Ehrlich v. Hartford Life and Accident Insurance Company

Background

The court had previously ruled that Hartford Life and Accident Insurance Company and Aetna Life Insurance Company abused their discretion in terminating Steven Ehrlich’s long-term disability benefits as of June 28, 2019. The court also granted Ehrlich’s motion for judgment under Federal Rule of Civil Procedure 52 on his claim for benefits, but deferred deciding the remedy because the parties had not briefed that issue.

Before termination, Ehrlich had received benefits for physical conditions including fibromyalgia, neurological conditions, chronic pain, fatigue, and chronic bacterial infections. The defendants initially determined that he was totally disabled under the policy’s “any reasonable occupation” standard, based on an independent medical examination finding that he could not sit, stand, walk, or perform fine hand movements for more than 2.5 hours in an eight-hour workday. The defendants later attributed those physical limitations to severe depression, required proof that Ehrlich was receiving psychiatric care, and terminated his benefits when he did not submit that proof.

The earlier order identified several reasons for finding an abuse of discretion, including inadequate support for the conclusion that a mental illness caused Ehrlich’s physical impairments, failure to credit reliable contrary evidence, selective treatment of consultant reports, failure to sufficiently address a Social Security Administration disability decision, and failure to consult a second physician as required by Employee Retirement Income Security Act regulations.

Parties’ Positions on the Remedy

Ehrlich argued that the court should order retroactive reinstatement of benefits from June 28, 2019, through the date of judgment. He relied on the court’s prior finding that, absent the defendants’ arbitrary and capricious conduct, he would have continued receiving benefits because of physical conditions.

The defendants argued that the court should remand the claim for further administrative review because the record did not clearly establish that benefits should have been awarded. Alternatively, they asked the court to limit any reinstatement to June 28, 2019, through March 5, 2020, when the administrative record closed. They also argued that they should be allowed to obtain additional medical input about whether a mental illness caused Ehrlich’s impairments.

Court’s Analysis

The court explained that, under Ninth Circuit law, retroactive reinstatement through the date of judgment is appropriate when an insurer’s arbitrary and capricious conduct caused benefits to be terminated even though the claimant would have continued receiving them, or when the record contains no reliable evidence supporting termination. Remand is instead appropriate when the administrator misconstrued the plan or applied the wrong standard in the first instance.

The court found that this case involved an incorrect benefits decision, not a misinterpretation of the policy or application of the wrong standard. The defendants had already determined that Ehrlich was disabled under the “any reasonable occupation” standard. The court had found that they reached the wrong conclusion by attributing his physical impairments to mental illness despite reliable evidence of physical causes, and that Ehrlich would have continued receiving benefits absent that error.

The court rejected the defendants’ request for a further opportunity to develop the medical record. It stated that the defendants had the opportunity, and under the applicable regulations were required, to investigate the cause of Ehrlich’s impairments during the administrative process. The court also found that the existing record contained ample reliable evidence that the impairments resulted from physical conditions rather than mental illness. It therefore concluded that the defendants were not entitled to another opportunity to support the termination.

The court also rejected limiting benefits to March 5, 2020. It held that reinstatement through the date of judgment was appropriate because the defendants had reached the wrong conclusion in terminating benefits and the benefits would have continued absent their arbitrary and capricious conduct.

Disposition

The court ordered the defendants to reinstate Ehrlich’s long-term disability benefits from June 28, 2019, through the date of judgment. It directed the Clerk to enter judgment and close the file.