McKennon Law Group, Author at McKennon Law Group

An individual suffering from a disabling condition undoubtedly has many concerns. In addition to dealing with physical pain and emotional distress, there is always the thought of how to pay for medical bills and living expenses if the disability prevents the person from continuing work.

It can be stressful and time consuming for a disabled claimant to fight for long-term disability benefits (“LTD”) provided under an ERISA-governed employee benefit plan. However, a recent District Court case, Carrier v. Aetna Life Insurance Company, 2015 WL 4511620 (C.D. Cal. July 24, 2015), may help insureds by making it more difficult for insurance companies/claim administrators to summarily deny an insured’s claim without proof of specific findings and details as to how and why they reached their conclusion to deny benefits.

Gloria Carrier was employed by Bank of America as a Credit Administrator. Her job duties included clearly communicating risk analysis, identifying problems on credit-related issues, guidelines and policies, performing research on closed loans and supervising between twenty and 100 people across multiple states. After being diagnosed with uterine cancer, she had to have her uterus removed and subsequently underwent three cycles of chemotherapy. After her surgery and chemotherapy, her cognitive abilities were severely affected and, according to her treating physician, she suffered from severe depression and suicidal thoughts.

Carrier initially received short-term disability (“STD”) benefits under her employee benefit plan issued by Aetna Life Insurance Company. After the expiration of her STD benefits, she applied for LTD benefits under the plan. Although Carrier was initially awarded LTD benefits, Aetna decided to terminate them a few months later “based on its determination that she no longer met the definition of disability,” despite her treating physician’s opinion that she continued to suffer from major depression and cognitive disorder that prevented her from performing her normal job duties. Aetna’s decision was based on peer evaluations conducted by three Aetna retained doctors of the plaintiff’s treating physician’s records and office notes. Aetna then upheld the denial decision on appeal.

During litigation, the district court conducted a de novo review of the claim decision, and determined that Carrier’s benefits were improperly terminated. In finding that plaintiff’s claim for LTD benefits was wrongfully terminated, the court found that the opinions of Aetna’s physicians were “presented in a conclusory fashion, making it unclear how they reached such starkly contrasting results from those of [plaintiff’s treating physician], despite reviewing the same materials.” The court found the opinions of plaintiff’s treating physician that she suffered from severe depression and cognitive disabilities that prevented her from performing her job under the “own occupation” definition of “disability” to be more compelling. Although it indicated that there was no legal deference to the treating physician’s opinion, the court’s ruling demonstrates that insurance companies who rely upon peer-to-peer evaluations in evaluating and potentially denying a LTD claim must ensure that a detailed analysis has been conducted, rather than a simple blanket/conclusory conclusion made without meeting or treating the insured.

The court awarded Carrier LTD benefits for a portion of the period she was wrongfully denied benefits and remanded the action to the plan administrator to resolve a secondary issue regarding a change in the policy’s language from “own occupation” to “any occupation” that went into effect while the initial dispute was being litigated.

When an insured obtains his or her disability insurance coverage from an employer, more often than not, that claim is governed by Employee Retirement Income Security Act of 1974, also known as ERISA. Litigation under ERISA is very different from “normal” bad faith insurance litigation where the insured sues the insurer for breach of contract and breach of the implied covenant of good faith and fair dealing. Some of the differences favor the insured, while others favor the insurance company/claims administrator. However, thanks to the California Legislature and recent District Court rulings, one of the insurer’s asserted weapons is longer available.

In an ERISA case, the court reviews the claim decision by applying one of two different standards of review: the abuse of discretion standard of review or de novo review. Under the abuse of discretion standard of review, the Court is required to give some deference to the insurer’s decision. However, under the de novo standard of review, the Court does not give any deference to the insurer’s decision, but rather determines in the first instance if the claimant has adequately established that he or she is disabled under the terms of the Plan. Between these two options, obviously, the abuse of discretion standard of review could be viewed as more favorable to disability insurance companies. (We believe that in practice there is not much difference between them as the abuse of discretion standard of review gives a disability insurance claimant more access to good discovery from the insurer and we believe that if judges are convinced that a claimant is really totally disabled, they will rule in favor of the claimant no matter the standard). However, the abuse of discretion standard is no longer available to insurers in California.

An insurer can only reap the benefits of the abuse of discretion standard of review by pointing to language in the insurance plan/policy in which the insurer is specifically granted the “discretion” to make claim decisions and interpret the plan provisions. Such a provision is referred to the “discretionary clause.” California Insurance Code section 10110.6 has now completely foreclosed the inclusions (and effect) of any discretionary clause contained in an plan/policy with a “renewal date” of 2012 or later.

California Insurance Code section 10110.6 states in the relevant part:

(a) If a policy, contract, certificate, or agreement offered, issued, delivered, or renewed, whether or not in California, that provides or funds life insurance or disability insurance coverage for any California resident contains a provision that reserves discretionary authority to the insurer, or an agent of the insurer, to determine eligibility for benefits or coverage, to interpret the terms of the policy, contract, certificate, or agreement, or to provide standards of interpretation or review that are inconsistent with the laws of this state, that provision is void and unenforceable.

(b) For purposes of this section, “renewed” means continued in force on or after the policy’s anniversary date.

(c) For purposes of this section, the term “discretionary authority” means a policy provision that has the effect of conferring discretion on an insurer or other claim administrator to determine entitlement to benefits or interpret policy language that, in turn, could lead to a deferential standard of review by any reviewing court.

…

(g) This section is self-executing. If a life insurance or disability insurance policy, contract, certificate, or agreement contains a provision rendered void and unenforceable by this section, the parties to the policy, contract, certificate, or agreement and the courts shall treat that provision as void and unenforceable.

This section, by its own terms, applies to any policy or agreement that provides “disability insurance coverage” to “any California resident” regardless of where it was offered, issued, delivered, or renewed. Thus, when determining whether a subject policy is governed by this section of the California Insurance Code, the only issue is whether the policy was offered, issued, delivered, or renewed on or after January 1, 2012 and before the claim accrued. However, this is typically a minor hurdle for an insured to clear as, for the purposes of section 10110.6, a policy automatically renews every year on the policy’s anniversary date. See Cal. Ins. Code § 10110.6(b) (providing that “renewed” means “continued in force on or after the policy’s anniversary date”). Most Policies renew every year, which means, that as of now, a vast majority of disability insurance policies’ issuance dates (and renewal dates) fall within the relevant time period.

Indeed, numerous recent Court rulings establish that, even if the Policy contains a discretionary clause, per California Insurance Code section 10110.6, that language is unenforceable, and de novo is the proper standard of review. See Polnicky v. Liberty Life Assur. Co. Of Boston, 999 F. Supp. 2d 1144, 1148 (N.D. Cal. 2013) (applying de novo standard of review to ERISA claim for denial of benefits because “[t]he Policy was continued in force after its January 1, 2012 anniversary date, [so] any provision in the Policy attempting to confer discretionary authority to Liberty Life was rendered void and unenforceable”); see also Gonda v. The Permanente Med. Grp., Inc., 10 F. Supp. 3d 1091, 1093-1094 (N.D. Cal. 2014); Cerone v. Reliance Std. Life Ins. Co., 9 F. Supp. 3d 1145 (S.D. Cal. 2014); Curran v. United of Omaha Life Ins. Co., 38 F. Supp. 3d 1184 (S.D. Cal. 2014); Rapolla v. Waste Mgmt. Employee Benefits Plan, 2014U.S. Dist. LEXIS 87256, 2014 WL 2918863 (N.D. Cal. June 25, 2014); Snyder v. Unum Life Ins. Co. of Amer., 2014 WL 7734715 (C.D. Cal. Oct. 28, 2014); Jahn-Derian v. Metro. Life Ins. Co., 2015 U.S. Dist. LEXIS 28652, 2015 WL 900717 (C.D. Cal. Mar. 3, 2015).

Given these rulings, it appears that the abuse of discretion standard of review is now, more than three years after the effective date of the statute, dead in ERISA cases that are filed in Federal Courts in California.

If your claim for short-term disability insurance or long-term disability insurance has been denied, you can call (949) 387-9595 for a free consultation with the attorneys of the McKennon Law Group, several of whom previously represented insurance companies, who are exceptionally experienced in handling ERISA short-term and long-term disability insurance litigation.

Have you ever wondered whether the liability policy you purchased covers losses you already knew about before you bought the policy? How much do you have to know? What if you knew about certain property damage at a construction project you caused but not about other related damage your policy would otherwise cover? A recent case from the Ninth Circuit sheds light on these issues, and it is good news for policyholders.

In Kaady v. Mid-Continent Casualty Co., 2015 WL 3894394 (9th Cir. June 25, 2015), the Ninth Circuit, applying Oregon law, strictly construed the known-loss provision in a commercial general liability policy in favor of the insured. Despite that the insured subcontractor knew about property damage to his work before he purchased a policy to cover it, the Court held the provision did not preclude coverage. Namely, it did not preclude coverage for different property damage to the work of others the insured did not know about, though the damage resulted from the insured’s work.

In Kaady, the insured, a masonry subcontractor, was sued in a construction defect action because the wall sheathing and deck posts behind the manufactured stone he installed over them had deteriorated. He did not install the underlying wall sheathing and posts, which were installed by other subcontractors. He was sued in the construction defect case for wall and post deterioration caused by his defective masonry work.

The insured settled the construction defect case and then tendered to his commercial general liability insurer seeking coverage for the settlement. He claimed the wall and post deterioration of which he settled was “property damage” covered under his policy, defined as “physical injury to tangible property . . . .” The insurer denied his claim and the insured sued for breach of the policy.

The insurer argued the insured’s claim was barred because he purchased the policy after he already knew about the “property damage.” More specifically, the insurer contended the insured’s settlement of the construction defect case was not covered based on the policy’s known-loss provision. That provision states the policy “applies to ․.. ‘property damage’ only if ․.. no insured ․.. knew that the ․.. ‘property damage’ had occurred, in whole or in part.” The insurer argued that the manufactured stone and underlying structural components are the same “property” and part of the same structure, and, “so long as the insured knew about any damage to a structure, the known-loss provision bars coverage of any other damage to the same structure.”

There was undisputed evidence that the insured knew about some cracks in the manufactured stone he had installed. But he did not know about any of the property damage for which he sought coverage: the damage to the wall sheathing and deck posts behind the stone facade.

The insurer prevailed on summary judgment but the Ninth Circuit reversed. It rejected the insurer’s argument that it should treat components the insured provided and components provided by others as the same “property.” The Court reasoned that a commercial general liability policy, in the construction defect context, necessarily distinguishes between the two in every other policy provision and therefore should also in the known-loss provision.

Mid–Continent has offered no reason to treat the insured’s work and the work of others as different property in every provision of the policy except the known-loss provision. Thus, we conclude that the known-loss provision also distinguishes between them. The insured’s knowledge of damage to his own work doesn’t automatically constitute knowledge of damage to the components of the structure furnished by others.

The Ninth Circuit then soundly rejected the insurer’s next argument. Even if the insured’s masonry stone and the underlying walls and deck posts (furnished by others) were considered the same “property,” the Court concluded the known-loss provision still did not preclude coverage. It reasoned the provision does not preclude coverage for a different type of “property damage” than the type the insured knew about when he bought the policy, even if both types of damage were to the same “property.” In other words, the insured only knew about the cracks in the stone, not about the deteriorated walls and posts, which is a completely different type of “property damage.” Since the policy’s known-loss provision bars coverage for “property damage” if the insured “knew that the . . . ‘property damage’ had occurred,” the Court reasoned use of the definite article “the” particularizes the subject which it precedes and indicates “that the claimed damage must be the same as the known damage.”

The Court went on to explain that the insurer’s interpretation of the policy would eviscerate the known-loss provision’s “continuing property damage” language, which states that if the insured “knew, prior to the policy period, that the ․.. ‘property damage’ occurred, then any continuation, change or resumption of such ․.. ‘property damage’ during or after the policy period will be deemed to have been known prior to the policy period.” The Court correctly reasoned that “if the insured’s knowledge of any damage to any part of the structure automatically barred coverage of all damage to that structure, it wouldn’t matter whether the claimed damage was a ‘continuation, change or resumption’ of the known damage,” rendering that policy provision meaningless.

The Court summarized its holding as follows:

Applying our interpretation of the policy to [the insured’s] claim, we conclude that [the insured’s] knowledge of the cracks in the masonry before he bought the policy doesn’t constitute knowledge of the claimed “property damage” to the structural components. Not only are the wooden deck posts and wall sheathing different “property” than the manufactured stone . . ., the claimed damage is of a different type. We don’t think that the ordinary purchaser of the policy would interpret the known-loss provision as broadly as [the insurer] advocates.

Lastly, the Court concluded the insured’s knowledge of one type of “property damage” when purchasing the policy would only preclude coverage for different, unknown “property damage” under the known-loss provision if the latter was a continuation of the former. It stated,

the correct inquiry is whether the claimed damage to the structural components was a ‘continuation, change or resumption’ of the cracks. If it was, [the insured’s] knowledge of the cracks would bar coverage of the claimed damage; if not, his knowledge of the cracks wouldn’t bar coverage.

Courts regularly interpret policy provisions in favor of coverage, particularly where they are ambiguous or involve an exclusion. This case is no different. The Court looked at the policy and interpreted it as written, rejecting the insurer’s extremely broad reading of a provision limiting coverage. Just because an insured knows some facts about a potential loss when he buys a policy does not necessarily mean there is no coverage.

When a person suffers from a disability caused by an injury or sickness, the resulting restrictions and limitations, be they physical or mental, can have a devastating impact on that person’s ability to return to work. What is often overlooked, is that the side effects of the medication prescribed to treat a medical condition can themselves also impede a person’s ability to perform in the work place, thus resulting in a long-term disability. Recently, Central District of California Federal Court Judge Percy Anderson, in Hertan v. Unum Life Insurance Company of America, 2015 WL 363244 (C.D. Cal. June 9, 2015), ruled that a long-term disability insurer had to consider how the side effects of an insured’s medication impacted her cognitive abilities, and therefore, her ability to perform her job.

In 2010, Plaintiff Gaye Hertan was diagnosed with a large brain tumor. At the time of her disability, Hertan was the partner in a law firm. Hertan underwent brain surgery to remove the tumor, and during the surgery plates and screws were inserted into her head. A couple of months after the surgery, Hertan returned to work on a part-time basis. While her doctors cleared her return to work, they also stated that she could work no more than 50-70% of the time. Following the surgery, Hertan experienced pain along the incision and under her scalp, for which her physicians prescribed endocet (Percocet). When the pain persisted, she was eventually also prescribed the pain medications of meloxicam, Lyrica and OxyContin.

Unable to return to work on a fulltime basis, Hertan filed a claim for long-term disability insurance benefits under the ERISA-governed long-term disability insurance policy provided by her employer. Hertan reported to Unum Life Insurance Company of America (“Unum”), the Plan’s claim administrator, that the medication made her tired, a little dizzy and made it hard to focus. Unum initially approved Hertan’s LTD claim. However, despite confirming that Hertan was still taking Percocet, and in fact was required to increase her dosage, which also increased the side effects, Unum eventually denied Hertan’s claim for further LTD benefits. On appeal, Hertan and her physicians again confirmed that Hertan’s pain was disabling, and also that the side effects of the pain medication included drowsiness, dizziness, reduced concentration and overall inability to think clearly. These side effects, obviously, negatively impacted Hertan’s ability to return to fulltime work as an attorney. Despite these reports, Unum again denied her disability claim.

Judge Anderson reviewed Unum’s claim decision under the de novo standard of review. In reviewing Hertan’s medical records and Unum’s claim decision, Judge Anderson determined that Hertan’s medical records, which included numerous references to her pain, pain medication and resulting side effects, supported her ongoing claim for LTD benefits, explaining that:

Throughout her claim, Hertan consistently explained that she could only work part-time because her pain would get worse throughout the day until it reached a point where she would need to take her narcotic pain medication. Once taking the medication, she was unable to work as an attorney because the medication made her tired, dizzy, and unable to focus. (AR 196, 248.) Dr. Jordan repeatedly confirmed that the pain medication impaired Plaintiff’s cognitive functioning to the extent that it prevented her from returning to full-time work as an attorney. (AR 1017.)

Judge Anderson criticized Unum for focusing on the physical requirements of an attorney, a sedentary occupation, rather than “address[ing] the cognitive demands of Hertan’s occupation as an attorney.” Finally Judge Anderson rejected Unum’s contention that the side effects of the Percocet might be minimized as she “may have become habituated to the Percocet,” noting that such a conclusion was not supported by the record. After reviewing the record, Hertan was awarded past-due LTD benefits and placed back on claim.

The lesson of Hertan v. Unum Life Insurance Company of America is that, when assessing whether a claimant meets an ERISA Plan’s definition of disability, the claim administrator must evaluate, not only how the underlying disability impacts a claimant’s ability to perform his or her job duties, but also whether the prescribed medication has side effects that might impede a claimant from returning to the work force. What is surprising is that although this decision is correct and logical, not many long-term disability insurance cases under ERISA have focused on the side effects of medication as being disabling, and that an insurer’s decision to discount them is inappropriate.

Recent verdicts from across the nation in disability, life and health insurance policy cases must be alarming for big corporate insurance companies. The trend is for jurors to award individual plaintiffs astronomical punitive damage verdicts, showing their general disdain for insurance companies and tendency to empathize with policyholders, particularly where a person’s health is at issue.

That trend in juror attitudes is supported by jury consultant research. For example, Mark S. Sobus, Ph.D., J.D. of EDGE Litigation Consulting, LLC, found insurers are at a great disadvantage when trying to persuade jurors to side with them because jurors tend to have a negative attitude toward insurance companies. Dr. Sobus in his research asked jurors, “In a dispute between a policyholder and his/her insurance company, are you someone who without knowing any facts would automatically side with the policyholder or the insurance company?” Dr. Sobus found no one ever said they would side with the insurance company, but around thirty percent of jurors admitted that they would automatically side with the policyholder. That thirty percent of jurors can almost never be persuaded to change their minds.

Dr. Sobus also found:

While most jurors believe policyholders make fraudulent claims to insurance companies and that such conduct is wrong, this rarely leads to jurors adopting such a position when they decide a case, even where the insurer presents strong evidence the policyholder made misrepresentations to the insurer.
Jurors hold insurance companies to an incredibly high standard of constructive knowledge. Jurors very often forgive misconduct by the insured when they conclude (as they most often do) that the insurance company could have and should have independently learned about “missing” information left out by the insured on his application for insurance.
An example of this happened in a life insurance dispute in which the insured was murdered. The murder happened during the policy’s two-year contestability period, which allowed the insurance company to rescind the $5 million policy if it found material misrepresentations in the application. The insured omitted that he was bankrupt on his application. He misrepresented his assets. And he failed to disclose he had been turned down by other insurance companies. In this case and similar cases, according to Dr. Sobus, jurors consistently found in favor of the beneficiary. The jurors concluded that the company did not adequately investigate the insured prior to issuing the policy. The common refrain from jurors was the company wanted the premiums and didn’t care about the insured’s material financial history until he died and the insurance company’s assets were on the line. Only then did the company properly investigate the underwriting risk, when it should have done so before it sold the policy.

Jury consultant conclusions that jurors are predisposed to side with individual insureds over their insurance companies are borne out by recent jury verdicts against insurance companies. In Latham v. Time Ins. Co., No. 2006-cv-1040 (Boulder Colo. Dist. Ct. Jan. 2010), after just six hours of deliberating, a jury awarded a thirty-nine year old teacher and her two children almost $50 million in damages, mostly punitive damages. Her health insurer, the defendant, had rescinded her insurance policy after she submitted a claim for $185,000 in medical bills for the broken bones, internal injuries and brain damage she and her children suffered in an automobile accident caused by a drug dealer fleeing from police. The insurer decided not to pay the claim and rescind the policy because it discovered the insured had failed to disclose certain medical information on her application for the insurance.

The insured’s omission did not matter to the jury, which emphasized the lack of humanity and concern by the insurance company for the insured mother of two. Indeed, the insured admitted she failed to disclose the medical information on her insurance application. But, according to the local news report, jurors contacted after the verdict stated that the defendant insurance company failed to show that plaintiff deliberately misrepresented her health on her application for insurance or that the company had conducted a reasonable investigation before revoking her coverage. Another juror stated:

Most of [the insurance company’s] witnesses seemed dishonest, defensive and just showed a basic lack of humanity. It was kind of frightening. I was blown away by just how much they acted like robots.

The jury foreman even stated that he had been in favor of awarding as much as $150 million to the insured, “as a way of punishing the company and sending it a message.”

The message of this case to insurance companies is obvious. Do not discount the role emotions play on jurors involving a dispute between an insurance company and individual insured over her medical condition. Jurors will tend to side with the insured based purely on their emotions. Jurors will give the insured considerable grace and big damage awards whenever the evidence will remotely allow it.

Another example is Hull v. Ability Ins. Co., No. 1:10-cv-116 (D. Mont. April 6, 2012). In that case, an insurance company stopped paying an elderly woman’s benefits, after two years of paying them, under her long-term care insurance policy. The company claimed her dementia did not qualify her for the benefits under the policy’s terms. The insured presented evidence the insurer had not obtained information from her treating physician and had not obtained her medical records before denying her claim. She also presented evidence that the insurer’s claims manual recommended claims representatives avoid relying on information from the insured’s treating physicians. The jury awarded the elderly woman $250,000 in benefits for the insurance company breaching its insurance contract and $32 million in punitive damages (later reduced on appeal to $10 million).

No doubt, as these and other cases illustrate, there is a trend developing among jurors to punish recalcitrant insurers with large punitive damage awards, particularly in cases involving an individual insured’s claim for disability, life or health benefits. The lesson to “big business” insurance companies is unmistakable, don’t discount the human element juries use to decide cases. That element puts corporate insurance companies at a distinct disadvantage from day one of a jury trial involving an individual and his or her health problems.

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

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

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

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

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

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

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

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

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

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

* * * *

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

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

* * * *

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

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

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

ERISA Insurers’ Conclusory Medical Opinions Regarding Disability Status Will Not Carry the Day

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