In Lavery v. Restoration Hardware Long Term Disability Benefits Plan, 2018 WL 3733936 (D. Mass. August 6, 2018), Plaintiff John Lavery (“Lavery”) brought claims under the Employee Retirement Income Security Act (“ERISA”) against Defendants Restoration Hardware Long Term Disability Benefits Plan (“the Plan”) and Aetna Life Insurance Company (“Aetna”) over the denial of his claim for disability benefits.

Benefit Provisions

The Plan states that “Long Term Disability Coverage does not cover any disability that starts during the first 12 months” of coverage if it is “caused or contributed to by a ‘pre-existing condition.’” The Plan further states that “a disease or injury is a pre-existing condition if, during the three months before the date you last became covered: it was diagnosed or treated; or services were received for the disease or injury; or you took drugs or medicines prescribed or recommended by a physician for that condition.”

Facts

On April 25, 2014, Lavery had an office visit with his primary care physician, Dr. Anthony Lopez and presented Dr. Lopez with a lesion on his back. Dr. Lopez suspected that the lesion might be a basal cell carcinoma and recommended that Lavery consult with a dermatologist. On June 10, 2014, Lavery treated with Dr. Eileen Deignan, a dermatologist, about the lesion. Dr. Deignan biopsied the lesion and diagnosed Lavery with malignant melanoma on June 19, 2014. On September 29, 2014, Lavery ceased working and sought to commence disability leave on September 30, 2014, due to impairments caused by the treatments for his malignant melanoma. Lavery applied for and received short-term disability benefits under RHI’s Short Term Disability Plan (“STD Plan”), also administered by Aetna. In the context of the request for short-term disability benefits, RHI communicated to Aetna that Lavery’s date of hire was May 12, 2014 and the effective date for coverage under the STD Plan was June 1, 2014.

On or about March 26, 2014, Pedro Cortero, an Aetna Clinical Consultant, conducted a “pre-existing assessment” of Lavery’s claim. Cortero wrote a note in Lavery’s LTD file that considered Lavery’s April 2014 visit to Dr. Lopez, his primary care physician, and concluded that “[t]here is no evidence of a definitive diagnosis and management rendered for his malignant melanoma during the look back period.” That same day the Disability Benefit Manager (“DMB”) Therese Leimback, wrote that she “will recommend approval of claim.” Despite Cortero’s assessment and Leimback’s note, Aetna sent Lavery a denial letter on or about March 30, 2015, which stated that Lavery had a pre-existing condition due to his April 2014 visit with Dr. Lopez.

Lavery appealed. On appeal, Aetna requested a review by Tyler Thornton, another clinical consult, of the pre-existing condition issue. Thornton concluded that “[t]he documentation supports overturn of the prior pre ex decision.” Thornton referred to “the clinical review dated 3/25/15 by P. Cortero thoroughly and accurately reviewing the record including” the April 2014 visit with Dr. Lopez. Subsequently, DBM Leimback added another note stating that she would “rec[ommend] approval and reinstatement.” Yet, on September 9, 2015, a note was entered in Lavery’s file indicating, for the first time in Aetna’s records, that the effective date of Lavery’s coverage was not June 1, 2014, but July 1, 2014. The apparent rationale for the change was a Summary of Coverage (“SOC”) that issued on June 23, 2014, with an effective date of May 1, 2014, which laid out that an employee’s eligibility date is “the first day of the calendar month following the date you complete a probationary period of 30 days of continuous service for your Employer.” Based on Lavery’s date of hire (May 12, 2014) his effective date under the revised SOC would have been July 1, 2014. On September 11, 2015, Aetna issued its final decision denying Lavery’s claim for LTD benefits explaining that the effective date for Lavery’s benefits was July 1, 2014, and that the look-back period therefore included both the April 2014 visit with Dr. Lopez and the June 2014 visit with Dr. Deignan, both of which served as bases for its final decision to deny Lavery’s claim under the pre-existing condition exclusion.

District Court’s Decision

After review of the administrative record, the District Court concluded that Aetna’s two unexplained reversals of the recommendations to award benefits by Cortero, Thorton and Leimback, in the absence of new information and in the face of a detailed explanation for the awarding of benefits, weigh heavily toward a finding that the administrator acted unreasonably in denying benefits. Accordingly, the Court held that the April 2014 visit was not an adequate ground on which to deny benefits under the pre-existing condition provision.

Turning next to the denial based on the revised SOC and a July 1, 2014, effective date of coverage, the Court noted that although “[i]t is well-established that ERISA does not prevent employers from adopting, modifying or terminating welfare plans at any time and for any reason,” courts have blocked “attempts to apply plan modifications retroactively to affect benefits that had already become due.” In Lavery’s case, the court found that because the obligation to pay LTD benefits arose at the time that Lavery became disabled and not at the time that Lavery was diagnosed, and thus performance from Aetna was not yet due, Lavery was able to show prejudice due to his reliance on the terms of the Summary of Coverage that was in effect at the time he sought treatment from Dr. Deignan – i.e., June 23, 2014.

Finally, in refusing to remand the claim back to Aetna for further investigation, the Court found that not only did Lavery have no opportunity to challenge the claim below that he had been an employee as of an earlier date, a remand to allow him to make that claim would be unfair. Lavery made the decision to visit Dr. Deignan on June 10, 2014, and at that point in time, he reasonably understood – based on the Summary of Coverage in effect at that time – that any diagnosis he received from Dr. Deignan would not be considered a pre-existing condition subject to exclusion from long-term disability coverage. The record on remand would therefore be shaped by the reasonable decisions that Lavery made in reliance on a Summary of Coverage that was retroactively changed by Defendants, resulting in prejudice to Lavery.