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Kennedy v. Life Insurance Company of North America

United States District Court, W.D. Kentucky, Louisville

July 6, 2017

WILLIAM KENNEDY PLAINTIFF
v.
LIFE INSURANCE COMPANY OF NORTH AMERICA DEFENDANT

          MEMORANDUM OPINION

          Charles R. Simpson III, Senior Judge

         I. Introduction

         This matter is before the Court on the motion of Defendant Life Insurance Company of North America (LINA) for summary judgment under Federal Rule of Civil Procedure 56(a), ECF No. 27. Plaintiff William Kennedy responded, ECF No. 31. LINA replied, ECF No. 34.

         Kennedy filed a cross-motion for summary judgment, ECF No. 28. LINA responded, ECF No. 30. Kennedy replied, ECF No. 35.

         Because LINA and Kennedy's motions for summary judgment involve similar issues and the same facts, the Court will address them in a single memorandum opinion and order. For the reasons explained below, the Court will grant LINA's motion for summary judgment. The Court will deny Kennedy's cross-motion for summary judgment.

         II. Background

         In 2002, Kennedy began working as a training supervisor for Perma Fix Environmental Services. Admin. R. 277, ECF No. 11. His job duties included (1) managing the RADCON Alliance Training Program, (2) ensuring that the training and qualifications of the RADCON Alliance staff were properly validated and documented, and (3) directing continued training and requalification. Id. at 539.

         As part of his Perma Fix Environmental Services employee benefits, Kennedy was insured under a short term disability policy, Policy Number LK-750398. Id. at 130-77. He also was insured under a long term disability policy, Policy Number LK-961385. Lodi Decl. 5, ECF No. 27-2. LINA issued both disability policies. Id.; Admin. R. 277, ECF No. 11. Perma Fix Environmental Services appointed LINA to adjudicate claims submitted under the policies. Lodi Decl. 5, ECF No. 27-2; Admin. R. 174-75, ECF No. 11.

         A. Relevant Terms of the Long Term Disability Policy

         The long term disability policy under which Kennedy was insured defines “disability/disabled” as “unable to perform the material duties of his or her Regular Occupation” and “unable to earn 80% or more of his or her Indexed Earnings from working in his or her Regular Occupation.” Lodi Decl. 8 ECF No. 27-2. The policy provides, “[t]he Insurance Company will pay Disability Benefits if an Employee becomes disabled while covered under this Policy. . . . He or she must provide the Insurance Company, at his or her own expense, satisfactory proof of Disability before benefits will be paid.” Id. at 35. The policy further states, “[t]he Insurance Company will, from time to time, review the Employee's status and will require satisfactory proof of earnings and continued Disability.” Id.

         The policy provides that the elimination period-the time during which an employee must meet the definition of disability but before benefits are paid-for a long term disability claim is ninety days. Id. at 11. To receive long term disability benefits, an eligible employee must give LINA written or telephonic notice of a claim within thirty-one days of the event that led to his becoming disabled. Id. at 21. The employee must also provide written proof of loss within ninety days after becoming disabled. Id. at 22. If an employee is unable to submit proof of loss within ninety days, he may do so up to a year after the end of the ninety-day period. Id. The policy states that “[i]f written proof of loss, or proof by any other electronic/telephonic means authorized by the Insurance Company, is provided outside of these time limits, the claim will be denied.” Id.

         The policy specifies the procedure for appealing LINA's denial of long term disability claims. Id. at 29. The policy states, “A written request for appeal must be made to the Insurance Company within 60 days (190 in the case of any claim for disability benefits) from the date the denial was received.” Id. If an insured employee fails to timely submit a written request for appeal, he waives his right to appeal the denial of a claim for long term disability benefits. The policy then explains that LINA has between forty-five and sixty days to review the appeal and render its decision. Id.

         B. Relevant Terms of the Short Term Disability Policy

         The short term disability policy under which Kennedy was insured is similar to the long term disability policy. The short term disability policy defines “disability/disabled” as “unable to perform the material duties of his or her regular job” and “unable to earn 80% or more of his or her Indexed Earnings from working in his or her Regular Job.” Admin. R. 136, ECF No. 11. The policy provides for a seven-day elimination period, and benefits are paid up to twelve weeks. Id. at 136-37. Employees approved for short term disability benefits receive up to 66.67% of their weekly covered earnings or $750.00 per week, whichever is the lesser amount. Id. at 136. “Weekly covered earnings” means an employee's wage or salary, excluding bonuses, commissions, overtime pay, and other additional compensation. Id.

         The short term disability policy further states that LINA will pay disability benefits only if the employee satisfies the elimination period, is under the appropriate care of a physician, and meets all other terms and conditions of the policy. Id. at 140. Additionally, the employee must “provide the Insurance Company, at his or her own expense, satisfactory proof of Disability before benefits will be paid.” Id.

         To receive short term disability benefits, the employee must notify LINA of his claim within thirty-one days of becoming disabled or “as soon as reasonably possible.” Id. at 133. After LINA is notified of the short term disability claim, it sends the employee claim forms for filing proof of loss. Id. at 145. The employee must give written proof of loss to the insurance company within ninety days after the day that she became disabled. Id. If an employee cannot submit his proof of loss within ninety days, he may do so up to a year after the end of the ninety-day period. Id.

         The long term disability policy specifies the procedure for appealing LINA's denial of claims. Id. at 152. The policy states, “A written request for appeal must be made to the Insurance Company within 60 days (180 in the case of any claim for disability benefits) from the date the denial was received.” Id. An employee who fails to timely appeal the denial of his claim waives the right to such an appeal. Id. The policy then explains that LINA had between forty-five and sixty days to review the appeal of a denial of a claim for long term disability benefits and provide its decision on the appeal. Id.

         C. LINA's Short-Term-to-Long-Term-Disability-Claims Procedure

         In limited circumstances, LINA transitions claims for short term disability benefits into claims for long term disability benefits. Lodi Decl. 33, ECF No. 27-2. The short-term-to-long-term-disability-claims policy that was in effect when Kennedy filed his claim for short term disability benefits was revised in November 2009. Id. Under the revised policy, LINA transitions claims for short term disability benefits into claims for long term disability benefits when the claims for short term disability benefits reach “maximum duration.” Id. LINA transitions a short term disability claim expected to reach maximum duration even when it denies the claim due to an exclusion in the policy.[1] Id. at 34. LINA's short-term-to-long-term-disability-claims policy states, “[t]he claim should still be investigated for [long term disability] benefits in a timely manner.” Id.

         D. History of Kennedy's Claim

         Before filing the claim for disability benefits that is at issue in this case, Kennedy had filed two claims for short term disability benefits, which LINA approved and paid. After a blood clot formed in his left lung, Kennedy began his first period of short term disability on December 23, 2010. Admin. R. 82, 123-24, ECF No. 11. He returned to work on January 13, 2011. Id. A few months later, Kennedy was diagnosed with a severe infection in his right lung and began a second period of short term disability between June 11, 2012 and June 18, 2012. Id. at 46-47, 315-16. He returned to work on July 2, 2012. Id. at 315-16.

         Two months after returning to work in July 2012, Kennedy filed the claim for disability benefits that is at issue in this case. Id. at 276-79. On the application for disability benefits, Kennedy stated that he was suffering from severe peripheral neuropathy in his feet, hands, and legs. Id. at 276. His last day of work was August 16, 2012. Id. The first day he was unable to work-and thus met the definition of disability provided by the short term disability policy-was August 17, 2012. Id. He was forty-five years old when he filed the claim for disability benefits. Id. at 1.

         Kennedy called LINA to notify the insurance company about his claim for disability benefits. Id. at 383-91. On August 23, 2012, LINA wrote Kennedy a letter explaining that it had received his application for short term disability benefits and that it needed more information to process his claim. Id. at 110. LINA requested that Kennedy examine and make any required changes to a “Telephonic Report of Claim” form that a representative had partially filled out during the phone call in which Kennedy initially notified LINA about his claim for disability benefits. Id. LINA also requested that Kennedy have his physician complete an enclosed medical request form. Id. LINA then notified Kennedy that he was responsible for sending it the requested information by October 12, 2012. Id. At the end of the letter, LINA stated that it would contact Kennedy after thirty days to update him on the status of its evaluation of his short term disability claim. Id.

         Kennedy returned the “Telephonic Report of Claim” form to LINA on September 5, 2012. Id. at 276-79. Under the heading “Please list any hospitals, clinics, or physicians that treated you for your condition, ” he listed the name of five physicians: his family practitioner, Dr. Dwight Willett, three neurologists, and a pain clinic. Id. at 277. Only next to Dr. Willett's name did Kennedy list a treatment date ...


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