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Unlike a state law claim for benefits under an individual insurance policy, an ERISA claim generally limits recovery to benefits due under the plan: prejudgment interest, declaratory or equitable (non-monetary) relief and attorneys’ fees. Accordingly, looming attorneys’ fees serve as an important financial disincentive for an ERISA plan administrator’s misconduct. In today’s edition of the Los Angeles Daily Journal, Robert J. McKennon and Stephanie L. Talavera of the McKennon Law Group PC discuss the importance of ERISA attorneys’ fees and how a recent case positively impacts the ability to recover those fees. In a column entitled “Ruling Clears Up Attorney Fees in ERISA Cases,” we evaluate the effect of the new Ninth Circuit Court of Appeals case, Micha v. Sun Life Assurance of Canada, Inc., 2017 DJDAR 10411 (Nov.1, 2017) and explain how the decision provides ERISA plan participants, beneficiaries and fiduciaries with a solid foundation for recovery of certain attorneys’ fees in the future.
The Hartford Agrees to Purchase Aetna’s Group Disability Insurance and Group Life Insurance Business
In a deal between two of the country’s largest disability insurers, The Hartford agreed to purchase Aetna Life Insurance Company’s group life insurance and disability insurance business for $1.45 billion. After the purchase, which is expected to close before the end of 2017, The Hartford will be the second largest group life and disability insurer, with 20 million customers insured by the combined business. A vast majority of these customers’ claims will be governed by ERISA.
According to media reports, The Hartford’s purchase of Aetna’s group life and disability insurance was designed to strengthen the company’s business among mid-sized companies, and take advantage of Aetna’s superior technology infrastructure. Aetna, in turn, will focus on its race with rival health insurance companies like UnitedHealth Group, Cigna and Anthem.
The McKennon Law Group has successfully represented many clients with claims against both The Hartford and Aetna. If your group disability insurance claim or group life insurance claim was denied, please contact the McKennon Law Group at (949) 387-9595 for a free consultation.
Attorney Robert J. McKennon Educates Policyholders on ERISA and Disability Insurance Claims
When a disability insurance claim is denied, the process of challenging that wrongful denial can be daunting. At McKennon Law Group PC, we represent policyholders in their insurance disputes and help guide our clients through the complex insurance claims process. We pride ourselves on the relationships we build with our clients and work hard to ensure that our clients understand the status of their matter every step of the way.
As part of our firm’s dedication to serving insureds, Robert J. McKennon, the firm’s founder, answered some of the most frequently asked questions regarding disability insurance benefits and the Employee Retirement Income Security Act, or ERISA. In the Q&A, Mr. McKennon briefly explains the role of ERISA, the body of law that governs most employer-sponsored group benefit plans. He also briefly discusses insurance bad faith, which governs most individual disability insurance policies. Additionally, Mr. McKennon covers some common misconceptions regarding the disability insurance claims handling process, as well as the remedies available to an insured should they successfully overturn their wrongful denial.
At McKennon Law Group PC, we believe in establishing lasting relationships with our clients and providing the highest quality of legal services, with integrity. Part of that requires effective communication and taking the time to respond to your questions. If your claim for life, retirement, health, short-term disability or long-term disability 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 state law insurance bad faith claims.
This was issued as a press release and appeared in numerous legal and non-legal publications. To see if Mr. McKennon answered your questions, please review the press release in full, below.
Attorney Robert J. McKennon Educates Policyholders on ERISA and Disability Insurance Claims
Southern California insurance litigation attorney Robert J. McKennon, of McKennon Law Group PC, examines four common insurance law issues.
NEWPORT BEACH, Calif. (PRWEB) October 25, 2017
Robert J. McKennon, founder of McKennon Law Group PC, which represents policyholders in their insurance disputes with insurers, asks and answers the top four most frequently asked questions concerning insurance law.
No. 1: What is ERISA? The Employee Retirement Income Security Act of 1974, ERISA, governs most employer-sponsored group benefit plans, including plans that provide health insurance, disability insurance and life insurance to employees.
“ERISA protects employees and requires that plan and claim administrators adhere to strict standards and deadlines when resolving disputes,” said McKennon. “As such, litigation under ERISA is very different from other forms of litigation, even other insurance litigation.”
No. 2: How do I get my disability benefits claim paid? Most people think that simply providing the insurance company with their medical records will be enough to support a claim for disability benefits. “In a perfect world that would be the case, but insurance companies are not typically interested in making it easy for people to collect their benefits,” noted McKennon. “If your claim is denied, the best thing you can do is hire an attorney who has experience dealing with insurance companies, which will greatly increase your odds of getting your claim paid.”
No. 3: What are my remedies if I sue the insurance company over my disability, life or health insurance claim and win? The remedies available to someone insured under an individual disability insurance policy are very broad and under a breach of contract claim include past due benefits and all future benefits. Under a bad faith claim, damages include emotional distress damages, economic damages and other compensatory and consequential damages, punitive damages, attorneys’ fees and interest.
“If the policy is issued through an employer to provide coverage to eligible employees, the remedies are very different. These are referred to as ‘group’ policies,” added McKennon. “Most people who have life, health and disability insurance are covered under group policies. Because most group policies are governed by ERISA, the remedies available to insureds are much more limited. If an individual insured under an ERISA group policy prevails at trial, he or she is only entitled to past due benefits, interest and attorneys’ fees.”
No. 4: What is insurance bad faith? “If you purchased an individual life, health or disability insurance policy, ERISA will not apply to your claim,” stated McKennon. “Instead, separate principles of tort law govern your claim, which includes what is referred to as ‘insurance bad faith.’ Litigation of an insurance bad faith claim involves proving that the insurer denied a claim or other policy benefit unreasonably or without proper cause. If a claimant can prove that the insurer acted with fraud, oppression or malice, punitive damages may be awarded.”
About Robert J. McKennon, McKennon Law Group PC
Robert J. McKennon represents individuals and corporations in insurance litigation matters in state and federal court. He has an AV Preeminent rating from Martindale-Hubbell and a “Superb” Avvo rating. He has been awarded the Super Lawyer designation every year since 2011. Practice areas of McKennon Law Group PC include bad faith insurance, disability insurance, life insurance, ERISA/employee benefits, health insurance, long-term care, property and casualty insurance, directors and officers liability insurance, professional liability insurance, insurance agent and broker liability, business litigation and unfair competition and unfair business practices. For more information, please call (949) 387-9595, or visit https://mslawllp.com.
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Robert McKennon and Stephanie Talavera Publish Article in the Los Angeles Daily Journal: “An Agent of the Insurer.”
In the October 9, 2017 Los Angeles Daily Journal, Robert J. McKennon and Stephanie L. Talavera of the McKennon Law Group PC published a column entitled “An Agent of the Insurer,” covering a very important new Ninth Circuit Court of Appeals case, Salyers v. Metro. Life Ins. Co., 2017 DJDAR 9291 (Sept. 20, 2017). The article details the case’s key holdings, as it establishes federal ERISA common law rules that follow California’s employer-friendly rules. The decision provides a solid foundation for future ERISA plan participants and beneficiaries to vigorously attack ERISA coverage denials on theories of estoppel, waiver and breach of fiduciary duty.
Plan Administrators Cannot Violate their Fiduciary Duties by Failing to Provide Proper Notice of Policy Amendments; ERISA Plan Exclusions/Limits May Not be Enforceable
In King v. Blue Cross and Blue Shield of Illinois UPS, No. 15-55880 (Ninth Cir. Sep. 8, 2017), Linda King, the wife of a retired UPS employee, participated in a welfare retiree-benefit plan sponsored and administered by Blue Cross and Blue Shield of Illinois (“Blue Cross”). After suffering from an infection requiring immediate surgery and lengthy care, Mrs. King filed a claim under the plan for medical benefits. Blue Cross subsequently denied her claim for benefits claiming the plan had a $500,000 lifetime benefit maximum and would not cover most of her medical expenses. The plan that covered retirees of UPS was governed by a SPD that was issued in 2006 and a series of 12 material modification summaries describing amendments to the plan that were adopted since 2006. This required Mrs. King to read the 2006 SPD and the summaries of plan modifications in order to determine the current language for each benefit provision. Also, Blue Cross claimed some of the provisions applied to the employee plan but did not apply to the retiree plan, although the language in the SPD and modification summaries did not make this clear.
While the SPD mentioned a $1 million lifetime maximum, a subsequent material modification in 2010 limited the lifetime maximum to $500,000. Later, yet another material modification eliminated the lifetime benefit cap, though it was unclear if the cap applied only to the employee plan or if it included the retiree plan. After Mrs. King incurred almost $950,000 in medical bills, Blue Cross sent her an explanation of benefits stating it would only pay a small fraction of her medical bills because she already reached the $500,000 lifetime benefit maximum. Mrs. King filed her first-level appeal with Blue Cross explaining that, among other things, she was previously assured by Blue Cross that her health benefits had no limit. After her appeal was denied by Blue Cross, Mrs. King filed a secondary appeal, this time submitting her appeal to the entity designated by the policy to review secondary appeals, UPS Claims Review Committee (“CRC”). The CRC subsequently denied Mrs. King’s secondary appeal emphasizing that the lifetime maximum was limited to $500,000. Mrs. King filed a lawsuit alleging that both Blue Cross and CRC breached their fiduciary duties in violation of ERISA by failing to reasonably appraise the average plan participant that the lifetime benefit maximum applies to the retiree plan. The district court granted summary judgment to Blue Cross and CRC, and Mrs. King appealed (Mrs. King died while the suit was pending).
On appeal, the Ninth Circuit reversed the decision of the district court. After determining that lifetime benefit maximums are not barred in retiree-only plans, the Ninth Circuit Court concluded that the SPD, as amended by the subsequent modifications, violates ERISA’s statutory and regulatory disclosure requirements because it did not reasonably apprise the average plan participant that the lifetime benefit maximum continued to apply to the retiree plan. The Ninth Circuit criticized the SPD and modification summaries because all of the material modifications would need to be read in conjunction with the SPD to determine available benefits instead of either an amended SPD, cumulative summaries of material modifications, or a comprehensive table of contents being issued allowing participants to verify which SPD terms were amended by the modifications being issued. The Court also criticized improper placement of provisions and font size in the SPD and material modifications.
Blue Cross argued that it did not qualify as a fiduciary under ERISA, since UPS retained the exclusive right and discretion to interpret the terms and conditions of the plan. The Court noted that this argument rested on a misunderstanding of the fiduciary designation in ERISA which includes any person who exercises any discretionary authority or control respecting management or administration of a plan. Since Blue Cross processes and pays claims to plan participants and conducts a first-level appeal for benefit denials, it is required to interpret the plan to determine whether to pay claims a or uphold benefit denials, and any one of these abilities confers fiduciary status under ERISA. It is certain that on remand, Mrs. King (via her estate) will argue that the lifetime cap is not enforceable. The Court’s opinion suggests that this is a viable theory because of the problems with the SPD.
While many ERISA governed plans may be confusing, plan participants should be able to rely upon plan administrators to provide them with accurate information concerning their ERISA benefit plan. This case further confirms that entities rendering decisions on the provision of plan benefits need to assure that plan documents and modifications thereto are easily understood by the average plan participant and cannot escape liability for providing confusing modifications or misinformation by attempting to layer the decision-making responsibility.
Ninth Circuit Grants a Small Reprieve to the Abuse of Discretion Standard of Review, Ruling That Discretionary Language Provisions in Self-Funded ERISA Will Apply
When litigating ERISA-governed short-term disability, long-term disability, life and medical insurance claims, a major consideration is which “standard of review” will apply to the Court’s review of the insurer’s decision – abuse of discretion or de novo. The de novo standard of review is more claimant friendly. When applying the abuse of discretion standard of review, the Court is required to give some deference to the insurer’s decision. Under the de novo standard of review, the Court does not give any deference to the insurer’s decision, but simply makes a determination as to whether available evidence establishes that the insured was disabled under the terms of the Plan.
The abuse of discretion standard of review, which is friendlier to insurers, only applies if the ERISA plan contains “discretionary language” generally stating that the insurer has total discretion to interpret the terms of the Plan and decide whether the claimant is entitled to policy benefits. However, in 2011, California enacted Insurance Code section 10110.6, which banned discretionary clauses in ERISA plans issued or renewed on or after January 1, 2012. Since that time, District Courts in California and the Ninth Circuit have repeatedly ruled that Insurance Code section 10110.6 was valid and enforceable, most recently in Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan, 856 F.3d 686 (9th Cir. 2017). See our article on this case here. Unfortunately, with this ruling, the Ninth Circuit opened the door for the abuse of discretion standard of review to apply in a limited number of cases where employers provide group disability insurance and life insurance coverage which they fund.
Williby v. Aetna Life Insurance Co., 2017 WL 3482390 (9th Cir. August 15, 2017) involved a claim for short-term disability benefits made under a self-funded group short-term disability insurance plan. “Self-funded” means that the employer (here, Boeing) did not purchase an insurance policy to cover its plan obligations, instead committing to pay any benefits “from its own coffers.”
After Williby’s STD claim was denied, she filed a lawsuit seeking past-due benefits. At trial, the District Court Judge ruled that Insurance Code section 10110.6 invalidated the discretionary language in the STD Plan, and applied the de novo standard of review when ruling that Williby was entitled to STD benefits.
Aetna, the company Boeing hired to administer the ERISA plan, appealed the District Court’s decision, arguing that ERISA preempted the application of Section 10110.6 to self-funded plans. In considering Aetna’s argument, the Ninth Circuit offered a brief discussion of three interrelated ERISA provisions governing the preemption of state law – the “preemption clause,” the “saving clause,” and the “deemer clause” – before indicating that the issue would turn on the “presence or absence of traditional insurance.”
Specifically, the Court noted that in FMC Corp. v. Holliday, 498 U.S. 52 (1990), the Supreme Court set forth a “simple, bright-line rule: ‘if a plan is insured, a State may regulate it indirectly through regulation of its insurer and its insurer’s insurance contracts; if the plan is uninsured, the State may not regulate it.’” Thus, because the Boeing Plan was self-funded and not insured, state insurance regulations operating on a self-funded plan – like Section 10110.6 – are preempted. The Court accordingly ruled that the District Court applied the incorrect standard of review, and remanded the case back to the District Court for further consideration.
While this ruling does give limited life to the abuse of discretion standard in some California-litigated ERISA cases, in reality, the McKennon Law Group does not believe this will significantly harm insureds’ ability to successfully recover ERISA benefits through litigation. First, only a small number of group insurance plans are self-funded, so the reach of this ruling will be small. More importantly, we believe that, in practice, there is not much difference between the two different standards of review. Not only does the abuse of discretion standard of review gives claimants the ability to obtain helpful information through discovery, but we believe that if judges are convinced that a claimant is really totally disabled, they will rule in favor of the claimant no matter the standard.
