ERISA Disability and Life Insurance Litigation
Oral arguments from various courts of appeal across the federal circuits involving long term disability or life insurance claims governed by ERISA.
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ERISA Disability and Life Insurance Litigation
Why Did the Appellant Challenge the Denial of her Disability Benefits as Bad Faith?
The claimant was a former respiratory therapist and a director at Athens Limestone Hospital before she ceased working on October 12, 2012, due to multiple health issues.
The disabling conditions she claimed included:
- Fibromyalgia
- Rheumatoid Arthritis
- Chronic Pain
Her disabling conditions severely impacted her ability to perform her job. Specifically, her conditions led to:
- Intractable pain at multiple sites
- Adrenal fatigue
- Reduced range of motion
- Fibromyalgia pain that confined her to bed one to three times a week
These health issues made it impossible for the claimant to carry out the material duties of her occupation and significantly impaired her functional capacity, preventing her from returning to work.
Due to her worsening health, she applied for long-term disability benefits. However, her insurance company, Life Insurance Company of North America (LINA), turned down her claim. They said she didn’t fit their definition of 'disabled,' which affected her chances of getting benefits after the first two years.
This decision was backed up by various doctors and specialists, who said that the claimant could still do desk jobs and wasn’t limited in ways that would make her eligible for disability under the policy’s terms.
Not happy with this decision, the claimant challenged LINA’s refusal to grant her benefits under the life policy's waiver of premium and long-term disability benefits. She argued that the insurer's view of her ability to work certain jobs didn't truly reflect her medical condition.
This is the oral argument in the 11th circuit court of appeals.
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that its own claims manual says it's compound.
Speaker 2:One final question on this. I assume you know this number, but I'm not very good at math. So you got $160,000, give or take $100 or so on the actual claim. Then you got prejudgment interest of $95,000. If you were to win this compounding point, how would that $95,000 change?
Speaker 3:Welcome to this podcast. This podcast is brought to you by Ben Glass Law, a personal injury and long-term disability law firm with headquarters in Fairfax, Virginia. Listening to oral arguments is one of the best ways to both learn and stay abreast of the substantive and procedural aspects of practicing law. By putting these public domain recordings into the form of a podcast, Ben Glass Law has made it easy for the public to access these recordings. All commentary that is not part of the actual court proceedings is that of the show's sponsor.
Speaker 4:We'd like to thank Judge Boulay from the Northern District of Georgia for joining us and thank you very much for being here. The first case we have on the calendar is Sherry Walker versus Life Insurance Company of North America Counsel. Are you both prepared? You may proceed.
Speaker 1:Good morning. May I please the court. My name is Andrew Grabhorn and I represent the plaintiff appellant in this matter, Sherry Walker. I would like to reserve three minutes of rebuttal time.
Speaker 4:You may Thank you.
Speaker 1:This appeal concerns three separate issues the first, whether the district court erred in not allowing Ms Walker to present her mental anguish damages to the jury. Second, whether the district court erred in granting summary judgment to defendant Appellee Lina, as Ms Walker's bad faith claim. And third, whether the district court erred in its findings related to both pre and post-judgment interests, both as to the rates and as to the calculations. The first issue the court is being asked to address is whether the district court erred in not allowing Ms Walker to present her mental anguish damages to the jury. At the party's pretrial conference, the court orally held that Ms Walker was not permitted to recover mental anguish damages. Aside from stating it was relying upon state law or case law, the lower court did not delineate which cases it was relying on for us to adequately be able to address those.
Speaker 2:Why doesn't the Sanford case from the Alabama Supreme Court resolve that issue, adversely to you?
Speaker 1:Because of the later decision in both Lunsford and Pate. In Lunsford, justice Maddox wrote a dissent in which he noted that the majority opinion was changing Alabama law. The majority was changing it to the effect of where mental language damages could no long previously could not be awarded on a breach of insurance contract, the majority in Lunsford was changing that opinion. He reaffirmed that when he later I think it was less than three months later Judge Justice Maddox wrote the opinion in Pate, citing to himself and his dissent in Lunsford, wherein he specifically noted that we just changed the law and implicitly modified everything before it, including Vincent and Sanford.
Speaker 2:Okay, but Sanford was, I guess, the issue that I have with that, and maybe I'm just misunderstanding Sanford. But Sanford, the way I understood it, it was a contract almost exactly like this one, and so the previous cases that you're talking about were factually distinguishable from Sanford. If we were looking at those cases and we're under the obligation to try to follow Alabama law to the best of our ability what about the later cases Pate, et cetera? How do they look more like this case than Sanford does, I guess, is my question.
Speaker 1:Okay, I think let me answer you two ways. First, do the old law school Depends? But anyways, I think it is important to note, like we did in the reply brief of, how the law evolved post-Stanford. Post-stanford, the court came out with the decision in Lavoie, which is overturned on different grounds, but in the dissent Justice Torbert specifically noted that a particularly likely risk of breaching an insurance contract that was resulting in poverty or bankruptcy, coupled with the fact that these breaches almost always coincide with emotional vulnerability and so on, following Lavoie is when Lunsford came in, and in Lunsford, as I say, justice Maddox noted that the Supreme Court of Alabama was overturning implicitly the earlier cases that dealt with breach of an insurance contract. So I don't know that we need to get down into the weeds of the type of insurance contract.
Speaker 4:Right, but isn't paid. Maybe I misread the particular case, but I thought that paid was expressly predicated on, quote, the special nature of credit disability insurance which, unlike long-term disability insurance, contemplates the possibility that an insured will not be able to repay a specific debt. Isn't there a distinction?
Speaker 1:I think what we're getting into there more is not necessarily the specific holding of the case and what it really stands for, but that's getting more into the minutia, the dicta, the specific facts of that case. Because earlier in the case I'm quoting here, however, an independent fire insurance company V Lunsford, this court affirmed a judgment awarding damages for mental anguish based on a breach of a contract of insurance, thus implicitly modifying the rule stated in Vincent. And then in a footnote because this is just Justice Maddox writing it in his footnote he cites back to his dissent in which he again notes that Lunsford changed the law regarding the recovery of damages for mental anguish and inaction for a breach of an insurance contract. So, while I agree that Pate specifically dealt with a disability credit insurance, I don't think that it stands for just disability credit insurance is the only one that they're allowing mental anguish for now. Rather, it's all breach of an insurance contract.
Speaker 4:because, going back to LaVoy, so you don't think Pate cabined the policy in question?
Speaker 1:I do not Cabined do policy in question? I do not. Okay, cabin, do you mean excluded? When we're talking disability, credit insurance and disability insurance, as in this case, the two are essentially synonymous. What they are? They're protecting your ability to pay in one instance a specific bill or all your bills in case you become disabled. These are specifically sold to these individuals, as we cite in our briefing to the websites for New York Life who is an outliner for all intents and purposes where they are selling peace of mind. They're selling to protect your family. They're selling to secure your financial interests if something happens, to give you the ability to pay your mortgage to feed your family. If that doesn't get into the mental solicitude that all these cases really at the heart say, it's hard to fathom what really does. Hopefully that answers your question. Thank you.
Speaker 2:Could you talk a little bit about the interest issue to me First off? I guess I would say does the standard that we would apply to determine? Let's just assume that we agree that the parties can stipulate to what the post-judgment interest rate would be? So it looks to me like the circuits are, I don't know, divided maybe is not the right word, but it looks like there are slightly different tests. That would apply to that question is whether the parties have agreed to a different post-judgment interest rate. What do you say about that? Does that matter for your argument?
Speaker 1:I don't know that it matters so much what other circuits or states do, because, under the 11th Circuit precedent that we cited, the interpretation of the provision is a question of law. Obviously, we're due to know, though, and then, under Alabama law, it specifically says what the contract says is what the contract says, and I think that's a fundamental issue, especially in insurance contracts, where you're dealing with a contract.
Speaker 2:With post-judgment interest, though you're talking about a federal question, so I guess that's my point. So, with respect to post-judgment interest, the Second Circuit, I think, says correct me if I'm wrong, but the Second Circuit says that the parties have to be expressed in their contract to address post-judgment interest itself, to agree to a different interest besides what the federal interest rate would be, and I think maybe I'm misunderstanding, but I think there are some other courts that have said there is no special rule as to how you would interpret that contract. Does that matter?
Speaker 1:Yeah, it does. I'm misunderstood when we're talking about reimposing. It's all confusing, but I don't know that it necessarily matters, because at the end of the day, we would contend that even if the more harder test for lack of a better phrase of express I think that it's specifically in here and we even cited a prior case where they're talking about you're talking about the amount due.
Speaker 1:When the amount due is comes, whether it's from the month to month benefits, whether it comes from the court each month, that's where that one.5% applies to in this case. So, by way of example, just because the jury found in Ms Walker's favor that didn't stop the policy from applying as to the impact, of those benefits were still due and until they're paid, then that 1.5% interest rate inside the policy still controls.
Speaker 2:So I think you might be talking about prejudgment interest. So, talking about prejudgment interest, the way I understood that argument was that your argument was that it should be compound interest instead of simple interest. Am I understanding that right? That's your argument? Okay, what is the annual interest rate that you got as simple?
Speaker 1:I believe it's 18% per annum, so 1.5% monthly.
Speaker 2:So the contract is written that the interest is per month on the amount of any claim that has become overdue and it's a 1.5% interest rate per month. Why would that compound annually? How do you read that to make it compound annually?
Speaker 1:Because it's more than 1.5%, because I guess you're doing it monthly, compounded monthly, essentially at 1.5%, because every month it's just when you're dealing with a disability context, that monthly benefit's not due until the next month and the next month and the next month. That's how they move forward.
Speaker 1:As those move forward. It's compounding each month because it's a new payment. It's not, by way of example, like a life insurance, where it's one set amount. No, it's each month. It's a new payment, so it has to be compounded.
Speaker 1:And we cited the prior cases where Linus specifically said that, yeah, this is compound interest. And I believe the judge, judge Johnson, distinguished those cases by saying, I believe most of them were ERISA cases and, as I'm sure you all are well aware, being in federal court, most of the time when we're dealing with long-term disability policy, we're going to hear the five little letters E-R-I-S-A for ERISA. And so in those situations though, it's indistinguishable from what we're talking about here, because, as their own 30B6 witness said, it doesn't matter if it's ERISA, it doesn't matter if it's ERISA, it doesn't matter if it's a state law. We treat them all the same, which they're required to under every insurance code in the country. You can't treat one person differently than somebody else. So where Lina has conceded in other cases that it's compound interest as well, as, again, we believe the language in the policy gets us there as well.
Speaker 2:I don't see any way around it and I just what exactly makes so. The way I understand Alabama law on this issue is that there's a presumption in favor of simple interest.
Speaker 3:This podcast is brought to you by Ben Glass Law, a national leader in long-term disability insurance claims. We help doctors, lawyers, entrepreneurs, ceos and other C-suite executives get paid for their long-term disability benefits. Visit us at benglasslawcom or give us a call at 703-591-9829.
Speaker 2:Case you agree with that. So what is it about this contract language that overcomes that presumption and says that it should be compound interest?
Speaker 1:And that gets into. Hang on, I'm going to flip into the actual language that I had here just a second ago. Hold on one second for me, your Honor, because we got into and I believe it's discussed in the reply brief dealt with the language of adjudication and overdue, and hang on, let's see I have it right here. Yeah, we were talking about where the policy discusses the terms were adjudicated, then overdue and settled, and again each month those benefits keep adding on. They are compounding to one another, as would the interest.
Speaker 1:And we again asked the 30B6 witness is this a reasonable interpretation of this policy? And he said yes. And then on top of that we can even cite to the claims manual whether or not it was properly before the court or not. But again, linus never disputed. That's their claims manual wherein it says all this interest is compound. It flows with everything that one, as we've discussed thoroughly in our brief on what the language says, as well as the fact that Linus said in its own prior briefing before other judges that it's compound, that its own claims manual says it's compound.
Speaker 2:One final question on this. I assume you know this number, but I'm not very good at math. So you got $160,000, give or take $100 or so dollars on the actual claim. Then you got prejudgment interest of $95,000. If you were to win this compounding point, how would that $95,000 change? Do you know?
Speaker 1:It would increase what I was going to say exponentially. But a dollar is always in the eye of the beholder and I don't know the exact number. Right off the top of my head, which I think is what you wanted, I'll tell you it's more than 10,000. I think it's more than 20,000, but specific down to the penny, I couldn't tell you at this minute. But there's just one more thing I would like to add to that, if I may, because I'm out of time.
Speaker 4:You may.
Speaker 1:Okay, the only last thing I would add is yeah, we're talking about big numbers there 160,000. We're talking about ninety five thousand in interest, but again, that's all in the eye of the beholder. And two, we're talking about someone who was terminated benefits in 2014. That's over eight years ago. That adds up. Thank you, I see I'm well over. Thank you.
Speaker 4:We'll let you have your remaining time for rebuttal. Thank you, Mr Little.
Speaker 5:May it please the court? My name is John Little. I'm here on behalf of the Applealachian Insurance Company of North America, or LINA, the district court followed the law in this case.
Speaker 5:It followed Alabama Supreme Court precedent and authority from this court when precluding an award of mental language damages on a claim for breach of contract. It followed Alabama law when it decided that the expert opinions that LINA relied upon to make its claim decision precluded the plaintiff from carrying her burden of proof on her bad faith claim. And it followed both Alabama and federal law when it assigned the post-judgment interest rate at the federal rate and awarded prejudgment interest as simple interest we have, as a court, ruled on the issue of post-judgment interest, correct?
Speaker 5:That's correct, your Honor.
Speaker 4:But the majority of our sister courts have and they say you follow the statute.
Speaker 5:That's right, your Honor, and I think, to follow up on Judge Brasher's point I believe it's the 2nd, 10th, 7th and 5th that have all said the parties may, by agreement, select a different post-judgment interest rate. However, to answer your question, our position would be that if you're going to have the parties come up with a different rate, then the better rule for this court to adopt would be one where the parties must do that using clear language. Some circuits have used the clear, unambiguous and unequivocal language standard here. Not only is there no clear language altering the post-judgment interest rate, there's no language at all. The contract does not speak to altering the post-judgment interest rate in any way. So the district court correctly decided that the post-judgment interest rate should follow this federal statute at Section 1961. I'd also like to follow up on the point about Pate and Lunsford. I believe that question has already been answered by this court in Ruiz. In Ruiz the court considered pretty much the same argument that.
Speaker 5:Lunsford ushered in a different mental anguish standard under Alabama law and this court rejected that argument. Not only did it reject that argument, it also rejected the argument that any insurance policy gives rise to a proper award for mental anguish damages. And when the court did, it made an important point and really a logical one that especially applies in the insurance context. Anytime you have a contract which the parties care about, there's going to be some emotional impact if for an alleged breach of that contract. But, as the court said, that alone is not enough to change Alabama law and allow mental language damages to be recovered for breach of a contract. And, as the court noted, the binding decision here is the Sanford decision which addressed these exact facts and determined that mental language damages are not recoverable for breach of a disability policy.
Speaker 5:I think the last point to make for the court is with respect to the bad faith claim. The district court did not enter by running summary judgment on the bad faith claim. As we've noticed extensively in our brief and as the district court discussed extensively in his well-reasoned 70-page opinion, there was ample evidence in the record to support Linus' claim decision and in light of that evidence the jury could not have found that there was no legitimate reason for the denial. Again, the standard under Alabama law for bad faith is a very heavy burden that the plaintiff bears and it's to prove the absence of a legitimate reason. No reasonable juror could have found the absence of a legitimate reason when in the claim decision.
Speaker 5:You're citing expert medical opinions, expert vocational opinions, and it's those opinions that are giving rise to the claim denial.
Speaker 2:Could you address the compound interest issue before you sit down? Your opposing counsel's argument is basically that the contract language says it says per month and it says on the amount due. I'm sorry that has become overdue. Why doesn't that encompass compounding? The language of the contract says on the amount due. I'm sorry that has become overdue. Why doesn't that encompass compounding?
Speaker 5:The language of the contract says on the amount of the claim, and the amount of the claim is the benefit, not interest. Compound interest is interest on interest. Contracts that would allow for an award of compound interest would need to say that they're an award of interest on interest and that's not what this language says. This language says that there's interest due on the amount of any claim and, as we noted in our brief, I think this court has addressed an extremely close factual scenario in its recent decision in Carradine USA LLC versus Pruitt, where the court was considering Georgia law which, like Alabama, had a presumption against compound interest, and it was considering a provision that also allowed for 1.5% per month interest, and the court said in that case that it was simple interest, not compound interest, and I would submit that the court should follow the same reasoning here and affirm the district court's decision that this is a simple interest calculation for prejudgment interest. Okay, thank you.
Speaker 5:Ms Walker simply can't evade settled law on mental language damages. She has no case that says that you can receive mental language for breach of a disability contract. For almost a decade, alabama law has been very clear on bad faith claims that you have to prove the absence of a legitimate reason for the denial. The District court followed that law and made the correct determination on summary judgment. And the district court also properly set the amount of interest at the federal rate for post-judgment interest and simple interest for prejudgment interest. If the court has no further questions, I'm happy to yield my time.
Speaker 4:No further questions. Thank you, Mr Little.
Speaker 1:Thank you, your Honors. I do want to address primarily what I just heard there. Let's start with what opposing counsel said, about what this court said in Ruiz, and I think one of the things that keeps getting missed about Ruiz is not truly about a breach of an insurance contract. What happened in Ruiz?
Speaker 1:was the plaintiff wanted insurance from this company. He was told that he got insurance company or insurance through that company, but they never actually went and got it. The argument there it wasn't a breach of an insurance contract, it was a breach to procure an insurance contract. So I would disagree that Ruiz is spot on with this case and even Pate is the controlling state law case on this issue from the Alabama Supreme Court, with all aspects of federalism and comedy. That's what this court's required to go by. I still continue to disagree with opposing counsel regarding Sanford. Sanford again is just no longer good law. That was again in 19, I believe 79. And coming forward the 24-plus years later, justice Maddox continually noted hey, we're changing the law. In Lunsford he said in his dissent we're changing the law. And then on his majority opinion in Pate, which was a unanimous decision that he authored, he said in Lunsford, we changed the law Again. We have changed the law. Mental language is now available for a breach of an insurance contract and I wanted to turn back to quickly leave.
Speaker 1:Justice Lagoa had made a comment about the special nature that was mentioned in there and the court highlighted the special nature resulting from the periodic payments involved with disability insurance which distinguish it from lump sum benefits like health and life insurance. But all disability benefit or disability insurance, all insurance really shares the same special nature and that's what Judge Lavoie or Justice Lavoie was getting to or Justice Torbert in Lavoie was getting to was. That's what insurance is for is to give us that peace of mind. It's to protect our family and loved ones. We've seen everything that's happened. Insurance is for is to give us that peace of mind. It's to protect our family and loved ones. We've seen everything that's happened with the hurricanes and everything If they didn't have their homeowner's insurance.
Speaker 1:That's not a good thing, because they're hoping that they're protected. That's exactly what disability benefits are there for. It's to protect you that if you cannot work, if you cannot provide for your family, and you just need that little help to be able to pay your bills, to pay your mortgage, to pay for your car insurance and all the cases that have come after Lunsford and Sanford or sorry.
Speaker 4:Lunsford and.
Speaker 1:Pate. They don't really get to the issue of insurance contracts specifically. Most of them are dealing with breaches of warranty they're dealing with I believe one was dealing with a burial issue. No one has said that paid is bad law, it's just been one of those that somehow it's like those old statutes, they just get lost into the void.
Speaker 1:But that is the Alabama controlling precedent on this point and again while it did note later on in the decision about the special nature of the insurance, and while it did note later on in the decision about the special nature of the insurance, it still said that breach of an insurance contract Lunsford said you can get employment advantages under this.
Speaker 4:And I know.
Speaker 1:I'm over time. Can I briefly just say one thing on bad faith, and then I'll be done.
Speaker 1:Very quickly Thank you I just wanted to quickly address, because I didn't get to my initial was that opposing counsel said that the lower court recognized there was ample evidence and that no reasonable juror could find for Ms Walker. The thing is we were able to put in expert, medical, expert testimony from her doctors. We were able to put in testimony from our own vocational person who was again an expert witness, and then we were able to point out all the fallacies that were within the things they relied upon, including the record review that actually supported her inability to do sedentary level work. If we're just going to sit there and allow an insurance company to put in whatever evidence they want and say, oh it has to be true because we have it, that cannot be the standard. Ms Walker went well above her burden of proof and established that there was at least a genuine issue of material fact. Thank you, your Honors, thank you for letting me go over.
Speaker 4:Thank you both for being here.
Speaker 3:Have a good day.