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Court questions disability insurer’s “fairness” in eligibility rejection

A gay former corporate executive living with HIV won the right to a trial to restore his disability benefits on March 31, when Senior U.S. District Judge Charles S. Haight, Jr., in Manhattan, rejected a motion for pre-trial summary judgment by the disability insurance company. Pre-trial discovery exposed flaws in the way the insurer conducted its determination of continued benefits eligibility, leading Haight to question the “fairness” and “sufficiency” of the process.

The following description is based on Haight’s detailed written opinion.

Steven Troy was a top executive of Ketchum Communications, serving as chairman and CEO of Ketchum Directory Advertising and as president of Ketchum Interactive Group, overseeing 160 employees in seven offices and generating annual earned revenue of $125 million. Troy also served on the board of directors of the corporate parent, an advertising and public relations conglomerate with close to $2 billion in annual revenues.

One of the benefits of Troy’s senior position was a special executive disability insurance policy from Unum Life Insurance Company of America intended to pay out benefits while the employee was unable due to injury or sickness to “perform each of the material duties” of their “regular occupation.” Disability coverage could also continue under certain circumstances where the employee could perform only some duties with compensation below a specified portion of pre-disability pay.

Troy, who began working at Ketchum in 1976, developed symptoms of advanced HIV infection in 1993 that soon led to his inability to function effectively as an executive. He began AZT treatment in April 1994 after loosing 26 pounds in eight months and stopped working. His application for Unum long-term disability benefits was approved.

Five years later, when Unum contacted Troy requesting “updated certification of your continued disability,” his doctor stated that he “should not work in any mentally or physically demanding job-related activity.” However, based on what its lawyers said was “the stability of plaintiff’s condition and greater level of activity,” Unum launched an “investigat­ion” of Troy’s status. A review for the company by Dr. William Hall, an infectious disease specialist, led Troy’s physician to reiterate that it would be “very difficult for Mr. Troy to maintain the level of function required for him to carry out the duties of his previous employment.”

Troy’s benefits continued, but in the summer of 2001, Unum claims to have received an anonymous e-mail message and a phone call stating that Troy was defrauding the insurance company by submitting false diagnoses of his condition. Though Unum’s Special Investigations Unit concluded that there was not enough information to pursue a fraud claim, the insurer stepped up its surveillance. In November 2001, investigators surreptitiously videotaped a man at Troy’s residence “standing, walking, climbing steps, leaning, bending over at the waist, carrying trash bags, and snapping right arm in an up and down motion while shaking a piece of cloth.”

Though it later became clear that the videotaped man was not Troy, but his domestic partner, in January 2002, Unum sent him a letter, mentioning the tape and stating “there is no indication of severe, progressive or intractable disease or symptoms which would preclude you from performing your occupation as chairman, director of advertising.”

Another problem was that Unum throughout this process relied on a definition of “disability” appropriate for Ketchum’s regular employees, but not its executives. That definition allowed for disability benefits beyond two years only if an employee was so disabled that they could not “perform each of the material duties of any gainful occupation for which you are reasonably fitted by training, education or experience,” not that they were unable to return to their “regular occupation.”

Troy’s attorney responded, explaining that the wrong definition had been used and seeking a reversal. Unum decided to continue paying benefits while extending its review process, yet its response focused on Troy’s physical ability, even though the main impediments to his performing work on the executive level were mental and psychological, according to his doctor.

In August 2002, Unum informed Troy again that he had been found ineligible for benefits, and after further additional appeal and review, in April 2003 affirmed its previous decision. That finding again referred to the anonymous charges and “a reported activity level that appears inconsistent with an individual so impaired that he is unable to work”—including Troy’s travel between California and New Jersey, his participation in the Gay Men’s Chorus, a vacation in Mexico, and recreational activities that had been observed.

After the threat of a lawsuit, Unum agreed to take another look and arranged for an independent neuropsychiatric evaluation, but the psychologist Unum retained backed out and, according to Troy’s lawyer, warned Troy that he had withdrawn from the exam “because he had become convinced that the process would not be fair to Mr. Troy and that UNUMProvident had put him in the untenable position of using his professional skills in the service of a preordained conclusion.” Troy then decided against cooperating in the test.

Unum instead consulted the same doctors who had made the previous decision, and they of course concluded that they had been correct. Unum then denied Troy’s claim once and for all and the lawsuit began.

After discovery, both sides moved for pre-trial summary judgment, Troy contending that he remains eligible for benefits, Unum arguing that it had provided all the necessary appeals and that its decision was correct.

Haight found that “a significant number of facts call into question the sufficiency and fairness of defendant’s claims review process,” including that at each level of review the same medical doctor would review his prior determinations and confirm them, that the vocational analysis was lacking in explanation for its conclusions, and appeared to be relying on outmoded sources of information, by stark comparison to professional opinions offered by Troy’s expert.

Most significantly, Haight found that Unum had consistently applied the inappropriate definition of “disability” in evaluating Troy’s eligibility. Haight pointed out that Unum’s final determination relief turned heavily on the “mental aspects of plaintiff’s condition on the basis of opinions of independent consultants who never personally examined plaintiff, while discounting the opinions of plaintiff’s treating physicians and independent examiners who did conduct personal examinatio­ns.”

Courts generally afford considerable deference to medical decisions made by insurers, but are unwilling to do so where the process is severely flawed, and Haight refused to grant summary judgment to the insurer.

However, he decided that the question whether Troy was disabled within the policy’s meaning still needs to be determined so he did not grant summary judgment to Troy either.

The judge ordered that the trial begin on October 16, 2006.

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Updated 5:17 pm, July 20, 2018
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