Company ordered to review its benefits decision in ERISA case

March 28, 2013
By Patricia Manson
Law Bulletin staff writer

The administrator of a disability insurance plan acted arbitrarily and capriciously when it denied a participant’s application for benefits, a federal judge has held.

In a written opinion, U.S. District Judge Matthew F. Kennelly said Liberty Life Assurance Co. of Boston ignored or rejected evidence that was contrary to its decision to deny Amy Krupp long-term disability benefits.

That evidence included an administrative law judge’s determination — made at the request of a lawyer hired by Liberty Life to represent Krupp — that Krupp was totally disabled and entitled to Social Security benefits, Kennelly said.

He said surveillance conducted by Liberty Life also produced evidence favorable to Krupp that the company ignored.

Four consecutive days of surveillance showed that Krupp did not leave her house for the first three days and then drove a total of eight minutes on the fourth, Kennelly said.

He said a subsequent five-day stretch of surveillance resulted only in 26 seconds of video footage of Krupp checking her mailbox.

And Kennelly said Liberty Life imposed a short deadline for Krupp’s treating physicians to respond to the independent medical evaluation performed by Liberty Life’s own expert.

When a physician who had not received a cover letter with the evaluation asked for more time to respond, Liberty Life refused, Kennelly said.

“This sort of borderline adversarial behavior on the part of Liberty Life is contrary to its fiduciary duty to act in the interest of plan participants and is further evidence supporting a finding that the plan’s determination was arbitrary and capricious,” he wrote.

Kennelly directed Liberty Life to reconsider Krupp’s request for long-term disability benefits.

The lead attorney for Krupp — Mark D. DeBofsky of Daley, DeBofsky & Bryant — said he is pleased with Kennelly’s ruling.

DeBofsky noted that claimants seldom prevail in lawsuits filed under the Employee Retirement Income Security Act.

“These ERISA cases are extremely difficult because we’re up against a deferential standard of review,” he said.

While working as a design director at McGraw-Hill Companies Inc., Krupp participated in a disability insurance plan underwritten and administered by Liberty Life.

After undergoing four operations on her spine, Krupp stopped working and applied for long-term disability benefits.

Liberty Life denied the application after concluding that Krupp could still perform sedentary work.

In his opinion, Kennelly said Liberty Life’s three consulting physicians failed to consider how “chronic and debilitating pain” interfered with Krupp’s ability to work.

Kennelly conceded that the administrator of an insurance plan may deny benefits to a claimant who fails to show that pain prevents him or her from performing certain functions.

“In this case, however, Krupp provided evidence that she had undergone four back surgeries, received five nerve blocks, and had been prescribed and taken numerous narcotic pain medications,” Kennelly wrote.

“She also submitted sworn witness statements prepared by her friends, family and colleagues attesting to her changed lifestyle and inability to perform simple tasks due to pain.”

Kennelly issued his opinion Monday in Amy Krupp v. Liberty Life Assurance Company of Boston, No. 11 C 6707.

In addition to DeBofsky, Krupp is represented by Marie E. Casciari, also of Daley, DeBofsky & Bryant.

The lead attorney for Liberty Life is Jason M. Kuzniar of Wilson, Elser, Moskowitz, Edelman & Dicker LLP. He could not be reached for comment.

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