Nichols v. Reliance Standard Life Ins. Co.

JUANITA NICHOLS, Plaintiff, v. RELIANCE STANDARD LIFE INSURANCE CO., Defendant.

No. 3:17-CV-42-CWR-FKB

United States District Court, S.D. Mississippi

June 29, 2018

ORDER GRANTING DISABILITY BENEFITS

Before CARLTON W. REEVES, District Judge.^*

Few Americans can retire on their savings alone.¹ Instead, many participate in an employee benefits plan, which can provide financial security in case of disability or retirement.²

The insurers that manage these plans often have conflicting missions of deciding who qualifies for benefits and ensuring those decisions do not undermine their own bottom line.³

"When guarding the henhouse," as one expert on employee benefits plans said, "some foxes are bound to go rogue."⁴ Last decade, for example, courts discovered that one insurer "engaged in a deliberate program of bad faith denial of meritorious benefit claims."⁵ Despite the discovery of such wrongdoing, scholars say government officials continue to "abdicat[e] their duty to supervise" insurers.⁶

This case is about Reliance Standard Insurance Company, one of the country's largest disability insurers.⁷ The question the Court must address is whether Reliance's denial of disability benefits to Juanita Nichols was an abuse of discretion. The answer to that question reveals a decades-long pattern of arbitrary claim denials and other misdeeds, a pattern the Court must take into account when assessing Reliance's actions in this case.

IUndisputed Facts

Juanita Nichols is 62 years old.⁸ She says she has spent her life doing "one thing and one thing only,"⁹ namely, working as a Hazard Analysis and Critical Control Points Coordinator at Peco Foods' chicken processing factory in Sebastopol, Mississippi.¹⁰ Nichols' duties as Coordinator required her to "spend a minimum of twenty percent [of] her work day in processing areas."¹¹ Temperatures at the factory were kept at 8 degrees above freezing.¹²

In 2016, Nichols was diagnosed with a host of circulatory system disorders including Raynaud's disease,¹³ a condition that causes arteries to become "unduly reactive and enter spasm" when cold.¹⁴ Doctors concluded that exposure to the cold could give Nichols serious circulatory problems, including gangrene.¹⁵ Nichols was prescribed a treatment regimen that included "avoiding . . . working in an environment where there is exposure to the cold."¹⁶ As a result, Nichols had to stop working at Peco.¹⁷

Nichols applied for long-term disability benefits through the insurance plan Peco had with Reliance.¹⁸ Under that plan, Nichols qualified for benefits if "as a result of an Injury or Sickness [she] cannot perform the material duties of [her] Regular Occupation."¹⁹ The plan defines "regular occupation" as "the occupation [a claimant] is routinely performing" at the time of disability onset.²⁰ To determine what that occupation is, Reliance says it "look[s] at [a claimant's] occupation as it is normally performed in the national economy, and not the unique duties performed for a specific employer or specific locale."²¹

Reliance admits that Nichols' medical conditions prevent her from working in cold temperatures, and therefore prevent her from performing her current duties "in a factory where the temperatures are kept at 40 degrees."²² However, one of Reliance's vocational experts determined that Nichols' occupation as it was performed in the national economy was "sanitarian," an occupation with duties that do not require exposure to cold temperatures.²³ Based on this determination, Reliance denied Nichols' application for disability benefits.²⁴

Nichols asked Reliance to reconsider that denial, saying it raised the question of "whether your review procedures include blatantly ignoring the evidence on-hand" about her occupational duties.²⁵ Reliance says it "again consulted" its vocational experts, who reached the same conclusion as before: "[a]ny exposure to cold temperatures would be job-site specific," rather than a duty of her "regular occupation" as "[s]anitarian."²⁶ On that basis, Reliance denied Nichols' appeal.²⁷

Nichols promptly filed this lawsuit against Reliance to challenge her denial under the Employee Retirement Income Security Act (also known as "ERISA").²⁸ The Act's purpose is, in part, to "protect" workers "by establishing standards of conduct" for those who manage their benefit plans.²⁹ The Act allows employees to "recover benefits due" under a covered plan,³⁰ like Pecos' plan with Reliance.³¹

Under that plan, Reliance had the right to both determine benefit eligibility and interpret the plan's terms.³² Therefore, the Supreme Court says Nichols can only recover benefits under the Act if Reliance abused its discretion in denying her benefits.³³ Nichols claims Reliance abused that discretion by, among other things, "having erroneously concluded" that she could "perform the essential duties of her occupation."³⁴

In the Fifth Circuit, an insurer "abuses its discretion when the decision is not based on evidence, even if disputable, that clearly supports the basis for its denial."³⁵ The Supreme Court has held that such abuse of discretion review must "take account of . . . several different, often case-specific, factors, reaching a result by weighing all [factors] together."³⁶ Furthermore, "a conflict of interest . . . must be weighed as a factor in determining whether there is an abuse of discretion."³⁷

Given this "combination-of-factors method of review," the Fifth Circuit says that reviewing courts must not only check if an insurer "based its decision on substantial evidence," but "must [also] consider other factors," such as an insurer's "conflict of interest" and how the insurer "treat[ed]" any government determination about a claimant's disability.³⁸

IIAbuse of Discretion Analysis

The record does not reflect any government determination about Nichols' disability.³⁹ Therefore, two factors are relevant to the Court's abuse of discretion analysis: whether Reliance's denial was supported by substantial evidence, and whether Reliance has a conflict of interest.

ADid Reliance Base its Denial on Substantial Evidence?

No.

The Supreme Court says evidence is "substantial" when a "reasonable mind might accept" it to "support a conclusion."⁴⁰ Substantial evidence is thus a specific "quantity" of evidence.⁴¹ The precise quantity is unclear, but it is more than the amount necessary to have a "suspicion" something is true.⁴² A decision is supported by substantial evidence only when it is "justified by a fair estimate" of "the record as a whole."⁴³

Reliance denied Nichols' application because an occupational review by one of its vocational specialists, Jody Barach, determined that exposure to cold temperatures was not among the "material duties" of Nichols' "regular occupation."⁴⁴ This conclusion is not based on a fair estimate of the record evidence.

Reliance's policy with Peco states that Nichols' "regular occupation" is defined by its duties as they are "normally performed in the national economy," rather than "the unique duties performed for a specific employer or specific locale."⁴⁵ Reliance admits that this definition of "regular occupation" is "close if not identical to the Fifth Circuit's interpretation of the term in House v. Am. United Life Ins. Co."⁴⁶ In that case, the Fifth Circuit held that an employee's "regular occupation" is defined by its duties as they are performed "in the general economy."⁴⁷ To determine what those occupational duties are, the Fifth Circuit says insurers must review the "specific duties of the employee's job, as described by the employer"; these specific duties are "relevant" because they "well illustrate" occupational duties.⁴⁸

Nichols' specific job duties, as described by her employer, fell into three categories. Duties in the first required her to educate other employees in proper sanitary practice; such duties included "train[ing] quality assurance employees" in sanitary procedures.⁴⁹ Duties in the second category required Nichols to inspect meat products; such duties included "[p]hysically inspect[ing]" processed chicken for "bones," "feathers," "infection," "fat levels," and "bruising in excess."⁵⁰ Duties in the final category required Nichols to package and export meat products; such duties include "packaging and labeling products," and "provid[ing] all paperwork required for the export of product."⁵¹ Thus, wherever Nichols' job was performed in the national economy, it would require her to perform sanitary-training duties, meat inspection duties, and meat packaging duties.

Common sense says that an occupation involving inspection and packaging of meat products would require exposure to refrigeration and low temperatures. This common sense is reflected here. The plant where Nichols worked was kept near freezing.⁵² It is also reflected in the Dictionary of Occupational Titles, the source Reliance used to define the duties of Nichols' regular occupation. While no single Title covers all three categories of Nichols' job duties, those that include meat inspection and meat packaging duties appear to require work in refrigerated environments.⁵³ Indeed, the Title that best captures Nichols' meat inspection and packaging duties - with duties like "[e]xamin[ing] carcasses to determine condition of meat" and putting "information" on "inspection tag[s]," "[s]tamps," and "date tags" to prepare "meat cuts" for "shipping . . . and . . . delivery" - has cold temperatures built into its name: "Cooler Room Worker (Meat Products)."⁵⁴

In concluding that Nichols was able to perform the duties of her regular occupation, Barach's "occupation review" ignored both common sense and the record evidence.⁵⁵ That re- view is two pages long, and contains barely 100 words actually written by Barach.⁵⁶ Most of the review is copy-and-pasted text from the Dictionary of Occupational Titles and a doctor's review of Nichols' medical records.⁵⁷ Barach references no other sources, not even the official description of Nichols' job duties as written by her employer.⁵⁸

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