ERISA - Health Insurance Archives

In the case of Irina Morris v. Aetna Life Insurance Company, the Ninth Circuit Court of Appeals made a significant ruling that favors ERISA plan participants. The court’s decision in Bafford v. Northrup Grumman Corp. had previously established that a third-party administrator’s incorrect plan benefit calculation is not a fiduciary duty breach if it is within the framework of a preset policy set by another. Insurers and administrators relied on this ruling to avoid liability for miscalculating plan participants’ benefits.

However, the Morris case expanded the definition of fiduciary function and increased the potential liability for insurers and administrators. The court clarified that an ERISA insurer can still be held liable for fiduciary duty breaches if they exercise discretion in other misconduct related to ministerial benefit calculation errors that harm the plan participant.

Aetna argued that Bafford controlled the outcome of the case because their error was a ministerial calculation mistake. The court rejected this argument, emphasizing that Aetna’s subsequent actions, which were discretionary and central to Morris’s injury, qualified as fiduciary functions.

The court identified several instances where Aetna performed fiduciary functions involving discretion after its calculation error. They provided Morris with individualized consultations and engaged in extensive communication regarding her monthly plan benefit. Unlike the automated online mechanism in Bafford, Aetna’s benefits specialists consulted with Morris by phone, sent letters for her to share with lenders, and communicated with her financial institutions.

Aetna’s communication of the incorrect benefit amount to Morris and her lenders was deemed a fiduciary function due to the extent of Aetna’s involvement in her financial life. Despite Morris questioning the accuracy of the benefit calculation, Aetna affirmed the erroneous amount for nearly a decade, leading Morris to make significant financial decisions based on the misinformation.

The court also ruled that Aetna exercised discretion and performed a fiduciary function when gathering Morris’s earnings information and interpreting the plan’s terms to determine her monthly benefit amount. This was different from the ministerial calculations in Bafford, where a third-party administrator followed a preset online formula without discretion.

The Morris court restated the designated Ninth Circuit ERISA fiduciary duty law, emphasizing that a breach of fiduciary duty must occur in connection with the performance of a fiduciary function. The key question in fiduciary breach cases is whether the fiduciary was performing a fiduciary function when the complained action took place.

The ruling in the Morris case expands the potential liability for ERISA plan insurers and administrators, highlighting the importance of exercising their discretion properly to act in the best interests of plan participants. With the help of McKennon Law Group PC, an insurance and ERISA litigation law firm in Newport Beach, California, Irina Morris was able to get the justice she rightfully deserved for her case.

McKennon Law Group PC has a long track record of successfully representing and fighting on behalf of clients dealing with insurance and ERISA-related disputes. With a pay-if-you-win structure, there is hardly any risk to seeking out their help – no matter how big or small your insurance dispute is. Get in touch with McKennon Law Group PC today at 949-504-5381 to book an initial consultation.

It should not surprise anyone that health insurance companies are motivated and incentivized to deny coverage of costly surgical procedures. Most insurers deny health insurance claims by claiming that a recommended surgery is “not medically necessary” or that the claimant “did not try conservative treatment” prior to undergoing surgery. Does a health insurer abuse its discretion by denying a claim without providing a reviewing doctor with important records that would assist in proving medical necessity? The Fourth Circuit Court of Appeals recently answered this question in the affirmative, ruling that insurers who do not provide important records to their medical reviewers abuse their discretion by denying claims on the grounds that medical procedures are not medically necessary. In Garner v. Central States, __ F.4th __, 2022 WL 1160386 (4th Cir. 2022), the claimant, Dorothy Garner, suffered from back and neck pain that continued to increase despite her taking medication and treating with postural exercise like yoga. Her doctor recommended surgery, based on the results of an MRI. To cover the cost of the surgery, Ms. Garner submitted a claim with Central States as a beneficiary of her husband’s ERISA employee health benefit plan sponsored by United Parcel Service, Inc.

Central States denied Ms. Garner’s claim on the grounds that her $90,000 surgery was not “medically necessary” under the plan provisions. This decision was based on an independent medical review (“IMR”) of Ms. Garner’s claim, conducted by Dr. Francesco Serafini, a physician who is Board-certified in general surgery. But the records that Central States provided to Dr. Serafini for his IMR did not contain either the MRI report that had led her doctor to recommend surgery or his office notes that explained this recommendation. Without access to these missing documents, Dr. Serafini concluded that there was no basis in the provided records to justify Ms. Garner’s surgery, and this conclusion formed the basis for Central States’ denial letter.

Ms. Garner submitted another appeal after having a physician review her file, and Central States conducted another IMR of Garner’s claim, this time by Dr. Brad Ward, a physician who is Board-certified in neurological surgery. Unlike Dr. Serafini, Dr. Ward had full access to Ms. Garner’s medical records, including the MRI report and the office notes. But Dr. Ward also concluded that the surgery was not medically necessary, relying in part on the fact that Ms. Garner had not taken “any conservative measures other than medication.” Central States thus upheld its denial decision.

Ms. Garner filed an ERISA lawsuit against Central States, seeking coverage under the plan for her surgery. The district court, ruling on the parties’ summary judgment motions, found for Ms. Garner because Central States “had not engaged in a ‘reasoned and principled’ decision-making process.” The court’s ruling was based on three points: (1) Central States had not provided Dr. Serafini with the “critically important” MRI records and office visit records, (2) “nothing in the plan required covered individuals to exhaust conservative treatment options before undergoing surgery” and (3) it was undisputed that Garner had unsuccessfully tried postural exercises to relieve her pain.

On Central States’ appeal of the district court’s finding, the Fourth Circuit reviewed Central States’ claim denial to determine whether it had abused its discretion under the plan by denying Ms. Garner’s claim. Even under this abuse-of-discretion standard, which affords deference to Central States in its claims decisions, the Court affirmed that the district court’s decision to deny her claim was an abuse of discretion. The Court provided various substantive items that supported its finding.

First, the court noted that Central States “utterly failed to disclose” Ms. Garner’s pertinent medical records to Dr. Serafini, including her MRI results and her doctor’s notes explaining his surgery recommendation. The court found that these documents “were critical” — the MRI report because it established the underlying medical basis for her surgery, and the office visit notes because they explained why her doctor recommended the surgery. Notably, the reviewing physician had complained of a lack of information during the initial review, and after he completed his report, Central States did not follow up with him or provide him with the MRI or doctor’s notes.

While the Court stopped short of concluding that Central States “acted in bad faith or deliberately withheld documentation,” it emphasized that under ERISA, Central States owed Ms. Garner a “deliberate, principled reasoning process,” but that it had failed to provide such a review. Central States argued that it cured the flaws in its initial review by providing all of Ms. Garner’s relevant records, including the MRI report and the doctor’s notes, to Dr. Ward. However, the Court did not accept this reasoning because Central States had repeatedly indicated that it relied on both doctors’ reports in upholding its decision. Central States’ denial was not “a reasoned determination” because it relied on Dr. Serafini’s report that did not consider the MRI report or the doctor’s notes.

Second, the Court focused on Central States’ basing its denial on Ms. Garner’s not trying conservative treatment before having surgery. The record indicated that Ms. Garner “had tried postural exercises such as yoga without relief.” Also, the reason why she had the MRI done was that her pain had continued “despite her efforts at conservative treatment over the past several months,” including medication. Central States could not require Ms. Garner to receive conservative treatment “as an absolute condition” to finding that her surgery was medically necessary. By not allowing Central States to “add a new term to the plan, a term for which Garner did not bargain, and about which she lacked any notice,” the Court precluded it from using subjective terminology to “move the goal posts” by requiring ever more “conservative” treatment in order to find her surgery to be medically necessary.

Third, the court observed Central States’ persistence in attempting to justify its improper denial of Ms. Garner’s claim through vague terms. The court noted that Central States “repeatedly failed to handle Garner’s claim in a sensitive and fair-minded manner.” After “no fewer than three opportunities to give [Ms.] Garner’s claim the reasoned consideration that it deserved…[i]t would neither encourage the careful and efficient resolution of benefits claims, nor would it be fair to [Ms.] Garner, to permit Central States a fourth opportunity. Three strikes are enough.”

While the court’s reasoning hints that insurers have significant leeway in their claims review processes under the abuse-of-discretion standard of review, insurers must use a fair and reasoned claim review process in deciding claims. When they do not do so, the courts will not condone this conduct.

The claims review process can be daunting for claimants who are simply trying to obtain much-needed care or treatment, and even more so when insurance companies use unfair means to justify denying legitimate health insurance claims. McKennon Law Group PC is highly experienced in handling denied ERISA health insurance claims, especially those based on an alleged lack of medical necessity.

If your claim for health insurance benefits has been wrongly denied, or if you are disputing some other action taken by your health insurance company, a California health insurance claims attorney such as McKennon Law Group PC may be able to help.

When you purchase health insurance, privately or through your employer, you trust that your medical expenses – except for co-payments and deductibles – will be paid by the insurance company.

But what can you do if a claim submitted to your health insurance provider is rejected or if the insurance company offers you an amount that is far below what the claim is actually worth? We discuss this below. But first, what are the most common types of denials by health insurers? They are:

denied payment for care already provided based upon an exclusion in the policy;
your care was not medically necessary or required;
you are ineligible for the benefit;
your treatment is “experimental;”
you have a pre-existing condition;
another insurer is primarily liable to pay for the medical procedure; and
prior consent for the treatment was not obtained.

What Can Happen If Your Health Insurance Claim Is Denied?

If your claim is denied or if the insurance company offers to pay a lesser amount than what the claim is worth, you may be responsible for paying these medical expenses out-of-pocket. This could mean serious financial hardship – even bankruptcy – for far too many people.

Disputes between policyholders and health insurance providers are becoming more frequent. Disagreements may arise over a denial of coverage for services already provided, a refusal to approve a procedure or a visit to a specialist, or an incorrect charge for services or office visits.

It is important to know exactly what steps to take when you dispute a charge or disagree with a decision made by your health insurance provider. If you continue reading, you will learn what steps to take should this happen to you, and you will also learn more about your rights as a health insurance policyholder.

What Should You Do When Faced With a Health Insurance Dispute ?

The first step you should take is to make certain that you know what your health insurance policy covers and does not cover. You should make sure that you fully understand what procedures you must follow in order to comply with your policy and retain your coverage.

If you are familiar with your policy’s details, you will know if your health insurance complaint will be considered legitimate, and if it is, you will be able to point to the policy language that demonstrates that you are right and the insurance company is wrong.

To dispute a charge or a coverage decision, you may want to start by contacting the claims representative who denied the claim or the insurance company’s customer service department. You may even ask for intervention by a company supervisor. The company may simply have made a mistake. Insurance company personnel may be able to reverse mistaken charges or approve services that were initially denied.

If you cannot obtain reversal of its decision, ask the insurer for a precise written explanation of the reasons why the claimed services were not authorized or why the coverage was denied.

If your denied health insurance claim cannot be resolved by working with the insurer informally, then it is time to contact a California health insurance claims lawyer such as the McKennon Law Group PC. The attorneys at McKennon Law Group PC can help you by appealing the insurance company’s decision to deny your insurance claim. We can also file litigation to request a court to reverse the insurer’s decision.

When May You Appeal Directly to the Insurance Company?

Federal law establishes the following deadlines for insurance companies to review and decide formal appeals:

sixty days for denials of services that have already been provided
thirty days for denials of nonurgent care that has not yet been provided
seventy-two hours for denials of urgent care services

What Steps Can You Take If Your Appeal Is Denied?

If your appeal is denied, you are entitled to a full explanation, and you have the right to take legal action. If the company made a mistake or violated the terms of your policy, a California health insurance claims attorney such as McKennon Law Group PC can fight for your rights and help you recover your wrongly denied insurance benefits.

If your policy was obtained through a private employer, it is likely governed by the Employee Retirement Income Security Act of 1974 (ERISA). Under ERISA’s restrictions, you may sue only for the policy benefits, attorneys’ fees, and interest on past-due benefits.

If your policy is not governed by ERISA, and if your health insurance company was operating in “bad faith” when it rejected your claim, you may sue for the policy benefits, the “consequential damages” caused by the insurance company’s bad faith conduct, punitive damages, attorneys’ fees, emotional distress, and interest on past-due benefits.

How Will an Insurance Claims Lawyer Help You?

Do not accept an offer from the insurance company for an amount that does not compensate you fully, fairly, and reasonably. When you have reached the point that you should no longer deal with the insurance company on your own, it is best to have a California health insurance claims lawyer such as McKennon Law Group PC working for you from the moment you learn your claim has been denied and informal attempts at resolution do not work. Your claims lawyer can help you appeal directly to the insurance company, negotiate with the company on your behalf, and if necessary, file a lawsuit against the insurance company.

You may be tempted to take a quick offer from the insurance company, especially if you cannot yet return to work and you need money, but settling for less than your claim is worth also means that you will be ineligible to take further legal action or seek additional compensation for your claims.

It Costs Nothing to Begin the Legal Process with McKennon Law Group PC

We will review your claim during a no-cost, no-obligation first legal consultation. As your insurance claims attorneys, you pay us nothing unless and until we recover health insurance benefits on your behalf.

Every health insurance dispute is unique. Take advantage of that free first legal consultation to receive the personalized legal advice you need and to learn how the law applies to your own circumstances.

The important thing to remember is that you should not let the insurance company have the last word regarding your health insurance claim. If you cannot resolve your dispute informally and your case goes to court, a court of law will have the last word.

It is imperative that you are represented by an insurance claims attorney who will effectively and aggressively fight on your behalf, who knows what it takes to prevail, and who will bring the case to its best possible outcome. You should contact us as soon as possible.

The McKennon Law Group PC periodically publishes articles on its California Insurance Litigation Blog that deal with frequently asked questions in the insurance bad faith, life insurance, long term disability insurance, annuities, accidental death insurance, ERISA and other areas of the law. To speak with a highly skilled Los Angeles long-term disability insurance lawyer at the McKennon Law Group PC, call (949) 387-9595 for a free consultation or go to our website at www.mckennonlawgroup.com and complete the free consultation form.

Which state law will govern your disability insurance claim? That often is a very important question. Whereas each state has its own collection of laws governing insurance companies and various types of insurance policies, ERISA is a uniform federal law that applies throughout the entire country. ERISA preempts state law under the Constitution’s Supremacy Clause. However, in certain circumstances, some state laws are not preempted and therefore apply to policies governed by ERISA. Given that ERISA litigation often entails an insured and an insurer who are domiciled/reside in different states, an important question naturally arises: Which state’s laws apply?

An important aspect of any litigation over the denial of benefits under a policy governed by ERISA is the standard of review. This affects life insurance, disability insurance and even medical insurance. We have previously written about the standard of review. As we noted in a previous blog, the standard of review determines how much deference an insurance company has to deny a claim and how difficult it will be for an insured to establish their entitlement to their benefits in any resulting litigation. Many states have laws firmly establishing that, even under policies governed by ERISA, the standard of review is always de novo, a standard that is more favorable to the insured/plan participant. Not all states have those laws. In light of this difference between states, the answer to the above question about the application of state law can potentially become significant. This is something that the insured in Earle v. UNUM Life Insurance Co. of America, 2020 WL 4434951 (C.D. Cal. July 23, 2020), learned firsthand.

Ms. Elaine Earl had an accidental death and dismemberment (“AD&D”) policy with UNUM. She acquired her policy through her employment at the University of Southern California. This policy provided that she would receive a benefit under the policy if she suffered one or more various types of injuries, such as going blind. One day, while walking, she fell down stairs. Initially, her injuries did not seem particularly severe. However, over time, she started to develop significant vision problems that eventually resulted in her becoming legally blind. After a protracted administrative appeals process, UNUM denied her AD&D claim. Ms. Earl sued to enforce her rights under the AD&D policy.

Ms. Earl lived in California. Unum is a legal entity of Maine. A Summary of Benefits for the policy contained a choice-of-law provision that stated that the laws of Maine apply to the extent not preempted by federal law. Ms. Earl wanted California law to apply for one key reason: Under the law of California, the standard of review for her claim would be de novo, while if the law of Maine applied, then the abuse-of-discretion standard would apply. In short, if California law applied, Ms. Earl would have a better standard of review available to her in litigation. As such, a key question of the case was whether a clause in the policy stating that the law of Maine applied was valid.

The district court ruled that Maine law applied. The district court explained that “The Ninth Circuit has consistently held that ‘[w]here a choice of law is made by an ERISA contract, it should be followed, if not ‘unreasonable or fundamentally unfair.’ Wang Labs., Inc. v. Kagan, 990 F.2d 1126, 1128 (9th Cir. 1993)[.]” Id. at 10. The district court concluded, “that it would not be ‘unreasonable or unfair’ to enforce the Maine choice of law provision in the Summary of Benefits.” Id. at 11. The district court based its reasoning on the fact that USC, the contracting employer, was aware that it was contracting with Unum, an entity from Maine, and that the contract was quite clear as to what law applied. It also emphasized how it was reasonable, in the district court’s opinion, for an insurer domiciled in another state to insist that its law applies.

Unfortunately for Ms. Earl, this conclusion of law resulted in the more stringent abuse-of-discretion standard being applied to her case. The district court granted summary judgment for UNUM, concluding that Unum had not abused its discretion in denying her claim.

For many areas of the law, the differences between states can be minimal. In those situations, a choice-of-law provision does not significantly affect the case. However, under certain circumstances, such as those related to the standard of review, the differences can determine whether an insured will receive benefits versus being sent home with nothing.

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 a recent decision by the U.S. District Court for the Northern District of California, Bain v. Oxford Health Insurance, 2020 WL 808236, the Court held that it is an abuse of discretion for an insurance company to rely on unreasonable medical necessity guidelines, to decide benefit claims, when these guidelines are inconsistent with the standards of care generally accepted in the field of mental health treatment. In Bain, the Plaintiffs filed a lawsuit against the plan administrator of their health insurance plan and its affiliate United Behavioral Health (collectively, “UBH”) after their daughter’s claim for mental health services was repeatedly denied. In making its coverage determinations for mental health services, UBH utilized “Level of Care Guidelines” (“LOC Guidelines”), which were not formally part of the Plan.

While the Bain’s lawsuit was filed in July 2015, it was stayed in April 2017 due to another class action lawsuit, Wit v. United Behavioral Health, No. C-14-2346 JCS (N.D. Cal.) pending against UBH. In Wit, the plaintiffs asserted that UBH breached its fiduciary duty because it developed LOC Guidelines which were “far more restrictive than [the standards of care] that are generally accepted [in field of mental health treatment] even though Plaintiff’s health insurance plans provide for coverage of treatment that is consistent with generally accepted standards of care, and by prioritizing cost savings over member’s recovery of benefits.” Plaintiffs maintained that UBH “improperly adjudicated and denied [their] requests for coverage by … relying on the overly restrictive [LOC] Guidelines.”

On the claim for breach of fiduciary duty, the Judge in Wit found in favor of the plaintiffs and held that “by adopting ‘unreasonable’ Guidelines that do not reflect generally accepted standards of care, UBH breached its fiduciary duty.” The LOC Guidelines were found to be flawed as follows: (1) The LOC Guidelines significantly narrowed the scope of coverage by excessively emphasizing “acute symptoms and stabilizing crises while ignoring the effective treatment of underlying conditions;” (2) The LOC Guidelines “actively seek to move patients to the least restrictive level of care at which [patients] can be safely treated, even if a lower level of care may be less effective for that patient;” (3) The LOC Guidelines fail to address the unique needs of children and adolescents; and (4) The LOC Guidelines “deviated from generally accepted standards of care by using an overly broad definition of ‘custodial care’ and an overly narrow definition of ‘active’ treatment and ‘improvement’.”

Based on the decision in Wit, the Bains filed a Motion for Judgment asserting that they were entitled to judgment on their claim based on the ruling in Wit, specifically because (1) in Wit, the Judge found in favor of the plaintiffs on their claim for benefits and (2) that the doctrine of collateral estoppel bars UBH from relitigating the Bains’s claim.

The Bains’s Motion for Judgment was denied in part and granted in part. The Court did agree with the Bains that it should give collateral estoppel effect as to the “standard of review” to be applied to UBH’s decision to deny benefits. The Wit court had previously determined the standard of review to be applied is abuse of discretion, meaning that the UBH’s denial would only be overturned if it was not reasonable. The Bains argued that the Court’s review for abuse of discretion should factor in a significant conflict of interest, since UBH is both paying out on claims of benefits and deciding claims of benefits. Therefore, the Bains argued the LOC Guidelines were based on financial considerations rather than medical considerations. The Court agreed there was a conflict of interest as to the LOC Guidelines and applied a significant amount of skepticism to UBH’s decision to deny the Bains’s benefits. The Court in Bains ultimately held that UBH abused its discretion in denying the Bains’s claim for benefits and remanded the case to the plan administrator for a renewed evaluation.

Lack of medical necessity is the most frequent basis for health insurance denials. As Bains demonstrates, an insurer’s medical necessity guidelines may be out of step with reasonable standards in the medical community. Fighting with your insurer over a legitimate claim for health, life, long-term disability or other insurance benefits can be a daunting task. If you believe your claim for benefits was unjustly denied, please contact us.

McKennon Law Group, Irina Morris Takes on Aetna Life Insurance