin’s LTD claim based on a West Nile virus infection in 2003 from a mosquito bite that left him with cognitive impairments and brain damage from resulting encephalitis.
After he became unable to work in 2004, Prudential approved his claim for LTD benefits and paid them until 2015 (except for one termination during that time after an unsuccessful work attempt that was reversed on review). Paquin’s extensive file at Prudential included numerous medical records spanning the entire eligibility period documenting that several medical professionals found permanent cognitive decline and other disabling effects of the virus.
In 2015, Prudential abruptly terminated Paquin’s benefits based on a neuropsychological test, called an NPT, that the insurer arranged. This doctor hired by Prudential suggested that Paquin did not “perform to his true capacity” in the testing, making the result invalid and compromising the reliability of the entire medical record. She concluded that “no valid or compelling evidence” supported “clinically significant cognitive impairment.”
After the insurance company denied the claim on review twice, Paquin filed his lawsuit.Abuse of Discretion
The judge disagreed with Prudential’s determination. First, he explained that these factors are relevant to an abuse-of-discretion analysis:
When an insurance company terminates benefits after initially finding the claimant disabled, there must be new information that changes the disability determination in “some significant way.”
Second, the judge explained that the insurer abused its discretion and “reviewed the evidence with blinders on” for the following reasons:
The court ordered past due benefits paid with interest, plus reinstatement of ongoing payments.
We do not know at this time whether Prudential will appeal this strongly pro-claimant decision.