Federal Court Finds CIGNA Failed to Provide Claimant with a Full and Fair Review
Monday, June 18th, 2018
In an ERISA disability case that began with an appeal filed in 2014, a plaintiff sought a judicial review of the determination by Life Insurance Company of America (LINA, a member of the CIGNA family of disability insurance companies) that his occupation did not fall under the classification of Sales Personnel and therefore he was not entitled to a higher level of monthly benefits under the LINA long term disability policy that was part of his employee benefits package.
The plaintiff, who worked for a large pharmaceutical company, said that his benefits should include bonuses or target incentive compensation bonuses for his covered earnings, as that is how his income is structured.
Employment Classification Minimizes Disability Benefits
The plaintiff was granted short-term disability benefits in 2011 due to a degenerative eye condition. He received benefits until his long-term disability benefits were approved in 2012. The dispute concerns his additional income from his bonuses.
The plaintiff was a participant in an employee benefit plan established by his employer, Endo, a large pharmaceutical company that is governed by ERISA. LINA/CIGNA was told by Endo that the company had two classes of employees – Class 1 – All active, full time and part time employees, excluding sales personnel, who routinely work at least 20 hours a week, and Class 2 employees. But prior to his claim, there were never any references to those two separate classes of employment in any materials other than in the long-term disability insurance policy.
Court Rules Employee Classification Issue Not Reviewed Fully or Fairly
In February 2017, the court found that LINA committed an error by not providing a full and fair review and breached its fiduciary duties to the policy owner. The court remanded the case back to LINA for further fact finding to determine whether he should be considered “Sales Personnel” under the policy. The claim for higher benefits was again denied by LINA.
June 2017, the plaintiff filed a motion to reopen the case, as the policy owner wanted a court review.
The court found that LINA failed to conduct a full and fair investigation of his claim, both during the initial appeals process and on appeal. The court stated that LINA did not consider or entirely discounted the evidence provided by the plaintiff that supported his assertion that he was “Sales Personnel.”
The plaintiff provided the federal court with evidence that he was initially told by Endo that his bonuses would be included in his earnings for purpose of his LTD benefits. Then he was told that “someone” at Endo had determined that he was not “Sales” and should be classified as a Class 1 employee. If the plaintiff were classified as a Class 2 employee, his long-term disability benefits would increase by $902, a substantial amount, based on 60% of $1,503, for a total monthly benefit of $3,072.
There no evidence that classified this plaintiff, or any other employee of Endo, for that matter, as a non-sales employee before this person put in a claim for benefits. The federal court said that the company had a duty to conduct a full and fair review of whether or not he should be classified as “Sales Personnel.”
The plaintiff submitted three documents to LINA – his 2010, 2011 and 2012 Incentive Compensation Plans—proving that he participated in a Target Physician Incentive Compensation Plan. He also presented emails that clearly described his role as someone who is charged with helping to market the technology, and his successful marketing of these products resulted in business and bonuses. For every $100,000 of pathology work that a doctor performed using Endo’s equipment and services, he received a $3,000 bonus, plus a monthly bonus for every case he worked on.
As to Endo’s decision that their employee was not “Sales Personnel,” the employer did not provide substantial evidence to support the insurance company’s determination.
Based on a thorough review of the case, the court ordered that the decision of the Plan Administrator is reversed, and the plaintiff is awarded benefits retroactive to the date that his long term disability benefits commenced.
Hodges v. Life Ins. Co. of North Am, 2018 U.S. Dist. LEXIS 96369