Can CIGNA approve disability benefits but deny life insurance waiver of premium?

The case of William MacNally v. Life Insurance Company of North America (LINA / CIGNA) is an interesting one. In this case LINA argued that despite the fact that it had found MacNally disabled from his own occupation, he did not qualify for the life insurance premium waiver under his policy because he was not disabled from “any occupation.”

Had CIGNA / LINA violated the terms of its life-insurance policy?

Here is what the policy said. If MacNally became disabled and remained disabled past the nine month waiting period, LINA would waive his life-insurance premiums for as long as he remained disabled, or until he reached the age of 65. The policy also contained the following stipulations. MacNally had to be willing to submit to any physical examination required by LINA to confirm his disability. MacNally could also lose his benefits if he failed to submit satisfactory proof of his continuing disability at least three months before the end of each 12 month period once his waiver of premium was established.

Continuing disability would prove to be the issue. For the first 12 months after MacNally’s waiver of premiums was approved, he needed only prove that he was disabled under the “own occupation.” After 12 months had passed, the life insurance policy defined disability under stricter terms. MacNally had to be disabled from working in any occupation for which he could reasonably become qualified for based upon his education, training and experience. It is commonly understood that the definition of “any occupation” is far more difficult to demonstrate to an insurance company.

MacNally, who was an executive with Allina hospitals, had also participated in 80 long-term disability insurance policy provided by his employer. He was diagnosed with multiple sclerosis in 1993, but continued working until the symptoms became so severe that he had to stop working in 2002. He had some difficulty securing his long-term disability benefits initially, but eventually did secure benefits under both the “own occupation” and “any occupation” definitions under his disability insurance plan.

LINA uses different terms in disability insurance policy and life insurance policy.

The definition of disability in his long term disability plan differed slightly from his life-insurance plan, in that he could be found disabled under the “any occupation” definition of the disability benefit plan if he was unable to earn 80% of his earnings before he became disabled. The life insurance plan did not recognize earnings, only whether or not MacNally was disabled from working in “any occupation.”

MacNally applied for long-term disability benefits and the waiver of his life insurance premiums in July 2002. He had some initial difficulty in proving his long-term disability claim, but in April 2003 LINA approved his long-term disability application. His application for the waiver of premium benefit was approved in early June 2003.

Around this time, LINA also arranged for Allsup to help MacNally apply for Social Security Disability Insurance benefits. While his initial application was denied in August 2003, McNally appealed and the decision was reversed on September 1, 2003.

LINA continued to pay disability benefits and to waive the life insurance premiums for four years. It wasn’t until September 2006 that LINA chose to prepare a transferable skills analysis (TSA) based on a physical ability assessment (PAA) prepared by one of his physicians. The TSA found that he was still able to work as the administrator of a healthcare facility, his old job.

Based on this finding, LINA notified MacNally that his waiver-of-premium benefit would end that month because he was capable of doing two jobs identified in the TSA. Neither of these jobs allowed MacNally to earn 60% of his predisability salary (a figure 20% lower than stipulated in the policy), so LINA continued to pay long-term disability benefits.

Despite the fact that MacNally was able to provide additional medical records to support his ongoing disability from any occupation, including an explanation of the PAA which LINA had used to determine that he was able to work in an occupation, LINA stood by its decision. LINA claimed that MacNally’s complaints were not adequately documented.

What are the symptoms of multiple sclerosis?

A discussion of multiple sclerosis (MS) might be helpful at this point. MS is a disease of the central nervous system (CNS) which involves the brain, spinal cord and the optic nerves. In a mild case, numbness in the limbs may be the only symptom. In more severe cases, paralysis and loss of vision occur. Each person is affected differently and symptoms are unpredictable. The disease commonly has periods of remission where symptoms may disappear almost entirely, only to return as severe as ever.

MacNally had responded initially to treatments with Solu-Medrol, a type of steroid administered intravenously, and was able to return to work, though he reduced his work hours to about four hours per day. From the time of his diagnosis in 1993, he had to walk with a cane and use a cane if he had to stand for any length of time. Over the next nine years, MacNally was treated for the following symptoms connected with multiple sclerosis:

• Depression and anxiety. He took Prozac for a short period of time, but the negative impact upon his MS symptoms was so severe that he had to stop taking it. He tried other medications as well with some success.
• Intention tremors and muscle rigidness. He reported that the symptoms were worse when he over exerted himself. His physicians also noted tremors and muscle rigidness during his office visits. A series of medications succeeded in slowing the progression of his disease, but ultimately became severe enough to prevent his ability to get around.
• Exhaustion and inability to sleep. His doctor prescribed Elavil. While this helped improve his ability to sleep, MacNally experienced other side effects and could not continue taking the medication. Other sleep aids were tried, including sleep apnea treatments.
• Reduction in verbal and cognitive capacities. The Elavil prescription helped improve MacNally’s mental focus and cognitive functioning, while he was able to take it.
• Paresthesia. MacNally would experience times in which he felt a burning of prickling sensation. While this was most common in his hands, arms, legs and feet, he also occasionally felt the sensation in other parts of his body. It could be best described as a feeling of tingling or numbness in the skin, though some have described this as though the skin is crawling.
• Weakness, fatigue and difficulties with balance. Numerous medications would provide initial relief, only to cease providing benefits after prolonged use.
• Lhermitte’s sign. MacNally would experience brief, stabbing electric shocks running down the back of his head and through his spine whenever he bent his neck forward.
• Visual difficulties. MacNally began having problems with paralysis of his eye muscles.

Despite multiple medications, MS continues to worsen

MacNally began taking Trental in 1997, to treat his exhaustion. It was also hoped that this medication which improves blood flow would prevent the progress of his multiple sclerosis. Avonex was added a month later to help slow the progression of his MS and decrease the number of episodes MacNally experienced. Several times over the next few years, MacNally would experiment with other medications to assist in the sleeping, react poorly to them, and have to discontinue use of the medication.

By 2000, MacNally had to move into a less stressful position at Allina. By this time, he was taking pemoline daily. He began taking Neurontin for the increasingly frequent paresthesias in his hands and feet as well as hand tremors. By 2001, he was dropping things and reported that the Neurontin no longer helped his numbness. He was switched to clorazepate, placed on trazodone for insomnia, Inderal for tremors, pemoline for fatigue and Zoloft for depression. An EMG showed “mild loss of motor unit potentials in the arms.” By the middle of the year, his neurologist had concluded that MacNally’s future at his current job or possibly at any job with a significant level of responsibility would come at “a significant cost to his mental/physical health.”

His doctors tried other medications, but MacNally’s condition continued to worsen. By early 2002, he had begun to discuss disability issues with his healthcare providers. He discussed his concern about his ability to be gainfully employed for his economic security. At this time, his depression deepened in connection with a flare up in his symptoms. In April 2002, MacNally fell down some stairs, and began to experience visual problems. The leave taken after this event would lead to elimination of MacNally’s job.

Forced retirement for disability reasons follows leave of absence

The next month Allina laid MacNally off due to his disabled status, finding his job was no longer needed. This forced retirement made it essential that he apply for long-term disability benefits. MacNally had numerous medical records to support his claim. When LINA terminated his long-term disability benefits in 2007 (as well as his life insurance premium waiver), his disability attorney was able to argue persuasively against the termination. LINA reinstated the long-term disability benefits, but refused to reinstate the life insurance premium waiver, claiming that McNally could still work.

Is it possible that McNally’s condition had improved in the five years since he initially filed for long term disability benefits? Could he now be considered capable of working a full-time job? Had LINA rescinded his life insurance premium waiver rightfully? To answer these questions, McNally filed a lawsuit against Cigna / LINA in federal court. To learn more read Part II of this article.