Handling of disability claim showed desire to get rid of nurse; employer should have stepped in: Arbitrator
Arm’s length won’t avoid finger of blame
Most employers who provide medical benefits, including short-term disability (STD) and long-term disability (LTD), purchase the benefit plans from an outside insurance company. And, since the insurance provider is the one paying out the benefits, it’s usually the provider who evaluates whether or not an employee’s claim will be accepted or rejected.
However, if the employer removes itself completely from the claim evaluation process, it can lead to some sticky situations if an employee has a disability that requires accommodation. Also, the employer is ultimately liable for anything affecting an employee’s employment, so it should be wary of giving free rein to an outside insurance company to rule on employee claims.
A Hamilton hospital that contracted out its attendance management to an outside consultant found out keeping an arm’s-length detachment from its consultant’s bad-faith treatment of an employee’s disability benefits claim didn’t keep it from being held responsible for the employee’s suffering caused by that treatment.
The attendance management consultant for an Ontario hospital acted in bad faith when it refused to allow a nurse to return to work from sick leave when she claimed she was ready and the employer hospital is on the hook for that behaviour, the Ontario Arbitration Board has ruled.
Barbara Shuster, 45, was a registered nurse at the Hamilton Health Sciences Centre (HHSC). She began experiencing back problems in 2004 and was diagnosed with herniated disks. She received treatment over the next couple of years and was off work receiving long-term disability (LTD) benefits from March 2004 to May 2005. She returned to work with modified duties in May 2005 after a functional abilities evaluation established permanent restrictions. By October, Shuster suffered from more back pain as well as a bladder condition and she went on short-term disability (STD) leave. Shuster’s doctor cleared her to return to work in November with restriction on the amount of weight she could lift and a stipulation she should do no prolonged standing, walking or bending. A second letter later diagnosed Shuster with degenerative lower lumbar disk disease. The letters were send to Cowan Wright Beauchamp, a consultant company that handled the HHSC’s attendance management.
According to HHSC policy, disability claims would be reviewed by Cowan within 48 hours. However, Cowan didn’t make a recommendation on Shuster’s claim until four months later. During that time, she was paid benefits but if Cowan didn’t approve the claim, she would be responsible for paying the money back.
Concern over nurse’s ability to do her job with a bad back
Cowan was concerned about Shuster’s ability to return to her job, since during her previous LTD leave, HHSC felt she would not be able to perform the duties of a registered nurse because of her restrictions. Cowan’s file included an observation that Shuster would likely only be able to perform desk work when she came back to work. These concerns were revisited when Shuster went on sick leave in October 2005 less than six months after returning from LTD leave.
Cowan was also concerned about the fact the collective agreement stipulated employees back from long-term disability did not go back on it from a recurrence if they had been back for more than three months. Instead, they filed a new STD claim. Cowan raised the issue that Shuster “suddenly” had no restrictions for three months after doing modified work after LTD and then going on STD.
Claim evaluator misunderstood pension application
By January 2006, the HHSC hadn’t yet allowed Shuster to return to work and she supplied another note from her doctor stating she could return to work with no heavy lifting greater than 15 pounds. In the meantime, Shuster was advised to apply to the hospital’s pension plan, which would give her free pension accrual during her leave without having to make contributions. The pension provider approved her because of partial disability, but Cowan made the assumption Shuster was “totally incapacitated from her own job” and the pension application meant she planned to retire. Though Cowan had accepted the return-to-work restrictions in Shuster’s medical note, the claims adjudicator referred to the pension application in an email as a “golden opportunity” to solve the problem once and for all.
On Feb.7, 2006, Shuster filed a grievance, claiming the HHSC had violated the collective agreement by not returning her to work. The following week, Cowan accepted her STD claim, which had already run out. She told the HHSC she could return to work with modified duties, but Cowan was skeptical of the doctor’s note that fit her request. Cowan recommended to the HHSC that Shuster’s treatment and modified duties were “only a temporary relief measure,” her condition was “a chronic, unremitting problem” and she would be better off on LTD benefits.
Another doctor’s note in April 2006 stated she had completed treatment for her back pain, but she was still denied a return to work and she filed a second grievance on May 8, saying Cowan was “callous and high-handed” in denying her the opportunity to go back to work as a registered nurse. Since the HHSC as the employer was responsible for its consultant’s handling of the case, it was also responsible for the bad-faith violation of the collective agreement.
Evaluator suspicious from the start: Arbitrator
The arbitrator found Cowan’s approach to Shuster’s claim was suspect from the beginning. Cowan handled the situation as if it suspected both Shuster and her doctor of fraud, as evidenced by Cowan’s communication that Shuster “all of a sudden” was fit to return to work when her three-month LTD limit expired. Cowan had originally agreed to Shuster’s return to work under the same limitations as her previous LTD but changed its mind when it learned of — and misinterpreted — Shuster’s application for pension continuance. Cowan’s actions after that demonstrated an eagerness to get rid of Shuster rather than impartially evaluate her claim, said the arbitrator.
“From the very outset, Cowan’s consideration of the approval of benefits and (Shuster’s) return to work are clouded with the basest of suspicions,” said the arbitrator. “The obligation of good faith and fair dealing are nowhere to be found in (Cowan’s) handling of the file either before or after (learning of the pension application).”
The HHSC was also at fault for not questioning Cowan’s findings and methods, the arbitrator found. It delegated the duties and responsibilities of evaluating the claim to Cowan without taking any steps to independently assess and decide how its employee would be treated, despite the fact Cowan discussed the case with HHSC management through regular emails.
“The (HHSC), by its action or inaction, adopted Cowan’s activities as its own,” said the arbitrator. “(It) allowed Cowan to run free without hindrance, even as (Cowan) kept it advised of the steps being taken on its behalf.”
The arbitrator found Cowan showed it was unfit to properly perform the duties the HHSC had contracted it to do — fair and impartial evaluation of disability claims — and the HHSC acted recklessly by not acting at all. The HHSC had a duty to accommodate Shuster, but failed to meet it by going along with Cowan’s recommendations. Because of this inaction, there was a significant delay in the approval of Shuster’s STD benefit approval, during which Shuster didn’t know if she would be denied and forced to pay back the benefits she received — a delay caused by Cowan’s inaccurate understanding of both the pension application and the collective agreement’s LTD limits.
The arbitrator ruled Shuster was entitled to damages for the unnecessary emotional suffering and financial disadvantage she was subjected to because of Cowan’s and, by extension, the HHSC’s, bad-faith behaviour in her disability claim. He instructed the HHSC and the nurses’ union to negotiate the amount of damages, though he acknowledged the union’s suggestion of full compensation plus punitive damages as appropriate.
“The (HHSC) was aware of Cowan’s malicious and unsupported accusations and (it) was content to ride along with Cowan’s behaviour. “In the final analysis, it is for the (HHSC) to make the decisions in matters such as these. Those decisions must be informed,” said the arbitrator.
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