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

A case in the Sixth Circuit, Balmert v. Reliance Standard Life Ins. Co., 2008 WL 4404299, S.D. Ohio,2008, reminded us that advisers to claimants, unfamiliar with the practice of disability income insurance claims, can sometimes overlook a client’s fundamental right.

An ERISA litigation is tough enough to win even when the claimant dots all the “i’s” and crosses all “t’s”. But, overlooking the claimant’s fundamental right to review and respond to a critical independent medical examiner’s (IME) report, bought and paid for by the insurer, see IME, is a disability insurance “no-no”.

It is important to note that in Balmert, the claimant wanted the plan administrator’s denial of her claim for benefits to be overturned because she had not been given the opportunity to rebut the report of the insurer’s medical expert.

The Sixth Circuit, in denying her appeal, stated clearly that she had a right to review the IME report and to rebut and/or otherwise comment on it, but her failure to review and rebut the report, since she had never asked to see it prior to the litigation, was not grounds for granting a reversal.

Not having seen it, we have no way of knowing if a review and rebuttal of the IME report could have carried the day in this case, but we do know that each and every report or piece of evidence used by the insurance company to reject a claim should be examined in detail and clearly rebutted by the claimant, if warranted, during the administrative appeal process. If a claimant waits for the opportunity to do so in the actual litigation, it may be too late.

For a claimant not to do so at the administrative level may hand the insurance company an undeserved “leg up” in its battle to deny benefits.

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A recent article outlining the effect of insurance regulators trying to do away with the “discretionary clause” in ERISA disability income insurance policies raised an interesting and basic issue concerning life in these United States.

Why do we keep kidding ourselves about what we do?

The “discretionary” issue here concerns whether plan administrators should have the discretion to determine whether a claim is covered by an ERISA policy when the insurance company is both the insurer which will pay the claim and the administrator of the ERISA plan. It doesn’t take a genius to know that this “discretionary” situation creates a powerful incentive for the administrator to favor the insurance company in making that decision.

Defenders of this “discretionary” system say this procedure keeps costs manageable and that to do otherwise would raise the cost of insurance because with the discretionary clause the insurer will pay fewer claims. They are correct. But, what does unfair favoritism have to do with protecting the sick or disabled?

Is it better to call a thing a nice sounding name, but not give the nice-sounding protection the name implies? Have we become so used to Madison Avenue that we are willing to play the ad game with the terms of our insurance policies?

When you buy an insurance policy, you expect to be fully protected against risks you bought the policy for. Why should the insurer insurer have the advantage of unfairly denying your claim and then having the courts constrained to defer to that unfair denial, simply because such a system leads to smaller disability payouts and, hence, lower premiums. If the insurance doesn’t cover what it is supposed to cover, who cares how low the premiums are?

What good is a policy that doesn’t do what it s supposed to do? And, how far do we carry this sham?

Policies are supposed to be statistically underwritten so that the insurance company knows the risk and sets its price accordingly. If the price is high, so be it. Reduce some of the benefits so that the premium meets the cost. Don’t use an artificial stricture on paying benefits to deprive deserving claimants what is due them.

During the last decade, we have all had the experience of living a lie: Banks urging people with bad credit to take their credit cards and use them recklessly; calling “liar’s loans” home mortgages; thinking housing prices would go up and up and up forever; Wall Street becoming a crap-shooting gambler, shuffling paper back and forth and making billions in bonuses on the paper shuffle; rating companies being fooled (or worse, just okaying any deal for the fee money); and on and on and on.

We are suffering for living the lie because it felt so good. Now, let’s start getting real. If insurance requires a certain premium, require that it be paid. Shortcuts created by fudging what is actually going on leads to injustice and worse.

If an ERISA policy calls for “discretion” on the part of an administrator who works for an insurer, and the decision is required to get deference in the courts, let’s call it what it is:

A maybe disability income policy

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If you have an ERISA income disability policy (a group LTD insurance policy most often purchased through an employer), you may think you have the same coverage and benefits as a privately purchased disability policy – but, you would be flat out wrong.

First off, in most states you would have to deal with the ERISA “discretionary clause” which puts a policyholder behind the 8-ball before a claim is even filed. Some 16 states have prohibited the clause in new policy language, but most states haven’t.

This clause allows the insurance company, which will pay the claim, to initially determine if the claim is covered by the disability policy. If the insurer says “no”, then the claimant has to climb out of a deep legal hole to prevail no matter what the actual facts of the claim.

A private policy has no “discretionary clause” to put the claimant on the defensive right from the start. If a private insurer denies a disability claim, the policyholder has to prove the disability is covered by a straightforward preponderance of the evidence and does not have to prove that the insurer’s denial of a claim was “arbitrary and capricious” a tough standard of proof in any court.

Other advantages of private over ERISA polices are:

* The way covered earnings are calculated. ERISA covers base salaries while private policies usually cover base plus incentive compensation.
* Taxation. ERISA benefits are taxed to the extent of employer contribution. Private benefits, usually paid with after-tax dollars are non-taxable.
* No benefits offsets. ERISA benefits are frequently subject to offsets from other group insurance benefits, SSDI, and Workers Comp. Private policies usually hve no benefits offsets.
* Portability. Private disability income policies are transferrable if employment changes. ERISA policies are generally not transferrable.
* “Own Occupation”. Private policies have “own occupation” clauses which are more tailored to the policyholder’s occupational status at time of policy purchase. ERISA policies usually have a 2-year “own occupation” coverage and then switch to an “any occupation” disability definition.
* Contract Changes. Private coverage usually prohibits rate increases until age 65 while ERISA rates can increase during the life of the policy.
* Cost of living. COLA increases are much more common in private coverage while it is rare in ERISA policies.
* Mental and nervous disorders. ERISA policies often limit benefit coverage to 2 years. With a private policy, even an unlimited benefit coverage for these types of ailments may be purchased.
* Legal rights. Private policy claims permit jury trials, while ERISA claims do not. In addition, private disability insurance allows full discovery and punitive damages in a proper case while ERISA coverage permits very limited discovery and no punitive damages.

If you are covered only by an ERISA policy and believe you would like to have some of the benefits of a private disability income policy, there is nothing stopping you from buying additional cover age to supplement what you have under ERISA.

If so, don’t delay. Buy the additional coverage BEFORE something untoward happens. Otherwise you’ll cry over spilt milk and lost benefit dollars.

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Sometimes it’s a claim for millions of disability dollars and sometimes it’s a claim for $20,000. But, it’s all part of our ongoing, never-ending battle with disability insurance carriers to get people what they paid for and are entitled to – contractual policy benefits, especially when the coverage is governed by ERISA.

A while back, our firm was asked to assist Vermont counsel, Anderson & Eaton, P.C., Rutland, VT, appeal a Federal District Court’s summary judgment decision upholding Vermont Blue Cross & Blue Shield’s (BCBS) refusal to pay for a “standing component” for their client’s motorized wheelchair. The burden we had to overcome was the tough “arbitrary and capricious” standard because the plan, under ERISA, gave BCBS of Vermont discretionary power to determine eligibility for benefits.

There was no argument about the claimant’s disability – he was paralyzed and needed the wheelchair. However, when he asked for a “standing component” which would lift him up and hold him in a standing position, BCBS refused, purportedly on two grounds:

* There was no proof that the “standing component” was medically necessary because no peer reviewed clinically controlled studies showed improved net health outcomes, and
* There was no evidence that such a feature would help or restore the claimant’s health. Instead, BCBS argued, the standup component would be simply a “convenience” for the claimant without any real therapeutic value.

On appeal, the United States Court of Appeals for the 2nd Circuit rejected the first argument because it found no requirement in the ERISA plan contract supporting the lack of peer reviewed clinically controlled studies. Rather it found that the actual plan documents outlined a lower standard as a requirement.

As to the second ground, the court found it to be factually inaccurate. Claimant offered 10 medical journal articles which supported the use of a “standing component”, citing various medical benefits of the component for patients with claimant’s condition.

In overturning the summary judgment, the 2nd Circuit remanded the case to the Vermont Federal District Court for further proceedings.

But, we are happy to report, BCBS of Vermont saw the handwriting on the wall and has agreed to settle the matter equitably thereby ending the need for further litigation.

To read the opinion, click here.
 

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We wonder how the naysayers in Congress would act if they lost their health insurance as so many have in this recession? Would the members be so sanguine when it comes to cost and coverage and finally bringing health car costs and the insurance companies to account?

It’s easy to say no when you have a health insurance policy which covers you and your family for everything and anything and doesn’t cost you one thin dime. When you are up on a mountain, the flood doesn’t bother you nearly as much as those who live by the river.

Just to emphasize how this works, take ERISA. Although just about every other group health policy in the nation is covered by ERISA, Congress exempted Federal (this includes Congress) and State employees from ERISA provisions.

So, those who have the good fortune to be employed by the government, do not have the burden of dealing with the discretionary clause, the one which gives the group plan administrator, usually the insurance company which pays the claim, the first right to decide if a claim is valid.

Talk about a stacked deck!

Why should government employees be exempt from this provision which has plagued the rest of the ERISA disability population for decades? If as the Constitution says, we are all created equal under the law, why aren’t we insured “equal” under the law?

Come on, Congress. You have a great health plan that we, the taxpayer, pays for.

What about the rest of us?
 

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t’s time to stop being polite and call it like it really is: ERISA disability claimants’ motives are highly suspect in the eyes of the courts, while insurance company motives are given the greatest leeway.

One has to wonder if this is because the workingman has few, if any lobbyists in Washington while the Capitol reeks with the smell of highly-paid insurance lobbyists who can toss campaign money and other largesse around without rhyme but with plenty of reason.

A recent article in the Los Angeles Daily Journal, once again highlighted the fraud of insurance company hired doctors who “call them like they see ‘em”, i.e., to hold onto their lucrative arrangements with their insurance meal ticket. Their motto: NOBODY IS DISABLED!

What excuse do insurers use to foist this corrupt system on people at the worst time of their lives – your treating doctor may feel sorry for you and shade medical opinion in your favor, so that your disability claim may be approved. Therefore, the insurers say, we have to check your doctor’s opinion with one or more of our doctors.

This seems fair enough, except that the insurance company doctor, although not formally employed by the insurance company, is in many, many instances beholden to the insurer.

To construct the façade of “impartiality”, insurance companies hire doctor “agencies” which hire physicians to do what are facetiously called Independent Medical Examinations, purportedly because the insurance company wants to catch malingerers. These doctor agencies scout out MDs, many of whom do not practice medicine as a vocation, but stick strictly to IME exams. These exams provide most, if not all of their income.

These physicians are paid to be highly skeptical of disability claim and claimants. Most of their exams are based on the written reports of claimants’ doctors, but yet they are supposedly able to determine that a claimant is not in pain or restricted in movement or otherwise afflicted, even though they never see the claimant!

Despite this, many courts still give these insurance-hired and paid IME doctors reports enough weight under ERISA to uphold denial after denial, leaving truly disabled people out in the deep freeze of life. How can this be?

Why does ERISA give insurance companies the right to to stack the deck, simply because these companies say some claimants may be faking it? In reality, the insurance companies are faking it with a sham system of Independent Medical Exams which are not even close to being independent and in most cases are not even real exams.

Yet many courts feel constrained under the law to give inordinate weight to these exam “findings” and thereby dump many needy and deserving policyholders into a sea of desperation without the ability to earn an income for themselves and their families.

If the courts were permitted to truly evaluate these exams through cross-examination or even simple discovery, without being hampered by ERISA, they would find that many of the I.M.E. doctors do not practice anything but ways to find that there is no disability, no matter the medical facts. When the M.D agencies that employ these examining doctors make millions from their insurance exams, would any fair-minded person see them endangering their relationship with insurers by having their doctors call them as they really see them?

Can any one imagine that insurance companies, which make money by paying as few claims as possible, would continue to employ a doctors’ agency or an examining physician who called the shots straight? Such an agency or doctor would find themselves out of the money loop and on the street in one big hurry.

So, why don’t we call this unsavory system, loaded against claimants, what it is – a fraud hiding in sheep’s clothing, aided and abetted by hamstrung courts, which are prevented by ERISA from looking for the truth.

At least then, ERISA disability claimants will really know what they are up against.

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Some recent case reports made us wonder once again why IMEs are called Independent Medical Examinations. They are hardly “independent”.

These “examinations” are the evidentiary foundation upon which disability insurance companies rely to deny disability income claims so that these denials can withstand subsequent scrutiny from the courts.

How do you “fix” a game so that it favors you? When you are the manager, you pick the players who you think will win the game for you. Medical “experts” who can be counted on to deny a disability are key to getting the outcome the carrier is looking for. That part is obvious. What is not obvious is that Congress and the courts have permitted this corrupt practice to flourish, making this already one-sided affair a knockout blow for disabled claimants.

ERISA, supposedly passed by Congress to make it easier for employees to level the playing field, gives the insurer, which is also an administrator of a plan, discretion to determine whether a disability claim is covered by a disability policy. It doesn’t take a great brain to figure that if a claim is denied, the money that would have been paid to the claimant goes right to the insurance company’s bottom line.

Ever since the Supreme Court ruled in Firestone v. Bruch, 489 US 101 (1989) that courts must give deference under ERISA to the finding of the plan administrator as to whether a claim is covered, insurance companies have been having a field day denying claims that should have been paid and having the courts, with their hands tied by Firestone, back them up.

What does the IME have to do with this? Insurers have gathered to themselves a coterie of doctors who know only one thing – which side of the bread their butter is on. These “experts” make all or most of their income year after year from insurance company examinations (some in excess of $1 million per). They know that if they were actually impartial in their work, their source of income would dry up fast. So, these “independents” lean heavily in favor of their meal ticket. The result? Disabled policyholders, who may have been paying premiums for years, suffer.

On top of this, courts have had their hands tied since 1989, and have to give these slanted medical reports not only credence, but deference. If any of these so-called “independent” medical reports supports the denial of benefits by the administrator, the court has to uphold the denial even if the court may feel, on the basis of the evidence it has heard, that the denial is flat wrong.

So, why are these reports commonly referred to as “independent”. They are anything but.

(This blog is the first in a series of blogs we intend to publish on the misnamed “Independent” Medical Examination).

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 Being invited to speak to a doctor’s organization in the New York Metro Area about how confident they should be in the protection they think they get from their disability income insurance policies, got us thinking specifically about doctors’ insurance problems.

And, doctors have plenty of them, although most physicians don’t know it until they are stricken and it is too late.

First off, doctors have to realize that they will get special attention (of the wrong kind) from a disability carrier if forced to make a long term disability claim. Why? Because a doctor’s long term DI claim, especially if the doctor practices in a specialty, usually involves a heavy potential payout for the insurer and heavy payouts are something insurance companies despise.

Most physicians think they have “Own Occupation” coverage and feel secure. Not so fast. Believe it or not, there is no one definition of “own occupation” in insurance policies. For example, a policy may have a perfectly sound “Own Occupation” clause, but with a time limit. Therefore, it may be described by the company as an “Own Occupation” policy, but the protection of the clause ends in say, 2 years, and after that the definition of disability may become much more general.

So, if you are a surgeon and think you are buying a disability income policy that will cover you and your family in the event you can no longer perform surgery, you may be surprised to learn, after 2 years, that you have to go back to work in a lesser medical field and will no longer be paid your disability benefits by your insurer.

Another major issue doctors should resolve before they can feel secure about income if they should become disabled is to determine if their policy is an individual policy or a group policy which involves ERISA, a Federal statute, which adds a completely new set of problems to the doctor’s woes if the unthinkable happens.

It is difficult enough to pursue a disability income claim when the insurance company is determined to find any way it can not to pay, without having the insurer have the advantages that a group ERISA policy gives it.

The way to tackle this problem before a disaster strikes is for the doctor to read and parse every word of his or her disability income policy before the need for claim arises (hopefully it never will), because the policy language (strictly construed) determines the benefits available. No more and no less.

If the doctor wants help to understand the language of the policy a lawyer with disability income insurance experience should be consulted. Don’t rely on what the insurance company ad or the insurance agent or salesman told you. Read it and understand the policy yourself.

And, most important of all – DO IT NOW – while you think of it and BEFORE you have to make a claim.

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  We couldn’t believe our eyes. Twenty-one Federal judges from all over the country are scheduled to come to New York City in October to participate in a forum on how to help insurance companies defend against ERISA claims! These are the same judges whom ERISA mandates have sole jurisdiction to decide these cases.

What is going on, we thought? How could this be? When we read the brochure of the American Conference Institute’s (ACI) announcement about the conference, we became even more confused. It is clearly an event structured only to give insurance company counsel tips and ideas on how to defend against ERISA claims. What are a group of Federal judges doing lending their judicial authority to such a one-sided affair, we thought?

Obviously, ACI had a strategy. In soliciting the participation of these judicial luminaries, the American Conference Institute downplayed the clearly “defense-oriented” nature of the conference and played it up as an educational event without partisan overtones. Given the neutral appearance of the event, judges might certainly want to participate to further educate both sides of the litigation bar.

We can’t believe that any of the judges who accepted the invitation were given the opportunity to review the announcement brochure which contains phrases such as:

* “Expert defense strategies…”
* “Senior in-house counsel, top outside defense litigators and renowned jurists will provide you with up-to-the minute practical information on:

“Using the claims review process to set up, control and strengthen the defense…

“…ERISA fiduciary litigation: ...substantive defenses, and trends in defense pleadings and motions…

“…Communication with the Judge: Explaining a plan and the ERISA statute to the court…

“… ERISA preemption – the procedural and substantive aspects of the defense…

“…Defending against age-based and other “recessionary economy ERISA claims…”

* “The premier ERISA litigation conference devoted entirely to the defense of claims, led by an unparalleled faculty of 28 in-house counsel, 21 federal judges,…

* “…Sympathy for plaintiffs in today’s landscape and juror bias against defendant companies…”

In fact, there are so many embarrassingly one-sided topics and statements in the brochure that we can’t excerpt them all so we have pdfed them so you can read the full document. After such a review can any one be in doubt about the one-sided defense tenor of this conference?

Why would any judge expose his or her reputation for the sake of attending a biased conference, once the judge knew all of the facts? What would a disabled ERISA plaintiff feel if the claimant knew that the judge hearing the case had attended such a defense-oriented forum?

Our read on the situation is that when the judgers were asked to attend they were not given the full story. The acceptance of the invitation by 21 Federal judges was a feather in the cap of the ACI and the insurance defense bar and they sure are flaunting it in this brochure.

Wouldn’t it be better for all concerned if the ACI withdrew its invitation to the judges and find a replacement program for the morning of October 20?

We suggest the substitute program be called, “Mounting a Rigorous and Complete Defense for Doing What is Right -  for a Change”.

…

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Federal judges finally seem to be coming to grips with phony “independent” medical examinations set up by many disability insurance carriers to deny claims, thereby feathering their own financial nests.

Lately there have been a trickle of cases in which the courts take a closer look at the relationship between the physicians insurance companies use to “independently examine” claimants and the insurance companies themselves. See Solomon v. MetLife, 2009 U.S.Dist.LEXIS 51507 (S.D.N.Y. June 18,2009). 

It is no surprise that those “independent examining” doctors, relying in large part or fully on insurance company fees for their living, are frequently unable to see any merit to a claim.
 

Actually, the insurance company’s “examining” physician oftentimes doesn’t even see or physically examine the claimant. Only the medical paperwork provided by the claimant in support of the claim is “examined”, and it is on this “review of the record” that the doctor bases his or her opinion, most often finding the claimant is not disabled.
While the insurers are doing nothing to redress this obvious tilt of the playing field in their direction by setting up truly independent medical exams, Federal Courts are increasingly recognizing the basic unfairness of the situation.
 

In making decisions on ERISA disability claims, courts are beginning to take into account the relationship between the insurance company and the doctors they hire and pay as “independents”.
Courts are recognizing more and more that physicians who rely on these insurance “evaluation” assignments for a significant portion of their income know that if they find the claim valid too often, they will soon find no requests for examinations from the insurance company.
 

No requests, no exam fees, no income.
 

In fact, these medical exams are such a lucrative business that there are several agencies in the business of engaging doctors to examine claimants for insurance companies. This makes it easy for the companies to have physicians to conduct exams without having them on payroll (and, perhaps, making it look fairer to a casual observer). Such a system makes it easier for doctors who don’t want to actually practice (or are not competent to do so), get exam assignments without having to go through the trouble of looking for them.
 

However, one would have to be quite naïve to believe that the agencies and the physicians whom they employ for this work are not fully aware of which side of their bread has the butter.
 

The insurers have found a way to call a medical exam “independent” while retaining almost complete control of its outcome.
 

With the Solomon case, courts are getting closer to the bone with the purported neutrality of these “independent” physicians. Rather than just accept the statements of these “independent” doctors, the court looks at their personal (substitute “financial”) interest in the outcome of the exam and what they actually did medically to reach their conclusions.
 

Until a court is satisfied that all of the answers to these questions are fair to both the claimant and the insurer, courts should absolutely reject insurance company ERISA claim denials based upon such purported “independent” medical exams.

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A decision with the impact of an earthquake on ERISA litigation was handed down yesterday (June 29) by the 7th Circuit Court of Appeals in Krolnik v. Prudential, No. 08-2616.

The ruling called the “de novo review” standard set in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), a misnomer and suggested that “de novo” be replaced by the word “independent”, with the word “review” replaced by the word “decision”.

In effect, the Court did away with the “kowtow” requirement in ERISA disability income cases which since Firestone v. Bruch seemed to require that the courts must defer to administrative decisions made by plan administrators even where de novo review is appropriate.

In Krolnik, the appeals court ruled that in those cases in which discretion is not granted to the administrator by the ERISA plan, claimants are entitled to a trial on the merits – not just a review of whether the administrator’s decision can be justified based on the record of the administrative hearing below.

Relying on the language in Firestone v. Bruch, the 7th Circuit suggested that litigation by plan participants seeking de novo review of benefit denials under ERISA should be conducted in the same manner as contract litigation, since an ERISA plan and the insurance policy which is to be interpreted are contracts.

The court said, in part, “In a contract suit the judge does not ‘review’ either party’s decision. Instead the court takes evidence (if there is a dispute about a material fact) and makes an independent decision about how the language of the contract applies to those facts”.

This ruling is a blockbuster law changer which should send ERISA claimants and their lawyers scurrying to carefully reread the language of their ERISA policies.

For LTD insurers, it means real litigation in de novo review cases – complete with full discovery, the right to cross-examine witnesses and, perhaps, even some day a jury trial.

The days when ERISA carriers could slide through on the basis of untested, unsubstantiated and unchallengeable medical reports may very well be coming to an end, at least, in de novo review cases.
 

GOOD RIDDANCE!

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Federal judges are quickly wising up to the tricks of the trade used by insurance companies to deny disability income claims. The penchant of many insurance company medical examiners to disregard valid first-hand evidence of disability, while themselves relying on medical reports and other “long-distance” diagnoses in making decisions, is receiving less and less support from the courts.
 

One trick the courts seem to really have caught onto is the Social Security Disability “scam”. While flooding Social Security with practically every group long term disability claim on their books, insurers consistently disregard the Social Security findings of disability whenever it suits them.
 

The way it works is that the insurance company will force a disabled group policyholder to file for SSDI benefits with the Social Security Administration by threatening to cut off their disability benefits if they don’t. The insurer will even supply an attorney to handle the claim for its policyholder. Seems like a generous move, eh?
 

Not so. If the SSDI claim is successful, the insurance company gets to deduct the amount of the SSDI payments from the claimant’s insurance company benefit payments, a definite plus for the insurer. But, does this affect how the insurance company looks at the claimant’s benefits claim? In a great many cases, not at all!

In reviewing and deciding disability under the terms of its own policy, companies many times pay little or no attention whatsoever to the SSDI decision (while accepting the benefits of reducing their claims payments). In other words, they are saying, “We’ll accept the SSDI judgment that the claimant is disabled (and take the money), but not when we have to decide if the claimant is disabled under the terms of our policy”.
 

However, since the decision in Metropolitan Life Insurance Company, et al v. Glenn, 128 S. Ct. 2343 (2008), recognizing the inherent conflict of interest when an administrator who makes the decision in a  disability case is the same entity which would have to pay the claim, courts are more and more giving weight to the SSDI decision in determining whether an insurance company refusal of disability benefits was proper.
 

Insurance companies have had their cake and ate it for far too long. It’s time disabled policyholders get their fair share.
 

For recent decisions on this issue:
 

          Barteau v. Prudential Insurance Co.,2009 WL 1505193 (C.D.,Cal.) 

         MacNally v. LINA, 2009 WL 1458275 (D.Minn.)
 

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There’s an ERISA problem that should have been eliminated years ago, but still persists to the detriment of disability claimants in too many of our states – the discretionary clause – which gives insurance companies a big leg up when contesting disability claims.

This gives the insurer, who is usually the administrator of an ERISA plan, the discretion to decide if a claim is covered by the very ERISA policy the insurer would have to pay on if the claim were approved. This power is further compounded by the decision in Firestone Tire & Rubber Co. v. Bruch, 489 US 101 (1989), in which the court ruled that a finding by such an administrator could only be overturned by a court finding that such a decision was “arbitrary and capricious," a legal phrase meaning that the court could not find a single reasonable basis upon which the decision could be based.

Needless to say, when an administrator rules against a claimant, this ruling puts a mountain in the way of the claimant on appeal. There are a legion of cases where a Federal judge has found that the decision of the administrator was all wet, but the court felt constrained to rule that the administrator’s ruling could not be changed because of Firestone.  In other words, even though the judge would have clearly found the administrator's decision incorrect, the court had to uphold the decision because it was not found to be “arbitrary and capricious”.

Adding to the problem is the Federal statute’s command that ERISA  preempts states' powers so that Federal law controls in ERISA cases. States cannot change ERISA law. But, there is an exception to this in the ERISA statute – states have the final say in the language of insurance policies issued in their state.

So, in 2004, the National Association of Insurance Commissioners, an organization of the state insurance commissioners of all 50 states, approved a model rule, proposing adoption by all state insurance commissioners, that prohibited discretionary clauses from the language of any policy issued in a state.

One would think that state insurance commissions or legislators would hop on this prohibition bandwagon quickly, but this has not been the case. As of this date, 16 states have prohibited the discretionary clause in ERISA policies while 34 states have left their citizens at the mercy of the discretionary clause when at a low point in their lives - when making a claim for disability income and treatment.

At the present time, the issue of banning the discretionary clause is before the legislature in Wyoming. Although the New York State Insurance Commission thoroughly denounced the discretionary clause as against public policy in 2006, it has yet to approve a rule giving that denunciation the force of law and leaving its citizens on a playing field heavily tilted against them when forced to make an ERISA disability claim.

Lawyers and ERISA policyholders in states where the legislature or the insurance commission has not yet righted this wrong should seriously consider writing their insurance officials to protect their citizens from this injustice.

For a list of states without discretion-banning law on their books and the addresses and phone numbers of the people to call ask for a change, click here.

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Do 27 years of legal battle give a foot soldier the right to offer his opinion to the world on how to run a war? I obviously think so, because here I am going out front of the world with my thoughts and ideas on ERISA, other health insurance claims and whatever else occurs to me. 

My hope is that at least one person who reads here will benefit.

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