Federal Appeals Court Reverses Decision of Insurer, Finds Principal Insurance to be Arbitrary and Capricious

The Second Circuit Court of Appeals, hearing a case which came of the Federal Court in New York’s Southern District, has overturned the decision of the District Court judge and determined that Principal Insurance was arbitrary and capricious in its denial of benefits to an insured with a long term disability insurance claim. The claimant, a partner in a law firm, suffered from bilateral tinnitus which was accompanied by ear pain, hearing loss, headaches and vertigo.

Principal had denied the claim, relying upon paper only file reviews by well known insurance pandering doctors, including Dr. Bruce LaForce, a neurologist who works for many vendors of paper reviews for insurance companies, and provides opinions on a host of medical conditions, often where he has had limited exposure to these conditions in his practice.

Principal denied the claim, despite Social Security awarding benefits to the claimant and despite Principal financially benefiting from the award of Social Security. Principal rested its decision upon a purported lack of objective information confirming the impairment and despite the finding from Social Security that the claimant was credible in his subjective complaints. In its review of the appeal, Principal Insurance retained another set of well known insurance pandering doctors, including Dr. Leonid Topper, a pediatric neurologist, who performs hundreds of reviews per year for insurance companies, and who rarely finds any claimant to suffer any impairments.

In determining that Principal abused its discretion, the Court noted that Principal “failed to properly consider” the subjective complaints, unreasonably demanded objective proof, and in selectively considering evidence in the record. This decision is extremely significant to claimants, as many insurers have felt emboldened to require objective evidence, even where the policy does not have such a requirement,

The Court remanded the case back to the District Court for further proceedings.

Miles v. Principal Life Ins. Co.