The Shame of Disability Insurance

One of the oldest human worries is what a person will do if he or she becomes too sick to work.  In another time, in a different place, the social community supported those who were injured or ill.  In our time and place, many people must instead rely on a more formal arrangement — disability insurance.

Many of the large insurance companies sell disability insurance, which should provide basic financial security for people who become unable to work.  The benefit paid under such policies is not great – typically 60% of what a person made before becoming disabled, and that money is often subject to income tax.  (That alone disproves the myth that people “choose” the “easy” path of seeking disability benefits – that and the fact that most people want to work and derive a great deal of their sense of self from doing so.)

Disability insurance is a fine and honorable undertaking.  A group of people each contribute a little something to a collective pot of money, and if any one member of that group becomes too ill or injured to work, he or she receives a regular and reliable (if modest) benefit.  The role of insurance companies is to administer this system, pay disability benefits to those who need them, and retain enough of the premiums to pay their own employees.

Sadly, many of the large disability insurers have failed to uphold their part of this arrangement.  Although the law requires these companies to act as “fiduciaries” – to act in the utmost good faith toward their insureds – they ignore that obligation.  They act in their own interest, rather than in the interest of the people who agreed to the social contract of disability insurance.  Every claim denied is more profit.

To enhance the bottom line of their ledgers by paying as few claims as possible, insurance companies often purchase a “peer review,” performed by a purportedly independent doctor, who reads the medical records and then issues a report.  But these “independent” doctors are managed and paid by companies whose interests are aligned with the disability insurers they serve.  If one looks closely at the vendors that provide peer reviews to the large disability insurers, one sees that many of their officers and owners came out of top positions with . . . disability insurance companies.

Rather than being independent, neutral assessments of a person’s medical condition, peer reviews far too often are biased position pieces, written with one purpose – to provide the disability insurer a plausible basis to deny claims.

The world of private disability insurance has become a world of broken promises.  The original idea – the simple promise that if you become too sick to work, you will have a small but reliable income to keep the wolf from the door – is regularly broken, as insurance companies violate their fiduciary duty and put their own interest in sky-high profit above the interests of their insureds.  There is a word to describe that: shameful.  The same word applies to doctors who violate their most fundamental duty – the duty to do no harm – and willingly help insurers by providing biased and sham peer reviews.

Insurance Company Surveillance Proves . . . Nothing

What Does Insurance Company Surveillance Prove About Disability? 

Nothing – that is what Liberty Life Assurance Company of Boston (“LLACOB” or “Liberty Life”) has again been told.  In Bigham v. Liberty Life Assurance Co. of Boston, — F.Supp.3d –, LLACOB secretly filmed the claimant over several days, and then terminated her benefits.  When Ms. Bigham sued, LLACOB insisted that its surveillance video “proved” she was not disabled.  In an Order issued on December 11, 2015, the United States District Court disagreed:

After reviewing the surveillance footage and the rest of the record, the Court disagrees with Liberty Life’s analysis and conclusions. The surveillance footage neither proves nor disproves that Ms. Bigham’s documented chronic intractable pain, fibromyalgia, seronegative spondyloarthropathy, cervical and lumbar degenerative disc disease, and related conditions prevent her from doing her job. Ms. Bigham has never claimed that she cannot walk or lift a small dog. Indeed, Liberty Life acknowledges that “Plaintiff’s doctors reviewed the surveillance and each submitted a declaration that nothing in the video was inconsistent with plaintiff’s self-reports.” Just because Ms. Bigham did not grimace or limp in this limited window of surveillance does not mean that she is not experiencing significant pain at the time, or more importantly, at other times, and frequently. The surveillance footage does not show Ms. Bigham in a workplace setting, or performing any of the complex tasks associated with her prior position at Amazon. Nor does it catch Ms. Bigham in a lie, as implied by Liberty Life in their briefing . . .

Bigham v. Liberty Life Assurance Co. of Boston, — F.Supp.3d –, 2015 WL 8489417, at *7 (W.D. Wash. Dec. 11, 2015).

Five months earlier, LLACOB was given the same message in Anderson v. Liberty Mut. Long Term Disability Plan.  As in Bigham, LLACOB denied disability benefits and, when sued, trotted out video surveillance it had surreptitiously obtained of the claimant.  The Court stated:

Defendants argue that the surveillance evidence brings into question whether Ms. Anderson “actually experiences the severe dizziness, fatigue and nausea which she claims prevent her from performing her occupation.” To the contrary, the surveillance evidence neither proves nor disproves Ms. Anderson’s claims of intermittent vertigo, fatigue, nausea, disequilibrium, and related issues which prevent her from doing her job.

Anderson v. Liberty Mut. Long Term Disability Plan, — F.Supp.3d –, 2015 WL 4523452, at *8 (W.D. Wash. July 27, 2015).  The Court further observed that “LLACOB obtained surveillance of Ms. Anderson after she submitted her final appeal for LTD benefits and relied upon that surveillance as a basis for denying her appeal, when Ms. Anderson had no opportunity to review and respond to that surveillance.  This was a procedural violation contravening the purpose of ERISA.”  Id., — F.Supp.3d. –, 2015 WL 4523452, at *10 n 5.  In making that observation, the Court cited an earlier case involving LLACOB, Prado v. Allied Domecq Spirits & Wine Grp. Disability Income Policy, 800 F. Supp. 2d 1077 (N.D. Cal. 2011).   In Prado, Liberty Life used the same ruse – it waited until the claimant had exhausted all of his appeals before undertaking surveillance, thereby depriving him of the opportunity to review and respond to the surveillance.  The United States District Court strongly disapproved of that tactic:

Yet another factor is Liberty’s reliance, at the eleventh hour, on the surveillance footage. “[A]n administrator that adds, in its final decision, a new reason for denial, a maneuver that has the effect of insulating the rationale from review, contravenes the purpose of ERISA.” Abatie, 458 F.3d at 974. “This procedural violation must be weighed … in deciding whether [the administrator] abused its discretion.” Id.  While Liberty’s initial denial was premised on a lack of evidence of physical impairment, its final decision hinged on the Plaintiff’s lack of credibility in light of the surveillance footage. Furthermore, Liberty’s last-minute reliance on the surveillance footage did not give Plaintiff an opportunity to respond to this basis for denial.

Prado v. Allied Domecq Spirits & Wine Grp. Disability Income Policy, 800 F. Supp. 2d 1077, 1097-98 (N.D. Cal. 2011).

LLACOB may want to re-read the Ninth Circuit opinion in Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 633 (9th Cir. 2009) – where the Court found that Hartford Insurance Company “overstates and over-relies on surveillance” of the claimant.  If insurers have been slow to catch on to the failings of surveillance, the federal district courts have not.  “The Ninth Circuit has admonished district courts not to overly rely on surveillance video, particularly where the restrictions are consistent with the video surveillance.”  Bertelsen v. Hartford Life Ins. Co.:1 F. Supp. 3d 1060, 1073 (E.D. Cal. 2014) (citing Montour, 588 F.3d at 633).

Surveillance of disability insurance beneficiaries generally proves nothing.  That is particularly true when the person is beset with a condition that has ups and downs, causing good days and bad days.  The kind of skepticism, distrust and suspicion that prompts use of surveillance may have suited the Stasi, but it almost always falls short when used by insurers fulfilling fiduciary duties to their insureds.