The case of Smith v. Reliance Standard Life Insurance Company (Reliance) demonstrates the length disability insurance companies will go to avoid paying benefits to claimants. It began in 2013 when Fredrick Smith, who had been plant manager at Charles Craft, Inc. since the 1970s, experienced a series of strokes and suffered from heart problems. These conditions, combined with his diabetes, hypertension, neuropathy and other illnesses made it impossible for him to work.
Smith’s employer provided its employees disability and life insurance policies with Reliance. If Smith proved to Reliance he was totally disabled according to the terms of the policy, then Reliance would waive premiums for the life insurance.
On March 6, 2013, Smith underwent triple-coronary bypass graft surgery. On July 30, 2013, Smith filed a claim for total disability benefits claiming he had only been able to work part-time between March 4 and July 24, 2013, and after July 24, he had not been able to work at all.
Smith’s claim for benefits was approved when Reliance determined that Smith was unable to perform the material duties of his regular occupation. After 24 months of receiving benefits, the definition of disability changed to requiring Smith to prove he was unable to work in any occupation.
On September 1, 2016, Reliance determined Smith could work at a sedentary job and denied his claim for any further benefits. Smith pursued an administrative appeal that was denied. After he exhausted his administrative remedies, he filed a lawsuit in state court that was sent to United States District Court for the Eastern District of North Carolina as an ERISA lawsuit.
That court found in favor of Smith and ordered Reliance to reinstate benefits. Reliance appealed to the Reliance States Court of Appeals for the Fourth Circuit. The appellate court affirmed the District Court decision holding: “Against a gale of medical opinion and considerable evidence, Reliance sought shelter in opaque statements from medical records. The sheer mass of the health problems Smith suffered rendered him eligible for long-term disability benefits as defined by the terms of the plans. To repeat: Smith had a triple bypass surgery, diabetes, nerve damage, arteries that were narrowed and hardened, multiple strokes, and multiple stents for his heart and kidneys. The Social Security Administration and all of his doctors uniformly concluded that he was unable to work. Reliance abused its discretion in denying him benefits, and the district court’s judgment in reinstating those benefits is hereby AFFIRMED.”
District Court Proceedings
The District Court reviewed the administrative record and found that Reliance abused its discretion in denying Smith’s claim for benefits.
Reliance relied on two sources: 1) the opinion of its own medical reviewer, Dr. Weston, who relied on an error in the medical records when he reported that Smith could work full-time in a sedentary occupation for which he was educated and trained; and 2) Its own interpretation of Smith’s medical records.
It was an abuse of discretion to rely on Weston’s review when his conclusion was based on an error in the medical records. The District Court noted that three treating physicians found that Smith was unable to work at any gainful occupation. Weston, Reliance’s reviewing physician, who did not examine Smith, nor did he talk to any of Smith’s treating physicians, was the only physician to say Smith could work full-time at a sedentary job. It was discovered that Weston’s opinion was based on typographical errors in the notes of heart specialist, Dr. Klang. Klang’s notes indicated Smith was much more active than he really was, and in some places, the notes were incoherent. For example, one entry stated, “50-1/2 mild tracks,” and “7 a half miles.” Weston overlooked a disclaimer present at the bottom of Dr. Klang’s medical note submission, and included in all of his submissions, that “[t]his note was formulated using various recognition software and therefore may contain unintended errors.” Despite this note, without talking to Dr. Klang, Weston concluded that Smith was not entitled to disability benefits.
It was an abuse of discretion for Reliance to rely on its own review of the medical records. Reliance cherry-picked the record and found chart notes in Smith’s medical record with physician comments such as “Smith is feeling better today” and “no new complaints.” It ignored the details found in all treating physicians reports about the number of serious medical problems and diagnoses.
In its ruling in favor of Smith, the District Court noted, “the court cannot find an example where a court upheld an administrator’s decision to deny benefits based upon an inaccurate independent physician report and its own opinion as a non-medical provider with a conflict of interest, while all treating physicians of the insured recommended a different course of action.”
The District Court ordered Reliance to reinstate benefits, pay back benefits to July 16, 2016, the date it denied Smith benefits, and to also pay the life insurance premiums. Reliance appealed the decision to the Fourth Circuit.
Fourth Circuit Court of Appeals Affirmed the District Court’s Order for Reliance to Pay Back Benefits and Life Insurance Premiums
The Appellate Court noted that on Smith’s initial application for disability benefits, Dr. Stewart had written that his heart problems were stress-related and that he “could NEVER return to work.” His employers recognized this and would not even call him for advice out of concern that the phone call could cause him more stress.
Smith was taking 17 different medications and reported he could not sleep more than two hours at a time. He frequently forgot things and was not strong enough to play golf.
The Court of Appeals noticed other problems with Weston’s reliance on the medical records. One doctor’s note said that Smith could “walk up to 40 miles.” Weston interpreted that to mean 40 miles a day. Smith reported to Reliance that it meant 40 miles in approximately four months.
In upholding the District Court’s order to Reliance to reinstate benefits, the Appeals Court commented:
“Our review of the record persuades us, as it did the district court, that Reliance abused its discretion in concluding that Smith could work full-time in a sedentary job. Reliance agrees that Smith is too ill to return to his job at Charles Craft, but maintains that a job with less lifting and stooping than a plant manager would suit him. This view defies belief. Drs. Stewart and Haworth said Smith’s health problems related to stress. He had multiple strokes, multiple stents for his heart, kidney disease, a urological stent, hypertension, a triple bypass surgery, diabetes, nerve damage, and a host of other maladies. Every doctor that examined him told Reliance he would never be able to work… This record evidence shows that Smith has carried his burden to show an abuse of discretion.”
The Court of Appeals then affirmed the decision of the District Court which ordered Reliance to reinstate Smith’s disability benefits.
If you are dealing with a similar issue with your disability company, or have any questions about your disability claim, contact one of our attorneys at Dell & Schaefer for a free consultation. We serve clients throughout the entire United States.