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.




Speak Very Clearly in ERISA

A recent line of court decisions has been placing ERISA plan drafters under a heightened duty to speak very plainly if they want to have courts uphold plan administrator discretion in making disability decisions. The importance of discretion; it will determine whether a reviewing court applies a de novo standard of review to the evidence in a case, or if the court must find an abuse of discretion to overturn a plan administrator’s decision.

In Cosey v. Prudential, 2013 WL 5977151, 4th Circuit (2013), the Fourth Circuit found that ERISA plan language stating that benefits will be paid to a claimant who “…submit(s) proof of continuing disability satisfactory to Prudential…” was ambiguous and therefore failed to grant the necessary discretionary power to the administrator.

Ms. Cosey offered a mixed bag of medical opinions to support her claim of both short and long term disability. Most of her complaints involved her own reported symptoms, with very little objective proof.

The Federal District Court below had found the plan language offered the degree of certainty necessary to give the administrator’s discretion in ruling on a claim. In fact, the District Judge bootstrapped the language so that the administrator could even require objective evidence to uphold a claim for disability even though there was no such requirement in the policy.

The Fourth Circuit Court of Appeals strongly disagreed, finding the plan language lacked the clarity ERISA requires to confer discretionary power in the administrator.

The major fault in the language, the Court found, was that “proof satisfactory to us” is ambiguous. It can mean proof must be provided in a certain form and the wording does not clearly confer discretion to the administrator to make a decision on the merits.

The extraordinary part of the opinion to our mind was the Court’s concern that an employee may not understand the meaning of the language in the plan and that an employee may make a choice of employer based on whether a plan gives an administrator’s decision deference.

In reality, such a chain of events is so far from what actually happens in real life that it makes us wonder how courts can conceivably think that an employee carries any weight in the ERISA plan his employer enters into. Further, it suggests a degree of sophistication regarding the nuances of ERISA jurisprudence that most laymen, even most lawyers, simply do not possess.

The insurance contract portion of an ERISA plan is not a contract the employee bargains for. It is a contract of adhesion. It is in place at the time of employment and the employee either takes it or leaves it. There is no input from the employee which can change its terms.

That’s why we are upset when the Supreme Court justifies, as it did in U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013), taking away important equitable remedies from employees on the grounds that the insurance contract is something they had a hand in bargaining for.

The decision in Cosey is to be applauded. Employers and insurance companies have all the say in the wording of an ERISA plan and its supporting insurance policy. It should be done correctly.

The worrisome part of Cosey is that some judges still think employees have any influence or knowledge of the ERISA plan and insurance policy which covers them. This is absolutely not so.

To believe it is so, gives the wrong slant to deciding future ERISA cases.





"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.




Post The ERISA Plan

One way to make ERISA easier for employees to understand would be to post the employer’s plan online where they can see what protections they are supposed to get. Airing out the protections and restrictions of employer purchased insurance policies would make it easier for employees to know their coverages and limitations, and is now a common practice for many larger employers.

This would bring the reality of the contractual relationship of employees a little closer to the harsh reality created for them in U.S. Airways v.McCutchen, 133 S. Ct. 1537 (2013). If the fair reach of Equity is precluded by the employee’s supposed agreement with the terms of an employee welfare benefit plan, the employee ought to have a reasonable way to know what the terms of the plan are.

Most of the time the plan details and the insurance policies which underwrite the plans are hidden away in the Human Resources Department of the employing entity. Even if an employee was aware of this situation when becoming employed, the employee would have to ask for a copy of the ERISA plan from the Human Resources department and would probably be given a copy of the Summary Plan Description (SPD) instead. The SPD is supposed to accurately convey, in simple language, the terms of the plan.

However, reading the SPD would do the employee little good because the Supreme Court has held that the SPD is not the plan and only the language of the plan itself is the law of any case brought under it, Cigna v. Amara, 131 S. Ct. 1866 (2011). So, even if an employee knows enough to ask for a copy of the plan, what he or she would probably get (the SPD) would not be the final say in any dispute.

In fact, even if the SPD is flat out wrong, the employee cannot rely on it if the SPD contradicts the plan itself.

With this in mind, we were absolutely floored by the decision in McCutchen. If the law of the case is the plan itself and the employee never sees it until requesting it (which is usually after a claim accrues), how did the Court base its decision on holding that the plan is what the employee bargained for and therefore they are bound by its terms?

McCutchen makes it more imperative that employees learn about their ERISA plan as soon as they can before or when they become employed. If courts are going to hold them to having bargained for the plan terms, in all fairness they should be able to know the terms of the bargain when they become employed.

Making the full plan available online seems the easiest way to accomplish this.




De-Conflicting Medical Reports

A new Federal rule which would require prescription drug and medical device manufacturers to report what they pay doctors for consultations and speeches is just what the doctor ordered for ERISA insurance claims.

The Centers for Medicare and Medicaid Services proposed the rule which will require the gathering of such data on August1, 2013, with the CMS scheduled to release the data on a public web site at the end of September, 2014.

What has this to do with ERISA claims?  Lots!

The purpose of the new rule is so that the public should know what financial relationship the doctor who recommends a drug or treatment has with companies which supply the pharmaceuticals or medical treatment a patient may need.  This transparency allows the patient to have a meaningful discussion with the doctor about what the doctor is prescribing

The whole point, according to CMS, is to reduce the potential for conflict of interest in the doctor- patient relationship. 

Why don’t courts require the same openness in ERISA litigation?  Federal judges are becoming more and more aware of the potential conflict of interest when a physician makes a substantial portion of his or her income from insurance company exams to determine the validity and extent of claimed injuries or illnesses for which his or her insurer would have to pay benefits.

Why not make insurance companies provide a breakdown of all of the monies paid to a doctor to perform so-called “independent medical exams” along with the doctor’s report?  That would give the court, considering whether benefits should be paid to a disabled employee an insight into the credibility of the physician’s report.

Attorneys representing ERISA claimants have been complaining for years that many of the doctors called upon by insurance companies to examine claimants are more interested in continuing to be paid for reports, than they are in giving honest opinions.  If a doctor’s opinions are not heavily in favor of insurers, how long do you think that doctor would continue to get paid for opinions by insurance companies?

The beginning of the end for secrecy about physician track records began with the U. S. Supreme Court decision in Metropolitan Insurance v Glenn, 128 S.Ct.2342 (2008),when the court seemed to wake up to the fact that there is an innate conflict of interest when medical experts are paid by insurance companies to “independently”  evaluate disability claimants.

Why it took so long for the Court to reach this obvious conclusion is anybody’s guess.  Arguably, Glenn opened the door to allow discovery in this area.  But, to be fair to claimants who are suffering not only from their illness or injury, but also from total loss of income when unable to work, much more light should be shone on the insurance company-“independent” medical examiner relationship so Federal District  Courts can properly value the worth of medical reports in ERISA cases.

What better way than to follow the CMS rule and have each doctor whose report is being considered by the court present the details of the financial relationship that doctor has with the insurance company the doctor examined for?

The details should include:

* How many medical exams the doctor performed for insurance companies during the last two years.
* How much money insurance companies paid the doctor for these examinations during the last two years.
* The percentage of these exams in which the doctor found the insured too disabled to work.
* Any other financial arrangement in which the doctor receives any remuneration from the insurance company.

We can’t see the difference between the conflict of interest which may be generated by a physician being paid for “consulting” or “speeches” and being paid for examining claimants.

Both activities affect the insurance company’s bottom line and are therefore suspect.