Articles Archives - McKennon Law Group

Claims made for short term disability and for long term disability benefits are frequently denied by ERISA plan benefits administrators. Congress enacted ERISA to provide a level of minimum standards for most voluntarily established retirement, disability and health plans in private industry to provide protection for individuals in these plans. To help achieve that goal, ERISA provides claimants with rights and protections, including the right to timely appeal an adverse benefits decision, such as an improper denial of benefits, and it imposes procedural requirements on ERISA plan administrators to ensure that claimants are given the opportunity to obtain the benefits that were promised and for which they had paid.

If your disability insurance coverage is not subject to ERISA, perhaps because you work for an employer in the public sector or you purchased individual disability coverage on your own and not through your employer, the basic steps to prepare your appeal are similar. The insurance company has a duty to communicate with you in good faith and provide you with all relevant information regarding its denial of the claim, and it can be sued for “bad faith” if it fails to comply with its obligations.

You want to know what you can do to assure that your claim is administered fairly and, hopefully, approved. There are a few key things that disability claimants must do to give themselves the greatest chance of success in getting their claims approved after an initial denial, but the most important thing, short of hiring experienced ERISA disability attorneys and aggressive disability insurance bad faith attorneys, is to make sure that you provide the plan administrator with as much evidence as you can of your disability so that this information will be included in your administrative record. This is especially critical in ERISA cases because the determinations in them often rest solely on the contents of the plan administrator’s administrative record when your case is litigated in federal court.

Below is a list of things that should generally be done by a disability claimant who has been wrongfully denied ERISA disability benefits:

Request a copy of the administrative record
Obtain a copy of the governing ERISA plan documents, if applicable, and the disability insurance policy
Carefully review the denial letter
Outline the bases for the improper denial of benefits
Martial evidence that supports your claim, making sure to address ALL of the stated bases for the denial

Send a letter to the plan administrator and insurer requesting a complete copy of the administrative record and the claim file

ERISA claimants who are denied benefits are entitled to receive a copy of the administrative record, and the plan administrator is generally required to provide it to them within 30 days of receipt. If the plan administrator fails to respond within that timeframe, it has violated the ERISA regulations and may be subject to statutory penalties.

In cases that are not subject to ERISA, disability insurers will sometimes provide you with a copy of your claim file. However, most insurers will not provide you with a copy of the claims file because they are not required to do so under the law. If your insurer refuses to produce the claims file to you for your appeal, you will have to do your best to challenge the appeal without the claim file. It is especially important to hire competent ERISA disability attorneys when you want to prosecute an appeal under these circumstances.

Review the claims file and administrative record carefully, focusing on the reasons the plan administrator used to deny your claim and take appropriate action

A plan administrator is required to state all of the reasons it denied your claim. The denial letter and the administrative record will serve as a roadmap for the evidence you need to successfully appeal your claim.

For example, if the denial letter indicates that the plan administrator was unable to obtain medical records that are important to your disability claim, you will need to follow up and make sure that those records are included with your appeal. Often the denial letter will state that the plan administrator’s medical consultants had attempted to contact your treating physicians, without success. In that case, following up with a statement from your treating physician may serve to underscore your eligibility for benefits and discredit the broad and self-serving statements by these paid medical reviewers in the administrative record and in the denial letter. Insurers normally use medical consultants, often referred to as “paper reviewers,” to review your medical records and render an opinion as to your medical conditions and your restrictions and limitations. These paper reviewers are typically “hired guns” who know what their hiring insurers want to hear. You should focus your attack on their medical review, attempting to undermine their opinions as best as you can.

Prepare your own summary of your actual job duties

The denial letter is required by law to indicate why the disability plan administrator believes you are not entitled to benefits. Sometimes incorrect denials are made because the plan administrator is not considering an accurate description of the requirements of your particular job. If so, it is necessary to correct that misunderstanding. You may also be able to provide additional support for your description of your own occupation from your employer or co-workers. If necessary, you could ask them to explain why your particular disability prevents you from doing your job and to confirm that your description of the job requirements is more detailed and accurate than the information the plan administrator relied upon to deny your claim.

Write a detailed description of, and get your doctors to certify, how your disabling condition or conditions interfere with your everyday life and prevent you from performing your own occupation or any occupation

Insurance companies are required to review and evaluate personal statements from disabled individuals and others who have perceived the impact of the disabling condition. It is important for you to write a detailed statement that helps fill in the blanks in the medical records. Medical records of your treating providers will usually not contain the level of detail that you can provide to support your claim, in part, because your treating providers are focusing on the treatment, and not on the disability. Letters from your treating providers can be very powerful evidence of your disability if you are able to get them to draft them to address the mistaken conclusions of the medical professionals who were hired by the insurance company to review your medical records. Your employer, friends, and coworkers may also be able to provide letters that provide the insurance company with facts to support your claim.

Draft a detailed letter that addresses the reasons the insurance company denied your disability claim and include all of the additional medical records and supporting statements you have obtained with it

It is important to present your disability claim thoroughly and accurately and to focus on the stated reasons for the denial. Additional medical records and certifications from your doctors or other treating professionals should be attached as exhibits to your letter. It is also extremely important that you submit your appeal letter before the deadline. The denial letter should contain this information. It is also very important to request an extension of time to submit your appeal letter if you need one.

In summary, there is a lot of work involved in preparing an appeal letter that maximizes your chances of winning the appeal. This article has only provided a rough outline of the things that can or should be done in many cases to prepare a winning appeal. Obviously, every disability claim is different, and the appeal letters will differ based on the specific reasons for the denial and the evidence. Because of the complexity of the task, many disability claimants choose to hire an experienced ERISA or bad faith insurance disability attorney to help them navigate the appeal process and to prepare their appeal letters. McKennon Law Group PC’s practice focuses on disability insurance claims and has substantial experience dealing with disability claims against most, if not all, major disability insurers. If you have any questions regarding your recently denied insurance claim, you can contact us to arrange for a free consultation.

According to the California Department of Insurance, most Californians cannot afford nursing home care – at an average cost of $6,000 per month – and are worried about the cost of growing older. Purchasing a long-term care insurance policy is one solution to this dilemma facing an aging California population. Long-term care insurance can be invaluable to elderly persons who can no longer care for themselves. These insurance policies typically cover nursing home costs and in-home care at your own residence if you are unable to care for yourself. But even if you are one of the lucky few that has LTC insurance, unfortunately, we regularly see long-term care insurers that do not honor their policy obligations.

The California legislature recently created a Long-Term Care Insurance Task Force within the Department of Insurance. California Insurance Commissioner Ricardo Lara just appointed six members to the Task Force with preeminent credentials. The Task Force will explore how to design a statewide affordable long-term care insurance program including whether an increase in payroll taxes might allow for the program to be publicly subsidized. An article on the Task Force is copied below. You can learn more about the Task Force at http://www.insurance.ca.gov/0500-about-us/03-appointments/ltcitf.cfm#about.

Hopefully, the Task Force will result in long-term care insurers honoring their contract obligations more frequently. That is doubtful in our opinion. That is not the goal of the Task Force. Moreover, insurers are in the business of making money. To do that successfully, an insurer must take your premiums and pay out as little in claims as possible. In our experience, Department of Insurance actions usually do not change an insurer’s conduct in a particular claim.

So, what should you do if your long-term care insurer wrongfully denies your claim? Relying on this new Task Force will not change your claim denial, and the Task Force is not even scheduled to create a potentially publicly subsidized long-term care insurance program for several years. You should hire an experienced California insurance bad faith or ERISA lawyer to represent you. If your claim for long-term care, long-term disability, life, accidental death, retirement or health benefits has been denied, you can call (949) 387-9595 for a free consultation with the attorneys of the McKennon Law Group PC, several of whom previously represented insurance companies and are exceptionally experienced in handling both ERISA insurance claims and non-ERISA California insurance bad faith claims.

Commissioner Lara Appoints Members to the California Long Term Care Insurance Task Force

SACRAMENTO, Calif. — Insurance Commissioner Ricardo Lara today announced his six appointments to the new Long Term Care Insurance Task Force, established within the California Department of Insurance by legislation that he strongly supported to help address the long-term care services and insurance needs of older Californians.

“Our new Long Term Care Insurance Task Force will explore greater options for Californians to help them age with dignity and security,” said Commissioner Lara. “With their deep experience in insurance, culturally competent care and services, and the health needs of older Californians, these Task Force members are ready for the challenge of envisioning a statewide insurance program that is sustainable and meets the needs of our growing diverse population. The health disparities exposed by the current pandemic on our aging population and the services and supports they will need in coming years make this Task Force even more critical today.”

Created by the legislative passage and Governor Gavin Newsom’s signing of AB 567 (Calderon, Chapter 746, Statutes of 2019), the Task Force will, under Commissioner Lara’s leadership, explore how a statewide long-term care insurance program could be designed and implemented to expand the options for people who are interested in insuring themselves should they encounter functional or cognitive disability that requires long-term care, services, and supports. The 15-member Task Force includes the Insurance Commissioner, who will serve as its Chair, as well as the Director of the California Department of Health Care Services (DHCS) or his designee, the Director of the California Department of Aging or her designee, six individuals appointed by the Commissioner, four individuals appointed by the Governor, one appointment made by the Speaker of the Assembly, and one appointment made by the Senate Committee on Rules.

“The lack of affordable long-term care is a serious threat to the well-being of many Californians, and yet another symptom of the systemic inequities in our health and social support systems,” said DHCS Director Will Lightbourne. “I’m pleased to join this task force and work on solutions that will increase access to long-term care and help provide healthy and dignified lives for our aging populations.”

“Affording the care we need as we age, so we can live where we choose in the community, is a top priority for the thousands of Californians we heard from in developing the Governor’s Master Plan for Aging, released in January,” said California Department of Aging Director Kim McCoy Wade. “Innovative public private leadership and partnership, such as this new Task Force provides, are essential to developing effective and equitable solutions. I’m eager to work with Commissioner Lara and members of the Task Force to move this important work forward.”

Over the next two years, the Task Force will meet to discuss establishing a statewide long-term care insurance program and prepare a feasibility report for the Commissioner, the Governor, and the Legislature by January 1, 2023. The recommendations made by the Task Force in the feasibility report will then be analyzed in an actuarial report to ensure an adequate benefit within a solvent program which, if approved by the Task Force, will be submitted to the Legislature by January 1, 2024.

The first meeting of the inaugural Task Force is expected in early spring 2021. More details are available at http://www.insurance.ca.gov/0500-about-us/03-appointments/ltcitf.cfm.

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Media Notes:

Newly appointed members include:

Dr. Lucy Andrews, is Director of Nursing and CEO for At Your Service Nursing and Home Care. Dr. Andrews presently serves as Board Chair for the California Association for Health Services at Home (CAHSAH) and is the former Vice Chair of the National Association for Home Care and Hospice in Washington, DC. She is also a recipient of the Lois Lillick Award, which honors advocacy and expertise in the home care industry. Dr. Andrews joins the Task Force as a representative of hospice and palliative care providers.

Grace Cheng Braun, MSPH is President and CEO of WISE & Healthy Aging, which administers the City & County of Los Angeles’ Long-Term Care Ombudsman Program (the largest Ombudsman program in the state, and second in the nation) and Elder Abuse Prevention Services. The community-based, nonprofit social services organization also operates two adult day care centers and other care coordination and enrichment programming for older adults and caregivers of the elderly in Los Angeles. She is also a member of the Steering Committee of both the Los Angeles Alliance for Community Health and Aging (LAACHA) and the Westside Older Adult Services Network, which promotes health and service equity in the Los Angeles community. Cheng Braun joins the Task Force as a representative of adult day services providers.

Michael Mejia is Senior Vice President, Operations for Atria Senior Living where he leads Atria’s operations in the Western U.S. and currently oversees operations at 43 Atria communities in California, including 33 with memory care neighborhoods. He joined Atria in 1998 and since then has overseen operations in Texas and Kansas as Regional Vice President and served as Senior Vice President previously in the Central, Southeast, and Southwest divisions. He is also a member of the California Assisted Living Association (CALA) Board of Directors. Mejia joins the Task Force as a representative of residential care facilities for the elderly.

Doug Moore is the Executive Director of the United Domestic Workers of America (UDW/AFSCME Local 3930) which represents more than 140,000 In-Home Supportive Services (IHSS) providers and family child care providers across California. Moore also serves as International Vice President of AFSCME. He was appointed by the State Assembly to the California Task Force on Family Caregiving in 2017. In 2019, he was appointed to the Governor’s Task Force on Alzheimer’s Prevention and Preparedness. Moore joins the Task Force as a representative of independent providers of in-home personal care services.

Dr. Karl Steinberg, M.D., C.M.D., has been a skilled nursing facility and hospice medical director in San Diego County for over 25 years and cares for patients in nursing homes, assisted living facilities, and small board-and-care facilities. He is President-Elect of AMDA – The Society for Post-Acute and Long-Term Care Medicine, a national organization representing physicians and medical directors working in various post-acute and long-term care settings, and is a delegate to the American Medical Association and the California Medical Association. Dr. Steinberg joins the Task Force as a representative of long-term care health professionals.

Tiffany Whiten is Senior Government Advocate at SEIU California State Council where she oversees and coordinates state legislative and administrative policy development on many SEIU-California policy priorities, including assisted living, IHSS, nursing homes, adult day care, developmentally disabled, and other long-term care sectors as well as racial and social justice issues. She not only represents and advocates on behalf of long-term care providers, workers, and consumers, but is also a family caregiver to her mother with Alzheimer’s. Whiten’s previous roles include working as an Associate with Niemela Pappas and Associates, a Consultant for Senator Mark DeSaulnier, a Legislative Aide to Senate Majority Leader Ellen Corbett, and a Legislative Aide to Senate President pro Tempore Don Perata. Whiten joins the Task Force as a representative of family caregivers.

In the March 6, 2020 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon. The article addresses a recent case by the Supreme Court of the United States, Intel Corporation Investment Policy Committee v. Sulyma, which upheld the Ninth Circuit’s holding that generic disclosures by plan administrators do not trigger the three year statute of limitations for breach of fiduciary duty claims under ERISA. Given the Supreme Court’s emphasis on what the individual plan beneficiary consciously knows and the increasing importance of breach of fiduciary duty claims under ERISA, this will likely help a variety of plan beneficiaries by guaranteeing that their otherwise meritorious claims are not barred by a statute of limitations triggered by stray statements in the volumes of documents ERISA plans send to their beneficiaries every year.

Victory for Plan Beneficiaries in US Supreme Court Ruling

The Supreme Court’s decision in a case last week will have wide-reaching implications. Now, plan administrators can no longer hide behind the volumes of unintelligible disclosures they make every year. Employers and plan fiduciaries may now be exposed to litigation challenging plan actions for a much longer time than they had anticipated.

By Robert J. McKennon

Just a decade ago, breach-of-fiduciary-duty claims under the Employee Retirement Income Security Act were not common. That changed in 2011 when the U.S. Supreme Court broadened the scope of equitable relief available under ERISA utilizing breach of fiduciary claims in its landmark decision in Cigna Corp. v. Amara, 563 U.S. 421, 441 (2011). The Supreme Court recognized that equitable relief under ERISA could take a variety of forms, including, equitable estoppel, waiver and monetary damages in the form of equitable surcharge. Before, even if there had been a breach, the available remedies were often meaningless. Now, courts have the power to order the offending administrator to provide meaningful redress. A claim may arise from a plan’s refusal to honor a life insurance policy after it has received numerous premiums and made repeated statements that someone was covered under the policy. And, a plan may be held liable for making misstatements about the value of someone’s pension benefits. In a post-Amara world, breach of fiduciary duty claims under ERISA have become increasingly important.

Breach of fiduciary duty claims under ERISA are subject to a somewhat complicated statute of limitations. Under 29 U.S.C. Section 1113, there are three different potential deadlines by which a suit must be brought. First, “under §1113(1), suit must be filed within six years of the date of the last action which constituted a part of the breach or violation or, in cases of breach by omission, the latest date on which the fiduciary could have cured the breach or violation.” Second, “suit must be filed within three years of the earliest date on which the plaintiff had actual knowledge of the breach or violation.” Id. (emphasis added). Finally, in cases of fraud or concealment, suit must be brought within six years of the date of discovery. See id.

Given the importance of these claims in a post-Amara world, the significance of the Supreme Court’s recent decision in Intel Corporation Investment Policy Committee v. Sulyma, 2020 DJDAR (Feb. 26, 2020), becomes clear. In Sulyma, the Supreme Court handed down a commonsense opinion that will help employees secure their pension and employee benefits. In Sulyma, the court clarified that disclosure of information by a plan administrator in a generic mailing does not necessarily mean that a beneficiary possesses the “actual knowledge” required to trigger the three-year statute of limitations on a breach of fiduciary duty claim arising under ERISA.

Like many employees, Christopher Sulyma did not pay much attention to the lengthy disclosures and prospectuses associated with his employer’s 401(k) plan. Sulyma worked for Intel Corporation between 2010 and 2012, during which time he was automatically enrolled in Intel’s Target Date 2045 Fund. The fund was managed by an investment committee appointed by Intel’s board of directors. Intel provided Sulyma with various disclosures about the fund’s investments, which were also available on two websites. These documents revealed that the fund had made allocations to alternative investments such as hedge funds and private equity funds, which charged higher-than-average fees and underperformed in the market. Although Sulyma accessed some of the disclosures during his employment, he testified that he did not know that Intel had allocated the fund’s portfolio in alternative investments, or that this was the reason for the fund’s poor performance.

In 2015, Sulyma eventually learned of the fund’s poor performance and brought claims against Intel’s oversight committees under section 1104 of ERISA on the basis that Intel had made imprudent investments, failed to disclose those investments, failed to monitor the performance of those investments and failed to remedy other defendants’ ERISA violations despite knowing about them. What followed was a battle over whether Sulyma’s claims were barred by ERISA’s three-year statute of limitations.

Intel moved to dismiss Sulyma’s complaint, arguing in the district court that ERISA’s three-year statute of limitations barred Sulyma’s claims. Sulyma filed his action against Intel on October 29, 2015, and Intel claimed Sulyma had actual knowledge of the alleged breach before October 2012 because he had access to the fund documents as early as 2010. The district court sided with Intel and imputed the knowledge of the fund’s portfolio allocation to Sulyma.

On appeal, the 9th U.S. Circuit Court of Appeals reversed the district court’s granting of summary judgment. Neither “knowledge” nor “actual knowledge” is defined in ERISA. The 9th Circuit emphasized the plain meaning of the phrase. It concluded that actual knowledge refers to what the person consciously knows. The 9th Circuit found that the district court had erred when it inferred that Sulyma had actual knowledge merely because he had received fund documents that disclosed Intel’s investment strategy.

The Supreme Court affirmed the 9th Circuit’s ruling. The Supreme Court explained that “Although ERISA does not define the phrase ‘actual knowledge,’ its meaning is plain.” “[T]o have ‘actual knowledge’ of a piece of information, one must in fact be aware of it.” The court examined a variety of sources to confirm this meaning, but, as the court explained, “Dictionaries are hardly necessary to confirm the point, but they do.” Of note, the term “actual” separates the type of knowledge required by Section 1113 from the legal concept of constructive knowledge. Constructive knowledge is the kind in which the law imputes knowledge “to a person who fails to learn something that a reasonably diligent person would have learned.” By contrast, actual knowledge means that the person, at some point, consciously knew the fact in question. Here, Congress clearly intended to make clear that the person must be aware of the fact in question in order for the three-year statute of limitations to begin. Mere inclusion of the fact amid the text in volumes of documents regularly sent to plan participants is insufficient to impart actual knowledge.

The Supreme Court’s decision was not entirely bad for Intel or employers. The court explained that the “usual ways” of proving actual knowledge remain available to plan administrators. “Inferences from circumstantial evidence” can still be used by plan administrators to establish when the statute of limitations should begin to run. Furthermore, a participant cannot engage in “willful blindness,” the act of refusing to inform oneself of a piece of information. However, constructive knowledge cannot trigger the three-year statute of limitations.

The Supreme Court’s decision in Sulyma will have wide-reaching implications. Now, plan administrators can no longer hide behind the volumes of unintelligible disclosures they make every year. Employers and plan fiduciaries may now be exposed to litigation challenging plan actions for a much longer time than they had anticipated. Given the significant increase in ERISA breach of fiduciary duty claims and litigation, employees who seek to recover promised employee benefits will greatly benefit from this ruling.

Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith and ERISA litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at www.californiainsurancelitigation.com.

In the November 19, 2019 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon. The article addresses a previous 2009 Daily Journal investigation that revealed insurers’ regular practice of improperly denying claims. Since 2009, recent regulations promulgated by the Department of Labor and recent court opinions have helped even the playing field for claimants. A full and fair review of a claim for benefits is required by statute and regulation, and helps prevent insurers from illicit claim denials as detailed in the Daily Journal investigation. However, it remains to be seen whether these recent regulations and court decisions will ultimately have the effect of evening the power imbalance insurers wield against vulnerable disability claimants.

Leveling the Field Between Insurers and Disability Claimants

Every year, millions of Americans seek and obtain individual or group disability insurance, hoping to buy a safety net in case of an unexpected disability.

By Robert McKennon

Every year, millions of Americans seek and obtain individual or group disability insurance, hoping to buy a safety net in case of an unexpected disability. If they become sick or are injured and can no longer work, these disability policies promise to pay disability benefits to cover part of their salaries they may lose when they become disabled. Unfortunately, disability insurers often do not honor their promises. In a two-part series in 2009, the Daily Journal reviewed 576 lawsuits filed in federal court in California against seven of the largest disability insurers in the country. (“Ill Workers Denied Benefits Face Fight Alone,” Oct. 20, 2009, and “Doctors Paid To Aid In Disability Denials,” Oct. 21, 2009.) This investigation found that “insurance companies regularly deny, or terminate, benefits to people …. The companies hire contract doctors who routinely reject the opinion of treating physicians without ever having seen the patients.” The Daily Journal also found that some insurers provide incentives to their employees to deny and terminate disability insurance claims, tying performance evaluations to meeting money-saving goals.

When group disability insurance policies/plans are involved, they are governed by the federal Employee Retirement Income and Security Act of 1974. Under ERISA, a policyholder’s recourse against an insurer is constrained to filing a lawsuit in federal court, in which his or her damages are limited. Unlike state laws such as California’s that allows a policyholder to sue for contract and tort damages, including punitive damages, ERISA limits recovery to plan benefits, interest on the delay in paying these benefits, and attorney fees. And, even attorney fees can be avoided. This can be done if the insurer initially denies the disability claim, waits to see if the policyholder files a mandatory administrative appeal, and if he does, the insurer can pay the claim and avoid any liability for attorney fees. Under ERISA, a policyholder cannot recover attorney fees for work done in the administrative appeals process. If the policyholder does not appeal the wrongful denial, the insurer profits. This results in a system that often does not penalize insurers that deny much needed benefits of disabled workers. Despite the internal conflict of interest insurers have, where they tie denial of disability claims with profitability, insurers often escape any negative ramifications of their illicit claim denials.

Insurers even go so far as to reward employees who deny claims. The Daily Journal’s investigation found that one employee of The Hartford Financial Services Group’s claims department received high praise for work that saved over $4 million. This same employee was chastised for continuing the claim of a 35-year-old worker, rather than speculating the worker could have worked a sedentary desk job. Sun Life Financial sent a memorandum telling claims handlers to “kick it up a notch” because the insurer was behind on its goal to “achieve the planned terminations/denials of 271 by the end of the month.” The Daily Journal found this memo offered a $250 gift certificate lottery to meet the insurer’s bottom line financial results. In nearly half the cases reviewed by the Daily Journal that reached court, judges found that the insurance companies had no appropriate basis to deny benefits.

To assist in the wrongful denial of these claims, insurers often rely upon doctors they hire frequently to write reports on claims they do not want to pay. Insurers will send files to so-called “independent” medical reviewers. The doctors conduct “paper reviews” and render conclusory opinions without seeing or even talking the claimant or her doctors. The reviewers may receive hundreds of assignments per year in repeat business from these insurers and may be their only source of income. Shockingly, these reviewing physicians do not have to be part of an independent panel overseen by regulators. The firms that coordinate these reviews collect millions of dollars a year, sometimes from a single insurer, and aggressively market their services to insurers. The Daily Journal found that these firms coach their doctors to never use the word “disabled” in reports and to use strict medical definitions they provide to determine a person’s ability of work. In many instances, these reviewers are not provided all of the claimant’s medical records and are not even qualified to render opinions for the specialty needed.

The Daily Journal even found one doctor who specialized in reviewing disability cases, Suresh Mahawar, M.D., who “nearly never” disagreed with the insurer. In the 202 cases he was assigned to review for The Hartford Financial Services Group between 2005 and 2007, court records show he only found nine people who were so sick or injured they could not return to work. Dr. Mahawar opined that anybody can work a desk job regardless of reported pain and physical limitations. Another disability case reviewer, Amy Hopkins, M.D., was paid $493,832 for file reviews for just one firm from 2001 to 2004. In 2004, a federal judge in Pennsylvania described her work as a “pick and choose approach” that ignored evidence and “completely mischaracterized” a treating physician’s notes in order to deny a claim.

Regulatory oversight to protect policyholders is weak. While insurers are required to notify policyholders that the California Department of Insurance is available to assist them with claims they feel have been wrongfully denied or rejected, in practice, the department is ineffectual in successfully resolving these complaints. Typically, complaints are ignored or, if the department takes any action, they conduct a routine inquiry with the insurer and, once the insurer responds, they do not pursue the matter, requesting that the policyholder hire an attorney who specializes in insurance denials to pursue the disability insurance benefits. The Daily Journal observed that, “No regulatory agency has taken responsibility for these cases.” “The result is a rare and gaping absence of regulation in a private insurance market that insures nearly a third of the nation’s workforce,” the Daily Journal wrote.

However, recent regulations promulgated by the Department of Labor and recent court opinions may help mend this troubled history. Federal courts have pushed back on insurers who wrongfully deny claims, and have found that a full and fair review of a claim for benefits is required by statute and regulation. The 9th U.S. Circuit Court of Appeals in Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 669 (9th Cir. 2011), found that Life Insurance Company of North America unreasonably denied the plaintiff’s claim for disability benefits. The 9th Circuit determined that the insurer failed to properly conduct a full and fair review of the claim for benefits, “violated its procedural obligations and violated its substantive obligation by abusing its discretion and judging the disability claim arbitrarily and capriciously.” As explained by the Salomaa court, in order to “conform to the claim procedure required by statute and regulation,” Cigna was required to “explain, upon denial, any additional ‘information needed’” to support a claim for benefits. The Salomaa court concluded the insurer did not meet the requirement of meaningful dialogue under this standard. Id. at 680.

Insurers are required to give claimants a full and fair review by explaining specifically what additional information is needed to qualify for disability benefits. As such, insurers are prevented from playing “hide the ball” with claimants by failing to advise them of documents or information needed to obtain approval of a claim, and by failing to send forms to claimants or their doctors that would have elicited the information needed. Boyd v. Aetna Life Ins. Co., 438 F.Supp.2d 1134, 1153–54 (C.D. Cal. 2006); see also Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F.3d 863, 870 (9th Cir. 2008); 29 CFR Section 2560.503–1(g).

Furthermore, a full and fair review takes on new significance under two new ERISA regulations, 29 C.F.R. Section 2560.503-1(h)(4)(i) and (ii). They require that if there is “any new or additional evidence considered” or if there is a “new or additional rationale” upon which the insurer intends to rely to deny the claim, the insurer must point out and provide this evidence or rationale to claimants, and they must have an opportunity to respond to the “new or additional evidence considered” or “new or additional rationale” before there is an adverse determination (i.e., a denial).

If, after reviewing the available evidence, an insurer still maintains that a claimant has not presented sufficient medical support for a claim, the insurer must provide a specific list of any tests and/or examination results that must be given and allow claimants an opportunity to meet that request. It is no longer sufficient for insurers to place the burden on claimants to guess which medical records will be found necessary, when they need to be submitted, and why they are necessary. This is particularly the case given the Department of Labor’s recent regulations codified at 29 C.F.R. Section 2560.503-1. The regulations clearly aim to minimize conflicts of interest and provide claimants with additional information, which the Department of Labor indicated was “necessary to ensure that disability claimants receive a full and fair review of their claims, as required by ERISA section 503.” It remains to be seen whether these recent regulations and court decisions will have the effect of evening the power imbalance insurers wield against vulnerable disability claimants.

Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith, ERISA and unfair business practices litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at www.californiainsurancelitigation.com.

In the August 28, 2019 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon. 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 opinion 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.

Ruling Could Send Shock Waves Through ERISA Claims Industry

A 9^th Circuit ruling will have the effect of limiting claimants’ much-needed access to the federal courts and class actions.

By Robert J. McKennon

The Employee Retirement Income Security Act of 1974 was the largest statute ever passed by Congress at the time it was enacted. ERISA established pension and employee benefit plan standards for private employers. As the number of retirees and employees covered by ERISA retirement and benefit plans continued to grow, many found that their plan fiduciaries, including former employers and their insurers, were not meeting their obligations with respect to their retirement and other employee benefits. Thus, the last two decades have seen a significant rise in class action litigation involving fiduciaries of 401(k) and pension plans under various legal theories. These class actions typically allege some type of wrongful conduct by plan fiduciaries that resulted in the reduction of plan assets, usually because of excessive fees charged and/or some type of imprudent investment activity.

These actions have been almost exclusively litigated in the federal courts. This is because in the 9th Circuit, plan participants and their beneficiaries were protected from being forced into arbitrating these claims by Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), in which the 9th U.S. Circuit Court of Appeals held that ERISA claims were not arbitrable. The Amaro court based its decision in large part on the premise that arbitrators “lack the competence of courts to interpret and apply statutes as Congress intended.” Amaro was widely seen as rejecting binding arbitration in the ERISA context.

Since the Amaro decision, the U.S. Supreme Court has pushed back on its past criticism of arbitration clauses. In AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 345 (2010), ideologically split justices ruled 5-to-4 that an arbitration provision in consumer contracts requiring individual arbitration and preventing class actions or class-wide arbitration was enforceable. The Supreme Court noted that Congress enacted the Federal Arbitration Act in response to widespread judicial hostility to arbitration and that the principal purpose of the FAA is to ensure that private agreements are enforced according to their terms. Id. at 339. In American Exp. Co. v. Italian Colors Restaurant, 570 U.S. 228, 238 n.5 (2013), the Supreme Court ruled that arbitrators are competent to interpret and apply federal statutes and dismissed the interest in ensuring the prosecution of low-value claims in favor of arbitration, permitting the waiver of the class action procedure.

In a momentous decision in Dorman v. Charles Schwab Corp., 2019 DJDAR 7932 (9th Cir. Aug. 20, 2019), the 9th Circuit overruled Amaro and enforced an arbitration clause in a pension plan on the basis that Supreme Court precedent in cases such as American Exp. Co. had impliedly overruled its ruling in Amaro.

Michael Dorman was employed at Schwab from February 2009 to October 2015. Dorman joined the Schwab Retirement Savings and Investment Plan, and voluntarily contributed to his retirement account through payroll deductions until he left Schwab. In December 2014, the plan was amended to add an arbitration provision, which states that “[a]ny claim, dispute or breach arising out of or in any way related to the Plan shall be settled by binding arbitration.” The arbitration provision includes a waiver of class or collective action that requires individual arbitrations, even if, absent the waiver, Dorman could have represented the interests of other plan participants.

In 2017, Dorman filed a class action suit in district court alleging that the defendants violated ERISA and breached their fiduciary duties by including Schwab-affiliated investment funds in the plan, despite the funds’ poor performance, to generate fees for Schwab and its affiliates. In response to his complaint, the defendants moved to compel individual arbitration of the asserted claims pursuant to the arbitration provision in the plan. The district court denied Defendants’ motion.

The court in Dorman addressed these Supreme Court rulings and reasoned further that in Comer v. Micor, Inc., 436 F.3d 1098 (9th Cir. 2006), the 9th Circuit acknowledged in dicta that its past “expressed skepticism about the arbitrability of ERISA claims … seem[ed] to have been put to rest by the Supreme Court’s opinions.” The Dorman court further noted that in American Exp. Co., the Supreme Court expressed that arbitrators are competent to interpret and apply federal statutes and that its opinion in Amaro was thus no longer valid.

The 9th Circuit reasoned that while a three-judge panel may generally not overrule a prior decision of the court, if an intervening Supreme Court decision undermines an existing precedent of the 9th Circuit, the three-judge panel may then overrule prior circuit authority. The court found that the holding in American Exp. Co. that federal statutory claims are generally arbitrable and arbitrators can competently interpret and apply federal statutes constitutes intervening Supreme Court authority that is irreconcilable with Amaro. The court thus reversed and remanded the district court’s ruling. Id.

In an accompanying unpublished order, the same panel enforced the arbitration clause in the plan document, finding that Dorman was bound by the plan’s arbitration provision, that the dispute fell within the scope of the arbitration provision, and that the claims challenging the use of Schwab’s proprietary funds were subject to arbitration and had to be arbitrated on an individual rather than a class basis, with recovery limited to the individual plaintiff’s damages.

To be contrasted with Dorman is the 9th Circuit’s ruling in Munro v. University of Southern California, 896 F.3d 1088 (9th Cir. 2018), which recently addressed a situation where an employee sued his employer not on his own behalf, but on behalf of another entity for claims that the employee cannot bring in his individual capacity. In Munro, nine current and former employees of the University of Southern California brought suit against their employer for breach of fiduciary responsibility in the administration of two ERISA plans offered by the employer. The relief sought by the plaintiffs included the following: a determination as to the method of calculating losses, removal of breaching fiduciaries, a full accounting of plan losses, reformation of the plans and an order regarding appropriate future investments.

Since the plaintiffs all signed arbitration agreements as part of their employment contracts, USC filed a motion to compel arbitration. The district court denied USC’s motion and ruled that the arbitration agreements, which the employees entered into in their individual capacities, do not bind the plans because the plans did not themselves consent to arbitration of the claims. The 9th Circuit upheld the district court’s ruling, finding that the claims for breach of fiduciary duty fell outside the scope of the arbitration agreements. In reaching its decision, the court turned to the language of the arbitration agreements, which state that the parties agreed to arbitrate “all claims … that Employee may have against the University or any of its related entities … and all claims that the University may have against Employee.” The court noted that this language does not extend to claims that other entities have against the university.

The Munro court concluded that the ERISA claims for breach of fiduciary duty were not claims that the “Employee may have against the University or any of its related entities.” Rather, the employees brought the claims on behalf of the plans, and, since the plans never consented to arbitration of the claims, the arbitration provision did not apply in this instance. Specifically, the court noted that the ERISA plaintiffs did not seek relief for themselves, but rather sought recovery for injury done to the plans.

Unlike Munro, in Dorman, the arbitration provision was contained in the plan document itself and thus the plan is deemed to consent by virtue of the arbitration provision. Considering the expansive potential reading of the arbitration provision in Dorman and location in the plan document, a claim on behalf of the plan for breach of fiduciary duties under ERISA could reasonably be considered as falling under the purview of the clause.

Dorman has the potential to send shockwaves through ERISA claims industry and will have the effect of limiting claimants’ much-needed access to the federal courts and class actions. Dorman and the above-cited Supreme Court cases appear to stand for the proposition that many types of ERISA claims will be subject to arbitration if the plan documents are drafted properly. Expect that following the Dorman decision, arbitration and class action waiver clauses will become more prevalent in ERISA plans. Given the expansive reading of arbitration clauses by the Supreme Court and now the 9th Circuit, it is likely that more ERISA claims will be litigated on an individualized basis and will be litigated in arbitration proceedings. It remains to be seen whether employers and plans will benefit by this trend.

Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith, ERISA and unfair business practices litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at www.californiainsurancelitigation.com.

Life, health and disability insurers are always looking for ways to deny insurance claims. When they do so unreasonably, insured policyholders may be able to sue them for insurance bad faith under California law. Count on insurers to argue everything they can to defeat a bad-faith claim, including asserting the statute of limitations for bad-faith claims. Life, health and disability insurance plaintiff attorneys must remain current as to changes in the law so they can defeat these insurance company tactics. One notable question they must answer is this: Can a disability policy provision setting forth the timing of a lawsuit against the insurer “extend” California state tort law (e.g., statute of limitations to three years) from the statutory two-year limitations period? Recently, a United States District Court in San Francisco held that it could. That court denied an insurance company’s motion to dismiss, because the policy’s contractual language (that barred an action “more than three years after the time proof of claim is required”) could be one that a “reasonable layperson” interprets as meaning she had three years (rather than the statutory two-year period) to bring any action, including both contractual and tort claims, based upon an allegedly wrongful cancelation of the policy. Alberts v. Liberty Life Assurance Company of Boston, 65 F.Supp.3d 790, 795 (2014). Therefore, it is crucial to closely compare any policy language that varies from the statute of limitations, in order to successfully argue for a longer timeframe within which to bring such a California state action.

Plaintiff, Karen Alberts, was a police officer for the University of California when she suffered an injury to her right wrist during physical-training exercises in September 2009. After her injury, Alberts resumed work in a modified-duty capacity, but her condition worsened and, eventually, the UC police department could no longer accommodate her medically prescribed work restrictions. On March 19, 2010, Alberts stopped working for the police department. She was initially approved by Liberty Life Assurance Company of Boston (“Liberty”) for short-term-disability (“STD”) benefits from February 1 through July 31, 2011; she was subsequently extended coverage through February 28, 2012. Sometime between February 9 and February 22, 2012, Alberts received a letter from Liberty that stated that Liberty would be terminating her STD payments because it had determined that she did not qualify for continued benefits under the policy’s provision for long-term coverage.

Under the standard two-year statute of limitations period set forth in California Code of Civil Procedure Section 339(1) for tortious breach of the covenant of good faith and fair dealing (also known as a bad-faith claim), Liberty argued that Alberts’ claim was filed too late, by at least three days, on February 25, 2014. The District Court compared the policy language barring such an action (“more than three years after the time proof of claim is required”) to California Insurance Code Section 10350.11, which sets forth that disability policies must include the following (at a minimum): “No action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished.” That exact language in the Insurance Code has repeatedly been held to not displace the two-year statute of limitations for purposes of federal ERISA claims. Nonetheless, since this was a state claim (even though it was being tried in federal court) and did not use exactly the same language as Insurance Code Section 10350.11, the trier of fact could find that a “reasonable layperson” would assume that she had three years, rather than two, within which to file her lawsuit.

In the meantime, however, in non-ERISA state-law disability insurance claims (even in federal court), it is imperative that the contractual language in each disability policy be closely examined. Where the statutory two-year limitation period is an issue, does the policy language vary at all from California Insurance Code Section 10350.11: “No action shall be brought after the expiration of three years after the time written proof of loss is required to be furnished”? If it does, even by a few words, the plaintiff may be able to argue that a longer, three-year limitations period applies, for both contractual and tort claims.

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.

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