McKennon Law Group, Author at McKennon Law Group

In the January 12, 2017 edition of the Los Angeles Daily Journal, Robert McKennon and Scott Calvert of the McKennon Law Group PC published an article summarizing the new U.S. Department of Labor disability insurance claims regulations aimed at reducing the inherent conflicts of interest present when ERISA plan administrators review long-term disability and short-term disability insurance benefit claims. In the article entitled “New Regulations Will Benefit Claimants in Disability Insurance Cases,” Mr. McKennon and Mr. Calvert explain that the new regulations require that insurance companies and ERISA plan administrators keep individual claimants much more informed throughout the claim process, which the Department of Labor believed was necessary to ensure a full and fair review of short-term disability and long-term disability claims.

The article is posted below with the permission of the Los Angeles Daily Journal.

New Regulations Will Benefit Claimants in Disability Insurance Cases

By Robert J. McKennon and Scott E. Calvert

Disability insurance cases dominate the Employee Retirement Income Security Act litigation landscape today. According to the U.S. Department of Labor, ERISA employee benefits litigation from 2006 to 2010 involving long-term disability claims accounted for 64.5 percent of benefits litigation, whereas lawsuits involving health care plans and pension plans accounted for only 14.4 and 9.3 percent, respectively. It is no secret that insurers and plans looking to contain disability benefit costs are motivated to aggressively dispute disability claims. Indeed, the DOL estimates that roughly 75 percent of long-term disability claims are denied.

The DOL is charged with promulgating new regulations governing disability insurance and health insurance benefit claims that are governed by ERISA. In late December 2016, the DOL finalized new regulations, codified at 29 C.F.R. Section 2560.503-1 and discussed at 81 Fed. Reg. 92316, aimed at minimizing the conflicts of interest inherent in the administration of ERISA plans and providing individual claimants with additional information regarding the reasons why their disability claim was denied. The DOL indicated that the regulations were “necessary to ensure that disability claimants receive a full and fair review of their claims, as required by ERISA section 503.”

The new regulations must be followed by plan and claim administrators when reviewing disability insurance benefit claims submitted by plan participants and their beneficiaries. The regulations take effect on Jan. 18, 2017, but only apply to claims for disability benefits that are filed on or after Jan. 1, 2018.

The primary change is to reinforce and strengthen the rules designed to avoid conflicts of interest. Paragraph (b)(7) of the rule is designed to “ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision.” The rule requires that decisions regarding hiring, compensation, termination and promotion must not be made based upon the likelihood that a person will support the denial of disability benefits. For example, a plan is not permitted to hire an “independent” medical expert based on that expert’s reputation for providing administrator-favored reports.

The biggest change is the expansion of what information must be disclosed and included in any denial letter.

First, a denial letter must specially include the bases for disagreeing with any disability determination by the Social Security administration. It requires that a denial letter explain why the plan agreed or disagreed with the conclusions reached by the Social Security administration after it evaluated the same disabling conditions, medical evidence, and job duties.

Similarly, a denial letter must now also include a discussion as to why the denial decision differs from the opinions offered by a claimant’s treating physician. This is important because, typically, a claimant’s treating physicians support the claim for disability benefits. By forcing the administrator to specifically address the contrary positions offered by the treating physicians, the administrator will be forced to confront and refute this significant evidence supporting the claim.

Additionally, the denial letter must include the internal rules, guidelines, protocols, standards, or other similar criteria that were relied upon in denying the claim. Providing a claimant with this information will allow him or her to specially address those rules and standards in seeking to overturn a claim denial.

The final disclosure requirement imposed by the new regulations is that the plan administrator must explain its basis for disagreeing with any experts whose advice was initially sought but not followed. This requirement was added to prevent “intentional expert shopping” by a claims administrator. That is, when an insurance company “may consult several experts and deny a claim based on the view of one expert when advice from other experts who were consulted supported a decision to grant the claim.” By forcing the administrator to acknowledge and explain why it did not follow the recommendation of its hired experts, the DOL seeks to prevent the hiring of multiple experts until an administrator-favorable opinion is secured.

Another significant change to the regulations, codified at paragraph (h)(4), requires the plan administrator to provide claimants, free of charge, any new or additional evidence considered or relied upon when making the benefit determination, thus giving the claimant the right to review and respond to new information even before the final claim decision is made. The new evidence must be provided to a claimant as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination is required, thus giving the claimant a reasonable opportunity to address the new evidence or rationale prior to the denial decision being made. This important new rule will allow claimants to augment the Administrative Record because they will have another opportunity to present evidence in support of their claim.

Other changes relate to when a claim is “deemed denied,” freeing a claimant to initiate litigation despite the fact that his or her administrative remedies were not yet exhausted. If a claim for benefits is denied, the claimant is required to appeal that decision before initiating litigation.

Under the new regulations, if a plan fails to adhere to all the requirements in the claims procedure regulations, the claim is “deemed denied” without the exercise of discretionary authority. This gives the claimant the right to file a lawsuit without further delay and will allow a court to decide the merits of the claim de novo, without any deference to the fiduciary who violated the rules. Thus, the claimant would be deemed to have exhausted administrative remedies, with a limited exception where the violation was (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of an ongoing good-faith exchange of information; and (v) not reflective of a pattern or practice of non-compliance.

The regulations also include a provision that allows a claimant to request a written explanation of any asserted violation. The administrator is required to respond to such a request within 10 days and include a specific description as to why the violation should not render the claim “deemed denied.” However, if a court finds the violation to be “de minimis,” then the matter would be remanded back to the plan administrator for further review.

Importantly, the regulations require a final denial to describe “any applicable contractual limitations period that applies to the claimant’s right to bring … an action [under ERISA], including the calendar date on which the contractual limitations period expires for the claim.” The DOL clearly states in the preamble to the new regulations its belief that any contractual limitations period that expires before the final denial is issued (or even less than a reasonable amount of time thereafter) is per se impermissible.

Finally, the claims procedures apply to any “adverse benefit determination,” which now specifically includes any rescission of disability coverage (unless it was caused by a failure to pay required premiums or contributions on time).

With these regulations, the DOL has acted to protect claimants from ERISA administrators by attempting to minimize their conflicts of interest, promoting an open and robust discussion of the claim, and ensuring that administrators strictly comply with the regulations. These are positive steps for ERISA claimants who file claims for short-term and long-term disability benefits.

As a whole, these changes will greatly benefit claimants and should make it easier to understand the claim review process and the reasons for denial, as well as make it easier to provide documents to support their claims. Indeed, the regulations finally “give some teeth” to the long-standing requirement that administrators engage in a “meaningful dialogue” with disability claimants.

Summary: A Los Angeles disability insurance attorney discusses the differences between long-term disability insurance (typically governed by ERISA) and individual disability insurance plans in California. Contact McKennon Law Group PC today if your long-term or individual disability insurance claim has been denied.

Long-term disability (“LTD”) insurance is a form of private insurance that provides individuals with a financial safety net in the event that they suffer a work-affecting, disabling injury. LTD insurance – as the name implies – covers disabilities that affect a person’s ability to work over a fairly lengthy period of time, typically in the range of three to five years (or more, depending on the details of your insurance plan).

Injured persons in California may be able to qualify for public long-term disability benefits (e.g., Social Security disability benefits or California state disability benefits through the Employment Development Department (EDD)), but it can be difficult to meet the requirements and remain qualified for such benefits over a long period of time. (Indeed, disability benefits paid through the EDD are typically only available for one year.) Most LTD policies will require individuals to file for Social Security and state disability benefits, as they will offset such benefits against their payment to the individual. Workers’ compensation and other income replacement payments will also be offset against the person’s LTD benefits.

Individuals may be able to access LTD insurance through an employee-sponsored plan, though bear in mind that employee-sponsored LTD coverage (which is typically governed by a federal law called ERISA) is still not available to many workers in both California and the United States at-large. Those who do not enjoy the privilege of such access will have to sign up directly for an individual policy.

According to the most recent data from the U.S. Bureau of Labor Statistics, 39 percent of private industry workers participate in short-term disability insurance programs and 33 percent participate in LTD insurance programs. See “Workers with Disability Insurance Plans,” The Economics Daily, U.S. Bureau of Labor Statistics, March, 4, 2015, accessed at: http://www.bls.gov/opub/ted/2015/disability-insurance-plans-for-workers.htm.

When deciding on an LTD insurance policy – whether an individual is choosing from a range of employee-sponsored or individual plans – he or she is likely to encounter a few key differences that can significantly affect one’s coverage.

The following is a short list of such differences.

Benefit Payments and Length of Payment

The amount, type, and distribution of disability benefit payments varies quite significantly between LTD plans.

Effective Coverage Date
Individuals will not be eligible to receive benefits until the effective coverage date has passed. Depending on the plan, the effective coverage date can start as soon as one month (or as late as six months) after the benefit claim application has been submitted. Generally speaking, the sooner an individual’s effective coverage date is, the higher the premium tends to be.

Benefit Payment
When comparing plans, individuals will likely find that some plans have significantly different methods for calculating benefit payments. Whereas some plans will pay out a set value (typically individual disability insurance policies), others will pay out a portion of a person’s total pre-tax employment income (typically LTD insurance policies).

Length of Benefits
Plans vary substantially with regard to how long benefits are paid out, so pay particularly close attention to such terms in the insurance agreement. Some LTD plans will pay out benefits for only two or three years, while others will pay out until retirement age (e.g., 65 years old). As an individual’s injuries may result in a very long-term disability – even lifelong – he or she should carefully consider the benefit payment period of a plan before signing on. The lengthier, the better.

Renewable vs. Non-Cancelable vs. Non-Renewable

Those signing up for an individual LTD insurance plan (as opposed to accessing LTD insurance through an employer-sponsored plan) are encouraged to consider several options: guaranteed renewable, non-renewable and non-cancelable.

Guaranteed Renewable
Guaranteed renewable LTD plans give individuals the option of renewing, but gives the insurance provider the power to raise premiums across the board.

Non-Renewable
Limited renewable or non-renewable LTD plans do not give individuals the option of renewing (or have particularly stringent renewal requirements), but as a result, initial premiums tend to be much lower.

Non-Cancelable
Non-cancelable LTD plans ensure that premiums cannot be raised and that the plan cannot be canceled (assuming that the individual meets the basic requirements for continued coverage). Unfortunately, insurance providers tend to charge higher premiums for non-cancelable policies.

What Constitutes a “Disability” Under Your LTD Plan?

LTD plans can have different interpretations of what constitutes a “disability” such that the policyholder is entitled to benefits. The broader the definition of “disability,” the more likely it is that an individual will qualify for benefits. The benefits may also be somewhat different, depending on the definition.

Some LTD plans define “disability” as the inability to work at a person’s existing job or occupation. This is called an “own occupation” definition of disability. This is a fairly narrow definition that is more favorable to the insured. Under these types of plans, and insured may be able to collect benefits, even if they are working at a different job. For example, if a surgeon has an “own occupation” policy, they would be able to collect benefits if they cannot perform the duties of a surgeon, even if they are able to work as a general practitioner. While sometimes these plans pay out benefits for a limited number of years (i.e., up to five years) if the disability simply prevents the individual from pursuing an existing job or similar jobs, there is typically the option of have the benefits continue until retirement age. If there is a time limitation on the benefits, the policy is intended to give the policyholder enough time to pursue an alternate occupation.

Some LTD plans define “disability” as the inability to work at any job. This is called an “any occupation” definition of disability. This is a broad definition, less favorable to the insured. These plans usually pay out benefits for an indefinite period of time until the plan ends in accordance with the default terms, or until the individual is able to find a different occupation.

Allowance of Part-Time Earnings

Disabilities vary significantly and in many cases, a disability may not result in a total inability to work, but instead may force an individual to work in short bursts. Whereas before the individual may have been capable of working full-time, he or she may only be capable of working part-time after suffering the disability. Certain LTD plans allow individuals to work part-time, but almost all such plans will offset part-time earnings against benefit payments.

Whether an individual is making an ERISA LTD claim under an employer-sponsored LTD plan, or a claim under his or her individual disability insurance plan, the application for disability insurance benefits is very likely to be evaluated by a claim administrator employed by the insurance company, also known as a claims administrator. As such, insurers often deny legitimate claims made under LTD or individual disability insurance policies. To fight the denial of an LTD claim or individual disability insurance claim, it is important that you work with an insurance litigation attorney who has had substantial experience handling denied disability insurance claims.

To speak with a highly skilled Los Angeles long-term disability insurance lawyer at the McKennon Law Group PC, call (949) 387-9595 for a free consultation or go to our website at mslawllp.com and complete the free consultation form.

During their Presidential election campaigns, Donald Trump and Hillary Clinton spotlighted for America flaws in our criminal justice system. They raised questions about whether the criminal probe into Ms. Clinton’s private email server was handled honestly or politically. Conservatives bitterly complained that FBI director Jim Comey’s recommendation not to prosecute Ms. Clinton was inconsistent with the FBI’s fact findings (that she carelessly mishandled classified emails) and influenced by the left-leaning Justice Department rather than justice. On the flip side, Liberals vehemently complained that on the eve of the election Director Comey made an unprecedented announcement that the FBI had reopened its criminal investigation into Ms. Clinton’s private emails, attempting to influence the election.

Whatever your political leanings are, most Americans would probably agree that politics has no business in a court of law, where a person’s freedom or livelihood is at stake. Lady Justice is supposed to be blind.

Like politics, “quack” physicians have inappropriately crept into our judicial process through the insurance industry. This has endangered blind justice for indigent policyholders. Wealthy life, health and disability insurers appear adept at getting a doctor to say just about anything for the right price. Some doctors are willing to sell the truth and abandon science for a steady stream of business from an insurance company. They have increasingly become willing to allow their high-paying insurance company clients to dictate what they can and cannot consider in reaching their professional medical opinions, often limiting them to a review of the insured’s medical records without the opportunity to examine or speak with the insured or his treating physicians. Some insurers seemingly have made this part of their business model to help them deny even legitimate claims made by their disabled or sick policyholders.

The California Court of Appeal recently criticized one such insurance company’s practice in the case of Nickerson v. Stonebridge Life Insurance Company, 5 Cal. App. 5th 1 (2016). While the bulk of the lengthy opinion focuses on the constitutionality of punitive damage awards – it held that a 10:1 ratio of punitive to compensatory damages in an insurance bad faith case passes muster – we have blogged on that topic and the Nickerson case before. See https://mslawllp.com/california-court-of-appeal-finds-that-a-101-ratio-between-punitive-damages-and-compensatory-damages/ (discussing Nickerson v. Stonebridge Life Insurance Company, 219 Cal. App. 4th 188 (2013)) and https://mslawllp.com/in-an-insurance-bad-faith-case-attorneys-fees-are-compensatory-damages-that-can-increase-a-punitive-damages-award/ (discussing Nickerson v. Stonebridge Life Insurance Company, 63 Cal. 4th 363 (2016). What is more interesting as it relates to ERISA and bad faith long-term disability insurance and health claims is that the Nickerson court berates the practice, systemic to the health and disability insurance industry, of hiring doctors to perform “pure paper reviews” of the insured’s medical records and, more accurately, of controlling the process to dictate results favorable to the insurance company.

The Nickerson case concerned a disabled veteran, Tom Nickerson, paralyzed from the chest down with no income other than a very small military pension. He bought a policy from Stonebridge providing coverage for hospital confinement. After suffering a broken leg from falling out of his wheelchair onto the asphalt, Nickerson was hospitalized for 109 days on the advice of his attending primary care physician. He submitted a claim to Stonebridge for his hospital stay. Stonebridge contended only 18 days was “Necessary Treatment” under its policy. On that basis, it denied him policy benefits for the rest of the time he was hospitalized. Nickerson sued Stonebridge for breach of the insurance contract and the implied covenant of good faith and fair dealing (i.e. “bad faith”) seeking his unpaid policy benefits, emotional distress, attorneys’ fees and punitive damages.

As health and disability insurers often to, Stonebridge had hired a medical consultant during the claim to review Nickerson’s medical records and render an opinion on whether 109 days of hospitalization was medically necessary. The insurance company’s doctor:

never spoke with the insured, Nickerson;
never spoke with Nickerson’s attending physicians; and
never examined Nickerson.

Based purely on a “paper review” of his medical records, Stonebridge’s doctor concluded that Nickerson should have been released from the hospital after eighteen days (which became the rationale for Stonebridge denying the claim).

Nickerson’s primary care physician disagreed and even wrote a three-paragraph letter to Stonebridge explaining in detail why hospitalization was required for 109 days, including that “the fracture was complicated by extensive swelling, infection, blistering, and muscle damage that required acute hospitalization, intravenous fluids and antibiotics, and full staff support including consultation with an orthopedic surgeon.” He further explained that because Nickerson was paraplegic and confined to a wheelchair, he could not have managed at home any earlier. Stonebridge never gave that information to its “paper reviewing” physician consultant and never asked him to speak with Nickerson’s treating doctor about his conflicting opinion. It withheld the obviously pertinent information and maintained its claim denial.

The court berated Stonebridge for what it found was a systemic company-wide practice: “Stonebridge’s practice was never to authorize peer reviewers to communicate with treating physicians, thus intentionally concealing material information from the claims’ functional decision-maker so as to limit the amount Stonebridge would have to pay out on its policies.” It held Stonebridge’s conduct in ignoring the opinion of the insured’s treating physician and withholding it from its peer reviewer essentially controlled the peer reviewer’s opinion and supported a finding that the insurer committed fraud warranting punitive damages, not just bad faith. The court held that the insurer’s conduct was “particularly reprehensible” warranting a higher constitutional ratio of compensatory to punitive damages. Finally, the court stated that, “Insurers may not ignore the opinion of treating physicians absent a showing the physician’s judgment is either ‘plainly unreasonable, or contrary to good medical practice.’ ”

Our take: Unfortunately, as the Nickerson case and our recent Presidential Election illustrate, Lady Justice is not always blind. It certainly isn’t for poor, out-of-work claimants fighting against billion-dollar life, health and long-term disability insurers with systemic corporate practices to the highest level of management aimed at denying even legitimate claims to line their own pockets with your hard-earned policy premiums. Justice is not blind for indigent claimants struggling against insurers’ handsomely paid “paper-reviewing” physicians complicit in the insurance industry’s often unfair claims handling practices.

If you have a long-term disability, life or health insurance claim, to equal the scales of justice, you need an experienced attorney to fight hard for you. At McKennon Law Group PC, our lawyers have decades of experience litigating these types of claims, both under ERISA and state insurance bad faith laws. Most of our lawyers previously spent years defending insurance companies against long-term disability, life and health insurance claims. That will give you a distinct advantage because our lawyers know how insurance companies operate and the arguments they are likely to raise from first-hand experience. We will review your claim free of charge. Your matter will be handled on a contingency basis, which means you pay nothing and we receive nothing unless you win a recovery by way of a settlement, claim reinstatement, verdict or award. Let us try to equal the scales of justice for you.

Under California law, an insurer has an obligation to, among other things, make reasonable efforts to settle a third party’s lawsuit against an insured. As a recent decision rendered by the California Court of Appeals illustrates, “reasonable efforts” entail more than timely offering the policy limit to settle a claim from a third party. The insurer’s conduct must be reasonable given the circumstances and they must do everything reasonably within their power to effect a settlement. An insurer’s responsibilities are not necessarily complete when they offer to pay their policy limits or other amounts agreed-upon by the parties.

Barickman v. Mercury Casualty Company, 2 Cal. App. 5th 508 (2016), arose from a personal injury claim where an individual insured of Mercury struck two pedestrians with her automobile while intoxicated and then fled the scene. The individual then reported the claim to Mercury the following day as an accident. The insured was subsequently arrested, sentenced to prison, and ordered to pay restitution to the injured pedestrians. Mercury offered the policy limits of $15,000 to each of the injured pedestrians to settle their claims against Mercury. The injured pedestrians accepted the settlement, but insisted upon additional language in the release agreement assuring that the $15,000 payments did not cover court-ordered restitution.

Mercury failed to respond to the injured pedestrian’s demand to include the additional language in the settlement agreement by the deadline provided to them. Mercury was later informed by criminal counsel that the language requested by the injured individuals should not be accepted because it could be interpreted as waiving the insured’s right to offset the restitution she is required to pay with the $15,000 insurance payments from Mercury. However, the injured parties’ attorney had conversations with the Mercury agent assuring them that he was simply trying to preserve his client’s basic rights to restitution, and not attempting to eliminate the insured’s right to an offset. Mercury never attempted to revise the language requested by the injured pedestrian’s attorney to clarify that the right to offset the restitution owed was preserved. After the insured assigned her rights to sue Mercury, the injured pedestrians filed suit against Mercury for breach of contract and insurance bad faith which resulted in a $3 million judgment against Mercury.

Mercury appealed claiming that it acted in good faith by offering the policy limits to the injured pedestrians and the only reason the case did not settle was because the injured pedestrians’ attorney insisted upon unacceptable additional language in the settlement agreement. The Appellate Court disagreed with Mercury’s argument, reasoning that Mercury’s position would mean that just because an insurer acted in good faith at one point in a settlement negotiation, it discharged its obligations to act in good faith and had no further responsibility to make reasonable efforts to settle a third-party lawsuit. The Appellate Court upheld the $3 million judgment, determining that Mercury’s policy limits offer was not enough to defeat the insurance bad faith claim. The Court determined that Mercury unreasonably rejected the modified settlement instead of at least attempting to amend the release to clarify the parties’ mutual intent. The Court also noted that the language requested by the injured pedestrians should not have affected the settlement, because a release in a civil case would not release a defendant from the criminal court’s restitution order and did not disturb the insured’s right to offset under California law. Therefore, Mercury did not make reasonable efforts to settle the injured parties’ claim.

Our take: This decision is important because it correctly demonstrates that insurers must make reasonable efforts to settle third-party lawsuits beyond simply offering to pay for a claim based on a settlement offer at or within policy limits, and they cannot fail to engage in reasonable negotiations related to the terms of settlement or release agreements. All of an insurer’s conduct surrounding settlement of a claim must be reasonable given the circumstances. If a conflict arises regarding the terms of a settlement or release, an insurer must pursue all reasonable avenues to resolve a dispute in order to satisfy their obligation to act in good faith.

The most common complaint McKennon Law Group PC hears from medical providers is that insurers refuse to pay for the services provided to their insureds, even after the medical provider sought and obtained a pre-authorization from the insurer for the services provided to a patient. After submitting a bill to the insurance company, all too often, a physician or other medical professional receives an Explanation of Benefits (“EOB”) letter indicating that either the insurer will not pay the claim at all or it will only pay a fraction of the amount billed.

After receiving the EOB, medical providers typically utilize the insurer’s voluntary appeal process in an effort to secure full payment. That appeal process can drag on for years. In Vishva Dev, M.D., Inc. v. Blue Shield of California Life & Health Insurance Co., 2 Cal. App. 5th 1218 (2016), the California Court of Appeal ruled that the two-year statute of limitations for a quantum meruit claims begins to run when a doctor first receives an EOB letter even when the insurer offered an appeal and then delayed that process.

In Vishva, a physician filed a complaint asserting breach of contract and quantum meruit claims seeking larger payments for emergency care rendered to three different patients. A quantum meruit claim seeks payment of a reasonable sum of money for services rendered. In response, Blue Shield of California Life Insurance Company and Blue Shield of California (collectively, “Blue Shield”) filed a motion for summary judgment on the quantum meruit claim, on the grounds that the lawsuit was initiated more than two years after the physician received the initial EOB for each patient.

The physician opposed the motion for summary judgment on the grounds that the filing deadline was tolled during the lengthy appeal process in which he engaged at the invitation of Blue Shield, and did not start until the final EOB was issued. The trial court granted Blue Shield’s motion, and on appeal, that judgment was upheld on the grounds that the statute of limitations begins to run upon the first unequivocal denial of payment in writing, that is, the date of the original EOB.

The Court, citing numerous California Supreme Court rulings in homeowner’s insurance cases, also rejected the doctor’s argument that Blue Shield was estopped from raising that statute of limitation defense because the doctor reasonably relied on the appeals process to resolve any payment issues. The Court held that Blue Shield’s decision was established with the original EOB, and the appeal process was a mere “extension of a courtesy” that did not extend the statute of limitation. Finally, the Court advised that ruling otherwise would create a situation where an insurer may inadvertently extend the statute of limitations period by responding to a mere inquiry, which would contravene the public policy of encouraging insurers to respond to new, substantive facts.

The lesson from this ruling is clear, if you are a medical provider and intend to file a lawsuit against an insurance company seeking payment for services rendered to a patient, you must bring that lawsuit within two years of the date of the initial EOB, or you will have forfeited your ability to assert a quantum meruit claim.

In our article of August 15, 2016 entitled “When is a Group Long-Term Disability Insurance Plan Not an ERISA Plan? When it’s Established and Maintained by a Church to Qualify as an ERISA-exempt Church Plan – That’s When,” we discussed a Ninth Circuit Court of Appeals ruling in Rollins v. Dignity Health, 2016 WL 3997259 (9th Cir. July 26, 2016), which decided when church-affiliated pension plans are subject to the Employee Retirement Income Security Act of 1974. Agreeing with the Third and Seventh Circuits, the Ninth Circuit held that ERISA’s church plan exemption applies only if a church “established” the plan. The United States Supreme Court on Friday December 2, 2016 accepted and consolidated three cases, including Rollins, that consider whether pension plans operated by church-affiliated organizations are subject to ERISA.

In class action lawsuits, employees suing St. Peter’s Healthcare System, Advocate Health System and Dignity Health claim the Christian-affiliated hospitals are evading ERISA’s minimum funding and reporting requirements, which place these plans in financial risk.

The plaintiffs are seeking retroactive penalties for past violations of ERISA. The church-affiliated hospitals have defended these suits in part by invoking their reliance on interpretations by federal agencies (the Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation) that enforce ERISA and have interpreted the church plan exemption in ERISA to apply to church-affiliated organizations, even if a church itself did not initially establish the pension plan.

The question presented in these cases is whether the church plan exemption applies so long as a pension plan is maintained by an otherwise qualifying church-affiliated organization, or whether the exemption applies only if, in addition, a church initially established the plan.

Our Take: this case presents highly important issues to church-affiliated plans and we’ll bet that the Supreme Court reverses these decisions. These recent decisions have upset the settled expectations of many church-affiliated ministries, which provide benefits to millions of current and former employees across the country. Those religious employers, many for decades, have relied on the agencies’ established, unanimous administrative interpretation when designing their benefits programs.