Hot off the Press

The following is from McCandless v. Std. Ins. Co., 2012 U.S.App. Lexis 26235 (6th Cir. 2012):
Standard relied on the Policy’s “Care of a Physician” provision in denying McCandless benefits. That provision provides:

You must be under the ongoing care of a Physician in the appropriate specialty as determined by us during the Benefit Waiting Period. No [long-term disability benefits] will be paid for any period of Disability when you are not under the ongoing care of a physician in the appropriate specialty as determined by us.

Standard’s reliance on this provision is problematic. Both Drs. Dickerman and Ingram faulted McCandless for failing to see a rheumatologist. But Standard never told McCandless that she would be ineligible for benefits if she did not see a rheumatologist. Further, Dr. Engelmann explained in his letter that he advised McCandless that there would be little difference between his treatment and the treatment a rheumatologist would provide. The one potential difference would have been Enbrel, a costly and potentially risky form of treatment that McCandless was hesitant to try. Standard’s decision to deny benefits, based in large part on the fact that McCandless did not see a rheumatologist, is suspect, particularly considering that it did not exercise its authority under the Policy to have a rheumatologist conduct an independent medical evaluation of McCandless.
Because Standard both evaluates and pays claims on the Policy, we must take into account its incentive to cut costs. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 108, 128 S. Ct. 2343, 171 L. Ed. 2d 299 (2008). Although our review in ERISA actions is deferential, the arbitrary and capricious standard is not a “rubber stamp [of] the administrator’s decision.” Kovach v. Zurich Am. Ins. Co., 587 F.3d 323, 328 (6th Cir. 2009) (alteration in original ) (citation and internal quotation marks omitted). In this case, Standard is operating under a conflict of interest, which “is a red flag that may trigger a somewhat more searching review.” Schwalm v. Guardian Life Ins. Co. of Am., 626 F.3d 299, 312-13 (6th Cir. 2010). Applying that review, we cannot say that Standard’s benefit determination was the result of a deliberate and principled decision-making process. See Balmert, 601 F.3d at 501 (citation omitted).
We conclude that the decision to reject McCandless’s claim without having a rheumatologist conduct an independent medical examination was arbitrary and capricious. . . .

In a similar circumstance we observed “[a]s this court has repeatedly found, . . . where an administrator exercises its discretion to conduct a file review, credibility determinations made without the benefit of a physical examination support a conclusion that the decision was arbitrary.” Helfman v. GE Group Life Assur. Co., 573 F.3d 383, 395-96 (6th Cir. 2009); Calvert v. Firstar Fin., Inc., 409 F.3d 286, 295 (6th Cir. 2005) (“[T]he failure to conduct a physical examination—especially where the right to do so is specifically reserved in the plan—may, in some cases, raise questions about the thoroughness and accuracy of the benefits determination.”).
For these reasons, we REVERSE and REMAND to the district court with instructions to remand to the plan administrator for a full and fair review of McCandless’s claim, which presumably will include a rheumatology evaluation.


Standard of Review – Long Term Disability (ERISA)

The first step in reviewing a claim for wrongful denial of long term disability benefits under ERISA is to determine whether the plan vested the insurance company with discretion to determine eligibility for benefits.  Such a determination is made de novo by the court.  If the plan confers discretionary authority to the plan administrator, the court reviews the decision under the abuse of discretion standard. Under the abuse of discretion standard, the Court is limited to the evidence that was before the plan administrator at the time the decision to deny benefits was made.

Next, a conflict of interest analysis must take place.  If the plan administrator’s decision to award or deny benefits impacts its own financial interests, that would be a conflict of interest.  Such a conflict must be considered by the court in determining the reasonableness of the decision.

ERISA Attorney Fees

In a long term disability case under ERISA, “the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” 29 U.S.C. 1132(g)(1). If the long term disability insurer’s position was not substantially justified and not taken in good faith, attorney fees may be awarded.  In order to determine a reasonable fee, the district court must make assessment based on a calculation of the “lodestar”: the hours reasonably expended multiplied by the reasonable hourly rate. Pickett v. Sheridan Health Care, 664 F.3d 632 (7th Cir. 2011).  Occasionally, the lodestar may be adjusted.  Hensley v. Eckerhart, 461 U.S. 424 (1983).

A reasonable billing rate examines both the attorney’s rates as well as the prevailing rate and/or market rate.   Blum v. Stenson, 465 U.S. 886 (1984).  The market rate is essentially the rate normally charged in the community.    “The best evidence of the value of the lawyer’s services is what the client agreed to pay him.” Assess. Tech. of WI, LLC v. WIREdata, Inc., 361 F.3d 434, 438 (7th Cir. 2004).  Therefore, the attorney’s actual billing rate paid by his client is “presumptively appropriate” to use as the market rate. People Who Care v. Rockford Bd. of Edu., 90 F.3d 1307, 1311 (7th Cir. 1996).  In addition, evidence of the rates charged by other attorneys in the community for similar work is appropriate evidence of the reasonable market rate.  Obviously, prior attorney fee awards is also appropriate.

The attorney should submit proof by Affidavit.  In addition, rates can be established by presenting evidence of what other local attorneys charge for the same type of work.  The defendant can challenge the hourly rate by producing evidence and/or a good reason explaining why a lower rate is appropriate.  The Court ultimately determines what is reasonable; though the lodestar amount is presumed reasonable.  City of Burlington v. Dague, 505 U.S. 557 (1992).