McKennon Law Group, Author at McKennon Law Group

In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim, to handling a claim denial and through preparing a case for litigation. In Part Four of this series, we discuss ERISA claim denials. Our focus in this article will be mostly on disability insurance claim denials.

When denying a claim, an insurer is required to provide a written explanation of the basis of its denial. Under Section 503 of ERISA, “every employee benefit plan shall . . . provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant.” 29 U.S.C. § 1133(1). In any subsequent litigation, the insurer is mostly limited to the basis for the denial that is asserted in a denial letter. Once a claimant has sued the insurer, the insurer or its attorneys cannot formulate new reasons why it is believed that the denial was proper. See, e.g., Lauder v. First Unum Life Ins. Co., 284 F.3d 375, 380-82 (2d Cir. 2002).

Generally, denials of disability claims fall into two broad categories: (1) lack of objective evidence in support of the disability, and (2) insufficient medical evidence to support the disability (i.e., that even though the claimant may be suffering from a diagnosable medical condition, there exists insufficient support that the medical condition is so severe so as to render the claimant unable to work). As for a lack of objective evidence of a diagnosis or disability, unless a provision of the plan states otherwise, a claimant can rely on a variety of forms of evidence, even if there is no objective evidence to support the disability. Evidence may include: current symptoms; other medical conditions that might affect or lengthen the recovery period; existing abnormalities or deficiencies; results from physical examinations; observations made by the treatment provider during office visits / therapy sessions; diagnostic tests and their results; treatment plans; any prescribed medications and the responses to those medications; level of functionality (restrictions and limitations); clinical documentation that supports the rationale that the treatment provider used when determining level of functionality; and a description of the impact that the employee’s level of functionality has on her ability to perform her job or any other job assigned by the company.

Of course, insurance companies do not want to pay most claims, and they often look for an excuse to deny ERISA claims. Most of the time, they have their own medical personnel examine the medical evidence to determine whether the evidence supports a diagnosis and whether the evidence supports significant restrictions and limitations to the claimant’s ability to perform the substantial and material duties of his occupation. However, the insurer cannot arbitrarily refuse to credit a claimant’s reliable evidence that supports his disability. See Michaels v. Equitable Life Assur. Soc., 305 F.App’x 896, 906–07 (3d Cir. 2009). A letter from a treating physician explaining that a claimant has a particular condition and cannot work because of that condition is reliable evidence that cannot properly be ignored without a reasonable basis. When filing a claim, or appealing the denial of a claim, the ERISA claimant should always obtain letters from his treating physicians explaining the nature of the condition, the basis for the diagnosis, the claimant’s symptoms and the reason why the claimant cannot return to work. Even if the insurer refuses to give the letters adequate weight, a judge in a subsequent lawsuit will likely consider the treating physicians’ opinions strongly.

ERISA claimants should carefully examine the plan to see if it requires “objective” evidence of a diagnosis or disability. If so, the plan’s documents usually state what kind of evidence is required. The plan may limit the relevant objective evidence to a specific and narrow list of symptoms and results from tests such as magnetic resonance imaging or electromyography. Each plan is different, and the plan’s documents should be examined before deciding how to attempt to meet this requirement. Insurers very often state in denial letters that there is no objective evidence of disability or diagnosis, even though the plan does not require objective evidence. The denial letter may emphasize the lack of a test or documented restriction of movement. Unless the plan requires the specific evidence that the denial letter demands, this may be an improper attempt to require that a claimant meet a heightened standard of disability that is not found in the plan. Courts often criticize insurers for this type of conduct. See Saffle v. Sierra Pacific Power Co., 85 F.3d 455, 459–60 (9th Cir. 1996). Such conduct on the part of an insurer can compel a court to rule that the insurer improperly denied a claim and that it must pay a claimant’s benefits under a policy.

Insurers also often deny disability claims because there allegedly is insufficient support for the diagnosis, the disability and/or the claimant’s inability to perform his occupation. This reason often takes the form of an assertion that the given diagnosis and restrictions do not support the conclusion that the claimant cannot perform her job duties. For example, a claimant with chronic and severe irritable bowel syndrome may receive a denial letter stating that the claimant’s reported time spent in the bathroom is exaggerated and that, even if he suffers from the diagnosed condition, the claimant only needs ready access to a bathroom and permission to use it once every two hours. The insurer will then assert that the diagnosis does not support a determination that the claimant simply cannot work. Of course, this conclusion may be contradicted by the claimant’s treating physicians, but the insurer may discount those opinions because, in its opinion, the diagnosis does not support the level of restrictions prescribed.

Insurers often combine both of these methods when denying a claim. An insurer may emphasize that a claimant can perform a sedentary occupation and will only disagree with a narrow, but critical, range of restrictions on the claimant’s behavior. An example of this form of denial is one with regard to an office worker who has horrible back problems. His job requires that he sit at a desk all day and work on a computer. His back pain renders him incapable of performing a variety of tasks, including sitting for eight hours per day. The insurer may acknowledge all of the limitations except for the restriction on the claimant’s ability to sit, stating that the back condition is not sufficiently severe so as to prevent the office worker from sitting. The insurer then concludes that given that the claimant can allegedly perform the main requirement of the office job — sitting — the pain and other limitations are irrelevant, and the claimant is not entitled to benefits under the plan.

There are a variety of ways to overcome these denials. A claimant can obtain independent evaluations of the condition in question. This independent testing may reveal more evidence of the claimed restrictions. The claimant may also undergo vocational assessments. This testing by an independent evaluator may help to provide more concrete evidence that the claimant suffers from the contested condition and restrictions. A determination affirming disability by a governmental agency, such as the Social Security Administration, may also help to overcome this form of denial. Personal statements from the claimant, family and friends are also helpful.

The McKennon Law Group PC periodically publishes articles on its Insurance Litigation and Disability Insurance News blogs that deal with frequently asked questions in insurance bad faith, life insurance, long-term disability insurance, annuities, accidental death insurance, ERISA and other areas of law. To speak with a highly skilled California/Nationwide disability insurance lawyer or ERISA lawyer at the McKennon Law Group PC, call (714)274-6322 for a free consultation or go to our website at www.mckennonlawgroup.com and complete our free consultation form today.

In this several part Blog Series entitled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health and disability claim, from navigating a claim, handling a claim denial and through preparing a case for litigation. In Part Three of this Series, we discuss the roles of various Administrators, the administrative record and the laws requiring Administrators to provide their records to a claimant.

Two different entities manage an ERISA plan, the Plan Administrator and the Claims Administrator. Often times, the two roles are performed by different entities. The Plan Administrator manages and sponsors the plan and must ensure that the plan complies with applicable regulations. The Plan Administrator is often the participant’s employer. Aside from electing some initial benefits and payroll deductions, the participant rarely interacts with the employer in its capacity as the Plan Administrator.

Among its various duties, the Plan Administrator must maintain a Summary Plan Description (“SPD”). The SPD tells plan participants what benefits the plan provides, how to participate in the plan, how to claim benefits and other details of the plan’s operation. The Plan Administrator must also prepare a summary annual report. This report addresses the financial status of the plan.

The Supreme Court has held that a disclosure in the SPD can not necessarily be enforced as part of an ERISA plan. As the Supreme Court explained in CIGNA Corp. V. Amara, 563 U.S. 421, 437 (2011), “The syntax of [ERISA], requiring that participants and beneficiaries be advised of their rights and obligations ‘under the plan,’ suggests that the information about the plan provided by those disclosures is not itself part of the plan.” (Emphasis in original). This is a clear delineation between an SPD and a plan. The SPD is useful and necessary, but, when in doubt, a beneficiary needs to request a copy of a plan itself.

In contrast to the Plan Administrator, the Claims Administrator addresses the actual requests for benefits filed by plan participants. Participants contact the Claims Administrator when they seek their life insurance benefits, disability insurance benefits, death and dismemberment insurance benefits, etc. Usually, a third party that specializes in claims administration, like an insurance company, serves as the Claims Administrator.

Sometimes, the same entity serves as the funding source for claims and Claims Administrator or a Plan Administrator may self-fund a plan and hire a Claims Administrator or Third-Party Administrator to handle claims. If the two roles are performed by the same entity, then a conflict of interest may arise once a claim is made. For example, if an entity such an insurer is the funding source of the benefits and is given the ability and discretion to decide whether claims are payable, there will exist a conflict of interest. If a dispute over benefits arises, such a conflict may have ramifications in litigation and will often make a court disinclined to believe that the Administrator’s actions were in good faith.

The records maintained and developed by the Administrators serve a critical role in the ERISA context. Unlike most non-ERISA litigation, courts decide ERISA insurance and pension claims almost entirely on the administrative record. The administrative record consists of all documents in the Claims Administrator’s files on a particular beneficiary. These will include medical records, applications for coverage and benefits, a copy of the plan, internal notes from the Administrator’s employees, denial letters and other records relevant to the claim. A claimant must be careful to make certain that the administrative record contains all relevant documents. In lawsuits over ERISA benefits, there are rarely depositions or live testimony before a judge. Often times, the court will not even hold an oral argument. Each side simply submits its written briefs, and the judge rules. Given this reliance on the administrative record, a claimant must know what the record contains at each stage of the dispute. It is vitally important that a claimant include in the Administrative Record all appropriate documentation to support a claim. Hiring an experienced attorney is often important to make sure an ERISA appeal of a denied insurance claim is properly done.

ERISA law, 29 U.S.C. Section 1133, states that “every employee benefit plan shall – (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant[.]” Once a beneficiary receives such a notice, they, or their attorney, should promptly request all documents applicable to their claim. The Administrators must furnish beneficiaries with virtually all documents relevant to a claim. 29 C.F.R. Section 2560.503-1(h)(2)(iii) states that: “a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.” The requirement that Administrators provide a beneficiary with relevant documents is quite broad. At its broadest, a beneficiary could obtain copies of internal notations made by the Administrators’ employees, relevant emails, applications for benefits, plan documents, and most other documents that have a connection to the claim. The Ninth Circuit has even ruled that the attorney-client privilege, which usually shields communications between an attorney and client, does not apply to communications between an insurer and counsel before a claims decision is made based on the “fiduciary exception” to the attorney-client privilege in ERISA matters. See Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917, 930-931 (9th Cir. 2012) (“The duty of an ERISA fiduciary to disclose all information regarding plan administration applies equally to insurance companies as to trustees.”). The regulations allow the beneficiary to examine all aspects of the claims process. A Claims Administrator cannot simply deny a claim and then refuse to explain or provide its reasoning and basis.

If a Plan Administrator refuses to provide the documents in question, then it expose itself to potential civil penalties. 29 U.S.C. Section 1132(c)(1) requires that an Administrator mail a copy of the requested materials within 30 days of the request. If the Administrator fails to provide the documents, then the Administrator may become liable for $110 a day starting on the 31st day or the date the Administrator refuses to comply, whichever is sooner. Courts may also order other relief deemed proper. The $110 a day penalty provides only a minor incentive for an Administrators to provide the documents sought by the beneficiary. It provides enough of an incentive that egregious refusals to provide documents are rare. The documents sometimes arrive after the 30 day deadline but Administrators generally provide the majority of the documents requested.

In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim, to handling a claim denial and through preparing a case for litigation. In Part Two of this series, our focus in this article will be on the filing of a claim.

Often, clients contact our firm before they have filed any life, health, accidental death and dismemberment and disability claim for benefits with their insurer. In these circumstances, we can assist them on an hourly or contingency fee basis. Our firm is able to put the client in the best position possible to ensure their claim gets paid. Before collecting documents and submitting a claim to an insurer, it is important to determine first if there are any issues with the timeliness of a claim.

Most first-party insurance policies, including life insurance, disability insurance, property insurance and liability insurance policies, require that an insured policyholder provide notice of a claim within a specified period of time, typically, “as soon as practicable,” “during the Elimination Period” or a similar formulation. See e.g. Ins. Code Section 10350.7 (requirement in disability policies). With respect to liability insurance policies, notice of a claim is required in both claims-made and occurrence policies. Notice generally must be given within a “reasonable time” or within a specified period. Insurance policies often specify that timely reporting of claims is a condition precedent to coverage. While there are different rules for insurance policies that require a timely notice of a claim, a policy-holder friendly rule known as the “notice-prejudice rule” has been adopted by the California courts. The rule provides that unless an insurer can demonstrate actual, substantial prejudice from late notice of a claim, the insured’s failure to provide timely notice will not defeat coverage. See our Blog post regarding the Notice-Prejudice Rule here.

There are many steps we can take to assist our clients with filing claims for insurance/ERISA benefits, even if a claim has already been filed and before an insurer has made a decision on a claim. With respect to a short-term disability or long-term disability claim, we can assist our clients with obtaining key documents to start the claim process. We can also assist with obtaining the necessary claim forms to file a disability claim and to obtain a copy of the disability insurance policy. It is critical that we review the policy to give our client advice about the claim, including the type of claim to file (e.g., total vs. residual disability, mental vs. physical, etc.). For example, if a client wishes to assert a mental-nervous claim, we will evaluate whether such a claim will be limited to a period of years (such claims are typically limited to two years of benefits) and we will evaluate if there is a “physical” cause of the disability our client can assert that could potentially give our client far more benefits for a much longer period of time. We will also evaluate what type of evidence will be required to prove the claim. We can assist the client with obtaining medical records, physician certification letters, attending physician’s statements, personal statements/letters in support of a client’s disability from the client, his/her family and friends. We can also work with the client to obtain the necessary experts to support the type of medical claim at issue. Due to our history of handling claim denials with insurers, we can perform an analysis of ways an insurer might attempt to deny a client’s disability claim, review all claim forms and medical records before submission, and ensure that there are no inconsistencies or irregularities in any of the documents. We can also assist the client with answering questions regarding how their disability affects their activities of daily living and their work, how best to identify the client’s occupational duties, how best to identify how long they can sit/stand/walk, and other information in support of a disability.

Many clients attempt to submit claims on their own, and often fall into pitfalls set by insurance companies that are structured to help an insurer deny a claim. We can assist in navigating the maze of rules and traps insurers set. Retaining an attorney early in the claim process to handle this process will maximize the likelihood a claim with get approved, and help to ensure ongoing future benefit payments.

Later in our Blog series, we will discuss the denial of a disability insurance claim, and steps to taking regarding an appeal of an insurer’s claim denial.

In this several part Blog Series entitled The Basics of an ERISA Life, Health and Disability Insurance Claim, we will discuss the basics of an ERISA life, health and disability claim, from navigating a claim, handling a claim denial and through preparing a case for litigation. In Part One of this Series, we discuss the background and purpose of ERISA, along with procedural rules and practical considerations for a disability claim.

Congress enacted the Employee Retirement Income Security Act of 1974 (“ERISA”) (29 U.S.C. § 1132(e)(2)) in response to public dissatisfaction with poorly funded pension plans, onerous vesting requirements and labor leader misuse of union benefit funds. Senator Jacob Javits, a sponsor of ERISA, observed at the time that only a relative handful of the estimated tens of millions of American workers covered under private pension plans would ever receive any money from the plans on which they staked their financial futures. Fearing that states would enact a patchwork of inconsistent pension reform legislation, employers began supporting federal regulation of private benefit plans, provided it had a strong preemption provision. Thus, ERISA was enacted and sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.

In general, ERISA governs “employee benefit plans” but does not cover group health plans established or maintained by governmental entities, churches for their employees or plans which are maintained solely to comply with applicable workers compensation, unemployment or disability laws.

ERISA’s Subchapter 1—entitled “Protection of Employee Benefit Rights” sets forth the Congressional findings and contains a declaration of policy. In enacting ERISA, Congress found that the “continued well-being and security of millions of employees and their dependents are directly affected by [employee benefit plans].” 29 U.S.C. § 1001(a). Congress further declared that a policy of ERISA was “to protect . . . the interests of participants in employee benefit plans and their beneficiaries . . . by providing for appropriate remedies, sanctions, and ready access to the Federal Courts” and to “increase the likelihood that participants and beneficiaries . . . receive their full benefits.” Id. at § 1001(b), 1001b(c)(3). This section allows plan participants or beneficiaries whose benefit claims were denied to file an action to recover benefits in federal or state court.

While ERISA itself does not require a participant or beneficiary to exhaust administrative remedies in order to bring an action under Section 502 of ERISA, 29 U.S.C. Section 1132, courts adopted an exhaustion requirement that requires an ERISA claimant to exhaust available administrative remedies before bringing a claim in federal court. However, when an employee benefits plan fails to establish or follow reasonable claims procedures consistent with the requirements of ERISA, a claimant may not be required to exhaust administrative remedies because her claims may be deemed exhausted.

The Supreme Court has noted that there is a two-tiered remedial scheme under ERISA—the first tier is the internal review process required for all ERISA disability benefit plans. After the participant files a claim for disability benefits, the plan has 45 days to make an “adverse benefit determination.” Two 30-day extensions are available for “matters beyond the control of the plan” giving the plan a total of 105 days to make that determination. 29 C.F.R. § 2560.503-1(f)(3).

Following denial, the plan must provide the participant with “at least 180 days . . . within which to appeal the determination.” The plan has 45 days to resolve that appeal, with one 45-day extension available for “special circumstances (such as the need to hold a hearing.)” In the ordinary course, the regulations contemplate an internal review process lasting about one year at the very latest, assuming the claimant waits until the 180-day time period expires. Upon exhaustion of the internal review process, the participant is entitled to proceed immediately to judicial review, the second tier of ERISA’s remedial scheme.

Notably, the 180-day limit to appeal the determination is treated much like a statute of limitations. If missed, the claimant may be denied the right to have her claim reconsidered, and also be denied the right to file suit in court. Thus, it is critical that appeals of claim denials are made timely.

Further, federal courts have established rules limiting judicial review to the contents of the “administrative record.” While there are some exceptions, generally it is important to supplement the record with as much evidence as possible during the appeal stage to support a claimant’s position. Therefore, not timely filing an appeal or appealing but not including important documents and evidence to support an ERISA claim can have extreme negative consequences to an ERISA plan participant or beneficiary. Highly experienced law firms like McKennon Law Group PC are often hired to navigate the ERISA claims and appeal process given the complexity of ERISA and its dangerous pitfalls.

McKennon Law Group PC is proud to announce that its founding shareholder Robert J. McKennon has been recognized as one of Southern California’s “America’s Top 100 Bet-the-Company Litigators.” With this honor, limited to only 100 attorneys in Southern California, Mr. McKennon joins the ranks of California’s most esteemed Bet-the-Company Litigators, including: Joseph Cotchett, Skip Keesal, Thomas Girardi, Patricia Glaser, and Thomas Bienert. Additional recipients can be seen on the website devoted specifically to recognizing the best High-Stakes Business Litigators throughout the country at www.Top100BetTheCompanyLitigators.com. Fewer than one-half percent (0.5%) of attorneys in the United States receive this award, making it the premier achievement for High-Stakes Business/Insurance Litigators throughout the nation.

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Life, health and disability insurers are always looking for ways to deny insurance claims. When they do so unreasonably, insured policyholders may be able to sue them for insurance bad faith under California law. Count on insurers to argue everything they can to defeat a bad-faith claim, including asserting the statute of limitations for bad-faith claims. Life, health and disability insurance plaintiff attorneys must remain current as to changes in the law so they can defeat these insurance company tactics. One notable question they must answer is this: Can a disability policy provision setting forth the timing of a lawsuit against the insurer “extend” California state tort law (e.g., statute of limitations to three years) from the statutory two-year limitations period? Recently, a United States District Court in San Francisco held that it could. That court denied an insurance company’s motion to dismiss, because the policy’s contractual language (that barred an action “more than three years after the time proof of claim is required”) could be one that a “reasonable layperson” interprets as meaning she had three years (rather than the statutory two-year period) to bring any action, including both contractual and tort claims, based upon an allegedly wrongful cancelation of the policy. Alberts v. Liberty Life Assurance Company of Boston, 65 F.Supp.3d 790, 795 (2014). Therefore, it is crucial to closely compare any policy language that varies from the statute of limitations, in order to successfully argue for a longer timeframe within which to bring such a California state action.

Plaintiff, Karen Alberts, was a police officer for the University of California when she suffered an injury to her right wrist during physical-training exercises in September 2009. After her injury, Alberts resumed work in a modified-duty capacity, but her condition worsened and, eventually, the UC police department could no longer accommodate her medically prescribed work restrictions. On March 19, 2010, Alberts stopped working for the police department. She was initially approved by Liberty Life Assurance Company of Boston (“Liberty”) for short-term-disability (“STD”) benefits from February 1 through July 31, 2011; she was subsequently extended coverage through February 28, 2012. Sometime between February 9 and February 22, 2012, Alberts received a letter from Liberty that stated that Liberty would be terminating her STD payments because it had determined that she did not qualify for continued benefits under the policy’s provision for long-term coverage.

Under the standard two-year statute of limitations period set forth in California Code of Civil Procedure Section 339(1) for tortious breach of the covenant of good faith and fair dealing (also known as a bad-faith claim), Liberty argued that Alberts’ claim was filed too late, by at least three days, on February 25, 2014. The District Court compared the policy language barring such an action (“more than three years after the time proof of claim is required”) to California Insurance Code Section 10350.11, which sets forth that disability policies must include the following (at a minimum): “No action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished.” That exact language in the Insurance Code has repeatedly been held to not displace the two-year statute of limitations for purposes of federal ERISA claims. Nonetheless, since this was a state claim (even though it was being tried in federal court) and did not use exactly the same language as Insurance Code Section 10350.11, the trier of fact could find that a “reasonable layperson” would assume that she had three years, rather than two, within which to file her lawsuit.

In the meantime, however, in non-ERISA state-law disability insurance claims (even in federal court), it is imperative that the contractual language in each disability policy be closely examined. Where the statutory two-year limitation period is an issue, does the policy language vary at all from California Insurance Code Section 10350.11: “No action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished”? If it does, even by a few words, the plaintiff may be able to argue that a longer, three-year limitations period applies, for both contractual and tort claims.

The Basics of an ERISA Life, Health and Disability Insurance Claim – Part Four: Denial of an ERISA Disability Claim or Appeal

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