U.S. District Court for W. District of NY rules insurance co. did

Daily Record (Rochester, NY), May 9, 2006 by Helen Nguyen

Concluding that the insurance company did not properly evaluate the plaintiff's disability claim, the U.S. District Court for the Western District of New York granted the plaintiff's motion for summary judgment.

In remanding the plaintiff's disability claim to the insurance company in David M. Yaw v. First Unum Life Insurance Co., Judge William Skretny noted that the employee of the insurance company who evaluated the claim admitted that she ignored the opinion of the treating physician and reached a summary conclusion regarding the nature of the plaintiff's job duties.

Plaintiff's Disability Claim

At issue is a claim for disability benefits made by the plaintiff, David M. Yaw.

Yaw is the president and owner of Yaw Automation, Inc. In August 2000, he suffered a major heart attack and underwent bypass surgery to remove blockages in three arteries. In May 2001, he filed a claim for residual disability benefits based on a disability insurance policy he had with the defendant, First Unum Life Insurance Co.

Yaw's claim was evaluated and denied by a First Unum employee, L.N. Yaw's claim was also denied again when it was sent for internal appellate review where it was evaluated by another employee.

Yaw subsequently filed this action in federal court in which he asserted a claim for benefits and attorney fees pursuant to the Employee Retirement Income Security Act (ERISA).

Court's Discussion

'Duty Of Good Faith'

In evaluating a disability claim, the district court referred to the term duty of good faith and fair dealing, which requires plan administrators to deal honestly and fairly with the claims of plan participants, Dunnigan v. Metro. Life Ins. Co., 99 FSupp2d 307, 324 (SDNY 2000).

Based on this standard, the court in this case determined that First Unum did not evaluate Yaw's disability claim fairly and in good faith.

The court based its decision on First Unum's employee, L.N., who evaluated Yaw's claim and who later admitted that she completely ignored the opinion of [Yaw's] treating physician and reached a summary conclusion regarding the nature of [his] job duties.

First Unum contended that L.N.'s improper evaluation of Yaw's disability claim was cured when his claim went through the insurance company's appellate review process and was evaluated by another employee. The court disagreed.

L.N. made the initial determination to deny [Yaw's] claim on an improper basis, and her conclusion and analysis necessarily framed the issues for subsequent review, explained the court. This initial taint established by an affidavit from the very individual who improperly evaluated the claim, cannot be overlooked and in this court's view, renders the entire claim review process in this instance invalid from its inception.

The court noted that First Unum considered L.N. an untrustworthy and disgruntled employee while others considered her a brave whistleblower. Therefore, the court determined that it would be in the best interests for both Yaw and First Unum if Yaw's claim was evaluated again.

To ensure fairness to both sides, this court finds it most appropriate to remand this case to [First Unum] for expedited review of [Yaw's] application by new examiners who shall adhere to the fiduciary duties applicable to them, concluded Judge Skretny. This course provides [Yaw] the opportunity to have his claim processed in an impartial manner, and permits [First Unum] to evaluate [Yaw's] claim in the first instance without the encumbrance of its former employee's improper predisposition.

The court also granted Yaw's claim for attorney fees and costs.

Court's Ruling

Concluding that First Unum did not evaluate Yaw's disability claim properly, the court remanded the claim back to the insurance company for further review.