Disability Insurance Blog

Insurer Was Arbitrary, Capricious For Not Ordering Medical Exam

short term disability

Monday, April 23rd, 2018

A federal appeals court has found that an insurance company should not have denied a short-term disability claim based on a clearly diagnosed hereditary disease without first ordering an independent medical examination (IME). In our last post, we wrote about the financial importance of short-term disability or STD benefits to a claimant who is unable to work. 

The impairment

Ehlers-Danlos Syndrome Type III or EDS is associated with fatigue and with severe and chronic pain from joint dislocation and subluxation as well as from loose connective tissue. The claimant, a 42 years old woman, has been repeatedly diagnosed since childhood with this disease by her treating and consulting doctors, who have also said it is disabling to her. For these reasons, the court held that the insurer’s STD denial without having referred the claimant for an IME was arbitrary and capricious. 

The plan 

In Guest-Marcotte v. Life Insurance Company of North America, an opinion from the U.S. Court of Appeals for the Sixth Circuit, the Court considered the claimant’s STD application under a plan supplied by her employer, an engine-part supplier, for which she worked as an insurance risk manager. Eligibility for disability under the plan meant that the claimant could neither “perform the material duties of [her] Regular Occupation” nor earn 80 percent of her earnings in her Regular Occupation. 

The administrative record 

One of claimant’s doctors is a recognized EDS expert. He confirmed the diagnosis, joint pain and fatigue, recommending she take short-term disability to rest, undergo “multiple consultations” and start “recommended therapies.” She submitted the STD application, which the insurer denied three times and the federal trial court affirmed. 

Throughout the application and appeals processes, she submitted numerous medical-provider statements, records and reports. Her doctors said that her ability to concentrate, sit and drive were limited. 

On the other side, the insurer had its own medical experts review the records and they repeatedly concluded that there was no “objective” or “quantifiable” medical evidence of disability. One reviewer said that the restrictions her doctors recommended were not “supported by documented impairment.” 

Arbitrary and capricious decision-making process 

Under the STD plan, the insurer may pay for and require that the claimant undergo an IME. The court said that under ERISA it can be evidence of arbitrary and capricious decision-making when the insurer dismisses complaints of chronic pain without ordering an IME. 

On that basis, the court sent the claim back for proper consideration by the insurance company. It is important to note that the decision to seek an examination is often explored by Courts, with mixed results.