District Court Finds AT&T Self-Funded Disability Plan Abused Its Discretion In Denying Software Engineer’s Long-Term Disability Claim

In a firm victory, Chacko v. AT&T Umbrella Benefit Plan No. 3, No. 2:19-CV-01837-DAD-DB, __F.Supp.3d__, 2023 WL 5806455 (E.D. Cal. Sept. 7, 2023), expertly litigated by our own Michelle Roberts, California Eastern District Judge Dale Drozd granted judgment to Plaintiff finding that AT&T’s self-funded disability plan, administered by Sedgwick, had abused its discretion in terminating her claim for ERISA-governed long-term disability (“LTD”) benefits.

Plaintiff was employed as a computer programmer with AT&T for over twenty years when she developed pain and numbness in her hands, arms, and neck that prevented her from performing the duties of her occupation, which consisted of almost exclusive computer keyboarding. AT&T initially approved and paid LTD benefits after at least two vocational assessments found that, while Plaintiff had sedentary work capacity, there were no identifiable occupations she could perform because she was restricted from computer use to no more than 5 to 10 minutes per hour.

Thereafter, upon receipt of updated medical records, including a QME report, Sedgwick requested a third vocational assessment relying solely upon the restrictions and limitations of the Workers’ Compensation physician who opined that Plaintiff could perform fine manipulation right/left, simple grasp right/left, firm grasp right/left occasionally (33% of a workday). Even then, the vocational assessment did not examine the impact of this restriction on Plaintiff’s ability to keyboard or use a mouse in any occupation, but nonetheless identified two sedentary computer-related occupations Plaintiff could perform. Sedgwick terminated Plaintiff’s benefits.

On appeal, Sedgwick retained Dr. Howard Grattan to perform a paper review of Plaintiff’s medical records. While Dr. Grattan acknowledged that Plaintiff suffered from bilateral overuse disorder; neck, arm and hand pain; and a cervical spine disc bulge, he concluded that Plaintiff could perform sedentary work, including “fingering, handling, and feeling with the bilateral hands” frequently (up to 66% of a workday). Despite supplementing her claim with additional documents and records, including a Social Security disability award, and updated medical records, for a total of five addended reports, Dr. Grattan’s opinion remained unchanged, and he did not modify his stated restrictions and limitations. Sedgwick upheld the decision on appeal. The instant lawsuit ensued.

The parties agreed that Sedgwick’s claim determination was to be reviewed under the abuse of discretion standard. Plaintiff argued that because: (1) Dr. Grattan operated under a conflict of interest and his opinion was biased; (2) Sedgwick failed to consider the actual requirements of Plaintiff’s occupation; (3) Sedgwick relied on a flawed, biased, paper review; and (4) Sedgwick failed to properly consider the Social Security disability decision, the Court must view the termination of benefits with skepticism and find that Sedgwick abused its discretion. The Court agreed.

The Court found both accurate and helpful Plaintiff’s spreadsheet analysis of a sample set of reviews prepared by Dr. Grattan in other Sedgwick claims wherein Dr. Grattan found claimants were not disabled 82% of the time and rejected Sedgwick’s claim that the spreadsheet was inaccurate. The Court further rejected Sedgwick’s effort to distinguish these results from other cases where reviewers had sided with the insurer in greater percentages. The court found that 82% was still more than adequate to suggest a bias triggered by a conflict of interest. The court acknowledged that the amounts paid by Sedgwick to Dr. Grattan paled in comparison to the six figure sums paid to the doctors in other cases but found the 82% denial rate was particularly significant given the Ninth Circuit’s decision in Demer v. IBM Corp. LTD Plan, 835 F.3d 893, 903 (9th Cir. 2016), where no statistical data had been presented.

The Court also found compelling the fact that Dr. Grattan’s compensation for Plaintiff’s claim demonstrated he spent little time analyzing the files before “rubber stamping his opinion on them.” Additionally, the Court noted several other cases in which Dr. Grattan’s opinions had been criticized for offering unsupported conclusions, and ultimately concluded there was a conflict of interest surrounding Dr. Grattan’s review that warranted a low-to-moderate level of skepticism.

With regard to Plaintiff’s claims of procedural irregularities, the Court found that Sedgwick’s failure to consider the duties of Plaintiff’s occupation (in particular, keyboarding) and the significant restrictions and limitations of the QME doctor, coupled with Sedgwick’s failure to include those restrictions in the third vocational analysis warranted further skepticism. And, while the Court did not agree that employing paper reviews is “per se” a procedural irregularity, it agreed that the accuracy of Dr. Grattan’s report was certainly an issue. Finally, the Court found that Sedgwick failed to adequately consider the Plaintiff’s Social Security disability award, having failed even request the SSA file to conduct a meaningful review of the rationale for approval.

Applying a “moderate level of skepticism” the Court concluded that the Plan abused its discretion when it terminated benefits and denied her appeal. The Court awarded Plaintiff benefits from the date of denial to the present and going forward prospectively.

If your disability insurer has denied or terminated your disability insurance claim, contact us for assistance.