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A California Federal District Court has granted a motion for summary judgment under F.R.C.P. Rule 52 in favor of a disability claimant, holding that an insurer must consider a long-term disability (“LTD”) claim in accordance with the correct classification of the claimant’s “occupation” as determined by the claimant’s “actual duties.”

In McCulloch v. Hartford Life and Accident, 2020 WL 7711257 (N.D. Cal. 2020), the plaintiff suffered from “involuntary tremors and body jerking, fatigue, and cognitive impairment” that, inter alia, affected her ability to drive. Id., *1. The insurer denied the disability claim and ensuing appeal, whereupon the “plaintiff filed a complaint against [the insurer], alleging a cause of action under 29 U.S.C. § 1132(a)(1)(B) to recover LTD benefits under the terms of [the insurer’s] Plan.” Id.

The Court found that, after having been bitten by a tick, the plaintiff developed various symptoms, including an impairment of “cognitive capacity”, whereupon one of her physicians wrote to the insurer, “I believe that [claimant’s] health issues are serious and limiting. She cannot work because of cognitive impairment as corroborated by her decidingly [sic] abnormal SPECT scan.” Id., *4. The insurer, however, determined that plaintiff’s occupation involved “light work” in the workplace, and denied the claim on the ostensible basis that “plaintiff’s medical records ‘did not provide any objective exam findings or other assessments to support the severity of … symptoms’ and did not state specific work restrictions.” Id., *5. Although the plaintiff appealed on the basis of the reports of several health care practitioners, the insurer denied the appeal on November 20, 2019. Id., *7. Notably, on August 30, 2020, the Social Security Administration (“SSA”) awarded the plaintiff monthly benefits because “under SSA’s rules, [the claimant] became disabled on March 12, 2018.” Id., *8.

The Court observed, “the issue before this Court is whether plaintiff qualifies as disabled under the Plan’s ‘Your Occupation’ definition” and whether the plaintiff was disabled thereunder. Id., *7. The Court first addressed the plaintiff’s “occupation.” The term, “Your Occupation,” was defined in the LTD Plan as “the [e]ssential [d]uties of the job [claimant] is performing for [her] [e]mployer.” Id. Observing that a determination of disability must be based on the plaintiff’s “actual duties”, the Court held that the insurer applied the incorrect definition of “occupation;” rather than “light work” as proffered by the insurer, the plaintiff’s “occupation involved concentration, frequent driving, traveling by airplane, and keyboarding.” Id. *7-8.

The Court then concluded that the plaintiff was, in fact, disabled under the foregoing definition of “occupation.” The Court rejected the insurer’s assertion that the plaintiff’s “real problem seems to be that she found her job and lifestyle extremely stressful.” Id., *8. Rather, because “[o]bjective tests support plaintiff’s disability”, the Court concluded that “plaintiff’s condition prevents her from driving and significantly impairs her physical and cognitive ability” such that “the Court finds that plaintiff is disabled under Hartford’s LTD Plan.” Id., *8-9. In reaching this conclusion, the Court was not persuaded by the insurer’s consulting physicians, concluding that the consultants neither correctly addressed the actual work required of the plaintiff nor the effects of her disability thereon. Id., *9-10.

McCulloch underscores that a disability claim must be evaluated under the proper classification of a claimant’s “occupation” as determined by the claimant’s actual duties. In making this determination, evidence is relevant as to the effects of the disability on the tasks inherent to the claimant’s actual work. Accordingly, delineating the claimant’s actual duties may preclude an insurer from introducing evidence not relevant to the claimant’s “occupation.”

We have significant experience in handling ERISA and non-ERISA disability insurance cases in which an insurer denied a claim based on a lack of objective evidence or a claimant has a disability condition that is subjective in nature and difficult to prove and measure. If your insurer or plan administrator has denied your disability claim, please contact McKennon Law Group PC for a free consultation so that we may assess your matter.

In the January 4, 2021 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon entitled “ERISA Ruling Expands Protection for Employees, Beneficiaries.” The article addresses a recent case by the Ninth Circuit Court of Appeals, Beverly Oaks Physicians Surgical Center, LLC v. Blue Cross and Blue Shield of Illinois, which found that while anti-assignment provisions in ERISA matters are valid and enforceable, plan administrators can waive the right to assert and enforce these provisions when their actions are inconsistent with the provision or they are aware that the claimant is acting as an assignee. This opinion will greatly benefit employees who have medical insurance and sign agreements with their medical providers to assign their rights to collect payment from their health insurers. The Ninth Circuit’s opinion will be not only useful for claimants/employees who have health insurance claims, but also those who have disability, life or other employee benefit claims as the decision in Beverly Oaks will serve to prevent employers and insurers from making misrepresentations regarding ERISA plan terms and/or taking actions inconsistent that which they had previously represented.

By Robert J. McKennon

The Employee Retirement Income Security Act of 1974, or ERISA, governs most employer-sponsored benefit plans. ERISA establishes protections for employees in the administration of their employer-sponsored benefits, requiring that the administrator adhere to certain requirements when determining a plan participant’s eligibility for benefits. Typically the ERISA plan’s terms govern, although that is not always the case.

All too familiar to patients of health care providers are agreements that assign to the health care providers their right under an ERISA plan to collect insurance benefits under their patients’ health insurance plans. However, most health insurance plans have anti- assignment provisions that prohibit insureds from assigning their right to collect insurance proceeds directly. Anti-assignment provisions in ERISA plans are valid and enforceable. Davidowitz v. Delta Dental Plan of Cal., Inc., 946 F.2d 1476, 1481 (9th Cir.1991); Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc., 770 F.3d 1282, 1296 (9th Cir. 2014). Therefore, courts have prevented health care providers from suing insurers under ERISA where health insurance plans have anti-assignment provisions, thus frustrating the efforts of health care providers to collect insurance proceeds to satisfy unpaid claims.

In its landmark 2011 decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), the U.S. Supreme Court signaled a broad expansion of the availability of equitable remedies under ERISA. The doctrines of equitable estoppel and waiver have provided plan participants with methods of forcing an employer or insurance company to honor their representations and take responsibility for previous conduct. But what about applying these equitable doctrines for the benefit of health care providers? There has been some recent good news for them.

The recent case of Beverly Oaks Physicians Surgical Center, LLC v. Blue Cross and Blue Shield of Illinois, 2020 DJDAR 132372 (Dec. 18, 2020) further expands protection for employees and their beneficiaries by expanding the circumstances their medical providers can sue insurers directly based on an assignment, even where the plan at issue contained an anti-assignment provision. In Beverly Oaks, the U.S. 9th Circuit Appeals Court allowed an out-of-network healthcare provider to assert equitable claims under ERISA seeking a direct recovery of unpaid claims from Blue Cross and Blue Shield of Illinois (BCBS).

Beverly Oaks Physicians Surgical Center, LLC (Beverly Oaks) performed out-of-network procedures on 14 patients who had employer-sponsored health insurance plans administered by BCBS. Each patient signed a form granting the center the right to collect benefits on their behalf. The center sought and obtained preapproval for each claim from BCBS, the latter stating it would typically pay between 50% to 100% of the claim.

After performing the procedures, the Beverly Oaks submitted the claims to collect ERISA benefits. BCBS either denied every claim or paid a small reimbursement amount and paying only $140,000 of the total $1.4 million of benefits sought. At no time during the pre-surgery conversations or during the administrative claim process did BCBS advise Beverly Oaks that it intended to assert an anti-assignment provision as a basis for denying reimbursement sought under a patient assignment of benefits.

Beverly Oaks filed a lawsuit alleging that BCBS waived or was equitably estopped from asserting the anti-assignment provision in the plan since BCBS did not assert that provision in pre-surgery telephone conversations or the administrative claim process. BCBS argued that the anti-assignment provision was valid and enforceable, even though the first time BCBS asserted the provision as a defense to payment was in litigation. The district court agreed that the anti-assignment provision was valid and enforceable. Beverly Oaks appealed.

In reversing the trial court’s order, the appeals court found that while anti-assignment clauses are valid and enforceable, plan administrators can waive the right to assert and enforce these provisions when their actions are inconsistent with the provision or they are aware that the claimant is acting as an assignee.

The court defined waiver as follows: “Waiver is ‘the intentional relinquishment of a known right.’ Gordon v. Deloitte & Touche LLP Grp. Long Term Disability Plan, 749 F.3d 746, 752 (9th Cir. 2014) (citing Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1559 (9th Cir. 1991) (Waiver occurs when ‘a party intentionally relinquishes a right, or when that party’s acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.’)).

The court found that Beverly Oaks had plead adequate facts to support waiver, including Beverly Oaks indicated on the claim form submitted to BCBS that it was acting as its patient’s assignee, BCBS processed each claim, denied in full or underpaid Beverly Oaks’ billed charges, and at no time during pre-surgery telephone conversations or the administrative claim process did BCBS raise the anti-assignment provision as a basis to deny benefits. This was to enough to show that BCBS should have been aware that Beverly Oaks sought to collect plan benefits through a patient assignment. The court also commented on BCBS’ silence and payment during the claims process, commenting that this behavior was “’so inconsistent with an intent to enforce’ the anti-assignment clause as to ‘induce a reasonable belief that [the right to enforce the clause] ha[d] been relinquished.’” The court held that “Blue Cross thus cannot raise the anti-assignment provision for the first time in litigation when Blue Cross held that provision in reserve as a reason to deny benefits.”

In addition to waiver, the court found the alleged facts also plausibly showed that BCBS made actionable misrepresentations upon which Beverly Oaks reasonably relied and therefore, were equitably estopped from raising the anti-assignment provisions. “Equitable estoppel ‘holds the fiduciary to what it had promised and operates to place the person entitled to its benefit in the same position he would have been in had the representations been true.” Specifically, the court pointed to telephone conversations between BCBS representative and Beverly Oaks wherein the representative stated that Beverly Oaks was eligible to receive payment, thus inducing Beverly Oaks to move forward with the claims process. In addition to traditional requirements to establish equitable estoppel, under 9thCircuit authority, Beverly Oaks also had to allege (1) extraordinary circumstances; (2) that the provisions of the plan at issue were ambiguous such that reasonable persons could disagree as to their meaning or effect; and (3) that the representations made about the plan were an interpretation of the plan, not an amendment or modification of the plan. The court held that these requirements were properly alleged facts that show a BCBS made a promise that it reasonably should have expected to induce action or forbearance on Beverly Oaks’ part, combined with a showing of repeated misrepresentations over time. Thus, the 9th Circuit reversed and remanded the case the case to the district court.

While federal courts consistently find anti-assignment clauses in ERISA matters enforceable, the decision in Beverly Oaks will have wide-reaching implications not only for medical providers, but also for plan participants and their beneficiaries. Plan and claim administrators must beware that making misrepresentations regarding plan terms, making representations about whether a procedure is covered or failing to raise certain defenses during the pre-claim and claim administrative review process could give rise to equitable claims that inure to the benefit of plan participants, their beneficiaries, and to their assignees. Because waiver and equitable estoppel serve as some of the legal systems’ fundamental checks on the fairness of a party’s actions and these doctrines serve to prevent employers and insurers from performing actions contradictory to what they have previously guaranteed or established via their words or conduct, decisions like Beverly Oaks are to be lauded.

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 & disability claim, from navigating a claim, to handling a claim denial, through preparing a case for litigation. In Part Thirteen of this series, we discuss the administrative record and attempts to augment an administrative record after an appeal has been closed and administrative remedies have been exhausted. Under the Employee Retirement Income Security Act of 1974 (“ERISA”), judicial review of an insurer’s denial of benefits is typically limited to the administrative record that existed at the time when the appeal was denied. Therefore, it is crucial to determine if there are any documents or records that were not considered by the claims administrator during the appeal process that a court must review in order to make an accurate judgment.

When it comes to disability claims denials, some of our clients decide to handle the appeal of the claim denial on their own. After the appeal is denied, if the policy does not allow for additional appeals, a disability claimant’s only available recourse is filing a lawsuit in federal court. This puts claimants in a difficult position should the insurance company deny their appeal. There may be important medical records, expert reports, personal statements or certification letters that the disability claimant failed to send to the insurance company that could be necessary for a district court to review in order to reverse an insurer’s decision to deny benefits.

For example, we often see that our clients are awarded Social Security Disability Insurance (“SSDI”) benefits after their disability insurance company has denied their claim and appeal. Evidence of an SSDI award could be very persuasive for a judge to consider in a de novo review of a benefits decision. SSDI awards have a similar, possibly more stringent, disability standard than most group disability policies. Therefore, it can be very important for a district court to view this persuasive evidence in order to make a properly informed de novo review. Making sure that a court views these important records that were not originally presented to the insurance company may be accomplished through a motion to augment the administrative record or a stipulation between the parties to augment the administrative record.

Under de novo review in an ERISA action, the key issue that a district court must decide is whether the insurer’s decision to deny benefits was correct. See Opeta v. Northwest Airlines Pension Plan, 484 F.3d 1211, 1217 (9th Cir. 2007). A district court has discretion to consider evidence extrinsic to the insurer’s administrative record when “circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.” Mongeluzo v. Baxter Travenol Long Term Disability Ben. Plan, 46 F.3d 938, 944 (9th Cir. 1995). Indeed, it can be reversible error for a district court to fail to admit extrinsic medical evidence that is not part of the administrative record. Id. .

There are two standards that courts consider when deciding whether to augment the administrative record: the Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006) and Opeta, 484 F.3d 1211 standards. The Abatie standard involves a situation when a plan administrator has failed to follow a procedural requirement of ERISA, in which case a court may consider evidence outside of the administrative record. Abatie, 458 F.3d at 971. An example of this may be an insurance company’s denial letter not clearly setting for the information needed to perfect the claim or why that information is needed regarding the next steps in the appeal process. In addition, courts have found that insurance companies have committed procedural ERISA violations by failing to provide a copy of a reviewing physician’s report to the disability claimant. Notably, until recent amendments to the ERISA regulations, the disability claimant had to first ask for a copy of new reports in order for a court to find that a procedural ERISA violation had been committed. See Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 678 (9th Cir. 2011); Yancy v. United of Omaha Life Ins. Co., 2015 WL 5132086, at *4 (C.D. Cal. Aug. 25, 2015).

The Opeta standard involves a non-exhaustive list of situations in which admission of evidence beyond the administrative record could be considered “necessary” by a district court to conduct an adequate de novo review. The situations include:

(1) Claims that require consideration of complex medical questions or issues regarding the credibility of medical reports.

(2) The availability of very limited administrative review procedures with little or no evidentiary record.

(3) The necessity of evidence regarding interpretation of the terms of the plan rather than specific historical facts.

(4) Instances in which the payor and the administrator are the same entity and the court is concerned about impartiality.

(5) Claims that would have been insurance contract claims prior to ERISA.

(6) The existence of additional evidence that the claimant could not have presented in the administrative process. Id.

Not all of these six factors need be present. Williams, 2009 WL 604942, at *3-4 (admitting extrinsic evidence that is not in the administrative record in an ERISA disability benefits action in which only two factors were present). In fact, courts routinely admit extrinsic evidence with only one Opeta factor present. See Langlois v. MetLife, 2012 WL 1910020, at *10 (N.D. Cal. May 24, 2012) (only one factor being present: the credibility of medical reports); Duncanson v. Royal, 2011 WL 5974805, at *4 (N.D. Cal. Nov. 29, 2011) (same). The list was intended merely as a guide to district courts faced with a motion to augment the administrative record. Quesinberry v. LINA, 987 F.2d 1017, 1027 (4th Cir. 1993).

When faced with one or more of these six factors, or faced with an ERISA procedural violation, a court may deem it necessary to view extrinsic documents such as evidence of an SSDI award, more recent medical records, personal statements or clarifying statements. In fact, in Schramm v. CNA Fin. Corp. Insured Grp. Ben. Program, 718 F.Supp.2d 1151, 1165, fn. 4 (N.D. Cal. 2010), the court held that evidence of an award of Social Security disability benefits was necessary for an adequate de novo review of the plan administrator’s determination, where the Social Security decision was rendered six months after the denial of the claimant’s final administrative appeal in the ERISA matter.

However, if a court decides against augmenting an administrative record, a disability claimant may be faced with an uphill battle to win their benefit claim in court. For this reason, it is important to contact a skilled ERISA attorney at the appeal stage before a final determination on appeal is rendered. When McKennon Law Group PC is hired, we make sure that insurers have all necessary evidence prior to the exhaustion of the administrative remedies. While it is possible to augment the record after a lawsuit is filed, the easiest remedy is to hire competent ERISA attorneys at the claims or appeal stage of your disability claim. However, there are some types of evidence (like SSDI awards) that often cannot be submitted prior to the final appeal denial. In these cases, a motion to augment the administrative record could be the only recourse for a claimant. In addition, it is always worth meeting and conferring with opposing counsel about stipulating to augment the record before filing a motion, in order to avoid costly motions and the uncertainty of a court ruling.

McKennon Law Group has significant experience in handling ERISA and non-ERISA disability insurance cases in which an insurer denied a claim. If your insurer or plan administrator has denied your disability claim, please contact us for a free consultation so that we may assess your matter.

In the October 23, 2020 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon. The article addresses a recent case by the California Court of Appeals, Dones v. Life Ins. Co. of N. Am., which reversed the trial court’s ruling sustaining demurrers without leave to amend based upon an agency theory due to the employer county’s errors administering the life insurance policy on behalf of the insurance company. These errors were imputed to the insurance company, rendering it liable for the employer’s mistakes under the equitable remedies of waiver and estoppel. The Dones case will surely be read to further expand liability against non-governmental employers and insurers and assist employees and their beneficiaries in receiving their much needed plan benefits.

Ruling demonstrates when employers are agents of insurers

A recent 9th Circuit decision affirms that in the context of employer-sponsored benefits, the employer is the agent of the insurer with regard to the administration of the policy.

By Robert J. McKennon

People are often drawn to job opportunities because of the employee benefits offered to them and their families. A generous benefit package that includes several types of insurance such as medical, short-term and long-term disability, and life coverage could be the deciding factor for a prospective employee. They are not experts in the enrollment process. They often rely on their employer’s human resources department to help them understand their coverage options, pay their premiums, understand what forms they must submit and help them solve any problems that may arise. However, if the employer fails to accurately explain coverage requirements, and if the forms are not correctly completed to an insurer’s satisfaction, insurers can and will deny claims, blaming the employees or their employers. California law protects employees in some circumstances. For example, under an agency theory, an employee can impute legal responsibility to the insurer for the employer’s errors in administering an employee benefit plan, thus rendering the insurer liable for the employer’s mistakes or negligence under equitable remedies of waiver and estoppel.

The recent case of Dones v. Life Ins. Co. of N. Am., 2020 DJDAR 10896 (Oct. 7, 2020) further expands protection for employees and their beneficiaries. In Dones, an employee of the County of Alameda (County), Trina Johnson, enrolled in supplemental life insurance coverage with the Life Insurance Company of North America (LINA). She was a County employee but on a medical leave of absence. While on her medical leave, she received information regarding her benefit eligibility for the supplemental life insurance. She made her election online, selecting $230,000 in supplemental life coverage and naming Michael Dones as her primary beneficiary.

The master policy stated, “If an Employee is not actively at work due to Injury or Sickness, coverage will not become effective for an Employee on the date his or her coverage would otherwise become effective under this Policy. [¶] Coverage will become effective on the date the Employee returns to Active Service.” The master policy defined “Active Service” as follows:

An Employee will be considered in Active Service with the Employer on a day which is one of the Employer’s scheduled work days if either of the following conditions are met: [¶] 1. He or she is actively at work. This means the Employee is performing his or her regular occupation for the Employer on a full-time basis, either at one of the Employer’s usual places of business or at some location to which the Employer’s business requires the Employee to travel. [¶] 2. The day is a scheduled holiday, vacation day or period of Employer approved paid leave of absence, other than disability or sick leave after 7 days.

After her cancer diagnosis, Johnson received confirmation that she had successfully elected her benefits and that her coverage would become effective on January 1, 2017. The County deducted premiums for her benefits which were sent to and accepted by LINA. Johnson remained on leave and died six months later without having returned to work.

After Johnson’s death, a County employee informed Dones that Johnson’s life insurance coverage never became effective because she had not returned to “active service.”

Dones sued both LINA and the County. In his second amended complaint, he asserted causes of action for breach of contract, breach of implied contract and breach of the implied covenant of good faith and fair dealing (against LINA only). Dones asserted that both defendants waived and were estopped from asserting the active service requirement. The second amended complaint alleged that if an employee who elected the supplemental insurance benefit while on leave returned to work for even one day after the January 1, 2017, effective date, the supplemental benefit would become active. But Johnson did not understand the requirement and reasonably believed that the policy covered her automatically after the effective date.

Defendants filed demurrers to Dones’ amended complaint. The trial court sustained the demurrers without leave to amend. It rejected Dones’ argument that LINA and the County waived, or were estopped from enforcing, the active service requirement. The trial court relied on case law holding that waiver and estoppel arguments cannot be used to create insurance coverage that does not exist in the plan documents. Dones appealed.

In reversing the trial court’s order, the California Court of Appeals considered several cases, including most importantly the 9th U.S. Circuit Court of Appeals decision in Salyers v. Met. Life Ins. Co., 871 F.3d 934 (9th Cir. 2017), a case involving employee benefits subject to the Employee Retirement Income Security Act of 1974 (ERISA). The Salyers court found a waiver where the insurer accepted premium payments but later denied a death benefit because the plan participant failed to provide a “Statement of Health” as required for eligibility. The court held, “The deductions of premiums, [the insurer] and [employer’s] failure to ask for a statement of health over a period of months, and [the employer’s] representation to Salyers that she had $250,000 in coverage were collectively ‘so inconsistent with an intent to enforce’ the evidence of insurability requirement as to ‘induce a reasonable belief that [it] ha[d] been relinquished.’”

While insurers and plan administrators often argue that waiver cannot be used to create coverage beyond that actually provided in an employee benefit plan, Salyers noted the distinction created by the acceptance of premiums. The Salyers court held that where premium payments have been accepted despite the plan participant’s alleged noncompliance with policy terms, giving effect to the waiver does not expand the scope of the plan, but rather, provides the plaintiff with an available benefit for which he paid.

The Dones court noted further that waiver and estoppel are normally questions of fact. It declined to hold that these principles cannot establish the existence of an effective contract of insurance as a matter of law.

It then turned to whether the County’s conduct could support causes of action for breach of contract against LINA. The court considered the California Supreme Court’s decision in Elfstrom v. New York Life Ins. Co., 67 Cal.2d 503, 512 (1967), which held as a matter of law that the employer is the agent of the insurer in performing the duties of administering group insurance policies. The California Supreme Court based its reasoning on the fact that the employee has no knowledge or control over the employer’s actions in handling the policy or its administration. The Dones court found that Dones’ allegations (that the County was acting as an agent for LINA in the administration of the life insurance policy as well as informing Johnson of available benefit options, communicating with her about and confirming her selections, deducting premium payments and transmitting them to LINA) were sufficient to allege agency under Elfstrom. It determined that the County acted as LINA’s agent in administering the life insurance policy (for purposes of determining LINA’s liability). But it held that the County could not be held responsible, relying on law that makes it difficult to pin liability on governmental entities.

This decision affirms that in the context of employer-sponsored benefits, the employer is the agent of the insurer with regard to the administration of the policy. This can be very important to tie an employer’s errors in administration to the insurer and thus provide an avenue of recourse for a beneficiary such as Dones who would otherwise be without recourse.

Plan administrators must carefully and accurately communicate coverage options and policy terms to employees like Johnson. If they do not, they and the insurer may be exposed to litigation and potential liability for their misconduct. As was the case with Salyers, this often occurs with a “proof of good health” requirement that the plan administrator and insurer fails to enforce, leading the unsuspecting employees to believe they are fully covered. Recent expansion of breach of fiduciary duty liability, waiver, estoppel and agency theories in federal ERISA cases have been a welcome development for employees who obtain insurance coverage from their employers. While the Dones case did not find liability against the County, when read in conjunction with Salyers, it will surely be read to further expand liability against non-governmental employers and insurers outside of the ERISA context and will thus assist employees and plan beneficiaries to secure their much needed plan benefits. Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith and ERISA litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at www.californiainsurancelitigation.com.

On July 24, 2020, McKennon Law Group PC’s client, Julie Hodgson, filed a 52-page Complaint against the administrator of her disability benefits, Lincoln Life Assurance Company of Boston (“Lincoln”), on the basis that Ms. Hodgson could no longer perform her job duties or those of any occupation because she suffered from chronic pain syndrome, connective tissue disease and fibromyalgia. Initially Lincoln had approved Ms. Hodgson’s short-term disability benefits, but after a transition and claim for LTD benefits, Lincoln improperly denied her long-term disability benefits, based on Lincoln’s reasoning that Ms. Hodgson no longer met the definition of disability.

The Complaint in detail attacked Lincoln’s examination and analysis of Ms. Hodgson’s claim and appeal for LTD benefits. First, the Complaint alleged that Lincoln contracted biased medical consultants who although agreed that Ms. Hodgson suffered from her impairing diagnoses, simply concluded that Ms. Hodgson was able to perform her job duties. The Complaint alleged that Lincoln’s reliance on these medical consultants was unreasonable since all of their reports were cursory, without adequate analysis and the paper reviewers did not clearly state the basis for disagreeing with Ms. Hodgson’s multiple examining doctors. Carrier v. Aetna Life, 116 F.Supp.3d 1067 (C.D. Cal. 2015).

Second, the Complaint alleged that Lincoln’s medical consultants did not examine Ms. Hodgson, though its Policy permitted it. This raised questions about the credibility of their opinions and the appropriateness of Lincoln’s benefits denial. Shaw v. AT&T, 795 F.3d 538 (6th Cir. 2015). This is to be contrasted with her treating providers who have regularly treated her for years and consequently gained great insight into her work limits. Therefore, their opinions were based purely on a “cold file review” of Ms. Hodgson’s medical records and therefore carried far less weight and did not have the benefit of the insight gained through personal observation. Sullivan v. Prudential, 2014 WL 3529974 (E.D. Cal. Jul. 15, 2014). A in person examination is especially important in cases involving subjective diagnoses, such as pain and fibromyalgia.

Third, Ms. Hodgson alleged that Lincoln and its consultants ignored Ms. Hodgson’s medical records that frequently referred to her numerous tender points in multiple exams, which courts have consistently recognized that such findings are significant in cases involving fibromyalgia. In Wulf v. Astrue, 773 F. Supp. 2d 984 (D. Kan. 2011), the court noted “as the Eighth Circuit said in [Brosnahan v. Barnhart, 336 F.3d 671 (8th Cir.2003)], the ‘objective medical evidence of fibromyalgia’ was the ‘consistent trigger-point findings’ and the plaintiff’s ‘consistent complaint during her relatively frequent physicians’ visits of variable and unpredictable pain, stiffness, fatigue, and ability to function. 336 F.3d at 678. This alone demonstrated that Lincoln’s medical consultant’s review of Ms. Hodgson’s medical records was incomplete and thus, any conclusions made from their review were flawed.

The Complaint concluded by attacking Lincoln’s vocational consultant’s report as incomplete, flawed and conclusory. Lincoln improperly relied on this vocational report which simply concluded that Ms. Hodgson could work in sedentary and light occupations, while failing to list the job duties of those listed occupations and the skills required to perform them. This detail is required by law. Turner v. Life Insurance Co. of North America, 2017 WL 6000099 (W.D. Wash. Dec. 4, 2017). Lincoln’s vocational analysis also failed to consider Ms. Hodgson’s non-exertional limitations, such as cognitive and psychological limitations, including those related to the side effects of her prescription medications and pain, and her limited ability to remain seated for an extended period of time. Such non-exertional limitations are important aspects of vocational capacity and should be considered. Rabuck v. Hartford Life and Accident Ins. Co., 522 F.Supp.2d 844 (W.D.Mich.2007). Finally, we alleged that the vocational consultant never looked at actual job postings or whether those businesses were looking to hire someone now (let alone whether Ms. Hodgson was a realistic candidate in the real-world employment market). Numerous courts have found that a group disability insurer’s failure to confirm that actual jobs are available in an occupation the claimant has the physical ability to perform violates the group policy. For example, in Kennard v. Means Industries, Inc., 555 Fed. Appx. 555, 557–58 (6th Cir. 2014), it was undisputed that, due to his medical condition, the clamant was only capable of working in an “absolute clean-air environment.” For all the reasons discussed above, the Complaint alleged that Lincoln’s reliance on its consultant’s vocational report was improper.

In less than two months after filing the lawsuit, Lincoln voluntarily reversed its denial of Ms. Hodgson’s claim for LTD benefits and agreed to pay her all disability benefits provided by the policy, plus prejudgment interest and our attorneys’ fees and costs. It was a total victory for Ms. Hodgson.

Unfortunately, many insurance companies participate in similar tactics to deny legitimate claims for benefits. Instead of accepting the opinions of treating physicians, insurance companies will often deny claims based on “a failure to meet the definition of disability” or lack of “objective evidence” or perform a “paper review” of medical files by “independent” medical consultants who are hired by the insurance company. If your disability insurer denied your claim for short-term disability or long-term disability benefits, please contact our firm for a free consultation. We have extensive experience with handling these types of disability claim denials

A Disability Claim Must Be Evaluated In Light Of A Claimant’s Actual Duties Undertaken For His Or Her Occupation

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