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

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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

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

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

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

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

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

Taking into account the checkered history of insurance company shenanigans:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Why do we keep kidding ourselves about what we do?

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

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

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

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

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

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

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

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

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

A maybe disability income policy

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

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

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

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

Other advantages of private over ERISA polices are:

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

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

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

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

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

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

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

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

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

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

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

To read the opinion, click here.
 

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

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

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

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

Talk about a stacked deck!

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

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

What about the rest of us?
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

…

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

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

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

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

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

No requests, no exam fees, no income.
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GOOD RIDDANCE!

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

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

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

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

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

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

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

For recent decisions on this issue:
 

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

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

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

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

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

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

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

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

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

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

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

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

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

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