Court stops UNUM from denying disability benefits based on the plan's "Self-Reported Symptoms Limitation"

The 7th Circuit Court of Appeals reverses district court’s holding that Unum Insurance Company could rely on its Summary Plan Description (“SPD”) as a basis for its decision to deny benefits to insured when the SPD did not contain any language about the self reported symptoms limitation. Unum failed to comply with the disclosure requirements set out by the Employee Retirement Income Securities Act of 1974 (“ERISA”), 29 U.S.C. § § 1000.

Procedural Background of the Case

Susie Weitzenkamp was awarded LTD benefits by Unum that were discontinued a little more than twenty-four (24) months later when Unum determined that Weitzenkamp had received all to which she was entitled under the plan’s self-reported symptoms limitation. Weitzenkamp appealed and after further review, Unum affirmed its denial decision. Weitzenkamp then filed a lawsuit in district court and Unum conterclaimed, seeking recovery of the overpayment by Weitzenkamp’s retroactive receipt of social security benefits.

The district court found that to the extent Unum’s discontinuation of benefits was based on a finding that she was not disabled, that decision was arbitrary and capricious. But the same court upheld Unum’s application of the self-reported symptoms limitation and concluded that Unum was entitled to $9,089 for its overpayment of benefits. Weitzenkamp appealed and Unum filed a conditional cross-appeal to preserve its right to appeal the district court’s determination that Unum’s finding of no disability was arbitrary and capricious in case the reviewing court reversed the district court’s judgment.

Unum Claimant was a Former Time Warner Cable Employee Disabled By Fibromyalgia and Depression

Susie Weitzenkamp worked at Time Warner Cable, Inc., and participated in an employee long-term disability plan (“the plan”) governed by ERISA and administered by Unum. The plan included a limitation which provided that benefits cease after 24-months for those with “disabilities, due to sickness or injury, which are primarily based on self-reported symptoms, and disabilities due to mental illness, alcoholism or drug abuse.” The plan further defined self-reported symptoms as “the manifestations of your condition which you tell your doctor that are not verifiable using tests, procedures or clinical examinations standardly accepted in the practice of medicine.”

As required under ERISA’s disclosure requirements, Unum provided Weitzenkamp and others covered by the plan with a Summary Plan Description (“SPD”). The SPD specifically limited payments for disabilities attributable to mental illness or substance abuse to 24-months. However, the same SPD never mentioned the self-reported symptoms limitation that Unum relied on in discontinuing Weitzenkamp’s benefits.

After being diagnosed with fibromyalgia, chronic pain, anxiety, and depression, Weitzenkamp was awarded LTD benefits under the plan. Her request was approved on July 25, 2006, and was retroactive to June 12, 2006, under a reservation of rights by Unum. The approval letter included language from the plan defining disability but did not mention the self-reported symptoms limitation. On January 29, 2007, Unum removed its reservation of rights but also invoked the self-reported symptoms and mental illness limitations, indicating it would pay benefits only until June 11, 2008 unless other conditions arose to which the limitations did not apply.

As required by Unum, Weitzenkamp applied for social security benefits and she was approved in September 2007 for an award that was retroactive to December 13, 2005. Unum subsequently reduced Weitzenkamp’s monthly benefit pursuant to a provision in the plan and its reservation of the right to recover any overpayments that resulted from a participant’s retroactive receipt of social security benefits. Although some of this overpayment was recovered, a balance of $9,089 remained.

On August 22, 2008, Weitzenkamp’s benefits were discontinued after a little more than 24-months. This decision was made after reviewing Weitzenkamp’s medical records and after acknowledging that she did not “have reliable, sustainable, functional capacity at any level of physical demand.” Unum nevertheless concluded that Weitzenkamp’s disability was primarily based on self-reported symptoms and mental illness and that she did not suffer from a severe enough physical condition to get around the 24-month limitation.

Weitzenkamp appealed through the plan’s appeal process and after further review, Unum affirmed its decision. Weitzenkamp then filed a lawsuit in district court to which Unum counterclaimed, seeking recoupment of the overpayment created by Weitzenkamp’s retroactive receipt of social security benefits.

District Court’s Ruling

The U.S District Court for the Eastern District of Wisconsin found that Unum’s decision to discontinue benefits was made in an arbitrary and capricious manner. Nevertheless, the court found in favor of Unum upholding Unum’s application of the 24-month self-reported symptoms limitation. The district court also concluded that Unum was entitled to its overpayment of benefits. Weitzenkamp appealed and Unum filed a conditional cross-appeal to preserve its right to appeal the district court’s determination.

7th Circuit Court of Appeals Ruling

The 7th Circuit Court of Appeals affirmed in part and reversed in part ruling that Unum had been arbitrary and capricious and could not rely on the self-reported symptoms limitation in the plan in discontinuing Weitzenkamp’s benefits. Reinstatement of benefits beyond the 24-month period was therefore appropriate. On review, the Circuit Court of Appeals considered three issues:

• Whether Unum’s failure to include the self-reported symptoms limitation in the SPD estops it from relying on the limitation as a basis for its decision.
• Whether Unum was entitled to recover overpayments it made to insured pursuant to the reimbursement provision in the plan when the Social Security Act provides that social security benefits shall not “be subject to execution, levy, attachment, garnishment, or other legal process.”
• Whether Unum properly filed a cross-appeal to preserve its right to challenge the district court’s non-dispositive finding that Unum’s determination of no disability was arbitrary and capricious.

Issue #1: Whether Unum’s failure to include the self-reported symptoms limitation in the SPD estops it from relying on the limitation as a basis for its decision.

The Circuit Court of Appeals held that the omission of the self-reported symptoms limitation from the SPD precluded Unum from relying on the limitation as a basis for its decision to discontinue Weitzenkamp’s benefits. In making its determination, the court relied on statutory language from ERISA and various cases to extract the following guidelines:

• An SPD is intended to be a “capsule guide to the plan in simple language and must “be sufficiently accurate and comprehensive to reasonably apprise participants and beneficiaries of their rights and obligations under the plan.
• An SPD must include “the plan’s requirements respecting eligibility for participation and benefits” and “circumstances which may result in disqualification, ineligibility, or denial or loss of benefits.”
• If an SPD does not satisfy ERISA’s disclosure requirement, a court may estop a plan administrator from denying coverage for terms not included in the SPD but found in the underlying plan.
• A limitation provision in an SPD should reasonably be included in the SPD if it concerns a broad exception to the continuation of benefits rather than only a few people. – in other words, if the plan exception was not unique to the insured’s situation, but rather, the information she needed would have been information relevant to all plan participants, then failure to include that information in the SPD is a violation of ERISA’s disclosure requirement.

The court reasoned that because the SPD failed to “reasonably apprise” the insured of the self-reported symptoms limitation and the limitation was relevant to a wide spectrum of plan participants, the SPD did not satisfy ERISA’S disclosure requirements and therefore Unum could not rely on the self-reported symptoms limitation in discontinuing Weitzenkamp’s benefits.

The court’s ruling in this case is a good example of a Federal Judge complying with the law and making UNUM comply with ERISA regulation. This case is a victory for disability claimants, however disability claimants should not think that all self-reported limitation clauses are invalid.

Whether Unum was entitled to recover overpayments it made to insured pursuant to the reimbursement provision in the plan when the Social Security Act provides that social security benefits shall not “be subject to execution, levy, attachment, garnishment, or other legal process.”

The Circuit Court of Appeals upheld the district court’s determination that Unum is entitled to recover $9,089 in overpayments it made to Weitzenkamp. Weitzenkamp argued that the Social Security Act precluded Unum from recovering any overpayment that resulted from her receipt of social security benefits. Weitzenkamp’s contention was that Unum’s counterclaim effectively sought an equitable lien on her social security benefits. The court specifically examined the following provision of the Social Security Act:

§ 207(a) provides that social security benefits shall not “be subject to execution, levy, attachment, garnishment, or other legal process.”

Pursuant to § 207(a), Unum cannot impose a lien directly on Weitzenkamp’s social security benefits. However, the court determined that because the $9,089 sought represented overpayments Unum paid to Weitzenkamp, rather than funds from social security, Unum’s recovery did not contravene § 207(a). Therefore, the Social Security Act did not bar Unum’s recovery for overpayments.

Whether Unum properly filed a cross-appeal to preserve its right to challenge the district court’s non-dispositive finding that Unum’s determination of no disability was arbitrary and capricious.

The court held that Unum’s conditional cross-appeal was procedurally improper. Because the district court had found that Unum’s determination of no disability was arbitrary and capricious, Unum filed a conditional cross-appeal, intending to preserve its right to challenge that finding in case the reviewing court reversed it. However, a cross-appeal would have been appropriate only if Unum sought a judgment different from that rendered by the district court.

Essentially, Unum’s cross-appeal operated as a means to advocate an alternate position for affirming the district court’s judgment that Unum’s decision was proper. The Circuit Court of Appeals explained that such an attack should have been raised by Unum in Weitzenkamp’s appeal. Because Unum failed to do so, it forfeited the ability to challenge the district court’s finding on the disability issue. Accordingly, the court dismissed Unum’s cross-appeal.

Conclusion

Because the plan’s self-reported symptoms limitation had not been included in Unum’s SPD, the SPD was found to violate ERISA disclosure requirements. As such, the limitation could not be used as a basis for discontinuing Weitzenkamp’s benefits. However, Unum did not violate the Social Security Act in recovering overpayments to which it had a claim for reimbursement. The Circuit Court of Appeals therefore held that Unum must reinstate Weitzenkamp’s benefits retroactive to the date payments were discontinued and that Unum is entitled to recovery of overpayments.