Did your disability insurer follow the law when it denied your insurance claim? Don’t count on it. If you have long- term disability insurance through your employer, you may need a lawyer with expertise in the Employee Retirement Income Security Act of 1974 (“ERISA”) to evaluate that. We routinely see disability insurers violate ERISA laws, either intentionally or negligently.

The case of Puccio v. Standard Ins. Co., 2015 U.S. Dist. LEXIS 21412 (N.D. Cal. Feb. 20, 2015) is a recent example. In Puccio, Judge James Donato issued a favorable opinion for policyholders that reiterated three longstanding legal principles disability insurers cannot seem to get right: (1) a “purely paper review” of the insured’s medical records by the insurer’s consulting physician, without personally examining the insured, is generally not sufficient to deny the insured’s disability claim; (2) although an insurer is not bound by a decision from the Social Security Administration (“SSA”) to award disability benefits, it must evaluate the decision and provide legitimate reasons for a contrary conclusion; and (3) an insurer cannot reject an insured’s claim without explaining in detail what specific additional information would be sufficient for it to award disability benefits.

Defendant Standard Insurance Company (“Standard”) violated every single one of these well-established principles when evaluating Plaintiff Annina Puccio’s long-term disability claim. In January 2009, Ms. Puccio submitted a claim to Standard under her group disability insurance policy asserting disability for a mental disorder. That commenced a six year process of numerous claims and appeals involving different mental and physical conditions. Each time Standard initially denied Ms. Puccio’s claim, she appealed. Standard would then reverse its claim decision and award Ms. Puccio disability benefits. This pattern proceeded for years until Standard finally upheld its claim denial in the final administrative appeal.

In the first two claims, Standard reversed its denials and decided to extend disability benefits for a mental disorder, then later for fibromyalgia and osteoarthritis (both musculoskeletal conditions). The policy had a twenty-four month limit for mental and musculoskeletal disorders. Standard thus rightfully limited Ms. Puccio’s benefits to two years based on those disabling conditions.

When Standard denied the insured’s final appeal, a different medical condition was at issue, Addison’s disease, a potentially crippling endocrine disorder. That disease was not subject to the policy’s two-year limit unlike Ms. Puccio’s earlier claims. Standard nonetheless upheld its denial. It concluded based on reviewing Ms. Puccio’s medical records her Addison’s disease symptoms were well controlled and not disabling. It concluded only her musculoskeletal conditions prevented her from working in her sedentary job. It therefore denied her claim for benefits based on Addison’s disease. It stopped paying any further disability benefits because the policy’s two-year limit on mental and musculoskeletal disabling disorders had expired.

Standard retained no less than nine different doctors during the six-year claim process to review Ms. Puccio’s medical records. None of them personally examined her. Each time they concluded Ms. Puccio was either disabled or not disabled based purely on a “paper review” of her medical records. None of them spoke to her treating physicians. Although Standard was well aware that the SSA concluded Ms. Puccio was disabled and had awarded her disability benefits, it failed to review or even ask for their records. While it reduced Ms. Puccio’s disability benefits based on the amount of the SSA award, as it was entitled to do under the policy, it apparently was not interested in understanding why the SSA found her disabled.

Ms. Puccio filed a lawsuit against Standard under ERISA for her long-term disability benefits beyond the two-year limit. She alleged her Addison’s disease symptoms prevented her from performing her job duties. Standard filed a motion for summary judgment and argued its decision to pay benefits for two years based on Ms. Puccio’s mental and musculoskeletal disorders, but to deny further benefits based on her other physical conditions like Addison’s disease, was proper. It contended her Addison’s disease symptoms did not disable her within the meaning of the policy because they did not prevent her from performing her sedentary job duties.

Judge Donato of the Northern District of California soundly rejected Standard’s argument and denied its motion. As discussed above, Judge Donato found it extremely important that Standard had concluded there was no disability based on a “pure paper review” of the insured’s medical records without ever having a doctor personally examine her. He also criticized Standard for not obtaining, evaluating and distinguishing the SSA’s finding of disability. Finally, he reasoned Standard should have told the insured precisely what additional information she needed to submit to change its denial decision and allow her that opportunity on appeal, but it did not.

Judge Donato discussed these legal principles in his opinion as follows:

Standard should have conducted an in-person medical evaluation to assess the disability impact of Puccio’s Addison’s disease . . . Standard limited itself purely to a paper review of her medical records at the cost of ascertaining all the facts from an in-person exam. That alone raises questions about the thoroughness and accuracy of the benefits determination.

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Evidence of a Social Security Award of disability benefits is of sufficient significance that failure to address it offers support that the plan administrator’s denial was arbitrary, an abuse of discretion. While Standard was not bound by the SSA’s determination, complete disregard for a contrary conclusion without so much as an explanation raises questions about whether an adverse benefits determination was the product of a principled an deliberative reasoning process. . . .

Taken together, these factors alone support a finding that Standard abused its discretion, but there is more. Standard also failed to request the specific evidence that it and its reviewing physicians concluded was necessary to evaluate Puccio’s claim.

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The Ninth Circuit has emphasized that ERISA regulations call for a meaningful dialogue between a claims administrator and plan beneficiary. A beneficiary is entitled to a description of any additional material or information that was necessary for her to perfect the claim, and to do so in a manner calculated to be understood by the claimant. Standard never informed Puccio that it needed information specifically stating that her Addison’s disease or gastrointestinal issues would prevent her from performing sedentary level work, separate and apart from the other conditions. . . . If Standard required specific information to evaluate Puccio’s claim, Standard needed to ask for it. [Citations omitted].

Based on that reasoning, Judge Donato held Standard abused its discretion when it denied Ms. Puccio’s long-term disability benefits beyond the mental health and musculoskeletal coverage. He remanded the case back to the plan administrator, Standard, to reconsider whether Ms. Puccio is entitled to additional disability benefits. He found Standard must obtain and evaluate the evidence it should have in the first place in reaching its decision, i.e., opinions from Standard’s “paper review” doctors after personally examining the insured, the SSA record, and the insured’s medical records that specifically address how Addison’s disease impacts her ability to work.

Do disability claims administrators diligently follow the law and act in the best interests of the plan’s participants as they are obligated to do as an insured’s fiduciary? You would not be surprised that the answer is that they do not. Often, as Standard did here, a disability claims administrator has a conflict of interest because it acts as both the decider of your claim and the entity ultimately responsible to pay it. Saddled with that conflict, Standard, like other similarly situated insurers, had a financial incentive to deny Ms. Puccio’s claim and ignore well-established legal principles about how a disability claims administrator must act when investigating the claim. Now ask yourself this question: did your claims administrator do so in handling your long-term disability insurance claim?