Disability Insurance Archives - Page 32 of 44

Too Little Time – Court Finds ERISA Plan’s Contractual Limitation Period Unreasonably Short and Unenforceable

One hundred days is not a reasonable amount of time to give a plan participant to file a lawsuit under the Employee Retirement Income Security Act of 1974 (“ERISA”). This was the conclusion reached by the United States District Court Southern District of California in its recent decision in Nelson v. Standard Insurance Company, 2014 U.S. Dist. LEXIS 119179 (S.D. Cal. Aug. 26, 2014), which held that a contractual limitation contained in an ERISA-governed group long-term disability policy’s limitation period is unreasonable and unenforceable because the time period may have ran prior to the end of the administrative review process and because it provided the plan participant only one hundred days to file an action in federal court. The holding in Nelson was one of the first in the Ninth Circuit to determine, in the wake of the Supreme Court’s decision in Heimeshoff v. Hartford Life & Accident Insurance Co., 134 S. Ct. 604 (2013), that a plan’s contractual limitation on filing a lawsuit is unreasonably short. While numerous questions still remain as to what constitutes an unreasonable plan limitations period, the Nelson decision makes it clear that, at the very least, providing a plan participant only one hundred days within which to file a complaint in federal court is not reasonable.

Last year, in its highly anticipated decision in Heimeshoff, the Supreme Court unanimously held that an ERISA governed plan’s limitation period, requiring a claimant to bring an action within three years of when proof of claim was due, was enforceable. The Court found that this contractual time limitation on filing a claim in federal court was valid despite the fact that it was shorter than the applicable statute of limitations. Although the Court held that a plan’s contractual limitation periods should ordinarily be enforced, it also stated that such provisions may not be enforced where the period provided is “unreasonably short.” The Heimeshoff Court explained that a limitations provision is unreasonably short if it “leav[es] [a] claimant[] with little chance of bringing a claim not barred.” The Heimeshoff decision left open the issue of just how short a plan’s contractual limitation must be in order to be considered unreasonable. The Southern District’s decision in Nelson now provides some guidance on this question.

In Nelson, the Plaintiff, a plan participant, brought an ERISA action against her Group Long-Term Disability Plan (“Defendant”) and the plan administrator, Standard Insurance Company (“Standard”). After initially accepting and paying the Plaintiff’s disability benefits in July 2008, Standard terminated her benefits in January 2010 based on a finding that she was no longer disabled. In June 2010, Plaintiff appealed the decision and a final denial was issued in October 2011. In January 2013, Plaintiff filed her action against Standard and Defendant in the Southern District. The plan contained a provision entitled, “Time Limits on Legal Actions”, which states that a plan participant must bring a legal action within three years after the earlier of either (1) the date the administrator received proof of loss or (2) the time within which Proof of Loss was due to the administrator. On the basis of this contractual limitations provision, Defendant filed a motion for judgment on the pleadings under the Federal Rules of Civil Procedure 12(c), arguing that because the Plaintiff provided her Proof of Loss in May 2008 and the contractual time limit had already expired in May 2011, she was barred from suit.

The court in Nelson first stated that it could not determine the date upon which the contractual limitations period began to run because the term, “proof of loss” was never used in Plaintiff’s first amended complaint and she had submitted documentation supporting her disability status on several different dates. Plaintiff argued that her cause of action did not accrue as of the May 30, 2011 date that Defendant contended the limitation period expired. However, Defendant asserted that Plaintiff’s cause of action accrued on February 16, 2011, one hundred days before the contractual time limit expired. The court held that, even accepting Defendant’s argument that the limitation period concluded on May 30, 2011 and that the Plaintiff’s cause of action accrued one hundred days earlier on February 16, Defendant cited to no legal authority finding that a period of one hundred days is a reasonable period for a Plaintiff to file a lawsuit. The court found that this time limitation was especially unreasonable in the Plaintiff’s situation because a final decision had not even been reached on the claim prior to the expiration of the contractual limitation period. Indeed, the court concluded that a contractual limitation period may be rendered unreasonable as a result of undue delay in reviewing a claim. Based on these findings, the court denied Defendant’s motion for judgment on the pleadings because the contractual limitations period in the plan was unreasonably short.

The decision in Nelson demonstrates that, even after Heimeshoff, a plan’s contractual limitation period that may run prior to the completion of administrative review process is a good candidate to be found to be unreasonable and unenforceable. Moreover, at least in the situation presented in Nelson, providing a plan participant with only one hundred days to file an action is patently unreasonable. It is important to note that the Nelson court also specifically stated that, even where a limitation period is found to be reasonable, the doctrine of equitable estoppel may still prevent enforcement of the contractual limitations provision. The decision in Nelson should remind plan participants to be mindful of both statutory and contractual time limitations on their ability to file a lawsuit to protect their benefits.

Court Allows Mandamus Claim Against the California Department of Insurance Regarding Disability Insurance Dispute

There is a commonly held belief that every disability insurance policy sold to the public has been actually reviewed and approved by the California Department of Insurance. Indeed, California Insurance Code section 10291.5 requires the Insurance Commissioner to reject a proposed new disability insurance policy form if it does not meet certain requirements set forth in the Insurance Code. However, prior to the recent ruling of Ellena v. Department of Insurance, 2014 Cal. App. LEXIS 883 (1st Dist. Oct. 1, 2014), the California Department of Insurance was not following this code provision, and in fact maintained that it did not have a duty to review each new disability insurance policy form. There is now no question that the Department of Insurance has a mandatory duty to review all new disability insurance policy forms that insurers wish to sell in California.

Cassaundra Ellena was an employee of the County of Sonoma who was insured under a group disability insurance policy sold and administered by Standard Insurance Company (“Standard”). Unfortunately, Ellena was diagnosed with lupus and was unable to continue working. Ellena filed a claim for long-term disability benefits with Standard, but Standard denied her claim, forcing Ellena to file a lawsuit to collect her disability benefits. Along with naming Standard as a defendant for various causes of action including breach of contract and bad faith (also known as the breach of the covenant of good faith and fair dealing), Ellena also named the California Department of Insurance as a defendant.

Ellena asserted a cause of action for mandamus against the Department of Insurance, alleging that the Department had a mandatory duty to review the policy to make sure it complied with California law before approving the policy. Ellena alleged that the policy was in violation of California law because it improperly allowed Standard to define “own occupation” as other than the one Ellena performed for the City of Sonoma, and also that the policy’s definitions of “disability” and “any occupation” were also improper.

The trial court granted the Department of Insurance’s demurrer, ruling that “Ellena had not sufficiently alleged a violation of a specific mandatory duty and that a writ of mandate could not be based on general enforcement provisions or statutes involving the DOI’s exercise of discretion.” The Department of Insurance was dismissed from the lawsuit, and Ellena timely appealed.

On appeal, a large focus of the Court of Appeals’ ruling turned on what exactly Ellena was seeking through her lawsuit. The Court of Appeals noted that “[w]hile a party may not invoke mandamus to force a public entity to exercise discretionary powers in any particular manner, if the entity refuses to act, mandate is available to compel the exercise of those discretionary powers in some way.” Ellena acknowledged that the Department of Insurance “has the discretion to decide whether to approve a policy, but maintains that the [Department of Insurance] must exercise that discretion by reviewing the policy to determine whether it does or does not comply with California law.” The Department of Insurance argued that the Insurance Code only requires that an insurance company submit its draft policy for review, but that it had no actual duty to review and approve the policy before it is sold to the public.

After reviewing the Insurance Code and characterizing the oversight function of the Department of Insurance as “a matter of great public interest,” the Court of Appeal ruled:

The clear language of this statute is that “[t]he commissioner shall not approve any disability policy for insurance or delivery …” unless it meets a number of requirements. (§ 10291.5, subd. (b), italics added.) “The commissioner shall require from every insurer a full compliance with all the provisions of this code” (§ 12926, italics added) and the commissioner has an obligation to fulfill the duties imposed by the Insurance Code under section 12921.5.

…

The plain meaning of these provisions is that the commissioner has a mandatory duty to review the policy prior to approving it and the commissioner must review the disability policy to ensure it meets the requirements set forth in section 10291.5, subdivision (b). The Insurance Code imposes on the commissioner the duty to review the policy to ensure it complies with the law.

The Court noted that if the Department of Insurance did not actually review each policy that was submitted for review, “how could the commissioner responsibly disapprove any disability policy containing provisions that are ‘unintelligible, uncertain, ambiguous, or abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued,’ as required by subdivision (b) of [section 10291.5]?” The Court further noted the “legislative history to [the 1949 amendment to section 10291.5] supports the conclusion that the statute requires the commissioner to review the disability policy form prior to approving it.” Accordingly, the Court of Appeal concluded that “the Insurance Code requires that the commissioner review a disability policy form prior to approving the policy.”

This is a victory for consumers and policyholders as the Department of Insurance will now be required to review every potential disability policy before it is sold to the public. The Insurance Commissioner and Department of Insurance should now ensure that policies, such as the one sold to Ellena, are in compliance with California law. This decision is also of practical procedural significance to attorneys who engage in insurance litigation against insurers as naming the Department of Insurance will destroy diversity of citizenship jurisdiction thus precluding insurers from removing such cases to federal court.

Recent Federal Court Decisions Give Teeth to California’s Ban on Discretionary Clauses in ERISA Plans

A virtually insurmountable concrete wall was once an apt analogy for the effect of discretionary clauses in ERISA Plans on claimants attempting to challenge a plan administrator’s unreasonable interpretation of policy terms. A valid discretionary clause gave insurance companies power to construe the terms of ERISA- governed group insurance policies based on their own interpretation, which could only be overturned by courts if it were “illogical, implausible or without support in inferences drawn from the facts in the record.” Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (2011). In order to counteract the discretion these clauses provided to plan administrators/insurers, California enacted Insurance Code section 10110.6, which placed a ban on such discretionary clauses. After the enactment of this new statute, questions regarding how courts would interpret and enforce it lingered. However, recent decisions in California strongly suggests that courts will give full force to the California statute and apply de novo review of claim denials rather than the abuse of discretion standard to claims denied on or after January 1, 2012.

California Insurance Code section 10110.6 provides in pertinent part:

(a) If a policy, contract, certificate, or agreement offered, issued, delivered, or renewed, whether or not in California, that provides or funds life insurance or disability insurance coverage for any California resident contains a provision that reserves discretionary authority to the insurer, or an agent of the insurer, to determine eligibility for benefits or coverage, to interpret the terms of the policy, contract, certificate, or agreement, or to provide standards of interpretation or review that are inconsistent with the laws of this state, that provision is void and unenforceable.

(b) For purposes of this section, “renewed” means continued in force on or after the policy’s anniversary date.

The statute applies to life and disability insurance policies issued, delivered or renewed on or after January 1, 2012 in California. One of the key questions that remained after the enactment of the statute was whether, and under what circumstances, it applies to policies that were in effect prior to the enactment of the statute. This question appears to have been answered in two recent Northern District of California decisions finding that the statute applies even to policies that were issued or had an effective date prior to January 1, 2012 where it is renewed annually and the relevant claim is denied after January 1, 2012.

In Polnicky v. Liberty Life Assurance Company of Boston, 2013 U.S. Dist. LEXIS 163915 (N.D. Cal. Nov. 18, 2013) the court interpreted section 10110.6 and concluded that the policy which controlled in that case was the one in effect at the time the claim was denied, after the enactment of section 10110.6, even though the policy had an effective date of January 1, 2010 (before the statute became effective). In Polnicky, the relevant policy was renewed annually on January 1. In March 2010, the plaintiff submitted a claim for short-term disability benefits under his ERISA-governed disability policy, which was denied in June 1, 2012. The plaintiff’s subsequent appeal was then denied in February 2013. The insurer argued that the abuse of discretion standard should be applied given the express grant of discretion authority in the policy. On the other hand, the plaintiff argued that any grant of discretion was void and unenforceable under section 10110.6. The court ultimately held that, because the policy was renewed and continued after its January 1, 2012 anniversary date, any provision in the policy attempting to confer discretionary authority was rendered void and unenforceable.

Recently, in Gonda v. Permanente Med. Group, Inc., 2014 U.S. Dist. LEXIS 5981, 2014 WL 186354 (N.D. Cal. Jan. 16, 2014), the court reaffirmed its prior holding in Polnicky and held that section 10110.6 made void any grant of discretionary authority in ERISA plans even if the plan was issued prior to when the statute came into effect because the policy in question renewed annually and became effective January 1, 2013, prior the final denial of the plaintiff’s claim in May 2013.

As Polnicky and Gonda demonstrate, courts will likely find discretionary clauses invalid and void where the policy is renewed after January 1, 2010, even if it became effective prior to the enact of section 10110.6.

Should You Hire an Attorney to Assist You with Your ERISA Disability Appeal?

If your disability policy was issued and paid for by your employer, it is likely governed by the Employee Retirement Income Security Act of 1974, commonly referred to as ERISA. ERISA is a complex statute that even scares off many experienced insurance attorneys. If your claim for disability benefits, made under an ERISA plan, is denied, you are not allowed to immediately file a lawsuit to collect your past due benefits. If you do, the court will dismiss your claim. Instead, you are required to appeal that claim decision to the very company that denied your claim in the first instance.

When appealing the denial of a short-term disability or long-term disability claim, many claimants make the mistake of handling the appeal without the assistance of an attorney. This can be a costly mistake, as the appeal is the most important part an ERISA claim because it likely represents a claimant’s final opportunity to present evidence to support his or her claim. Further, claimants who try to handle their own appeal often harm their claim.

One reason for this is that when you appeal the denial of your claim for benefits, the insurance company NEVER TELLS YOU that, if your case goes to trial, you will likely not be allowed to offer new medical records or other evidence to support your claim. Instead, you will be limited to the documents already in the insurance company’s file, called the Administrative Record. Thus, the worst thing you can do is simply tell the insurance company that you disagree with their decision and would like to appeal without offering any new evidence or arguments for disability. Such appeals are doomed to fail. You will need to offer new evidence and/or information, not only to support your appeal, but also to use later in court.

Also, you usually only have 180 days after the denial to appeal the claim. The sooner you contact an attorney to assist you, the sooner that attorney can obtain your file, see what is missing and work with you to ensure that the Administrative Record contains sufficient medical evidence to support your claim. An attorney can also ensure that you file your appeal in a timely manner. A failure to complete your appeal in time could mean that you waived your right to bring a lawsuit challenging the claim decision.

An experienced ERISA attorney can also help identify problems with the insurance company’s decision, and raise those issues with the insurance company. That way, at trial, the Court will see that the insurance company was made aware of its errors, but failed to correct them. In addition, when confronted with the arguments of experienced ERISA attorneys such as those from McKennon Law Group PC, the insurer or administrator will often reverse itself and approve the claim for benefits.

Accordingly, when appealing a claim decision under a short-term disability insurance policy, long-term disability insurance policy or life insurance policy or plan governed by ERISA, the best thing you can do to increase your chances on appeal is to immediately hire an experienced ERISA attorney to help you fight for your benefits.

New California Law Requires that Short-Term Disability Policies Provide Coverage for Severe Mental Illness

In a victory for insurance consumers and mental health advocates, a recent change to the California Insurance Code mandates that short-term disability insurance policies provide coverage for “severe mental illnesses” as that term is defined in the Insurance Code.

Passed in 2013, and signed in to law by Governor Jerry Brown on October 4, 2013, Assembly Bill No. 402 (“AB 402”) added Section 10144.55 to the Insurance Code, effective July 1, 2014. Section 10144.55 requires that every disability insurance policy with “a short-term limited duration of two years or less,” provide coverage for disabilities caused by severe mental illnesses. Section 10144.55(b) defines “severe mental illnesses” as schizophrenia, schizoaffective disorder, bipolar disorder (manic-depressive illness), major depressive disorders (including postpartum depression), panic disorder, obsessive-compulsive disorder (OCD), pervasive developmental disorder (autism), anorexia nervosa or bulimia nervosa.

AB 402 was introduced by California Assemblymember Tom Ammiano, and passed the California Assembly by a 57-12 vote. When the Bill was being considered by the California Senate Insurance Committee, Assemblymember Ammiano argued that:

[A]ccording to the 2010 United States census, approximately 1.2 million adults live with serious mental illness. Most of these adults continue to work right through their mental illness utilizing sick days on occasion when symptoms are severe. Occasionally, employees may need a longer period of time to adequately recover from a severe mental illness or transition onto a new medication. California State Disability Insurance can pay for a portion of an employee’s salary, but to keep the employee’s income whole, many rely on short term disability income insurance to make up the remaining lost wages and allow an injured person to continue paying mortgage, rent, tuition and car payments, as well as help cover expenses for food, child care and utilities. When these policies exclude coverage for mental illness or injury, these families are left with the decision of working against their doctor’s orders and placing employers and fellow employees at risk or facing often unmanageable financial burdens.

Following the passage of California’s Mental Health Parity Act (“Parity Act”), California already required that health insurance policies provide the same coverage for severe mental illnesses as other health issues. Now, with the passage of AB 402 and the addition of Section 10144.55 to the Insurance Code, California workers with short-term disability policies that are issued, amended or renewed on or after July 1, 2014 will have coverage if a “severe mental illness” temporarily prevents them from returning to work.

Filing a disability claim can be a complex and daunting progress, especially when the claimant suffers from a mental illness. Accordingly, it is absolutely crucial that claimants seek the advice of attorneys who have knowledge and experience in this highly specialized area of law. The attorneys at McKennon Law Group PC specialize in handling and litigating disability insurance claims, including short-term disability insurance claim and mental health claims.

Insurance Companies May Conduct Orwellian Investigations in Order to Deny Disability Benefits

Disability typically offer their insureds little insight into their claims administration processes. If you are waiting for a decision on your claim, or anticipate filing a disability claim soon, be alert that your insurer will thoroughly investigate your claim and actively search for reasons to deny your claim for disability benefits. In order to recover on your disability claim, your disabling condition must be accurately stated and well-supported. In addition, you need to make sure that, after submitting your claim for benefits, your actions do not present a false picture of your conditions, as insurers will likely seize upon any opportunity to challenge an otherwise valid claim. Here, we focus on surveillance and social media.

Surveillance

Insurers often hire outside investigators to conduct surveillance in the hopes of catching claimants engaging in activities that cast doubt on their disability claims. An insurer may request surveillance prior to approving your claim, or after you have been paid benefits for a while. Sometimes, field investigators will schedule interviews to take place at claimants’ houses, or other agreed upon locations. An investigator may ask to videotape the session or take photos of the claimant. It is also not uncommon that insurers will ask a claimant to attend an independent medical examination or a Functional Capacity Examination and then videotape their claimants as they come and go to these examinations. Other times, insurers will ask a claimant to complete a list of the daily activities and then will dispatch field investigators to secretly videotape claimants performing regular daily activities including driving, grocery shopping, taking out garbage or working out at the gym to see if these activities are consistent with a claimant’s stated activities of daily living. Insurers may view these activities in a vacuum and decide that your limited ability to perform an activity means your condition is not so serious that you cannot work.

For instance, an insurer may point out that its videotape of a claimant driving for thirty minutes suggests the claimant is capable of prolonged sitting and working at a full time sedentary job, or the videotape of a claimant carrying a few grocery items contradicts an alleged back injury. Be wary of engaging in activities or taking actions which may produce evidence to weaken your claim. If an insurer misinterpreted an activity as a basis to deny your claim, you should challenge its decision or hire an experienced attorney to do so on your behalf.

Social Media

Over the past decade, social media has advanced to a point where it is integrated into our lives and savvy insurers embrace this trend by scouring Facebook, Twitter, Linkedin, online dating sites, and other networking sites using only a claimant’s name or email address. Often times, the information found is taken out of context to justify a denial of a valid claim. For example, insurers may find a dating profile which presents an eligible bachelor as athletic, and question the scope of his functional limitations. Similarly, insurers may view vacation pictures on Facebook as contradicting claims of financial or emotional distress, and posed pictures as contradicting the extent of your injuries. Even if posts were made or pictures were taken prior to the onset of a disability, an insurer may overlook the date and fixate on what they find as contradictory to your current restrictions and limitiations. In addition, insurers may utilize any information found to discredit claimants in litigation. After filing a claim, consider terminating your social media accounts or at least locking or privatizing all your social media accounts so that only immediate or close contacts have access to what you post online. Also, be aware of what you are posting so that your insurer cannot use this information to deny your disability insurance claim.

For additional information, please see our FAQs for Can social media impact a claim for disability benefits.

McKennon Law Group PC is very experienced with handling short-term and long-term disability insurance claims and for many years their attorneys actually represented insurance companies. Call us for a free evaluation of your disability insurance claim.

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