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McKennon Law Group PC founding partner Robert J. McKennon was awarded the designation of 2014 “Top Rated Lawyer in Litigation” by American Lawyer Media and Martindale Hubbell, leading providers of news and rating information to the legal industry.
When reviewing a claim for disability insurance, insurers and other claim administrators often rely on the opinions of paid physicians to support their improper denial decisions. For example, a disability insurance company will hire a doctor to conduct a “paper review” – that is, reviewing an insured’s medical records, without actually examining the insured – and then offer an opinion on the insured’s ability to return to work. If the “paper reviewer” opines that the insured is capable of returning to work, the insurance company will then rely on that opinion to deny the claim for benefits; even if the insured’s own treating physicians repeatedly state that the insured is disabled. However, in Oldoerp v. Wells Fargo & Co. Long Term Disability Plan, 2014 U.S. Dist. LEXIS 9847, 2014 WL 294641 (N.D. Cal. Jan. 27, 2014), the court held that with a psychological disability, a treating mental health professional’s observations are “more persuasive” than a paper reviewer’s opinion. This opinon is beneficial for policyholder/insureds, espeically in ERISA cases, because insurers will have a harder time using the opinions of paid, so-called “experts” who do not examine the insured to support their improper claim decisions.
In 2007, Kerilei Oldoerp was forced to stop working after experiencing a host of symptoms, including pain, fatigue and depression. Eventually, Oldoerp was diagnosed with a variety of conditions, including depression, chronic fatigue syndrome, fibromyalgia, generalized anxiety, panic disorder and Bartonella. Oldoerp made a claim for short-term disability (“STD”) benefits, and then long-term disability (“LTD”) benefits. MetLife, the claim administrator, approved her STD claim, and also paid her LTD benefits for one month before denying the claim, and forcing Oldoerp to bring an ERISA lawsuit to recover the disability benefits to which she was rightfully entitled.
In Oldoerp, the District Court originally upheld MetLife’s claim decision, ruling that its decision to deny benefits was not an abuse of discretion. However, on appeal, the Ninth Circuit, following CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), overturned that ruling because the discretionary language was contained in a summary plan description, but not the acutal plan. On remand, applying the de novo standard of review, the district court ruled in Oldoerp’s favor, finding that “Oldoerp, more likely than not, was disabled under the plan’s[IC1] terms beginning in August 2007,” and that her disability persisted after February 13, 2008, the date MetLife determined she was capable of returning to work.
In reaching this ruling, the District Court reviewed the medical evidence in the Administrative Record, as well as Oldoerp’s Social Security Disability Insurance file, after finding that it was “necessary . . . for an adequate de novo review.” First, noting that MetLife had previously approved Oldoerp’s LTD claim, in order to find that Oldoerp was not longer disabled, “one would expect the [evidence] to show an improvement, not [simply] a lack of degeneration.” However, the record did not reveal that Oldoerp’s condition improved. Rather, the records of Dr. Becky Simonelic, a psychologist who “treated Oldoerp longer and more often than any other medical professional in the record,” showed that Oldoerp’s condition had actually “deteriorated without significant improvement.”
In defending the denial decision, MetLife relied on psychologist Marcus J. Goldman, its paid physician who did not examine Oldoerp, but, after conducting a “paper review” opined that she failed to demonstrate psychiatric functional limitations after November 2007. The Court found Dr. Goldman’s conclusions to be “minimally persuasive.” First, while Dr. Goldman criticized the “subjective evidence” used to support Oldoerp’s disablity, the Court noted that an insured is “entitled to rely on credible subjective evidence in support of her claim,” especially when “the record lacks persuasive objective evidence to rebut the credible evidence” supporting the disability. In addition, the court noted that while Dr. Simonelic “consistently observed Oldoerp throughout the pendency of her claim, Goldman never examined Oldoerp,” and explained that “[w]hile an ERISA plan administrator need not provide in-person medical evaluations of its claimants, Simonelic’s in-person observations are more persuasive than Goldman’s paper review.” The Court also noted that “in-person examinations can prove more conducive to an accurate assessment of a claimant’s condition.”
Based on Dr. Simonelic’s opinions, and the other medical evidence in the record, the Court ruled that Oldoerp was entitled to a reinstatement of her LTD benefits. This opinion is very good for insureds. In addition, to holding that the opinions of a doctor who only conducted a “paper review” was only minimally persuasive in the face of a contradictory opinion by a treating physician, the Court also ruled that a Social Secuity Disability Insurance file was necessary for a full de novo review (following Mongeluzo v. Baxter Travenol Long Term Disability Ben.[IC2] Plan, 46 F.3d 938, 943 (9th Cir. 1995)) and that a disability claim can be supported by subjective evidence, especially where there is no contrary objective evidence.
The February 10, 2014 edition of the Los Angeles Daily Journal featured Robert McKennon’s article entitled: “Policyholder Wins Handed Down in Insurance Decisions.” In it, Mr. McKennon discusses six insurance decisions handed down in California and federal courts in 2013 that were favorable to policyholders.
The article includes a discussion of Zhang v. California Insurance Co., 57 Cal. 4th 364 (2013), which empowered policyholders to pursue Unfair Competition Law claims against insurers, as well as Rochow v. Life Insurance Company of North America, 737 F.3d 415 (6th Cir. 2013), in which the 6th U.S. Circuit Court of Appeals affirmed a large disgorgement of profits award in long-term disability case governed by the Employee Retirement Income Security Act of 1974 (ERISA). Also discussed are Barnes v. Western Heritage Insurance Co., 217 Cal. App. 4th 249 (2013), Nickerson v. Stonebridge Life Insurance Co., 219 Cal. App. 4th 188 (2013), Aguilar v. Gostischef, 220 Cal. App. 4th 475 (2013) and American Safety Indemnity Co. v. Admiral Insurance Co., 220 Cal. App. 4th 1 (2013). The article is posted here with the permission of the Daily Journal.
McKennon Law Group PC’s founding partner, Robert J. McKennon, published an article entitled “Clearing Up Murky Waters: Insurer’s Duty to Settle” in the Los Angeles Daily Journal on October 29, 2013, discussing the very important California Court of Appeal ruling in Reid v. Mercury Insurance Co., 2013 DJDAR 13436 (October 7, 2013). This decision clarified an insurer’s duty to settle claims against their insureds.
In California, courts have long held that where a policy provision is ambiguous because it is susceptible to multiple interpretations, the reasonable expectation of the covered party governs. But which parties’ objectively reasonable expectations should govern where there are both a named insured and an additional named insured claiming coverage? In its significant decision in Transport Insurance Company v. Superior Court of Los Angeles County, __ Cal. App. 4th __, 2014 Cal. App. LEXIS 28 (Jan. 13, 2014), the Court of Appeal of California held that it is the objectively reasonable expectation of each party seeking coverage that is applied in determining the meaning of language within an insurance contract as it applies to that party, even where it is an additional insured who is not a party to the contact.
In Transport, Vulcan Materials Company was issued a commercial excess and umbrella liability insurance policy by Transport Insurance Company (“Transports Policy”). A provision of the Transport Policy named R.R. Street & Co. as an additional insured with respect to the distribution or sale of certain industrial products. The Transport Policy provided that Transport would have a duty to defend any covered claim if it was not covered by the “underlying insurance” or if the “underlying insurance” were exhausted. The Transport Policy’s schedule of underlying insurance policies identified nine contracts.
Claims were brought against both Vulcan and R.R. Street in several underlying pollution and environmental contamination actions. National Union Insurance Company defended R.R. Street in these actions under a general liability insurance policy. In Legacy Vulcan Corp. v. Superior Court, 185 Cal. App. 4th 577 (2010), a prior coverage litigation before a different court of appeal, Transport brought a declaratory relief action concerning its duty to defend Vulcan under the Transport Policy. A key issue before the court concerned the meaning of the phrase “underlying insurance” and whether it included only the scheduled insurance contracts in the Transport Policy or all primary insurance contracts in effect during the continued loss period. Vulcan argued that the term should only encompass the insurance contracts identified in the Transport Policy in order to maximize the scope of Transport’s potential duty to defend. The court of appeal in the case held that the term “underlying insurance” in the policy provision was ambiguous and that absent, any conflicting extrinsic evidence, the ambiguity should be reasonable based on the reasonable expectations of the named insured- Vulcan. The trial court held in Vulcan’s favor in interpreting “underlying insurance” to include only the policies identified in the Transport Policy.
Subsequently, in Transport, an action was brought by Transport against R.R. Street, and its general liability insurer National Union, seeking a declaration that it did not have a duty to defend R.R. Street as an additional insured in the underlying claims against R.R. Street and Vulcan. R.R. Street then brought a motion for summary adjudication arguing that Transport was collaterally estopped by the decision in Legacy Vulcan from arguing that “underlying insurance” meant anything other than the policies identified in the Transport Policy and as such, Transport had a primary defense obligation to R.R. Street because it was not an insured under any of those policies. Thus, R.R. Street argued that the umbrella portion of the Transport Policy provided primary coverage for Street for the underlying actions and required Transport to provide a defense.
The trial court granted R.R. Street’s motion on the basis of collateral estoppel. The Court of Appeal disagreed. Based on the assumption that the term “underlying insurance” is ambiguous as to R.R. Street, the court found that it is the objectively reasonable expectation of the party claiming coverage, in this case R.R. Street, that must be applied in determining the meaning of ambiguous insurance provision. The court reasoned that this is true even if the party claiming coverage is, like R.R. Street, not a party to the insurance contract because “the intent of the named insured in requesting the added coverage is directly dependent on the bargain that the additional named insured made with the named insured.” In this case, the court asserted, R.R. Street’s intention may well differ from those of Vulcan because R.R. Street arguably would not expect coverage under the Transport Policy to take precedent over its own commercial liability policies. The court found that, because the Legacy Vulcan case did not address R.R. Street’s objectively reasonable expectations, the trial court was not bound by Legacy Vulcan’s findings based on the named insured’s reasonable expectations. As such, the Court of Appeal directed the trial court to vacate its order granting R.R. Street’s motion for summary adjudication and enter a new order denying the motion.
This decision is significant in that it clearly establishes that it is not only the reasonable expectations and intentions of the named insured that are relevant in interpreting ambiguous language and provisions in an insurance policy. Where additional insureds are involved, even where they are not parties to the insurance contract, courts in California will analyze ambiguous policy language in light of the reasonable expectations of the party actually claiming coverage.
Robert J. McKennon has been named as a 2014 Southern California Super Lawyer as one of California’s top insurance litigation attorneys. Less than 5% of attorneys nationwide are awarded this status. Mr. McKennon also received this Southern California Super Lawyer designation in 2011, 2012, and 2013.
