Quiat on Claims : New York Disability Insurance Lawyer & Attorney : Michael Quiat : Uscher Quiat Uscher & Russo Law Firm : ERISA, Denied Claims

It was both startling and refreshing last Tuesday (September 28, 2010) to watch the U.S. Senate Finance Committee hold a hearing on the real problems claimants have with ERISA, a statute which, when enacted by Congress in 1974, was supposed to be the “greatest piece of legislation for the working man since Social Security”.
 

The inequities which have developed through the years since then, seem to have arisen from how courts have interpreted the legislation. Courts seem to have bought the insurance company party line that without the insurance companies having an advantage (“deference’), the ERISA system would fall apart, disability income insurance would be priced out of the market and there would be no insurance for anyone.
 

Although there seems to be very little chance that the present contentious Congress will make any real effort to clarify ERISA to undo the damage courts have done to claimant’s rights, the remarks of Finance Committee Chairman, Senator Max Baucus, offer a glimmer of hope.
 

At the hearing, Committee Chairman Baucus said there was a huge ERISA problem and that he was disturbed by the testimony he heard at the hearing. He cited what he called “abusive insurance company tactics” and the conflicts of interest inherent in the system. A promise by him to compare what happens to long term disability claims under ERISA and Social Security, seems to offer a way bring the ERISA claims system more in line with what Congress said it intended in the legislation.
 

Those of you who follow this blog are aware of the one-sided way courts seem to look at ERISA, particularly as it pertains to LTD claims. The litany of cases which support this statement include the leader, Firestone v. Bruch, 489 US 101 (1989) , which decision unwittingly bestowed upon the insurance industry an undeserved mantle of impartiality and evenhandedness.
 

For whatever reason, in Firestone, the U.S. Supreme Court decided that if an employer in an ERISA plan gives discretion to the administrator of the plan (usually an insurance company selected by the employer), a claimant is not entitled to an actual trial by an impartial judge. Firestone decrees that a court may only “review” the insurance company denial of benefits on the record and may overturn a denial only if the claimant proves that the denial was “arbitrary and capricious”, after giving the insurance company position “deference”. What a tough, tough hurdle!
 

The policy behind the decision appears to be that it is more important to keep a lid on insurance costs than it is to provide employees with a fair and impartial consideration of their right to a fair and Impartial consideration of their right to benefits when they are stricken with a long term, disabling illness or injury
 

Talk about putting the fox in charge of the hen house! Giving this devastating power to insurance companies has led to a rash of cases in which obviously disabled persons have been denied benefits despite being clearly unable to work. The Firestone decision was the keystone in ERISA law which unconscionably built a bridge of profits for insurers on the blighted lives of totally ill and injured workers and their families.
 

To add insult to injury, the courts consistently failed to recognize the damage Firestone had caused, and usually refused to grant discovery to claimants who needed the discovery if they were to have any hope of obtaining evidence that the denial was “arbitrary and capricious”.
 

For years, until MetLife v. Glenn, 554 US 105 (2008) , courts seemed blind to the inherent conflict of interest insurance companies had judging the validity of a claim they would have to pay.
Insurance companies took advantage of this Firestone-induced exalted position by engaging in all sorts of shady tactics that made a disability claimant’s position as underdog even more daunting:
 

• They established stables of I.M.E. doctors who would deny claims from behind a desk, without ever seeing the claimant, while at the same time earning the major source of their annual annual income from doing so.
• They paid their employees bonuses and other financial incentives based on the number of claims the employees terminated or denied.
• They found ways to delay, delay, delay, while insureds, unable to work and earn money, burned up their resources just to try to go on living.
• They insisted that claimants apply for Social Security disability benefits so they could offset the Social Security benefits against their own benefit obligation, then ignored those same Social Security disability awards when they later decided they to terminate their own obligation to pay benefits.
• They did all of these things without facing any penalty for their egregious conduct. 
 

So, after all of these years of insurance companies being in the driver’s seat, one can see why this Senate Committee hearing raises hopes for ERISA claimants. But, don’t become too excited. In addition to the problem of legislative inertia, the insurance companies have yet to marshal their lobbyists, publicists, advertising forces and friends in Congress to their cause, which is – keep the status quo.
 

As we have said several times before, the key to today’s world is: Follow the money!

And, the money is all on the insurance companies’ side. 

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A ”hot-off-the-presses” decision from the Illinois Federal District Court finally lays out, without all of the obfuscating folderol, the true basis for getting to the truth of the ERISA-SSDI tug of war:   See Raybourne v. Cigna, No. 07C3205, (N.D. Ill., September 23. 2010).
 

Did an LTD insurance administrator, in denying a policy claim, meet the burden of establishing a credible basis for rejecting an SSDI finding of disability?

Long-standing LTD insurance company strategy has been to insist that claimants must pursue SSDI claims to be eligible for their LTD disability benefits. There is nothing wrong with this, as LTD insurance policies usually provide that third party payments to a claimant (including SSDI) have to be used to offset payment of benefits by the insurer.
 

The problem is that after forcing the claimant to make a disability claim to SSDI so as to receive benefits which go straight into the pocket of the LTD insurance carrier, the carrier then completely ignores the SSDI decision in its own determination of its own liability under its disability policy.
 

LTD insurance companies were getting away with this ploy for years, until MetLife v. Glenn, 554 U.S. 105 (2008), when the U.S. Supreme Court woke up to the fact that there is an inherent conflict of interest in a situation where an insurance company which has to pay the claim is the entity which makes the initial decision as to whether the claim is actually covered. Add to this already conflicted siutation the added insult that in ERISA cases, the LTD insurance company’s decision must be given deference, Firestone v. Bruch, 489 U.S. 101 (1989) , and you have a stew which smells bad right from the start.
 

Why the courts seemed to be blind for so long to the unfairness of putting such extreme power in the hands of one party to a controversy, is hard to fathom, particularly when that party is an insurance company, a class of entities not known for being overgenerous. Firestone was decided in 1989 and Glenn in 2008.
 

Those who represent disability claimants have been afflicted by the free ride the Firestone decision has given insurance companies for almost 25 years. No court so clearly took them to task on the SSDI issue as did the District Court in the Raybourne decision. Hopefully, now the shoe is on the other foot, where it actually belongs.
 

Why should an LTD insurer be able to force a claimant to obtain an SSDI ruling that finds the claimant disabled so that the SSDI benefits go into the insurer’s pocket, and then ignore the SSDI decision in the claimant’s claim against the insurer?
 

Hopefully, the inherent conflict so clearly defined in Raybourne, as a result of Glenn, will give otherFederal courts the gumption to reexamine the unfair body of ERISA law which has grown in the wake of Firestone. They should examine closely evidence of the LTD insurance company system of hiring and maintaining stables of supposedly “independent” medical examiners and financially rewarding employees on the basis of their record of denial of claims.
 

LTD insurance companies should, as do all other litigants, have to meet the burden of proof once it has shifted to them. If a party shows a court that an expert witness might have a prejudice for or against a party, the court must scrutinize that evidence closely. It should not give that evidence “deference” as otherwise suggested by Firestone.
 

Glenn gives attorneys the tools to show the conflict of interest and how it might affect the insurer’s decision. We only hope that having this tool, judges are as straightforward and skeptical as Judge Gettleman was in deciding Raybourne.
 

Claimants have the duty of proving they are disabled. Once they do, LTD insurance companies should have the duty of proving that they are not.

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Don’t be blindsided by the simple words “own” and “occupation".  Joined together, in a policy of disability income insurance, these words become a minefield, ready to blow up your and your family’s life in the event of a disability. 

“Own occupation” is a complicated insurance policy phrase requiring your complete attention and understanding before you can believe you have done what you could to protect your own and your family’s future.
 

For those who don’t earn high incomes, the nuances of “own occupation’ clauses in disability income policies are not of great import.  But, to those earning the “big bucks” the definition of “own occupation” in their disability income policies can be the difference between life as they know it and an economic wasteland.
 

A cardiac surgeon making $750,000 a year and up, who becomes disabled and can’t practice and earn as a cardiac surgeon, adds a financial catastrophe to the already heavy burden of the disability.  Smart high earners insure themselves and their families by taking out “own occupation” disability policies to provide substantial disability benefits while they are disabled and unable to earn anywhere near their usual income. 
 

And, when buying these policies, these people are usually smart enough to ask their insurance agent or broker if their policy has an “own occupation” clause.  If the agent says “yes”, they feel content.  But that question hardly touches the core of what a person with a substantial income should be asking.
 

The major issue for the prospective policyholder is the way “own occupation” is defined in their policy.  Is it the occupation at the time you buy the policy or is it occupation at the time you become disabled?  Are there time limits on how long the ”own occupation” benefits will be paid?  How does the policy define “unable to perform the duties of your occupation”?  What happens if you start working in a totally different occupation while disabled? Are you entitled to benefits? Are there any other limitations or restrictions on the type of injury or illness which will trigger benefits in the event of a major disability?
 

Each of these issues is among a myriad of other considerations which have to be understood and evaluated before a high-earning professional can feel comfortable that whatever could reasonably be done to protect the family’s future has been done. 
 

Some other important considerations are:
 

* Should the renewal of your policy be guaranteed in case you contract an illness or injury which might lead your insurer to think it is in its best interests to cancel your coverage before you actually become disabled?
* Should you include a cost of living clause in the policy to keep your benefits in line with the cost of living since disability benefits may go on for years and years?
* Should you contract to continue benefits after age 65, the usual termination of policy benefits?
* Should you contract for residual (partial) disability in the event you still can do “some” but not “all” of your “own occupation”?
 

As with everything else, you have to pay for any additional coverage protection.  But, the important thing is that you should have the opportunity to decide before you buy the policy whether you want or need the added protection. 
 

So, if you are a person to whom an “own occupation” clause is important, you shouldn’t feel secure even if your insurance adviser assures you that your policy contains an “own occupation” clause. 

While you are thinking of it, read your disability insurance policy TODAY!   The language may be tough to understand but you can do it if you try.If you haven’t the time, get someone who knows to help you with it NOW.
 

Making the effort NOW is better than having your complacency shattered by receiving a letter from your disability carrier when the chips are down: BENEFITS DENIED!

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