Court Orders Modest Penalty Payment for Insurer's Failure To Provide Policy Upon Request

A Biogen Inc. employee appealed to the First Circuit Court of Appeals a federal district court decision upholding an insurer’s denial of his long term disability benefits and imposing only a $5,000 penalty for failure to provide the policy agreement to him upon request, asking the court to overturn the district court’s decision on benefits and to impose a stiffer penalty.  The case centers on a Biogen employee welfare benefit plan underwritten by defendant-appellee Aetna Life Insurance Company (Aetna). The employee and plaintiff, Joseph McDonough, was working as Senior Analyst III of the Systems Administration.

Case Facts

In November of 2008, the plaintiff experienced right-side numbness, dizziness, and blurred vision while at work. He was brought to the hospital and diagnosed with a stroke. After being treated, some symptoms persisted, preventing him from returning to work.

Through the Biogen employee welfare benefit plan, McDonough successfully received long term disability (LTD) benefits starting May 23, 2009. However, on October 29, 2009, Aetna informed the plaintiff that his LTD benefits would be terminated two days later because he no longer met the plan’s definition of disability.  Aetna based the termination on its "discretion to determine benefits."

The Plaintiff’s Plight

The plaintiff appealed Aetna’s decision and submitted medical records from various sources to support his claim. Aetna denied the appeal. The plaintiff filed suit in federal district court for wrongful termination of benefits under the Employee Retirement Income Security Act (ERISA).

Early in the case, the plaintiff requested a complete copy of his plan and its related amendments from both his company and from Aetna.  Aetna and Biogen failed to provide a copy of the plan to the plaintiff until well after it was requested, a violation of law that subjects a plan administrator to a penalty of $110 a day.  The plan language was important, because it contained a “discretionary clause.”  When an ERISA plan contains a “discretionary clause,” a judge cannot review the case and decide for himself whether the plaintiff is disabled under the terms of the plan.  Instead, he can only review the decision made by the employer or insurer and must uphold that decision unless he finds that it was an abuse of discretion to deny benefits.

The Court’s Decision

The First Circuit Court of Appeals overturned the decision of the federal district court judge, holding that Aetna's benefits-termination decision was arbitrary and capricious (and therefore an abuse of discretion) because it failed to articulate the employee’s occupation adequately and therefore could not and did not determine whether the employee’s medical condition made him disabled from his occupation.  The Court remanded the matter back to Aetna to make a new determination consistent with its holding.

The court upheld the district court’s assessment of a $5,000 penalty against Aetna for failing to disclose the policy to the plaintiff in a timely manner.

ERISA Disability Claims and You

If your employer an LTD plan and you are a participant in that plan, chances are that the plan contains a “discretionary clause."  This means that the plan administrator’s decisions about your eligibility for benefits can only be challenged in federal court on the grounds that the decision was an abuse of discretion.  As the case of McDonough v. Biogen shows, whether or not a plan contains a discretionary clause is vitally important when it comes to obtaining LTD benefits.  If you have an LTD plan through your employer and are in the process of obtaining benefits, consult with disability lawyers to determine whether your plan contains a discretionary clause and what you need to do if it does.

Be prepared and know what you must do to obtain and protect your long term disability benefits in Massachusetts. Consult with your local Northampton, MM lawyers like Terrence A. Low and Anthony J. Canata who can help you to fight for your rights.