McKennon Law Group, Author at McKennon Law Group

By granting certiorari in Heimeshoff v. Hartford Life and Accident Insurance Co., 496 Fed. Appx. 129, 2012 U.S. App. LEXIS 19269, 2012 WL 4017133 (2d Cir. September 13, 2012), the United States Supreme Court is poised to address an issue that has left countless ERISA claimants without a remedy to challenge a wrongful denial of disability benefits. Specifically, the Supreme Court will consider when the statute of limitations accrues following a decision to deny a claim for disability benefits. Or, as a claimant would ask the question, “What is my deadline to file a lawsuit in an ERISA matter?”

In Heimeshoff, the claimant was a Wal-Mart employee who filed long-term disability claim under an ERISA plan, asserting that she could no longer work as of June 2005 because of a variety of conditions, including lupus and fibromyalgia. Her claim was denied in November 2007, and she filed her lawsuit in November 2010, believing that she met the Policy’s three-year internal limitations period. However, the District Court granted Hartford’s motion to dismiss, based on the policy language stating that a lawsuit must be brought “within 3 years after written proof of loss is required to be furnished,” which would have been in September 2008 (because proof of loss was due within 90 days of Heimeshoff’s last day at work).

The Second Circuit Court of Appeals affirmed the District Court’s ruling, rejecting the arguments that the Hartford’s contractual limitations period did not begin to run until the final denial of benefits and that Hartford erred by not disclosing the deadline to file a lawsuit in the final denial letter.

Hopefully, in addressing these issues, the United States Supreme Court’s ruling will simplify the calculation of deadlines to file a lawsuit. The clearer the rules, the fewer claimants who will be unwittingly left with no remedy to challenge a final denial decision.

Many claimants (and some lawyers) are confused by the deadlines associated with ERISA claims. If your claim for disability benefits was denied by an insurance company, you should speak with an attorney as soon as possible to ensure that you do not forfeit your right to file a lawsuit. If you have a dispute with an insurance company and would like to discuss your matter with an attorney, please contact us for a free consultation.

The McKennon Law Group PC periodically publishes articles on its California Insurance Litigation Blog that deal with frequently asked questions in the insurance bad faith and ERISA area of the law. This is another such article in that series.

If an insurance company has unfairly denied an insured’s disability benefits or has otherwise committed bad faith, an insured may be entitled to substantial compensation for harm that the insured has suffered. In fact, not only may an insured seek payment of all the unpaid benefits, but the insured can also sue for future policy benefits, among other damages.

Under a breach of contract theory, an insured generally can only recover accrued unpaid benefits where payments under the policy are made periodically. However, under California law, insurers are subject to an implied covenant of good faith and fair dealing. If an insurer acts in bad faith in handling an insured’s disability insurance claim, the insured can sue to recover future disability benefits. See Hangarter v. Provident Life & Acc. Ins. Co., 373 F.3d 998, 1012-1013 (9th Cir. 2004). Furthermore, if the insured can establish bad faith by the insurer, the insured can also recover reasonable attorneys’ fees incurred in proving the benefits owed in a lawsuit. See Brandt v. Sup.Ct. (Standard Ins. Co.), 37 Cal. 3d 813, 817 (1985). Generally, an insured can establish bad faith by showing that an insurer’s delay or withholding of benefits under the disability insurance policy was unreasonable or without proper cause. For a detailed discussion of what constitutes insurance bad faith, see the article on our California Litigation Blog.

If the insured’s insurance disability plan is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), then the remedies available under California law for breach of the implied covenant of good faith are not available. This means that, under ERISA, the insured/participant will not be able to recover future disability benefits. However, pursuant to ERISA, section 502(a)(1)(B), an insured/participant may sue for benefits due under the terms of an ERISA plan and also a declaration of the insured’s/participant’s rights to future benefits under the disability insurance plan. Furthermore, as under California law, ERISA allows the judge to exercise discretion to award the prevailing party attorneys’ fees and costs incurred during court proceedings. See 29 U.S.C. §1132(g)(1).

Being denied disability benefits during an insured’s/participant’s time of physical and emotional hardship is extremely upsetting. However, both California and federal law provide insureds with considerable remedies where their benefits have been wrongfully denied by insurers. It is crucial for insureds/participants to understand that they have a right to their disability benefits and that they can take action to protect them. If you have a dispute with an insurance company and would like to discuss your matter with an attorney, please contact us for a free consultation.

A recent Ninth Circuit Court of Appeals decision reaffirmed the need for plan administrators to state the reasoning behind their denial of coverage. In Lukas v. United Behavioral Health, __ F.3d __, 2013 U.S. App. LEXIS 1230 (9th Cir. Jan. 17, 2013) the Ninth Circuit was faced with evaluating whether the district court properly weighed the factors necessary to determine if there was an abuse of discretion by the plan administrator in denying the benefits to the claimant. On de novo review, the Ninth Circuit found that the lower court failed to properly weigh these factors and reversed the decision, remanding the case back to the district court for a benefit award and further necessary proceedings related to that award.

The claim at issue in Lukas was based upon Lukas’ stay at a residential treatment facility for an eating disorder and co-morbid conditions. United Behavioral Health denied Lukas’ claim for benefits because it did not think the treatment at the facility was a medical necessity. Furthermore, United Behavioral Health stated that Lukas had not provided adequate documentation to prove a medical need for the treatment. However, Lukas had provided United Behavioral Health with a letter from the medical treatment facility expressing why the treatment was necessary. At no time during the initial denial or the appeals process, did United Behavioral Health explain why the letter from the medical treatment facility was insufficient in proving a medical necessity, nor did they request any further information. The Ninth Circuit specifically found that the lower court had not properly weighed the factors pertaining to the existence of a conflict of interest and the procedural requirements for review of the claim. The Court made it clear that the weight given to the conflict interest factor depends on the facts of each case, and the Administrative Record revealed that United Behavioral Health committed numerous procedural errors that caused the conflict of interest to weigh more heavily in the analysis.

The Ninth Circuit found that United Behavioral Health committed three clear ERISA statutory violations during the review process, including a failure to provide a meaningful explanation in the initial determination of denial of benefits, a failure to provide a complete case file on request and a failure to reveal the name of the reviewing doctor upon the second appeal. Additionally, the Court stated that United Behavioral Health inadequately investigated the claim by not clearly defining their decision and requesting more information. This was particularly troublesome because of the conflict presented by United Behavioral Health acting as both a payor and evaluator of claims.

The Court stated that United Behavioral Health’s:

Reliance upon a lack of documentation was unreasonable because it was not supported by the record and because [United Behavioral Health’s] numerous procedural violations deprived [Lukas] of the opportunity to provide additional relevant records.

The Ninth Circuit’s decision suggests that a single statement denying coverage does not meet the standard necessary to constitute meaningful dialogue, and without a further explanation by the plan administrator or a request for further information from the claimant, a plan administrator likely exposes itself to the risk of liability under ERISA.

There are several procedural protections ERISA affords claimants in ensuring that their claims are properly investigated and reviewed. This opinion is one of many recent Ninth Circuit opinions explaining how a claims administrator’s violation of these procedural protections will positively impact the outcome of a court’s review of a insured’s/participant’s claim.

On March 22, 2013, a federal district court ordered Sun Life Insurance Company to pay the McKennon Law Group PC over $215,000 in attorney’s fees for its client’s trial victory in an ERISA disability case.

The McKennon Law Group PC periodically publishes articles on its California Insurance Litigation Blog that deals with frequently asked questions in the insurance bad faith and ERISA area of the law. This is another such article in that series.

Generally, to establish a bad faith claim in first party cases (such as those involving life, health, disability, property and casualty, auto liability, and homeowner’s insurance), an insured must demonstrate that an insurer’s delay or withholding of benefits under the policy was unreasonable or without proper cause. The courts have determined that many types of conduct may constitute insurance bad faith, such as:

Failure to accept an insured’s reasonable settlement offer.
Biased investigation or factual determination, including:
- Misrepresenting the nature of the investigatory proceedings and the insurer’s employees/agents lied during the depositions or to the insured.
- Focusing on facts justifying denial, ignoring evidence that supported the claim, and failure to utilize objective standards in making its claims decisions.
- Retention of biased doctor to conduct an independent medical exam and to prepare a report that falsely minimized insured’s injuries.
- An insurance provider’s act in conducting a “pure paper” review, rather than an independent medical examination, constitutes “an indicator of bias.”
Failure to conduct a thorough investigation, including:
- Failure to interview necessary witnesses.
- Failure to investigate beyond facts and coverage theories asserted by insured.
- Failure to consult with medical experts in appropriate cases.
Unduly restrictive interpretation of claim form.
Denial of a claim based on improper standards.
Unreasonable delay in payment of claim.
Deceptive, abusive or coercive practices to avoid payment of claim, including:
- Misrepresenting coverage.
- Intimidating prospective witnesses.
- Threats to close file without payment to pressure settlement.
- Groundless accusations against insured to pressure settlement.
- Arbitrary termination of benefits.
Inadequate communication with insured.
Failure to notify insured of certain policy rights.
Unreasonably incorrect accountings.
Unreasonable litigation conduct.

Insurance bad faith claims can be potent weapons for insureds or beneficiaries who have been mistreated by insurance companies in the handling of their insurance claims. Knowing what kinds of actions by an insurer constitute bad faith is therefore critical to understand if you are considering an insurance bad faith lawsuit. If you have a dispute with an insurance company and would like to discuss your matter with an attorney, please contact us for a free consultation.

The United States District Court for the Central District of California has approved the highest billing rate ever allowed by a California Court for ERISA insurance matters for McKennon Law Group’s founding partner, Robert McKennon. The court approved Mr. McKennon’s billing rate based on his strong experience and expertise in litigating ERISA and bad faith insurance matters, stating: “[G]iven Mr. McKennon’s extensive experience in ERISA matters, it seems reasonable that he would command fees on the high end for attorneys practicing in this area of law.” The court made the following findings in allowing the billing rate:

Mr. McKennon has been practicing law in California for 27 years.
He has spent the majority of that time litigating insurance cases, including ERISA-regulated group disability claims.
Mr. McKennon has litigated ERISA disability cases on behalf of claimants as well as ERISA plan and claim administrators and fiduciaries.
He has handled hundreds of ERISA insurance litigation matters, most of which involved claims for disability insurance benefits.
Mr. McKennon [is] an expert in ERISA and bad faith disability insurance litigation cases.
He has served as a speaker at local and national conferences concerning ERISA issues, and has authored several ERISA insurance articles.
He has also been recognized as a Southern California Super Lawyer in insurance coverage matters from 2010 through 2013.

United States Supreme Court to Decide When the Statute of Limitations Period Begins in an ERISA Disability Case

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