Merck's Laundry List

 A recent case caused Merck & Co. to go down swinging on every pitch served up by the Third Circuit when it comes to being arbitrary and capricious. 

Kosiba v.Merck & Company, 2011 WL 843927, set forth a procedural laundry list of errors by a plan administrator which would lead a court to find an administrator’s decision terminating LTD benefits to be arbitrary and capricious. 

In any other “world” but ERISA any procedural error from the following list would almost automatically call for an “arbitrary and capricious” reversal of a decision favoring an administrator, but in ERISA law, where the administrator is highly favored, such a reversal is news.

Here’s the Third Circuit list.  See if you don’t agree.

  • A reversal of benefits determination without additional evidence.
  • A disregard of opinions previously relied upon .
  • A self-serving selectivity in the use of evidence or reliance on self-serving paper reviews of medical files.
  • A reliance on the opinions of non-treating doctors over treating doctors without explanation.
  • A reliance on inadequate of incomplete investigation.
  • A failure to comply with notice requirements of Section 504 of ERISA.
  • Failure to analyze all relevant diagnoses.
  • Failure to consider claimant’s ability to perform actual job requirements.

With all of these strikes against it, one would think that the Court would automatically reinstate the claimant’s benefits without question.  Not so in ERISA.

Although the Court did restore claimant’s benefits, it took pains to declare that if the administrator had denied claimant’s “any occupation” LTD benefits from the start, it would have remanded the claim rather than reinstate her right to benefits.

How come?  Defendant had multiple swings at the ball. 

On this sorry record, why give it more?

The 2-Sided ERISA "Cheat"

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.




Equity Can Be Fickle in ERISA

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.”


In ERISA, Go It Alone At Your Peril

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.








"Pingponging" An ERISA Claim

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.




Equity in ERISA?

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.





Don't Be A 'One-Shotter' In ERISA

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.



Keeping Doctors Honest In ERISA

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?

Lest Ye be Judged...


  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”.