Have “Quack” Medical Reviewers Caused Denial of Your Long-Term Disability Claim? California Court of Appeal Berates Insurance Company for Controlling Medical Peer Reviews

During their Presidential election campaigns, Donald Trump and Hillary Clinton spotlighted for America flaws in our criminal justice system.  They raised questions about whether the criminal probe into Ms. Clinton’s private email server was handled honestly or politically.  Conservatives bitterly complained that FBI director Jim Comey’s recommendation not to prosecute Ms. Clinton was inconsistent with the FBI’s fact findings (that she carelessly mishandled classified emails) and influenced by the left-leaning Justice Department rather than justice.  On the flip side, Liberals vehemently complained that on the eve of the election Director Comey made an unprecedented announcement that the FBI had reopened its criminal investigation into Ms. Clinton’s private emails, attempting to influence the election.

Whatever your political leanings are, most Americans would probably agree that politics has no business in a court of law, where a person’s freedom or livelihood is at stake.  Lady Justice is supposed to be blind.

Like politics, “quack” physicians have inappropriately crept into our judicial process through the insurance industry.  This has endangered blind justice for indigent policyholders.  Wealthy life, health and disability insurers appear adept at getting a doctor to say just about anything for the right price.  Some doctors are willing to sell the truth and abandon science for a steady stream of business from an insurance company.  They have increasingly become willing to allow their high-paying insurance company clients to dictate what they can and cannot consider in reaching their professional medical opinions, often limiting them to a review of the insured’s medical records without the opportunity to examine or speak with the insured or his treating physicians.  Some insurers seemingly have made this part of their business model to help them deny even legitimate claims made by their disabled or sick policyholders.

The California Court of Appeal recently criticized one such insurance company’s practice in the case of Nickerson v. Stonebridge Life Insurance Company, 5 Cal. App. 5th 1 (2016).  While the bulk of the lengthy opinion focuses on the constitutionality of punitive damage awards – it held that a 10:1 ratio of punitive to compensatory damages in an insurance bad faith case passes muster – we have blogged on that topic and the Nickerson case before.  See (discussing Nickerson v. Stonebridge Life Insurance Company, 219 Cal. App. 4th 188 (2013)) and (discussing Nickerson v. Stonebridge Life Insurance Company, 63 Cal. 4th 363 (2016).  What is more interesting as it relates to ERISA and bad faith long-term disability insurance and health claims is that the Nickerson court berates the practice, systemic to the health and disability insurance industry, of hiring doctors to perform “pure paper reviews” of the insured’s medical records and, more accurately, of controlling the process to dictate results favorable to the insurance company.

The Nickerson case concerned a disabled veteran, Tom Nickerson, paralyzed from the chest down with no income other than a very small military pension.  He bought a policy from Stonebridge providing coverage for hospital confinement.  After suffering a broken leg from falling out of his wheelchair onto the asphalt, Nickerson was hospitalized for 109 days on the advice of his attending primary care physician.  He submitted a claim to Stonebridge for his hospital stay.  Stonebridge contended only 18 days was “Necessary Treatment” under its policy.  On that basis, it denied him policy benefits for the rest of the time he was hospitalized.  Nickerson sued Stonebridge for breach of the insurance contract and the implied covenant of good faith and fair dealing (i.e. “bad faith”) seeking his unpaid policy benefits, emotional distress, attorneys’ fees and punitive damages.

As health and disability insurers often to, Stonebridge had hired a medical consultant during the claim to review Nickerson’s medical records and render an opinion on whether 109 days of hospitalization was medically necessary.  The insurance company’s doctor:

  • never spoke with the insured, Nickerson;
  • never spoke with Nickerson’s attending physicians; and
  • never examined Nickerson.

Based purely on a “paper review” of his medical records, Stonebridge’s doctor concluded that Nickerson should have been released from the hospital after eighteen days (which became the rationale for Stonebridge denying the claim).

Nickerson’s primary care physician disagreed and even wrote a three-paragraph letter to Stonebridge explaining in detail why hospitalization was required for 109 days, including that “the fracture was complicated by extensive swelling, infection, blistering, and muscle damage that required acute hospitalization, intravenous fluids and antibiotics, and full staff support including consultation with an orthopedic surgeon.”  He further explained that because Nickerson was paraplegic and confined to a wheelchair, he could not have managed at home any earlier.  Stonebridge never gave that information to its “paper reviewing” physician consultant and never asked him to speak with Nickerson’s treating doctor about his conflicting opinion.  It withheld the obviously pertinent information and maintained its claim denial.

The court berated Stonebridge for what it found was a systemic company-wide practice: “Stonebridge’s practice was never to authorize peer reviewers to communicate with treating physicians, thus intentionally concealing material information from the claims’ functional decision-maker so as to limit the amount Stonebridge would have to pay out on its policies.”  It held Stonebridge’s conduct in ignoring the opinion of the insured’s treating physician and withholding it from its peer reviewer essentially controlled the peer reviewer’s opinion and supported a finding that the insurer committed fraud warranting punitive damages, not just bad faith.  The court held that the insurer’s conduct was “particularly reprehensible” warranting a higher constitutional ratio of compensatory to punitive damages.  Finally, the court stated that, “Insurers may not ignore the opinion of treating physicians absent a showing the physician’s judgment is either ‘plainly unreasonable, or contrary to good medical practice.’ ”

Our take: Unfortunately, as the Nickerson case and our recent Presidential Election illustrate, Lady Justice is not always blind.  It certainly isn’t for poor, out-of-work claimants fighting against billion-dollar life, health and long-term disability insurers with systemic corporate practices to the highest level of management aimed at denying even legitimate claims to line their own pockets with your hard-earned policy premiums.  Justice is not blind for indigent claimants struggling against insurers’ handsomely paid “paper-reviewing” physicians complicit in the insurance industry’s often unfair claims handling practices.

If you have a long-term disability, life or health insurance claim, to equal the scales of justice, you need an experienced attorney to fight hard for you.  At McKennon Law Group PC, our lawyers have decades of experience litigating these types of claims, both under ERISA and state insurance bad faith laws.  Most of our lawyers previously spent years defending insurance companies against long-term disability, life and health insurance claims.  That will give you a distinct advantage because our lawyers know how insurance companies operate and the arguments they are likely to raise from first-hand experience.  We will review your claim free of charge.  Your matter will be handled on a contingency basis, which means you pay nothing and we receive nothing unless you win a recovery by way of a settlement, claim reinstatement, verdict or award.  Let us try to equal the scales of justice for you.

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