NEW JERSEY FEDERAL COURT EXAMINES OWN-OCCUPATION POLICY CLAIM
In October 2017, a U.S. District Court judge in New Jersey issued a blistering opinion, finding that a disability insurer had been arbitrary and capricious in the termination of disability benefits. At the time of denial, the insurance company had already paid benefits for seven years under an own-occupation disability insurance policy. The unpublished opinion sheds light on what this type of policy is and on legal issues that can arise in policy interpretation, with real life consequences for policyholders.
What is own-occupation disability insurance?
Own-occupation policies offer income protection for individuals who can no longer perform their work duties due to disabling conditions. Coverage questions can arise over the meaning of a person’s “own occupation.” For example, does the disability prevent the person from performing his or her job exactly as it was done on the date of disability? Alternatively, is it interpreted that the person cannot perform any job within his or her own profession from a broader, even national perspective, without accounting for the particular demands of the exact job held?
Might an insurer even take the position that though the insured cannot perform his or her own occupation, he or she could work in a different but gainful field?
The answer can depend on the policy language. Is “own occupation” defined anywhere within the insurance contract? Does the policy define “own occupation” one way immediately after the disabling condition starts and another way after a period of time has passed?
Ultimately, the matter can end up before a judge or jury, requiring a judicial finding of the scope of “own occupation” under the policy in question. A dispute related to the discussion happened in the October 23, 2017, decision of Patterson v. Aetna Life Insurance Company.
Christopher Patterson was a system development technical director for an IT consulting company to health care organizations. By Patterson’s job description, he was out of town serving clients so much that he did not even have a hometown office. Patterson normally traveled for the most of each business week to a client site.
In 2007, Patterson became disabled after spinal surgery and Aetna paid disability benefits to him for seven years under a long-term own-occupation disability policy provided through his employer. While being paid benefits, his treating physician completed required statements and worksheets that documented ongoing disability. The doctor also submitted progress notes to the insurer.
The insurer hired investigators in 2008, 2009, 2013 and 2014 to conduct surveillance of Patterson’s activeness. In 2009, he attended an Aetna-required independent medical examination (IME). The IME doctor concluded that Patterson could do full-time sedentary work. Aetna continued to pay for full disability while equipped with the IME information.
Aetna also researched jobs that would allow Patterson to earn at least 80 percent of his earlier income as required by the policy. No jobs were found within 50 miles of the plaintiff’s house that were sedentary and would meet the wage requirement (at least $71.76 per hour).
The investigative firms retained by Aetna also reported on Patterson’s wife’s Facebook page, which reflected family vacations.
In 2014, Aetna conducted both a medical review and a vocational analysis. The medical review did not include a physical exam and concluded that Patterson could perform sedentary work and possibly be able to change positions throughout a workday. Patterson’s doctor agreed with the assessment of Aetna’s medical reviewer.
Termination of benefits
The vocational analysis looked at Patterson’s “own occupation” from a national perspective instead of as solely performed by him. The study found that the “generic position in the national economy” does not necessarily require travel (like Patterson’s position had) and is lighter duty than Patterson’s job had been. The analysis concluded that because it is “routine” to “provide reasonable accommodations for sedentary occupations” the plaintiff could work “within the scope of [his] occupation” within the national economy.
Aetna terminated Patterson’s LTD payments, which was appealed with the support of a communication from his treating doctor that said Patterson “should be considered completely and permanently disabled” and that even with changing positions, he could not work six to eight hours a day. Plaintiff’s appeal letter said that he could not stand for more than “four to five minutes,” could not regularly bathe because of trouble with standing and could not travel as his previous job required.
Aetna denied the appeal based on another medical review of the record without physical exam. The reviewing doctor said after looking at surveillance videos, the medical records and considering a trip to Europe that Patterson could work in his “own occupation as defined in the national economy.”
Termination found to be arbitrary and capricious
The judge wrote a long and detailed opinion that analyzes Aetna’s actions and the evidence in light of relevant case law. Several aspects of the record were reviewed and the judge was skeptical at the insurance company’s claim that the seven years’ worth of benefits paid to Patterson were done in error. The judge also questioned the failure to order an actual physical examination before the termination given the subjective nature of Patterson’s pain.
Regarding the interpretation of “own occupation,” the court said that since the policy did not explicitly assign a national, generic definition, the plain meaning of “own occupation,” the actual “functional and physical requirements” of the insured person’s specific job must be considered. In Patterson’s case, this would include almost constant travel along with presentations while standing. The court found that an ability to perform these material duties was not supported by substantial evidence.
Rather, the objective evidence in the record supported a finding that Patterson could not perform such duties. Furthermore, the court said that even if a generic, national definition of “own occupation” applied, the termination of benefits would still have still been arbitrary and capricious.
The court ordered “retroactive reinstatement” of benefits.
The opinion is not available free of charge on the court’s website as of this writing, but it is on Westlaw, which also reports that Aetna appealed the decision to the U.S. Court of Appeals for the Third Circuit on November 27. Advocates for the rights of insured people will watch this appeal with keen interest.