McKennon Law Group, Author at McKennon Law Group

In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment & disability claim, from navigating a claim, to handling a claim denial, through preparing a case for litigation. In Part Thirteen of this series, we discuss the administrative record and attempts to augment an administrative record after an appeal has been closed and administrative remedies have been exhausted. Under the Employee Retirement Income Security Act of 1974 (“ERISA”), judicial review of an insurer’s denial of benefits is typically limited to the administrative record that existed at the time when the appeal was denied. Therefore, it is crucial to determine if there are any documents or records that were not considered by the claims administrator during the appeal process that a court must review in order to make an accurate judgment.

When it comes to disability claims denials, some of our clients decide to handle the appeal of the claim denial on their own. After the appeal is denied, if the policy does not allow for additional appeals, a disability claimant’s only available recourse is filing a lawsuit in federal court. This puts claimants in a difficult position should the insurance company deny their appeal. There may be important medical records, expert reports, personal statements or certification letters that the disability claimant failed to send to the insurance company that could be necessary for a district court to review in order to reverse an insurer’s decision to deny benefits.

For example, we often see that our clients are awarded Social Security Disability Insurance (“SSDI”) benefits after their disability insurance company has denied their claim and appeal. Evidence of an SSDI award could be very persuasive for a judge to consider in a de novo review of a benefits decision. SSDI awards have a similar, possibly more stringent, disability standard than most group disability policies. Therefore, it can be very important for a district court to view this persuasive evidence in order to make a properly informed de novo review. Making sure that a court views these important records that were not originally presented to the insurance company may be accomplished through a motion to augment the administrative record or a stipulation between the parties to augment the administrative record.

Under de novo review in an ERISA action, the key issue that a district court must decide is whether the insurer’s decision to deny benefits was correct. See Opeta v. Northwest Airlines Pension Plan, 484 F.3d 1211, 1217 (9th Cir. 2007). A district court has discretion to consider evidence extrinsic to the insurer’s administrative record when “circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.” Mongeluzo v. Baxter Travenol Long Term Disability Ben. Plan, 46 F.3d 938, 944 (9th Cir. 1995). Indeed, it can be reversible error for a district court to fail to admit extrinsic medical evidence that is not part of the administrative record. Id. .

There are two standards that courts consider when deciding whether to augment the administrative record: the Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006) and Opeta, 484 F.3d 1211 standards. The Abatie standard involves a situation when a plan administrator has failed to follow a procedural requirement of ERISA, in which case a court may consider evidence outside of the administrative record. Abatie, 458 F.3d at 971. An example of this may be an insurance company’s denial letter not clearly setting for the information needed to perfect the claim or why that information is needed regarding the next steps in the appeal process. In addition, courts have found that insurance companies have committed procedural ERISA violations by failing to provide a copy of a reviewing physician’s report to the disability claimant. Notably, until recent amendments to the ERISA regulations, the disability claimant had to first ask for a copy of new reports in order for a court to find that a procedural ERISA violation had been committed. See Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 678 (9th Cir. 2011); Yancy v. United of Omaha Life Ins. Co., 2015 WL 5132086, at *4 (C.D. Cal. Aug. 25, 2015).

The Opeta standard involves a non-exhaustive list of situations in which admission of evidence beyond the administrative record could be considered “necessary” by a district court to conduct an adequate de novo review. The situations include:

(1) Claims that require consideration of complex medical questions or issues regarding the credibility of medical reports.

(2) The availability of very limited administrative review procedures with little or no evidentiary record.

(3) The necessity of evidence regarding interpretation of the terms of the plan rather than specific historical facts.

(4) Instances in which the payor and the administrator are the same entity and the court is concerned about impartiality.

(5) Claims that would have been insurance contract claims prior to ERISA.

(6) The existence of additional evidence that the claimant could not have presented in the administrative process. Id.

Not all of these six factors need be present. Williams, 2009 WL 604942, at *3-4 (admitting extrinsic evidence that is not in the administrative record in an ERISA disability benefits action in which only two factors were present). In fact, courts routinely admit extrinsic evidence with only one Opeta factor present. See Langlois v. MetLife, 2012 WL 1910020, at *10 (N.D. Cal. May 24, 2012) (only one factor being present: the credibility of medical reports); Duncanson v. Royal, 2011 WL 5974805, at *4 (N.D. Cal. Nov. 29, 2011) (same). The list was intended merely as a guide to district courts faced with a motion to augment the administrative record. Quesinberry v. LINA, 987 F.2d 1017, 1027 (4th Cir. 1993).

When faced with one or more of these six factors, or faced with an ERISA procedural violation, a court may deem it necessary to view extrinsic documents such as evidence of an SSDI award, more recent medical records, personal statements or clarifying statements. In fact, in Schramm v. CNA Fin. Corp. Insured Grp. Ben. Program, 718 F.Supp.2d 1151, 1165, fn. 4 (N.D. Cal. 2010), the court held that evidence of an award of Social Security disability benefits was necessary for an adequate de novo review of the plan administrator’s determination, where the Social Security decision was rendered six months after the denial of the claimant’s final administrative appeal in the ERISA matter.

However, if a court decides against augmenting an administrative record, a disability claimant may be faced with an uphill battle to win their benefit claim in court. For this reason, it is important to contact a skilled ERISA attorney at the appeal stage before a final determination on appeal is rendered. When McKennon Law Group PC is hired, we make sure that insurers have all necessary evidence prior to the exhaustion of the administrative remedies. While it is possible to augment the record after a lawsuit is filed, the easiest remedy is to hire competent ERISA attorneys at the claims or appeal stage of your disability claim. However, there are some types of evidence (like SSDI awards) that often cannot be submitted prior to the final appeal denial. In these cases, a motion to augment the administrative record could be the only recourse for a claimant. In addition, it is always worth meeting and conferring with opposing counsel about stipulating to augment the record before filing a motion, in order to avoid costly motions and the uncertainty of a court ruling.

McKennon Law Group has significant experience in handling ERISA and non-ERISA disability insurance cases in which an insurer denied a claim. If your insurer or plan administrator has denied your disability claim, please contact us for a free consultation so that we may assess your matter.

In the October 23, 2020 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon. The article addresses a recent case by the California Court of Appeals, Dones v. Life Ins. Co. of N. Am., which reversed the trial court’s ruling sustaining demurrers without leave to amend based upon an agency theory due to the employer county’s errors administering the life insurance policy on behalf of the insurance company. These errors were imputed to the insurance company, rendering it liable for the employer’s mistakes under the equitable remedies of waiver and estoppel. The Dones case will surely be read to further expand liability against non-governmental employers and insurers and assist employees and their beneficiaries in receiving their much needed plan benefits.

Ruling demonstrates when employers are agents of insurers

A recent 9th Circuit decision affirms that in the context of employer-sponsored benefits, the employer is the agent of the insurer with regard to the administration of the policy.

By Robert J. McKennon

People are often drawn to job opportunities because of the employee benefits offered to them and their families. A generous benefit package that includes several types of insurance such as medical, short-term and long-term disability, and life coverage could be the deciding factor for a prospective employee. They are not experts in the enrollment process. They often rely on their employer’s human resources department to help them understand their coverage options, pay their premiums, understand what forms they must submit and help them solve any problems that may arise. However, if the employer fails to accurately explain coverage requirements, and if the forms are not correctly completed to an insurer’s satisfaction, insurers can and will deny claims, blaming the employees or their employers. California law protects employees in some circumstances. For example, under an agency theory, an employee can impute legal responsibility to the insurer for the employer’s errors in administering an employee benefit plan, thus rendering the insurer liable for the employer’s mistakes or negligence under equitable remedies of waiver and estoppel.

The recent case of Dones v. Life Ins. Co. of N. Am., 2020 DJDAR 10896 (Oct. 7, 2020) further expands protection for employees and their beneficiaries. In Dones, an employee of the County of Alameda (County), Trina Johnson, enrolled in supplemental life insurance coverage with the Life Insurance Company of North America (LINA). She was a County employee but on a medical leave of absence. While on her medical leave, she received information regarding her benefit eligibility for the supplemental life insurance. She made her election online, selecting $230,000 in supplemental life coverage and naming Michael Dones as her primary beneficiary.

The master policy stated, “If an Employee is not actively at work due to Injury or Sickness, coverage will not become effective for an Employee on the date his or her coverage would otherwise become effective under this Policy. [¶] Coverage will become effective on the date the Employee returns to Active Service.” The master policy defined “Active Service” as follows:

An Employee will be considered in Active Service with the Employer on a day which is one of the Employer’s scheduled work days if either of the following conditions are met: [¶] 1. He or she is actively at work. This means the Employee is performing his or her regular occupation for the Employer on a full-time basis, either at one of the Employer’s usual places of business or at some location to which the Employer’s business requires the Employee to travel. [¶] 2. The day is a scheduled holiday, vacation day or period of Employer approved paid leave of absence, other than disability or sick leave after 7 days.

After her cancer diagnosis, Johnson received confirmation that she had successfully elected her benefits and that her coverage would become effective on January 1, 2017. The County deducted premiums for her benefits which were sent to and accepted by LINA. Johnson remained on leave and died six months later without having returned to work.

After Johnson’s death, a County employee informed Dones that Johnson’s life insurance coverage never became effective because she had not returned to “active service.”

Dones sued both LINA and the County. In his second amended complaint, he asserted causes of action for breach of contract, breach of implied contract and breach of the implied covenant of good faith and fair dealing (against LINA only). Dones asserted that both defendants waived and were estopped from asserting the active service requirement. The second amended complaint alleged that if an employee who elected the supplemental insurance benefit while on leave returned to work for even one day after the January 1, 2017, effective date, the supplemental benefit would become active. But Johnson did not understand the requirement and reasonably believed that the policy covered her automatically after the effective date.

Defendants filed demurrers to Dones’ amended complaint. The trial court sustained the demurrers without leave to amend. It rejected Dones’ argument that LINA and the County waived, or were estopped from enforcing, the active service requirement. The trial court relied on case law holding that waiver and estoppel arguments cannot be used to create insurance coverage that does not exist in the plan documents. Dones appealed.

In reversing the trial court’s order, the California Court of Appeals considered several cases, including most importantly the 9th U.S. Circuit Court of Appeals decision in Salyers v. Met. Life Ins. Co., 871 F.3d 934 (9th Cir. 2017), a case involving employee benefits subject to the Employee Retirement Income Security Act of 1974 (ERISA). The Salyers court found a waiver where the insurer accepted premium payments but later denied a death benefit because the plan participant failed to provide a “Statement of Health” as required for eligibility. The court held, “The deductions of premiums, [the insurer] and [employer’s] failure to ask for a statement of health over a period of months, and [the employer’s] representation to Salyers that she had $250,000 in coverage were collectively ‘so inconsistent with an intent to enforce’ the evidence of insurability requirement as to ‘induce a reasonable belief that [it] ha[d] been relinquished.’”

While insurers and plan administrators often argue that waiver cannot be used to create coverage beyond that actually provided in an employee benefit plan, Salyers noted the distinction created by the acceptance of premiums. The Salyers court held that where premium payments have been accepted despite the plan participant’s alleged noncompliance with policy terms, giving effect to the waiver does not expand the scope of the plan, but rather, provides the plaintiff with an available benefit for which he paid.

The Dones court noted further that waiver and estoppel are normally questions of fact. It declined to hold that these principles cannot establish the existence of an effective contract of insurance as a matter of law.

It then turned to whether the County’s conduct could support causes of action for breach of contract against LINA. The court considered the California Supreme Court’s decision in Elfstrom v. New York Life Ins. Co., 67 Cal.2d 503, 512 (1967), which held as a matter of law that the employer is the agent of the insurer in performing the duties of administering group insurance policies. The California Supreme Court based its reasoning on the fact that the employee has no knowledge or control over the employer’s actions in handling the policy or its administration. The Dones court found that Dones’ allegations (that the County was acting as an agent for LINA in the administration of the life insurance policy as well as informing Johnson of available benefit options, communicating with her about and confirming her selections, deducting premium payments and transmitting them to LINA) were sufficient to allege agency under Elfstrom. It determined that the County acted as LINA’s agent in administering the life insurance policy (for purposes of determining LINA’s liability). But it held that the County could not be held responsible, relying on law that makes it difficult to pin liability on governmental entities.

This decision affirms that in the context of employer-sponsored benefits, the employer is the agent of the insurer with regard to the administration of the policy. This can be very important to tie an employer’s errors in administration to the insurer and thus provide an avenue of recourse for a beneficiary such as Dones who would otherwise be without recourse.

Plan administrators must carefully and accurately communicate coverage options and policy terms to employees like Johnson. If they do not, they and the insurer may be exposed to litigation and potential liability for their misconduct. As was the case with Salyers, this often occurs with a “proof of good health” requirement that the plan administrator and insurer fails to enforce, leading the unsuspecting employees to believe they are fully covered. Recent expansion of breach of fiduciary duty liability, waiver, estoppel and agency theories in federal ERISA cases have been a welcome development for employees who obtain insurance coverage from their employers. While the Dones case did not find liability against the County, when read in conjunction with Salyers, it will surely be read to further expand liability against non-governmental employers and insurers outside of the ERISA context and will thus assist employees and plan beneficiaries to secure their much needed plan benefits. Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith and ERISA litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at www.californiainsurancelitigation.com.

On July 24, 2020, McKennon Law Group PC’s client, Julie Hodgson, filed a 52-page Complaint against the administrator of her disability benefits, Lincoln Life Assurance Company of Boston (“Lincoln”), on the basis that Ms. Hodgson could no longer perform her job duties or those of any occupation because she suffered from chronic pain syndrome, connective tissue disease and fibromyalgia. Initially Lincoln had approved Ms. Hodgson’s short-term disability benefits, but after a transition and claim for LTD benefits, Lincoln improperly denied her long-term disability benefits, based on Lincoln’s reasoning that Ms. Hodgson no longer met the definition of disability.

The Complaint in detail attacked Lincoln’s examination and analysis of Ms. Hodgson’s claim and appeal for LTD benefits. First, the Complaint alleged that Lincoln contracted biased medical consultants who although agreed that Ms. Hodgson suffered from her impairing diagnoses, simply concluded that Ms. Hodgson was able to perform her job duties. The Complaint alleged that Lincoln’s reliance on these medical consultants was unreasonable since all of their reports were cursory, without adequate analysis and the paper reviewers did not clearly state the basis for disagreeing with Ms. Hodgson’s multiple examining doctors. Carrier v. Aetna Life, 116 F.Supp.3d 1067 (C.D. Cal. 2015).

Second, the Complaint alleged that Lincoln’s medical consultants did not examine Ms. Hodgson, though its Policy permitted it. This raised questions about the credibility of their opinions and the appropriateness of Lincoln’s benefits denial. Shaw v. AT&T, 795 F.3d 538 (6th Cir. 2015). This is to be contrasted with her treating providers who have regularly treated her for years and consequently gained great insight into her work limits. Therefore, their opinions were based purely on a “cold file review” of Ms. Hodgson’s medical records and therefore carried far less weight and did not have the benefit of the insight gained through personal observation. Sullivan v. Prudential, 2014 WL 3529974 (E.D. Cal. Jul. 15, 2014). A in person examination is especially important in cases involving subjective diagnoses, such as pain and fibromyalgia.

Third, Ms. Hodgson alleged that Lincoln and its consultants ignored Ms. Hodgson’s medical records that frequently referred to her numerous tender points in multiple exams, which courts have consistently recognized that such findings are significant in cases involving fibromyalgia. In Wulf v. Astrue, 773 F. Supp. 2d 984 (D. Kan. 2011), the court noted “as the Eighth Circuit said in [Brosnahan v. Barnhart, 336 F.3d 671 (8th Cir.2003)], the ‘objective medical evidence of fibromyalgia’ was the ‘consistent trigger-point findings’ and the plaintiff’s ‘consistent complaint during her relatively frequent physicians’ visits of variable and unpredictable pain, stiffness, fatigue, and ability to function. 336 F.3d at 678. This alone demonstrated that Lincoln’s medical consultant’s review of Ms. Hodgson’s medical records was incomplete and thus, any conclusions made from their review were flawed.

The Complaint concluded by attacking Lincoln’s vocational consultant’s report as incomplete, flawed and conclusory. Lincoln improperly relied on this vocational report which simply concluded that Ms. Hodgson could work in sedentary and light occupations, while failing to list the job duties of those listed occupations and the skills required to perform them. This detail is required by law. Turner v. Life Insurance Co. of North America, 2017 WL 6000099 (W.D. Wash. Dec. 4, 2017). Lincoln’s vocational analysis also failed to consider Ms. Hodgson’s non-exertional limitations, such as cognitive and psychological limitations, including those related to the side effects of her prescription medications and pain, and her limited ability to remain seated for an extended period of time. Such non-exertional limitations are important aspects of vocational capacity and should be considered. Rabuck v. Hartford Life and Accident Ins. Co., 522 F.Supp.2d 844 (W.D.Mich.2007). Finally, we alleged that the vocational consultant never looked at actual job postings or whether those businesses were looking to hire someone now (let alone whether Ms. Hodgson was a realistic candidate in the real-world employment market). Numerous courts have found that a group disability insurer’s failure to confirm that actual jobs are available in an occupation the claimant has the physical ability to perform violates the group policy. For example, in Kennard v. Means Industries, Inc., 555 Fed. Appx. 555, 557–58 (6th Cir. 2014), it was undisputed that, due to his medical condition, the clamant was only capable of working in an “absolute clean-air environment.” For all the reasons discussed above, the Complaint alleged that Lincoln’s reliance on its consultant’s vocational report was improper.

In less than two months after filing the lawsuit, Lincoln voluntarily reversed its denial of Ms. Hodgson’s claim for LTD benefits and agreed to pay her all disability benefits provided by the policy, plus prejudgment interest and our attorneys’ fees and costs. It was a total victory for Ms. Hodgson.

Unfortunately, many insurance companies participate in similar tactics to deny legitimate claims for benefits. Instead of accepting the opinions of treating physicians, insurance companies will often deny claims based on “a failure to meet the definition of disability” or lack of “objective evidence” or perform a “paper review” of medical files by “independent” medical consultants who are hired by the insurance company. If your disability insurer denied your claim for short-term disability or long-term disability benefits, please contact our firm for a free consultation. We have extensive experience with handling these types of disability claim denials

On October 14, 2020, Judge Janis L. Sammartino of the Southern District of California ruled in favor of McKennon Law Group PC’s client in her motion for attorneys’ fees and costs arising out of an ERISA disability lawsuit against Aetna Life Insurance Company. Our client, a former senior vice president at a major retailer, became disabled as a result of her numerous medical conditions which include chronic pain syndromes, neurological deficits, spinal problems, deterioration of high-level cognitive functioning and gastrointestinal issues. She has a long-term disability policy with Aetna. After paying two years’ worth of benefits, Aetna terminated our client’s claim for disability benefits. After pursuing her administrative appeals, our client sued Aetna to obtain the benefits she was owed. We convinced Aetna to reinstate our client’s benefits. When it was discovered that Aetna had improperly deducted our client’s worker’s compensation benefits from her payments of disability benefits, we convinced Aetna that it had erred and to pay our client the withheld funds. However, Aetna still refused to pay our client’s attorneys’ fees and costs. We filed a motion for the fees and costs.

In ruling on the motion, Judge Sammartino rejected a variety of Aetna’s arguments as to why it should not pay our client’s attorneys’ fees and costs. For example, Judge Sammartino explained that, even though she had not ruled on the merits of the claim, our client’s lawsuit prompted Aetna to reinstate our client’s benefits and, under a “catalyst theory of success,” our client had demonstrated success on the merits of the case, a key factor in establishing entitlement to an award of attorneys’ fees. Judge Sammartino also rejected Aetna’s arguments that our client’s attempts to augment the administrative record before suing Aetna were not compensable as part of the litigation. As Judge Sammartino explained, the attempts to augment the record served as a demand letter related to litigation and were not part of the administrative appeals process. The awarding of fees for this additional time significantly increased the value of the award of fees.

We had several strategic victories along the way that contributed to this favorable result. Not only did we convince Aetna to reinstate our client’s benefits, but we also successfully rebutted several attempts by Aetna to acquire a copy of our fee agreement with our client. Whereas fee agreements are discoverable under certain circumstances, they are completely irrelevant to an award of fees under ERISA. See Van Gerwen v. Guarantee Mut. Life Co., 214 F.3d 1041, 1048 (9th Cir. 2000); Welch v. Metropolitan Life Insurance Co., 480 F.3d 942, 946 (9th Cir. 2007). Not only did successfully denying Aetna access to the fee agreement deny Aetna access to additional arguments as to why the fees should be reduced, but the time arguing that issue was compensable when we filed our motion for fees.

The Court ordered Aetna to pay our client 80% of her requested fees and costs, $182,869.82. This was the final piece of a very successful case.

Health insurance plans frequently deny claims by plan members on the basis that the claimed services are not medically necessary. This limitation is applied even more so in the context of claims for mental health and substance abuse services where plans often seek to limit what type of coverage they provide or how long they will cover such treatment. The recently-enacted California SB 855 expands the coverage obligations for fully-insured health plans in California for mental health and substance abuse treatment. Self-insured plans are not impacted. The law applies to all California health plans and disability insurance policies issued, amended or renewed on or after January 1, 2021. It requires that health plans provide coverage for all medically necessary services for mental health issues under the same terms and conditions applied to other medical conditions. The bill also prohibits a health care plan from limiting benefits or coverage for mental health and substance abuse disorders to short-term or acute treatment and defines covered benefits to include basic health care services, intermediate services and prescription drugs.

The law defines “medically necessary treatment of a mental health or substance abuse disorder” as a service or product addressing the specific needs of a patient for the purpose of preventing, diagnosing, or treating an illness, injury, condition, or its symptoms, including minimizing the progression of such, in a manner that meets all of the following:

Is in accordance with generally accepted standards of mental health and substance use disorder care;
Is clinically appropriate in terms of type, frequency, extent, site, and duration; and
Is not primarily for the economic benefit of the health care service plan and subscribers or for the convenience of the patient, treating physician, or other health care provider.

The law prohibits health plans from applying different, additional or conflicting criteria when making medical necessity determinations. The law also requires that health plans base medical necessity determinations on current generally accepted standards of mental health and substance abuse disorder care and that they apply specified clinical criteria and guidelines in conducting utilization reviews.

The bill also makes any provision in a health plan that reserves discretionary authority to the plan to determine benefit eligibility, interpret the terms of the plan or provides standards for interpretation that are inconsistent with California law, void and unenforceable. In addition, the law expands coverage to include medically necessary treatment of all mental health and substance abuse disorders described in the most-recent edition of the International Classification of Diseases or the Diagnostic and Statistical Manual of Mental Disorders. Lastly, the law provides that if medically necessary treatment of mental health and substance abuse disorders is not available in-network within the geographic and timely access standards, the plan must arrange coverage to ensure medically necessary out-of-network services at the same cost-sharing level that the member would pay for in-network services.

Health plans and insurers that provide coverage in California are already subject to the 1999 California Mental Health Parity Act and the federal Mental Health Parity and Addiction Equity Act of 2008, which, combined, require coverage of medically necessary treatment of severe mental illnesses, serious emotional disturbances of a child, and substance use disorders under the same terms and conditions applied to other medical/surgical conditions. The California Mental Health Parity Act required mental health parity to nine enumerated severe mental illnesses but did not require parity in the treatment of substance abuse, anxiety, opioid use, alcohol use, and post-traumatic stress disorders.

The overall impact of SB 855 is to expand healthcare plans’ obligations for covered mental health services. Claimants faced with denied health insurance claims for these services should contact an experienced insurance attorney such as the McKennon Law Group PC who can help guide claimants through these new requirements and ensure that their health plans are providing appropriate coverage.

National Football League (“NFL”) players are covered by an employer-sponsored long-term disability (“LTD”) policy called the Bert Bell/Pete Rozelle NFL Player Retirement Plan (“Plan”). This NFL Plan, like most employer long-term disability plans, is governed by ERISA. Therefore, disabled NFL players face many of the same evidential challenges as company-bound employees when filing a claim for disability. These similarities are evidenced in the recent decision, Dimry v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, 2020 WL 5526607 (N.D. Cal. Sept. 15, 2020)(“Dimry”). The court held in Dimry that Plan administrator (“Bert Bell”) abused its discretion when denying Mr. Dimry’s disability claim primarily for the following reasons: (1) Bert Bell did not provide Dimry with a “full and fair” review; (2) Bert Bell demanded “objective evidence” which was not required by the Plan; and (3) Bert Bell failed to consider Mr. Dimry’s Social Security award.

Dimry originally filed a complaint against Bert Bell to recover LTD benefits in 2016. Shortly after, the Social Security Administration (“SSA”) found that Dimry had been disabled since 2012. The district court found that Bert Bell had abused its discretion when it denied Mr. Dimry’s LTD claim because it ignored two reports from Mr. Dimry’s treating physicians in favor of two so-called “neutral physicians” who were paid almost $300,000 by Bert Bell to review claims. The district judge found in favor of Dimry finding Bert Bell had abused its discretion since the denial of Mr. Dimry’s benefits claim was “based upon an unreasonable bias in favor of Plan-selected physicians” and remanded the matter to Bert Bell to re-evaluate Mr. Dimry’s disability claim. On remand, Bert Bell relied on the Plan’s medical director, Dr. Jackson, who opined that Mr. Dimry’s primary impairment appeared to be pain and subjective complaints that were not supported by objective evidence. Relying on Dr. Jackson’s report, Bert Bell again denied Mr. Dimry’s claim. Another lawsuit followed.

Dimry first argued that there was a conflict of interest because the three physicians who had reviewed his claim were biased since the first two physician reviewers had been paid almost $300,000 and Dr. Jackson had been paid $223,000 by the Plan. The court explained that “Even apart from any issue preclusion that may apply given the Dimry I court’s findings, under Demer ‘[t]he magnitudes of these numbers, particularly when combined, raise a fair inference that there is a financial conflict which influenced the [the physicians’] assessments.’ Demer, 835 F.3d at 902.”

Dimry next argued that he was excluded from Bert Bell’s “review of his claim following the remand in violation of the requirement that there be ‘a meaningful dialogue between ERISA plan administrators and their beneficiaries’ and that the Plan give a ‘full and fair review’ to an appeal of an adverse benefits determination.” A full and final review requires giving the claimant an opportunity “to submit written comments, documents, records, and other information relating to the claim for benefits” and provide the claimant with any new or additional evidence, as soon as possible, to give the claimant an opportunity to respond. In Dimry, not only did Bert Bell not provide Dr. Jackson’s report to Mr. Dimry, Bert Bell never informed Dimry that it was consulting Dr. Jackson or that he was issuing a report which it intended to rely on. The Court held that by excluding Dimry from the renewed review, Bert Bell was in violation of “the rule that there be a meaningful dialogue between ERISA plan administrators and their beneficiaries.”

Next, Dimry challenged Bert Bell’s finding that the objective medical evidence did not support his claims of neck and back pain. Although Dr. Jackson opined “that Mr. Dimry’s pain complaints could be accurate despite not being fully supported by the objective medical evidence given the nature of his impairment,” Bert Bell made no attempt to follow up with Mr. Dimry’s complaints of pain. The Court agreed with Dimry that requiring objective evidence to support his pain complaints was “illogical and without support in inferences that may be drawn from the facts in the record.” First, the Plan did not contain language limiting benefits to claimants that can provide objective evidence to support subjective complaints of pain. Second, the Court found that while Bert Bell “may consider the lack of objective medical evidence in making a benefits determination, ‘reliance on objective evidence can be problematic for medical conditions that are not amenable to objective verification.’”

Lastly, Dimry insisted Bert Bell abused its discretion when it failed to acknowledge Mr. Dimry’s social security award. In response, Bert Bell attempted to assert the following justifications for disregarding the SSA’s award decision: First, the SSA was somehow incomplete as it did not have and/or consider the Plan’s physician’s reports when it made its determination. However, the court did not find this argument convincing. Instead the court found Bert Bell “acted as an adversary, not a fiduciary,” and stated Bert Bell’s rejection of the SSA “is particularly striking where, as here, [Bert Bell’s] non-disability finding was based on the absence of objective evidence, and the [SSA] discussed the objective evidence in Mr. Dimry’s Social Security file at length – none of which Dr. Jackson reviewed.” Second, Bert Bell contended that since Mr. Dimry’s social security was rejected twice before it was granted, this constitutes evidence that reasonable minds could differ as to whether Dimry was disabled and precludes a finding that Bert Bell’s finding of no disability was arbitrary. The court again disagreed and explained, “[w]hile [Bert Bell] was not required to accept the [SSA’s] opinion, it had to consider it and explain why it was not persuasive.” Third, Bert Bell claimed that “[t]he Social Security decision turned on factors that are irrelevant to a finding of total and permanent disability under the Plan, such as [Mr. Dimry’s] education and work experience.” The court also rejected this argument stating that based on the relevant medical evidence, Mr. Dimry’s education and/or work experience had “nothing to do [with] whether the medical evidence fully supported Mr. Dimry’s pain complaints.” Finally, Bert Bell argued that it, unlike the SSA, was not required to give substantial weight to Mr. Dimry’s treating physician. While the court agreed that Bert Bell was not bound by the SSA’s treating physician rule, Bert Bell was also not allowed to simply discount the SSA’s ruling.

The lawsuit eventually resulted with the Court’s finding that Bert Bell had abused its discretion and remanded Mr. Dimry’s case back to Bert Bell for a renewed evaluation of his claim. The Court also stated that it “expects that once [Bert Bell] gives Dimry the full and final review ERISA requires, and eliminates the mandate of objective evidence – a mandate not in the Plan and not in Dr. Jackson’s reports – that Dimry will be found disabled under the Plan.

We often see LTD claims denied without a full and fair review provided to our clients. We often see plan administrators/insurers who use biased physicians who conduct cursory paper reviews, who wrongfully rely on the lack of objective evidence to deny LTD claims and who do not meaningfully address favorable SSA determinations. If you believe your LTD claim was denied without a full and fair review for any of the reasons discussed above, please contact us for a free consultation by calling our office at 949-387-9595 or completing the contact form on our website.

The Basics of an ERISA Life, Health and Disability Insurance Claim – Part Thirteen: Augmenting an Administrative Record

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