ERISA Archives - Page 26 of 56 - McKennon Law Group

Discovery in De Novo Review ERISA Cases: Court Grants Plaintiff’s Request for Bias Discovery Concerning Paper Reviewing Consultants

In ruling on an action to recover ERISA benefits, a court generally considers only the evidence contained in the administrative record. However, in certain circumstances, a plaintiff in an ERISA case may be able to introduce evidence outside of the administrative record either by way of discovery or a motion to augment the administrative record.The Ninth Circuit has established guidelines for when the admission of new evidence is appropriate. “[T]he district court should exercise its discretion to consider evidence outside of the administrative record ‘only when the circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.’” Opeta v. Nw. Airlines Pension Plan for Contract Emp., 484 F.3d 1211, 1217 (9th Cir. 2007) (emphasis in original).

Recently, in the matter of Kip Jones v. Life Insurance Company of North America, et al., 2020 WL 2126498 (D. Ariz.May 5, 2020), an Arizona District Judge granted the plaintiff’s request to conduct discovery related to the potential bias of the plan administrator’s medical experts that were utilized during the underlying claims review process. In Jones, the plaintiff filed a lawsuit against Life Insurance Company of North America (“LINA”) after it determined that he no longer met the policy’s definition of “disabled” and, as a result, terminated his life insurance waiver of premium benefit. LINA’s decision relied entirely on paper reviews from its reviewing experts. The plaintiff sought discovery into LINA’s relationships with the vendors that provided the reviewing experts and its history with the experts themselves.

In permitting the requested discovery, the Court recognized that the outcome of the case turned on the credibility of the experts and that “where an expert or the third-party vendor who supplies that expert has a long-standing relationship with or receives substantial compensation from a carrier or industry, and overwhelmingly renders opinions in their favor, such evidence might be important in accessing that expert’s bias and credibility.”

The Court also found that the plaintiff’s unchallenged representations about LINA’s relationship with its vendors and their experts raise a concern regarding the fairness of LINA’s claims handling and that this concern warranted discovery into LINA’s relationships with those vendors and the experts who rendered opinions upon which the decision to terminate plaintiff’s claim was based. In addition, the Court rejected LINA’s argument that the requested discovery was not proportional to the needs of the case because the plaintiff would neither win a large amount of money, nor vindicate vitally important personal or public values. The Court found that the life insurance waiver of premium benefit was a valuable benefit and that the plaintiff’s qualification for the benefit was an important issue at stake in the action.

Ultimately, the Court found that discovery into the potential bias of experts rendering opinions was relevant and met the high burden for discovery in an ERISA case. The Court explained:

LINA will be required to respond to discovery that delves into the number of times it retained and the amount of money it paid to third-party vendors in disability and LWOP claims and medical reviewers utilized here, LINA-generated performance evaluations of these vendors and medical reviewers, the number of times they concluded that a claimant could perform work, LINA-generated performance evaluations for LINA employee Mary Faltaous, and any guidelines and manuals used by LINA in evaluating this claim . . .. The Court finds that LINA has the resources to respond to the discovery requests and is the only party with access to the requested discovery. The Court further finds that the discovery ordered herein is relevant and proportional to the needs of the case and that the burden or expense of the discovery does not outweigh its likely benefit.
Id. at *5.

The plaintiff in Jones also sought to supplement the administrative record with a letter from his treating physician responding to LINA’s doctors’ record reviews. The plaintiff asserted that LINA had not provided him the opportunity to respond to the record reviews during the appeal process. LINA argued, among other things, that ERISA regulations do not contemplate the disclosure of reviewing doctors’ opinions prior to the appeal being decided. The Court rejected this argument and granted the plaintiff’s motion to supplement the administrative record. In granting the motion, the Court relied on Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666 (9th Cir. 2011), which found that failing to furnish medical reports violated ERISA by denying the claimant’s physicians the opportunity to submit written comments and perform additional examinations.

Although discovery in ERISA cases is generally limited, the Jones case establishes an important trend that, in certain circumstances, courts will permit discovery in de novo review cases to uncover insurance company bias. ERISA claimants seeking to conduct discovery into this issue can look to the Jones case as excellent support for allowing such discovery.

District Court Chastises Aetna for Committing Several ERISA Violations Through Its Denial of Disability Claims

Facing a long-term disability (“LTD”) claim, insurers often attempt to tip the scales against insureds in order to deny legitimate claims for benefits. This imbalance can become especially pronounced where an insured primarily suffers from disabling conditions that are subjective in nature and difficult to objectively measure. Instead of accepting the statements of physicians who certify an insured’s disability claim, insurance companies often deny claims due to a lack of “objective evidence” or perform a “paper review” of an insured’s medical file by contracting with “independent” peer-review medical vendors who supply physicians to review claimants’ medical files. These vendors and physicians have an inherent bias in favor of insurance companies, as they are financially dependent upon insurance companies and routinely contradict the opinions of insureds’ treating providers.

In a recent LTD decision involving Aetna Life Insurance Company (“Aetna”), Woolsey v. Aetna Life Ins. Co., 2020 WL 1083932 (D. Ariz. Mar. 6, 2020), the District Court of Arizona, under an abuse-of-discretion standard, found that Aetna had committed several violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), entitling the matter to be remanded. The court found that Aetna failed to effectively and meaningfully communicate with the plaintiff, failed to consider the comorbid effect of his disabling conditions, arbitrarily dismissed the conclusions of his treating providers, failed to address the requirements of the plaintiff’s specific vocation, violated its duty to investigate, failed to disclose paper-review reports to the plaintiff and failed to explain what was necessary for him to perfect his appeal. The decision highlighted several of the tactics that we routinely see group-disability insurers use to deny ERISA claims.

Plaintiff Michael Woolsey worked as a financial advisor for UBS Financial Services until he made a claim for short-term disability (“STD”) and LTD benefits with Aetna on January 6, 2016, due to issues with migraines and depression that precluded him from working in his own occupation. Id. at *1. Woolsey also successfully underwent treatment for prostate cancer and experienced suicidal ideations. Due to the nature of many of Woolsey’s disabling conditions, treating notes largely reflected his own self-reported symptoms. Aetna initially approved his STD claim based on representations from his primary-care provider, a physician’s assistant who referred him to a neurologist and psychologist.

Following a transition from STD to LTD benefits, Woolsey’s claim for LTD benefits was denied on July 1, 2016. Woolsey appealed Aetna’s determination. He submitted additional medical records as well as a supportive disability letter from his neurologist who noted that Woolsey “clearly remains unable to work because of his frequent headaches” and “continues to remain disabled.” Id. at *4. During its appeal review, Aetna contracted the third-party vendor Reliable Review Services (“RRS”) to conduct paper reviews of Woolsey’s file. Despite the support of Woolsey’s treating providers, the two reviewers found his record to be insufficient to support a determination of “significant impairment.” Aetna then denied Woolsey’s appeal on December 15, 2016, upholding its LTD benefits denial. The reviewers determined that specific restrictions that would prevent Woolsey from working were not supported, because of a lack of clinical correlation for such restrictions. Id.

The court noted that Woolsey’s medical records prior to his LTD claim were “shockingly thin,” and that Woolsey had attempted to return to work. The court also noted that Aetna initially denied his claim due to a lack of “objective clinical examination findings to support subjective symptoms.” Id. at *8-9. However, the court found several ERISA violations that entitled the matter to be remanded back to Aetna to cure its defects.

First, the court criticized Aetna’s reliance on the opinions of RRS’ paper reviewers. Id. at *10. The court stated that “undoubtedly, . . . RRS is well-compensated for its services. Its share of Aetna’s independent-review business increased from 2015 to 2016.” Id. The court further found that the statistical evidence of Aetna’s relationship with RRS supported a finding common in ERISA cases: that independent reviews are prone to the same conflicts of interest that afflict ERISA plan administrators.

In fact, RRS touts on its Website that “Disability plans are serviced through independent peer review, which provides clinical expertise to support plan decisions.” (Emphasis added). This is not surprising; insurers like Aetna are its main source of income. If RRS only provided opinions that had an inherent bias in favor of insureds, it would surely go out of business. Its profit-driven business structure is exactly the reason why courts routinely dismiss these biased peer reviewers’ opinions in favor of the opinions of the doctors who had actually treated insureds.

The court further criticized Aetna’s paid consultants, who failed to consider the aggregate effect of Woolsey’s conditions, but instead deferred to other physicians for assessments in areas outside of their areas of expertise. Id. at *10. The court thus found a “procedural violation for Aetna’s failure to consider the possibility that the conditions’ combined effect was disabling.” Id. The court also noted the paper reviewers’ dismissive attitude toward Woolsey’s treating providers, evidenced by how they “gave short shrift to, or fail to address entirely [Woolsey’s doctor’s] observation that [Woolsey] ‘clearly remains unable to work.’” Id. The court found that more deference to Woolsey’s treating providers’ opinions was warranted and that the RRS paper reviewers’ dismissive treatment of Woolsey’s treating providers’ opinions was irregular. Id., citingC.F.R. § 2560.503-1(h)(2)(iv) (requiring plan administrators to consider documentation submitted by a claimant at the appeal stage).

In addition, the court in Woolsey criticized Aetna’s deficient and inadequate communication with the plaintiff. The court found that “Aetna engaged [the plaintiff] in dialogue regularly, but not meaningfully.” Woolsey, 2020 WL 1083932 at *12, citing Booton v. Lockheed Medical Ben. Plan, 110 F.3d 1461, 1463 (9th Cir. 1997) (determining that what ERISA, “[i]n simple English[,] . . . calls for is a meaningful dialogue between ERISA plan administrators and their beneficiaries” such that “if the plan administrators believe that more information is needed to make a reasoned decision, they must ask for it.”) While Aetna communicated in part with Woolsey’s treating providers, the court noted that “Aetna failed to disclose those reports to [the plaintiff] and explain what was necessary to perfect his appeal ‘in a manner calculated to be understood.’” Id.,citing 29 C.F.R. § 2560.503-1(g)(1). The court further found that Aetna had violated its duty to investigate when it largely discredited or ignored the opinions of Woolsey’s treating providers, who concluded that he was unable to work. Id. at *13.

The Woolsey case underscores the tactics that Aetna and other group disability insurers use to deny disability claims. We often seen insurers deny a claim for disability benefits after discrediting a claimant’s subjective accounts of disability (while implicitly demanding objective evidence of a condition for which no objective results could exist), relying on paper reviewers to deny a LTD claim, hiring biased and financially conflicted vendors to conduct a paper review of a claimant’s medical file, discrediting the opinions of treating providers (who concluded that a claimant is unable to work), failing to furnish copies of paper reviewers’ reports to the claimant and failing to engage in a meaningful dialogue with claimant. Woolsey sheds light on these insurer-friendly tactics and indeed found them to be procedural ERISA violations. Hopefully, courts encountering similar insurer tactics to deny disability claims will respond to them with similar skepticism as the Woolsey court did here.

If your disability insurer denied your claim for STD or LTD benefits, please contact our firm for a free consultation. We have extensive experience with handling the denials of ERISA STD and LTD claims.

Coronavirus: California Insurance Commissioner Orders Policyholder Safeguards

Coronavirus, or COVID-19, has hit California extremely hard. Since the outbreak, there have been many questions from clients regarding what kind of impact the novel coronavirus (COVID-19) will have on the ability of policyholders to maintain and utilize their insurance policies. While the situation continues to change from day to day, on April 3, 2020, the California Insurance Commissioner, Ricardo Lara, issued a “NOTICE RE: Extension of Policyholder Deadlines that Impact Claims or Coverage Due to the current State of Emergency Caused by Coronavirus (COVID-19) Outbreak” as an effort to protect policyholders during these uncertain times.

Commissioner Lara has instructed all insurance companies to stop enforcing policy or statutory deadlines on policyholders for claims or coverage until 90 days after the COVID-19 state of emergency has ended. The notice states, “Commissioner Lara now finds it necessary to issue this Notice to protect policyholders from losing, limiting, or waiving policy benefits, as a result of the current national state of emergency.”

This Notice quickly follows Commissioner Lara’s March 18, 2020 Notice, which requested all insurance companies to provide their policyholders with at least a 60-day grace period to pay insurance premiums. This is an action taken by the Commissioner to ensure policies are not canceled for nonpayment of premium due to the national COVID-19 public health emergency.

While the COVID-19 pandemic is a circumstance beyond anyone’s control, it is comforting that the California Department of Insurance is working to protect your ability to maintain and use your insurance policies. If you have a problem with a claim under your disability, life, health, accidental death, ERISA or long-term care insurance matter, please contact us.

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California Supreme Court to Review the Court of Appeal’s Ruling in McHugh v. Protective Life Insurance

In the October 2019 matter, McHugh v. Protective Life Insurance, 40 Cal.App.5th 1166 (2019) (“McHugh”), the California Court of Appeals ruled that Insurance Code Sections 10113.71 and 10113.72 only apply to policies issued or delivered after January 1, 2013. This was an unfortunate ruling that did not protect insureds who have paid premiums for years and who may become too sick to pay a premium, thus allowing a policy lapse at the time the insured needs the life insurance the most.

California Insurance Code Sections 10113.71 and 10113.72 primarily do three things: (1) mandate that life insurance policies issued or delivered in California have a 60-day grace period; (2) set forth notice of pending lapse and termination requirements; and (3) require insurers to provide notice to applicants and annual notice to policyholders of their right to designate someone other than themselves to receive lapse notices. The latter requirement, which applies only to individual life insurance policies, was an important addition to the California Insurance Code because it allows policyholders to designate persons who can receive lapse notices so that if the policyholder is too sick to read a premium notice and/or pay a premium, he may still be protected. While both statutes went into effect on January 1, 2013, a question remained as to whether these safeguards would apply to life insurance policies issued or delivered prior to January 1, 2013. According to McHugh, the answer to this question was “no.” However, the California Supreme Court has decided to review the Court of Appeals ruling in McHugh. Until the Supreme Court makes its determination, McHugh is no longer proper law to be relied upon or cited to in legal proceedings.

When Can a Disability Claimant Obtain Discovery in an ERISA Suit When the De Novo Review Standard Applies?

When it Goes to the Bias of an Insurer’s Consultants, that’s When a claimant who challenges a denial of disability or life insurance benefits by filing a court action under ERISA is generally not able to present evidence to the court that is not in the administrative record. The administrative record consists of all the medical records, documents and other information obtained by and submitted to the plan administrator during the initial stages of the claim and through the appeal process. Because courts are generally unwilling to consider any evidence which is not in the administrative record, plaintiffs are normally not entitled to legal discovery from the insurance company.

However, courts in the Ninth Circuit have carved out exceptions to the above discovery rule in de novo review cases. “[T]he district court should exercise its discretion to consider evidence outside of the administrative record ‘only when the circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.’” Opeta v. Nw. Airlines Pension Plan for Contract Emp., 484 F.3d 1211, 1217 (9^th Cir 2007) (emphasis added.).

In a recent decision by the U.S. District Court of Arizona, Coffou v. Life Insurance Company of North America, 2020 WL 1502104 (D. Arizona 2020), the court allowed discovery in an ERISA case relating to the plan administrator’s alleged use of biased experts when it denied a claim for waiver of premium benefits under a life insurance policy. In Coffou, the Plaintiff, Mary Coffou, filed a lawsuit against Life Insurance Company of North America (“LINA”) after it determined Ms. Coffou did not meet its definition of “disabled” and as a result, denied her a waiver of life insurance policy premiums. Ms. Coffou alleged that LINA intentionally denied her claim by hiring third-party vendors to supply a biased vocational expert and biased medical experts who had a history of providing findings to support LINA’s denial of claims.

While the court stated that compensating experts for work done is not in itself proof of bias, evidence such as a long-standing relationship or substantial compensation may be important to access an expert’s bias and credibility. In Coffou, the Court held as follows:

For several reasons, this case meets the exceptional circumstances test set out by Opeta. This is a case in which the carrier has an admitted structural conflict and a history of self-dealing, resulting in its claims practices being subject to an extensive national “market conduct study,” a 2013 Regulatory Settlement Agreement (“RSA”), and continued monitoring. In addition, Plaintiff’s claims would have been insurance contract claims prior to ERISA. Further, Plaintiff has pointed out that some of LINA’s experts, Drs. Grattan and Mobo, rendered opinions outside their area of expertise. And, Plaintiff has indicated that LINA provided its vocational consultant, Glenna Taylor, with the reports and limitations by its own experts, Drs. Mobo and Grattan, but did not provide all the medical records and report that Plaintiff used to support her claim. Also, LINA did not provide the SSA ALJ’s decision, the SSA claims file, or Plaintiff’s medical, vocational, and lay witness evidence.

LINA’s conduct puts this case outside the garden-variety “structural conflict of interest” scenario. Rather, LINA’s history and the unchallenged representations of Plaintiff that LINA provided its experts with its other experts’ reports, but not the entire record, raises concerns whether LINA’s structural incentive to minimize benefit payments distorts its obligation to fairly handle benefits claims. This warrants discovery into LINA’s relationships with its vendors and experts and into whether it was employing vendors and experts who would reliably do LINA’s bidding.

The Court concluded that discovery beyond the administrative record would be helpful to determine the credibility of LINA’s experts. LINA was ordered to respond to interrogatories relating to its relationship history with the subject third-party vendors and experts used to determine Ms. Coffou’s claim. Specially, LINA was required to respond to discovery that delved into the number of times it retained the subject third-party vendors and experts and what amount of money was paid to them, as well as the number of times its internal vocational expert has conducted assessments and concluded the claimant could perform work.

As Coffou demonstrates, while discovery in ERISA de novo review cases is limited, under the right circumstances the courts will allow discovery that will expose insurance company bias in the denial of ERISA life and disability insurance claims to protect insureds from having their claims improperly denied.

McKennon Law Group PC Wins ERISA Disability Trial against Long-Term Disability Insurer MetLife

On March 24, 2020, after a bench trial in a 46-page opinion, Eastern District of California federal court Judge Troy Nunley ruled in favor of McKennon Law Group PC’s client in her ERISA lawsuit against her long-term disability insurer MetLife, who had denied her claim for long-term disability benefits. She had worked for Kaiser Permanente in a sedentary position in its HR department and obtained the MetLife disability coverage through her employer. Judge Nunley pointed out many weaknesses in MetLife’s denial decision, including the fact that it relied almost entirely on the reports of its own hired medical consultants who “only performed paper reviews of Plaintiff’s medical records and neither observed nor treated Plaintiff personally.” Nor did MetLife’s medical consultants, he reasoned, speak with any of her treating physicians (who had decided she was disabled after examining her in person for years). Judge Nunley afforded one of MetLife’s consultants, nurse Bachner, “with less weight as she is not a physician.”

He harshly criticized MetLife’s doctor consultant because his opinions were “not well-supported” and conclusory: “Dr. Hinrichs simply summarized the medical records he reviewed and then made a conclusion” without explaining which specific medical records supported his conclusion. Judge Nunley also determined that MetLife’s doctor “disregarded Plaintiff’s subjective reports of pain and only focused on what he deemed to be ‘objective’” evidence of disability, violating Ninth Circuit case law. As “Plaintiff correctly points out, it would be an abuse of discretion for the Court to fail to consider Plaintiff’s subjective account of pain. Kibel v. Aetna Life Ins. Co., 725 F. App’x 475, 477 (9th Cir. 2018) (citing Demer v. IBM Corp. LTD Plan, 835 F.3d 893, 904–07 (9th Cir. 2016)).”

The firm had several strategic battle victories along the way that contributed to winning the war for our client. We prevailed on a motion for partial summary judgment, where the Court ruled that the standard of review at trial would be de novo. We augmented the administrative record with the client’s favorable Social Security disability finding. Judge Nunley found that our client was totally disabled from performing the material duties of her own sedentary occupation because her physicians concluded, based on several in-person exams, that she had severe low back and heel pain that prevented her from sitting for more than two hours per workday or from standing on her own, which well-reasoned opinions the Court found much more credible than MetLife’s “paper reviewers.”

The Court entered judgment in our client’s favor requiring MetLife to reverse its disability insurance claim denial and pay our client all her benefits for the Policy’s “own occupation” period, plus prejudgment interest for the last seven years. This decision will allow our client to collect all her substantial attorneys’ fees and costs she incurred aggressively fighting MetLife for the last five years.

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