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

Last October we warned disability claimants about a favorite ploy of insurance companies – taking surveillance videos of claimants on the day they are scheduled for an IME. Insurers love videos because they find that if they can catch a claimant doing anything he or she says they are unable to do, some courts are impressed enough by such evidence as to uphold an otherwise shaky benefit denial.

This is especially true if the court feels constrained to give discretion to the plan administrator which is very often the same insurance company which would have to pay the claim if it is upheld. For more on this see.

We like to call this the “Gotcha!” ploy. If insurance companies see you make what they think is a wrong move on video tape, your benefits come to a screeching halt.

Don’t misunderstand us. We don’t have any argument with insurance companies gathering evidence against a faker who tries to collect disability claim benefits fraudulently. Insurers should fight these claims tooth and nail.

On the other hand, insurance companies should not, as they seem to, consider everyone who makes a claim a faker.

A recent case illustrates how far insurance companies will go to use a video in an attempt to put the lie to a claim of disability, In Maher v. Massachusetts General Hospital Long Term Disability Plan, 2011 WL 6061347 (C.A.1 (Mass.))) , a registered nurse claimed she had to stop working because of chronic, disabling stomach pain and the side effects caused by the strong amounts of narcotics she had to use to control the pain. Although her doctors were unable to pin down the exact cause of her pain, they all were certain that she actually was suffering the pain.

Nurse Maher said she could perform some activity from time to time, but said she spent most of her time in bed. After paying benefits for 5 years during which the company videotaped her for 6 days in 2002, 3 days in 2005 and 10 days in 2006, the plan administrator, Liberty Life Assurance of Boston, yelled “Gotcha” and stopped her benefits.

On 10 of the 19 days during which she was photographed, she engaged in no activity. On the other 9 days, she was photographed sitting or standing outside of her home. Out of the entire 90 hours she was before the camera, there were about 15 minutes when she was seen carrying a bucket or pot and 30 minutes when she was seen playing with her children.

Surprise, surprise! The insurer’s doctors (who had never examined Nurse Maher although she offered to submit to an exam) all jumped on the video as proof that the claimant wasn’t disabled and that she could reliably perform a full-time sedentary job.

After careful analysis the 3-judge court found for the claimant, but split on the remedy. Two judges ordered the matter sent back to the District Court, which had found for the insurance company, for further consideration of the claim, while the dissenting judge felt the denial of benefits was so wrong that the court should immediately reinstate them.

In supporting the claim, the court approved language in a case involving a Social Security appeal, Carradine v. Barnhart, 360 F. 3d 751(7th Cir. 2004), where the court found there is a sharp difference between a person being able to perform sporadic household and family duties and being able to work 8 hours a day for 5 consecutive days of the week).

Although insurance companies benefit big time when they can cut off a disability income claim midstream, they should realize it is not a game of “Gotcha”. Real people are hurting and their families are suffering.

It is not any kind of game at all.

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The 3rd Circuit Court of Appeals applied a little ERISA common sense recently and came up with a decision that does justice when it comes to medical expense reimbursement. The court ruled that an ERISA claim administrator’s rights are subject to “appropriate equitable relief” under 29 USC 503(a)(3) and that the word “appropriate” has real meaning.

Just about every ERISA plan has reimbursement provisions which provide that the plan is subrogated to an insured’s claim against a third party and that the plan has the right to recover any amounts it paid to the insured out of any monies the insured may recover from a third party for the same losses.

That was the situation in US Airways, Inc. v. McCutchen, 2011 WL5557411 (C.A.3(Pa.)). McCutchen, the insured, was severely injured in a motor vehicle accident in which several others died or also suffered severe injuries. Since the negligent driver did not have adequate insurance to cover all of the damages of the accident, McCutchen settled his claim for a total of only $110,000.

US Airways, McCutchen’s employer and the administrator of his Health Insurance Plan, had laid out $66,866 for McCutchen’s medical and hospital expenses, as required by his ERISA policy. After McCutchen settled his third party claim US Airways sought to recoup from those funds the $66,866 it had previously paid in medical expenses. But, McCutchen, after paying his lawyers and expenses of suit, was left with less than $66,000 from his settlement. Yet, US Airways insisted on full reimbursement of the $66,866 it had laid out.

It is important to note that although the plan administrator had the right of subrogation, (the right to sue the negligent party for the money it had paid McCutchen), US Airways chose to let the insured carry the ball and did not exercise its rights. Most plan administrators take this position. They let the insured lay out the time and money to sue and collect from the wrongdoer. Then the plan administrator just comes in at the end to take back their money without having all the hassle and expense of trying to collect from the third party.

The 3rd Circuit said, “Not so fast”. When McCutchen argued that US Airways’ claim for reimbursement was limited to “appropriate equitable relief”, the court agreed that forcing McCutchen to pay the full amount requested would amount to unjust enrichment for U.S. Airways. Therefore, the court sent the matter back to the District Court (which had earlier granted summary judgment to US Airways for the full amount) to determine what would constitute “appropriate” equitable relief for US Airways.

Other circuits, notably the 5th, 7th, 8th and 11th do not give much weight to the word “appropriate” and allow a result which the 3rd Circuit would call “unjust enrichment”. Insurance companies and other plan administrators love this because it puts the entire burden of obtaining and paying for recoveries against third parties squarely on the insured. Then, once the money is collected, the insurers and plan administrators stick out their hands and automatically collect their money without having expended a dollar in legal fees and costs, or an ounce of sweat in getting the money back.

Hopefully, the good sense and sound arguments of McCutchen will persuade circuits which pay too little attention to the word “appropriate” in addressing claims for equitable relief under ERISA, to come around to this more equitable position.

When they do, it will force plan administrators to get off their butts and help insureds,
both financially and effort-wise to collect from wrongdoers.

That would truly be “appropriate equitable relief”.

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