McKennon Law Group, Author at McKennon Law Group

Newport Beach, Ca. October 4, 2016 – McKennon Law Group’s California Insurance Litigation Blog has been selected to compete in The Expert Institute’s Best Legal Blog Competition.

From a field of hundreds of potential nominees, McKennon Law Group’s California Insurance Litigation Blog has received enough nominations to join the one of the largest competitions for legal blog writing online today.

Now that the blogs have been nominated and placed into their respective categories, it is up to their readers to select the very best. With an open voting format that allows participants one vote per blog, the competition will be a true test of the dedication of each blog’s existing readers, while also giving up-and-coming players in the legal blogging space exposure to a wider audience.

Each blog will compete for rank within its category, while the three blogs that receive the most votes in any category will be crowned overall winners.

The competition will run fromOctober 3rduntil the close of voting at12:00 AM on November 14th, at which point the votes will be tallied and the winners announced.

The competition can be found athttps://www.theexpertinstitute.com/blog-contest/. Here is a direct link to our blog’s listing, which will allow our readers to vote for our blog.

https://www.theexpertinstitute.com/legal-blog/insurance-litigation-blog/

About The Expert Institute:

Founded in 2011, The Expert Institute is a technology-driven platform for connecting qualified experts in every field with lawyers, investment firms, and journalists looking for technical expertise and guidance. The Expert Institute combines a vast database of pre-screened experts with a talented case management team capable of custom recruiting experts to fit the specific needs of our clients. The Expert Institute also maintains one of the internet’s most visited blogs on expert witnesses, in addition to an extensive case study archive and expert witness resource center.

In the September 8, 2016 edition of the Los Angeles Daily Journal, Robert McKennon of the McKennon Law Group published an article regarding the use of so-called “independent” physicians used by insurance companies as a pretense to deny valid claims. In the article entitled “9th: ‘Independent’ Physicians may Favor Insurers,” Mr. McKennon summarized the recent U.S. Court of Appeals for the Ninth Circuit case, Demer v. IBM Corporation LTD Pan, 2016 DJDAR 8929 (9th Cir. Aug. 29, 2016), in which the Court noted that insurance companies frequently pay doctors a substantial amount of money to review files, and therefore their opinions are likely biased in favor of the insurance company that pays them.

The article is postedbelowwith the permission of the Los Angeles Daily Journal.

9th: ‘Independent’ Physicians may Favor Insurers

By Robert J. McKennon

Insurance companies that provide group long-term disability insurance benefits governed by the Employee Retirement Income Security Act of 1974 (ERISA) usually hire a doctor which they typically refer to as an “Independent Physician Consultant” (IPC) to review the insured’s medical records and give an opinion about whether the insured is disabled. But is the insurance company’s doctor really independent and unbiased? Often times, the IPC never meets with or examines the insured, and does not even discuss the matter with the insured’s physicians. Yet, the IPC determines that the insured is capable of working simply by spending a few hours reviewing his medical records. The IPC typically disagrees with the opinions of the insured’s treating physicians, who have treated the insured for months or even years. Almost invariably, the insurer favors the opinion of its IPC over the opinions of the insured’s physicians. When this happens, what is an insured to do?

In a published opinion favorable to insureds that addresses this issue,Demer v. IBM Corporation LTD Pan, 2016 DJDAR 8929 (Aug. 29, 2016), the 9th U.S. Circuit Court of Appeals demonstrated that it understands that insurance companies frequently use doctors and pay them a substantial amount of money for their services, and therefore their opinions are likely biased in favor of the insurance company that pays them. The 9th Circuit held that a district court’s review of an insurance company’s benefits decision, when it is based upon the opinion of an IPC, should be tempered by skepticism because of the financial incentive that the IPC has to pander to the insurer’s interests (again, who uses them often and pays them significant amounts of money).

InDemer, the plan participant, Daniel Demer, was an employee of IBM Corporation LTD Plan. Suffering from severe recurrent depression, spinal stenosis, chronic osteoarthritic pain, and chronic headaches and unable to continue working, he filed a claim for long-term disability benefits. MetLife, which had a structural conflict of interest because it both evaluated claims made against the plan and funded claims, initially approved his claim after concluding he was incapable of performing the duties of his occupation. However, after two years, the plan required that Demer be unable to work in any occupation for which he was suited by education, training and experience in order to qualify for benefits, and MetLife denied his claim relying primarily on the opinion of its IPC indicating that despite his supported functional limitations, Demer was capable of working in a sedentary position.

Demer appealed MetLife’s claim denial, and MetLife subsequently upheld its denial relying on the opinions of two other IPCs. One of the IPCs was board certified in physical medicine and rehabilitation. He determined that while Demer “likely had a modicum of discomfort” from “neck and back pain related to spinal degeneration,” he retained physical functional capacity to perform a sedentary occupation despite a contrary conclusion from Demer’s treating physician. MetLife’s other “independent” physician consultant, board certified in psychiatry, claimed that despite the fact that Demer was taking powerful narcotic and neurological medications and asserted that he suffered from significant medication side-effects that cause fatigue and an impediment to his comprehension and communication, there was no objective data to establish functional impairment as a result of the medications he was taking.

Demer filed suit, arguing in part that MetLife operated under a conflict of interest because two of the IPCs that MetLife hired to review the medical record previously conducted a substantial number of reviews for Metlife and received significant compensation from MetLife for their services. For 2009 and 2010, one IPC performed more than 250 reviews/addendums per year, earning more than $125,000 each year. For the same time period, the other IPC performed between 200-300 reviews/addendums each year, and received more than $175,000 from MetLife each year. Based on the number of reviews and the amount of compensation, Demer asserted that the IPCs’ opinions should be questioned because the doctors had financial incentives to render opinions favorable to MetLife. Demer further argued that, because MetLife relied on the doctors’ opinions in denying him relief, the doctors’ conflict is imparted to MetLife and therefore the court should view their opinions with skepticism. The court noted that this argument is comparable to conventional approaches to discrediting the testimony of retained experts whose objectivity may be challenged based on the number of times he or she has served as an expert in support of a party and the amount of compensation received.

The district court entered judgment in favor of IBM and MetLife finding no abuse of discretion, but the 9th Circuit reversed. Thec court concluded that because MetLife’s consulting physicians earned a substantial amount of money from, and performed numerous medical record reviews for, MetLife, an inference was raised that there was a financial conflict which influenced the physicians’ assessment. It held that this conflict was a factor to be considered in reviewing MetLife’s decision under the abuse of discretion standard. Since MetLife failed to negate any inference of a financial conflict of interest, the court determined that “the number of examinations referred and the size of the professional fees paid to a reviewer may compromise the neutrality of an expert.”

The court further concluded that MetLife abused its discretion in denying Demer’s claim that his mental functional capacity was affected by his medications. The court determined that since it was undisputed that Demer took powerful narcotic medications, that these medications were medically necessary, and because they have known strong side-effects, MetLife’s conclusion (that Demer’s complaints regarding medication side-effects was not credible) was unsupported. A dissent disagreed, and stated that he would abandon “skepticism” as a separate standard of review in ERISA cases.

Even though theDemercase involved the abuse of discretion standard of review, insurers will argue that this case will have little application in de novo review cases in which the conflict analysis is not used. In California, the abuse of discretion standard of review will likely become uncommon in future cases because of California Insurance Code Section 10110.6, which renders discretionary language “void and unenforceable” in policies, contracts and certificates that provide funds for life insurance or disability insurance coverage for California residents. However, even in de novo review cases, it is advisable to remind the courts of the rationale behind the “skepticism” rule as even the 9th Circuit noted the similarity to the arguments made in non-ERISA cases. Thus, this case is useful to establish that the opinion of an insurance company IPC who never examined the insured and who undermines or rejects an insured’s credible evidence of disability should be viewed skeptically where the insured’s disability is supported and verified by the insured’s treating physicians who treated and examined the insured.

When insurance companies deny long-term or short-term disability, life or health insurance claims, it is vital that the plan participants and their beneficiaries be able to receive the claim file (also known as the Administrative Record) and ERISA Plan documents so that they can review them and challenge these claim denials. It is therefore not surprising that ERISA Plan administrators are required to comply with certain claims procedures and requests for information from plan participants, otherwise, under ERISA, they could be fined up to $100 per day for each day they fail to comply. Pursuant to 29 U.S.C. § 1332(c)(1), a plan administrator:

… who fails or refuses to comply with a request for any information which such administrator is required to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court’s discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper.

The Ninth Circuit Court of Appeals, in Lee v. ING Groep, N.V., No. 14-15848, No. 14-15936, 2016 WL 3974176 (9th Cir. 2016), recently joined all other Circuits except for the Fourth and Fifth Circuits, in finding that only on the plan itself, not the claims administrator, can be penalized under 29 U.S.C §1332(c)(1).

In Lee, Mr. Lee, a former employee of ING Management, LLC, filed a claim with his long-term disability plan governed by ERISA and initially received long-term disability benefits before his claim for benefits was later terminated. ING North America Insurance Corporation (“ING”) was the plan administrator of Mr. Lee’s long-term disability plan, and the claims administrator was ReliaStar Life Insurance Company (“ReliaStar”). On February 5, 2010, Mr. Lee’s attorney requested from ReliaStar copies of all communications, including e-mails, from ING’s attorney, and a copy of all documents including the Plan Documents. ING did not produce the requested e-mails until November 9, 2011 (over 1.5 years later) and did not produce the Plan Documents until March 11, 2013 (over 2 years later). The district court imposed a penalty of $27,475.00 on ING for failing to timely produce the Plan Documents and the requested e-mails. ING subsequently appealed this decision.

The Ninth Circuit Court of Appeals affirmed the district court’s decision to impose a penalty on ING for its failure to timely produce the Plan Documents, but reversed the district court’s decision to impose a penalty on ING for its failure to produce the requested e-mails. The Court of Appeals noted that the e-mails were only required to be provided to Mr. Lee pursuant to C.F.R. §2560.503-1(h)(2)(iii), which imposed requirements on benefit plans and not plan administrators, and 29 U.S.C. §1332(c)(1) only applies to documents that plan administrators are required to produce. The Court of Appeals noted that a failure to follow claims procedures imposed on benefits plans, such as those outlined in C.F.R. §2560.503-1(h)(2)(iii), does not give rise to penalties under 29 U.S.C. §1332(c)(1). The Court of Appeals further noted that “Plans” and “plan administrators” are separate entities with separate definitions under ERISA and penalties under 29 C.F.R. §1132(c)(1) can only be assessed against “plan administrators.” Because C.F.R. §2560.503-1(h)(2)(iii) does not impose any requirements on plan administrators, it cannot form the basis for a penalty under 29 U.S.C. §1332(c)(1). The Court remanded the case to the district court to assess a penalty based solely on the failure to timely produce the Plan Documents.

Given that many of the claims procedures governing the handling of an ERISA claim are imposed upon benefit plans and not on plan administrators, ERISA plan participants might not have the opportunity to seek penalties when they are unable to obtain claim related documents. However, they can expect that when a claims administrator fails to comply with ERISA regulations designed to protect the integrity of the claims and appeal process, their claims will be given the appropriate review before a judge. Claim and plan administrators are aware that they face significant liability at trial, even without statutory penalties, such a plan benefits due under long-term or short-term disability policies or life and/or health insurance policies. This is why seeking out highly experienced ERISA attorneys such as the McKennon Law Group PC will substantially increase the chance of obtaining the disability, health and life insurance benefits to which plan participants and their beneficiaries are entitled.

You know church can be very good for you, but you probably never contemplated that church could help you in ways other than spiritually. Let’s say you find yourself in this position: you become disabled, work for a church-related employer and now want to make a disability claim under your short-term disability and/or long-term disability insurance policy. You wonder: is my claim covered by ERISA or will I have those really good state law remedies because ERISA does not apply? Your question was recently answered by the Ninth Circuit Court of Appeals, albeit in a pension plan case.

“Church plans” are exempt from the federal regulatory requirements of ERISA. However, language contained in the relevant ERISA statute left the rules what constitutes a “church plan” open to multiple interpretations. The Ninth Circuit closed the door to multiple interpretations and clarified exactly what is required to qualify as a church plan exempt from the regulatory requirements of ERISA.

Pursuant to 29 U.S.C. § 1002(33)(A), the term “church plan” means a plan established and maintained by a church or by a convention or association of churches. However, 29 U.S.C. § 1002(33)(C) confuses these two seemingly straightforward requirements by providing that a plan established and maintained by a church or a convention or association of churches includes a plan maintained by a “principal-purpose organization,” the principal purpose or function of which is the administration of funding a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention of churches. This raises the question of whether the requirement that a plan be established by a church is eliminated by § 1002(33)(C) since it can be argued that it only requires a plan be maintained by a principal-purpose organization. In other words, does this mean the plan must be established by a church to be eligible for the church plan exemption, or does it mean the plan qualifies for the church plan exemption even if it is established by an organization other than a church whose principal purpose is religiously-affiliated and who maintains the plan?

In Rollins v. Dignity Health, No. 15-15351, 2016 WL 3997259 (9th Cir. 2016), employees of a nonprofit hospital system, Dignity Health, established by Catholic Sponsoring Congregations, received pension benefits through a single pension plan maintained by Dignity Health, which adopted a resolution to treat the plan as a church plan. Ms. Rollins, who was a participant in the plan, filed a putative class action against Dignity Health alleging its plan was not a church plan and it violated numerous ERISA requirements. Dignity Health conceded that the plan did not comply with ERISA but alleged that it did not need to since it qualified for the church-plan exemption even though its plan was not established by a church. Dignity Health contended that pursuant to 29 U.S.C. § 1002(33)(C), a church plan need not be established by a church if it is maintained by a principal-purpose organization. The district court granted partial summary judgment against Dignity Health holding that a plan must be established by a church and maintained by either a church or a principal-purpose organization to qualify for the church-plan exemption. The district court then certified its order for interlocutory appeal given the substantial ground for difference of opinion and the Court of Appeals accepted jurisdiction.

The Court concluded that the phrase “includes” contained in 29 U.S.C. § 1002(33)(C) (a plan established and maintained by a church or a convention or association of churches includes a plan maintained by a “principal-purpose organization”), serves only to broaden the definition of organizations that may maintain a church plan and does not eliminate the requirement that a plan must be established by a church. The Court noted that the legislative history revealed that Congress inadvertently excluded plans maintained by church-controlled or church-affiliated pension boards rather than the churches themselves, so Congress relaxed this requirement by adding the language in § 1002(33)(C) to address only the problem of maintenance by church-controlled or church-affiliated pension boards.

The Court was unpersuaded by Dignity Health’s argument that establishment by a church is not required since other federal statutes support that a church plan does not need to be established by a church, noting that the statute at issue specifically requires church establishment and it would not construe terms to have the same meaning when Congress explicitly defined the terms differently. The Court concluded that its reading of the statute did not involve a constitutional Establishment Clause violation or a Free Exercise violation and it affirmed the district court’s ruling and remanded the action for further proceedings.

Now that you know about Rollins, you can look to see if your group long-term disability or life insurance plan was established and maintained by a church organization, so you can now determine if you will be facing that beast called ERISA.

The Social Security Administration’s Death Master File database provides insurers with the names of deceased people in the U.S. who have social security numbers. It is a useful tool for insurers to identify deceased policyholders and pay life insurance benefits to beneficiaries who may be unaware that they are owed money. However, until recently many life insurers used the Death Master File only to benefit themselves, such as using it to identify deceased annuity holders in order to stop making annuity payments, but not to pay life insurance benefits.

Four years ago we blogged about Metropolitan Life Insurance Company’s (“MetLife”) inconsistent use of the Death Master File database to deprive beneficiaries of $40 million in life insurance benefits. See “MetLife Pays $40 Million To Settle Allegations That It Failed To Properly Identify And Pay Life Insurance Beneficiaries”. That database, created by the Social Security Administration, is consistently updated with the names and identity of everyone for whom a death certificate is filed in the United States. The Administration licensed it to life insurance companies so they could easily identify decedents, a necessary part of their business. We again blogged about it in April. See “National Investigation Uncovers Systemic Practice Among Life Insurers Depriving Beneficiaries of $5 Billion!”.

Not surprisingly, it turns out that most life insurance insurers are engaged in the same actions. – Insurance Commissioner Dave Jones today announced settlement agreements with Hartford Fire & Casualty Group, Securian, Great American Life, and Standard Insurance Companies related to use of the Death Master File database.

Hartford will pay $2.1 million, Securian $625,000, Great American Life $400,000, and Standard $277,000 to the states participating in the national investigation. All four insurers agreed to reform their business practices to benefit policyholders and use the database to search for policyholder beneficiaries that might be owed benefits from a life insurance policy.

It would therefore behoove policyholders and beneficiaries to vigilantly investigate and protect their own life insurance policies. If you believe that a life insurance company failed to pay the benefits you are owed under a life insurance policy, please contact McKennon Law Group PC for a free consultation.

Most group long-term disability policies and employer-sponsored long-term disability plans include a provision called “Offsets,” “Other Income Benefits,” “Income Which Will Reduce Your Disability Benefit,” “Deductible Sources of Income” or a similar name. These provisions allow the insurer to reduce the monthly disability benefit that you would otherwise receive under the disability insurance policy by the amount of the “other income” paid to you during the same time period. Each policy is different, but the insurer is usually allowed to reduce your monthly disability benefit by the following types of “other income” you receive: (1) Social Security disability benefits; (2) California State disability benefits; (3) disability benefits paid under Workers’ Compensation laws; (4) retirement plan benefits funded by the employer that issued the group policy; (5) unemployment compensation; (6) amounts received in a personal injury lawsuit settlement or judgment for loss of earnings; and (7) amounts received as sick leave, salary continuation, vacation pay and personal time off.

For example, if your monthly disability benefit under your policy is $1,000 and you receive Workers’ Compensation benefits of $400 per month, your disability insurer would only be responsible to pay you $600 per month while you are receiving Workers’ Compensation benefits. Once you stop receiving Workers’ Compensation and, assuming you are still disabled, your monthly disability benefit would increase to $1,000.

Sometimes an insured receives so much in “other income” payments that it totals more than his or her monthly disability benefit. In that case, the insured is typically entitled to receive only a “minimum benefit,” the amount of which is defined in the policy. Many times the minimum benefit is the higher of 10% of the full monthly benefit or $100 per month.

Social Security disability benefits are probably the most important offset. Under most group long-term disability policies, the disability insurer is provided a dollar-for-dollar deduction of Social Security disability benefits received by their insured. The offset lasts through your Social Security retirement age (65 to 67 years old depending on your date of birth) if you are still disabled, much longer than Workers’ Compensation or State disability benefits, typically a maximum of two years and one year, respectively. Social Security can thus reduce your monthly benefit for the entire duration of your policy. Essentially, the United States government and your tax dollars end up paying for a good portion of your disability instead of the disability insurance company to which you or your employer paid premiums.

Social Security disability benefits typically increase over time to compensate for the effect of inflation on fixed incomes. This increase is called a “COLA,” or cost-of-living adjustment. Some states, such as California, have laws that prevent insurance companies from reducing your benefit if your Social Security disability benefit goes up. California Insurance Code section 10127.15 in fact provides that, “Any provision contained in a policy of disability insurance . . . for a reduction of . . . benefits during a benefit period because of an increase in benefits payable under the federal Social Security Act . . . shall be null and void . . .” Even if no law prohibits an insurer from reducing your benefit, insurance policies will often contain a provision stating that the insurer will not do so due to a COLA.

The fact that an insurance company is often not entitled to offset a COLA paid by the Social Security Administration can be very beneficial to an insured. If, for example, your policy’s disability benefit is $1,000 per month before offsets and you are receiving $400 per month in Social Security disability (leaving a net policy benefit of $600 per month and total income of $1,000 per month between both sources), and then you start receiving $50 more per month due to an increase in your Social Security for a COLA, your disability insurer cannot reduce the policy benefit by the $50 COLA increase. Thus, you would continue to receive $600 per month from your insurer (not $550 despite the $50 COLA), in addition to the $450 from Social Security for a net increase in your monthly income of $50 or, $1,050 per month total. That can be particularly important if you are young and permanently disabled. In such a scenario you may end up receiving numerous COLAs from Social Security over a period of decades substantially boosting your “other income,” but in many States such as California, the law will not permit your disability insurer to take advantage of that by reducing the policy benefit by the COLA amounts.

Group disability policies or plans almost always allow the insurer the right to be reimbursed for any “overpayment” it makes to its insured of monthly disability benefits due to your receipt of “other income.” An overpayment of benefits most often occurs if you are approved for Social Security disability. Approval by the Social Security Administration routinely occurs well after you apply for benefits because Social Security disability claims take a long time to process – you have to love our bureaucrats. At that time, the Administration will pay you a retroactive lump sum for past due benefits or “back-pay” (while your application was processed and also because federal law permits an award of Social Security benefits dating back as much as one year before you applied). And it will also start paying you a monthly amount on an ongoing basis. Thus, you may receive monthly benefits from your disability insurer for months or years without a reduction for Social Security because you would not have received Social Security yet. When you receive your lump sum award, however, your insurer will certainly “come knocking” to collect the overpayment it made in past months as a result of the retroactive Social Security back-pay. Your insurer has that right under the policy, though a skilled ERISA lawyer can sometimes avoid you reimbursing the overpayment based on various case law arguments, e.g. if the Social Security money you received was commingled with your other general funds, is not traceable to definitive property, or spent and no longer in your possession. See our article entitled, “Ruling Limits Insurance Company’s Ability to Collect SSDI Overpayments.”

Many group disability policies include language obligating the insured to pursue all “other income benefits” for which the inured may be eligible, including Social Security. If such benefits are not applied for, then under the provisions of most policies, the insurer has the right to estimate the insured’s entitlement to these benefits and then reduce the monthly disability benefit by the estimated amount. Usually, however, the insurer is not entitled under the policy’s language to reduce your monthly benefit by an estimated amount if you: 1) apply for all other income benefits to which you might be entitled; 2) appeal any denial to all administrative levels the insurer feels is necessary (the law requires only that you appeal to the administrative law judge level); and 3) sign the insurance company’s Reimbursement Agreement, which states that the insured promises to pay the insurer any overpayment caused by an award.

If your disability insurer denies your claim, but you were approved to receive disability benefits from Social Security, the State of California or Workers’ Compensation, often times your insurer will completely ignore that disability finding in its claim denial. Experienced ERISA attorneys such as the McKennon Law Group can use that to your advantage. Federal courts have ruled that where a disability insurance company denies a claim without explaining why its decision differs from that of the Social Security Administration, it tends to show that the insurer did not properly evaluate the insured’s claim.

If you are an employee covered under your employer’s group disability plan or policy and had your claim denied, or if you have questions about what sources of “other income” may result in an offset to your disability benefit, you should immediately contact the McKennon Law Group PC at (949) 387-9595 for a free consultation, a law firm specializing in ERISA insurance and employee benefits litigation. Let us decide whether your claim was wrongfully denied or whether your insurer is wrongfully offsetting your benefit, and let us see if we can assist you.

McKennon Law Group’s California Insurance Litigation Blog Nominated for The Expert Institute’s Best Legal Blog Contest

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