Sanding Down Claim Unfairness

The noose is slowly tightening around the neck of rough and tumble, insurer-weighted, adversarial tactics in ERISA disability income insurance cases. Courts are, inch by painful inch, insisting that claimants be treated more fairly by insurers and that the tremendous advantages insurers have, be sanded down so that policyholders have a fighting chance when forced to make a claim.

Insurance companies are bound to yell “Foul”, claiming that they and claimants are already on a level playing field. The actualities show that this is not so. Just run through the following short list of advantages for insurers and you can see why:

* Insurance companies have cadres of lawyers who study and
practice in the specialized field of ERISA law. Claimants usually
have no knowledge of law, let alone the complicated ins and outs of ERISA law, and have to find a knowledgeable ERISA lawyer to help them if they think they have a claim.

* Insurance companies rarely hurt for money. Disability income
claimants are almost always under financial overload.

* In many states, insurance companies have the advantage of the
discretionary clause which, when a claim is denied, puts an almost impossible burden of proof on a claimant

* Courts are constrained to give as much weight to the opinion of insurance doctors who never see the claimant as they give to the opinions of treating doctors who diagnose and treat the actual claimant on a continuing basis.

Over the years many courts seemed not to see the inequality favoring insurers when considering ERISA disability income claims.

But, starting in the last decade, after having had a lot of experience with the one-sidedness of some ERISA law decisions, courts began to have a conscience about what they were doing and began to call upon insurance companies to act more fairly toward employees with disability claims.

Even the U.S. Supreme Court opened its eye a little wider in Metropolitan Life Insurance Company, et al v. Glenn, 128 S. Ct. 2343 (2008), when it recognized that there is an inherent conflict of interest when an insurance company decides a claim which it will then have to pay.

Courts are looking more and more closely at opinions by insurance doctors who never see the disabled patient, but are happy, for a hefty fee, to offer opinions that the patient is able to work. Courts are wondering more and more why insurers order and assist their policyholders in seeking SSDI benefits which, when obtained, the insurers take to reimburse themselves for benefits they may have already paid, following which they completely ignore the SSDI judge’s decision when deciding the validity of the same disability claim under their own policy

As anyone who has had to file and pursue an SSDI claim knows, it is far from a piece of cake Uncle Sam, despite what a lot of people seem to think, is not a soft touch and only about one-third of those who believe they are permanently disabled and unable to work, have their claims approved. So, why shouldn’t the insurer at least give some weight to the SSDI outcome and explain to a court why the SSDI decision doesn’t apply to the court case on the insurer’s policy?

The sanding away of insurer unfairness in ERISA litigation continued with two recent decisions – Galutza v. Hartford, 2010 WL 1329985 (N.D.Okla.) and Beaver v. Bank of the West, 2010 WL 1030464 (N.D.Cal.) In both of these very recent cases, the courts took the insurers to task for failing to properly communicate the particulars in which the insurer felt the claim documents were lacking so that the claimant could fill in the blanks.

In Galutza, the court agreed that a fiduciary has the duty to protect a plan’s assets against spurious claims.. But it also said that the same fiduciary has a duty to see those entitled to benefits get them.

In Beaver, the court found that the administrator had not engaged in a meaningful dialogue with claimant when advising her of additional records and materials the administrator thought it needed to adjudicate the claim.

It is our opinion that after years of dealing with disability insurance company “no-pay-at-any-cost” tactics, courts are coming to recognize that insurers will go and have gone to extraordinary lengths to avoid paying on disability income policies. Courts have found that the parties to such disputes are not nearly on an equal footing, so they slowly but surely require the decision-making party to justify its decisions by taking a much closer look at the evidence.

If this trend continues, disabled employees may finally get a fair shake from their bosses’ insurance carriers.





Legal Fee Law Reins In Insurers

The scales of Justice weigh heavily in favor of insurance companies generally, but even more so in disability income claims. After all, insurers are well funded, have their health, and employ plenty of lawyers who are familiar with the “ins” and “outs of the business.

A typical disabled employee, on the other hand, frequently has little or no funding (being unable to work), has little experience in law, and hasn’t a single friend, relative or neighbor who even knows where a law school is located, let alone having attended one.

The issue of whether a mental or physical impairment truly prevents a claimant from performing the duties of employment can be a complex question, even if it is conscientiously considered by people who have no financial interest in the outcome. When you add the financial interest insurance companies have in the outcome of these questions, the issue becomes more vexing because if they agree that the employee is disabled, they pay – and insurance companies hate that.

This leads to a situation in which insurers make claimants run through hoops in an effort to discourage them because there is very little downside to such conduct. Most states make each litigant pay for his or her own legal fees and costs. So, if an insurer makes a claimant sue and loses, what’s the downside?

In the 2nd Circuit Court of Appeals, which includes New York, Connecticut and Vermont, ERISA claimants get a leg up from a line of cases starting with Birmingham v. SoGen-Swiss International Corporation Retirement Plan, 718 F. 2d 515 (2nd Cir. 1983), which hold that although the award of counsel fees and costs is discretionary with the court, the 2d Circuit favors awarding counsel fees in ERISA cases unless there is a particular justification for not doing so. This judicial attitude in the Circuit makes insurance companies think twice in ERISA matters before saying “No” just because they can with impunity.

A road map for evaluating the merits of the right to attorney’s fees, was set forth in Chambless v. Masters, Mates & Pilots Pension Plan, 815 F. 2d 869 (2nd Cir. 1987) and has generally been followed in the Circuit. The major points of the scorecard are:

Culpable conduct (i.e., arbitrary and capricious) by the insurer.

The defendant has the financial resources to satisfy an award.

The merits of the case favor such an award.

The award of attorney fees would tend to deter defendant insurer and others from violating ERISA regulations in the future.

The results in the case confer a common benefit in that the defendant and other insurers will think twice before violating ERISA’s requirements in future.

Nobody wants an illness or injury which eliminates their income or employment. But for those unfortunate enough to face this condition in the 2d Circuit, there is some comfort in knowing that if they are covered by ERISA, arbitrary denials can cause insurers to bleed.