Cigna’s Structural Conflict Will Now Be Scrutinized

An appeals court held this month that even though Cigna’s plan administrator had discre-tion to decide questions of eligibility for long-term disability benefits, remand was appropriate to allow the district court to determine how heavily the administrator’s structural conflict weighed in the abuse-of-discretion balance.

In this case the claimant, “Edward,” suffers from a number of degenerative conditions in his right foot, and especially in his great right toe. In 2003 he stopped working because of the severe pain that these conditions cause. Edward initially received long-term disability benefits under his employer’s group benefit plan, which is insured by Cigna Life Insurance Company of New York. However, two years later Cigna determined that he no longer qualified for benefits because he could not meet the plan’s requirement of showing that his disability prevented him from performing any job. Edward brought suit under the Employee Retirement Income security Act of 1974 (“ERISA”). The district court concluded that Cigna did not abuse its discretion in discontinuing Edward’s benefits and granted Cigna summary judgment. The Court of Appeals however applied the Supreme Court’s recent pronouncement in Metropolitan Life Insurance Company v. Glenn, advising courts to take cognizance of structural conflicts in ERISA cases.

Edward’s disability policy was typical in that after 24 months of disability benefits a more stringent standard kicks in: the beneficiary must be unable to perform “all the material duties of any occupation” that he is reasonably qualified for based on his education, training, or experience. Six months before the end of Edward’s initial 24-month period-Cigna began to investigate whether he qualified for further benefits under the more stringent standard. Cigna requested updated medical records from Edward’s doctors, including Dr. Ronald Sage, a podiatrist who had performed Edward’s third and fourth surgeries. Dr. Sage reported that Edward could sit, stand, or walk for less than two and a half hours in an eight-hour day. He expected Edward’s condition to continue indefinitely. Cigna submitted Edward’s medical files and Dr. Sage’s reports to three case managers, who referred Edward for an independent medical examination (“IME”).

The IME was conducted by Dr. J.S. Player, a board-certified orthopedic surgeon. He reviewed the medical files and physically examined Edward. Dr. Player noted that Edward walked with a cane but observed that he maintained a normal posture while standing and appeared comfortable sitting for extended periods. He agreed that Edward had a degenerative joint disease in his right great toe and that he suffered from a loss of motion and strength in his right foot. But Dr. Player concluded that Edward was engaging in “symptom magnification” and had an “abnormally high degree of perceived disability.” He also concluded that Edward could return even to his former job as long as he did not have to walk or climb stairs.

As part of the LTD review process, Cigna sent Dr. Player’s IME to Dr. Sage and asked for his comments. Dr. Sage said that he agreed with Dr. Player’s findings based on the physical examination, but reiterated that Edward could not return to his former job because of the severity of his foot pain. The same month, a rehabilitation specialist retained by Cigna identified six jobs that Edward could perform in the Chicago market. (Meanwhile, Cigna had hired a firm to advocate for Edward’s social security disability benefits by arguing that Edward was totally disabled.)

Cigna informed Edward that it had decided to terminate his long-term disability benefits. Edward appealed using Cigna’s internal appeals process. He submitted a report from Dr. Sage confirming that his chronic degenerative conditions left him unable to work. He also submitted a social security form completed by Dr. Sage reporting that he suffered from “intractable pain.” An appeals claim manager consulted with Dr. R. Norton Hall, an associate medical director at Cigna, who concluded that Dr. Sage’s report did not establish that Edward was incapable of performing all work. The manager concluded that Edward’s new evidence was insufficient to overcome the conclusions of Drs. Hall and Player that he could perform sedentary work. Accordingly, the appeals claim manager upheld the denial of benefits.

Six months later Edward filed his second internal appeal. He argued that Cigna should disregard the IME because, he said, Dr. Player had not considered his pain or the side effects of his pain medication. He also submitted a copy of a favorable social security disability ruling, dated three days before Edward’s first appeal was denied. In that ruling, the administrative law judge found that Edward’s willingness to undergo surgery in attempts to alleviate his pain showed that the pain was genuine and concluded that he was incapable of performing full-time work.

As part of the review process, Cigna forwarded Edward’s new evidence to a second associate medical director, Dr. Paul Seifarth. Dr. Seifarth noted Dr. Sage’s remark that pain would prevent Edward from concentrating enough to work, but dismissed the remark as unsubstantiated. An appeals claim manager denied Edward’s second appeal.

Suit was filed and the district court determined that Cigna’s plan administrator had discretion to decide questions of eligibility for long-term disability benefits. On appeal however, the Court held that the district court “had little to say beyond acknowledging that it was ‘disturbed’ by the discrepancy it saw between Cigna’s hiring of a consultant group to advocate on Edward’s behalf before the Social Security Administration (“SSA”), and Cigna’s subsequent denial of his claim for benefits despite the SSA’s finding of disability.” Cigna’s advocacy of a disability finding before the SSA should have been treated as a “serious concern” for the court to consider in weighing whether Cigna’s structural conflict rendered its denial of benefits arbitrary.

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Alan Olson writes this web-log to provide helpful information regarding long-term disability cases. He practices long-term disability law throughout the United States from his offices in New Berlin, Wisconsin. Attorney Olson may be contacted at [email protected] with questions about the information posted here or for advice on specific disability benefit claims.

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