All too often an insured’s claim for short term disability benefits is approved by their disability insurance carrier only to have the subsequent claim for long term disability benefits, which uses the same medical information used to approve the short term disability claim, denied by the insurance company. It is frustrating, illogical and inherently wrong to say the least. Arrogantly, the disability insurance companies, typically “protected” by the auspices of ERISA and the insurance industry friendly arbitrary and capricious standard of review, argues that they provided a full and fair review of the claim and that it has done nothing wrong in denying the claim. However, every now and then common sense does prevail.

In the recent ruling in Redden v. Aetna Life Ins. Co., a federal judge from the Northern District of Oklahoma determined that Aetna acted arbitrary and capricious when it denied the long term disability claim of a dental equipment salesperson who had filed disability due to visual and hearing problems, dyslexia, ADHD and anxiety. It should be noted that although this ruling occurred in August of 2018, the facts and circumstances surrounding Redden’s claim began when she filed a claim for disability benefits in May of 2008.

Aetna, which had acted as the third party administrator (TPA) of Redden’s employer’s self-funded short term disability policy, determined that due to the aforementioned medical conditions Redden qualified for short term disability benefits as of May 1, 2008. Aetna, acting in its role as the TPA for the short term disability policy, reviewed all applicable medical information to not only approve the claim, but all the information used to continue payments under the STD policy all the way through the maximum benefit period. However, when it came time to apply for long term disability benefits under her employer’s policy, which was fully insured by Aetna (meaning Aetna was responsible for issuing payments), Aetna notified Redden that it was denying her claim for benefits following several reviews performed by “peer reviewers” that had determined the medical information did not support restrictions and limitations and that Redden was not disabled from May 1, 2008, through the elimination period (aka the short term disability period). Redden properly appealed Aetna’s denial. Aetna subsequently upheld the denial and Redden then filed suit in federal court.

The Court was quick to point out that Aetna’s rationale for denial- that the medical information used by Aetna to approve the claim for short term disability benefits from May 1, 2008 through the maximum benefit period (aka the LTD Elimination Period), now all of a sudden did not support that she was disabled during the LTD Elimination Period- blatantly contradicted itself. The Court was troubled by the way Aetna handled the case and stated, “It is remarkable that, four month later, Aetna could come to the exact opposite conclusion regarding the same time period- without giving any kind of explanation or even acknowledgement of this contradiction.”

Aetna attempted to justify the denial of benefits by making a very common “what changed” argument – essentially that Redden had been able to work with her condition since 2006, so what had changed in 2008 that would now prevent her from performing her occupational duties? In making this argument, Aetna ignored the explanation provided by Redden and her doctors- that although she was able to previously work despite her condition, the changes in computer hardware and software used in the execution of her job duties had overwhelmed Redden and made it increasingly difficult for her to compensate due to her impairments. The Court lambasted for ignoring this rationale and even went so far as to point out that one of Aetna’s reviewing doctors for the STD claim noted that Redden’s job would “actually require rapid scanning, rapid data entry, and rapid reading, then it was reasonable to consider some limitation on her ability to perform these tasks due to her field defect.”

The Court deemed Aetna’s denial of Redden’s benefits to be arbitrary and capricious, and found in its ruling:

Aetna relied on non-treating, non-examining physicians whose opinions contradicted- without explanation- the opinions of Redden’s treating physicians, the observations made by Redden’s employer, and Aetna’s own prior conclusions regarding Redden’s disability. The conflict of interest at play here further tips the balance in favor of Redden.

The Court ordered the retroactive reinstatement of benefits. However, in doing so, based upon argument presented in court, the Judge applied the 24 month limitation for mental health conditions and limited Redden’s claim to benefits under this limitation.

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In this ruling, logic and common sense prevailed, but all too often disability claimants in the same predicament as Redden find themselves on the losing end. As initially noted, it is very common that a claim for LTD benefits is denied despite an approval for STD benefits. As was the case here – more often than not an insurance carriers acts as a third party administrator of an employer’s short term disability policy (meaning the employer pays the actual benefit at the direction of the insurance company) and underwrites the long term disability policy (meaning LTD benefits come from the insurance company’s pockets). Therefore, there is certainly a conflict of interest when an insurance carrier approves STD benefits because it is coming out of an employer’s pockets, but then uses the same medical information to deny LTD benefits – and save itself money in the process. Aetna is not alone in this practice, but with the recent purchase of Aetna’s life and disability insurance business by Hartford, the days of Aetna doing what they did to Redden are numbered.

Our firm did not represent Redden in her claim against Aetna, but we felt that this ruling was a notable one worth sharing. If you are having difficulty with a claim for disability benefits with Aetna, or any other insurance carrier, please feel free to contact our office for a free consultation to discuss your claim.