Even when a claims administrator approves a claim for disability benefits, its job is not done. That principle was again demonstrated in the recent case Owings v. United of Omaha Life Insurance Co., No. 16-3128 (10th Cir. Oct. 17, 2017). The plaintiff's claim for long-term disability benefits had been approved, but he claimed that the benefits paid were based on the wrong salary.
The plaintiff injured his back at work on July 1, 2013. Later that same day, the plaintiff was demoted from manager to supervisor with a corresponding reduction in his salary. The plaintiff returned home that day and claimed that he did not return to work the following day due to his back pain. The claims administrator approved and paid long-term disability due to plaintiff's back injury, but based the amount on his reduced salary. It relied on the employer's human resources representative, who said that plaintiff worked on July 2, making his date of disability at July 3. Plaintiff filed a claim seeking increased benefits based on his prior claim and appealed the denial. The defendant again relied on the employer's human resources department in determining that the plaintiff worked on July 2, thus making his pay at the time of his disability the lower amount. After plaintiff filed suit in Kansas state court, the case was removed to the U.S. District Court for the District of Kansas. That court ruled in the defendant's favoring, determining that it did not abuse its discretion in denying plaintiff's claim.
On appeal, the Tenth Circuit overturned that decision, determining that the insurer abused its discretion in several ways. First, it held that the defendant's interpretation of "disabled" under the plan was unreasonable. The defendant had determined that plaintiff's disability did not begin until July 3 because he continued to perform at least one job duty on July 2. The plan, however, defined disability as being unable to perform "at least one of the Material Duties of Your Regular Occupation." The defendant's interpretation was thus inconsistent with plan's terms. The Court also rejected the defendant's argument that plaintiff was disabled, at the earliest, on July 2 because he worked at least part of July 1. The Court noted that the plan did not support the defendant's interpretation that the date of disability must be difference than a claimant's last day worked. This interpretation was unreasonable in light of the plan's plain language. Finally, the Court found it unreasonable for the defendant to rely solely on the assertions of the employer's human resources director in determining that last day worked. The defendant was focused solely on whether plaintiff worked on a specific day, and not on when plaintiff's injury sustained on July 1 prevented him from performing one or more of the duties of his position. The Court remanded the case to the lower court with instructions to enter judgment for the plaintiff.
This case presents a few key takeaways. As always, the plan terms and, in particular, the plan's definition of disability, must always be at the forefront of any benefits decision. The more unexpected result is the Court's finding that a claimant's last day worked and date of disability may be the same. This defies the typical interpretation many administrators use where the date of disability follows the last day worked. While the Court relied on the specific plan language at issue in making that determination it is noteworthy for claims administrators going forward. Further, the Court found it was unreasonable for the administrator to rely on the employer's assertions alone. This case thus serves as a reminder to conduct an independent investigation.
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