ERISA - Basics of an ERISA Claim Series Archives

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 & disability claim, from navigating a claim to handling a claim denial, through the subsequent appeal and litigation. In Part Sixteen of this series, we discuss ERISA’s preemption of state insurance law. Because ERISA is federal law, it can preempt state law. However, ERISA does not preempt all aspects of state insurance law, and someone involved with a disputed ERISA claim must be aware of which areas of law apply in which context.

Section 514(a) of ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). Because of the breadth of this language, the Supreme Court has attempted to create practical limits on the breadth of ERISA’s preemption by holding that a law “relates to” an employee benefit plan “if it has a connection with or reference to such a plan.” NY State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656 (1995) (internal quotation marks omitted). This has resulted in a two-prong test to determine whether a law is preempted. “To determine whether a law has a forbidden ‘reference to’ ERISA plans, we ask whether (1) the law ‘acts immediately and exclusively upon ERISA plans,’ or (2) ‘the existence of ERISA plans is essential to the law’s operation.’” Golden Gate Rest. Ass’n v. City & Cnty. of San Francisco, 546 F.3d 639, 657 (9th Cir. 2008).

To better understand this test, it helps to look at examples of the interaction between State law and ERISA. One example of potential preemption involves disputes when the designated beneficiary under a life insurance policy is someone other than the decedent’s spouse. One example of such a dispute is Orr v. Prudential Insurance Co. of America, 2012 WL 2122157 (D. Idaho June 12, 2012). The court in that matter concluded that the benefits from a life insurance policy acquired through an ERISA plan must be paid to the beneficiary listed in the plan records, irrespective of a state’s community property laws. Relying on the United States Supreme Court’s decision in Egelhoff v. Egelhoff, 532 U.S. 141 (2001), the Orr court held: “In accordance with Egelhoff, the Court finds that ERISA preempts Idaho community property laws when such laws require an ERISA plan administrator to pay ERISA life insurance proceeds to someone other than the designated beneficiary.” Orr, 2012 WL 2122157 at *2. The Orr court concluded that application of Idaho’s community property laws in that context would violate the rule that an ERISA plan must be administered pursuant to the plan documents. The Ninth Circuit Court of Appeal has reached a similar conclusion. See Metropolitan Life Ins. Co. v. Buechler, 19 F.App’x 678, 679-80 (9th Cir. 2001); Carmona v. Carmona, 603 F.3d 1041, 1062 (9th Cir. 2010). State community property laws cannot compel a plan to give a life insurance benefit to anyone other than the designated beneficiary under the plan. ERISA preempts the laws of the states in that context.

Another example of potential preemption is the standard of review. The standard of review is often controlled by a clause in an insurance contract and establishes the burden of proof that a claimant must meet in order to convince the court to grant them the benefits that an insurer/plan previously denied them. A court can examine the denial of benefits under the de novo standard of review (i.e., reach its own conclusion without deference to the insurer’s position) or review the claim for an abuse of discretion, which is a much stricter standard of review that favors claim denials. Many states, such as California, have laws that prevent insurance companies from selling disability and medical insurance policies containing abuse of discretion clauses. However, does this state law apply to disability and medical insurance provided through employer benefit plans? The Ninth Circuit has ruled that it does. See Orzechowsky v. The Boeing Company Non-Union Long-Term Disability Plan, Plan Number 625, an ERISA Plan, 856 F.3d 686 (9th Cir. 2017). In Orzechowsky, the Ninth Circuit addressed California’s law that eliminates abuse of discretion clauses from medical and disability insurance contracts. The Ninth Circuit explained that ERISA “has a saving clause that saves from preemption ‘any law of any State which regulates insurance, banking, or securities.’” Id. at 692. The Ninth Circuit concluded that the California law regulated “entities engaged in insurance,” but the law also addressed the scope of permissible insurance contracts in the state, as opposed to relationships between ERISA plans and their participants. See id. at 692-95. Consequently, the Ninth Circuit held that medical and disability insurance contracts provided via ERISA plans in the State of California are governed by the de novo standard of review.

ERISA preempts a wide variety of state laws. Whereas most substantive claims will be preempted, some aspects of state law are still relevant for an ERISA claim. Ultimately, the interchange between state and federal law is very complicated and this blog only provided a very basic overview of this topic. The complicated nature of these claims is why working with attorneys who are experts in these matters is critical when attempting to resolve an ERISA dispute. Please contact an experienced California ERISA attorney, such as the attorneys at the McKennon Law Group PC, if you require assistance with your ERISA claim denial, appeal or litigation.

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 Twelve of this series, we discuss the standard of review. The standard of review can greatly affect the outcome of any litigation for insurance benefits.

As we previously noted in this series, before suing an insurer over denial of benefits under a policy governed by ERISA, an insured must usually file an administrative appeal. In theory, this gives the insurer and insured a chance to “have a meaningful dialogue” regarding the disability, life, health, or accidental death and dismemberment claim over the benefits and gives the insurer another opportunity to make the correct decision. In reality, more often than not, insurers just use this time to create as compelling a case as possible to deny the claim for benefits and to set themselves up to win in litigation. If the claim is denied and the insured has pursued all mandatory appeals, the insured can sue the insurer. In the resulting ERISA litigation, the federal court will examine the insurer’s decision, records and reasoning to determine whether to affirm the denial.

The standard of review is a measure of how much discretion the insurer has to deny a claim. This applies during any litigation arising from the denial of an ERISA claim. If the claim for benefits is approved, then the standard of review is irrelevant.

Generally speaking, there are two standards of review: “abuse of discretion/arbitrary and capricious” and “de novo.” The terms “abuse of discretion” and “arbitrary and capricious” tend to be used interchangeably. Under the abuse-of-discretion standard, the court should overturn a ruling when it is “without reason, unsupported by substantial evidence or erroneous as a matter of law.” Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011). Under the de novo standard of review, “the burden of proof is placed on the claimant” to establish entitlement to plan benefits. Muniz v. Amec Const. Mgmt., Inc., 623 F.3d 1290, 1294 (9th Cir. 2010). “When conducting a de novo review of the record, the court does not give deference to the claim administrator’s decision, but rather determines in the first instance if the claimant has adequately established that he or she [qualified for benefits] under the terms of the plan.” Id. at 1295-96. The trial court performs an “independent and thorough inspection” of the plan administrator’s decision in order to determine if the plan administrator correctly or incorrectly denied benefits. Silver v. Executive Car Leasing Long–Term Disability Plan, 466 F.3d 727, 733 (9th Cir. 2006). De novo review permits the trial court to “evaluate the persuasiveness of conflicting testimony and decide which is more likely true.” Kearney v. Standard Ins. Co., 175 F.3d 1084, 1095 (9th Cir.1999).

The easiest way to think of the standard of review is to think of a meter measuring how much an insured has convinced the court that he or she is entitled to benefits. Under de novo review, the insured need only establish 50.01% on the meter. Under the abuse-of-discretion standard, that number is much higher. With that standard, it helps to think of that number perhaps being 60% or even higher. An ERISA claimant/insured wants the de novo review standard to apply. Under the abuse-of-discretion standard, an insurer may be able to deny claims that, to a layman, are clearly meritorious. For example, a court may uphold an insurer’s decision where the insured’s treating physician stated that the claimant is disabled, but the insurer hired a doctor to conduct a “paper review” of the insured’s file without examining the insured and then denying the claim based on the resulting report. Because the hired paper reviewing doctor concluded that the person did not have a serious medical condition or did not have sufficiently disabling restrictions and limitations, the insurer’s resulting decision was not “without reason, unsupported by substantial evidence or erroneous as a matter of law.” Miller, 632 F.3d at 845. In short, the standard of review is critically important in most cases and may be outcome determinative.

The standard of review exists because insurance policies/ERISA plans have language that gives discretion to the claims administrator or employer in determining coverage and benefits issues. The standard of review is based on such a grant of discretion clause. If there is no such clause, then the default standard of review is de novo. Most ERISA plans in the United States include a discretionary clause if the applicable law permits the clause’s inclusion. Insurers and employers like these clauses because it makes their determinations more likely to be affirmed by the courts.

We all know that insurance companies generally seek profit over making claims decisions that result in paying claims and thus readily deny many valid claims merely to avoid paying benefits under the plan. Because of this, many states have banned clauses that grant discretion to insurance companies. These states want the courts to review the evidence and decide whether a person is entitled to the benefits without a presumption in favor of the insurer’s or employer’s claim decision. For example, such clauses are banned in California. California Insurance Code Section 10110.6 invalidates discretionary clauses for all life insurance and disability insurance plans. As a result, for a disability plan that insures an individual residing in California, an insurer’s decision will almost always be subjected to de novo review. Furthermore, some courts in California have interpreted Section 10110.6’s language as applying to medical insurance plans as well. See Ticconi v. Blue Shield of California Life & Health Ins. Co., 160 Cal.App.4th 528, 540, n.7 (2008); Mahlon D. v. Cigna Health and Life Ins. Co., 291 F.Supp.3d 1029, 1031-32 (N.D. Cal. 2018).

Even though ERISA is federal law, many of these state laws still apply to contracts governed by ERISA. In many circumstances, ERISA preempts state law. However, laws such as California’s Section 10110.6 are not preempted by ERISA because of ERISA’s “saving clause that saves from preemption ‘any law of any State which regulates insurance, banking, or securities.’” See, e.g., Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan, Plan Number 625, 856 F.3d 686, 692-695 (9th Cir. 2017). Furthermore, this applies to all ERISA plans and insurance policies. See id. at 695. As such, in California, there is little dispute that, for a disability, life insurance or accidental death claim, the standard of review will be de novo. In many other states, there are similar laws that alter the standard of review for many types of policies.

Another temperance on the abuse-of-discretion standard lies in the fact that courts have ruled that discretionary clauses are disfavored as a matter of public policy. This means that an insurer must be careful about how the clause is worded. If the court concludes that the clause is less than clear or has any a defect that the court can locate, the clause will be deemed invalid, and the standard of review will be de novo.

Ultimately, the standard of review is a critical aspect of any ERISA lawsuit for pension or insurance benefits. Even when filing a mandatory administrative appeal, a claimant, or his or her attorneys, must always keep in mind how the standard of review will influence the court’s decision on a claimant’s entitlement to benefits. Such considerations are paramount in pursuing a claim.

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, through preparing a case for litigation. In Part Eleven of this series, we discuss personal statements from claimants and third-party witness statements in support of a claimant’s disability, which can help to support a disability claim that is based upon subjective symptoms like pain and fatigue.

We often see claimants who suffer from subjective conditions like Chronic Fatigue Syndrome, fibromyalgia or generalized chronic pain face difficult hurdles in getting their disability benefits paid precisely because of the subjective nature of these conditions. See our blog post regarding our recent trial victory in DeVries v. Aetna in which our client suffered from Chronic Fatigue Syndrome.

Under the Employee Retirement Income Security Act of 1974 (“ERISA”), judicial review of an insurer’s denial of benefits is typically limited to the administrative record that existed at the time the appeal was denied. After a complaint has been filed in federal court against an insurance company, generally, very limited discovery is allowed, and witnesses are normally not permitted to testify. Therefore, before an insurer reaches an appeal decision, it is important that the claimant submit as much information as possible to the insurer in support of their disability. For conditions like depression, chronic headaches, chronic pain, Chronic Fatigue Syndrome, fibromyalgia and other ailments, it may be impossible to supply objective evidence to prove that one suffers from these conditions. Because of this, courts recognize the importance of personal statements and third-party witnesses in support of a disability claim.

The Ninth Circuit’s recent decisions require insurers and the courts reviewing disability claim denials to take these types of statements into account when deciding an employee’s claim, including the claimant’s subjective self-reports of their symptoms and pain level. In a fairly recent long-term disability insurance case governed by ERISA, Kibel v. Aetna Life Ins. Co., 725 F.App’x. 475 (9th Cir. 2018), the Ninth Circuit emphasized the importance of these statements. In Kibel, the claimant, Margueritte Kibel, submitted a personal statement to her disability insurer Aetna regarding the subjective symptoms that she suffered, such as pain, fatigue and other such complaints. The court found that “the district court clearly erred in failing to consider the personal statement that Ms. Kibel submitted explaining that her fatigue did, in fact, render her totally disabled.” In her personal statement, Ms. Kibel described her fatigue as “an overpowering feeling of extreme tiredness, exhaustion, [and] weakness[.]” In this personal statement, Kibel further explained how it left her “completely drained” and caused “a complete slowdown of [her] brain and body[.]” The Court found that this evidence in the form of Ms. Kibel’s own personal statement, when appropriately considered, further supported a finding that Ms. Kibel’s condition prevented her from performing the duties of her occupation. For that reason, the Ninth Circuit reversed and remanded, and instructed the district court to direct an award of benefits to Ms. Kibel and conduct any further proceedings consistent with the order.

The Kibel court relied on the Ninth Circuit’s opinion in Demer v. IBM Corp. LTD Plan, 835 F.3d 893, 904‑07 (9th Cir. 2016)for the rule that both a district court and a disability insurer must “consider a claimant’s subjective account of pain” and corroborating friend/colleague statements when deciding whether she is disabled. See also Godmar v. Hewlett-Packard Co., 631 F.App’x 397 (6th Cir. 2015). In Godmar,the court considered the claimant’s statement that was submitted with his appeal, in which he explained that he was on morphine 24 hours per day, could no longer drive and slept more than 20 hours per day several times per week, to support a finding that the insurer had abused its discretion in denying benefits. Similarly, in Leetzow v. Metro. Life Ins. Co., 2016 WL 7324092, *12‑13 (C.D. Cal. Dec. 5, 2016), the court considered the claimant’s subjective personal accounts of her migraine-related pain and found that her policy did not require objective medical evidence to support her disability claim.

These findings are further supported by the Ninth Circuit’s holding in Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 678 (9th Cir. 2011), in which the court held that a “lack of objective physical findings” does not necessarily justify a denial of benefits; that is, a disability insurer may not condition coverage on proof by objective indicators such as blood tests when the condition is recognized even though no such proof is possible. In Salomaa, the court looked at a statement by the insured’s boss, who wrote that before his disability Samuel Salomaa “was one of the few people in southern California to walk or jog to work, and had been a superb employee until he got sick, and that those at Honda aware of his difficulty getting his disability benefits were ‘appalled.’” The court also considered a statement by Mr. Salomaa’s brother-in-law, who wrote that he got to know Mr. Salomaa when they were students at Harvard and MIT, that Mr. Salomaa had been very energetic and intelligent, but that more recently he had noticed that Mr. Salomaa had profound apparent changes in comprehension, ability to plan and stamina. His brother-in-law recounted the time when he “drove [Mr. Salomaa] and their daughter from Los Angeles to Arkansas. For the entire trip [Mr. Salomaa] was either fully or partially reclined in the back of their Honda Element… When stopping to eat, [Mr. Salomaa] could not manage to eat in the restaurant. I would go in to order the food, and then bring it back to [Mr. Salomaa] to eat in the car.” These accounts are compelling evidence of disabling conditions that can be hard to objectively measure, like Chronic Fatigue Syndrome, chronic pain syndrome, fibromyalgia and chronic migraines. In addition, observations made by persons with first-hand knowledge of a claimant’s disability must be considered by the administrator, but administrators rarely address or scrutinize these statements in their denials. Indeed, we typically see administrators ignore these types of statements. Courts often place emphasis on these omissions by administrators in choosing to overturn a denial of benefits.

Personal statements and third-party witness statements can be the difference between a denial and an award of long-term disability benefits; this was the case for Ms. Kibel. With this in mind, personal statements must be relevant to the circumstances and should include the following information: (1) a detailed description of the duties of your occupation as you performed them; (2) a detailed discussion of the history of your condition; (3) a detailed discussion of your symptoms; (4) how those symptoms, such as pain and fatigue, impact your ability to perform the duties of your occupation; (5) how your disability has also impacted your overall quality of life; and (6) a discussion of the things you could previously do but no longer can. It is also important that you write your own personal statement. It should sound authentic, and the best way to achieve that is by writing it in your own words. Moreover, because personal testimony is a form of proof that typically raises credibility issues, it is likewise important that you gather corroborating statements from colleagues, friends and family. We often see powerful corroborating statements from spouses who witnessed first-hand how the claimant has been affected by the disability, close friends who saw a marked decline in a claimant’s activity level or abilities or co-workers who could speak to a claimant’s work capacity both before and after the onset of disability.

Even though disability plan language rarely requires objective proof of conditions that are subjective in nature, we often see insurers deny disability benefits for claims based on such absence. At the appeal stage, it is important, often crucial, to send to the insurer a personal statement written by the claimant. In addition, witness statements from friends, family members or co-workers can have a powerful impact on a reviewing court when it assesses the credibility of the claimant. Given the lack of discovery in ERISA matters, these statements could mean the difference between a benefit denial and a favorable result.

We have significant experience in handling ERISA and non-ERISA disability insurance cases in which an insurer denied a claim based on a lack of objective evidence or a claimant has a disability condition that is subjective in nature and difficult to prove and measure. If your insurer or plan administrator has denied your disability claim, please contact McKennon Law Group PC for a free consultation so that we may assess your matter.

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 Ten of this series, we discuss vocational experts. The assistance of a vocational expert is generally only necessary when addressing a disability claim. Even then, for many claims, a vocational expert’s expertise is not required. However, under certain policies and circumstances, their assessment is critical.

Vocational experts typically analyze the duties of a particular job, a claimant’s ability to perform the duties of a job, what jobs are available that a particular disability claimant could perform and whether a job pays a certain level of income so as to determine if it is a “gainful” occupation. Some of these assessments are made in light of the individual’s education, training and work experience, the restrictions and limitations resulting from their medical conditions and the job’s required substantial and material duties. For example, a medical expert may submit to disability insurer a report stating that a disability claimant can only sit for six hours per day and cannot lift objects that weigh more than five pounds. The vocational expert would then take into consideration whether those restrictions/limitations prevent the person from performing a particular job that is or may be available for him or her to perform.

For most disability claims, especially those governed by ERISA, the policy’s language controls. But, there are occasions when applicable state or ERISA law will control certain aspects of a claim. A person’s claim may entail an assessment of their ability to perform their own occupation. Under those circumstances, the vocational expert will look at the job’s requirements and the restrictions and limitations provided to him by the insurer. The vocational expert may then determine whether the restrictions and limitations prevent the person from performing their job’s duties.

If a person’s claim is governed by an “any occupation” standard, then the vocational expert will have to perform a more in-depth analysis. The vocational expert will likely need to perform a transferable skills analysis (“TSA”). Conducting a TSA entails examining the Department of Labor’s Dictionary of Occupational Titles (“DOT”), which is a listing of the job requirements for a wide variety of different occupations. The vocational expert will compare the insured’s job experience, their restrictions and limitations and the DOT to determine whether the insured can potentially perform a particular job within the relevant market provided for by the policy. If the policy requires that the potential job be within a specific region or pay a specific salary, then the vocational expert will also examine whether those requirements are met. When addressing the reports of vocational experts, some courts have held that the vocational expert must define the duties of the identified “other occupations” in their report. See, e.g., Turner v. LINA, 2017 WL 6000099, at *3-4 (W.D. Wash. Dec. 4, 2017).

If an insurance company concludes that a person does not have restrictions or limitations, then it will not consult a vocational expert. Likewise, if the insurer’s medical experts conclude that a person has very substantial restrictions and limitations, then a vocational expert will likely not be consulted. Vocational experts become much more important when a person has some restrictions and limitations but is not completely disabled. Under those circumstances, a battle of vocational experts can become very important.

If an insurer obtains the opinion of a vocational expert, and the expert lists numerous positions that the insured can allegedly perform, then hiring a vocational expert as a rebuttal expert can be useful for the claimant. Most vocational reports relied upon by insurance companies are flawed because the vocational expert performing the analysis is not provided with detailed information about the insured’s work history. A cornerstone of a TSA is an assessment of the duties that the insured previously performed. This failure of the insurance company to provide detailed information about the insured’s employment history to the vocational expert often renders the report highly inaccurate.

A review of the vocational expert’s report may reveal other flaws that may persuade a court to disregard the opinion. For example, if the vocational expert fails to consider all of the insured’s restrictions and limitations, the court may conclude that the report lacks merit, and thus ignore it. See Bruce v. N.Y. Life Ins. Co., 2003 WL 21005313, *4-5 (N.D. Cal. April 28, 2003). The court will also likely discount the vocational expert’s report if the insurer failed to provide the expert with medical reports, or at least a synopsis of the contents therein. See Archuleta v. Reliance-Standard Life Ins. Co., 504 F.Supp.2d 876, 885-86 (C.D. Cal. 2007); Lambert v. CWC Castings Div., 2003 WL 1797916, *2–3 (W.D. Mich. March 14, 2003). Furthermore, courts have found that an insurer’s failure to confirm that the allegedly performable jobs are present in the local economy violates the terms of some disability policies. See, e.g., Kennard v. Means Industries, Inc., 555 F.App’x 555, 557-58 (6th Cir. 2014).

Finally, vocational experts who assess claimants for insurance companies are almost always only provided with the restrictions and limitations that were found to be applicable by the insurance company’s peer reviewers. These peer reviewers, who receive some or most of their income directly or indirectly from insurers, are almost invariably biased in favor of the insurance company and go to often absurd lengths to conclude that a person either is not disabled or, at most, only has minor restrictions and limitations. Given that the vocational experts are only given the limitations that were found to be present by these peer reviewers, another way to attack a vocational expert’s report is to convince the court that the underlying peer reviewer’s analysis is flawed. Garbage in, garbage out. If the court rejects the peer reviewer’s assessment, then anything relying on that assessment becomes useless.
For most disability claims, the real battle is over which medical expert has properly assessed a claimant’s level of disability. However, in some cases, finding a means of effectively attacking a vocational expert’s report can be the difference between convincing a court that an individual is disabled and losing the disability claim because the insurer found that a person could work in his own job or in any other job.

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 Nine of this series, we discuss insurer reliance on sub rosa surveillance, which can be either the death knell to a claim for benefits or strong proof of disability. Sub rosa, a Latin phrase literally meaning under the rose, is a surveillance investigation that takes place in secrecy.

Insurers often use such surveillance when investigating the activities of their insureds, especially when they investigate disability claims. They spend inordinate amounts of money conducting surveillance on benefits claimants. This often results in insurers paying thousands of dollars for a private investigator to track claimants’ movements and videotape claimants outside of their home. Whatever activity a disability claimant is engaged in will be observed and recorded, such as gardening, running errands, going for a walk, going to the gym or attending a doctor’s appointment. Insurers often conduct surveillance when they have their claimants attend an independent medical examination or functional capacity examination, hoping to catch them in activity inconsistent with their claims of disability or their asserted limitations or restrictions concerning activities of daily living.

Typically, insurers will attempt to use surveillance footage to assert that their insureds are capable of working and thus not entitled to disability benefits, often overstating the level of recorded activity or over-relying on it, drawing the conclusion that because of the activities recorded, a disability claimant can work at a full-time job. While this may seem suspect, insurance companies have the right, and indeed the duty, to thoroughly investigate claims. In California, an insurer’s failure to reasonably investigate an insurance claim may result in bad-faith liability. See Egan v. Mutual of Omaha Life Ins. Co., 24 Cal.3d 809, 819 (1979); Guebara v. Allstate Ins. Co., 237 F.3d 987, 996 (9th Cir. 2001).

However, courts have warned insurers against over-reliance on surveillance, particularly where a plaintiff’s reported restrictions are consistent with the video surveillance. Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 633 (9th Cir. 2009) (“[T]hat Plaintiff could perform sedentary activities in bursts spread out over four days does not indicate that he . . . is capable of sustaining activity in a full-time occupation.”); Bertelsen v. Hartford Life Ins. Co., 1 F.Supp.3d 1060 (E.D. Cal. 2014). For example, in Lin v. Metropolitan Life Ins. Co., 2016 WL 4373859 (N.D. Cal. Aug. 16, 2016), defendant MetLife suggested that the insured’s ability to travel on a two-week trip to China was inconsistent with his disability. However, the court disagreed and found that a closer reading of the office note mentioning the trip showed that the plaintiff reported consistent symptoms throughout his trip. As the court said, “[T]he mere fact that Plaintiff traveled to China does not undermine his claim that his conditions were debilitating.” Id. at *8; see also Bertelsen, 1.F.Supp.3d at 1073 (“[T]he Court also notes the inordinate amount of weight Defendant placed on the surveillance information. The Ninth Circuit has admonished district courts to not overly rely on surveillance video, particularly where the restrictions are consistent with the video surveillance.”)

It should be obvious that a videotape showing a few minutes of activity does not most of the time indicate full-time work ability. In Beaty v. Prudential Insurance Co., 313 F.App’x 46, 49 (9th Cir. 2009), the Ninth Circuit rejected the insurer’s attempt to rely on “unsupportable inferences from a surveillance video and reports which show the plaintiff engaging in a variety of normal day-to-day activities” and criticized the insurer’s failure to explain how activities show “she can perform the duties of her occupation.” Other courts have likewise ruled that an overstatement of a claimant’s activities in surveillance footage is improper, and they warned that activities observed for a short amount of time do not necessarily translate into full-time work capacity. For example, in Thivierge v. Hartford Life, 2006 WL 823751, *11 (N.D. Cal. Mar. 28, 2006), the district court held that activities observed “for a couple of hours on five out of six days [that the claimant] was under surveillance does not mean that Plaintiff is able to work an eight-hour[-per-]day job.”

In a recent decision, Black v. Hartford Life Ins. Co., 2019 WL 2422481, *9 (D. Or. June 10, 2019), the District Court of Oregon found that the defendant insurer overstated surveillance findings. The court noted that, of the 16 hours of surveillance, including five hours during which the plaintiff was away from his house, the surveillance company returned less than 16 minutes of footage that was comprised of small clips that frequently lasted less than one minute each. The court found the video in this case to be “ambiguous at most, and misleading at worst.” Id. Further, the court found that the activities depicted “do not show [that the plaintiff] is capable of maintaining work and are not necessarily inconsistent with Plaintiff’s reported limitations. Plaintiff is recorded riding a bus and running errands. These errands include getting a haircut, using ATMs, and purchasing food. Defendant provides no explanation for how these activities might translate to the work environment.” Id. Further, the plaintiff’s treating physician reviewed the video and still opined that the plaintiff was disabled. Id. The court ultimately found that the surveillance video evinced a level of functioning that was entirely consistent with the plaintiff’s own self-reported limitations, and that the defendant insurer’s “overstatement and over-reliance on this surveillance weighs against Defendant’s decision to terminate benefits.” Id. at *10; see Montour, 588 F.3d at 633 (“[S]igns of bias” included Hartford’s decision to “overstate . . .and over-rel[y] on surveillance of Plaintiff,” and “[this] bias infiltrated the entire administrative decision-making process, which leads us to accord significant weight to the conflict.”).

It is important to carefully review the surveillance videos to determine exactly what conduct the claimant is doing and compare that to the claimant’s restrictions and limitations. In another recent decision, Fleming v. Unum Life Ins. Co., 2018 WL 6133859 (C.D. Cal. Nov. 20, 2018), the Central District of California heavily criticized the defendant Unum’s overreliance on surveillance footage. Id. at *8. The court in Fleming noted that bending at the waist and leaning into a car did not relate to the claimant’s restrictions and limitations, as her degenerative disc disorder and resulting neck pain are her primary disabling conditions. Id. The court added, “The fact that Fleming took out the trash or bent down to place a one-pound cooler in her car does not render her capable of her full-time employment as a litigation attorney.” Id.; see Vertigan v. Halter, 260 F.3d 1044, 1050 (9th Cir. 2001) (“This court has repeatedly asserted that the mere fact that a plaintiff has carried on certain daily activities . . . does not in any way detract from her credibility to her overall disability. One does not need to be ‘utterly incapacitated’ in order to be disabled.” (citation omitted)).

The Ninth Circuit is understandably skeptical of insurers’ reliance on brief surveillance footage as alleged proof of a claimant’s capacity to work full time. See Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1162 n.36 (9th Cir. 2001) (affirming the district court’s rejection of video surveillance as alleged proof of work capacity and noting that the footage “did not shed much light on whether she could function full time as a trial attorney”); Fleming, 2018 WL 6133859 at *8.

While surveillance videos can sometimes be fatal to a claim, our firm has found that insurers frequently over-rely on surveillance, making great leaps of logic to conclude that minutes of surveillance means our clients can work at a full-time job. It is crucial to carefully scrutinize each second of the surveillance videos relied upon by the insurer to deny a claim. Then, it is necessary to compare the videos and the stated activities to the claimant’s restrictions and limitations, and even have a doctor or treating physician review the surveillance video and provide an opinion. Claimants should be wary of their actions in public and be mindful that an insurer may have hired a private investigator to surveil their activities. But courts have pushed back on over-reliance of these surveillance videos, understanding that these videos often depict a cursory and biased snapshot of a claimant’s abilities. We have significant experience handling cases in which an insurer over-relies on surveillance to deny a claim. If this has occurred, please contact McKennon Law Group PC for a free consultation so that we may assess your matter.

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 Eight of this series, we discuss the impact of a finding of disability by the Social Security Administration (“SSA”) on a claim for disability benefits that was filed under an insurance policy governed by the Employee Retirement Income Security Act of 1974 (“ERISA”).

Social Security Disability Insurance (“SSDI”) is an important federal program available to many people who pay into the Social Security system. If a person becomes disabled, they are able to file a claim with the SSA for disability benefits. If the claim is denied, as many are, the claimant has the option of appealing the decision. An administrative law judge (“ALJ”) will hear the appeal and rule on whether the claimant is disabled and entitled to benefits.

When it comes to employees who receive disability policies with an insurance company, the impact on a disability insurance claim depends on the type of disability policy a person has. With respect to most individual disability policies (not issued through an employer), these policies serve as separate sources of funding should the person become disabled. Whether or not a person qualifies for SSDI benefits generally does not impact an individual disability claim. However, there are a myriad of different ways in which an SSDI decision can affect a person’s claim for group disability benefits issued through an employer.

The most significant impact an award of SSDI benefits can have on a group disability claim is that an award of SSDI benefits serves as strong evidence that the person is disabled under the group policy as well. The SSDI determination serves as strong evidence, in part, because the SSA has a more stringent standard for finding a claimant disabled than is found in most group disability policies. See Shaw v. Life Ins. Co. of N. Am., 144 F.Supp.3d 1114, 1135 (C.D. Cal. 2015) (“The Ninth Circuit has warned that ‘in some cases, such as this one, the SSA deploys a more stringent standard for determining disability than does the governing ERISA plan.’ Specifically, to receive Social Security disability benefits, Shaw had to show that she was ‘unab[le] to engage in any substantial gainful activity . . . .’ Under the Plan, however, Shaw had merely to show . . . .”); Bertelsen v. Hartford Life Ins. Co., 1 F.Supp.3d 1060, 1063, 1074 (E.D. Cal. 2014) (finding that “the SSA’s definition of disability [was] stricter than” the policy’s definition). Furthermore, the SSA is an independent entity that has no financial stake in the outcome of a claim for benefits. On the other hand, if a claim is approved by a disability insurer, the insurer will be negatively financially affected to having to pay the claimant. An SSDI benefits award is sufficiently strong evidence of disability that, should an insurance company deny a claim for group disability benefits after the claimant has been awarded SSDI benefits, the insurer must explain why it reached a different result. See Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 679 (9th Cir. 2011) (“Evidence of a Social Security award of disability benefits is of sufficient significance that failure to address it offers support that the plan administrator’s denial was arbitrary, an abuse of discretion. Weighty evidence may ultimately be unpersuasive, but it cannot be ignored.”).

Claimants must be warned, however, that an award of SSDI benefits does not mean that the insurer must pay under a group disability plan. The SSDI award merely serves as strong evidence. See Maher v. Aetna Life Ins. Co., 186 F.Supp.3d 1117, 1126 (W.D. Wash. 2016 (“Maher later received an award of SSDI benefits which, although not binding upon the Court, is evidence weighing in favor of her meeting the Plan’s definition of disability.”). At times, the insurer and court may state that the evidence in the record before it is insufficient to establish disability regardless of what the SSA found. The court and insurer want additional evidence. Even in those circumstances, the SSDI process can help an insured. For example, during the process of acquiring SSDI benefits, the claimant may have undergone medical examinations. Submitting the results of these examinations to the insurer may help the insured establish entitlement to benefits under the group disability plan. Regardless of an award of SSDI benefits, a claimant must take care to build a strong record and submit all relevant evidence to the insurer while pursuing their group disability claim.

Of course, an unfavorable decision by the SSA can harm a claimant’s chances of obtaining SSDI benefits. Many judges look at such a decision and will be persuaded by the ALJ’s findings. While an ALJ’s decision does not control, there are exceptions to this general rule, but they are rare. See Parr v. First Reliance Standard Life Ins. Co., 2017 WL 1364610 (N.D. Cal. Mar. 31, 2017) (granting summary judgment for the insured in a dispute over group disability benefits even though the insured was denied SSDI benefits).

In addition to the evidentiary aspect of an award of SSDI benefits, an insured must also understand the financial implications of such an award. Most group disability policies include clauses that state that the insurance company may deduct the value of payments for SSDI benefits from any payments to the insured issued under the group policy. As such, it is in the insurer’s best interest to encourage a claimant to obtain SSDI benefits. Insurers not only encourage a claimant to apply for SSDI benefits, they often require that disability claimants apply. If they do not, then they will estimate an offset and deduct it from the amount of any benefits owed to the claimant.

A simple example helps to illustrate why an insurer would want such an award:

A claimant earns $100,000 a year. The group disability policy provides that the insurance company will pay 60% of that salary, $60,000, if the insured becomes disabled. That comes to $5,000 per month in group disability benefits. However, the person may also potentially receive $2,200 per month in SSDI benefits. Under the policy, the SSDI benefits are deductible. Therefore, the insurer need only pay $2,800 per month if the person is awarded SSDI benefits.

As the above example makes clear, there is a strong incentive for insurance companies to require insureds to seek out SSDI benefits. If the benefits are awarded, the insurer need only pay a fraction of the original benefits. If the SSDI claim is denied, the insurer acquires some evidence to assist it in denying the insured’s claim. In short, the SSDI process is a win/win scenario for the insurance industry. It is especially a win-win for the insurer when they encourage their claimant to apply for SSDI benefits, then they are awarded and then the insurer denies the disability claim anyway. Believe it or not, we see this occur often. That is when a disability claimant will need the assistance of experienced disability attorneys like McKennon Law Group PC.

The Basics of an ERISA Life, Health and Disability Insurance Claim – Part Sixteen: State Law Pre-emption

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