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The November 6, 2015 edition of the Los Angeles Daily Journal features an article written by Robert McKennon and Joseph McMillen of the McKennon Law Group entitled: “Supreme Court Ramps Up Interest in ERISA.” In the article, Mr. McKennon and Mr. McMillen discuss five important United States Supreme Court cases involving litigation over employee life, health and disability benefit claims governed by the Employee Retirement Income Security Act of 1974. It discusses these cases and explains that the High Court has: (1) relaxed the standard for an employee to recover his attorney fees; (2) allowed discovery previously not permitted; (3) significantly expanded employee remedies; (4) determined plan language controls benefit reimbursement claims; and (5) confirmed an employer’s right to choose plan terms limiting the time to file a lawsuit.
Short-term disability insurance and long-term disability insurance policies provide insurance benefits to consumers who are unable to continue working due to injury or sickness. Such coverage can be offered as a benefit of employment by an employer (in which case, the policy is usually governed by a federal law called the Employee Retirement Income Security Act of 1974 or ERISA) or can be purchased by the individual insured.
Regardless of how the coverage is obtained, the terms of every policy form for disability insurance must be approved by the California Department of Insurance before it is offered for sale. Recently, Governor Jerry Brown signed Assembly Bill 387, authored by Assembly Member Kevin McCarty and co-sponsored by Insurance Commissioner Dave Jones, which will improve the Department of Insurance’s ability to review draft disability policies before they are sold to the general public.
Among other changes, the new law increases the time the California Department of Insurance has to review policy forms and any associated risks and premium rates from 30 to 120 calendar days. Here is the press release from the California Department of Insurance:
New law improves rate filing review process
SACRAMENTO, Calif.– Governor Brown signed Assembly Bill 387 today, authored by Assembly Member Kevin McCarty. Co-sponsored by Insurance Commissioner Dave Jones, the law will ultimately improve the department’s ability to review and approve disability policy filings more effectively and completely in the specified timeframe.
“This law will allow my department to continue to protect consumers, make the approval process more effective and still allow for timely marketplace availability of products,” said Commissioner Jones. “I’d like to thank Assembly Member McCarty for authoring this bill.”
AB 387 reflects an agreement between the California Department of Insurance and the Association of California Life and Health Insurance Companies. The law extends the period of time allowed for the department to review and approve policy forms and any associated risks and premium rates from 30 to 120 calendar days.
The new law will also authorize the Commissioner to develop and publish new guidelines on the department’s public website for the purpose of streamlining and expediting the department’s file review process for life and disability insurance forms. Providing clear guidelines for insurers to follow when submitting policies for approval, coupled with increasing the amount of time to review and approve policies, will improve the overall process and reduce confusion for consumers and the industry.
The new law also requires the requesting of an independent study to examine and compare California law with standards set forth in the Interstate Insurance Product Regulation Compact. This study would examine important consumer protections established under current law for annuity, life insurance, disability income, and long-term care insurance products.
Recently, we explained that District Courts within the state of California, applying California Insurance Code section 10110.6, ruled that, even if an insurance Plan contains language giving discretion to a claim administrator, that language is unenforceable, and de novo is the proper standard of review. See The Death of the Abuse of Discretion Standard of Review in ERISA Disability Insurance Cases in California. A recent ruling expanded the application of California’s anti-discretionary language statute to self-funded plans, further signaling the end of the abuse of discretion standard of review in California Federal Courts.
In Williby v. Aetna Life Insurance Company, 2015 WL 5145499 (C.D. Cal. August 31, 2015), the plaintiff initiated the lawsuit after Aetna denied her claim for short-term disability (“STD”) benefits. The facts of the benefits dispute are fairly straightforward, and the District Court eventually ruled that Aetna’s decision to deny the plaintiff’s claim for STD benefits was improper, regardless of the standard of review. What is unique about the ruling is the District Court’s application of California Insurance Code section 10110.6.
The ERISA Plan in Williby was a self-funded plan. This means that the employer, not Aetna, was responsible for paying any disability benefits due under the Plan. Aetna argued that Insurance Code section 10110.6 did not apply to self-funded plans, but only insured plans (where the claims administrator/insurer, not the employer, is responsible for any benefits payable under the Plan). This argument was based on the language in the statute that bars provisions which “reserve[] discretionary authority to the insurer.” See Insurance Code section 10110.6(a). The Court disagreed with Aetna’s interpretation of the statute, instead holding that the California State Legislature intended for the statute to apply, not only to insurance policies, but also insurance contracts. Specifically, the Court explained:
[P]rovisions that reserve discretionary authority to insurers to determine eligibility for benefits in contracts or policies in effect after January 1, 2012, are void and unenforceable under California Insurance Code § 10110.6.
…
Defendant argues that the insurance code does not apply because (1) the STD benefits are self-funded by Boeing, and (2) Aetna is granted discretion by the Plan, which is not an insurance policy, and thus, not regulated by the insurance code. Several district courts have found, although not in the context of self-funded plans, that Section 10110.6 applies to ERISA plan documents because the statute expressly applies to contracts and insurance policies. A federal court interpreting a state statute gives the language of the statute its “usual, ordinary import,” but if the statute’s wording is ambiguous, it may consider extrinsic evidence of legislative intent. In re First T.D. & Inv., Inc., 253 F.3d 520, 527 (9th Cir. 2001). Section 10110.6 by its plain language applies to any insurance policy, contract, certificate or agreement, and “an ERISA plan is a contract.”Harlick v. Blue Shield of Cal., 686 F.3d 699, 708 (9th Cir. 2012). The statute’s legislative history reinforces its application to employer-sponsored ERISA plans. A report from a June 22, 2011, hearing refers to an opinion letter from the Insurance Commissioner’s counsel that explained: “in group, employer-sponsored disability contracts that are governed by ERISA, the presence of a discretionary clause has the legal effect of limiting judicial review of a denial of benefits to a review for abuse of discretion. . . .[t]his standard of review deprives California insureds of the benefits for which they bargained, access to the protections of the Insurance Code[,] and other protections in California law.” See June 22, 2011, Senate Bill No. 621. The Court finds that the provisions conferring discretionary authority to Aetna are void and unenforceable pursuant to Cal. Ins. Code § 10110.6. Because the Court finds the provisions conferring discretionary authority to Aetna are void and unenforceable, the Court reviews whether Aetna correctly or incorrectly denied benefits de novo. See Firestone, 489 U.S. at 957; see also Abatie, 458 F.3d at 963. (Emphasis added.)
This ruling is further proof that the abuse of discretion standard of review will no longer apply in a vast majority of the ERISA cases filed in Federal Courts in California.
If your claim for short-term disability insurance or long-term disability insurance was denied, you can call (949) 387-9595 for a free consultation with the attorneys of the McKennon Law Group, several of whom previously represented insurance companies, who are exceptionally experienced in handling ERISA short-term and long-term disability insurance litigation.
Long-term care insurance covers long-term personal and custodial care services, including in a variety of settings such as your home, a community organization or other facility. Long-term care insurance policies reimburse policyholders a daily amount (up to a pre-selected limit) for services to assist them with their activities of daily living when they are unable to perform these activities.
Individuals who have these policies do not currently receive periodic notification from their insurer that these benefits are available. Without notification, these individuals and their families can easily lose track of the existence of the benefits, especially if the insured suffers from cognitive impairment. These individuals and families likely end up paying for care despite having this insurance or doing without when, in fact, benefits are available.
Recently, Governor Brown signed Senate Bill 575, authored by Senator Carol Liu. Sponsored by Insurance Commissioner Dave Jones, the new law requires long-term care insurers to provide annual notification of the availability of non-forfeiture benefits and contingent benefits to the insured and the insured’s designated backup contact. This notification will give seniors and their loved ones a clearer understanding of benefits available to them. Here is the press release from the California Department of Insurance:
Seniors gain greater consumer protections under new law
SACRAMENTO, Calif.- New consumer protections were ushered in yesterday when Governor Brown signed Senate Bill 575, authored by Senator Carol Liu. Sponsored by Insurance Commissioner Dave Jones, the new law protects consumers, specifically the elderly and their caregivers by requiring long-term care insurers to provide annual notification of the availability of nonforfeiture benefits and contingent benefits to the insured and the insured’s designated backup contact.
“This notification will give seniors and their loved ones a clearer understanding of benefits available to help finance and provide long-term care,” said Commissioner Jones. “Without notification, individuals and their families can easily lose track of the existence of the benefits and may end up paying for care or missing out on benefits that are available to them. I would like to thank Senator Liu for authoring this important bill.”
Consumers may stop making premium payments because they can no longer afford them. Although the long-term care benefits may still be available to the consumer even after they stop making payments, the benefits may not be utilized by the consumer until years after the policy has lapsed, which is why consumers may forget the benefits are available for use.
SB 575 earned strong bipartisan support in the Legislature and was supported by the Congress of California Seniors, California Advocates for Nursing Home Reform, the California Commission on Aging, California Retired Teachers Association, California Health Advocates, the American Federation of State, County, and Municipal Employees, National Association of Social Workers, and the Arc and United Cerebral Palsy California Collaboration.
The September 22, 2015 edition of the Los Angeles Daily Journal features an article written by Robert McKennon and Joseph McMillen of the McKennon Law Group entitled: “Examine the “Reasonable Expectations of the Insured.” In the article, Mr. McKennon and Mr. McMillen discuss the California Court of Appeal’s decision in Sequeira v. Lincoln National Life Ins. Co., 2015 DJDAR 10163 (Cal. App. 1st Dist. Aug. 31, 2015), in which the Court applied the “Reasonable Expectations of the Insured” doctrine to allow an employee of a group life policy to collect life insurance benefits. Mr. McKennon and Mr. McMillen explain this doctrine that has been so vital to allowing insureds to gain their insurance policy benefits.
McKennon Law Group PC founding partner Robert J. McKennon was awarded the designation of 2015 “Top Rated Lawyer in Insurance Law” by American Lawyer Media and Martindale Hubbell, leading providers of news and rating information to the legal industry. Mr. McKennon was featured as a “Top Rated Lawyer in Insurance Law” in the September 2015 edition of the American Lawyer Magazine for his and his firm’s work representing ERISA plan participants and insureds in disability insurance, life insurance and health insurance litigation.
