We have previously written about the serious problems which result when insurance companies hire doctors to perform “paper reviews” of insurance claims without ever meeting or examining the patient, and then use those paper reviews to justify termination of benefits. In an ERISA context, this is particularly difficult because claimants are denied in most cases the opportunity to confront those professional reviewers or to cross examine them to show they are financially biased or otherwise not competent to speak to the issues about which they have given an opinion. Even so, insurance companies in increasing numbers rely on these unnamed, unknown medical sources to justify termination of benefits. On December 14, 2014, 60 Minutes broadcast a piece which speaks in part directly to this issue and points out the fundamental unfairness, indeed the dangers which can result when insurance companies make claim determinations and deprive people of benefits to which they are entitled and which they desperately need.
With all of the specialized, technical ”legalese” an ERISA attorney must know to do a proper job for a client, you wouldn’t think that knowledge of cooking and laundry would play a part. But, you would be wrong.
In Hannon v. Unum Life Insurance, 2013 W L 6821263 (S.D.Ind.), Unum tried to stop LTD benefits after paying them to an ERISA beneficiary for 10 years. One of Unum’s excuses for claiming the beneficiary was no longer entitled to benefits was that she could perform certain household chores and , therefore, was not disabled.
Battling insurance companies to get sick and injured people what is due them is a time-consuming and tiring occupation. Insurance companies fight ERISA claims like the devil. They assume that each claimant is a malingerer trying to get money without working for it. Nothing could be further from the truth.
The vast majority of people want to work. They wouldn’t know what to do with themselves if they didn’t have a job to go to. So, rather than stress the relatively few who are malingerers, insurers should consider each case as if the claimant would rather work than sit at home.
In Ms. Hannon’s matter, Unum began paying benefits to Ms. Hannon, a registered nurse, in March, 2001, when she became unable to perform her duties because of chronic pain. She was diagnosed with a rare disease that affects a person’s connective tissues, joints and blood vessel walls.
All of her seven doctors had found her disabled and unable to work for more than 4 hours at a time at a sedentary job. A theater company was able to give Ms. Hannom a flexible schedule to accommodate her disability, so she took a part-time job with it as a seamstress. When Unum discovered that claimant had a part-time job it sent an investigator to find out more.
When Unum learned that Ms. Hannon performed household chores in addition to working at the theater, Unum halted her LTD payments.
Unum said that the fact that she could do housework in addition to working at a part time job made it evident that she could perform 8 hours a day of sedentary labor, so LTD payments were terminated.
The Court disagreed stating that equating the ability to do casual household work to the requirements of performing the duties of full time employment was in error. Not only is household work different, but the ability to take breaks when needed is not part of an ordinary job description, sedentary or not.
The Court noted that Ms. Hannon’s daughter helped her mother with the housework and that claimant, at home, could take breaks whenever she felt it was necessary to rest because of pain.
In agreeing with Ms. Hannon that Unum cherry-picked her doctors’ reports, ignoring their clear finding that she could do no more than 4 hours a day in a sedentary job, the Court clearly distinguished the difference in the rigors of doing housework in your own home and working for a third party employer at a place of business.
That difference seems obvious to all but an ERISA insurer.
The Second Circuit Court of Appeals has clarified the issue of when an ERISA claimant is entitled to attorney fees from a plan administrator:
When you win, you are entitled to recover fees.
This ruling came in an opinion in which the Court reversed a lower court which had denied legal fees and costs to a claimant because the judge couldn’t find that the insurance company had acted in “bad faith”.
After 9 years of legal strife, John Donachie finally recovered ERISA disability benefits to which he was entitled because of the serious side effects of a heart valve replacement, Donachie v. Liberty Life Assurance Company of Boston, et al., 2014 W L 928971, CA 2 (N.Y.).
The matter was decided on a summary judgment motion made by Liberty which was converted by the District Court into a judgment for the claimant because the court found the denial of benefits by Liberty to be arbitrary and capricious. Thus the benefits issue was finally resolved.
But, the District Court denied claimant’s motion for legal fees and costs because the Court found that defendant had not acted in “bad faith”. Thus the claimant would receive nothing toward his considerable legal fees and costs despite the wrongful refusal of Liberty to pay him benefits all those years.
The Court of Appeals held that the District Court ruling on fees in this case was contrary to the intent of ERISA, 29 U.S.C. 1132(g)(1), which gives the District Court the discretion to award reasonable attorney fees and costs. Although this discretion is not unlimited, fees and costs are to be awarded when the beneficiary has obtained some degree of success on the merits. Certainly in Mr. Donachie’s case where he was awarded benefits by the Court on the insurance company’s motion for judgment, he had obtained “some degree of success on the merits”.
The Court cited a line of cases which stand for the proposition that ERISA’s attorney fee provisions must be liberally construed to protect the statutory purpose of ERISA.
The Court was clear saying that some degree of success on the merits is the sole factor a court must consider in exercising its discretion on awarding fees to claimants.
Many people have lawyers in their family. Maybe your brother-in-law? But, if you have an ERISA disability claim, it is not for your lawyer brother-in-law to handle just because he’s related to you. Many lawyers know little more about ERISA than do the people they undertake to represent.
What such representation may lead to was made clear in Riley v. Metropolitan Life Insurance Company,WL 814742 C.A.1 (2014), recently decided in Massachusetts.
Mr. Riley worked for Metlife in a managerial position when he was stricken by chronic pain in his back, neck and some joints. He applied for and received STD, but was denied LTD.
The following year, he was able to resume working, but in a non-managerial position. He earned substantially less than he had previously. About a year later, Mr. Riley’s pain returned and he stopped working again. This time he received both STD and LTD. But, his LTD benefit left him only $50/month of his MetLife benefit after it took its offset for a Social Security benefit he was receiving.
He tried to argue that his ERISA benefit should have been based upon his managerial salary of $80,000 when he was first stricken not his substantially lower salary after he returned to work. If this had been the case, Mr. Riley would have received a monthly benefit of about $1400 from Metlife, not $50.
It seems obvious that his then legal counsel was unaware, as so many attorneys are, that ERISA is a law unto itself. His attorneys started suit in State court in February, 2007, alleging violation of a Massachusetts statute! They did not realize that ERISA, a Federal statute, preempts state law. Jurisdiction lies only in Federal District Courts. So, his case was dismissed.
In 2011, at Mr. Riley’s urging, his then attorneys filed again, but in the Federal District Court. Their filing did not conform to the rules of that Federal District (each has their own) and the pleading was not served properly. Again the suit was dismissed on motion in January, 2012.
By March, 2012, claimant Riley had retained counsel knowledgeable in ERISA who filed a proper complaint, except for one thing – it was filed after the 6-year statute of limitations had run and was dismissed for that reason.
This is a prime example of what can happen when a lawyer representing an ERISA claimant has no idea of what ERISA is all about and doesn’t invest the time and effort to learn even the basics.
There is no way of knowing if Mr. Riley’s claim could have been successful because he never had his day in court. His original attorney didn’t seem to know enough ERISA fundamentals to get him there.
If Mr. Riley’s second round of pain was caused by the condition that caused his first round, he stood a reasonable chance of establishing that his actual date of disability was the earlier STD claim and therefore his benefit should have been based on his first salary and not his lesser second one.
We live in a world of specialization, and ERISA lawyers are specialists in the arcane world that is ERISA. Because the stakes can be so high, it is critical to get advice and guidance from someone who knows the ropes so that you don’t learn about ERISA the hard way.
One thing that has really galled us through our years practicing ERISA law is the way many courts seemed to assume that disabled ERISA claimants have a propensity to fake disabilities while ignoring the clear motivation for ERISA insurance companies to do the same.
A recent decision, Eisner v. The Prudential, 2014 WL 244365 N.D.Cal, opened the fallacy of this judicial tendency to the light of day, when it said:
“…Claimants have an incentive to claim symptoms of a disease they do not have in order to obtain undeserved disability benefits. But the claimants are not the only ones with an incentive to cheat. The plan with a conflict of interest also has a financial interest to cheat. Failing to pay out money owed based on a false statement of reasons for denying is cheating, every bit as much as making a false claim.”
Thankfully, this tendency has been moderating in the last few years, particularly since Metropolitan Life Insurance Co. v. Glenn, 128 S. Ct. 2343 (2008). Glenn allowed claimant’s ERISA attorneys to dig a little deeper into the motives and methods insurance companies use to deny claims.
The endemic chicanery uncovered by claimant attorneys under the authority of Glenn,
has led many courts to question the bona fides of insurance company ERISA claim denials. These courts now require substantive proof before upholding an insurance company denial of benefits.
As a result of Glenn, courts learn more and more that just because an entity is big and in business, it should not be assumed that it is honorable and conducting itself in a manner in which its judgment should be more trustworthy than an individual party.
Employees are suspect because if they can successfully fake a disability under ERISA they can get 60% of their salary without having to work. But, insurance companies also have this “something for nothing” motivation to deny valid claims. They get “something for nothing” when they wrongfully collect premiums but deny claims and pocket benefits which rightfully belong to insureds.
While employees act individually when cheating, insurance companies organize their efforts. They have been known to tie how much they pay an employee to the number of claims the employee denies, use doctors who depend for their living solely on the insurer to “independently” examine claimants, and to demand claimants provide medical proof that is impossible to provide, according to medical authorities.
This organized conduct on the part of insurance companies is the reason we object to courts giving companies a “pass” while scrutinizing employee claims with a magnifying glass. Now, with Glenn, the truth is becoming apparent and courts are taking a good, hard look at the bases for insurance denials.
Thank you Glenn.
When forced to file an ERISA disability claim, ego can become one of your biggest problems.
It’s not even your ego that gets in the way. It may be the ego of your lawyer or doctor or both. The two professions frequently look down their noses, one at the other, and you may suffer because of it.
ERISA disability insurance cases require the utmost cooperation between the medical and legal professions. Time limits on supplying information are strictly enforced. The connection between the injury or illness and the patient’s ability to perform his or her occupation must be firmly established. All of this must be accomplished without live testimony and strictly within the framework set out by the client’s employer’s administrative plan and the terms of its insurance policy.
There is no room in this equation for “one-upsmanship” between professionals. The strict rules of ERISA demand that the claimant’s professionals act in a cooperative manner to present the best case for you.
Nothing in ERISA is taken for granted. Not only must the medical basis of the disability be clearly established, but how the disability causes the client’s inability to perform an occupation must also be made plain. Every part of the proof required by the plan and the policy terms must be presented clearly in the original claim documents. There are few “do-overs” in ERISA.
The lawyer and the doctor are the final “word” in your case. Unfortunately, neither profession is accustomed to checking with or answering to the other, and neither particularly trusts the other. But, ERISA claims absolutely require such cooperation to give you any chance to succeed.
ERISA is different from any other area of law, even Social Security, with which most people associate ERISA. Attorneys who have spent a large part of their career reading ERISA plans and insurance policies, should be best able to know what is important to include in your claim submission and to “captain” your claim “ship”.
Likewise, physicians are best qualified to make physical and mental findings in medical reports which are essential to any disability claim.
When an ERISA attorney suggests to your doctor that certain details regarding limitations or restrictions be included in the Attending Physician Statement (APS), it is not a reflection on the physician’s ability. It is a suggestion, based on the lawyer’s prior experience, that the document be clarified because it is required by the terms of your ERISA plan or insurance policy.
If your attorney can help your doctor write an honest, truthful report that better fits the requirements of ERISA, the lawyer should do so. Neither professional should take umbrage at such a request.
Each professional should treat the other with respect for their professional standing and their time and defer to the other’s area of expertise. ERISA lawyers may not be doctors, but they tend to know a lot more about ERISA requirements than doctors do. Each professional should keep in mind that their primary obligation is to your needs as a ERISA disability claimant. There is no room for professional prejudices.
Each professional must listen to the suggestions of the other in presenting their area of expertise and must act accordingly when appropriate to do so.
When you are sick or injured, out of work and facing a bleak future, you deserve nothing less.
The day after the 2014 Super Bowl is the perfect day for illustrating the difficulty of obtaining disability benefits under ERISA no matter what kind of work you do. This “difficulty” principle is best demonstrated in the words of a well-respected ERISA attorney who normally works in the corner of employers and insurance companies.
Attorney Stephen D. Rosenberg writes the Boston ERISA & Insurance Litigation Blog. His posts generally favor the employer side of ERISA issues, so he knows what it takes for a claimant to obtain ERISA benefits.
In his January 30 blog, Mr. Rosenberg reported on the case of Dwight Harrison who played in the NFL for the Raiders, the Bills, the Colts and the Denver Broncos during a 10-year NFL career. For those who don’t know, the NFL’s disability benefits and pension plans are covered by ERISA.
Mr. Harrison had been receiving NFL disability payments for many years when he applied for a disability benefit increase. What he wound up with was the League not only denying him, but:
• He lost the disability benefit he had been receiving.
• He lost separate pension payments he had been receiving.
• He lost prior disability and pension benefits of $236,626 he had received.
• He lost $99,112.50 in NFL legal fees he was ordered to pay.
How did this happen? Basically, Mr. Rosenberg says, because Mr. Harrison had attorneys who had little or no experience in litigating ERISA cases. If you have a lawyer who has been around the ERISA block a few times, your chances of success in litigating an ERISA claim with an employer or insurance company, even one as tough as the NFL, improve substantially.
The Rosenberg blog clearly states that the amount of experience a lawyer has in handling ERISA matters makes a “huge difference” to the outcome of ERISA cases. This is particularly so, Mr. Rosenberg says, when there is a “well-lawyered” adversary as is usually the case when an insurance company is involved.
Mr. Rosenberg states flatly that a claimant’s ERISA case cannot be properly litigated by “…anyone who doesn’t have substantial experience and expertise in this area of the law.”
One of the things we like best about being an ERISA attorney is that when a prospective client asks if he or she needs to retain an experienced lawyer to handle an ERISA matter we can answer “yes” with a clear conscience.
In a 4th and goal situation, a veteran quarterback is most likely to score.
The Employee’s Retirement Income Security Act was enacted by Congress purportedly to make it simpler for employees to obtain disability and retirement benefits. So, why does the U.S. Supreme Court keep making it harder for average citizens to get the benefits they’ve worked for and to which they are entitled?
The latest dagger to the heart of ERISA claimants was sharpened by the Court in Heimeshoff v. Hartford Life, 134 S. Ct. 604 (2013), where the Court gave employers and insurance companies a new way in which to harass employees and make benefits claims more difficult for the average claimant.
To understand the Heimeshoff downside, one must know that trying to establish a disability claim can take years, most of them spent on the employer’s “court”. Employers make the rules for how such claims can be made when they write an administrative plan and then support that plan with an insurance policy.
Time limits are set by the plan terms formulated by the employer who gets an additional assist from the insurer who has years and years of experience fighting claims. If there is a way to make successful claim prosecution more difficult, you can bet that is the path the employer and insurance company will choose.
A statute of limitations limits the time period within which a lawsuit may be filed. Ordinarily, it does not begin run until the claim’s cause of action has accrued. This makes the statute’s effect universal. Each claimant is subject to the same rules.
In Heimeshoff, it was different. The plan itself limited the time within which a claim had to be filed to 3 years from the date upon which proof of loss had to be filed .
However, as anyone in the ERISA area is aware, the time limit in the law on when a denial of claim must be issued has not been rigorously enforced. It can take far more than 90 days for a final denial of a claim to be issued. Only when such a final denial issues has the claimant exhausted his administrative remedies so that a lawsuit may be filed.
A statute of limitations usually runs from the date upon which a cause of action arises. For example:
• The date of an accident.
• The date of a contract.
• The date of an alleged breach of duty.
• The date of a purchase.
Under Heimeshoff, the statute of limitations could very well run before the right to file a suit on the claim accrues! The time limit within which you could file a suit could expire before a final denial is communicated by a plan administrator, leaving a claimant with no time in which to file a suit.
The Supreme Court felt it had covered this eventuality by citing equitable doctrines which would permit relief from such a result. But, the ERISA plaintiffs’ bar, remember U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013) and other such cases where the Supreme Court found no difficulty in ignoring a well-settled equitable rule, resulting in a harsh result for the claimant.
If the Court can ignore established equitable principles in one type of case, why not in another? How much can plaintiffs rely on equitable principles to prevent injustice in cases where the insurance company controls the pace of proceedings until final denial?
A fixed period of time for filing an action on an ERISA claim should be the rule. That time should not begin to run until either there is a final denial of an administrative appeal or until the time to file such an administrative appeal expires. A defendant’s artful ability to delay a final denial of claim should not be able to restrict those rights .
The Heimeshoff decision puts real teeth into the maxim:
“Justice delayed is justice denied.”
A recent case made it very clear that insurance companies will try to move mountains to get a disability claim covered by ERISA. Insurance companies, which usually are cold to anything but profits, are “hot” for ERISA as the law has been adjudicated down through the years by the courts.
This point was highlighted in Hill v. Lincoln National Life, WL 5863007 (N.D.Cal., 2013), a case in which there was a lot of confusion about the type of coverage a claimant had. Ms. Hill said ERISA did not apply to the disability policy she had while the defendant, Lincoln National, argued strenuously that it did apply.
What should interest those not familiar with ERISA is: Why do both sides fight so strenuously over the ERISA issue?
The answer is simple. If the case is decided under ERISA, the insurer may be protected, even for egregious conduct. The company can deny the most obvious claim for benefits without the threat of having to pay extra for the denial. They can starve a claimant through a long litigation without worrying about having to pay more when the claimant prevails. No risk, no loss. So, why not hang on to the money for as long as you can?
ERISA preempts state law which would otherwise provide a claimant some relief against the tactics used by insurers. For example, a jury may decide an individual, non-ERISA disability claim in state court. But, ERISA precludes the use of a jury. All ERISA cases are decided by a Federal judge without a jury. There are no witnesses and no testimony.
In addition, depending on the language used in the ERISA plan, the Federal Court must give deference to the ERISA plan administrator’s decision. In other words, if ERISA applies, the court can only reverse the administrator (usually an employee or associate of the insurance company which will have to pay the benefits claim) if it finds the decision was “arbitrary and capricious”, a very tough standard for a claimant to prove.
Some other factors which make the application of ERISA to a claim a most important factor:
• Strict time limits on filing the claim, medical reports and documents which support the claim. A claimant’s failure here can bounce a claim forever.
• State laws with penalties and doubling of recoveries, do not apply in ERISA since ERISA preempts state law. Insurance companies can delay, obfuscate and prevaricate with almost total impunity.
• Medical reports from insurance company doctors who never see a claimant are given as much weight by the courts under ERISA as the treating doctor’s opinion.
• Social Security disability decisions, no matter how well founded, are not binding on ERISA insurers.
Knowing this, we can see whether a case is decided under ERISA or under state law is an issue important to both the insurer and the claimant.
The success or failure of the claim may very well depend on it.
A recent line of court decisions has been placing ERISA plan drafters under a heightened duty to speak very plainly if they want to have courts uphold plan administrator discretion in making disability decisions. The importance of discretion; it will determine whether a reviewing court applies a de novo standard of review to the evidence in a case, or if the court must find an abuse of discretion to overturn a plan administrator’s decision.
In Cosey v. Prudential, 2013 WL 5977151, 4th Circuit (2013), the Fourth Circuit found that ERISA plan language stating that benefits will be paid to a claimant who “…submit(s) proof of continuing disability satisfactory to Prudential…” was ambiguous and therefore failed to grant the necessary discretionary power to the administrator.
Ms. Cosey offered a mixed bag of medical opinions to support her claim of both short and long term disability. Most of her complaints involved her own reported symptoms, with very little objective proof.
The Federal District Court below had found the plan language offered the degree of certainty necessary to give the administrator’s discretion in ruling on a claim. In fact, the District Judge bootstrapped the language so that the administrator could even require objective evidence to uphold a claim for disability even though there was no such requirement in the policy.
The Fourth Circuit Court of Appeals strongly disagreed, finding the plan language lacked the clarity ERISA requires to confer discretionary power in the administrator.
The major fault in the language, the Court found, was that “proof satisfactory to us” is ambiguous. It can mean proof must be provided in a certain form and the wording does not clearly confer discretion to the administrator to make a decision on the merits.
The extraordinary part of the opinion to our mind was the Court’s concern that an employee may not understand the meaning of the language in the plan and that an employee may make a choice of employer based on whether a plan gives an administrator’s decision deference.
In reality, such a chain of events is so far from what actually happens in real life that it makes us wonder how courts can conceivably think that an employee carries any weight in the ERISA plan his employer enters into. Further, it suggests a degree of sophistication regarding the nuances of ERISA jurisprudence that most laymen, even most lawyers, simply do not possess.
The insurance contract portion of an ERISA plan is not a contract the employee bargains for. It is a contract of adhesion. It is in place at the time of employment and the employee either takes it or leaves it. There is no input from the employee which can change its terms.
That’s why we are upset when the Supreme Court justifies, as it did in U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013), taking away important equitable remedies from employees on the grounds that the insurance contract is something they had a hand in bargaining for.
The decision in Cosey is to be applauded. Employers and insurance companies have all the say in the wording of an ERISA plan and its supporting insurance policy. It should be done correctly.
The worrisome part of Cosey is that some judges still think employees have any influence or knowledge of the ERISA plan and insurance policy which covers them. This is absolutely not so.
To believe it is so, gives the wrong slant to deciding future ERISA cases.
Every night, before going to bed, every disability insurance company executive prays for each ERISA claimant to go it “alone” without a lawyer, in filing a disability claim. This is especially so if the claim is based upon a mental or nervous condition.
Why? Three reasons. First, the prosecution of such a claim requires knowledge of a highly technical law which is sometimes counterintuitive to common sense. What you might expect is not what necessarily what you get with ERISA. Secondly, because insurance companies have developed, down through the years, an arsenal of strategies which surprise the uninitiated and can sink an ERISA claim before it even gets started. Thirdly, because such claimants may be impaired by their mental condition, they are even more vulnerable than most to the rigid, technical requirements of pursuing an ERISA claim.
Some people seem to have an intuitive dislike for dealing with an attorney. Likewise, some attorneys give good cause for people to have such feelings. But, at bottom, people hate to pay attorney fees unless they think they are getting a real benefit. Insurance companies know and encourage this feeling so that ERISA claimants will often go it alone into an area of law filled with land mines and booby traps.
The ERISA statute, 29 USC, Sec. 1001, et seq., has been around since 1974. It has developed an encyclopedia of decisions, some very technical, interpreting the meaning of the statute in those 40 years. Insurance companies have followed these decisions religiously, most times as a party to the litigation which produced the decision. On the other hand, you, the claimant, are likely to be totally unfamiliar with ERISA, or the way courts have interpreted and applied it.
Add to this mix that an ERISA disability involves a person who can’t work, is sick or injured, is probably under severe financial pressure -- and you can see that the cards are stacked in favor of the insurer. Plus, if the disability is psychiatric, this may add a new dimension to the person’s ability to withstand the rigors of making such a claim.
If the claim is based on a psychiatric condition, a lawyer should have experience with this type of issue. Not only are the medical questions different, requiring specialized knowledge of these types of illnesses, but the relationship of client to attorney also may require a special “touch” to be effective.
Some people think an ERISA claim is similar to a Social Security disability claim. Not so. The fundamental difference is in who decides the claim.
In Social Security, it is an impartial judge whose job it is to weigh the evidence and then come to an impartial decision. The judge has no axe to grind.
In ERISA, it is a plan administrator who is employed by or closely affiliated with the same insurance company which has been fighting your claim all the way and will have to pay the claim if the decision favors you. The difference is obvious.
When you have an ERISA claim you have to decide how to pursue it. You can decide to go it alone and take your chances that without the requisite knowledge you’ll be able to work your way through. Or, you can retain a lawyer who has the experience necessary to help you work your way through. When you make the decision, give some thought to the stakes involved and avoid being penny wise and pound foolish.
It’s your call.
Congress is about to declare war on entitlements to cut government help for those in need so as to save money for those at the top of the income pyramid. After all, with rising costs and no replacement for old tax cuts, revenue has to come from somewhere.
It doesn’t help that “60 Minutes” a well watched and generally well regarded television news journal recently aired a misleading, one-sided view of Social Security benefits and those who receive them.
In handling ERISA claims we are so used to fighting insurance companies, that we take their one-sided tactics as a matter of course. Those in the Social Security field may not be accustomed to the way the other side is going to fight to cut benefits to those in need.
The difference lies in the nature of the different practices. In Social Security, claims are tried before impartial SSA judges who are selected for their ability to make unprejudiced judgments about disabilities. They have no axe to grind and are paid by the Government, not a private business interested in making profits.
On the other hand, ERISA plans are usually administered by people closely affiliated with insurance companies. Many times their livelihood depends on these same insurance companies who are definitely interested in making profits. So, plan administrators pay out as few benefit dollars as possible. Every dollar saved goes right to the insurer’s bottom line.
ERISA lawyers are accustomed to plan administrator’s leaning heavily in favor of employers (and their insurance companies) in making benefits decisions. So, you learn to fight their tactics as hard as you can to give clients a chance at success. Social Security advocates, used to much more impartial judges, may have difficulty in doing this.
Be sure, this fight is going to be “down and dirty”. There are elements in Congress that won’t believe people truly get sick or get hurt, some so badly that they legitimately can’t work anymore. They look at each recipient as a “moocher”, freeloading at the public trough.
These elements ignore the fact that studies have shown that fraud rates are low and that benefits are far from generous. “60 Minutes” helped paint SSDI unfairly as wasteful and loaded with abuse.
These are some of the facts “60 Minutes” omitted from its report:
- SSDI fraud is less than 1% in its disability program.
- Application rates have risen, but award rates have declined.
- Retirement age has risen from 65 to 67 meaning that those on SSDI remain on it longer before being eligible to switch to retirement benefits.
- One in five male and one in six female SSDI recipients die within 5 years of first receiving benefits. (Does this sound like “fakery)?
- The average SSDI benefit is just above $1,130 a month, about $35 a day. Try living on that for a while.
In 1994, the Disability Insurance Trust Fund was predicted to face the problem it faces in 2016. Historically, Congress has 10 times reallocated funds between retirement and disability accounts because of demographic changes, without a problem. It could now do so again, insuring that both funds would remain solvent until 2033.
But, will this Congress do it? Not very likely.
This Congress is more likely to vilify and blame the people relying on $35 a day to live, than it is to fix a problem which an easily be fixed.
What has happened to America?
One of the new tricks of the trade in denying disability benefits was exhibited by AT&T playing ping pong with an employee’s short term disability (STD) claim and thereby not only denying the STD claim, but also ruling her out of time on making a later LTD claim. Guthery v. AT&T Umbrella Benefit Plan No. 1, 2013 WL 4510584 (W.D., Ark.).
This denial trick was accomplished by having no communication between the two separate departments which handled disability claims and workman’s comp claims for AT&T. This problem was compounded by the plan administrator relying on medical reports which threw little light on the medical issues in the case.
The claimant’s problems began when she fell off a ladder at work and was injured. Ms. Guthery went for medical treatment at a medical facility to which she had been referred by the AT&T department handling her claim. At the same time she was making her disability claim Ms. Guthery also filed for workman’s comp.
As each of the claims was handled by a separate department of AT&T, it made it easy to start a game of ping pong, with the claimant being caught in the middle.
When the AT&T disability claims department needed info or an exhibit from the workman’s comp claims department, it was requested, but the WC people didn’t send it. Requests between the departments were ignored until time limits set by the requesting department had long passed. And, who got the blame? Why, Ms. Guthery, of course.
All through claims process, Ms. Guthery kept in close contact with the claims department to follow up on whether information, totally in control of the plan, had been provided. It didn’t help. When time limits arbitrarily set by AT&T passed, her STD benefits were terminated even though the information was totally in the hands of AT&T people.
While this game of intercompany ping pong was going on, time was passing. Ms. Guthery did not file her claim for long term benefits because of the STD benefits brouhaha. When she did try to press her LTD claim, AT&T defended by claiming she had not exhausted her administrative remedies by first completing her claim for short term benefits.
Even though this was a “deference” case, the Court found the denial arbitrary and capricious and restored Ms. Guthery’s STD benefits along with her right to make an LTD claim.
In its opinion, the Court in Guthery specifically pointed out the trap that medical “generalizations” lay for claimants. Insurance companies take advantage of this trap and send claimant’s doctors forms which are designed to get the doctors to “speculate” on the length of time it might take for a disability to end. As the Court pointed out, this makes an assumption that a claimant is no longer disabled because “generally” a disability ends after such a period.
The actuality may be far from the truth, as each case is different. Some patients recover slower than others with the same illness of injury.
We have warned physicians about being constrained in reporting on patient on the forms insurance companies send them, boxed.
In the interest of their disabled patients, we do so again.
When an ERISA plan gives the administrator broad discretion to interpret the plan, the administrator has the ability to interpret claims to the point where common sense doesn’t count for beans.
The unlucky husband of an unlucky woman working for Lowe’s Companies found that out when he sued Lowe’s and its insurance company to collect ERISA life insurance benefits after his wife was killed in a car crash.
The story in a nutshell:
* Elizabeth Porter was a manager at a Lowe’s store.
* She was on her way home from work when she received a call that the store alarm had been actuated.
* Mrs. Porter turned around to head back to the store to take care of the alarm when she was blasted by another car, killing her and her unborn child.
The ERISA life insurance policy specifically did not cover an injury sustained during travel to and from work. The question here: Was Mrs. Porter’s turnaround to head back to the store travel to and from work? This fact makes the meaning of the words travel to and from work ambiguous.
In his ruling, the administrator found that Mrs. Porter was traveling to work to perform her regular job duties (ignoring the fact that she had to turn around from her trip home to go back to the store). Her Workman’s Comp claim was approved even though Comp, too, doesn’t pay for claims arising from travel to and from work. Mr. Porter sued.
In ruling in his favor, the District Court applied a common sense interpretation to the administrator’s decision, and held that the phrase applied only to her ordinary daily commute and that her turnaround to return to the store was outside of her ordinary commute.
The District Court rejected as an abuse of discretion the administrator’s finding that Mrs. Porter’s turnaround and return was “traveling to work to perform her regular job duties”. The Court therefore ordered the insurance company to pay the life insurance benefits to Mr. Porter. The insurance company appealed.
The Circuit Court of Appeals for the 5th Circuit reversed and entered judgment for the defendants, holding that when a plan gives the administrator broad power to interpret its terms, the administrator has that power even if there are ambiguities in the wording of the insurance policy. So long as there is any reasonable basis upon which the administrator’s ruling may be upheld, it is not arbitrary and capricious and must be upheld, the Appeals Court said.
This ruling means that ERISA gives a properly authorized administrator the right to resolve policy ambiguities in favor of the insurer even in the face of a very long line of insurance cases which holds just the opposite: Ambiguities in an insurance policy are interpreted in favor of an insured.
An interesting sidelight here is the Appeals Court found no conflict of interest as the administrator was not the insurance company insuring the plan. An online search, however, showed that the administrator was closely affiliated with the insurance company and probably received the financial benefits of administering many of the insurer’s ERISA plans. Wouldn’t such facts lead to a possible conflict of interest which the Court should have considered?
ERISA was billed as the “workingman’s friend” when it became law in 1974.
Sometimes it turns out to be her worst enemy.
Why do legislators and courts appear to see more to fear from individuals’ hypothetical cheating than they do from insurance companies’ actual, institutionalized cheating? Our close review of ERISA cases leads to the exact opposite conclusion.
A recent Seton Hall Legislative Journal article makes this perfectly clear when it points out that there is no deterrent written into ERISA that would make insurers think twice before using all means available to delay and obfuscate an employee’s right to ERISA benefits.
The article points out that ERISA affords plaintiffs little opportunity to obtain compensatory and no opportunity for punitive damages, no matter how egregious the conduct of the insurance company. The only downside for insurers is that ERISA authorizes payment of claimant’s attorney fees by the insurer, but only after a series of preconditions are met
In his article, the author, Thomas Kelly III, tracks Reliance Standard Life Insurance Company persisting in following a course of litigation conduct even though it had expressly been overruled by the Third Circuit in previous cases.
At issue was the meaning of “regular occupation” in the Reliance policy language. Reliance refused benefits because it said “regular occupation” meant a typical work setting for the occupation for any employer in the general economy, without so defining the term in its policies.
Not so, the Third Circuit ruled, holding that “regular occupation” means the usual work that an insured is actually performing immediately before the onset of the disability.
Despite the clear ruling of the Third Circuit which was appealed to the U.S. Supreme Court (certiorari denied), Reliance brought at least five more cases to the Third Circuit arguing for its definition of the term “regular occupation”.
The author suggests (and we concur) that the only way to deter insurers from defending on “old” grounds is to make them pay for the privilege.
As is obvious, ERISA plaintiffs, unable to work, have to look to other sources upon which to live while the company is “delaying” its way to a final ruling. These alternate sources, if they are available, may include liquidating banks accounts, IRAs, selling a home, home equity loans and cashing in life insurance policies.
Such actions are likely to trigger interest charges, early withdrawal penalties and the sale of property at a loss. Yet, the employee can’t recover these losses even though, based upon previous decisions, the insurance company position could never prevail.
The delaying tactic gives the insurance company a double gift:
* It puts extreme financial pressure on the plaintiff to settle disadvantageously or give up the claim.
* At the same time the insurer retains the use of claimant’s funds
without fear of paying interest or consequential damages.
What better invitation for insurance companies to deny, deny, deny, bad faith or not?
The author suggests economic cures that would really make the insurance company and the employer think twice before engaging in such egregious conduct:
* Punitive damages available for a knowing or bad-faith violation of ERISA.
* Making employers vicariously liable for such misconduct when a plan administrator has been delegated to operate the plan.
* Consequential damages should be available when a claimant can prove a plan
administrator caused the loss
* The tax deduction for employers policy premiums should be forfeit when a knowing violation of ERISA can be shown.
It is only when ERISA permits insurance companies to be hit as hard as they hit claimants that their decades-long egregious misconduct toward employees may start to slow.
To those who wonder if they should need an ERISA-wise lawyer in their corner when they battle an insurance company or a big employer on a disability claim, read what a Federal District Court Judge said in finding for AT&T, in May v. AT&T, 2013 WL 3879895 (N.D. Ala.):
“Mrs. May has only one ERISA case, this one. Sedgwick and other professional claims administrators and insurers, have many cases and are represented by highly competent lawyers who are well trained in ERISA jurisprudence… The ‘one-shotters’ cannot compete with the ‘repeat players’”.
This succinct analysis by an impartial Federal District Court judge of what an employee faces when forced to make an ERISA disability claim because of illness or injury is another way of saying what we have been saying for years:
"Insurance companies fight claims like yours a thousand times a day.
You have only one shot to get it right."
Lawyers always find it difficult to answer the question of a potential client: Do I need a lawyer? Very few people would expect a “no” answer when legal issues are involved. But, having to answer “yes” has the appearance of the lawyer looking for more business.
When it comes to ERISA, however, the “yes” answer has much support. A while back we wrote a post in which an ERISA lawyer who represents employers posted an item in which he pointed out the advantage to him and his clients of facing an employee claim represented by a lawyer who had little or no experience with ERISA. See why.
Now a Federal judge, William M. Acker, Jr., a long-time critic of the ERISA system as it was interpreted in Firestone v. Bruch, 489 U.S.101 (1989) and who handles many an ERISA matter, has felt compelled to comment again on the almost insurmountable difficulties facing an unrepresented claimant facing off against “…highly competent lawyers…well trained in ERISA jurisprudence”.
If you are unfortunate enough to be unable to work because of a disability and you have to fight an ERISA claim against your employer and/or its insurance company, don’t be a “one-shotter” fighting “repeat players”.
Don’t be afraid. File your claim.
But, before you begin, be sure to hire an attorney who is also a “repeat player”.
Give yourself the best “shot” to prove your claim.
There is no way an ERISA claimant can ease up on the pressure while pursuing an LTD claim, hoping that matters will take care of themselves. Despite setbacks and claim denials, the claimant must be certain to meet all time constraints required by the terms of ERISA plan documents, insurance policies and rules and regulations.
This overriding importance of claimant conduct was reemphasized in the recent case of Engleson v. Unum,2013 WL 3336741 CA 6 (Ohio) (NO. 21-4049), in which a disability case with a long history was finally dismissed because the plaintiff failed to file an appeal within the 3-year period permitted in his ERISA plan.
Despite having filed two denial appeals in 2001 with Unum, Mr. Engleson’s claim remained dormant until 2008 when he felt his condition became so severe that he refiled for LTD benefits. He wanted the Court to consider his claim as an appeal of the prior denials which Unum issued in 2001, declaring that benefits had been wrongfully denied at that time. He further alleged that he was not given a full and fair review of his claim in 2001.
The District Court dismissed his suit holding that the 3-year contractual limitation had expired and he could not bring such a suit.
On appeal Mr, Engleson claimed he was entitled a ruling that the contractual limit should be tolled under Cigna v. Amara, 131 S. Ct. 1866 (2011), but the appellate court disagreed, finding no facts upon which to consider tolling the 3-year time limit on appeals.
To illustrate its point, the Court reviewed the facts in Calanderia v.Orthobiologics, 661 F3d 675 (C.A.1 Puerto Rico) 2011), a case in which the claimant actively twice asked for and received copies of the ERISA plan documents to which he was subject. At the time he received them the plan had no time limit on filing a suit after a denial.
A week after the last time the plan was disclosed to Mr. Calandria, the plan was changed to require that a claim to the court be filed within one year of the date of occurrence. Plaintiff had received no notice of this change from his employer and reasonably believed that the statute of limitations on his claim was 15 years.
Since this policyholder had tried to stay abreast of his claim rights and had not been advised of a critical change in his policy rights, the 1st Circuit held that the 1-year limitation on the right to appeal should tolled and allowed Mr. Calandria to file his claim.
The ERISA lesson in Calandria: Don’t sleep on your rights!
Representing ERISA claimants requires an attorney to start at the very beginning and go careful step by careful step to the end. Nothing is to be assumed. An attorney has to make certain that the plan structure and all actions taken pursuant to it by the administrator have been done properly and only as authorized by the plan and ERISA law.
A recent decision, Gaines v. LINA, 2013 WL 677886 (N.D.Ill.), clearly illustrates this point. The issue in the case was whether the court would apply the de novo standard of review or whether it would give deference to the claim denial issued by the insurer, LINA.
If de novo, the Court could hear evidence and decide the matter based upon the preponderance of the evidence presented. If the Court had to give deference to LINA’s denial of benefits, the Court could only consider the record and could overturn the denial only if it found, based on the record, that the denial was “arbitrary and capricious”, a very tough obstacle for a denied claimant to climb.
The ERISA plan documents showed that the employer and the plan administrator had authorized the claims administrator to utilize its discretion in deciding claims. If properly set up, this would force a court, under Firestone v. Bruch, 489 U.S. 101 (1989), to give deference to the denial of the claim.
The problem for the employer in this case was that the plan document relied upon to authorize administrative discretion gave “Cigna” not “LINA” the authority to exercise discretion. Therefore, the Court held, since only Cigna was authorized to exercise discretion, LINA had no authority to do so and the case would be heard de novo.
In making this ruling, the Court followed a line of cases which held that when an unauthorized body without fiduciary discretion to determine disability benefits denies an ERISA LTD claim, the claim will be reviewed by a court on a de novo basis.
Sometimes in the jungle of ERISA plan language and the thicket of insurance policy terms the insurance company and the employer stumble and the claimant gets a break. You can be sure it doesn’t happen too often, but when it does, it is cause for a celebration.
We’ll drink to that.
One way to make ERISA easier for employees to understand would be to post the employer’s plan online where they can see what protections they are supposed to get. Airing out the protections and restrictions of employer purchased insurance policies would make it easier for employees to know their coverages and limitations, and is now a common practice for many larger employers.
This would bring the reality of the contractual relationship of employees a little closer to the harsh reality created for them in U.S. Airways v.McCutchen, 133 S. Ct. 1537 (2013). If the fair reach of Equity is precluded by the employee’s supposed agreement with the terms of an employee welfare benefit plan, the employee ought to have a reasonable way to know what the terms of the plan are.
Most of the time the plan details and the insurance policies which underwrite the plans are hidden away in the Human Resources Department of the employing entity. Even if an employee was aware of this situation when becoming employed, the employee would have to ask for a copy of the ERISA plan from the Human Resources department and would probably be given a copy of the Summary Plan Description (SPD) instead. The SPD is supposed to accurately convey, in simple language, the terms of the plan.
However, reading the SPD would do the employee little good because the Supreme Court has held that the SPD is not the plan and only the language of the plan itself is the law of any case brought under it, Cigna v. Amara, 131 S. Ct. 1866 (2011). So, even if an employee knows enough to ask for a copy of the plan, what he or she would probably get (the SPD) would not be the final say in any dispute.
In fact, even if the SPD is flat out wrong, the employee cannot rely on it if the SPD contradicts the plan itself.
With this in mind, we were absolutely floored by the decision in McCutchen. If the law of the case is the plan itself and the employee never sees it until requesting it (which is usually after a claim accrues), how did the Court base its decision on holding that the plan is what the employee bargained for and therefore they are bound by its terms?
McCutchen makes it more imperative that employees learn about their ERISA plan as soon as they can before or when they become employed. If courts are going to hold them to having bargained for the plan terms, in all fairness they should be able to know the terms of the bargain when they become employed.
Making the full plan available online seems the easiest way to accomplish this.
It would be very helpful and save much time if there were a court rule requiring a doctor examining a claimant for an insurance company to submit a simple form setting forth the doctor's testimonial history and relationship with the insurance company along with any medical report filed in the case.
To be fair, a claimant's doctor should be required to file the same form so that if the claimant's doctor is a ''testifier" for plaintiffs, the court should also be made aware of that.
A recent case in New York Supreme Court, Bermejo v. Amsterdam & 76th Associates, New York Supreme Court (Queens County, Index No. 23985/09), brought to a head the pervasive and unfair buying of medical testimony by insurance companies when fighting disability claims. It is a practice which has become almost institutionalized by most disability carriers.
Although the Queens case was not an ERISA dispute, it clearly illustrates what ERISA lawyers see every day in their practice. Doctors beholden to insurance companies for their living, “fairly” evaluating an insured’s claim medical condition without ever seeing the claimant!
Some smart businesspeople have formed supposedly “independent” medical services to provide insurers with medical reports in their ongoing war with policyholders in disability, life and long term care disputes. These services hire a stable of physicians to work for them so the doctors can deny any direct relationship with the insurance company.
But, doctors know that if their medical reports don’t favor the insurance company, their employing medical service wouldn't last long with the carrier and the doctor would soon be out of a job and an income.
The first defense of a claim by an insurer is to deny, deny, deny in the hope that the claimant will be frustrated and disgusted and just go away.
Their very next major defense is a network of doctors or medical services who appear preprogrammed to reject of minimize all but the most obvious debilitating medical conditions. This is especially true in ERISA cases where a court, is required by law to give deference to the finding of the plan administrator, usually an insurance company, when there is a dispute.
So, why shouldn't a physician offering evidence in an insurance company claim set out their relationships with parties in the case by telling the court their testimonial history right upfront? This is particularly true in ERISA cases where there is ordinarily no live testimony either by deposition or before the court (therefore, no cross-examination), all evidence being on the record of documents submitted to the ERISA plan administrator.
If a trier of fact knows that a doctor earns all or most of his or her income from writing reports for insurers or claimants, the court could legitimately take that fact into account while weighing the value of each side’s medical reports, which should result in more accurate, truthful, just results.
Isn’t this what courts are supposed to be striving to attain? There must be some other method of evaluating credibility and independence of medical testimony where no cross-examination of medical witnesses is allowed.
Since, MetLife v. Glenn, 128 S. Ct.2343 (2008), courts have spent a lot of time and effort on arguments over discovery in ERISA cases, particularly concerning the relationship between the insurance company and the physicians providing evidence in support of claim denials.
Wouldn’t it be more equitable to all parties to have each provide the relationship information with the medical reports, thus saving time, effort and legal fees for all while providing background information important to a court in deciding the validity of medical reports?
Anybody have any better ideas?
As we have said many times before, ERISA is a technical piece of legislation, but sometimes just plain common sense saves the day. Such was the case with Marc Kutten who disputed with his insurer whether he was entitled to LTD benefits of $1000 per month or $6000 per month. Such a difference is no small potatoes to a man who can no longer work. Kutten v. Sun Life Assur. Co. of Canada, 2013 WL 2457182 (E. D. Mo.).
Mr. Kutten had been taking an over the counter Vitamin A supplement for many years, recommended for retinitis pigmentosa (not prescribed), by his doctor. Under the terms of his employer’s new policy, he would be entitled to $1000 monthly if he was found to have a pre-existing condition rather the $6000 monthly if there was no preexisting condition.
Sun Life reduced his LTD claim on the ground that taking the Vitamin A supplement constituted “medical treatment” received during the 3 months prior to the effective date of his employer’s new policy and therefore he was only entitled to receive the $1000 benefit under his employer’s old policy.
Even though the Court gave deference to Sun Life, see Firestone v. Bruch, 489 U.S. 101 (1989), it found the insurer’s “medical treatment” denial unreasonable. The policy defined “medical treatment” and “prescribed drugs” as separate and distinct bases upon which to find a pre-existing condition which would invalidate the new policy. The Court found that taking a vitamin supplement could not be considered a “medical treatment”.
At best, it could be a basis for a “prescribed drugs or medicines” denial of a claim as a preexisting condition as defined in the policy.
But, even if Sun Life had actually denied the claim on that basis the Court’s common sense analogy prevented a denial:
“…Prescribed drugs or medicines generally require that a person have interacted with a medical professional, at least when the initial prescription is given. Vitamin supplements, however, require no such medical intervention. A doctor recommending a person take Vitamin A for retinitis pigmentosa is more akin to a doctor suggesting to someone with digestive issues eat apples because they are high in fiber than it is like receiving a prescribed drug…”
The Court ordered judgment for Mr. Kutten so he will receive his $6000 month.
As an aside on this ruling we commend Judge Katherine Perry’s courage in following ERISA precedent by strictly adhering to policy language as called for in the recent case of U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013).
It is obvious from the facts of the case that Mr. Kutten did indeed have a preexisting condition, retinitis pigmentosa. But the facts in Kutten were clearly not covered by the definition of “preexisting condition” in the policy. So, enforcing the language of the policy as written, the Court found for claimant.
Bravo, Judge Perry.
Plenty of insurance company defenders point out that there seems to be a surge in Social Security and ERISA disability claims in the last few years. They do this to paint all disability claimants with a questionable brush.
What you don’t see is a flood of these same people pointing out that the reputation of disability insurers has suffered much greater hits in recent years. For some reason, these defenders quickly forget when insurance companies admit actual, far-reaching wrongdoing.
We only have to go back ten years to revive the memory of the UNUM settlement with 48 states because of the insurer’s deceptive handling of disability claims over many prior years. This was actuality, not innuendo. UNUM settled and paid because of its unsavory conduct in dealing with people who couldn’t work because they were disabled.
Then we had the recent instance of MetLife and other insurers hanging onto life insurance proceeds belonging to decedents’ beneficiaries because they claimed they “didn’t know” the policyholders had died. At the same time MetLife somehow “knew” of these very same deaths because it immediately stopped paying annuity benefits to these very same deceased policyholders.
Now we are in the middle of another insurance company scandal, Cigna, settling disputes with state after state about its fairness in handling disability claims.
With this history, we can’t see why some courts automatically seem to put insurance company exam reports, where the physician doesn’t see, talk to or touch the patient, on a par with treating doctor reports. Nor can we see why some courts equate supposedly “independent” medical exam reports from doctors who make a good part or all of their income from these so-called “independent” reports, on a level with the treating doctor.
It is not fair for courts to put opinion evidence from one of these “bought and paid for’ insurance doctors on the same level as the report of a treating doctor. Yet, because of Black & Decker, 123 S. Ct. 1965 (2003), many do.
Yet, to do so is a misread of Black & Decker. That case clearly dealt with only whether an ERISA court should follow the Social Security rule favoring the report of a treating doctor in evaluating evidence in an SSDI case. The Supreme Court said “No” for reasons clearly stated in that opinion.
Nowhere in that opinion did the Supreme Court say the two genres of medical evidence should be treated equally or that a District Court should not apply judicial common sense in evaluating medical evidence. The Justices said you can’t apply the Social Security “treating physician”rule. It didn’t say that judges are barred from judicially evaluating medical evidence in ERISA cases.
It is upsetting that a treating doctor’s opinion gets no more respect from some courts than does the opinion of an insurance company doctor who never sees the claimant, has no professional obligation to the claimant and probably earns a good part of the doctor’s annual income from insurance companies.
Courts which treat medical evidence in ERISA this way should reread Black & Decker.
A recent case involving the Federal Employees’ Group Life Insurance Act (FEGLI) reminded us again of the way some Federal statutes, including ERISA, can defeat the intentions of a policyholder even though basic common sense might dictate otherwise.
This most important topic has received our attention several times before
but repeated reminders are warranted so that beneficiaries and their attorneys remain alert to the danger of not checking and updating ERISA plan documents pertaining to those beneficiaries.
Courts consistently hold that in ERISA cases, the ERISA plan documents are the one and only contract to be looked to in a dispute. What the plan says is the rule of law and must be followed when a question of plan administration arises. This is so even when it is apparent from the facts that the policyholder would have clearly wanted another outcome.
In this reminder case, Hillman v. Maretta, 133 S. Ct. 1943 (2013), Mr. Hillman had been married to Judy Maretta, and while he was married to her, he named Judy as the beneficiary of his FEGLI policy. Mr. Hillman divorced Judy several years later and then married Jacqueline Hillman to whom he was married at the time of his death.
Judy Maretta sought Mr. Hillman’s FEGLI policy benefits and because she was still listed on his policy as his beneficiary, Judy received them even though she was no longer his wife.
His wife, Jacqueline, sued under a Virginia statute which gave her rights to the policy benefits under the facts of this case.
As in similar ERISA cases, the Supreme Court ruled preempted Virginia’s statute and that the policy proceeds were to stay with the beneficiary listed in the FEGLI policy. The Court upholds the principle that in these types of disputes court should uphold the law as it was written by Congress and unless specifically exempted, the Federal law preempts state law.
The lesson for ERISA policyholders is clear: If you want to change a beneficiary or in any way alter what an ERISA plan calls for, DO IT NOW!!! If you die or become incompetent before you get around to making the change, forget about it. It won’t happen.
Whether it’s a tax plan, divorce, remarriage or some other event which requires a change in what an ERISA plan calls for, notify the plan administrator immediately and complete the necessary paperwork to effect the change.
To do otherwise clearly jeopardizes what you have in mind.
Wouldn’t you think it fair for all parties who benefit from a recovery pay their fair share of the costs of that recovery? In most areas of the law this holds true. Not in ERISA.
In U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013), the ERISA plan called for the employer self-insurer to be reimbursed for any benefits paid from any recovery the insured received from a third party tortfeasor. Unfortunately in this case, the third party tortfeasor injured a lot of people and didn’t have nearly enough insurance to pay all claims.
So, Mr. McCutchen found himself in the position of receiving a total of $110,000 from the tortfeasor and his own insurance company. After he had paid his lawyer a 40% contingency fee for the recovery ($44,000) Mr. McCutchen was left with $66,000. But his employer had laid out $66,866 and wanted it all, (including the $866 which would have to come from McCutchen’s pocket) without paying any of the cost of collection.
Since the plan clearly called for reimbursement of benefits, but did not expressly dictate how the fees and costs for recovering reimbursement monies were to be paid, the Supreme Court through Justice Kagan, speaking for a 5-4 majority, gave Mr. McCutchen a break by holding that in the absence of a clear plan dictate as to how the parties should bear the costs of third party recoveries, the “common fund” rule should apply.
The “common fund” rule is applied in most third party recovery matters involving insurance companies and beneficiaries. The rule generally apportions the costs of these recoveries between insurers and beneficiaries, so that each one pays a fair share.
In McCutchen, the Court clearly opened the door for plan administrators to disregard the “common fund” doctrine by specifying in their plans that they are to receive every penny of a third party recovery, without any offsets for legal fees or costs, until paid in full for benefits laid out. You can be sure that plan administrators are reviewing their plans with their attorneys at this very moment to accomplish this.
But, in making this ruling the Court showed its naiveté in the never-ending battle between ERISA plan administrators and claimants. Justice Kagan said she doubted that U.S. Airways would want to take the $686 out of McCutchen’s pocket. Having battled ERISA insurance companies and employers for more than 30 years, we don’t think it would have bothered an insurance company in the least.
Most ERISA plans give the insurance company subrogation rights against a third party tortfeasor. This gives insurers the clear right to bring suit against a third party in the name of the insured. But, do they?
They don’t because if they did they might have to pay a share of the lawyer and court costs. By staying out of the legal loop, the insured bears the burden of the third party litigation including the obligation of paying the lawyer while the insurance company stands by ready to grab repayment of all benefits paid out from the first monies recovered.
So, if you have a third party claim involved in an ERISA case, know that you’ll be going it alone until recovery, when your insurer will jump in front of you with its hand out.
Unbeknownst to some insureds and their attorneys, ERISA can thwart the most obvious intentions of insureds if they are negligent in following up on changes in beneficiary status. Most of the time this issue is involved in matrimonial and estate cases.
Except in the most unusual cases, a spouse who divorces his or her mate, does not want the proceeds of his or her estate (ERISA andotherwise) to go to the divorced mate.
Yet, should the participant in an ERISA plan fail to properly change the plan beneficiary to reflect the changed circumstances of his or her life, the ERISA plan administrator is forced to pay benefits to the beneficiary listed in the plan, Kennedy v. Plan Administrator for DuPontSavings & Investment Plan, 555 U.S. 285 (2009).
Because ERISA preempts all other law which might affect this outcome, the beneficiary shown in the policyholders’ plan documents is the one who to whom the plan administrator has to deliver the benefits.
The Kennedy court based its decision on three main points:
* ERISA requires simple plan administration.
* Avoiding the danger of the administrator having to pay double benefit payments.
* Encouraging speedy benefits payments.
It is essential for a plan participant to get to the administrator as quickly as possible with any change in circumstances. To delay may mean
that ERISA may cause benefits to go to the wrong person or require extensive litigation and legal costs for the benefits to go to the personactually intended by the plan participant.
Although Kennedy supported the law of ERISA preemption strongly, it specifically left open the issue of whether preemption applied once the benefits had been paid as required by ERISA.
The United States Court of Appeals for the Fourth Circuit recognized that this “straitjacket” approach can lead to obviously inequitable results as shown in Andochick v. Byrd, 2013 WL 781978 (CA4 (Va.)) .
In that case, Mrs. Andochick married Mr. Andochick in February, 2005, and separated in July, 2006, at which time Mr. Andochick agreed to and signed a marital settlement agreement in which he gave up any rights to Mrs. Andochick’s survivor benefits and life insurance policies in both of which he had been made beneficiary by his wife at the time they were married.
Following Kennedy and a long line of cases, the Fourth Circuit Court of Appeals agreed with the District Court that Mr. Andochick, as the named beneficiary in her ERISA plan, had to receive the benefits of the plan and the proceeds of his ex-wife’s life policy.
But, the Court also agreed that once proceeds were allocated to the ex-husband, state or Federal courts were not preempted from dealing with the proceeds in line with his waivers and free of ERISA preemption.
The opinion makes it clear that ERISA’s strict interpretation of which party gets ERISA
benefits proceeds, is meant to facilitate the swift and smooth operation of ERISA plans.
Preemption is not meant as a back door through which a party can grab benefits to which, by all reasonable and equitable measures, he isnot entitled.
A new Federal rule which would require prescription drug and medical device manufacturers to report what they pay doctors for consultations and speeches is just what the doctor ordered for ERISA insurance claims.
The Centers for Medicare and Medicaid Services proposed the rule which will require the gathering of such data on August1, 2013, with the CMS scheduled to release the data on a public web site at the end of September, 2014.
What has this to do with ERISA claims? Lots!
The purpose of the new rule is so that the public should know what financial relationship the doctor who recommends a drug or treatment has with companies which supply the pharmaceuticals or medical treatment a patient may need. This transparency allows the patient to have a meaningful discussion with the doctor about what the doctor is prescribing
The whole point, according to CMS, is to reduce the potential for conflict of interest in the doctor- patient relationship.
Why don’t courts require the same openness in ERISA litigation? Federal judges are becoming more and more aware of the potential conflict of interest when a physician makes a substantial portion of his or her income from insurance company exams to determine the validity and extent of claimed injuries or illnesses for which his or her insurer would have to pay benefits.
Why not make insurance companies provide a breakdown of all of the monies paid to a doctor to perform so-called “independent medical exams” along with the doctor’s report? That would give the court, considering whether benefits should be paid to a disabled employee an insight into the credibility of the physician’s report.
Attorneys representing ERISA claimants have been complaining for years that many of the doctors called upon by insurance companies to examine claimants are more interested in continuing to be paid for reports, than they are in giving honest opinions. If a doctor’s opinions are not heavily in favor of insurers, how long do you think that doctor would continue to get paid for opinions by insurance companies?
The beginning of the end for secrecy about physician track records began with the U. S. Supreme Court decision in Metropolitan Insurance v Glenn, 128 S.Ct.2342 (2008),when the court seemed to wake up to the fact that there is an innate conflict of interest when medical experts are paid by insurance companies to “independently” evaluate disability claimants.
Why it took so long for the Court to reach this obvious conclusion is anybody’s guess. Arguably, Glenn opened the door to allow discovery in this area. But, to be fair to claimants who are suffering not only from their illness or injury, but also from total loss of income when unable to work, much more light should be shone on the insurance company-“independent” medical examiner relationship so Federal District Courts can properly value the worth of medical reports in ERISA cases.
What better way than to follow the CMS rule and have each doctor whose report is being considered by the court present the details of the financial relationship that doctor has with the insurance company the doctor examined for?
The details should include:
* How many medical exams the doctor performed for insurance companies during the last two years.
* How much money insurance companies paid the doctor for these examinations during the last two years.
* The percentage of these exams in which the doctor found the insured too disabled to work.
* Any other financial arrangement in which the doctor receives any remuneration from the insurance company.
We can’t see the difference between the conflict of interest which may be generated by a physician being paid for “consulting” or “speeches” and being paid for examining claimants.
Both activities affect the insurance company’s bottom line and are therefore suspect.
An insurance law professor recently pointed out that “Insurance is the one product where you can’t find out what you’re buying until you’ve bought it.”
He came up with the suggestion that all state insurance regulators follow an initiative of the Nevada Department of Insurance, according to a recent article in the Newark Star Ledger.
Rutgers University professor Jay Feinman pointed out that you can choose coverages and deductibles, but you can’t read the fine print in your insurance policy until after you have bought it.
Those who have been exposed to insurance law (and readers of this blog) know full well that, with insurance policies, the “the devil is in the details”.
Why not put policy forms online so that people can read them and understand what they are going to get before they buy a policy?
The professor suggests that a Nevada initiative should be adopted by all states to give people better understanding of their coverage.
According to him, the state of Nevada began publishing online the policy forms of 10 of the state’s largest home and auto insurance carriers. These carriers do about 80% of the home and auto business in Nevada.
We agree with Professor Feinman that making this material available to the public online is not likely to help too much in educating the public because policyholders are notorious for not reading their policies even after a triggering event occurs.
But, there are many consumer advocacy groups can and will provide consumers with easy-to-understand guides to compare rates and the coverages offered.
Although this present situation covers only auto and home policies, there is no reason why it can’t be expanded to cover ERISA disability, life, health and other types of insurance which are based upon standard types of insurance policy forms.
As well as helping employees to understand what insurance protection they have, the employer could also benefit by having an easy-to-understand comparative guide covering both benefits and cost.
These guides can be formulated by large employer associations as a service to their members.
Greater transparency – What a concept!
You may not always need a lawyer when making a legal claim, but when you do, you really, really do need one. This is particularly true in ERISA and disability claims against insurance companies. Why?
Because they employ armies of experienced and knowledgeable lawyers and claims adjusters who all have one purpose in mind – to destroy your claim ASAP so they can keep the money your claim represents. It is in the very nature of insurance claims because insurance is a business and all businesses are after profits.
Insurance companies fight claims like yours a thousand times a day.
You get only one shot to get it right.
Because fighting claims such as yours is all they do day in and day out, these insurance company minions know ERISA and disability insurance law and how to use this knowledge to try to sink your claim.
That’s why you need an attorney who handles ERISA and insurance law day in and day out. Why should you, as a claimant, use an attorney who is unfamiliar with the law and the procedures necessary to successfully file and prosecute a claim, while your enemy, the insurer, has knowledgeable experts defending it?
Insurance claims, by their nature, are usually hotly contested because insurance companies make money by not paying. Being profit oriented, they have many ways to get around a claim. They study these methods and use them without compunction whenever the opportunity arises.
Some of their common methods are:
- Getting you to “wimp” out.
- Subjecting you to a “no see’em” IME.
- Losing your paperwork.
- Asking for more and more paperwork.
This is only part of the arsenal insurers use to fight claims like yours each and every day. And, you can be sure that if you make a claim, the insurance company’s natural instinct it to deny it by using any or all of the methods listed above.
Know this for sure: When you make claim, be prepared for a battle to the bitter end.
That way you’ll be neither surprised nor disappointed.
The danger of relapse in some cases can be as much a disability as the actual disability itself, the 1st Circuit Court of Appeals has ruled in Colby v. Union Security Insurance Company, et als, 2013 WL 174419, C.A. 1 (Mass.).
Dr. Colby was an anesthesiologist who became addicted to opioids and, because of this condition, was unable to continue working. But, the insurance company stopped her benefit payments immediately upon her release from the treating facility, claiming that the threat of relapse was not a condition covered by her employer’s ERISA disability policy.
The Court itself framed the basic central question: In an addiction context, can the risk of relapse be so significant as to constitute a current disability requiring the payment of disability benefits? The Court found that under the facts in this case the answer was yes.
Dr. Colby was admitted to a treatment facility for her addiction.. She was released from the facility after having received benefits for just a few weeks because there was a 90-day waiting period before benefits began. Following her release, the insurer refused to make any more benefit payments to her, taking the position that the risk of relapse is not the same as a current disability and she was not entitled to any more benefit payments under the ERISA plan.
It is common knowledge in the medical and disability insurance fields that doctors and, particularly anesthesiologists, are more likely to become addicted to drugs than is the ordinary person. This is because in their line of work they have easy access to drugs.
Although the Court recognized it had to pay deference to the decision of the plan administrator, it said that giving deference in the review doesn’t mean the Court is not to review at all.
Throughout the proceedings, Union Security, in defense of the claim, maintained that the risk of relapse, no matter how serious, could not be a disability under the ERISA plan.
The Court held otherwise. There was no reference to “risk of relapse” in the plan. The administrator’s denial of benefits, the Court said, has to be based on the text of the plan and the meaning of the words used. Here nothing was said about “relapse”.
Finally, claimant’s doctors all were of the opinion that because of the particular stress factors in her life and various other mental health disorders she suffered from, putting Dr. Colby in a situation where she would have access to opioids, would make her relapse just about inevitable.
With no “relapse” language in her ERISA plan, these factors amounted to a disability entitling her to benefits, the Circuit Court ruled.
If you don’t put all of your eggs in one basket when filing an ERISA claim, you’ll most likely to wind up with “scrambled” rather than with your “sunny” side up.
Knowing that the insurance company is likely to deny your claim no matter how good you think it is, it is imperative that you present a full and complete story of your claim from the very beginning, leaving nothing to the imagination. There is little to no chance that you will be able to add to the record after a claim denial.
Why? Because the basic foundation of an ERISA claim is what is called the administrative record. This record is ordinarily composed of witness reports, medical and hospital reports, and medical and occupational evaluations and other written or pictorial evidence which is presented to the insurance company, and what the insurance company relies on in making its claim decision.
If you fail to provide a necessary piece of the case, the insurance company can’t and won’t consider it and it is likely a denial of claim will be upheld even if appealed to a Federal Court.
Obviously, an insurance examiner can’t weigh evidence you don’t provide. And the examiner’s decision can’t be faulted by a court if you didn’t provide the necessary data. If you have evidence that will support your claim – use it or lose it!
Despite omitting crucial evidence, a claimant caught a break in Acree v. Hartford, 2013 U.S. Dist. LEXIS 3687, because the Hartford so overreached in denying an ERISA accidental death and dismemberment claim, that the Court felt compelled to send it back and to allow the claimant to add evidence for that new review.
The issue was whether an insured died as a result of suicide or was accidentally killed while cleaning his gun. The final autopsy report listed the cause of death as “undetermined” although there was mention of suicide in the preliminary autopsy report and in the police incident report.
Naturally, Hartford grabbed on to the “suicide” reference and denied the claim, ignoring the final “undetermined” finding of the coroner. Death by suicide was not covered by the policy and Hartford could pay nothing to the unfortunate victim’s family.
There were pictures of the scene of death which showed that the deceased had beside him gun cleaning paraphernalia which would seem to clinch the theory that the shooting was an accident which happened while the gun was being cleaned.
However, the claimant failed to provide the photos when filing the claim. Therefore, even though the insurer was aware that there had been pictures taken, the picturtes were not provided for the record by claimant and were not considered.
Luckily for claimant, there is a negative presumption in Federal common law against suicide. Unless the evidence shows that the deceased likely committed suicide there is an affirmative presumption of accidental death. Ignoring this presumption weighed heavily in causing the Court to send the matter back for a de novo review and reopening the record thereby allowing the claimant to put the pictures of the scene of the accident into the record.
The importance of having a full and complete record before filing suit on an ERISA claim denial is clearly set forth by the Court at Page 5 of the opinion, when Judge Treadwell says:
“In the Court’s experience, lawyers for ERISA claimants all too often do not appreciate the importance of getting all of their evidence in the administrative record, Thus, it is not uncommon for ERISA claimants, when they get to court, to discover they cannot use what they think is critical evidence.”
Your first step (the administrative appeal) in appealing an ERISA insurance denial is likely your last word. Make sure you’ve got it all and you’ve got it right!
The above holiday card message from a client reminded us of what our disability insurance practice is all about – “little people”. “Little people” is not a reflection of a claimant’s standing in the world. It describes a claimant’s position when fighting a mammoth insurance company for policy benefits.
No matter how wealthy or well connected you may be, your wealth and power pales in comparison to the resources of an insurance company. They not only have the “bucks”, they have armies of claims adjusters and experienced insurance attorneys and plenty of ways to throw a monkey wrench into a claims procedure.
Luckily there are legal procedures which level the playing field somewhat so long as you know how to use those procedures properly. Those who practice this type of law do know and help to bring an insurance company down to a size which is manageable by a claimant. We have been doing this for more than 30 years and never once worked on the insurance company’s side of the street!
Being able to bring hope to those insurance claimants who are overwhelmed by the thought of what they are up against is an added bonus to the way we make our living as attorneys. It helps us to keep going when things get rough.
The client who wrote the holiday card was fearful of going ahead with her LTD claim when she first came to see us. We encouraged her to move ahead with her claim after reviewing her circumstances. She had a perfectly valid claim under her policy.
There should have been no question that her carpal tunnel condition kept this accountant from working as she couldn’t operate a computer or an adding machine without severe pain and numbness. For an accountant to be unable to operate a computer or an adding machine is almost the same as a carpenter being unable to use a hammer.
But, did this obvious fact dissuade her insurance company from terminating her disability claim? Hardly. One of the biggest moneymakers for insurers is discouraging their policyholders from pursuing valid ERISA and private disability claims. After all, when a policyholder drops a valid claim, the benefits payments go from “Debit” to “Profit” for the insurer.
Although she was discouraged and doubtful about whether to challenge her insurance company’s denial of her claim, this client was resilient enough (See “Wimp”) to be able to take on the challenge after we spoke and take the fight to her insurance company. She recognized the insurance company denials and tactics for what they were: A ploy to make her drop her claim.
With help from us, the insurer reconsidered on appeal and now pays her disability benefits.
What makes this claim stand out is that a claimant was brought back from the abyss of giving up a rightful claim which would have made her life a greater struggle because of her finances. She still can’t work but has the security of the disability insurance benefit to which she is entitled to under the terms of her disability policy.
Her card said, “…thanks for watching out for the little people and keep being defender of the faith!”.
Watching out for “little people” is what we have been doing for more than 30 years, particularly when ordinary folks are matched against insurance Goliaths and their “denial machines”.
We intend to keep doing this until we can be of no further use to “little people”.
An ERISA SPD (Summary Plan Description) is supposed to help employees understand the insurance protection they have from their employer by explaining that protection in plain English.
However, since the SPD is compiled by a person who may or may not have the needed abilities to read, understand and transcribe in plain English the complex language of an ERISA plan and its underlying insurance policies, the SPD may very well contain errors, misinterpretations and may even omit important requirements.
To rely only on the information in an SPD in making an ERISA claim is to court disaster. Proof of this is in Cigna v. Amara, 131 S. Ct. 1866 (2011), which holds that even when an SPD provides incorrect information, a claimant has no right to rely upon it. Only what is actually in the plan controls.
ERISA claims are dependent solely on the terms of the ERISA plan specific to each employer, regardless of what the SPD says. The plan has to conform to strict Federal regulations modified only by case law which pertains to ERISA.
The one consistent rule is that the specific terms of the employer’s plan itself are the only reliable guidelines for evaluating an insurance claim under an ERISA plan.
The result is layer after layer of complex, many time obtuse “legalese”, inserted in the plan by people who know exactly what they are doing. To most people, including some lawyers who don’t practice ERISA law, the plan may as well be written in a foreign language.
To determine whether an employee’s claim is covered by an employer’s ERISA plan, one must first read and understand the plan and the accompanying insurance policies. Only if the claim is covered by the plan will the claimant have a shot at succeeding.
In most cases an employee will never have seen a copy of the plan. He or she may not know where to find one. ERISA requires employers to furnish an employees with a copy of the ERISA plan when asked.
If circumstances are forcing you to think you might have to make an ERISA claim, getting a true copy of the plan and the insurance policy associated with it, should be your first order of business. Most employers make them available through their Human Resources departments. uman Resourcersd departmentsd.
When you get the necessary documents, if the language is a bit much or you think you don’t have the expertise, get help from a lawyer, preferably one who has experience with ERISA claims.
The SPD is OK for giving you a general overview of the ERISA coverage afforded you by your employer.
But, when matters turn serious, rely only on the terms of the ERISA plan and the insurance policy which supports it. To do otherwise may do you great harm.
Too often, because of the case law interpreting ERISA, ERISA claims are denied by courts which are required to defer to claims administrators even though the courts would have found for the claimant on the basis of the evidence. There are a flood of such cases throughout ERISA jurisprudence and such unnatural outcomes are not foreign to those who labor in the ERISA field day in and day out.
So, it was refreshing when a Federal District Court Judge in Alabama recently opted to favor interpreting ERISA with emphasis on plan fiduciaries’ discharging their duties solely in the interest of participants and beneficiaries. The clause containing this clear direction, 29 U.S.C. Sec. 1104 (a)(1)(A), is too often overlooked or denigrated by judges in deciding ERISA claims.
Historically, because of the Supreme Court’s decision in Firestone v. Bruch, 489 U.S. 101 (1989), courts have given deference to the decisions of plan administrators (fiduciaries), while sacrificing the primary objective of ERISA – to give employees’ interests top priority in their deliberations. Insurance companies, who most often act as ERISA plan fiduciaries, have made it a religion to ignore this guiding precept of ERISA. That is why this recent Alabama decision is so noteworthy.
Going back to basics in Howington v. Smurfit-Stone, 856 F. Supp. 2nd 1235 (S.D. AL, 2012), District Court Judge Kristi K. DeBose told a fiduciary that a mistake on an application should be corrected so that a claimant’s application could be fairly considered, rather than being dismissed out of hand because the claimant had made a simple mistake in entering the date when his disability arose.
The plan administrator took the position that because the plan documents allowed correction of such an error only if a prior SSDI court Administrative Law Judge made the correction first, the claimant could not rectify the mistake although it was clear that the date was actually in error. Further compounding the mix was the fact that the time within which claimant might have asked the SSDI judge to revise the record had expired.
But, rather than take the “straitjacket” Bruch view (that an administrator’s discretion must be upheld if there is anything in the record to support it), which has been adopted in an overwhelming line of cases since it was first promulgated in 1989, Judge DeBose went back to the basic language of ERISA citing the fiduciary duty owed by an administrator to a claimant.
The Court held that the administrator’s refusal to determine the correct disability date was arbitrary and capricious and the denial of benefits was sent back to the plan administrator for further consideration of Mr. Howington’s real date of disability.
So, instead of taking the hard Bruch line, as many courts have done to favor administrators, Judge DeBose opted for the more humane “prudent fiduciary” standard.
This makes more sense. After all, the purpose of ERISA, as expressed in the statute, is to help disabled employees – not to provide an unfair, unwarranted windfall to claim fiduciaries, because of a simple, honest mistake on the benefit claim forms.
We have warned several times before that ERISA disability cases are not to be trifled with. The presently ongoing matter of Gearlds v. Entergy Mississippi, Inc., 2012 WL 1712441 (S.D., Miss 2012) adds new emphasis to this warning.
The big problem with being unsure of how to proceed is that ERISA law is that sometimes the ERISA statute requires a decision which is counterintuitive to what ordinary common sense (even legal common sense) would indicate.
Gearlds, which at this writing is an undecided appeal, involves an employee who was thoroughly misled by his employer, Entergy, into early retirement in 2005, based on the assurance that he would continue to be covered by the employer’s health insurance plan. He was actually covered for those benefits until 2010, at which point his coverage was terminated by Entergy. After several years of paying, the plan “discovered” it had been mistaken in 2005 and that Gearlds was not an eligible employee under the plan after he retired.
To add insult to injury for Mr. Gearlds, his wife retired from her employment between 2005 and 2010, and he could have received benefits under her policy but turned them down because he believed he was covered under Entergy’s plan.
This case clearly illustrates the importance of knowing ERISA law before claiming a benefit. ERISA rights result from Federal statutes and regulations issued by the U.S. Department of Labor. If a claimant doesn’t meet what’s required in that law and those regulations, the claimant is most likely going to fail in seeking benefits.
Gearlds is a prime example of ERISA litigation that seems to defy common sense. Mr. Gearlds was clearly misled, whether by intention or negligence, by his employer, to do an act which he would not have done if he were properly informed. Yet, because ERISA requires strict interpretation of an employer’s plan, he has so far been denied relief while his employer is permitted to deny him benefits which the employer told him he had.
In ERISA, the plan is the lodestone for benefits. Not only that, under ERISA, the plan administrator interprets the plan and decides what the plan covers. And, courts give deference to the administrator’s decision so long as it is not “arbitrary and capricious”.
What a person can ordinarily do with his property may not hold true if the property is an insurance policy or benefits covered by ERISA. To be certain that your wishes are carried out, the plan administrator’s approval must be obtained.
Otherwise, the administrator may reject what you want to do and your beneficiary may be forced to go without your largesse.
Many people, including a number of attorneys, think ERISA and Social Security disability claims are joined at the hip. They definitely are not.
The only similarity between them is they were both created by Federal statute. In ERISA a private insurance company is usually added to the mix and that adds tons of problems.
A Social Security claim requires a disabled employee to persuade an administrative law judge, an employee of the Federal government with no financial interest in the outcome, that the claimant is unable to work in any occupation for which claimant is reasonably suited by education, training or experience. Such a person is entitled to benefits under Social Security law. Social Security rules and regulations are followed and the imagination is given very little leeway to interpret.
In ERISA the disability claimant not only has to deal with the requirements of the ERISA statutes and Department of Labor regulations, but also with a for-profit insurance company which runs the show. The insurance company has the right to deny benefits which, if granted, it would have to pay. Talk about a financial conflict of interes and an incentive to deny, deny, deny!
Having pursued disability income claims for more than 30 years, we are constantly amazed to find that many people, including attorneys, think ERISA and Social Security law are more or less the same
Our practice is in ERISA and private disability income claims. ERISA disability income benefits derive from both the ERISA statutes and regulations and from insurance policies which employers purchase for their employees as part of their employment benefits package.
Social Security disability income benefits derive from Social Security taxes paid by the employer and the employee and has its own statutory requirements.
Add to the difference, the requirement in ERISA law that the plan administrator's (most often an insurance company which would have to pay the benefit if the claim is approved) decision to deny benefits must be deferred to by the courts in adjudicating disputes.
In Social Security, a disinterested administrative law judge decides the matter. In ERISA, a very interested insurance company first decides a claim. Guess which way the decision tends to go.
This is only one difference between the two statutes, but it is obviously a major difference.
Confusing Social Security apples and ERISA oranges in the law doesn’t do much for desperate people who need benefits.
Claimants and some attorneys handling ERISA and private disability income insurance claims may be unaware of some of the idiosyncrasies of ERISA and disability income insurance law. They should not be lulled into a false sense of security
Because ERISA is a Federal statute with its own strict time constraints, no jury trials, and court deference to an insurance company’s judgment, there is additional special knowledge every claimant and lawyer should know in pursuing ERISA claims.
But, getting back to the idiosyncrasies which affect both ERISA and private disability claims:
* If the claimant is scheduled for an IME (Independent Medical Exam), it’s a photo op for the insurance company and they are almost certain to have a surveillance camera on the claimant on the day of the IME to try to cast doubt on the insured’s disability claim. (more on this)
* A claimant’s Facebook, etc., posts are meat for the insurance company’s grinder. These posts are public and insurance companies go hunting through them to try to catch one picture or statement which might suggest (accurately or not) that a claimant is not as disabled as he or she claims. (more on this)
* Not all psych material is discoverable by the insurance company. HIPPA clearly exempts psychiatric notes from discovery without the client’s permission, but this doesn’t keep the insurance companies from pressing claimants, their lawyers and mental health providers for them. Insurers just love to know a mentally impaired claimant’s darkest secrets, because they know this may disturb a psychiatric claimant’s mental equilibrium just at the time when they are most vulnerable. More importantly, it may provide fodder for the defense argument that the insured is not really impaired at all, but hates his boss or the guy he works next to. Even some practitioners in the mental health field are not aware of the danger they may put themselves in by disclosing such information without the patient’s permission. (more on this)
* Claim denials are a very common reaction of insurance companies to any LTD (Long Term Disability) claim. These claims can turn out to be quite expensive. Insurers make every effort to try to discourage them. (more on this)
* If a claimant has any psychological problems in addition to physical problems, most carriers will do whatever they can to make it seem that the psychiatric problem is the cause of the disability, rather than the other way around. This is because most ERISA and many private disability income insurance policies severely limit the payment of benefits for psychiatric disabilities to no more than 2 years. Non-psychiatric disability benefits may be payable to age 65, or even longer, depending on the policy terms. (more on this)
These are some of the more basic “ins” and “outs” we’ve picked up in practicing ERISA and private disability income law for more than 30 years. They should not be kept a secret, because failure to be aware of some of these things can really hurt an insurance claimant.
The last thing any claimant or their lawyer should want is to see the insurance company knock out a claim for want of insurance claims knowledge or experience.
As readers of this column are well aware, insurance companies are “stodgy” and “old-fashioned” only when it comes to paying claims. When it comes to defending against claims, insurers are swift, inventive and show very little, if any, conscience.
Even experienced disability income lawyers, are amazed at the lengths insurers will go to try to circumvent laws designed to level the playing field for claimants and policyholders.
A case in point is Curtis v. Hartford Life, 2012 WL 138608 (N.D.Ill.) which illustrates the latest tactic of some insurance companies in trying to undo the protection afforded by state legislatures to protect their citizens against the discretionary language rule in ERISA litigation. For more on discretionary language.
A U.S. Supreme Court case, Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) holds that employers, by adding a few words in their ERISA plan, can give a plan administrator, which is usually the insurance company which would have to pay the claim, discretion to decide whether or not a claim is valid. More importantly, Firestone requires reviewing courts to give deference to that decision. For more on deference.
Unless the claimant can show the denial by the insurer was “arbitrary and capricious”, a very tough burden, courts are forced by Firestone to go along with the denial of benefits, even if the court feels the denial is wrong.
To make the cheese even more binding, ERISA preempts state action in ERISA matters, one of the few exceptions being the wording of policies.
For too long, Firestone gave insurance companies the best of the bargain. Then, several years ago, the National Association of Insurance Commissioners (insurance officials from the 50 states) drafted a model rule for prohibiting the use of discretionary language in policies. In states which have adopted that rule, discretionary language is no longer permitted in policies issued in that state. Gone is this free ride for insurers.
At first, insurance companies attacked the policy language prohibitions as actually being covered by ERISA and, therefore preempted. This attack was foiled by Standard Ins. Co. v. Morrison, 584F.3d 837(9th Cir. 2009), in which the court upheld the state’s right to determine the language of insurance policies issued in its state and held such power exempt from ERISA preemption.
Since the preemption argument didn’t work, Hartford tried something else:
It used an insurance trust that was set up in Maryland, a state which doesn’t have a rule prohibiting discretionary language in policies (citizens of Maryland, why do you permit this?).
Hartford then had the trust issue the policy to the Curtis’s employer in Illinois, taking the position that the discretionary language prohibition does not apply because the policy is issued in Maryland, not Illinois. For good measure, Hartford added policy language that the policy was to be interpreted according to Maryland law which does not prohibit discretionary language.
However, the court did not buy this “misdirection” ploy, clever as Hartford thought it might be. The court found the tactic a subterfuge, and found that the actual terms of the insurance contract was the relationship between the insured’s employer and the insurance company. Therefore, the policy language was subject to the Illinois discretionary language prohibition.
As to Hartford’s claim that the policy called for Maryland law to prevail, the court said no, citing the Illinois State Supreme Court’s decision in Hofeld v. Nationwide Life, 332 N.E. 2d 454 (1975) , which held that such a choice of law provision would be upheld so long as no provision of the insurance policy was in conflict with the public policy of the state. In this case there was a clear conflict with the public policy of Illinois which prohibits discretionary language.
But, never fear. In their never-ending battle to pay as few claims as possible, insurers are bound to come up with new ways to try to resuscitate the deference “hammer” that Firestone v. Bruch provides for them.
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”.
Sometimes in writing about ERISA and private disability claims we tend to get into the finer points of insurance claims law and downplay the basics, which are frequently more important in pursuit of such a claim.
The big thing to remember is that insurance companies fight these battles hundreds, if not thousands, of times a day. You have just one shot to get it right.
In this post we are going to try to outline what should be done in the ordinary case when a claim situation arises.
If you think that an injury or illness which prevents you from doing your job may develop into a longer-term disability which might trigger payments under your ERISA or private disability policy, be certain to retain all papers, reports, prescriptions, X-rays, medical and hospital bills involved in the course of that medical incident.
These materials should be maintained for a reasonable period of time if there is a possibility that this injury or illness may recur in future and lead to a claim.
Should you have to file a claim, understand that this is one of the most important parts of the claims procedure. Don’t be lazy or sloppy. The assumption by claimants that they can correct an omission or error on their claim form later, has sunk more disability claims than there are wrecks on the ocean floors of the world.
Your first claim form, if not carefully and properly completed in accord with the terms of your policy, seriously undermines your chances of collecting, even if you have a claim that seems to you indisputable!
Many insureds, because they are not warned otherwise, assume that they are providing that their application for benefits to an impartial reviewer and that their feet will not be held to the fire if they make a mistake. WRONG!!!
Many times, especially under ERISA, the very insurance company which will have to pay you benefits has the right to determine whether or not your claim is covered by their policy. (Guess which way these insurance companies lean in deciding this question?). And, to top it off, their decision is given deference by the courts.
Not only that, you can bet your bottom dollar that if your claim is ever reviewed by a court, the errors of what you omitted or misquoted on your original application will be thrown up to the court time and time again.
So, if in making an ERISA claim, you start off by omitting an important document or medical report or if your physician is sloppy in reporting the facts and nature of your disability, you can be certain that error or omission will haunt you throughout the proceeding. Get it right the first time!!!
When you are unable to work, making a claim for income, perhaps for the rest of your life, is not the time to take chances and hope for the best. You get only one bite at this apple. Make sure you put your best teeth forward!
If you have any qualms about your ability to present all aspects of your disability claim in its best and fairest light, get help from an experienced disability claim lawyer.
It is not wise to stand alone in this fight. You and your family have too much to lose.
For years we have been dying to tell ERISA disability income and other types of insurance claimants that they need a lawyer with solid experience to press insurance claims. We were reluctant to do so, however, because it might look as if we were blowing own horn and overreaching to try to get claims business.
However a recent blog post written by a respected ERISA employer defense attorney points out, http//www.bostonerisalaw.com/archives/benefit-litigation-denial-of-benefit-claims-the-repeat-player-and-saving-money-on-litigation.html, many employers lose a substantial legal advantage in denying employee and other claims, particularly ERISA claims, because they don’t have attorneys who know ERISA insurance claims law.
If what’s good for the goose is good for the gander, this goes even more so for claimants who are represented by attorneys not experienced in disability insurance and ERISA law. To get a fair shake on both sides, you need attorneys on both sides who are intimately familiar with insurance claims law.
The Rosenberg blog’s advice was obviously meant for employers which may have only a few ERISA claims to deal with. Larger employers with more claims would almost certainly have attorneys who are well versed in ERISA claims law. And, it goes without saying that insurance companies that offer policies in the ERISA field would have loads of lawyers who know ERISA law and how to negotiate and defend ERISA claims.
So, why do employee-claimants many times go to their friendly neighborhood lawyer to handle their ERISA claims? Because, they have no idea of the complexity of the ERISA statute and the sometimes convoluted precedents of insurance claims law generally. This is a case of “what you don’t know can hurt you.”
Mr. Rosenberg, who mainly represents employers, talks of the “repeat player” (one who has handled ERISA claims over and over again) and the obvious difference in the knowledge and ability of the “repeat player” in handling an ERISA claim. He says, “…”I routinely see the difference when, on the other side…is a lawyer who regularly represents plan participants in such disputes, as opposed to a general practice lawyer who represents plan participants only occasionally”.
ERISA claimant rights were created solely by Federal statute, 29 U.S.C. § 1001, et. seq. They did not evolve from common law. General principles of common law may not automatically apply under the ERISA statute. So, a lawyer should have a good working knowledge of this specific statute and the case law which it has engendered to effectively represent a claimant.
Further, the law of insurance policy claims, in general, has many twists and turns which are exceptions to the common law. A claimant should consider this fact wisely before selecting an attorney to handle an insurance claim.
Just to blow our own horn, now that Mr. Rosenberg has opened the door for us, we specialize in handling complex insurance matters, particularly disability income, ERISA, life and long term care claims and claim denials. We have handled hundreds and hundreds of such claims in our 30 years at the bar and, we really enjoy doing this type of legal work.
To be fair, we are not the only ones who savor this calling. There are others throughout the country who do the same work with the same fervor.
Thanks to Mr. Rosenberg, our conscience is clear in writing this post. The aim is not to blow our horn. The aim is to blow a bugle to alert insurance claimants to consult with experienced legal counsel when fighting an insurance claim, especially one involving ERISA.
A recent decision of the 7th Circuit Court of Appeals underscores a couple of issues of interest to ERISA claimants and attorneys:
* You just can’t “wing’ it when your legal right is created by a statute.
* Even a seemingly minor procedural miscue by a claimant can get the claim booted out of court, with prejudice.
In Edwards v. Briggs & Stratton,2011 WL 1602061, a claimant was 11 days late in filing her disability appeal with her plan administrator even though there had been ongoing communication between her and the administrator. The administrator rejected her appeal on “lateness” grounds and the Federal District Court and Seventh Circuit agreed, taking the position that the failure to file on time constituted a failure to exhaust administrative remedies and dismissing the case with prejudice.
We are all familiar with attorneys advertising their experience in their particular practice area, and why clients need that experience. Some of those claims are valid and some are pure advertising hype. The Edwards case demonstrates that such a claim is valid in ERISA matters.
In Edwards, the court found that Ms. Edwards made several procedural errors which “deep-sixed” her claim. She was late in advising that she intended to appeal, and also in providing certain information required for her claim. Although, it might seem obvious to an ordinary observer that she was appealing a decision of the plan administrator, she did not make her intentions absolutely clear, with this “wiggle” room, the administrator and, ultimately, the court, found that she had not actually appealed within the time frame required by Federal regulations, and, therefore, she had failed to exhaust her administrative remedies. The court dismissed her claim with prejudice.
Although the court could have exercised discretion and give her some leeway since she was only 11 days late in providing what the court was looking for, the court withheld its discretion and dismissed her case with prejudice.
This case illustrates that ERISA law is one of those areas in which experience is generally a “must”. ERISA disability claims are created by statute. ERISA regulations promulgated by the Department of Labor along with the statute itself, cover thousands of pages in the United States Code and the Code of Federal Regulations.
It is a “picky” law which starts off giving the plan administrator deference in decisions. We have to assume that administrators will always give themselves and the plan the benefit of doubt, so a claimant a starts off behind the 8-ball.
Add to this the regulatory time limits and other technical requirements which must be met to pursue a claim, and it’s easy to see how those, unfamiliar with the timing and format of claims, can trip over the requirements. And, once they trip, as shown in Edwards, they may be out forever.
Much about ERISA is counterintuitive, so just exercising sound, common sense judgment, will not always win the day for a claimant. We don’t mean to enshrine ERISA claims work in some kind of voodoo mysticism, but we do mean to point out that ERISA practice requires more than a cursory reading of a few sections of the ERISA statute and regulations to become proficient.
If one prosecutes ERISA disability insurance claims, one needs a decent knowledge of other statutes which affect claims, such as HIPPA and COBRA. Experience and a good working knowledge of general insurance law are also a plus. It is not enough to just prove a medical disability in a disability income insurance matter. The claimant must also show that the disability prevents the claimant from performing the duties of his or her usual occupation. Sometimes the policy will require proof that the claimant is unable to perform the duties of almost any occupation.
As the Edwards decision shows, ERISA litigation should not be a hit or miss undertaking, where a claimant or an attorney can read a few cases to “get the feel of it” and then go winging along to a successful conclusion.
What you don’t know about ERISA can kill your claim. Just ask Augusta Edwards.
In the ordinary course of business, many financial planners and attorneys advocate renunciation clauses in wills to alleviate the bite of inheritance taxes. But, they may get bitten themselves if they try to renounce a benefit which is covered by ERISA and they do not follow the procedure necessary to accomplish such a renunciation.
Not that these benefits cannot be renounced under ERISA. They certainly may be. But they must be renounced properly, in accord with the requirements of the ERISA plan under which the benefits are offered to the employee. To fail to obtain prior written approval of the administrator of the ERISA plan to renounce may very well take this estate tax option away from the employee, and thereby wreck the tax advantage sought.
The same holds true for changes in the beneficiary of a life insurance policy issued under the terms of an ERISA plan. Many times the owner of the policy wants to change the beneficiary (divorce, death, etc.) and the advisor tries to do so in a formal legal document setting forth the details. Such an attempt might even be included in a separation or support agreement. But, if the proposed change is not in the form of a qualified QDRO, or it has not been run by the ERISA plan administrator and has not received the plan stamp of approval, there is no guarantee that the renunciation or the beneficiary change will ever go into effect.
Those familiar with ERISA litigation are aware that the most important third party to any transaction involving plan benefits is the plan administrator. The administrator has the “go” “no-go” say on any change which is not permitted by the clear language of the plan.
If there is a dispute, courts generally defer to the decision of the administrator because the administrator is held by law to have discretion in ERISA matters. Even though in a non-ERISA situation, the policyholder would have an absolute right to make a policy change in accord with the terms of the policy, the policyholder can’t take a chance under ERISA. If the ERISA administrator says “no”, it probably will be “no”.
If faced with the problem of trying to alter a benefit of an ERISA plan, you must read the plan documents before determining the action you want to take. If your client does not have the latest copy of the ERISA plan, (the usual situation), obtain one from the Human Resources Department of the employer. You have the right to get one on behalf of your client, the employee.
Read the plan carefully, particularly as it pertains to the action you want to take. If you have to run what you want to do by the administrator, follow the procedure set forth in the ERISA plan documents and make sure your intended change is accepted and acknowledged by the plan. Only then may you feel comfortable that you have effectively accomplished your goal for your client.
Estate and financial advisers who are aware of this required difference in approach to renunciation and other ERISA plan changes, will most certainly have taken the proper precautions.
Those who are not completely aware should immediately become familiar with the procedures required so their suggested strategies for ERISA clients are approved by the plan administrator.
Otherwise, the best laid plan may turn into a disaster.
While looking out of the window at another snowstorm today, it occurred to us that the weather we are having in the New York Metro Area this Winter is much like pursuing a disability income insurance claim – never-ending, frustrating and requiring a BIG shovel to get through all of the bull___ thrown at you, even though all you want to do is get on with your everyday life.
If you are unfortunate enough to get caught up in the world of disability income insurance claims, you had better know what you are doing. Most people would think that the insurance company on the other side of your claim will play fair and give you an even break – WRONG!!!
The ordinary claimant is just “plain folks”, a person who has worked all through life and is now stricken with a crippling illness or injury which makes it impossible to continue working. On the other hand, insurance company claims-deniers do little else but deny, deny, deny and receive applause from their superiors for doing so. The more they save the company, rightfully or wrongfully, the more they are held in esteem for the work they do.
And, ERISA cases can be particularly galling to claimants because the Supreme Court added brass knuckles to the fists of insurers by handing them the doctrine of deference in Firestone v. Bruch, 489 U.S. 101 (1989). Not only do the companies get to dip into their unsavory bag of tricks, the Supreme Court says that Federal Courts have to give deference to their denials.
Trying to establish a disability income insurance claim gives you the same feeling you get when you look out of the window and see the snow tumbling down week after week. More shoveling, more slipping and sliding, more cold and less sunlight. It puts you in a depressed winter mood. You feel as if you want to give up.
That is exactly the mood an insurance company wants you to be in when you are pressing a claim. They want more and more information and regard it with less and less attention. They deny and delay, knowing that you are not working and therefore not able to properly support yourself and your dependents. Why shouldn’t they take their time?
Not only do you have to know what, when and where the insurance company is taking advantage of you, but you also have to know that they are counting on you to fold your tent and slink away because of the legitimate pressure they can put on you. Denying claims is second nature to most insurers and they seem to wield this power without remorse. Insurers hold all of the cards (and the money) while you struggle to get them to fairly evaluate your claim.
Disability income claimants need someone in their corner to point out the objective of insurer tactics and to help counter them while standing by to encourage claimants to obtain what is due under the terms of their policy. Claimants not only need knowledgeable help to properly press their claim, they need someone who has the experience to encourage them to stick to their guns and not be discouraged by insurance company tactics.
Part of the insurance company claims strategy is to keep you and your family “barefoot” for as long as possible so that you get disgusted with the whole system and walk away from your claim or settle for much less than it is worth, just to be out of the grinding process of pursuing an income disability claim.
Either way, they win and you lose. From the insurer’s view, this is the Perfect Storm.
When a ‘kick-in-the-slats” state like Texas gives the heave-ho to the discretionary clause in disability income insurance policies, it’s time for the rest of the states (and maybe the courts) to take another look at a discretionary clause ban.
In early December, in a strong, well-reasoned ruling, the Texas Commissioner of Insurance booted the discretionary clause out of the State of Texas starting in 2011.
Any one reading this blog should know that the discretionary clause in a disability policy gives an insurance company an inordinate advantage when challenged by an ERISA policyholder over a disability denial.
This advantage was not mandated by Congress when it first enacted ERISA in 1974. This downer for the disabled was a “gift” of the Gods of the U.S. Supreme Court in Firestone v. Bruch, 489 U.S. 101 (1989), when the majority engaged in a pedantic discussion of trust versus contract law and decided to give administrators of disability insurance policies a more or less free hand by putting disabled workers through the almost insurmountable task of proving that the denial decision of an administrator was “arbitrary and capricious”.
The Firestone court opted for a trust-style review of how to weigh plan administrator denials rather than a contract-style review. Courts were ordered to give deference to the plan administrator denial (usually an insurance company which has to pay the claim, if approved) which automatically erects a steep hill which a disability claimant has to climb. (Apparently the Court overlooked the fact that no person in their right mind would set up a trust in which the trustee and the beneficiary had such obviously conflicting interests).
What a holiday present for insurance companies which have had a long history of taking maximum advantage in any situation. And, the insurers certainly have maxed out on the “deference” gift given them by the Supreme Court!
Down through the years, Federal District judges, bridling at not being able to judge ERISA cases as they see them because of Firestone, have tried to devise ways within the restrictions of Firestone to still do justice to the many wrongly denied disabled claimants whose cases they hear.
ERISA contains a preemption clause which generally keeps states from interfering with the Federal ERISA legislation. Many states were quick to recognize the advantage Firestone gave insurance companies and the unconscionable burden it placed upon the backs of those already so disabled that they could not work.
Led by the National Association of Insurance Commissioners, some states have already found an exception to the preemption clause – the language used in a policy is not preempted and, therefore states can ban the use of deference clauses in policies issued in their state, without violating ERISA.
At this time, some 22 states have tried to level the playing field for their citizens in ERISA disability income claims. Deference to insurers has been a topic of discussion in the ERISA disability insurance field for many years and slowly states have seen the wisdom and justice of giving claimants a chance to prove their case just as a plaintiff does in every other type of litigation – by a preponderance of the evidence with no head start for either side.
To have Texas, a state not known for being partial to wimpy notions, jump on the bandwagon so strongly, indicates that the advantage given to insurance companies in these types of cases is so one-sided, that even a state where sissy stuff is sneered at, says, “Enough”.
The practice of law involves many things – knowledge of the law, writing ability, speaking ability, ability to present a logical argument in an interesting way, but, most of all, compassionate understanding of the “human condition” of clients.
It has always amazed us to hear from clients that the “human condition” aspect of practicing law can be so low on the totem pole of legal services to some practitioners. Helping a client through tough times should be priority Number One for all lawyers.
This is especially true of those pursuing disability income (ERISA and private) claims against insurance carriers who reflexively don’t pay. Claimants in these types of claims usually are laid low, both physically and mentally, by a devastating illness or injury which prevents them from performing their daily occupation, thereby cutting off income to themselves and their families.
Add to this condition, that in most cases the “nest egg” claimants may have set aside to try to secure their future, is eaten up quickly with ordinary housing and food costs which they need to keep themselves and the family going through the “no-pay” period. What a “human condition”: Being seriously incapacitated and having no income!
It’s at that low point in their lives that disability income claimants comes to lawyers for help. They recognize that they stand very little chance of getting disability income payments from insurance companies unless they have knowledgeable legal representation to stand up to the well-staffed, specialized attorney corps insurers use to try to duck policy obligations.
It’s at that low point in their lives that most attorneys practicing disability income law recognize that their clients need more than just good “lawyering”. They also need good “peopling”. They need to project to the client that the client’s case is important to the lawyer and is getting the attention it needs to give it the best chance of resolution in the claimant’s favor. The most important thing, while a disability claim is pending, is for the client to really feel the lawyer understands the client’s economic situation and is doing everything in the lawyers’ power to get the job done quickly and correctly.
One of the smaller, but most important aspects of this caring lawyer-client attitude is one that some lawyers seem to ignore – returning phone calls promptly. If you are a client, what could give you a better feeling about how your case is being handled than to have your lawyer respond reasonably promptly to a phone call from you? It demonstrates that you are important enough to have your attorney take time out of a busy schedule to talk with you.
On the other hand, what could give a client a worse feeling than having the lawyer fail to return n calls for several days after they are made, or even fail to return them at all? Imagine what this phone call “non-etiquette” does to the psyche of a client who had already been laid low physically, mentally and financially. It is an inexcusable way to treat any client, let alone one who is incapacitated and pressing a disability income claim against an insurance company.
These types of client generally need liberal doses of TLC. They need encouragement and assurance that everything is being done to get their lives back on track. What they don’t need, most of all, is short shrift or even silence from the attorney they are banking on to help them.
Our law firm was started by a lawyer who was licensed in New Jersey in 1958 and 52 years later is still practicing law every day. One thing he insisted on when I joined the firm was that I and everyone else return client phone calls as soon as possible. Clients don’t hire you for your good looks, he said, they hire you to look after their interests. The best way to do that is to respond to them in a timely, efficient way. The best way to do that is to talk to them promptly when they let you know they want to talk.
By following this advice through the years, we have found that sometimes these older geezers know what they are talking about.
A recent decision of a Federal District Court judge in Alabama raises the crucial question of the intent of Congress in passing ERISA and the result of judicial tinkering with ERISA claims. (Edgar v. Disability Reinsurance, 2010 WL 3906651).
Federal Judge William M. Acker, Jr., clearly spells out the issue by pointing out that Firestone v. Bruch, 489 U.S. 101 (1989) , seems more intent on preserving the willingness of insurance companies to maintain lower premiums for employers, than to afford stricken employees with the help Congress apparently intended them to have.
The issue is important, but the question is: Should the Supreme Court deal with it or should Congress deal with it? Judge Acker points out that the legislation clearly sets forth that a stricken litigant can bring a civil action to recover benefits due under the terms of the plan. Judge Acker differentiates between a “civil action” which he says is mandated by ERISA and a “review” which he claims is mandated many times in ERISA matters by the decision in Firestone.
The argument centers on Federal Rule 56 (summary judgment), which Judge Acker believes is not applicable to ERISA litigation when there is a dispute of material facts cited by the opponent of the motion. Why, in such a situation is summary judgment permitted when no judge would think of allowing it in a non-ERISA civil case where there are disputed facts.
In support of his thinking, Judge Acker relies heavily on Krolnik v. Prudential, 570 F3rd 841, 7th Cir., 2009, in which the court applied contract law to the ERISA case before it, declaring that Firestone does not change the fact that at base, an ERISA dispute is a dispute over the meaning of the language in an insurance policy, which requires the application of contract law.
Judge Acker sets forth the long-standing law of Rule 56 cases: Only if after all evidence by a non-moving party is considered true, there is still no dispute of a material fact, judgment may be granted to the moving party, if the party is entitled to judgment as a matter of law.
If every other litigant in a Federal District Court is entitled to the benefit of this long-standing interpretation of Rule 56, why aren’t ERISA claimants afforded the same rights? As Judge Acker and Krolnik point out, the issue involves an insurance contract and should be adjudicated according to long-standing insurance law concepts.
To do otherwise indicates an attempt by the courts, with Firestone, to “fix” the legislation. This is not its province. If the legislation, as they wrote it, is actually “broken” in the view of Congress, then Congress should fix it.
For courts to give insurance companies an extra weapon in their already overloaded arsenal (“arbitrary and capricious”) is not the answer. Such a weapon adds a burden to the already overloaded claims wagon the ERISA claimant has to haul.
ERISA indicates clearly that Congress wanted to protect stricken employees. Why did the Supreme Court rebuff this intention by deciding Firestone as it did?
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.Continue Reading...
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.
Where did courts ever come up with the wild idea that medical opinions about a patient from a treating doctor and those from a reviewing doctor, who just looks at reports and test results without seeing the patient, should be given the same weight?
The responsibility of the physician in each case is worlds apart. Physicians know that seeing the patient (skin pallor, demeanor, eye condition, general appearance) is a major part of diagnosing disease or illness. How can such a personal examination by an experienced doctor be replaced by looking at words on paper?
The Social Security Administration has long ago concluded that it cannot, and has adopted the “Treating Physician” rule. This rule gives more credit to the opinion of a physician who actually treats a patient than it does to a doctor who is paid just to render a medical opinion on the patient. To most people, this would seem a sensible rule.
However, the U.S. Supreme Court in Nord v. Black & Decker, 538 U.S. 822 (2003),has refused to allow the “Treating Physician” rule to used by courts in ERISA cases. Why?
Sometimes, when the doctor has known the patient for some time, a change in appearance will offer a major clue to whether or not the patient is really ill. And, most importantly, a treating doctor can be held accountable for malpractice while a doctor examining for an insurance company cannot, because the person being examined is not that doctor’s patient.
But the Supreme Court in Nord suggests that a treating doctor may have a friendship or feel sorry for a patient and therefore shade his or her medical opinion toward the patient. However, this ignores the fact that for years insurance companies have been nurturing stables of doctors who never seem to find any claimant disabled, no matter how compelling that claimant’s injury or illness.
Until lately, courts have seemed to be blind to the practice of insurance companies using the same physicians over and over again based on the doctor’s inability to find disability. Many of these “experts” make all or most of their handsome livelihoods from these insurance company exams. Who would you think would be more liable to fudge examination results, the doctor who might feel sorry for a patient or the doctor who derives a major portion or all of his or her income from insurance exams?
To those who think there are doctors who would honestly follow their findings no matter what, we agree. However, such physicians are unlikely to have a stall in the disability insurance barn for long. We live in a world where to understand how things actually work you have to follow the money. When you follow insurance company money and a lot of it is going out because of one doctor’s opinions, you know there are going to be some changes made.
Which brings us back to the original question: Where did courts ever come up with the idea that medical opinions about a patient from a treating doctor and a reviewing doctor, should be given the same weight? And, why is it taking the courts so long to recognize this idea is so out of balance when everyone else involved in the disability insurance industry knows it is flat out wrong?
The obvious answer is that the insurance companies pay millions each year to PR and advertising people to blow smoke in the eyes of legislators and courts to perpetuate what is good for insurance companies, while claimants have no organized campaign to present inequities to the powers that be.
What’s to be done? Not much. Claimants will just have to chip away at the stodgy body of law which has grown since Congress enacted ERISA in 1974. Appellate courts seem to be starting to get the message of the unfairness of closing their eyes to reality. See MetLife v. Glenn, 128 S. Ct. 2343 (2008) at Page 2352, where the U.S. Supreme Court finally recognized that there is a conflict of interest when an insurance company, which will have to pay a claim, is given deference by courts to decide whether the claim is going to be paid. It doesn’t take a genius to figure that one out, especially in these times when “More, More, More” is the theme song in business.
Glenn should be a beginning. Notwithstanding Nord, more courts should come to the realization that treating doctors have their medical license to lose if they lie about their findings. On the other hand, many insurance company doctors lose their meal ticket if they don’t lie about theirs.
If courts do recognize the difference in responsibility, maybe, just maybe, they will generally afford the evidence of treating doctors an edge over insurance doctors, who never even see the claimant.
Although group insurance coverage normally expires on the last day of employment, most group policies have provisions that allow the coverage to be converted to an individual policy.
Under the law, the burden of clear notice to the employee of this conversion option is placed upon the employer, while the employee, once properly notified, has the burden of arranging for the individual policy to be issued.
Although these statements of the law are well accepted, the facts of individual cases sometimes lead to the conclusion that a review is in order so that employer and employee are both aware of what is required of them.
Such a case is Hauth v. Prudential Insurance Company, 2010 WL 3168279, in which the notice purportedly given by the employer was scrutinized to see if it was adequate when the employee, although terminally ill, failed to convert to an individual life policy.
Although there was a note in the benefits administrator‘s file that notice of the conversion privilege had been given to the employee the day after employment termination, there was no indication in the record of how the purported notice had been given or the form in which it had been given.
Relying on Canada life Assurance Co. v. Estate of Lebowitz, 185 F. 3rd 231 (4th Cir. 1999),the court ruled that any notice of conversion required by an insurance policy must be in writing, and must include:
* The date when the group coverage would expire.
* The date when the right of conversion to individual coverage would expire.
* The procedure to be followed by the employee when converting from group to individual coverage.
* The amount of the premium required to convert the policy.
Without these four requirements being clearly met, the court ruled that there was not the written notice of conversion required by the group policy and that therefore, claimant is entitled to collect under the terms of the group policy even though no longer employed.
In an unusual move for a court, it used “common sense” to make the cheese more binding. The court noted that the claimant was gravely ill when terminated (in fact, he died 41 days after termination). In such circumstances, the court found that there was no logical reason to suppose that had he been given adequate written notice of his right to convert a group life policy to individual coverage, that he would not have done so.
There is a lesson to be learned here for everybody involved in group insurance, the employee, employer and even the insurance company:
When the group policy calls for written notice to the employee of the right to convert a group policy interest to an individual interest, the employer should make certain the notice is in writing, contains the expiration date of policy coverage and of the right to convert the policy, and the amount of the premium the employee will have to pay to convert the policy.
The insurance company also has a great interest in seeing that the employer complies or it may wind up having to pay the piper.
In disability income insurance circles the word “malingering” is always used to paint the claimant black, but the word “malingerer” should be applied to insurance companies far more often than to claimants, for many insurance companies are open and blatant “malingerers” when it comes to paying benefits.
This was made very clear in a recent opinion in the 7th Circuit when the court raked MetLife over the coals for using an arsenal of shady denial tactics to thwart an ERISA claim based on subjective complaints, (Holmstrom v. Metropolitan Life, 2010 WL 3024870, 7th Cir., 2010).
In this case, the appellate court found a litany of reasons why the denial of benefits to Holmstrom was “arbitrary and capricious”, even though the Federal District Court from which the appeal was taken had found that MetLife’s denial of benefits was sound.
Why do courts (and, generally, the public) have no difficulty in believing a claimant is “malingering” when seeking benefits, but never seem to seriously consider whether an insurer is “malingering” when it comes to paying benefits?
One might reasonably ask if a corporation which stays alive on profits is any less likely to shave morality to obtain a larger income than is an individual who stays alive on work income and might shave morality to stop working and use benefits to keep the family going?
Some claimants do try to malinger by not working and collecting benefits when they are not actually disabled. Insurance companies are right to contest these claims vigorously. But, there also compelling evidence that some disability insurance carriers make it a policy to actively “malinger’ on paying benefits. One only has to go back to 2004 to the Unum settlement with 49 states to see the pattern of no-pay strategies employed by these insurers. Yet, insurance companies are still not labeled “malingerers”. Why not?
When individuals are suspected of malingering, there is a battery of tests used by insurers to try to detect the falsity of the claim for benefits. Insurers have used them for years and years and have had many a success in beating down a claimant, some deservedly so, some not.
Since it is abundantly clear that insurance companies malinger when it comes time to pay disability benefits, why isn’t there a test for insurance company “malingerers”? Why should claimants be any less entitled to challenge benefit denials in court in a manner supposedly as objective as the one they face when making a claim? More importantly, why shouldn’t there be a real consequence when insurance companies ?
As the Holmstrom court pointed out, such a test might include the following questions:
* Did the insurer require the claimant to make application for Social Security benefits? If so, did the insurer give appropriate weight to the result of the SSDI application?
* Did the insurer’s doctors actually physically examine the claimant? If not, what appropriate weight should the opinion of these doctors be given in view of the type of disability claimed?
* Did the insurer appropriately evaluate treating doctors’ reports?
* Did the insurer giver appropriate weight to objective test results?
* Was the claimant’s actual medical history appropriately considered by the insurance company?
* Did the insurer appropriately take into account the cognitive impairments which are likely to result from medication required by the claimant’s condition?
* Did the insurer inappropriately ignore overwhelming evidence of disability by treating doctors in favor of the opinions of its doctors who never examined the patient?
* Did the insurer continue to move the goal posts so the claimant could never kick a field goal, i.e., provide the proof necessary to convince the insurer?
“Appropriate” is a key word, because it should not be enough for an insurer to say “we deny” without giving reasons appropriate to the level of the claimant’s proof, to support “we deny”. If Congress, in writing ERISA, thought plan administrators, especially insurance companies, would be paragons of virtue when it came to protecting employees, (29 U.S.C. 1001, et seq.) they were horribly mistaken.
To even the playing field in light of Firestone v. Bruch, 489 U.S. 101 (1989), reviewing courts should require insurers to provide rebuttals to claimant’s proofs which are on a level with the quality of those proofs.
Case law is full of instances where the desire not to pay benefits was so outrageous, that courts, usually restrained in their language, take the defendant insurance companies to task severely.
Yet, when it comes to the word “malingering”, courts and the public seem to reserve the term for claimants only.
If it looks like a duck, acts like a duck and quacks like a duck, why not call it a duck?
Insurance company disability plan administrators are many times “malingerers” of the worst kind when it comes to paying benefits.
Lawyers sometimes have a habit of using more words than necessary. Many times this just bores the audience. Sometimes, it really, really hurts.
A case in point is the rule banning the use of the discretionary clause in health insurance policies in New Jersey. Discretionary clauses have been used by courts since the 1980s to require ERISA claimants to show that disability income claim denials by employers and insurance companies are “arbitrary and capricious” before the merits of the claim can be considered. This sea change in ERISA jurisprudence was based upon the Supreme Court decision in Firestone v. Bruch, 489 U.S. 101 (1989).
In 2006, the New Jersey Department of Banking and Insurance responded to our request to do something about this unfair burden on plaintiffs in a relatively prompt manner for a state agency. (As an aside, it has taken the State of New York years longer to respond).
But, in drafting the regulation, the New Jersey Department of Banking and Insurance felt it necessary to insert the unnecessary word “sole” before the word “discretion”, and to add language about review which accomplishes nothing as the law now stands. So, now the regulation (N.J.A.C. 11:4-58.3) reads as follows:
“ No individual or group health insurance policy or contract, individual or group life insurance policy or contract, individual or group long-term care insurance policy or contract, or annuity contract, delivered or issued for delivery in this State may contain a provision purporting to reserve sole discretion to the carrier to interpret the terms of the policy or contract, or to provide standards of interpretation or review that are inconsistent with the laws of this State. A carrier may include a provision stating that the carrier has the discretion to make an initial interpretation as to the terms of the policy or contract, but that such interpretation can be reversed by an internal utilization review organization, a court of law, arbitrator or administrative agency having jurisdiction.”
Why is it worded this way? Who knows? The word “sole” adds nothing and opens wide the door to confusion.
When we first saw the proposed regulation, we thought that the word “sole” was unnecessary and was very likely to cause a problem in the courts. We wrote to the Department of Banking and Insurance and objected to this language – to no avail. So, the word “sole” remained in the regulation, lying in wait for some poor claimant to fall prey to its tendency to confuse.
Lo and behold – it happened.
In the case of Evans v. Employee Benefit Plan, et als, 2009 WL 418628 (3rd Cir. 2009), which was decided on other grounds, the Court posited that the New Jersey ban on giving deference in insurance policy language only applied to policies which gave “sole” discretion to the administrator. Since the policy language used only the word “discretion” and did not use the word “sole”, the Court reasoned that the regulation would not apply, even though the policy gave no discretion to make decisions to any other person or entity!
What is “discretion” but the authority to decide an issue? If you are the only one with authority to decide an issue, what can the word “sole” add to your power of discretion? If more than one person has discretion to decide an issue, then none of them, alone, has discretion without the other(s).
As we had previously pointed out to the NJ Banking and Insurance Commission when N.J.A.C. 11:4-58.3 was proposed, amendment to N.J.A.C. 11:4-58.3 is required forthwith. The NJ Department made it clear in 2006 that giving deference to the administrator is against public policy. N.J.A.C. 11:4-58.3 was undoubtedly intended to ban the discretionary language from disability income insurance policies in the State. Why let the unnecessary word “sole” cause any confusion so as to threaten the policy rights of New Jersey citizens when they become disabled?
We intend to pursue the issue of amendment with the State until it goes into effect. Otherwise, there will be cases in which New Jersey disability income claimants are deprived of what is due them, because of an unnecessary extra word in the regulation.
When a judicial branch has a monopoly on hearing a certain type of case, one would think that judges in that branch would be meticulous in steering clear of anything which might make them look like they favored one side or the other.
Why then do some Federal District Court judges continue to attend a luxurious “forum” on Defending and Managing ERISA Litigation, a conference which “…is devoted entirely to the defense of claims…”? There has been an improvement, though. Last year 21 Federal judges attended this meeting (see Lest Ye Be Judged). This year only 9 Federal judges are scheduled to speak.
That’s progress, but what about ERISA disability income claimants who may be litigants in the district courts of these judges? How comfortable can they be?
We would guess the claimants would not be too comfortable if they knew the flier announcing the conference proclaims that the attending judges will discuss for the attending ERISA defense lawyers: "View from The Bench: Federal District & Magistrate Judges Speak out on How to Convey Complexities to the Court (including plan documents and the ERISA Statute), Effective Theories/Defenses, Evidentiary Approaches, Statute of Limitations, Deciding Cases Early, Discovery, Forum Shopping and More."
The brochure follows this synopsis of judicial topics with more of an explanation: “You cannot afford to miss this unique opportunity to hear (from the judges): “…the theories and defenses that are most effective; which arguments are most effective on a motion to dismiss; the best ways to limit discovery in a conflict of interest situation; and judicial pet peeves that could turn a case in your favor”.
These judicial insights are being revealed to a conference which strictly appeals to one side of bar - the ERISA litigation defense bar. If you figure that the judge’s trip to the posh Helsmsley Hotel in New York and other seminar goodies were paid for by the conference sponsors and that the judges were surrounded for a couple of days by attendees whose sole occupation is to beat ERISA claimants in courts presided over by Federal District Court judges, you have to wonder why any judges participate.
How “comforting” to a disabled ERISA worker trying to battle an insurance company for disability benefits, especially if the claimant’s case is being heard by one of the judges on the panel giving insights to insurance defense lawyers.
We know that some judges are able to overcome the effects of being treated well and being exposed to a one-sided view of a legal issue, but why should an ERISA litigant have to wonder if his or her judge is one who can really shuck off all that one-sided baggage?
Wouldn’t it be better for judges to avoid attending and lecturing at highly partisan convocations which take a single-minded, biased view of a legal issue when that legal issue might well come before that judge in future?
Like Caesar’s wife, these arbiters of ERISA claims should be above any suspicion.
Ever since Firestone v. Bruch, 109 S. Ct. 948 (1989),many disability insurance carriers have been getting a free ride on SSDI.
LTD insurance companies force claimants to pursue Social Security for disability benefits so they can recoup monies they have laid out in paying the private insurance claim. And then insurers totally ignore the SSDI disability finding when evaluating the claim they have to pay under their ERISA policy.
However, as courts come to realize the obvious conflict of interest these claims generate, they are beginning to look at this free ride more and more closely. Why should insurers be permitted to force claimants to go after SSDI benefits and then totally ignore them when deciding its own case with the same claimant?
The U. S. Supreme Court itself has recognized the problem. It succinctly stated in MetLife v. Glenn, 128 S. Ct. 2343 (2008) at Page 2352:
“…MetLife had encouraged Glenn to argue to the Social Security Administration that she could do no work, received the bulk of the benefits of her success in doing so (being entitled to receive an offset from her retroactive Social Security award), and then ignored the agency’s finding in concluding she could do sedentary work…”
Wouldn’t it be more evenhanded to have a successful SSDI claim raise a rebuttable presumption in the private LTD case that the claim is legitimate medically and is totally disabling? Such a presumption would not be anywhere near a lock on the issue, but would require the insurance company to come forth with reasonable proof that the SSDI finding was mistaken or that the SSDI decision did not apply to the current LTD claim.
Proving SSDI claims is not a walk in the park. SSDI judges have no more inclination to award benefits than do employers and insurance companies. Only about one-third of SSDI claims result in benefits being initially awarded to claimants. There is no conflict of interest nagging at an SSDI judge as there is at an insurance administrator, so the SSDI decision would appear more reliable.
While the SSDI judgment should not bind the insurer, it is a considered judicial decision that warrants more than a snub in defense of a claim.
If Federal District Courts were to hold that SSDI judgments raise a rebuttable presumption that a claimant is totally disabled, the insurer would be required to rebut on the merits a judgment by an unconflicted court, instead of paying the judgment lip service, and then ignoring it, to justify denial of a private LTD claim for its own benefit.
There are many reasons why such a presumption could be overcome by an insurance company:
* The terms of the insurance policy does not cover the illness or injury
* Evidence of an error in the SSDI proceeding or findings
* New evidence after the SSDI hearing (the claimant should also then be able to meet this evidence).
* Fraud on the SSDI court which impugns the decision (i.e., evidence that the claimant is working)..
With a rebuttable presumption approach, more weight would be given to an SSDI judgment, but the judgment still would not be binding on the Federal District Court when the insurer could show, with real evidence, that it should not be binding.
Such a judgment should not be ignored by an insurer which has benefited from it, unless there is a legitimate evidentiary reason for not following it.
A rebuttable presumption approach by Federal Courts to SSDI judgments would seem to be a fair way to deal with this crucial issue in ERISA LTD cases.
The first thing disability insurance companies do when hit with a claim in a state court that even mentions ERISA is to move it over into Federal District Court. It’s an almost knee-jerk reaction, no matter what the cause of action, because insurers seem to feel more comfortable in a federal court.
This feeling may be because a lot of plaintiff’s attorneys practice mostly in state courts and are unfamiliar with the practice and procedure in federal jurisdictions. Or, it may be that insurers get a warm and fuzzy feeling in federal courts because ERISA usually gives them a “deference” leg up in an ERISA matter.
Whatever the reason, automatic removal of such cases in the 2nd Circuit will no longer be a slam dunk after Stevenson v. The Bank of New York Company, Inc., . In Stevenson, the Federal District Court sent a case removed from the state court back to the state because the complaint did not make a claim about ERISA and its standards, or the conduct of any ERISA functionaries in their ERISA capacities.
In Stevenson, plaintiff sued Bank of New York because he alleged certain promises were made to him that if he worked abroad for the bank, his rights under certain ERISA plans would be maintained, and he would suffer no loss under those plans as a result of working abroad. His suit sounded in contract and tort law, having nothing to do with the interpretation of ERISA or his rights under ERISA.
Yet, the Bank of New York was able to remove the case from state to federal court, purportedly on the basis of ERISA jurisdiction, and further, to get the District Court to dismiss the complaint.
Holding that the claims in the complaint are neutral toward ERISA plans and that mention of ERISA in the complaint was just used to describe the underlying consideration for the contract, the 2nd Circuit remanded the case back to the District Court, with directions to remand the case back to the state courts for further proceedings.
So from now on, at least in New York, Connecticut and Vermont, insurers will have to do more than show that a complaint just mentions ERISA to get a removal into their warm and fuzzy place – the Federal District Court.
Texas has now joined New York in trying to level the playing field for their ERISA disability income insurance claimants. Both states have proposed new regulations designed to negate the deference courts give to insurance companies in deciding disability income cases under ERISA.
If the regulations are finalized and become law, New York and Texas will join more than 20 other states in giving their citizens an even chance to prove their right to disability benefits.
These problems started with the case of Firestone v Bruch, 489 U.S, 101, when the U.S. Supreme Court found that, under the court’s interpretation of trust law, ERISA plans could be written so that discretion is given to claims administrator’s in deciding claims, and courts would then be obliged to give deference to the administrator’s findings.
This led to the concept of “arbitrary and capricious” review in ERISA disability cases. Under Bruch, the administrator’s denial of a claim would be upheld unless the claimant could show that the denial was “arbitrary and capricious”, a term of art in the law. This rule raised a mountain in the path of the claimant. If there was any reasonable basis for the denial, it would be upheld, no matter how compelling the claimant’s contrary evidence might be.
The major problem with giving deference is that the administrator is many times the insurer who pays the claim. So, if the administrator approves the claim, it also has to pay the claim out of its own funds. This deference power in a conflict of interest situation would try the moral fiber of an angel. So, you can imagine what it does to insurance companies which are far from angels!
There have been many examples of how this conflict works against disabled employees, including the most infamous one – the Unum 49-state investigation of its claims handling practices, which led to a large settlement with Unum and the reopening for review of more than 220,000 Unum case disability income denials.
What makes this deference requirement of Bruch even more problematic for claimants is the principle of preemption which makes federal law completely controlling over state law in ERISA matters. Courts have held that states have very little to say in these cases, with one big exception – states have the right to determine the language of insurance policies in their jurisdiction. In policy language, state word is law.
As a result, many states which object to insurance companies getting the upper hand over their citizens because of Bruch, have banned the use of discretionary language which favors insurers, in approving the policy forms used in their state.
One would think that every state would look out for its people in this way, especially when it takes so little effort.
What is surprising is that about half of the states haven’t done it yet, leaving the insurers with the upper hand against their own people.
The U.S. Supreme court took a big chunk out of the “discretionary” fortress erected by ERISA disability income carriers when it reversed a 4th Circuit Court opinion in Hardt v Reliance Insurance, 2010 WL 2025127 (5/24/10). In Hardt, the court decided that claimants do not have to be a “prevailing party” to win attorney fees.
The discretionary fortress is built on the discretion ERISA gives plan administrators to determine whether a given plan covers a claim. Since many times the plan administrator is also the insurance carrier which would have to pay the claim, you don’t have to be a genius to figure out which way such discretion leans.
The Hardt decision, in effect, turns the tables on insurers which have been using their ERISA-granted “discretion” for decades to hamstring claimants without fear of penalty to themselves. Now, misuse of their “discretion” can very well lead to insurers paying the claimant’s legal fees, since Hardt holds that the award of fees in such cases is solely in the “discretion” of the trial court.
In the Hardt case, the District Court awarded legal fees to the claimant because she provided compelling evidence that she was totally disabled. Although the District Court did not decide the issue of claimant’s entitlement to benefits, it awarded her a remand order which sent the matter back to the insurance company for a new review. Upon looking at the matter on remand, Reliance reversed its prior denial of benefits and awarded benefits to Hardt.
However, Reliance balked at paying Hardt’s attorney fees, saying that under the American Rule (each litigant pays his or her own attorney), she was not entitled to be paid the fees it cost her to prove her case because she had not “prevailed” in the matter because all she had actually “won” was a remand back to Reliance. The 4th Circuit Court of Appeals agreed and overruled the trial court on the award of legal fees, since, according to the Circuit Court, she had not “prevailed”.
The Supreme Court ruled that the language of 29 U.S.C.1132(g), the ERISA statute which authorizes an exception to the American Rule, gives the trial court discretion to award fees so long as the plaintiff has achieved “some degree of success on the merits”. In this case, the Supreme Court held that by winning a remand at the District Court level, plaintiff had met the “degree of success on the merits” requirement.
Now, hopefully, there will be fewer American Rule free rides for insurance companies who are in the habit of saying “No” to just about every claim they conjure up the flimsiest doubt about, since they think they have nothing to lose. Carriers will have to consider the cost to them if the claimant succeeds in obtaining a removal, even though there is no final judgment by the court.
This ruling by the nation’s top court will give insurers pause before they force claimants to battle through the courts when the insurer well knows that the ERISA policyholder has a good case. All too often this tactic is used by the insurance company in the hope that the claimant will run out of money for lawyers or will just be discouraged by the roadblocks of litigation and go away.
Now that they know they are more likely to be held accountable for the claimant’s attorney fees when their conduct fails to comply with the law, insurers may reconsider this tactic and afford more policyholders the relief they are supposed to get.
The Hardt ruling will help insurance companies understand that “discretion” in ERISA means a measured judgment based upon a full and fair consideration of all of the facts, not a reflex denial just because it saves the company money.
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.
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.
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
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.
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.
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?
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.
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).
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.
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”.
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.
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.
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.)
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.
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.