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September 2010

Fagan v. Life Insurance Co. of North America ? Plaintiff Prevails On Motion for Summary Judgment Based On Physical Impairment

ERISA Plaintiff Provides Persuasive Evidence of Physical Impairment Precluding Him From Performing His Own Sedentary Occupation

(August 19, 2010) U.S. Dist. Lexis 85413; (N.D. Cal.)

Applying the de novo standard of judicial review, the United States District Court for the Northern District of California, denied Novartis Vaccines and Diagnostics, Inc., ("Novartis") and Life Insurance Company of North America's ("LINA's") motion for summary judgment and granted Plaintiff Mark Fagan's ("Plaintiff's") motion for summary judgment concerning his claim for disability benefits.

In February 2008, Plaintiff ceased working for Novartis in his sedentary position as a software engineer, and submitted a claim for disability benefits due to lower back pain following a lower leg fracture in 1995.  He also submitted medical records noting that his pain was making him depressed.  He filed a claim for long term disability ("LTD") benefits under an ERISA group insurance policy (the "Plan") issued and administered by LINA. 

On August 15, 2008, LINA denied Plaintiff's claim, after having it reviewed by a board certified physician in internal medicine.  On August 29, 2008, Plaintiff appealed. On February 6, 2009, his attorney sent LINA an appeal letter enclosing a letter from one of Plaintiff's physicians.

On April 23, 2009, LINA affirmed its prior denial of Plaintiff's claim for LTD benefits, following a peer review by a board certified physician in orthopedic surgery.  On June 8, 2009, Plaintiff's attorney sent LINA a letter appealing the claim denial.  Additional medical records were submitted.

On July 7, 2009, LINA sent Plaintiff a letter indicating it would schedule an independent medical examination ("IME") of Plaintiff as part of its evaluation of his claim.  However, Plaintiff wanted his attorney to attend and audio record the IME and LINA refused to allow the audio recording.  Plaintiff then offered to attend the IME and forego the audio recording if LINA would allow him to exclude the exam results from the record if he objected to it.  LINA would not agree and chose to forego the IME. 

LINA obtained another peer review from a physician specializing in orthopedic surgery.  On March 31, 2010, LINA upheld its decision to deny Plaintiff's claim for LTD benefits.

On June 15, 2009, Plaintiff filed a lawsuit against LINA and Novartis (collectively "Defendants"), alleging a cause of action under ERISA.  The parties filed cross motions for summary judgment.  The District Court, applying a de novo standard of review, held that it must resolve: 1) whether Plaintiff was disabled during the Elimination Period, per the terms of the Plan, 2) and if so, whether the Limited Benefits Period provision of the Plan limited Plaintiff's entitlement to benefits, and 3) whether an award of attorney's fees and costs was appropriate.  Plaintiff sought summary judgment on the first and third issues, while Defendants moved for summary judgment on all three.

The District Court held the elimination period under the Plan was from March 1, 2008 through August 28, 2008, and that if Plaintiff was unable to perform the material duties of his regular occupation as a software engineer, he was entitled to LTD benefits.  Plaintiff's papers suggested a physical disability caused by his back condition and a cognitive impairment. 

The District Court held that Plaintiff's arguments were better than Defendants' arguments.  The District Court held Plaintiff submitted objective documentation of a degenerative disc problem, evidence by his treating physicians of at least some significant manifestations of his pain, and of the manner in which his pain had, since 2008, prevented him from being able to sit long enough to perform the material duties of his job.  The District Court held Defendants failed to contradict that Plaintiff's back condition and pain prevented him from sitting for more than 20 minutes at a time, or otherwise adequately performing his job. 

The District Court held the Defendants' physician testimony and denial letters based on them, finding Plaintiff could perform light duty work without engaging in a detailed analysis, conclusory.  Defendants' reliance on evidence that Plaintiff exhibited no neurological defects, and that many of his physical exam results were normal did not materially counter the fact that the severity of the pain resulting from his disc problem precluded him from performing his job duties.

The District Court held that LINA's initial denial letter, noting that one of Plaintiff's treating physician's reports supported his ability to engage in sitting, was misleading.  The physician reported Plaintiff could sit, stand, and walk less than 2.5 hours a day.  LINA conceded that a software employee, as defined by Novartis, sits for between 2.5 to 5.5. hours a day.  Thus, the District Court held Plaintiff would be incapable of sitting for the hours required by Novartis.

Defendants sought to explain any deficiencies by arguing Plaintiff failed to attend an IME.  However, the District Court held it was ultimately Defendant, not Plaintiff, that called off the IME.  Further, the Plan administrator did not base the denial of benefits on Plaintiff's failure to attend the IME.

The District Court held Plaintiff presented no credible objective evidence of his cognitive impairment but that he showed he was disabled based on his back condition and the pain it caused.

Defendants argued that the District Court should decline to award more then 24 months of LTD benefits because the Plan's Limited Benefits Period provided only limited benefits would be paid for a disability "caused by, or contributed to by," a depressive or anxiety disorder.  However, the District Court held the Defendants did not clearly establish that a depressive or anxiety disorder was an objective source of Plaintiff's physical disability.  The District Court found Plaintiff's depression was a reaction to his physical condition, which it distinguished from a finding that his depression was a contributing factor to his physical condition.  The District Court would not apply the Limited Benefit Period provision. The District Court held the Defendants' motion for summary judgment was denied on this ground.

The District Court awarded Plaintiff reasonable attorney's fees and costs.

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This opinion is not final.  Though it has been certified for publication, it may be modified on rehearing, or granted review by the Ninth Circuit Court of Appeals.  If any of these events occur, the opinion would be unavailable for use as authority in other cases.

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