March 04, 2019 Issue: Spring 2019

Cautionary Tales on Insurer Tails: Recent Opinions on Insurer Surveillance in ERISA LTD Claims

By: Jodi K. Swick and Alec S. DiMario, McDowell Hetherington LLP

It is not uncommon for insurers to utilize more than just their insureds’ medical records and reports to verify a claimant’s eligibility for ERISA long-term disability (LTD) insurance benefits. An insurer may choose to retain a private investigator to perform surveillance of a claimant to obtain additional information regarding their restrictions and limitations, abilities and current activities. Historically, courts have cautioned insurers in giving too much weight to surveillance and closely examined the amount and nature of the activity observed. Frequently, courts have expressed that several hours of surveillance footage, obtained during a select time period, does not equate with or support the ability to perform full-time work on a regular basis. Recently, three federal courts have further elaborated on how an insurer may incorporate and rely on surveillance video when making an ERISA LTD claim determination. Overall, while a judge may understand the value that footage of a claimant conducting their daily activities provides, courts often characterize the surveillance as an incomplete view of a claimant’s work capacity and are critical when insurers permit the footage to carry more weight than the opinions of the insured’s medical doctors and the carrier’s independent physicians.

The Holmgren Case

In Holmgren v. Sun Life & Health Insurance Company, No. 17-CV-03028-YGR, 2018 WL 6336043 (N.D. Cal. Dec. 5, 2018), the district court, concluding that the plaintiff was disabled, found surveillance footage to have little persuasive effect where the insurer inferred the plaintiff’s functional capacity to perform the duties of his sedentary job from his engagement in limited physical activity.

Specifically, after the plaintiff submitted a claim for ERISA LTD benefits for an inability to work due to back pain, the insurer requested a surveillance report regarding the plaintiff’s activity. The plaintiff was surveilled for a five-day period, and the surveillance video showed the plaintiff driving, entering and exiting vehicles, walking, standing, sitting, and carrying a small bag. The insurer also considered a peer review report that concluded that, based on available medical records, surveillance video, and discussions with attending physicians, there was no objective evidence to suggest why the plaintiff would be unable to work full time. Consequently, the insurer denied the plaintiff’s LTD claim.

The insurer’s reason for denying the plaintiff LTD benefits was that the objective evidence did not support the severity of the plaintiff’s pain complaints. The insurer confirmed that the plaintiff’s complaints of pain were refuted by, among other things, the surveillance video in which the plaintiff performed “activities in a fluid and unrestricted manner without the use of any assistive devices.” However, the district court was quick to note that it did not agree with the insurer’s characterization of the surveillance footage. The district court highlighted the fact that each of the doctors who examined the plaintiff determined that he was unable to perform the duties of his sedentary job. Even accepting the insurer’s characterization as correct, the district court found the surveillance’s persuasiveness to be limited because the surveillance footage did not “establish” that the plaintiff could sit, stand, and walk as he saw fit and therefore had the functional capacity needed to perform his job duties. Equally, the district court determined that, at most, the surveillance footage established only that the plaintiff could sit for thirty minutes, stand for ten minutes or less, and walk short distances. Thus, the surveillance, in the court’s opinion, did not establish that the plaintiff could perform the functions of his sedentary job.

The Gross Case

Next, in Gross v. Sun Life Assurance Company of Canada, 880 F.3d 1 (1st Cir. 2018), the court of appeal considered whether activity restrictions necessarily defined an individual’s maximum capacities on any particular occasion.

Here, the surveillance revealed very little activity by the plaintiff, who made a claim for LTD benefits based on chronic and severe pain, with three notable exceptions: (1) the plaintiff drove for approximately one and one-half hours; (2) the plaintiff was observed bending down toward lower-level shelves, extending her arms above her head to retrieve items, and kneeling to examine others; and (3) the plaintiff drove to a gas station, pumped gas, and then drove two hours to a hospital where her mother had been admitted before then driving home. Significantly, the court of appeal placed particular emphasis on the plaintiff’s treating physician who set the outside range of the plaintiff’s abilities as sitting in one place for two hours, driving for ninety minutes, standing or walking for one hour, and lifting ten pounds.

The court, in this case, focused on placing the activities observed during surveillance in context. In doing so, the court of appeal found the surveillance to have limited persuasive effect because even the “particularly troubling” activities surrounding the hospital visit were not far removed from the limits set by the plaintiff’s treating physician, and in context the extra driving, the hurried movements, and the pumping of gas may have been at the far edge of what she could manage with the aid of medication in the face of a family emergency. On the other hand, the court found persuasive the fact that the plaintiff had told an examining physician that she could “function better” after changing her pain medication patch, and a month before the hospital trip she reported using numerous other medications on a daily basis. Therefore, the court considered the plaintiff’s brief actions, on days when she was largely inactive or also manifested limitations, to be of minimal significance.

Importantly, the court of appeal continued by stating that some fluctuation in physical ability related to such factors as fatigue and the timing of medications is predictable, and that assessments of the plaintiff’s activities that fail to account for such variations are necessarily incomplete if not misleading. Consequently, the appellate court thought it fair to conclude that the insurer gave undue importance to the few occasions when the plaintiff appeared not to be disabled by her symptoms, leading to a distorted view of her capacities. For these reasons, the court of appeal concluded that the plaintiff’s medical records supported a finding of total disability.

The Hall Case

Lastly, in Hall v. Mutual of Omaha Insurance Company, No. 4:16-CV-160-DMB-JMV, 2018 WL 1440075 (N.D. Miss. Mar. 22, 2018), the district court considered whether the inconsistencies between the observed activities and the plaintiff’s own statements and the restrictions imposed by the plaintiff’s treating physicians supported a finding of non-disability.

Here, the plaintiff was receiving LTD benefits based on her lower back and neck injury and claimed to be unable to lift, bend, twist, or reach overhead. During surveillance, the plaintiff was able to enter and exit her SUV, open and close the SUV’s trunk by reaching up, carry a purse, and carry fast food. The plaintiff also rode in a car for more than one hour. The plaintiff then underwent an independent examination and was surveilled on the date of that examination and for three more days. The summary of this surveillance revealed that the plaintiff drove herself to various locations, attended a movie for approximately three hours, and attended a dinner during which she was able to sit for approximately one hour. During the surveillance, the plaintiff carried her purse. Based upon the surveillance and the multiple independent examinations of the plaintiff, the insurer terminated the plaintiff’s LTD benefits.

The district court, in this case, focused on whether the surveillance was inconclusive and generally consistent with the claimed limitations. The district court also assessed whether the surveillance adequately addressed the plaintiff’s ability to perform the duties of her own occupation. Here, the district court agreed that the plaintiff’s surveillance activities (short walks, drives of various lengths, and carrying a purse) would not, on their own, support a finding of non-disability. However, the district court found it significant that the insurer did not consider the plaintiff’s activities to be direct evidence of non-disability; rather, in its termination letter, the insurer cited the plaintiff’s activities for two purposes: establishing inconsistencies with the plaintiff’s own statements, and establishing inconsistencies with the restrictions imposed by her treating providers.

Specifically, the insurer based its termination determination in part on the apparent inconsistency between the plaintiff’s observed activities (driving, attending a movie, and attending a party) and her later statement during a telephone interview with the insurer that, following an independent examination, she did not return to normal activities until after such observed activities. Accordingly, the district court found that, because the plaintiff’s observed activities were inconsistent with her self-reported information, the insurer did not abuse its discretion in considering this inconsistency in its disability determination. Also, the district court found that the insurer did not abuse its discretion in considering the inconsistencies between the plaintiff’s observed activities and the opinion of the plaintiff’s treating physician who opined that she could not sit for more than one or two hours and could not walk for more than one hour in an eight-hour day. For these reasons, the district court concluded that the inconsistencies between the observed activities and plaintiff’s own statements and the restrictions imposed by the plaintiff’s treating physicians supported a finding of non-disability.

Closing Thoughts

Surveillance evidence can certainly be an effective tool, among others, to utilize in examining a LTD claim. The 2018 decisions in Holmgren and Gross confirm that surveillance should not be the only evidence to support a claims decision as a reviewing court will likely minimize its value. The recent Hall case demonstrates that surveillance is a useful tool to identify inconsistencies with both the claimant’s statements and the provider’s limitations. Overall, surveillance is most persuasive when the nature and amount of the activity observed demonstrates clear discrepancies between opinions of the treating physicians and the claimant’s contemporaneous statements rather than as direct evidence of non-disability.