District Court Orders ERISA Plan Insurers to Pay Disability Benefits Through Date of Judgment

In Ehrlich v. Hartford Life & Accident Ins. Co., Case No. 20-cv-02284-JST (N.D. Cal. Mar. 28, 2025), a recent decision from the United States District Court for the Northern District of California, Judge Jon S. Tigar addressed the remedy available to Plaintiff Steven Ehrlich following Hartford Life and Accident Insurance Company’s and Aetna Life Insurance Company’s arbitrary and capricious termination of Ehrlich’s long-term disability (“LTD”) benefits under ERISA. The Court ordered the defendants to reinstate benefits from the date of termination to the date of judgment in this case.

Background and Legal Context

Before delving into the remedy, the court reviewed the background of Ehrlich’s claim. Ehrlich had been receiving LTD benefits due to multiple physical conditions such as fibromyalgia, neurological disorders, chronic pain, and fatigue. Initially, he was deemed “totally disabled” under the “own occupation” standard, and later, under the stricter “any reasonable occupation” standard, following an independent medical examination (IME) by Dr. Thomas Allems. This examination concluded that Ehrlich’s physical impairments were due to severe depression, thus requiring proof of psychiatric care to continue receiving benefits.

However, Ehrlich’s benefits were terminated on June 28, 2019, when he failed to provide proof of psychiatric care. Ehrlich challenged this, arguing that his physical impairments were not due to a mental health condition. The court found that the defendants abused their discretion by terminating his benefits based on inadequate support for Dr. Allems’ conclusions and a failure to account for evidence supporting his physical impairments.

Court’s Legal Analysis

The court identified several key issues with the defendants’ conduct:

Reliance on Inadequate Medical Opinions: The court found that the defendants erred in relying solely on Dr. Allems’ opinion without adequate support, ignoring reliable evidence that pointed to physical, not mental, causes for Ehrlich’s disabilities.

Failure to Credit Evidence: Defendants failed to acknowledge credible evidence submitted by Ehrlich demonstrating that his impairments stemmed from physical conditions.

Bias in Evaluating Reports: The court noted a biased approach where the defendants emphasized reports favoring termination and diminished those supporting benefit continuation.

Overlooking Social Security Determination: The defendants did not sufficiently address the Social Security Administration’s decision to award Ehrlich disability benefits based on his physical conditions.

Lack of Required Consultation: The defendants failed to consult a second physician to confirm whether Ehrlich’s impairments were indeed due to a mental health condition, as required by ERISA regulations.

Appropriate Remedy

The court determined that the reinstatement of Ehrlich’s LTD benefits from the date of termination through the date of judgment was the equitable remedy. This decision was grounded in the Ninth Circuit’s principle that if an insurer’s arbitrary and capricious conduct results in the termination of benefits, those benefits should be reinstated retroactively through the judgment date.

The defendants’ arguments for remand or limiting the reinstatement period were rejected. The court emphasized that remand is appropriate only when a plan administrator misconstrues the plan or applies the wrong standard. Here, the issue was not misapplication of the plan but rather the wrongful conclusion of terminating benefits. The court also dismissed the defendants’ claim that a lack of evidence beyond the administrative record closing date should limit benefits, citing the Ninth Circuit’s stance in similar cases.

Conclusion

This case underscores the importance of thorough and unbiased evaluation in disability benefit determinations. The court’s decision serves as a significant reminder to insurers about the ramifications of disregarding credible evidence and failing to adhere to procedural standards when handling disability claims. For Ehrlich, this ruling not only reinstates his benefits but also affirms the legitimacy of his claims and the necessity of fair treatment in the administrative process.