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On August 28, 2019, the Los Angeles Daily Journal published an article written by Robert J. McKennon of the McKennon Law Group PC. The article addresses a recent case by the Ninth Circuit Court of Appeals, Dorman v. Charles Schwab, which overruled the Ninth Circuit precedent Amaro v. Continental Can Co. and enforced an arbitration clause in a pension plan on the basis that Supreme Court precedent had impliedly overruled its ruling in Amaro. Given the expansive reading of arbitration clauses by the Supreme Court and now the Ninth Circuit, it is likely that more ERISA pension claims will be litigated on an individualized basis and will be litigated in arbitration proceedings. For a full view of the article, take a look at our blog, here.
ERISA guarantees claimants a “full and fair review” as well as an appeal of any denial by the insurance company. Can a disability claims insurer deny a claim too quickly and thus violate its duty to provide a full and fair review? A recent decision answered “yes” to this question. In Speca v. Aetna Life Ins. Co., 2019 WL 3754210 (D. Nev. August 8, 2019), the court ruled that Aetna Life Insurance Company (“Aetna”) did not provide a “full and fair review” and effectively cut off any meaningful access to an appeal when it denied a claim in just 14 days (without even waiting to receive any medical records).
Plaintiff, Paul Speca, worked at Home Depot until November 6, 2015 and suffered from narcolepsy (falling asleep unpredictably and uncontrollably). On November 7, 2015, he filed a claim for short-term-disability (“STD”) benefits with Aetna. That STD Policy contained a standard 45-day claim-determination period that could be extended twice, by 30 days each, for a total of 105 days, within which Aetna had to decide Mr. Speca’s STD claim. Although Aetna made several calls to Mr. Speca and his doctors, and sent at least one letter requesting medical records, after only 14 days (on November 20, 2015), Aetna denied Mr. Speca’s STD claim on the procedural ground that he had produced no medical records to support his claim. The Policy and 29 CFR § 2560.503-1 require that a claimant be given 45 days to provide requested records.
The district court reviewed this denial and remanded Mr. Speca’s claim back to Aetna. The judge wrote:
Considering that “ERISA was enacted to promote the interests of employees” [citation omitted], Defendant should have—at a minimum—waited a few more days to gather medical records before denying Plaintiff’s initial claim. There can be no question that denying Plaintiff’s initial claim on arbitrary procedural grounds not grounded in the Policy did not promote Plaintiff’s interests here. Of course, Plaintiff’s interest was to receive STD benefits, and he has not received them to date. But even if Defendant ultimately made the right decision on the merits during Plaintiff’s appeal, it never reached the merits of his claim until that appeal. And that deprived Plaintiff of an important right— the right to an appeal. Because of the way Defendant handled this claim, Plaintiff essentially received his initial claim review during his appeal with Defendant, and is now pursuing his appeal in this Court.
Defendant’s decision to essentially collapse its review of Plaintiff’s claim from two levels into one violates the spirit of both ERISA and the [STD] Policy. First, ERISA requires that Defendant “afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.ˮ 29 U.S.C. § 1133(2). Plaintiff effectively presented his evidence for the first time on appeal, which did not allow for a full and fair review of his claim. Second, the Policy clearly provides for an appeal right. (ECF No. 17-7 at 2-3.) As noted, Plaintiff was denied meaningful access to an appeal. Thus, Defendant’s decision to deny Plaintiff’s initial claim on procedural grounds less than 45 days after he submitted it violated the spirit of both ERISA and the Policy—and was thus incorrect.
Id. at *5.
Since ERISA requires a “full and fair review” as well as a meaningful access to an appeal, Aetna clearly violated those rights when it denied this claim in just 14 days (without even waiting to receive any medical records). Because the Court found that Plaintiff is ineligible for long-term-disability benefits where, as here, his STD benefits claim has been denied —and the Court remanded Plaintiff’s STD-benefits claim to Defendant for further consideration —the Court also ordered Defendant (Aetna) to consider Plaintiff’s eligibility for long-term-disability benefits as well. Aetna’s “rush to judgment,” after just 14 days, failed. We often see long-term disability claims denied without a full and fair review provided. If you believe your long-term disability claim was denied without a full and fair review, please contact us.
The McKennon Law Group PC periodically publishes articles on its Insurance Litigation and Disability Insurance News blogs that deal with frequently asked questions in insurance bad faith, life insurance, long-term disability insurance, annuities, accidental death insurance, ERISA and other areas of law. To speak with a highly skilled California/Nationwide disability insurance lawyer or ERISA lawyer at the McKennon Law Group PC, call (714)274-6322 for a free consultation or go to our website at mslawllp.com and complete our free consultation form today.
In this several part Blog Series entitled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim, handling a claim denial and through preparing a case for litigation. In Part Five of this Series, we discuss procedural considerations to an ERISA claim, as well as deadlines and timeframes to carefully monitor.
When first reviewing a potential ERISA matter, it is crucial to first determine the procedural history of your client’s claim and whether there have been any denials. Most denial letters in ERISA cases set forth specific deadlines to respond to an appeal. In fact, the Department of Labor regulations specifically dictate that a claimant be advised of her appeal rights.
The federal statue governing claims procedures under ERISA requires that “in accordance with regulations of the Secretary [of Labor], every employee benefit plan shall … afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” 29 U.S.C. § 1132(2). The regulation implementing 29 U.S.C. § 1133 states that a “reasonable opportunity for a full and fair review” is “at least 180 days following receipt of a notification of an adverse benefit determination within which to appeal…” (Emphasis added.) 29 C.F.R. § 2560.503-1(h)(3), (h)(3)(i), (h)(4). Further, in terms of calculating the 180-day deadline, courts interpreting this provision have held that if the deadline falls on a weekend, it extends to the following business day. LeGras v. AETNA Life Ins. Co., 786 F.3d 1233, 1237-38 (9th Cir. 2015).
However, if the deadline to submit an appeal has already run, this is largely accepted as being similar to missing a statute of limitations. If a claimant has missed the deadline to appeal, it is known as a failure to exhaust administrative remedies. It still may be worthwhile to ask the claim administrator to accept a late appeal or check the plan language to determine if administrative remedies be exhausted as a prerequisite to filing suit. However, if this does not work, there still may be a way to pursue litigation against the insurer or employer to get your life, medical or disability benefits paid. One way is to see if there is a recognized exception to the failure to exhaust administrative remedies doctrine. One such exception is the futility doctrine. We have discussed this previously here. [https://mslawllp.com/exceptions-to-the-exhaustion-requirement-when-is-an-appeal-futile-under-erisa/; https://mslawllp.com/exhaustion-of-administrative-remedies-under-erisa-not-required-if-exhaustion-would-have-been-futile/]
If a client has not submitted an appeal, and the deadline is quickly approaching, request an extension of time from the claims administrator. If the extension is not granted or the claims administrator does not respond in a timely fashion, the claimant should advise the administrator in writing that he is submitting an appeal of the denial, and provide as much supportive documentation as possible under the circumstances. After this initial appeal request is sent, gather the additional information, supportive medical records and documents and submit the appeal to the claims administrator. Courts typically require additional evidence of disability to be considered up until the date the appeal is denied, which will likely be after the submission of additional evidence if the appeal is sent promptly.
Some plans allow for a second appeal of a denial to be submitted. These denial deadlines are treated similarly with the first claim denials, and have similar deadlines to submit information. Remember, the appeal process allows the client to add additional supportive evidence of disability to the Administrative Record, which often includes certification letters from treating physicians, personal statements, updated medical records, updated occupational information, etc. It is necessary to have a strong Administrative Record that includes all of the critical evidence needed to support a life, medical or disability claim before commencing litigation. Therefore, it is important to enclose as much documentary support as may be needed in litigation, as courts may not allow you to supplement the record with evidence during litigation.
Sometimes, claimants may request attorney representation before a denial has been received. Nervous of the unscrupulous nature of some disability insurers, many claimants are worried that one of their main (and sometimes only) income source will be improperly ended by their insurer. Most first-party insurance policies, including life insurance, disability insurance, property insurance and liability insurance policies, require that an insured policyholder provide notice of a claim within a specified period of time, typically, “as soon as practicable,” “during the Elimination Period” or a similar formulation. See e.g. Ins. Code § 10350.7 (requirement in disability policies). For this reason, be wary of situations where your client may not have given timely notice of their claim. But, even where a policy specifies that timely notice is a condition precedent to coverage, a policyholder-friendly rule known as the “notice-prejudice” rule has been adopted by California courts to help subvert these provisions. We discussed the application of that rule here.
Next, many of the same considerations for the post-denial period apply where the claimant has not yet received the denial. The goal remains the same—obtain medical records, attending physician statements that certify your client’s disability, and submit these records to the insurer in a timely fashion. With this, the insurer will have as much information as needed to make a favorable benefit determination.
In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim, to handling a claim denial and through preparing a case for litigation. In Part Four of this series, we discuss ERISA claim denials. Our focus in this article will be mostly on disability insurance claim denials.
When denying a claim, an insurer is required to provide a written explanation of the basis of its denial. Under Section 503 of ERISA, “every employee benefit plan shall . . . provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant.” 29 U.S.C. § 1133(1). In any subsequent litigation, the insurer is mostly limited to the basis for the denial that is asserted in a denial letter. Once a claimant has sued the insurer, the insurer or its attorneys cannot formulate new reasons why it is believed that the denial was proper. See, e.g., Lauder v. First Unum Life Ins. Co., 284 F.3d 375, 380-82 (2d Cir. 2002).
Generally, denials of disability claims fall into two broad categories: (1) lack of objective evidence in support of the disability, and (2) insufficient medical evidence to support the disability (i.e., that even though the claimant may be suffering from a diagnosable medical condition, there exists insufficient support that the medical condition is so severe so as to render the claimant unable to work). As for a lack of objective evidence of a diagnosis or disability, unless a provision of the plan states otherwise, a claimant can rely on a variety of forms of evidence, even if there is no objective evidence to support the disability. Evidence may include: current symptoms; other medical conditions that might affect or lengthen the recovery period; existing abnormalities or deficiencies; results from physical examinations; observations made by the treatment provider during office visits / therapy sessions; diagnostic tests and their results; treatment plans; any prescribed medications and the responses to those medications; level of functionality (restrictions and limitations); clinical documentation that supports the rationale that the treatment provider used when determining level of functionality; and a description of the impact that the employee’s level of functionality has on her ability to perform her job or any other job assigned by the company.
Of course, insurance companies do not want to pay most claims, and they often look for an excuse to deny ERISA claims. Most of the time, they have their own medical personnel examine the medical evidence to determine whether the evidence supports a diagnosis and whether the evidence supports significant restrictions and limitations to the claimant’s ability to perform the substantial and material duties of his occupation. However, the insurer cannot arbitrarily refuse to credit a claimant’s reliable evidence that supports his disability. See Michaels v. Equitable Life Assur. Soc., 305 F.App’x 896, 906–07 (3d Cir. 2009). A letter from a treating physician explaining that a claimant has a particular condition and cannot work because of that condition is reliable evidence that cannot properly be ignored without a reasonable basis. When filing a claim, or appealing the denial of a claim, the ERISA claimant should always obtain letters from his treating physicians explaining the nature of the condition, the basis for the diagnosis, the claimant’s symptoms and the reason why the claimant cannot return to work. Even if the insurer refuses to give the letters adequate weight, a judge in a subsequent lawsuit will likely consider the treating physicians’ opinions strongly.
ERISA claimants should carefully examine the plan to see if it requires “objective” evidence of a diagnosis or disability. If so, the plan’s documents usually state what kind of evidence is required. The plan may limit the relevant objective evidence to a specific and narrow list of symptoms and results from tests such as magnetic resonance imaging or electromyography. Each plan is different, and the plan’s documents should be examined before deciding how to attempt to meet this requirement. Insurers very often state in denial letters that there is no objective evidence of disability or diagnosis, even though the plan does not require objective evidence. The denial letter may emphasize the lack of a test or documented restriction of movement. Unless the plan requires the specific evidence that the denial letter demands, this may be an improper attempt to require that a claimant meet a heightened standard of disability that is not found in the plan. Courts often criticize insurers for this type of conduct. See Saffle v. Sierra Pacific Power Co., 85 F.3d 455, 459–60 (9th Cir. 1996). Such conduct on the part of an insurer can compel a court to rule that the insurer improperly denied a claim and that it must pay a claimant’s benefits under a policy.
Insurers also often deny disability claims because there allegedly is insufficient support for the diagnosis, the disability and/or the claimant’s inability to perform his occupation. This reason often takes the form of an assertion that the given diagnosis and restrictions do not support the conclusion that the claimant cannot perform her job duties. For example, a claimant with chronic and severe irritable bowel syndrome may receive a denial letter stating that the claimant’s reported time spent in the bathroom is exaggerated and that, even if he suffers from the diagnosed condition, the claimant only needs ready access to a bathroom and permission to use it once every two hours. The insurer will then assert that the diagnosis does not support a determination that the claimant simply cannot work. Of course, this conclusion may be contradicted by the claimant’s treating physicians, but the insurer may discount those opinions because, in its opinion, the diagnosis does not support the level of restrictions prescribed.
Insurers often combine both of these methods when denying a claim. An insurer may emphasize that a claimant can perform a sedentary occupation and will only disagree with a narrow, but critical, range of restrictions on the claimant’s behavior. An example of this form of denial is one with regard to an office worker who has horrible back problems. His job requires that he sit at a desk all day and work on a computer. His back pain renders him incapable of performing a variety of tasks, including sitting for eight hours per day. The insurer may acknowledge all of the limitations except for the restriction on the claimant’s ability to sit, stating that the back condition is not sufficiently severe so as to prevent the office worker from sitting. The insurer then concludes that given that the claimant can allegedly perform the main requirement of the office job — sitting — the pain and other limitations are irrelevant, and the claimant is not entitled to benefits under the plan.
There are a variety of ways to overcome these denials. A claimant can obtain independent evaluations of the condition in question. This independent testing may reveal more evidence of the claimed restrictions. The claimant may also undergo vocational assessments. This testing by an independent evaluator may help to provide more concrete evidence that the claimant suffers from the contested condition and restrictions. A determination affirming disability by a governmental agency, such as the Social Security Administration, may also help to overcome this form of denial. Personal statements from the claimant, family and friends are also helpful.
The McKennon Law Group PC periodically publishes articles on its Insurance Litigation and Disability Insurance News blogs that deal with frequently asked questions in insurance bad faith, life insurance, long-term disability insurance, annuities, accidental death insurance, ERISA and other areas of law. To speak with a highly skilled California/Nationwide disability insurance lawyer or ERISA lawyer at the McKennon Law Group PC, call (714)274-6322 for a free consultation or go to our website at www.mckennonlawgroup.com and complete our free consultation form today.
In this several part Blog Series entitled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health and disability claim, from navigating a claim, handling a claim denial and through preparing a case for litigation. In Part Three of this Series, we discuss the roles of various Administrators, the administrative record and the laws requiring Administrators to provide their records to a claimant.
Two different entities manage an ERISA plan, the Plan Administrator and the Claims Administrator. Often times, the two roles are performed by different entities. The Plan Administrator manages and sponsors the plan and must ensure that the plan complies with applicable regulations. The Plan Administrator is often the participant’s employer. Aside from electing some initial benefits and payroll deductions, the participant rarely interacts with the employer in its capacity as the Plan Administrator.
Among its various duties, the Plan Administrator must maintain a Summary Plan Description (“SPD”). The SPD tells plan participants what benefits the plan provides, how to participate in the plan, how to claim benefits and other details of the plan’s operation. The Plan Administrator must also prepare a summary annual report. This report addresses the financial status of the plan.
The Supreme Court has held that a disclosure in the SPD can not necessarily be enforced as part of an ERISA plan. As the Supreme Court explained in CIGNA Corp. V. Amara, 563 U.S. 421, 437 (2011), “The syntax of [ERISA], requiring that participants and beneficiaries be advised of their rights and obligations ‘under the plan,’ suggests that the information about the plan provided by those disclosures is not itself part of the plan.” (Emphasis in original). This is a clear delineation between an SPD and a plan. The SPD is useful and necessary, but, when in doubt, a beneficiary needs to request a copy of a plan itself.
In contrast to the Plan Administrator, the Claims Administrator addresses the actual requests for benefits filed by plan participants. Participants contact the Claims Administrator when they seek their life insurance benefits, disability insurance benefits, death and dismemberment insurance benefits, etc. Usually, a third party that specializes in claims administration, like an insurance company, serves as the Claims Administrator.
Sometimes, the same entity serves as the funding source for claims and Claims Administrator or a Plan Administrator may self-fund a plan and hire a Claims Administrator or Third-Party Administrator to handle claims. If the two roles are performed by the same entity, then a conflict of interest may arise once a claim is made. For example, if an entity such an insurer is the funding source of the benefits and is given the ability and discretion to decide whether claims are payable, there will exist a conflict of interest. If a dispute over benefits arises, such a conflict may have ramifications in litigation and will often make a court disinclined to believe that the Administrator’s actions were in good faith.
The records maintained and developed by the Administrators serve a critical role in the ERISA context. Unlike most non-ERISA litigation, courts decide ERISA insurance and pension claims almost entirely on the administrative record. The administrative record consists of all documents in the Claims Administrator’s files on a particular beneficiary. These will include medical records, applications for coverage and benefits, a copy of the plan, internal notes from the Administrator’s employees, denial letters and other records relevant to the claim. A claimant must be careful to make certain that the administrative record contains all relevant documents. In lawsuits over ERISA benefits, there are rarely depositions or live testimony before a judge. Often times, the court will not even hold an oral argument. Each side simply submits its written briefs, and the judge rules. Given this reliance on the administrative record, a claimant must know what the record contains at each stage of the dispute. It is vitally important that a claimant include in the Administrative Record all appropriate documentation to support a claim. Hiring an experienced attorney is often important to make sure an ERISA appeal of a denied insurance claim is properly done.
ERISA law, 29 U.S.C. Section 1133, states that “every employee benefit plan shall – (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant[.]” Once a beneficiary receives such a notice, they, or their attorney, should promptly request all documents applicable to their claim. The Administrators must furnish beneficiaries with virtually all documents relevant to a claim. 29 C.F.R. Section 2560.503-1(h)(2)(iii) states that: “a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits.” The requirement that Administrators provide a beneficiary with relevant documents is quite broad. At its broadest, a beneficiary could obtain copies of internal notations made by the Administrators’ employees, relevant emails, applications for benefits, plan documents, and most other documents that have a connection to the claim. The Ninth Circuit has even ruled that the attorney-client privilege, which usually shields communications between an attorney and client, does not apply to communications between an insurer and counsel before a claims decision is made based on the “fiduciary exception” to the attorney-client privilege in ERISA matters. See Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917, 930-931 (9th Cir. 2012) (“The duty of an ERISA fiduciary to disclose all information regarding plan administration applies equally to insurance companies as to trustees.”). The regulations allow the beneficiary to examine all aspects of the claims process. A Claims Administrator cannot simply deny a claim and then refuse to explain or provide its reasoning and basis.
If a Plan Administrator refuses to provide the documents in question, then it expose itself to potential civil penalties. 29 U.S.C. Section 1132(c)(1) requires that an Administrator mail a copy of the requested materials within 30 days of the request. If the Administrator fails to provide the documents, then the Administrator may become liable for $110 a day starting on the 31st day or the date the Administrator refuses to comply, whichever is sooner. Courts may also order other relief deemed proper. The $110 a day penalty provides only a minor incentive for an Administrators to provide the documents sought by the beneficiary. It provides enough of an incentive that egregious refusals to provide documents are rare. The documents sometimes arrive after the 30 day deadline but Administrators generally provide the majority of the documents requested.
In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim, to handling a claim denial and through preparing a case for litigation. In Part Two of this series, our focus in this article will be on the filing of a claim.
Often, clients contact our firm before they have filed any life, health, accidental death and dismemberment and disability claim for benefits with their insurer. In these circumstances, we can assist them on an hourly or contingency fee basis. Our firm is able to put the client in the best position possible to ensure their claim gets paid. Before collecting documents and submitting a claim to an insurer, it is important to determine first if there are any issues with the timeliness of a claim.
Most first-party insurance policies, including life insurance, disability insurance, property insurance and liability insurance policies, require that an insured policyholder provide notice of a claim within a specified period of time, typically, “as soon as practicable,” “during the Elimination Period” or a similar formulation. See e.g. Ins. Code Section 10350.7 (requirement in disability policies). With respect to liability insurance policies, notice of a claim is required in both claims-made and occurrence policies. Notice generally must be given within a “reasonable time” or within a specified period. Insurance policies often specify that timely reporting of claims is a condition precedent to coverage. While there are different rules for insurance policies that require a timely notice of a claim, a policy-holder friendly rule known as the “notice-prejudice rule” has been adopted by the California courts. The rule provides that unless an insurer can demonstrate actual, substantial prejudice from late notice of a claim, the insured’s failure to provide timely notice will not defeat coverage. See our Blog post regarding the Notice-Prejudice Rule here.
There are many steps we can take to assist our clients with filing claims for insurance/ERISA benefits, even if a claim has already been filed and before an insurer has made a decision on a claim. With respect to a short-term disability or long-term disability claim, we can assist our clients with obtaining key documents to start the claim process. We can also assist with obtaining the necessary claim forms to file a disability claim and to obtain a copy of the disability insurance policy. It is critical that we review the policy to give our client advice about the claim, including the type of claim to file (e.g., total vs. residual disability, mental vs. physical, etc.). For example, if a client wishes to assert a mental-nervous claim, we will evaluate whether such a claim will be limited to a period of years (such claims are typically limited to two years of benefits) and we will evaluate if there is a “physical” cause of the disability our client can assert that could potentially give our client far more benefits for a much longer period of time. We will also evaluate what type of evidence will be required to prove the claim. We can assist the client with obtaining medical records, physician certification letters, attending physician’s statements, personal statements/letters in support of a client’s disability from the client, his/her family and friends. We can also work with the client to obtain the necessary experts to support the type of medical claim at issue. Due to our history of handling claim denials with insurers, we can perform an analysis of ways an insurer might attempt to deny a client’s disability claim, review all claim forms and medical records before submission, and ensure that there are no inconsistencies or irregularities in any of the documents. We can also assist the client with answering questions regarding how their disability affects their activities of daily living and their work, how best to identify the client’s occupational duties, how best to identify how long they can sit/stand/walk, and other information in support of a disability.
Many clients attempt to submit claims on their own, and often fall into pitfalls set by insurance companies that are structured to help an insurer deny a claim. We can assist in navigating the maze of rules and traps insurers set. Retaining an attorney early in the claim process to handle this process will maximize the likelihood a claim with get approved, and help to ensure ongoing future benefit payments.
Later in our Blog series, we will discuss the denial of a disability insurance claim, and steps to taking regarding an appeal of an insurer’s claim denial.
