An Oxymoronic Decision

The few crumbs the U.S. Supreme Court let fall off the table for ERISA disability claimants in Metropolitan v. Glenn, 128 S. Ct. 1117, it more than took away with its recent decision in Conkright v. Frommer, 2010 WL 1558979 (U.S.).

The Court used the words “honest mistake” (which we think is an oxymoron when used to describe insurance company conduct when fighting a claim) to justify ordering courts to give ERISA plan administrators a second “deferential” bite at the apple in a dispute.

Although the Conkright case was a pension plan case, the Supreme Court did not limit its “honest mistake” decision to pension cases, so it applies to all ERISA contests, including disability income claims.

The Supreme Court took the handcuffs off Federal judges only to encase them in a straitjacket. This decision gives insurance companies the ability to make “honest” mistakes while keeping a destitute claimant who can’t work away from benefits for as long as it takes to obtain the claimant’s surrender. It’s a win-win windfall for insurance companies.

Many disability claims take years and years to reach a final decision because of the ERISA requirement favoring the “judgment” of insurance administrators. Now they have an even more potent tool – the “honest” mistake! With the blessings of the Supreme Court, insurance administrators can make “honest” mistakes almost as a matter of course and still get deference in their next “honest” opinions.

The one thing the majority in Conkright omitted to tell us is how many “honest” mistakes the administrator can make before the deference doctrine is not required to be adhered to by the court hearing the matter.

Taking into account the checkered history of insurance company shenanigans:

  • The 49-state probe and settlement of Unum disability insurance tactics;
  • So-called medical exams without doctors seeing the patient;
  • Stables of doctors, bought and paid for by insurers which (witch?) doctors rarely find disability;
  • Ignoring SSDI disability decisions after insisting the claimant apply for it so the insurer can be reimbursed for benefits already paid;

one wonders why the Supreme Court came down on the side of the insurers.

Despite this history, it seems to us that many courts have an attitude that claimants, as a class, have a tendency to fake disabilities while they feel that insurance companies are paragons of virtue. They seem to feel this, despite the continuing parade of cases in which it has been shown that insurers engage in outrageous conduct while dealing with disabled employees at a seemingly hopeless stage in their lives.

We understand there are disability claimants who are not entirely truthful in describing their condition and who are not entitled to benefits. Insurance companies have many ways to defend against these claims. They do not need the added weapon of “discretion” when they have already abused the concept once, even if it really is an honest mistake.

If the mistake was really honest, it indicates a lack of expertise which should not then be afforded the armor of discretion the second time around. Why should a claimant have to surmount the “arbitrary and capricious” mountain after the administrator has clearly indicated a lack of expertise the first time around.

Many disability income cases take a long time to be resolved as a matter of course. If there is the slightest doubt about the case, you can bet the administrator is going to refuse to pay until the doubt is resolved. The administrative process can take months and months, if not years, for a decision of the administrator.

If court action is required by the claimant, this may take another year or two to resolve. If the “arbitrary and capricious” standard is an issue, an appeal may follow. Again, a year or two or more may go by.

Repeated court remands back to the plan administrator add to the pressure on disabled claimants who are not receiving benefits. Delays, no matter what the cause, always favor the insurance carrier.

And during all of this time, the disability claimant can’t work and can’t pay bills without help from family and friends, if they are available and willing to help. Do you doubt that an insurance company will keep this process going until the claimant takes a lot less than warranted or gives up altogether?

We know of several ERISA disability income cases decided in favor of the claimant in which courts found outrageous conduct by the insurance company and which took 10 years or more to be finally decided. So, it sticks in our craw as disability income insurance attorneys, who see our clients live with this burden day in and day out, to see the Supreme Court give the insurance people, who love to hold on to their money as long as they can, a second bite at the apple after they bit their tongue the first time.

The benefit of “honest” mistakes are for people who are absolutely neutral and have no interest in the outcome. That hardly fits the description or the history of the ERISA disability income insurance industry.

 

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