How Long Does It Take To Process A Life Insurance Claim In California?

Are you a beneficiary expecting a life insurance payout? If so, read on to learn what you can expect as a beneficiary, what you need to know about processing a life insurance claim, and what to do if the insurance company is taking longer than they should to provide you with your life insurance money.

In order to receive a life insurance payout, the beneficiary of the policy must file a life insurance claim as soon as possible after the death of the policyholder. Typically the payout will be received 30 to 60 days after the claim is entered, and beneficiaries can choose to receive a lump sum or have the funds deposited into a special account. If the total amount is not paid within a reasonable time, beneficiaries reserve the right to collect interest on the payout.

If you have questions about being a beneficiary to a life insurance policy, or have questions about the process of paying out a claim, contact McKennon Law Group PC today to schedule a free, no-obligation consultation. We’ll address any questions you have and ensure you understand the process that’s in front of you.

What Happens If A Beneficiary Is Not Designated While Enrolling In A Life Insurance Policy

It is not mandatory to designate beneficiaries when enrolling in a life insurance policy, but it would be wise to do so. Since a life insurance policy is a legally binding contract, insurance companies can only pay those listed as beneficiaries once the policyholder passes away. If a beneficiary has not been listed, the life insurance policy will go through the estate in probate, or will be distributed to next of kin. Sometimes mistakes or changes to beneficiary information on the policy can lead to payout delays. If your payout is delayed, consult with a life insurance attorney to help with the process.

Why Do Insurance Companies Sometimes Delay Or Deny Claims?

Insurance companies will also delay or deny claims for life insurance payouts with specific clauses listed in the policy. For example, if a policyholder dies within the first two years of the policy, the insurance company must contest the policy and investigate for material misrepresentation. Some life insurance policies contain a suicide clause, refusing to pay if the policyholder ends their own life. If the cause of death is homicide or accidental death, some life insurance companies will require a further investigation or a statement from law enforcement to make sure the beneficiary is not a suspect in the crime. The beneficiary must be acquitted of the crime in order to receive the payout.

What Should I Do If My Insurance Company Is Delaying In Paying Out My Claim?

All insurance companies are required to work on a good faith basis. Good faith is “a term that generally describes honest dealing. Depending on the exact setting, good faith may require an honest belief or purpose, faithful performance of duties, observance of fair dealing standards, or an absence of fraudulent intent.”

If you believe that your insurance company is not acting in good faith, you have the right to contact a lawyer and seek justice. Our lawyers know that insurance companies have a bottom line, and that they always look to make as much money as they can, and save as much money as they can. For this reason, they sometimes delay in paying out a claim, or deny it entirely. In these cases, our lawyers will communicate back and forth with your insurance company in order to investigate the situation and see whether or not the insurance company is operating in bad faith.

If not, we can still look into the situation in order to try and understand what is happening. With extensive knowledge of state and local law, our legal team are the representatives you need to ensure justice is being upheld and that you have access to the money you rightfully deserve as a beneficiary.

Schedule A Free, No-Obligation Consultation With McKennon Law Group PC If You Have Questions About Receiving A Life Insurance Payout As A Beneficiary

Not all California lawyers offer a free consultation for those in need of assistance with life insurance payouts. However, our lawyers at McKennon Law Group PC do. In your initial consultation, we take the time to understand your questions about life insurance, receiving your beneficiary money, and what you can expect as a beneficiary. And, if you feel that your life insurance company is acting in bad faith or is purposely delaying in paying out a claim, we will take action and fight back on your behalf.

A recent trend of lawsuits has involved Insurers who seek to avoid paying out life insurance or disability insurance benefits even though they have collected premiums on the policy, because they and the plan participant’s employers never obtained Evidence of Insurability (“EOI”). These insurers deny claims for life insurance and disability insurance benefits on the ground that a claimant was never covered by the policy. The Eighth Circuit Court of Appeals, in Corey Skelton v. Reliance Standard Life Ins. Co., 33 F.4th 968 (8th Cir. 2022), recently provided some clarity as to when an insurer and employer have a fiduciary duty to the insured with respect to life insurance and disability insurance coverage and when those fiduciary duties are breached. In Skelton, Plaintiff worked for Davidson Hotels LLC (“Davidson”) and obtained supplemental life insurance coverage for his wife. The life insurance policy was issued by Reliance Standard (“Reliance”). The policy generally required EOI, including proof of good health, for a member to obtain coverage. However, if an applicant for supplemental life insurance was changing coverage amounts within 31 days of “a life event change (such as marriage, birth, or specific changes in employment status),” then the applicant was not required to submit an EOI and receive Reliance’s approval.

Mrs. Skelton had life insurance coverage for $100,000 and wanted to increase the coverage to $238,000. Her husband regained custody of his son, Mrs. Skelton’s step-son, and she asked Davidson whether this qualified as a life event that would allow her to elect supplemental life insurance. Davidson told her that this did qualify as a life event. Skelton applied for the supplemental coverage and in Davidson’s response she received a notice informing her that she was required to submit EOI. Mrs. Skelton subsequently received a “Benefit Verification / Deduction Authorization” document indicating that she had “Supplemental Term Life” insurance, with the reason for completing the form being listed as “Regaining custody of dependent child.” She then paid premiums for a few months, but stopped, and one year later she qualified for a waiver of her premiums retroactive to when her coverage began. She then passed away and her husband made a claim for death benefits under her policy, which Reliance denied for lack of coverage, stating that Mrs. Skelton was never covered because she did not provide EOI.

Reliance argued that because Davidson’s practice was to collect the premiums and then forward the premiums to it, Reliance did not have a fiduciary duty to Mrs. Skelton. However, the district court held that Reliance had a fiduciary duty to ensure that its system of administration did not allow it to collect premiums until coverage was actually effective. The court held that

“Fiduciary status . . . is not an all or nothing concept. A court must ask whether an entity is a fiduciary with respect to the particular activity in question.” Maniace v. Com. Bank of Kansas City, 40 F.3d 264, 267 (8th Cir. 1994), quoting Kerns v. Benefit Tr. Life Ins. Co., 992 F.2d 214, 217 (8th Cir. 1993). “[A]n insurer who is not the plan administrator has no ERISA fiduciary duty” for a particular activity “unless the policy documents or the insurer’s past practices have created [such] an obligation.” Id.

The court held that the “ability to determine Mrs. Skelton’s eligibility for supplemental life insurance made Reliance a fiduciary for Skelton’s application process.” Reliance argued that while it had fiduciary duties related to eligibility and making claims decisions, those duties did not extend to enrollment. But because the policy language provided that enrollment occurred automatically as a result of Reliance’s eligibility decision, Reliance was therefore Mrs. Skelton’s fiduciary, as it essentially determined enrollment. The “plan documents and the insurer’s acts determine whether it is a fiduciary for the relevant function.” See Kerns, 992 F.2d at 217. Thus, as the entity that determined eligibility and conducted enrollment, Reliance was Skelton’s fiduciary.

The court further held that Reliance breached its fiduciary duty by failing to maintain an effective enrollment system. The court held that a reasonably prudent insurer would use a system that avoids the employer and the insurer having different lists of eligible, enrolled participants, and that Reliance used an insufficient, haphazard system. Reliance sent Davidson monthly status reports listing pending applications, but the reports did not include employees who had not submitted EOI, which resulted in a “ships passing in the night” situation between Reliance and Davidson as to who was eligible for coverage.

With respect to Reliance Standard’s argument that it did not communicate with the employer about enrollment in the ERISA plan, the court rejected it, explaining:

Reliance cannot insulate itself by failing to communicate with Davidson about enrollment—which Reliance controlled—while having Davidson remit ill-gotten premiums. ERISA seeks “to protect … the interests of participants in employee benefit plans and their beneficiaries” and to “increase the likelihood that [they] receive their full benefits.” 29 U.S.C. §§ 1001(b), 1001b(c)(3). This Circuit has emphasized that allowing plaintiffs to seek full recovery for breach of fiduciary duty “is so important” because this eliminates the “‘perverse incentive[ ]’” for fiduciaries to “‘enjoy essentially risk-free windfall profits from employees who paid premiums on non-existent benefits but who never filed a claim for those benefits.’” Silva, 762 F.3d at 725, (quoting McCravy v. Metro. Life Ins. Co., 690 F.3d 176, 183 (4th Cir. 2012)). Allowing an insurer to use “a compartmentalized system to escape responsibility” would undermine ERISA’s purposes. See Salyers v. Metro. Life Ins. Co., 871 F.3d 934, 940 (9th Cir. 2017) (quotations omitted).

Indeed, allowing a fiduciary to escape liability because it designed an enrollment system that ensured it would not know it was collecting “premiums on non-existent benefits” would endorse willful blindness—and the exact “perverse incentive” this Circuit has decried. See generally Patterson v. Reliance Standard Life Ins. Co., 986 F. Supp. 2d 1140, 1150 (C.D. Cal. 2013) (“Reliance Standard did not conduct any such investigation and only investigated the eligibility of Ms. Dietrich for *979 supplemental life insurance coverage after her death.”); Cho v. First Reliance Standard Life Ins. Co., 852 Fed. Appx. 304, 305 (9th Cir. 2021) (holding Reliance liable where employer erroneously collected premiums from ineligible person for over a year despite unsubmitted EOI); cf. Chao v. Merino, 452 F.3d 174, 182 (2d Cir. 2006) (stating, in ERISA breach-of-fiduciary-duty case, that under the duty of prudence, “If a fiduciary was aware of a risk to the fund, he may be held liable for failing to investigate fully the means of protecting the fund from that risk”).

Indeed, allowing a fiduciary to escape liability because it designed an enrollment system that ensured it would not know it was collecting “premiums on non-existent benefits” would endorse willful blindness—and the exact “perverse incentive” this Circuit has decried. See generally Patterson v. Reliance Standard Life Ins. Co., 986 F. Supp. 2d 1140, 1150 (C.D. Cal. 2013) (“Reliance Standard did not conduct any such investigation and only investigated the eligibility of Ms. Dietrich for *979 supplemental life insurance coverage after her death.”); Cho v. First Reliance Standard Life Ins. Co., 852 Fed. Appx. 304, 305 (9th Cir. 2021) (holding Reliance liable where employer erroneously collected premiums from ineligible person for over a year despite unsubmitted EOI); cf. Chao v. Merino, 452 F.3d 174, 182 (2d Cir. 2006) (stating, in ERISA breach-of-fiduciary-duty case, that under the duty of prudence, “If a fiduciary was aware of a risk to the fund, he may be held liable for failing to investigate fully the means of protecting the fund from that risk”).

Skelton, 33 F.4th at 978–79. The court additionally held that Reliance breached its fiduciary duty by accepting Skelton’s premiums without providing coverage. “ERISA fiduciaries must comply with the common law duty of loyalty, which includes the obligation to deal fairly and honestly with all plan members.” Shea v. Esensten, 107 F.3d 625, 628 (8th Cir. 1997). This includes the duty to not profit at the beneficiary’s expense.

Reliance argued that because it received all of the premiums from Davidson, it had no way of knowing whether Mrs. Skelton’s payments were made, but it presented no evidence that it did not receive payment for Mrs. Skelton’s life insurance policy from Davidson. The court thus held that Reliance breached its fiduciary duty to Mrs. Skelton by receiving her premiums without giving her a corresponding benefit of coverage, while serving as a fiduciary for her eligibility and enrollment, and thus profited at her expense by avoiding any financial risk of having to pay benefits for her.

Notably, the court did not hold that Reliance became a fiduciary merely by receiving premiums from an ineligible employee. The court found that Reliance told Mrs. Skelton that she would not pay premiums until it approved her application, then it took her premiums without approving her application, thus profiting on its broken promise. This act of misleading Mrs. Skelton (by causing her to believe that if she was paying premiums, she was covered for the supplemental coverage), then profiting off of her premiums without approving her application, was Reliance’s breach of its fiduciary duty.

The Skelton court’s decision demonstrates that an insurer can be held liable for a breach of fiduciary duty even where it does not have actual knowledge that a participant is paying premiums. Because a reasonably prudent insurer would have facilitated a system that reliably informed Davidson as to which participants’ premiums were being paid and which participants were required to provide EOI, Reliance breached its duty. The Skelton court’s holding provides a blueprint of recourse for participants whose insurers have breached such fiduciary duties.

If you or someone you know has experienced the same or similar treatment from an insurer or employer, you may be able to hold them accountable. McKennon Law Group PC is highly experienced in handling denied ERISA claims, including those involving the insurer’s breach of fiduciary duty. Contact McKennon Law Group today for a free consultation.

Life insurance exists to protect your loved ones after you pass away. If anyone in your family relies on you for financial help and protection, you will need a way to provide for them after you pass away, or in the event that you pass away suddenly. For example, parents of young children should file life insurance policies to ensure that their children can receive funds if they were to pass away, especially in a sudden or unexpected way,

Life insurance benefits should be paid after the insured has passed away and, of course, after the proposed beneficiary has properly filed a claim with the life insurance company. The beneficiary will then need to submit a copy of the death certificate to their insurance company, as well as any other supporting documentation that provides insight into the deceased’s passing.

Generally speaking, the faster you submit the correct paperwork, the laws that govern your claim and the insurance company’s processing time are all factors that will tie into how long it takes to process your life insurance claim and receive your check. In most cases life insurance companies are required to pay out claims within thirty to sixty days after they receive the documentation from you. So, the faster you provide them with information, the faster they should be able to provide you with your payout.

All life insurance companies are required to operate in good faith, meaning they owe you a duty of care and are legally required to not delay in paying out claims for no reason at all. Contact a California life insurance lawyer if you need help navigating your life insurance policy, or you feel that your claim is taking too long to process and pay out.

Why Is It Taking So Long To Receive My Life Insurance Money?

First, as mentioned earlier, the faster you submit important documentation, the faster you will likely receive your claim. But if you promptly submitted your information and it’s still taking awhile, there are other factors that could be to blame.

Some life insurance policies have a two-year contestability clause laid out in the contract. If the death in question happened within the first two years of the policy being filed, the life insurance company withholds the right to fully investigate the claim, in order to ensure that no mistakes or misrepresentations were made on the application for life insurance. The life insurance company also has the right to review the original application and the insured’s medical records to determine whether the insured provided false or incomplete information. If the insured person did not provide material information on the application, the company might delay or deny paying the claim based on material misrepresentation. Investigating such claims may take up to a year or even longer.

However, it’s important to remember that if you have held the life insurance policy for longer than two years, it’s quite likely that the life insurance company will opt to not investigate your claim, unless there are questionable or suspicious circumstances regarding the person’s death.

Sometimes, life insurance companies simply have a backlog. If they are short staffed or under staffed, or have a busier schedule than normal, this could impact how long it takes to process your claim. There are a multitude of reasons why processing your life insurance claim could be delayed. This is one of the many reasons it is crucial to work with a lawyer who understands your side of the story, and has extensive experience working with people in situations just like yours. It can seem hard, even impossible to stand up to insurance companies, but with the help of a California life insurance lawyer, it is possible.

Schedule A Free Consultation With A California Life Insurance Lawyer Today

All life insurance companies are required to operate in good faith. This means, they owe you a duty of care and are required by state and federal law to process claims and pay them out as promptly as possible. But, unfortunately, we know by now this isn’t always the case. At McKennon Law Group PC, we offer a free consultation for any life insurance beneficiary who is experiencing a delayed claim or is unsure when their life insurance money will be processed and paid out.

Schedule a free, no obligation consultation with a California life insurance lawyer as soon as possible. Our team of attorneys will help you fight back against big insurance companies, stand up for yourself and your loved ones, and get the money you deserve from your claim. Our team is here to help.

Life insurance policies are a smart way of financially protecting your loved ones in the future. If anyone in your family relies on your income and financial support, and will experience hardship if this financial support no longer exists, life insurance will pay out a sum of money to these dependents once you’ve passed away. The insurer should pay out the full amount in the policy after the insured dies. But, sadly, this isn’t always the case.

Big life insurance companies have a bottom line, and are always trying to save money. Sometimes, these big life insurance companies will deny reasonable claims for simply no reason at all. When this happens, beneficiaries of the deceased may experience serious financial hardship without the life insurance money that was intended to protect them.

Read on to learn what you can do if your life insurance claim was denied by the insurance company. We’ll break down what you can do and, if you have any questions about life insurance policies or about filing an appeal for a denied claim, contact us for a free consultation regarding your situation.

How Do I Know My Life Insurance Claim Was Denied?

You will be contacted by the life insurance company in order to tell you that your life insurance claim has been denied. The insurance company sends the proposed beneficiary a formal letter by mail, which will break down the reasons why the life insurance claim was denied. In the letter, the insurance company will typically take this time to quote specific standards and provisions from the policy that apply to your specific case, listing documents that they reviewed and evidence they leveraged in order to make the decision to deny your claim.

In some random cases, a beneficiary’s claim may be denied via a phone call. If you have had your life insurance claim denied in a phone call, you have every right to contact your life insurance company and request a formal denial letter in writing. It will be helpful to have this document on hand. A denial letter not only outlines important information that is required to fight back against the denied claim, but it also demonstrates exactly what day the life insurance company decided to deny your claim, and helps you outline a timeline for appealing the claim or deciding to file a lawsuit.

The denial letter that a beneficiary receives from the insurance company will be a crucial part of the appeal procedure, so be sure to have a physical copy for your records. With this information, a skilled California life insurance lawyer can outline a procedure for filing an appeal.

Why Did My Life Insurance Claim Get Denied In California?

There are a multitude of reasons why a life insurance claim can get denied in California. The following is a list of just a few examples, as there are many more reasons:

Policy was canceled or the life insurance lapsed because of a missed payment
Failure to reinstate the policy after a lapse or missed payment
Failure to provide correct or accurate information on life insurance application
The deceased passed away due to alcohol or drug use, including prescription drug misuse
The deceased passed away due to a sickness or treatment that is excluded from the policy
Failure to disclose a pre-existing medical condition
Failure to disclose frequency of medical check ups
Misrepresentation of the deceased’s weight, age or income
Denial under the two-year life insurance contestability clause
The deceased passed away via suicide
The deceased passed away in a foreign country
And much more

When filing for any kind of insurance, always be sure that you consult with a lawyer in order to know what you’re signing up for, and what is required of you to ensure you receive the full scope of benefits that you are requesting.

How Does A Lawyer Help Me File An Appeal For A Denied Life Insurance Claim?

First, your lawyer will help you contact the insurance company to find out why exactly the claim was denied. Sometimes, denial letters are hard to decipher, so we will help you figure out exactly what you need to do to proceed. Your insurance company will let you know if your policy allows you to file an appeal, and will let you know which documentation you need to do so. This may include medical records, reports of an autopsy, or receipts of your insurance payment. Your lawyer can help you collect all of this.

Our attorneys handle denied life insurance claims all the time. We will take the time to listen to your fears and concerns and, in a free consultation, will provide you with all of the resources you need to get help. To successfully file an administrative appeal for a denied life insurance claim, your California life insurance attorney will create and present a strong convincing argument that is based upon the facts of the case, which will be supported by the state and federal laws that govern it.

Suppose some unforeseen event leaves you unable to continue working. If you have insurance covering short-term disability, long-term disability, or both, you will be eligible to receive benefits determined by your income prior to becoming disabled. Now you can rest easy, right? Not necessarily. Regardless of the proportion of your pre-disability income that you will be eligible to receive as disability benefits, those benefits can be reduced through offsets. What is an offset? Simply put, it is a mechanism through which your disability insurance company can and will reduce your disability benefits on a dollar-for-dollar basis. If you have a group disability policy (as opposed to an individual disability policy), your policy almost certainly contains a provision allowing the insurer to reduce your benefits by the amount you receive as “Other Income Benefits.” Other Income Benefits can include income from Social Security Disability Income (SSDI) benefits, state disability benefits, worker’s compensation benefits, Veteran’s Administration benefits or other sources.

For example, if your employment income was $10,000 per month and you became totally disabled, and you therefore became eligible for long-term disability benefits of 60% of your pre-disability income, your monthly benefit would be $6,000. However, if you applied for SSDI as required by your policy, and were approved for benefits of $2,000 per month, your insurer will offset your policy benefits by $2,000, and will now only pay you $4,000 per month. While this is a relatively straightforward concept, it can quickly become convoluted and complicated, and can compound the headaches and frustration that often are associated with a disability claim. Therefore, it is important to consider several factors in order to avoid being caught off guard by receiving less than you anticipated in disability benefits.

First, it is important to know the source of any income you receive, and whether the income is subject to offset. Your disability insurance policy, which is often part of an ERISA plan offered by your employer, will discuss sources of income and whether they qualify as “Other Income Benefits” that are subject to offset. But what about income that is not discussed in the policy? If you cash in some of your retirement savings account, will your insurance company consider that “income” and reduce your disability benefits? It depends on the plan language. Rest assured that your insurer will take advantage of any possible offset, so if your policy is unclear as to whether a certain kind of income is subject to offset, you should expect the insurance company to err on the side of offsetting benefits. To avoid your benefits being improperly reduced, you should read your disability plan carefully and understand the source of your other income to decide whether the income is subject to offset. If you believe that your insurer is improperly reducing your benefits via an offset that is not provided for in the plan, an experienced California disability insurance attorney can assist you in determining whether your insurer is properly offsetting your disability income benefits.

Second, the timing of when you receive “other” income can significantly impact the overall picture of your benefits. The Social Security Administration currently takes several months to make claims determinations in many cases, so you may not get an answer to your claim for SSDI benefits until long after you started receiving policy disability benefits. However, if your SSDI benefits are approved, those benefits will likely be initially paid in a lump sum that covers the previous several months, which can be a substantial amount. But if your insurance company has been paying your long-term disability benefits throughout that time, it will apply the offset retroactively and require you to reimburse it for this “overpayment,” which can mean repaying your insurer the amount of your lump-sum payment. For example, suppose you have been receiving $4,000 per month in long-term disability policy benefits for one year ($48,000 total) and you receive one year’s worth of retroactive SSDI benefits of $2,000 per month ($24,000). Your insurance company will expect to be reimbursed that $24,000. It may be easy enough to issue a check to your insurance company for the amount that you received in SSDI benefits; however, it may not. Your insurer may not request reimbursement until later, during which time you may have spent some of this much-needed money; you may have been unaware that you need to reimburse the insurance company in such a scenario. Being in a situation where your insurer is requesting reimbursement for offsets can lead to distress and anxiety.

Third, it is important to be aware of the amount of the offset. An insurance company may try to offset more than it is allowed to offset under the policy. For example, if you receive SSDI benefits, they will periodically increase due to cost-of-living adjustments. But cost-of-living adjustments are not subject to offset under group disability policies. Or consider a recent case that McKennon Law Group handled that involved a Sheriff’s Deputy who became totally disabled due to injuries suffered in a devastating auto accident. Our client received long-term disability benefits according to his policy (after we successfully handled his ERISA appeal); but those benefits did not cover his household expenses, and his wife had to reduce her work time to be able to care for him and their two young children. The Deputy was fortunate enough to have many colleagues in the Sheriff’s Department willing and wanting to help him, and many did so by donating their accrued sick time to him. To facilitate these donations, our client was paid through his employer’s payroll system, and the donations appeared on his pay stubs as “Donated Sick Time.” The policy allowed the insurer to offset income from normal accrued sick time that our client was paid while receiving his disability benefits. The insurer considered all of the sick time pay donated to our client by his colleagues to be subject to offset. Because these donations amounted to just as much as the Deputy’s monthly disability benefits, the net result was that he received the minimum benefit under the policy, or $100 per month.

Obviously, none of the Deputy’s colleagues donated their sick time to him so that the insurer could benefit from those donations; the notion that an insurance company would intercept donations from individuals who are trying to give aid to their Sheriff colleague in need is enough to infuriate any reasonable person. In fact, had his colleagues known their donations would not go to him, but would rather be collected by the insurance company for its sole benefit, they would not have made the donations in that manner. The policy allowed for the insurer to offset any income that the Deputy received from the employer, including undonated “sick time.” However, the policy was silent as to whether “sick time” included donated sick time. The insurer argued that because the money was distributed via the employer’s payroll system, any money labeled “sick time” was subject to offset. McKennon Law Group filed a lawsuit to recover all of the donated sick-time pay that the insurer took as an offset. Because the insurer did not respond to the lawsuit, our client obtained a substantial default judgment in excess of $350,000, indicating a high likelihood that the insurer realized that its position was meritless.

This case serves as a reminder that offsets can significantly impact a claimant’s disability benefits. Insurance companies paying disability benefits will likely claim as many offsets as possible, including offsets to which they are not entitled. Thus, it is important to understand what offsets your insurer is taking, and whether it is entitled to take those offsets. Because you may not know whether your insurer is taking improper offsets, you should consult with an experienced California disability attorney like those at McKennon Law Group. The highly experienced lawyers helping clients with disability insurance at McKennon Law Group can help you determine whether your insurer is improperly reducing your disability benefits via offsets, and if that is happening, our firm can help you recover the benefits to which you are entitled.

It should not surprise anyone that health insurance companies are motivated and incentivized to deny coverage of costly surgical procedures. Most insurers deny health insurance claims by claiming that a recommended surgery is “not medically necessary” or that the claimant “did not try conservative treatment” prior to undergoing surgery. Does a health insurer abuse its discretion by denying a claim without providing a reviewing doctor with important records that would assist in proving medical necessity? The Fourth Circuit Court of Appeals recently answered this question in the affirmative, ruling that insurers who do not provide important records to their medical reviewers abuse their discretion by denying claims on the grounds that medical procedures are not medically necessary. In Garner v. Central States, __ F.4th __, 2022 WL 1160386 (4th Cir. 2022), the claimant, Dorothy Garner, suffered from back and neck pain that continued to increase despite her taking medication and treating with postural exercise like yoga. Her doctor recommended surgery, based on the results of an MRI. To cover the cost of the surgery, Ms. Garner submitted a claim with Central States as a beneficiary of her husband’s ERISA employee health benefit plan sponsored by United Parcel Service, Inc.

Central States denied Ms. Garner’s claim on the grounds that her $90,000 surgery was not “medically necessary” under the plan provisions. This decision was based on an independent medical review (“IMR”) of Ms. Garner’s claim, conducted by Dr. Francesco Serafini, a physician who is Board-certified in general surgery. But the records that Central States provided to Dr. Serafini for his IMR did not contain either the MRI report that had led her doctor to recommend surgery or his office notes that explained this recommendation. Without access to these missing documents, Dr. Serafini concluded that there was no basis in the provided records to justify Ms. Garner’s surgery, and this conclusion formed the basis for Central States’ denial letter.

Ms. Garner submitted another appeal after having a physician review her file, and Central States conducted another IMR of Garner’s claim, this time by Dr. Brad Ward, a physician who is Board-certified in neurological surgery. Unlike Dr. Serafini, Dr. Ward had full access to Ms. Garner’s medical records, including the MRI report and the office notes. But Dr. Ward also concluded that the surgery was not medically necessary, relying in part on the fact that Ms. Garner had not taken “any conservative measures other than medication.” Central States thus upheld its denial decision.

Ms. Garner filed an ERISA lawsuit against Central States, seeking coverage under the plan for her surgery. The district court, ruling on the parties’ summary judgment motions, found for Ms. Garner because Central States “had not engaged in a ‘reasoned and principled’ decision-making process.” The court’s ruling was based on three points: (1) Central States had not provided Dr. Serafini with the “critically important” MRI records and office visit records, (2) “nothing in the plan required covered individuals to exhaust conservative treatment options before undergoing surgery” and (3) it was undisputed that Garner had unsuccessfully tried postural exercises to relieve her pain.

On Central States’ appeal of the district court’s finding, the Fourth Circuit reviewed Central States’ claim denial to determine whether it had abused its discretion under the plan by denying Ms. Garner’s claim. Even under this abuse-of-discretion standard, which affords deference to Central States in its claims decisions, the Court affirmed that the district court’s decision to deny her claim was an abuse of discretion. The Court provided various substantive items that supported its finding.

First, the court noted that Central States “utterly failed to disclose” Ms. Garner’s pertinent medical records to Dr. Serafini, including her MRI results and her doctor’s notes explaining his surgery recommendation. The court found that these documents “were critical” — the MRI report because it established the underlying medical basis for her surgery, and the office visit notes because they explained why her doctor recommended the surgery. Notably, the reviewing physician had complained of a lack of information during the initial review, and after he completed his report, Central States did not follow up with him or provide him with the MRI or doctor’s notes.

While the Court stopped short of concluding that Central States “acted in bad faith or deliberately withheld documentation,” it emphasized that under ERISA, Central States owed Ms. Garner a “deliberate, principled reasoning process,” but that it had failed to provide such a review. Central States argued that it cured the flaws in its initial review by providing all of Ms. Garner’s relevant records, including the MRI report and the doctor’s notes, to Dr. Ward. However, the Court did not accept this reasoning because Central States had repeatedly indicated that it relied on both doctors’ reports in upholding its decision. Central States’ denial was not “a reasoned determination” because it relied on Dr. Serafini’s report that did not consider the MRI report or the doctor’s notes.

Second, the Court focused on Central States’ basing its denial on Ms. Garner’s not trying conservative treatment before having surgery. The record indicated that Ms. Garner “had tried postural exercises such as yoga without relief.” Also, the reason why she had the MRI done was that her pain had continued “despite her efforts at conservative treatment over the past several months,” including medication. Central States could not require Ms. Garner to receive conservative treatment “as an absolute condition” to finding that her surgery was medically necessary. By not allowing Central States to “add a new term to the plan, a term for which Garner did not bargain, and about which she lacked any notice,” the Court precluded it from using subjective terminology to “move the goal posts” by requiring ever more “conservative” treatment in order to find her surgery to be medically necessary.

Third, the court observed Central States’ persistence in attempting to justify its improper denial of Ms. Garner’s claim through vague terms. The court noted that Central States “repeatedly failed to handle Garner’s claim in a sensitive and fair-minded manner.” After “no fewer than three opportunities to give [Ms.] Garner’s claim the reasoned consideration that it deserved…[i]t would neither encourage the careful and efficient resolution of benefits claims, nor would it be fair to [Ms.] Garner, to permit Central States a fourth opportunity. Three strikes are enough.”

While the court’s reasoning hints that insurers have significant leeway in their claims review processes under the abuse-of-discretion standard of review, insurers must use a fair and reasoned claim review process in deciding claims. When they do not do so, the courts will not condone this conduct.

The claims review process can be daunting for claimants who are simply trying to obtain much-needed care or treatment, and even more so when insurance companies use unfair means to justify denying legitimate health insurance claims. McKennon Law Group PC is highly experienced in handling denied ERISA health insurance claims, especially those based on an alleged lack of medical necessity.