ERISA - Appeals 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.

Accidental Death & Dismemberment (“AD&D”) Insurance Update: Northern District of California Construes the Terms of ERISA-governed AD&D Policy Against the Insurer, Finds that “Near Fatal” Levels of Methamphetamine Did Not Trigger Policy’s Drug Exclusion

On November 15, 2021, Judge Phyllis Hamilton, in Santos v. Minnesota Life Ins. Co., 2021 WL 5302950 (N.D. Cal. Nov. 15, 2021), ruled in favor of an administrator of the estate of a 55 year-old engineer and Apple employee who died alone in his apartment after falling backwards and hitting his head. The death certificate listed the immediate cause of death as “blunt force head trauma with subdural hematoma.” The death certificate indicated that the death was “drug related,” but it also indicated that the manner of death was accidental.

The decedent was insured through an ERISA plan sponsored by his employer, Apple. Under the plan he had $311,000 in life insurance coverage and $311,000 in AD&D coverage. The insurance company paid the life benefit, but it denied coverage under the AD&D policy based on the policy’s “drug exclusion” that provided that the death benefit is not payable where the insured’s death results from or is caused directly or indirectly by: “being under the influence of any prescription drug, narcotic, or hallucinogen, unless such prescription drug, narcotic, or hallucinogen was prescribed by a physician and taken in accordance with the prescribed dosage.” The insurance company also tried to avoid liability under the AD&D policy based on its contention that the incident was not an “accident” due to the significant levels of methamphetamines found in the decedent’s system.

The policy beneficiary filed suit under ERISA based on the insurer’s improper denial of AD&D coverage. The court found that the death was accidental under federal common law and that the policy’s “drug exclusion” did not apply. The beneficiary was entitled to recover the wrongfully denied $311,000 accidental death benefit, and she was entitled to file a motion to recover her attorneys’ fees and costs.

There are three important things to take away from what was a relatively easy decision by the former U.S. Chief District Judge of the Northern District of California who took senior status last February. First, ERISA cases are governed by federal common law, and under federal common law, the term “accident” is interpreted based on the reasonable expectations of the insured. The court explained federal common law assessment of “accident,” using the test mandated by the Ninth Circuit in Padfield v. AIG Life Insurance Company, 290 F.3d 1121, 1126 (9th Cir. 2002):

A death or injury may be “deemed ‘accidental’ under a group accidental insurance policy established under ERISA if the death [or injury] was unexpected or unintentional.” 10 Couch on Insurance § 139:16 (3d ed. 1995 & 2000 Supp.). In determining whether death, or the injury that caused death, was unexpected or unintentional, courts have undertaken an overlapping subjective and objective inquiry. The court first asks whether the insured subjectively lacked an expectation of death or injury. See Wickman v. Northwestern Nat’l Ins. Co., 908 F.2d 1077, 1088 (1st Cir. 1990) (“Requiring an analysis from the perspective of the reasonable person in the shoes of the insured fulfills the axiom that accident should be judged from the perspective of the insured.”). If so, the court asks whether the suppositions that underlay the insured’s expectation were reasonable, from the perspective of the insured, allowing the insured a great deal of latitude and taking into account the insured’s personal characteristics and experiences. See id. If the subjective expectation of the insured cannot be ascertained, the court asks whether a reasonable person, with background and characteristics similar to the insured, would have viewed the resulting injury or death as substantially certain to result from the insured’s conduct.

Applying this analysis, the court found that the decedent’s death was unexpected because a reasonable person in his position would not have viewed the resulting injury and death as substantially certain to result from his conduct. Therefore, the death was accidental under controlling Ninth Circuit precedent, Padfield.

Second, the terms in insurance policies are interpreted based on their usual and ordinary meanings, and ambiguities are interpreted in favor of the insured. Here, the court found that crystal meth was not a “prescription drug” nor a “narcotic” nor a “hallucinogen” based on the ordinary meaning of the terms and with reference to the Merriam-Webster dictionary. Accordingly, it found that the policy’s drug exclusion did not apply. Minnesota Life lost this case because the terms in the drug exclusion in its policy, although broad, did not include more specific wording, such as “controlled substances.” Decisions in cases like this will necessarily depend on the interpretation of the language in the policy at issue.

Third, ERISA claims that are subject to California law will most likely be reviewed de novo by the district court. The court will not give any deference to the insurer’s denial of the claim. This is important to understand because there a number of cases relating to the key issue of whether the death was “accidental” that are distinguishable because they were decided under the deferential “abuse of discretion” standard. It is important to not give up on your claim before consulting a qualified and experienced California life insurance attorney/ AD&D insurance attorney.

McKennon Law Group PC specializes in handling accidental death insurance claims that have been improperly denied by insurance companies based on their misinterpretation of their own policies and on their failure to adequately investigate claims. Under both ERISA and California law, claimants may be able to recover their attorneys’ fees incurred in challenging improper denials of benefits. If you have been denied coverage under a life insurance or AD&D policy, please contact us at (949) 387-9595 to obtain a free consultation.

Under insurance policies governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), when an insurer denies a person’s claim for life insurance benefits, short-term-disability benefits or long-term-disability benefits, the beneficiary must request that the insurance company review the denial or termination if they intend to sue the insurer to obtain their benefits. Courts refer to this review as an “administrative appeal” and the obligation to pursue that appeal as the duty to exhaust administrative remedies. Courts have universally concluded that they “have the authority to enforce the exhaustion requirement in suits under ERISA, and that as a matter of sound policy they should usually do so.” Amato v. Bernard, 618 F.2d 559, 568 (9th Cir. 1980). The administrative appeals process is very important. Not only must a beneficiary pursue their administrative remedies in order to obtain the right to sue in court, but a beneficiary’s actions during the administrative appeals process can have serious ramifications for any resulting litigation.

When a beneficiary appeals an insurer’s initial decision, the documents submitted to the insurer become the “administrative record.” If an insured fails to submit a piece of evidence to the insurer, a Court may refuse to consider the evidence in any subsequent litigation. During litigation, a court usually only examines the administrative record. See, e.g., Blaj v. Unum Life Ins. Co. of Am., 2014 WL 2735182, at *2 (N.D. Cal. June 16, 2014) (citing Opeta v. Northwest Airlines Pension Plan, 484 F.3d 1211, 1217 (9th Cir. 2007), and stating that “a district court should determine whether the plaintiff is entitled to benefits based on the evidence in the administrative record, and evidence outside the administrative record may only be considered in ‘certain limited circumstances’”). Given the importance of building a strong administrative record, beneficiaries potentially imperil their claim by performing their own appeal. However, assuming an insured sends the insurer all relevant records, then a skilled attorney will likely possess most of the tools required to build their argument and win a case in court.

Given that a court rarely examines evidence outside the administrative record, a second question naturally arises: Can a beneficiary present arguments to a judge that they did not raise when pursuing their administrative appeal? The idea that a beneficiary cannot present an argument for the first-time during litigation is referred to as “issue exhaustion.” Thankfully, courts nearly universally reject insurance companies’ attempts to invoke this doctrine.

In Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620, 630 (9th Cir. 2008), the Ninth Circuit rejected an insurer’s attempt to dismiss a claim because of an alleged failure to satisfy this doctrine. The Ninth Circuit explained that the Supreme Court has instructed lower courts that “issue exhaustion is typically a creature of statute or agency regulation.” Id. The Ninth Circuit subsequently reasoned that because, “No ERISA statute precludes courts from hearing objections not previously raised to the Plan, nor does any ERISA statute or regulation require claimants to identify all issues they wish to have considered on appeal,” ERISA does not require issue exhaustion. Id.

In Wolf v. National Shopmen Pension Fund, 728 F.2d 182, 186 (3d Cir. 1984), the Third Circuit reached the same conclusion. ERISA does not compel courts to enforce the doctrine of issue exhaustion. The Third Circuit explained that it had found no caselaw supporting the doctrine:

Section 502(a) of ERISA does not require either issue or theory exhaustion; it requires only claim exhaustion. 29 U.S.C. § 1132(a). The Pension Fund cites no case, nor are we aware of any case which holds that a district court cannot decide a claim relying on a theory different from that presented to the Trustees of a Pension Fund. All of the cases with which we are familiar concern themselves only with whether the internal union remedies have been exhausted before finding federal jurisdiction appropriate.

Id. (emphasis in original).

These rulings declining to impose an issue exhaustion requirement protect ERISA plan participants and their beneficiaries. McKennon Law Group PC receives many calls from people who conducted their own appeals after an insured denied their benefits. If, in fact, issue exhaustion applied, then we likely could not help these people. A lay person does not know what the law requires of an insurer or what to argue on appeal. Many appeal letters drafted by attorneys, such as those at this firm, contain pages of legal argument and citations to cases supporting the claim. If issue exhaustion applied, a beneficiary would be required to seek legal counsel during the appeals process. One honest misstep would result in the claim being unsalvageable.

Of note, the Ninth Circuit did state that an insurer could, in theory, include an issue exhaustion requirement in a policy. See Vaught, 546 F.3d at 629-33. An insurance policy is just a specialized form of contract. The plain language of the contract dictates the relationship between the parties. However, the Ninth Circuit concluded that language stating that a beneficiary must “clearly explain . . . the reason why you think the Claims Administrator should reconsider your claim” lacked sufficient specificity so as to impose a contractual issue exhaustion requirement. Id. at 629, 632. The Vaught court’s opinion also implies that any such contractual requirement would need to be very explicit. See id.

That courts do protect ERISA plan participants and their beneficiaries in this instance does not mean that it is wise to handle appeals on their own. There are many pitfalls and landmines to avoid and hiring experienced ERISA appeals attorneys like McKennon Law Group PC may make the difference between getting your long-term disability claim paid or not.

In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim, to handling a claim denial and through preparing a case for litigation. In Part Six of this series, we discuss Independent Medical Evaluations and Peer Reviews. Our focus in this article will be mostly on disability insurance claim denials.

When an insurer examines a disability claim or appeal, it has the medical records examined by medical evaluators, typically a nurse or doctor. In theory, this allows the insurer to determine whether the claim has merit. In practice, it is typically a way for an insurer to set up a claim denial by having medical and other records evaluated by biased medical personnel.

ERISA regulations require that “the appropriate named fiduciary shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.” 29 C.F.R. § 2560.503-1(h)(3)(iii); § 2650.503-1(h)(4).

Sometimes, insurance companies rely on their own employees to perform such evaluations. The employee may be referred to as a “Medical Director,” “Medical Consultant” or some other similar title. Of course, this individual is paid by the very insurer with a financial interest in denying claims. Consequently, courts often look with disfavor upon such medical opinions. The Eighth Circuit has noted that “the administrator’s use of an in-house physician rather than a specialist to review a disability claim involving an uncommon disease can be a serious procedural irregularity affecting the administrator’s decision.” Morgan v. UNUM Life Ins. Co. of Am., 346 F.3d 1173, 1177 (8th Cir. 2003). In Morgan, the court found that the insurer’s decision to deny benefits was not supported by substantial evidence, in part because “[n]othing in the record show[ed] that [the insurer’s in-house physician] had any expertise or experience whatsoever in dealing with [the claimant’s disease].” Id. at 1177-78.

An entire industry has arisen that consists of supposedly “independent” medical evaluators, typically doctors, who examine medical records for insurance companies to render opinions on medical conditions and restrictions and limitations caused by these medical conditions. Oftentimes, as noted above, these medical evaluators are not independent because they are beholden to the insurer who hired them and the insurance industry for whom they work most of the time and from whom they derive most of their income. Courts are often wary of opinions given by these doctors because of the obvious potential bias. See Demer v. IBM, 835 F.3d 893, 901-03 (9th Cir. 2016).

A disability-claim review that consists of only a review of medical records is often referred to as a “peer review” or, somewhat derogatorily, as a “paper review.” Courts often criticize reliance on these reviews over the opinions of treating physicians. See Montour v. Hartford Life & Accident, 588 F.3d 623, 630 (9th Cir. 2009); see also Schramm v. CNA Fin. Corp. Insured Grp. Ben. Program, 718 F.Supp.2d 1151, 1164 (N.D. Cal. 2010) (“The Court likewise gives little weight to the opinions of Drs. Marion and Fuchs [the paper reviewers]. Although they reviewed plaintiff’s medical records, they did not examine her in person.”). Furthermore, these reviewers often make careless mistakes which make courts view them even more harshly. For example, it is common for a reviewer to not consider all of the disabling conditions and, instead, to focus on only one or two conditions. A court may take note of such an error and conclude that it renders the reviewing opinion unreliable. See, e.g., Cushman v. Motor Car Dealers Servs., Inc., 652 F.Supp.2d 1122, 1133 (C.D. Cal. 2009). Another common problem is that insurers often use doctors who are not qualified to discuss the claimant’s particular condition, which is also in violation of ERISA. See 29 C.F.R. § 2560.503-1(h)(3)(iii); § 2650.503-1(h)(4).

Whereas paper reviews are often shallow and problematic, there is a second more thorough form of medical review, the so-called independent medical examination (“IME”). These medical opinions are often given more weight by courts than simple paper reviews. See Shaw v. AT&T, 795 F.3d 538, 550 (6th Cir. 2015). In an IME, a physician chosen by the insurer examines the claimant. The physician then attempts to determine whether the claimant is disabled. A well-reasoned IME report concluding that the claimant is not disabled can seriously harm the claim. A well-reasoned IME report concluding that the claimant is disabled often results in the insurance company agreeing to pay the claim.

As a general rule, the type of medical review shows how seriously the insurer is considering paying the claim. A claim it does not take as seriously will often be decided with a paper review. Often, if the insurer believes the claim is otherwise weak, it will be willing to take that risk to save money. If the claim is stronger, it may seek to have the claim evaluated by an outside doctor, but not be willing to pay for a more expensive IME. In particularly difficult cases, the insurer is more likely to request an IME. Of course, some claimants are clearly disabled, and the insurer simply pays the claim because it knows it cannot avoid payment.

If a claimant attends an IME and the results are unfavorable, the claimant should strongly consider pursuing a second IME or at least having one her attending physicians review it and critique it. If the second IME is more favorable, that can greatly help the claimant. Even a strong rebuttal to the IME conclusions can be very effective. This is especially true for mental health claims, which can be difficult to evaluate.

There has long been a duty for an insurer to engage in a full and fair dialogue with a claimant about the claim. One thing a claimant should be aware of, however, is that under new regulations, an insurance company must give the claimant an opportunity to respond to “new evidence.” 29 C.F.R. Section 2560.503-1(4)(i) and (ii) “Provide that before the plan can issue an adverse benefit determination on review on a disability benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) in connection with the claim[.]” The results of an IME or peer review are considered new or additional evidence. As such, a claimant is entitled to be notified of any such opinions. A peer review or IME may be particularly biased. These regulations guarantee that a claimant has a chance to challenge such bias. The claimant may demand to have a new evaluation. And, as noted above, the claimant can also seek to have his own doctor respond to the new medical opinion and point out its flaws. Claimants are now guaranteed an opportunity to address any perceived bias. However, if the bias is particularly severe and overly blatant, then it may be prudent to do nothing further. This will leave an avenue to discredit the reviewing doctor and the insurer for relying on the clearly erroneous opinion.

In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim, to handling a claim denial and through preparing a case for litigation. In Part Four of this series, we discuss ERISA claim denials. Our focus in this article will be mostly on disability insurance claim denials.

When denying a claim, an insurer is required to provide a written explanation of the basis of its denial. Under Section 503 of ERISA, “every employee benefit plan shall . . . provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant.” 29 U.S.C. § 1133(1). In any subsequent litigation, the insurer is mostly limited to the basis for the denial that is asserted in a denial letter. Once a claimant has sued the insurer, the insurer or its attorneys cannot formulate new reasons why it is believed that the denial was proper. See, e.g., Lauder v. First Unum Life Ins. Co., 284 F.3d 375, 380-82 (2d Cir. 2002).

Generally, denials of disability claims fall into two broad categories: (1) lack of objective evidence in support of the disability, and (2) insufficient medical evidence to support the disability (i.e., that even though the claimant may be suffering from a diagnosable medical condition, there exists insufficient support that the medical condition is so severe so as to render the claimant unable to work). As for a lack of objective evidence of a diagnosis or disability, unless a provision of the plan states otherwise, a claimant can rely on a variety of forms of evidence, even if there is no objective evidence to support the disability. Evidence may include: current symptoms; other medical conditions that might affect or lengthen the recovery period; existing abnormalities or deficiencies; results from physical examinations; observations made by the treatment provider during office visits / therapy sessions; diagnostic tests and their results; treatment plans; any prescribed medications and the responses to those medications; level of functionality (restrictions and limitations); clinical documentation that supports the rationale that the treatment provider used when determining level of functionality; and a description of the impact that the employee’s level of functionality has on her ability to perform her job or any other job assigned by the company.

Of course, insurance companies do not want to pay most claims, and they often look for an excuse to deny ERISA claims. Most of the time, they have their own medical personnel examine the medical evidence to determine whether the evidence supports a diagnosis and whether the evidence supports significant restrictions and limitations to the claimant’s ability to perform the substantial and material duties of his occupation. However, the insurer cannot arbitrarily refuse to credit a claimant’s reliable evidence that supports his disability. See Michaels v. Equitable Life Assur. Soc., 305 F.App’x 896, 906–07 (3d Cir. 2009). A letter from a treating physician explaining that a claimant has a particular condition and cannot work because of that condition is reliable evidence that cannot properly be ignored without a reasonable basis. When filing a claim, or appealing the denial of a claim, the ERISA claimant should always obtain letters from his treating physicians explaining the nature of the condition, the basis for the diagnosis, the claimant’s symptoms and the reason why the claimant cannot return to work. Even if the insurer refuses to give the letters adequate weight, a judge in a subsequent lawsuit will likely consider the treating physicians’ opinions strongly.

ERISA claimants should carefully examine the plan to see if it requires “objective” evidence of a diagnosis or disability. If so, the plan’s documents usually state what kind of evidence is required. The plan may limit the relevant objective evidence to a specific and narrow list of symptoms and results from tests such as magnetic resonance imaging or electromyography. Each plan is different, and the plan’s documents should be examined before deciding how to attempt to meet this requirement. Insurers very often state in denial letters that there is no objective evidence of disability or diagnosis, even though the plan does not require objective evidence. The denial letter may emphasize the lack of a test or documented restriction of movement. Unless the plan requires the specific evidence that the denial letter demands, this may be an improper attempt to require that a claimant meet a heightened standard of disability that is not found in the plan. Courts often criticize insurers for this type of conduct. See Saffle v. Sierra Pacific Power Co., 85 F.3d 455, 459–60 (9th Cir. 1996). Such conduct on the part of an insurer can compel a court to rule that the insurer improperly denied a claim and that it must pay a claimant’s benefits under a policy.

Insurers also often deny disability claims because there allegedly is insufficient support for the diagnosis, the disability and/or the claimant’s inability to perform his occupation. This reason often takes the form of an assertion that the given diagnosis and restrictions do not support the conclusion that the claimant cannot perform her job duties. For example, a claimant with chronic and severe irritable bowel syndrome may receive a denial letter stating that the claimant’s reported time spent in the bathroom is exaggerated and that, even if he suffers from the diagnosed condition, the claimant only needs ready access to a bathroom and permission to use it once every two hours. The insurer will then assert that the diagnosis does not support a determination that the claimant simply cannot work. Of course, this conclusion may be contradicted by the claimant’s treating physicians, but the insurer may discount those opinions because, in its opinion, the diagnosis does not support the level of restrictions prescribed.

Insurers often combine both of these methods when denying a claim. An insurer may emphasize that a claimant can perform a sedentary occupation and will only disagree with a narrow, but critical, range of restrictions on the claimant’s behavior. An example of this form of denial is one with regard to an office worker who has horrible back problems. His job requires that he sit at a desk all day and work on a computer. His back pain renders him incapable of performing a variety of tasks, including sitting for eight hours per day. The insurer may acknowledge all of the limitations except for the restriction on the claimant’s ability to sit, stating that the back condition is not sufficiently severe so as to prevent the office worker from sitting. The insurer then concludes that given that the claimant can allegedly perform the main requirement of the office job — sitting — the pain and other limitations are irrelevant, and the claimant is not entitled to benefits under the plan.

There are a variety of ways to overcome these denials. A claimant can obtain independent evaluations of the condition in question. This independent testing may reveal more evidence of the claimed restrictions. The claimant may also undergo vocational assessments. This testing by an independent evaluator may help to provide more concrete evidence that the claimant suffers from the contested condition and restrictions. A determination affirming disability by a governmental agency, such as the Social Security Administration, may also help to overcome this form of denial. Personal statements from the claimant, family and friends are also helpful.

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.

If an insurer recently denied your claim, do not ignore the appeal requirements stated in the denial letter or you may lose the right to pursue your benefits. The Employee Retirement Income Security Act of 1974, or ERISA, protects most employee benefits, such as life insurance benefits, long-term disability income insurance benefits, accidental death and dismemberment insurance benefits and other such benefits offered through employer-sponsored plans. ERISA does so by establishing certain internal claims handling procedures, often referred to as “administrative remedies.” These administrative remedies govern the claims handling process when an administrator determines a plan participant’s eligibility for benefits. Although each employer-sponsored plan has different requirements, most contain provisions that require a plan participant to exhaust at least one level of internal appeal before he or she can file a lawsuit. Typically, where a plan participant fails to do so, he or she will also lose the ability to further pursue wrongfully denied life insurance, long-term disability insurance, accidental death and dismemberment insurance benefits.

In this blog article, we briefly cover the basics of the exhaustion doctrine under ERISA. We discuss a few well-recognized exceptions to the requirement, where the internal procedures are inadequate or pursuing an appeal would be futile because it is “doomed to fail.” Although these exceptions apply in limited circumstances, it is important to remember that a plan participant/insured bears the difficult burden of establishing that he meets these requirements. Ultimately, the safest route is to do everything you can to comply with the appeal procedures, even if you think doing so would be futile.

A Brief Discussion of the Exhaustion Requirement
ERISA does not expressly mandate exhaustion of administrative remedies before filing suit. The requirement that a plan participant first exhaust his or her administrative remedies is a court-established doctrine. However, the requirement for exhaustion does find its origins in the text of ERISA, which contemplates a “full and fair review” of adverse benefit determinations made in the administration of an ERISA-governed plan for life, health, disability, accidental and other employer-sponsored benefits. If the plan documents expressly require exhaustion, the individual plan participant is required to complete the internal appeal as stated in the plan.

The courts strongly support the “sound policy” of requiring a plan participant to exhaust administrative remedies for several reasons. First, Congress specifically authorized the courts to establish a “common law” for issues under ERISA, and like the closely related Labor Management Relations Act, ERISA common law also requires exhaustion. Second, exhaustion is consistent with the Legislature’s aims and goals in its enactment of ERISA, which protects employees from abuse of their benefit or pension plans by establishing internal review requirements. Third, allowing levels of internal review gives the ERISA plan or claims fiduciary the ability to fully consider its determination of benefits. For example, if the claims administrator denies disability benefits based on missing or incomplete medical records, the appeal allows the participant an opportunity to point out the missing information and ensure that the information appears before the claims administrator. That way, if the administrator decides to uphold its denial of benefits, it is at least based on a full set of facts in support of the individual’s claim. Finally, the doctrine also helps to achieve sound judicial policy by promoting the efficient use of judicial resources. Requiring internal review ensures that, by the time the denial of benefits reaches the federal court, the primary dispute revolves around the adequacy of the decision, not whether a decision was made at all.

Exceptions to Exhaustion: When are Appeals Futile or Inadequate Internal Procedures under ERISA?
Most courts promote strict adherence to the exhaustion requirement. Accordingly, the courts recognize exceptions to it in only a few circumstances. As a general matter, there are two well-established situations where the exhaustion requirement does not apply: if procedures are inadequate or the appeal is futile. The plan participant bears the burden of proving these exceptions apply.

Inadequate Internal Procedures
The first exception, inadequacy, is aptly named because it simply refers to a situation where the plan’s internal claims handling procedures provide an inadequate remedy. For internal review procedures to be inadequate, the claimant must show that the procedures followed by the claims administrator failed to comply with the terms of ERISA or its implementing regulations. To do so, the plan participant must specifically allege how the plan’s terms or the administrator’s actual conduct violated the statute or regulations. Further, a minor error, alone, does not establish inadequacy. Typically, if the administrator can demonstrate substantial compliance, the court will find the claims procedures adequate.

Futility
In contrast, futility applies where a resort to the plan’s internal, administrative remedies would be futile, pointless and “doomed to fail.” In one relatively recent unpublished Ninth Circuit opinion, the Court reversed and remanded the District Court’s opinion granting summary judgment in favor of the insurer based on a failure to exhaust administrative remedies in connection with a denied long-term disability claim. See Carey v. United of Omaha Life Ins. Co., 633 Fed.Appx. 478 (9th Cir. 2016). In finding the appeal “futile” and excused from further exhaustion, the Ninth Circuit looked to the claimant’s conduct following the denial and the language of the communications between the insurer and the claimant. Following the denial, the claimant filed a complaint with the California Department of Insurance, which in turn requested that the insurer reevaluate its decision. Following this request, the insurer wrote to the claimant, stating that it had “reviewed all of the documentation” and was “unable to approve” his long-term disability claim.

Relying on ERISA principles that the terms in an ERISA plan should be interpreted in an ordinary and popular sense, the Court determined that the insurer’s imprecise communications indicated to the claimant that pursuit of further review would have been futile as follows:

Because of the imprecision in United’s communications, however, a person in Carey’s position would have thought that United had reviewed the substance of his case and decided anew that he was not entitled to benefits. The plain language of the communications indicated to Carey that pursuing a further request for review—thinking that one had already occurred—would have been futile. C.f. Vaught, 546 F.3d at 628 (explaining this court’s “principle that terms in an ERISA plan should be interpreted in an ordinary and popular sense as would a [person] of average intelligence and experience” (internal quotation marks omitted)); Booton v. Lockheed Med. Benefit Plan, 110 F.3d 1461, 1463 (9th Cir.1997) (when communicating to claimants that benefits are denied, “the reason for the denial must be stated in reasonably clear language”). Id., at 479.

The Court found futility expressed in the communication quoted above, even though the same communication also reiterated the appeal procedures to the claimant.

In most cases, it will not be easy to prove an exception to the exhaustion requirement. Accordingly, the safest way to protect your benefits is to ensure that you understand and comply with the strict deadlines and requirements for an internal appeal, even if you think doing so would be futile or the procedures are inadequate.

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