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On April 1, 2020, Judge Janet Hall of the District of Connecticut ruled in favor of McKennon Law Group PC’s clients in their ERISA lawsuit against the administrator of their pension benefits, Henkel of America, Inc. Henkel had previously denied their claim for pension benefits, and our clients sued Henkel to obtain the benefits they are owed. One of our clients had previously worked for 12 years for a company whose pension plan liability was subsequently acquired by Henkel. Judge Hall pointed out many weaknesses in Henkel’s denial decision, including the fact that Henkel relied almost entirely on a single list of pension obligations that it had acquired, even though it had other evidence in its possession that called the validity of that list into question. For example, Henkel failed to investigate the records of the Third-Party Administrator hired by Henkel and the court pointed out other serious deficiencies in how Henkel handled our clients’ claim and requests for records. As she noted, “Henkel also had a duty ‘to investigate a claim for benefits and develop the reasonably available evidence.’” Hippe v. Life Ins. Co. of North America, No. 02-CV-86 (ILG), 2003 WL 22220749, at *9 (E.D.N.Y. July 31, 2003) (collecting cases). Henkel failed to fulfill this duty and created an administrative record that was inadequate for judicial review. The documents produced in the course of discovery filled some of the gaps, and raised doubts as to the basis upon which Henkel denied our clients’ claim for benefits.

We had several strategic victories along the way that contributed to winning this case for our clients. We prevailed on a motion for discovery. Discovery is rarely permitted in matters governed by ERISA, yet we convinced Judge Hall that it should be permitted in this matter. This discovery helped us to convince the court to apply a de novo standard of review to the claim under Halo v. Yale Health Plan, Dir. of Benefits & Records Yale Univ., 819 F.3d 42, 45 (2d Cir. 2016). We also successfully defeated an attempt to dismiss the entire case based upon statute of limitations and laches arguments. This was a hard-fought case in which Henkel was represented by one of the top pension defense firms in the country.

The Court entered judgment that remanded the matter to Henkel and required that Henkel properly investigate our clients’ pension claim. This decision led Henkel to pay our clients pension benefits and attorneys’ fees per a confidential settlement agreement.

In ruling on an action to recover ERISA benefits, a court generally considers only the evidence contained in the administrative record. However, in certain circumstances, a plaintiff in an ERISA case may be able to introduce evidence outside of the administrative record either by way of discovery or a motion to augment the administrative record.The Ninth Circuit has established guidelines for when the admission of new evidence is appropriate. “[T]he district court should exercise its discretion to consider evidence outside of the administrative record ‘only when the circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.’” Opeta v. Nw. Airlines Pension Plan for Contract Emp., 484 F.3d 1211, 1217 (9th Cir. 2007) (emphasis in original).

Recently, in the matter of Kip Jones v. Life Insurance Company of North America, et al., 2020 WL 2126498 (D. Ariz.May 5, 2020), an Arizona District Judge granted the plaintiff’s request to conduct discovery related to the potential bias of the plan administrator’s medical experts that were utilized during the underlying claims review process. In Jones, the plaintiff filed a lawsuit against Life Insurance Company of North America (“LINA”) after it determined that he no longer met the policy’s definition of “disabled” and, as a result, terminated his life insurance waiver of premium benefit. LINA’s decision relied entirely on paper reviews from its reviewing experts. The plaintiff sought discovery into LINA’s relationships with the vendors that provided the reviewing experts and its history with the experts themselves.

In permitting the requested discovery, the Court recognized that the outcome of the case turned on the credibility of the experts and that “where an expert or the third-party vendor who supplies that expert has a long-standing relationship with or receives substantial compensation from a carrier or industry, and overwhelmingly renders opinions in their favor, such evidence might be important in accessing that expert’s bias and credibility.”

The Court also found that the plaintiff’s unchallenged representations about LINA’s relationship with its vendors and their experts raise a concern regarding the fairness of LINA’s claims handling and that this concern warranted discovery into LINA’s relationships with those vendors and the experts who rendered opinions upon which the decision to terminate plaintiff’s claim was based. In addition, the Court rejected LINA’s argument that the requested discovery was not proportional to the needs of the case because the plaintiff would neither win a large amount of money, nor vindicate vitally important personal or public values. The Court found that the life insurance waiver of premium benefit was a valuable benefit and that the plaintiff’s qualification for the benefit was an important issue at stake in the action.

Ultimately, the Court found that discovery into the potential bias of experts rendering opinions was relevant and met the high burden for discovery in an ERISA case. The Court explained:

LINA will be required to respond to discovery that delves into the number of times it retained and the amount of money it paid to third-party vendors in disability and LWOP claims and medical reviewers utilized here, LINA-generated performance evaluations of these vendors and medical reviewers, the number of times they concluded that a claimant could perform work, LINA-generated performance evaluations for LINA employee Mary Faltaous, and any guidelines and manuals used by LINA in evaluating this claim . . .. The Court finds that LINA has the resources to respond to the discovery requests and is the only party with access to the requested discovery. The Court further finds that the discovery ordered herein is relevant and proportional to the needs of the case and that the burden or expense of the discovery does not outweigh its likely benefit.
Id. at *5.

The plaintiff in Jones also sought to supplement the administrative record with a letter from his treating physician responding to LINA’s doctors’ record reviews. The plaintiff asserted that LINA had not provided him the opportunity to respond to the record reviews during the appeal process. LINA argued, among other things, that ERISA regulations do not contemplate the disclosure of reviewing doctors’ opinions prior to the appeal being decided. The Court rejected this argument and granted the plaintiff’s motion to supplement the administrative record. In granting the motion, the Court relied on Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (9th Cir. 2011), which found that failing to furnish medical reports violated ERISA by denying the claimant’s physicians the opportunity to submit written comments and perform additional examinations.

Although discovery in ERISA cases is generally limited, the Jones case establishes an important trend that, in certain circumstances, courts will permit discovery in de novo review cases to uncover insurance company bias. ERISA claimants seeking to conduct discovery into this issue can look to the Jones case as excellent support for allowing such discovery.

On April 6, 2020, in the matter of Vicky Ibarra v. Hartford Life and Accident Ins. Co., Case No. 8:19-cv-00333-DOC-DFM, Judge David O. Carter of the U.S. District Court, Central District of California granted the McKennon Law Group PC’s motion for attorneys’ fees and costs after its client prevailed in her ERISA lawsuit. Hartford had wrongfully terminated Ibarra’s long-term disability benefits and then reversed its decision and reinstated her claim shortly after the lawsuit was filed. The Court concluded that the firm’s 2018 to 2019 hourly rates of $750 and $625 for Robert McKennon and Joseph McMillen were reasonable for ERISA work given their strong reputations and experience. The Court rejected several of Hartford’s arguments, including that it should cut Ibarra’s attorney’s fees by 80%, and that McKennon Law Group spent too much time drafting the detailed Complaint, calculating benefits and communicating with their client. The Court intended to award Ibarra nearly $130,000 in attorneys’ fees and costs. But because of a math error evident in the order, it mistakenly awarded $100,093.29. Hartford agreed to pay $119,000 to resolve the attorneys’ fees claim given the obvious math error.

Facing a long-term disability (“LTD”) claim, insurers often attempt to tip the scales against insureds in order to deny legitimate claims for benefits. This imbalance can become especially pronounced where an insured primarily suffers from disabling conditions that are subjective in nature and difficult to objectively measure. Instead of accepting the statements of physicians who certify an insured’s disability claim, insurance companies often deny claims due to a lack of “objective evidence” or perform a “paper review” of an insured’s medical file by contracting with “independent” peer-review medical vendors who supply physicians to review claimants’ medical files. These vendors and physicians have an inherent bias in favor of insurance companies, as they are financially dependent upon insurance companies and routinely contradict the opinions of insureds’ treating providers.

In a recent LTD decision involving Aetna Life Insurance Company (“Aetna”), Woolsey v. Aetna Life Ins. Co., 2020 WL 1083932 (D. Ariz. Mar. 6, 2020), the District Court of Arizona, under an abuse-of-discretion standard, found that Aetna had committed several violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), entitling the matter to be remanded. The court found that Aetna failed to effectively and meaningfully communicate with the plaintiff, failed to consider the comorbid effect of his disabling conditions, arbitrarily dismissed the conclusions of his treating providers, failed to address the requirements of the plaintiff’s specific vocation, violated its duty to investigate, failed to disclose paper-review reports to the plaintiff and failed to explain what was necessary for him to perfect his appeal. The decision highlighted several of the tactics that we routinely see group-disability insurers use to deny ERISA claims.

Plaintiff Michael Woolsey worked as a financial advisor for UBS Financial Services until he made a claim for short-term disability (“STD”) and LTD benefits with Aetna on January 6, 2016, due to issues with migraines and depression that precluded him from working in his own occupation. Id. at *1. Woolsey also successfully underwent treatment for prostate cancer and experienced suicidal ideations. Due to the nature of many of Woolsey’s disabling conditions, treating notes largely reflected his own self-reported symptoms. Aetna initially approved his STD claim based on representations from his primary-care provider, a physician’s assistant who referred him to a neurologist and psychologist.

Following a transition from STD to LTD benefits, Woolsey’s claim for LTD benefits was denied on July 1, 2016. Woolsey appealed Aetna’s determination. He submitted additional medical records as well as a supportive disability letter from his neurologist who noted that Woolsey “clearly remains unable to work because of his frequent headaches” and “continues to remain disabled.” Id. at *4. During its appeal review, Aetna contracted the third-party vendor Reliable Review Services (“RRS”) to conduct paper reviews of Woolsey’s file. Despite the support of Woolsey’s treating providers, the two reviewers found his record to be insufficient to support a determination of “significant impairment.” Aetna then denied Woolsey’s appeal on December 15, 2016, upholding its LTD benefits denial. The reviewers determined that specific restrictions that would prevent Woolsey from working were not supported, because of a lack of clinical correlation for such restrictions. Id.

The court noted that Woolsey’s medical records prior to his LTD claim were “shockingly thin,” and that Woolsey had attempted to return to work. The court also noted that Aetna initially denied his claim due to a lack of “objective clinical examination findings to support subjective symptoms.” Id. at *8-9. However, the court found several ERISA violations that entitled the matter to be remanded back to Aetna to cure its defects.

First, the court criticized Aetna’s reliance on the opinions of RRS’ paper reviewers. Id. at *10. The court stated that “undoubtedly, . . . RRS is well-compensated for its services. Its share of Aetna’s independent-review business increased from 2015 to 2016.” Id. The court further found that the statistical evidence of Aetna’s relationship with RRS supported a finding common in ERISA cases: that independent reviews are prone to the same conflicts of interest that afflict ERISA plan administrators.

In fact, RRS touts on its Website that “Disability plans are serviced through independent peer review, which provides clinical expertise to support plan decisions.” (Emphasis added). This is not surprising; insurers like Aetna are its main source of income. If RRS only provided opinions that had an inherent bias in favor of insureds, it would surely go out of business. Its profit-driven business structure is exactly the reason why courts routinely dismiss these biased peer reviewers’ opinions in favor of the opinions of the doctors who had actually treated insureds.

The court further criticized Aetna’s paid consultants, who failed to consider the aggregate effect of Woolsey’s conditions, but instead deferred to other physicians for assessments in areas outside of their areas of expertise. Id. at *10. The court thus found a “procedural violation for Aetna’s failure to consider the possibility that the conditions’ combined effect was disabling.” Id. The court also noted the paper reviewers’ dismissive attitude toward Woolsey’s treating providers, evidenced by how they “gave short shrift to, or fail to address entirely [Woolsey’s doctor’s] observation that [Woolsey] ‘clearly remains unable to work.’” Id. The court found that more deference to Woolsey’s treating providers’ opinions was warranted and that the RRS paper reviewers’ dismissive treatment of Woolsey’s treating providers’ opinions was irregular. Id., citingC.F.R. § 2560.503-1(h)(2)(iv) (requiring plan administrators to consider documentation submitted by a claimant at the appeal stage).

In addition, the court in Woolsey criticized Aetna’s deficient and inadequate communication with the plaintiff. The court found that “Aetna engaged [the plaintiff] in dialogue regularly, but not meaningfully.” Woolsey, 2020 WL 1083932 at *12, citing Booton v. Lockheed Medical Ben. Plan, 110 F.3d 1461, 1463 (9th Cir. 1997) (determining that what ERISA, “[i]n simple English[,] . . . calls for is a meaningful dialogue between ERISA plan administrators and their beneficiaries” such that “if the plan administrators believe that more information is needed to make a reasoned decision, they must ask for it.”) While Aetna communicated in part with Woolsey’s treating providers, the court noted that “Aetna failed to disclose those reports to [the plaintiff] and explain what was necessary to perfect his appeal ‘in a manner calculated to be understood.’” Id.,citing 29 C.F.R. § 2560.503-1(g)(1). The court further found that Aetna had violated its duty to investigate when it largely discredited or ignored the opinions of Woolsey’s treating providers, who concluded that he was unable to work. Id. at *13.

The Woolsey case underscores the tactics that Aetna and other group disability insurers use to deny disability claims. We often seen insurers deny a claim for disability benefits after discrediting a claimant’s subjective accounts of disability (while implicitly demanding objective evidence of a condition for which no objective results could exist), relying on paper reviewers to deny a LTD claim, hiring biased and financially conflicted vendors to conduct a paper review of a claimant’s medical file, discrediting the opinions of treating providers (who concluded that a claimant is unable to work), failing to furnish copies of paper reviewers’ reports to the claimant and failing to engage in a meaningful dialogue with claimant. Woolsey sheds light on these insurer-friendly tactics and indeed found them to be procedural ERISA violations. Hopefully, courts encountering similar insurer tactics to deny disability claims will respond to them with similar skepticism as the Woolsey court did here.

If your disability insurer denied your claim for STD or LTD benefits, please contact our firm for a free consultation. We have extensive experience with handling the denials of ERISA STD and LTD claims.

Coronavirus, or COVID-19, has hit California extremely hard. Since the outbreak, there have been many questions from clients regarding what kind of impact the novel coronavirus (COVID-19) will have on the ability of policyholders to maintain and utilize their insurance policies. While the situation continues to change from day to day, on April 3, 2020, the California Insurance Commissioner, Ricardo Lara, issued a “NOTICE RE: Extension of Policyholder Deadlines that Impact Claims or Coverage Due to the current State of Emergency Caused by Coronavirus (COVID-19) Outbreak” as an effort to protect policyholders during these uncertain times.

Commissioner Lara has instructed all insurance companies to stop enforcing policy or statutory deadlines on policyholders for claims or coverage until 90 days after the COVID-19 state of emergency has ended. The notice states, “Commissioner Lara now finds it necessary to issue this Notice to protect policyholders from losing, limiting, or waiving policy benefits, as a result of the current national state of emergency.”

This Notice quickly follows Commissioner Lara’s March 18, 2020 Notice, which requested all insurance companies to provide their policyholders with at least a 60-day grace period to pay insurance premiums. This is an action taken by the Commissioner to ensure policies are not canceled for nonpayment of premium due to the national COVID-19 public health emergency.

While the COVID-19 pandemic is a circumstance beyond anyone’s control, it is comforting that the California Department of Insurance is working to protect your ability to maintain and use your insurance policies. If you have a problem with a claim under your disability, life, health, accidental death, ERISA or long-term care insurance matter, please contact us.

Categories: Disability Insurance, Life Insurance, Health/Medical Insurance,Accidental Death or Dismemberment Insurance, Property and Casualty Insurance, ERISA, Insurance Commissioner, Insurance Questions and Concepts, Disability Insurance News, News, Regulations

Tags: Coronavirus, COVID-19, Department of Insurance, insurance, grace period, deadlines

In the October 2019 matter, McHugh v. Protective Life Insurance, 40 Cal.App.5th 1166 (2019) (“McHugh”), the California Court of Appeals ruled that Insurance Code Sections 10113.71 and 10113.72 only apply to policies issued or delivered after January 1, 2013. This was an unfortunate ruling that did not protect insureds who have paid premiums for years and who may become too sick to pay a premium, thus allowing a policy lapse at the time the insured needs the life insurance the most.

California Insurance Code Sections 10113.71 and 10113.72 primarily do three things: (1) mandate that life insurance policies issued or delivered in California have a 60-day grace period; (2) set forth notice of pending lapse and termination requirements; and (3) require insurers to provide notice to applicants and annual notice to policyholders of their right to designate someone other than themselves to receive lapse notices. The latter requirement, which applies only to individual life insurance policies, was an important addition to the California Insurance Code because it allows policyholders to designate persons who can receive lapse notices so that if the policyholder is too sick to read a premium notice and/or pay a premium, he may still be protected. While both statutes went into effect on January 1, 2013, a question remained as to whether these safeguards would apply to life insurance policies issued or delivered prior to January 1, 2013. According to McHugh, the answer to this question was “no.” However, the California Supreme Court has decided to review the Court of Appeals ruling in McHugh. Until the Supreme Court makes its determination, McHugh is no longer proper law to be relied upon or cited to in legal proceedings.

McKennon Law Group’s Client Wins ERISA Pension Lawsuit

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