Disability Insurance Archives - Page 43 of 44

Calling In a Disability Expert

Arthur Fries, an independent disability consultant and an expert I have known for many years, has written an article entitled “Calling In a Disability Expert” which appeared on November 16, 2009 in the National Underwriter. Insurance consumers and consumer attorneys should review this article. He posits that insurance consumers should hire consultants and/or attorneys with expertise in the disability insurance field. He explains that this is because disability claims are increasingly complex and insurance consumers cannot go it alone in the “David vs. Goliath” scenarios that typically play out between insureds and insurers. Here are some snippets:

[T]here are issues related to how your clients conduct themselves in communicating their disability to their physician, how to handle a field claims representative and how to conduct themselves should the insurer request an I.M.E. (independent medical evaluation) or F.C.E. (functional capacity evaluation).
Your client may think he has a residual (partial) claim from an emotional standpoint but in reality has a total disability claim from a contractual standpoint. There are issues related to objective symptoms vs. subjective symptoms. As an example, the claimant told the physician he felt nauseous. That’s subjective. If he then “threw up” in front of the physician that would be objective! Some claims may lean very strongly toward subjective symptoms yet be quite disabling in terms of doing the material duties of the job.
How would your client handle a request by the insurance company that he see a rehabilitation specialist when the contract provides a “your occupation” definition?
In past years, disability claim forms asked limited questions and insurance companies paid claims in a rather routine fashion. Because of mounting losses, many insurance carriers have made major adjustments in their claim departments. In addition, they utilize the services of C.P.A.s, psychiatrists, physicians with specific backgrounds, field investigators, video surveillance and other investigative agencies to analyze the claim to a finite degree.
Today, many claims are being denied because “going it alone” leaves the policyholder (claimant) at a serious disadvantage. Although you may think you, as a producer, know a lot about disability insurance, you may not be equipped to provide advice in terms of the knowledge and effort required on your part.
If your client has his claim terminated and it appears the claim is justified…what are his options? Should he remain in the corner with his thumb in his mouth in the fetal position or should he have available the services of a disability claim consultant? Should he seek the services of an attorney? Why or why not? Since we are often talking about a potential payout in the millions of dollars, shouldn’t your client have available a person to protect that money well? Do you want your client to collect on a fraudulent claim? Obviously, the answer is no. Insurers have every right to investigate a claim. But do they have the right to intimidate your client? Do they have the right to continuously ask for more information to the point where your client feels like a dog running around in circles chasing its “tail?”
The days of your client completing one or two pieces of paper are long gone. A half dozen or more forms may be required and an inadvertent or improper response by your client, his attending physician or employer can prejudice your client’s rights with a denial being the result.
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Although “Goliath” might outweigh you or your client, a smart approach and strategy can bring “Goliath” to his knees. There is a war out there as it relates to a disability claim. If you believe the saying “I’m from the IRS and I’m here to help you,” you’ll believe the disability carrier has your client’s best interest at heart!

Guardian to Offer Guaranteed-Issue Small Group Disability Income Insurance

According to National Underwriter, Guardian Life Insurance Company of America is making it easier for employers with 2 to 9 employees to offer disability insurance benefits. It says it now will let employers in that size range provide disability insurance on a guaranteed issue basis. The guaranteed issue provision lets employers provide employees with some disability protection without them having to complete a medical exam or undergo medical underwriting.

Court of Appeal Complicates the Analysis of Mental and Nervous Disability Claims

Bosetti v. The United States Life Ins. Co., 175 Cal. App. 4th 1208 (2009) is an important California Court of Appeal decision that addressed whether a two-year benefits limitation on disabilities due to “mental, nervous or emotional disorder[s]” could serve to limit benefits payable to an insured disabled from depression and anxiety who also complained of interrelated physical impairments.

Bosetti was employed by the Palos Verdes Peninsula Unified School District. As part of her employment benefits, she was covered under a group long-term disability insurance policy issued by The United States Life Insurance Company in the City of New York (“U.S. Life”).

Bosetti‘s job was eliminated for economic reasons. Shortly after she learned that her employment would be terminated, she saw a doctor for depression and was placed on temporary disability. Her disability extend beyond two years, and had a physical component as well as an emotional one. Under the policy, Bosetti could obtain disability benefits for two years if she was disabled from her own occupation. After that time, she could only obtain disability benefits if she was disabled from “any occupation.” U.S. Life concluded that Bosetti was not disabled from any occupation and terminated her disability benefits at the end of two years. That determination was based primarily upon the two-year benefits limitation for mental or nervous disorders, the results of a functional capacity examination, and an independent physician consultation.

After the U.S. Life moved for and was granted summary judgment, Bosetti appealed. The court of appeal held that the limitation was ambiguous and was not applicable if the claimant’s physical problems contributed to her disabling depression or were a cause or symptom of that depression. The Bosetti court further concluded that the insurer’s denial of benefits based upon that two-year limitation was not in bad faith under the genuine dispute doctrine.

The Bosetti court explained that the insured’s disability had both mental and physical elements, noting that one of her doctors had suggested that her physical disability arose out of her emotional disability and another that her emotional disability or depression arose out of her physical problems and chronic pain. The court held that the two-year mental limitation was ambiguous because it “does not clearly explain whether the limitation applies when the total disability is due in part to a mental, nervous …disorder” and because an insured’s reasonable expectations are that disabling depression arising from a physical condition like fibromyalgia and, correspondingly, disabling physical symptoms arising from depression, would not fall within the mental/nervous limitation.

As part of its analysis, the court rejected the rationale of Equitable Life Assurance Society v. Berry, 212 Cal. App. 3d 832, 835, 840 (1989), a California opinion concerned with an insured who was diagnosed with manic-depressive illness, a condition which has a chemical (physical) etiology, rather than a purely mental one. The Berry court concluded, as a matter of law, that there was no coverage due to a disability policy‘s exclusion for “[m]ental or nervous disorders” and a health policy‘s limitation on benefits for treatment for a neurosis, psycho-neurosis, psychopathy, psychosis, or mental or nervous disease or disorder of any kind, on the basis that these exclusions were unambiguous and referred solely to symptoms, rather than causes. Id. at 840. The court disagreed with Berry for two reasons: it disagreed with its analysis and its holding was abrogated by statute.

The court found that the holding of Berry did not survive Insurance Code section 10123.15, which provides that “every group policy of disability insurance which covers hospital, medical, and surgical expenses on a group basis, and which offers coverage for disorders of the brain shall also offer coverage in the same manner for the treatment of the following biologically based severe mental disorders: schizophrenia, schizo-affective disorder, bipolar disorders and delusional depressions, and pervasive developmental disorder. Coverage for these mental disorders shall be subject to the same terms and conditions applied to the treatment of other disorders of the brain.” It appears that based on the court’s ruling, the two-year mental or nervous disorders limitation can never be applied in California to the biologically based severe mental disorders of “schizophrenia, schizo-affective disorder, bipolar disorders and delusional depressions, and pervasive developmental disorder.”

The court adopted the Ninth Circuit’s approach in Patterson v. Hughes Aircraft Co., 11 F.3d 949, 950 (9th Cir. 1993) where the court concluded that a limitation on benefits resulting from “mental, nervous or emotional disorders of any type” was ambiguous as to whether mental disorders referred to causes or symptoms, and whether a disability is mental when it results from a combination of physical and mental factors. The court resolved the ambiguity in favor of the insured, holding that the limitation on coverage did not apply if the insured‘s disability was caused, in any part, by his physical symptoms.

“Top Hat” ERISA Plans Are Not Entitled To Special Treatment

The Ninth Circuit recently addressed, for the first time, whether the standard of review analysis for “top hat”ERISA plans is the same as for other ERISA plans. InSznewajs v. U.S. Bancorp Amended and Restated Supplemental Benefits Plan, 572 F.3d 727 (9th Cir. 2009), Franciene Sznewajs, the ex-wife of co-defendant Robert Sznewajs, challenged the Plan’s decision to treat Robert Sznewajs’ second wife, Virginia Sznewajs, as his surviving beneficiary. The Plan Administrator denied Franciene’s claim for benefits because it interpreted Robert’s “retirement” to have occurred when Robert started collecting benefits. Franciene argued that “retirement” meant the date of Robert’s termination of employment. The issues on appeal were the appropriate standard of review and the definition of retirement under the Plan.

The employee benefit plan in this case is known as a “top hat”plan. ERISA “defines a top hat plan as one which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.”Sznewajs at *4. Because of the specialized nature of “top hat” plans, Congress exempts such plans from certain ERISA regulations. Gilliam v. Nevada Power Co., 488 F.3d 1189, 1192-93 (9th Cir. 2007).

In most ERISA cases, the administrator’s claim decision is reviewed under the de novo standard of review unless the plan documents grant the administrator discretionary authority. Here, Franciene argued that, despite the discretion granted to the plan administrator, the district court should utilize the de novo standard of review because payments made to beneficiaries come directly from the company’s pockets and those payment decisions are made by the company’s executive committee. Franciene’s argument was consistent with holdings in the Third and Eighth Circuits, both of which have ruled that “top hat” plans are subject to a de novo standard of review despite the existence of a grant of discretionary authority for the very same reasons. However, the Ninth Circuit disagreed, explaining that applying a de novo standard of review to “top hat” plans “would create unnecessary confusion.” Therefore, in the Ninth Circuit, “top hat” plans are subject to the same standard of review analysis as other ERISA plans.

Finally, in making this ruling, the court found that the Plan did not abuse its discretion in its interpretation of the term “retirement.”

Ninth Circuit Clarifies Application of Abuse of Discretion Review When Insurer Has a Conflict of Interest

After the United States Supreme Court decided MetLife Ins. Co. v. Glenn in which the Court held that a reviewing court must consider the conflict of interest arising from the dual role of an insurer acting as a plan administrator and payor of plan benefits as a factor in determining whether the insurer abused its discretion in denying benefits, several courts have struggled with this standard. The Ninth Circuit Court of Appeals clarified how courts within the Ninth Circuit will apply this standard in Montour v. Hartford Life & Accident, 582 F.3d 933 (9th Cir. 2009). In Montour, the court adopted a new standard of reviewing ERISA abuse of discretion cases where the insurer has a conflict of interest. The court held that a “modicum of evidence in the record supporting the administrator’s decision will not alone suffice in the face of such a conflict, since this more traditional application of the abuse of discretion standard allowed no room for weighing the extent to which the administrator’s decision may have been motivated by improper considerations.”

Robert Montour was a telecommunications manager for Conexant Systems, Inc. His employer provided him with a group long-term disability plan governed by ERISA. Hartford was both the insurer and claims administrator of the plan. The plan granted Hartford discretionary authority to interpret plan terms and to determine eligibility for benefits.

Montour applied for and received disability benefits, initially for an acute stress disorder, in 2003. In 2004, Montour consulted an orthopedic surgeon, Dr. Kenneth Kengla, about knee and back pain and subsequently underwent surgery. Dr. Kengla diagnosed Montour with degenerative changes in both areas and notified Hartford that Montour was suffering from physical disability which prevented him from returning to the labor force. Dr. Kengla listed numerous restrictions on Montour’s physical activities.

In November and December 2005 Hartford conducted surveillance on Montour over the course of four days. Video footage from this surveillance depicted Montour driving his car along with other activities. Shortly thereafter, a Hartford investigator conducted a personal interview with Montour at his home, during which Montour listed a “bad back, [an] arthritic right knee, and sleep apnea” as the “disabling medical condition(s)” preventing him from returning to work. He also described an inability to concentrate, which he attributed to the medication he must take to treat his “constant pain.” Montour acknowledged that the surveillance video footage accurately depicted his level of functionality.

In May 2006 a Hartford nurse case manager submitted a letter to Dr. Kengla indicating that Montour was capable of performing “sedentary to light” work and soliciting their agreement. Dr. Kengla indicated that he disagreed with Hartford’s conclusions, citing Montour’s persistent orthopedic symptoms and physical restrictions.

In July 2006 Hartford hired a consulting physician, Dr. Gale Brown, to conduct a file review. Dr. Brown concluded that medical evidence supported the existence of a lower back condition but that Dr. Kengla’s offered restrictions were excessive. He acknowledged that the medical evidence supported Montour’s chronic pain but found that Montour was nevertheless capable of working full-time with modest restrictions, such as changing positions every thirty to forty-five minutes.

After Hartford enlisted a vocational rehabilitation expert to compile an Employability Analysis Report which concluded that Montour was capable of working in a high-level managerial capacity in five different fields, in August 2006 Hartford denied his claim. Montour appealed this decision and included a vocational appraisal report which concluded that Montour was “not employable in any setting” and that Hartford’s decision was based on numerous mistakes, including a disregard for the fact that the Social Security Administration (SSA) considered Montour to be “totally disabled.”

In response, Hartford hired a physician to conduct a second file review. The physician reviewed Montour’s records for evidence of a physical condition that would preclude sedentary work and, like Dr. Brown, found none. He noted in particular a lack of objective, clinical data demonstrating the extent to which Montour’s pain impacted his functionality. He also noted that Montour’s activities depicted on the surveillance videos exceeded the activity requirements of a “sedentary” job.

In light of concerns raised in the vocational appraisal report, Hartford requested a vocational specialist to conduct an Employability Analysis Report addendum, which reached the same conclusion as the initial Employability Analysis Report regarding the sedentary nature and thus the feasibility of the five proposed managerial positions. In February 2007, a Hartford appeal specialist affirmed the company’s previous decision to terminate Montour’s benefits. In a bench trial, the district court rendered its decision in favor of Hartford, upholding its denial.

In reversing the district court, the Ninth Circuit first explained that when an ERISA plan grants the administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan, the court reviews the decision for abuse of discretion. The court agreed with the district court that the abuse of discretion standard applied and that Hartford had a conflict of interest. However, the appeals court criticized the district court’s application of the “clear error” test, explaining that a reviewing court must also take into account the administrator’s conflict of interest as a factor in the abuse of discretion analysis. The appeals court concluded that the district court’s decision did not adequately balance the conflict factors. Accordingly, the appeals court proceeded to do so.

The appeals court gave a comprehensive description of the “signs of bias” it found were exhibited by Hartford throughout the decision-making process. These included overstatement of and excessive reliance upon Montour’s activities in the surveillance videos Hartford’s decision to conduct a paper review rather than an “in-person medical evaluation;” Hartford’s insistence that Montour produce objective proof of his pain level; and Hartford’s failure to deal with and distinguish the Social Security Administration’s contrary disability decision. The appeals court also noted Hartford’s “failure to present extrinsic evidence of any effort on its part to ‘assure accurate claims assessment.’”

The appeals court concluded that Hartford’s bias had infiltrated the entire administrative decision-making process, leading the court to accord significant weight to the conflict of interest. Weighing all of the factors together, the court concluded that Hartford’s conflict of interest improperly motivated its decision to terminate Montour’s benefits. The court reversed and remanded the matter for entry of judgment in favor of Montour and for reinstatement of long-term disability benefits.

Under Abatie, Discovery of Profitability Reports is Not Allowed

One of the most interesting questions in ERISA litigation is: What constitutes the administrative record for purposes of determining whether the administrator abused its discretion in making a claim determination? Bartholomew v. Unum Life Ins. Co., 579 F. Supp. 2d 1339 (W.D. Wash. 2008) helped answer this question.

Plaintiff, who sued to recover benefits under her long-term disability (LTD) plan, sought to expand the scope of discovery under ERISA by seeking documents outside the Administrative Record. Among others, the Plaintiff requested; “Details of compensation and financial incentives,” “revenue and profitability reports for the last 10 years,” and “[a]ny document discussing the claims handling process published during the last 10 years.” Despite the recent rulings in Abatie allowing weight to be given to structural conflict of interest analysis, the District Court held that Plaintiff was not allowed to engage in a fishing expedition. Here, the discovery requests were not narrowly tailored to lead to discovery of admissible evidence. Therefore, Plaintiff’s request for discovery outside the statutory guidelines was appropriately denied.

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