Wednesday, December 2, 2015

No. 129: Disability Insurance—A Federal Judge Hammers Aetna

On October 30, 2015, U.S. District Court Judge Lawrence F. Stengel handed down an important ruling. The plaintiff filed the lawsuit in 2012 after Aetna Life Insurance Company denied long-term disability insurance benefits under an Employee Retirement Income Security Act (ERISA) plan. In the ruling, the judge granted the plaintiff's motion for summary judgment, denied Aetna's motion for summary judgment, and issued a judgment in favor of the plaintiff. Whether Aetna will appeal the ruling remains to be seen. (See Charles v. UPS, U.S. District Court, Eastern District of Pennsylvania, Case No. 5:12-cv-6223.)

Marvin Charles, a 57-year-old high school graduate, began working for United Parcel Service (UPS) as a pre-loader/porter in or about 1978. In 1992 he was promoted to package car driver, earning $50,000 to $60,000 per year. Before working at UPS, he was a dock worker for eight years and a self-employed farm owner for 12 years. At UPS he participated in the UPS National Long-Term Disability Benefits Plan. Aetna administered the plan.

In or about 1985, Charles was involved in a motor vehicle accident that caused brain trauma. Later he was diagnosed with a partial complex seizure disorder. He took Depakote for several months, then stopped, and remained seizure-free for many years. In 2008 he suffered a grand mal seizure. His primary care physician referred him to a neurologist, who prescribed Lamictal to control the seizures. Because he was taking anti-seizure medication, Department of Transportation regulations prevented him from driving a truck.

In June 2009 Charles stopped working at UPS. He applied for and received short-term disability (STD) benefits. In May 2010 he returned to work at UPS on a part-time basis in a different position—as a pre-loader—which did not require him to drive. He worked 20 hours a week over five days. He continued to receive STD benefits at a reduced rate while working part-time.

Aetna later began paying Charles long-term disability (LTD) benefits, from February 2010 to February 2012. The LTD plan provided benefits for two years under the "own occupation" definition of disability, and thereafter under the "reasonable occupation" definition. In 2011 Aetna began investigating the question of whether Charles qualified for LTD benefits under the tougher definition. In February 2012 Aetna terminated LTD benefits. In March 2012 Charles appealed. In September 2012 Aetna denied the appeal.

The Lawsuit
In October 2012 Charles filed a lawsuit in state court. In November 2012 Aetna removed the case to federal court. In February 2014 Charles filed a motion for summary judgment. In March 2014 Aetna filed a motion for summary judgment.

The Ruling on LTD Benefits
In October 2015 Judge Stengel issued his ruling. First, he ruled on the question of the "standard of review" applicable to the benefit denial. The "abuse of discretion" standard of review is tougher for the plaintiff than the de novo standard of review. The judge ruled the tougher "abuse of discretion" standard of review applied in this case.

Second, the judge ruled on the plaintiff's claim that Aetna's denial of LTD benefits violated the terms of the LTD plan. Aetna had argued there was no clinical evidence to show that the seizure medication required a restriction to part-time work. The judge ruled the denial based on a lack of clinical evidence was an abuse of discretion.

Third, the judge noted that Aetna "both evaluates and pays for LTD benefits under the Plan." Based in part on the U.S. Supreme Court 2008 decision in Metropolitan Life v. Glenn, the judge ruled Aetna had an inherent conflict of interest that appeared to have tainted its decision.

Fourth, the judge noted Aetna's use of outside medical consultants and a vocational analysis. He was critical of the manner in which the vocational analysis had been interpreted, and he ruled the manner in which Aetna had used the vocational analysis was an abuse of discretion.

Fifth, the judge noted Aetna did not seem to have considered additional information provided by the plaintiff in rendering its appeal decision. He ruled the manner in which Aetna handled the plaintiff's appeal was an abuse of discretion.

Sixth, the judge noted Aetna gave great weight to the opinions of its own experts and gave little or no weight to the plaintiff's physicians. He ruled Aetna's denial of LTD benefits was an abuse of discretion, and he ordered Aetna to pay LTD benefits to the plaintiff.

The ERISA Claim
The plaintiff also claimed Aetna violated a section of ERISA requiring a plan administrator to mail requested plan materials to a participant within 30 days after a request. The plaintiff sought statutory penalties for Aetna's alleged failure to mail the requested materials in a timely manner. The judge declined to rule on the plaintiff's ERISA claim without further information. On November 13 the parties agreed to dismissal of the plaintiff's ERISA claim.

Attorneys' Fees and Costs
On November 16 the plaintiff filed a motion and a supporting brief seeking attorneys' fees and costs totaling $26,678. The motion is pending.

General Observations
Although Judge Stengel applied the relatively tough "abuse of discretion" standard of review, he nonetheless granted the plaintiff's motion for summary judgment and denied Aetna's motion for summary judgment. Moreover, instead of allowing the case to proceed to trial, the judge ordered Aetna to pay LTD benefits to the plaintiff. In my view, this is a strong ruling against Aetna. At this writing, what happens next in the case remains to be seen.

Available Material
I am offering as a complimentary 43-page PDF the ruling handed down on October 30, 2015. Send an e-mail to and ask for Judge Stengel's ruling in Charles v. UPS.