A recent decision from the Federal Court in Pennsylvania has chastised CIGNA’s claim handling conduct and awarded back benefits to an insured whose claim was terminated by CIGNA based upon its effort to apply the wrong standard of disability. CIGNA terminated the claim on the purported basis that the claimant was able to work in some occupation, despite the fact that her claim was in the own occupation stage. In litigation, CIGNA sought to argue that this was a typographical error, and that it actually applied the own occupation standard.
The Court methodically picked apart the arguments, and demonstrated how CIGNA wrongfully applied the any occupation definition. The Court also rejected CIGNA’s argument that evidence supported its claim decision under whatever standard was applied, factually demonstrating why CIGNA’s argument lacked merit. The Court held that “any action taken by a plan administrator inconsistent with the terms of unambiguous policy language is arbitrary.”
This strong decision serves to highlight how insurers often will apply erroneous standards, and will attempt in litigation to craft arguments to fix the holes in the logic of the underlying claim handling. Fortunately, this Judge appreciated the issues, and did not permit CIGNA to “mend the hole”.
Loomis v. Life Ins Co. of N. Amer. (CIGNA)