ERISA Archives - Page 30 of 56 - McKennon Law Group

Cassim v. Allstate Insurance: Attorney’s Fees in Contingency-Fee “Bad Faith” Cases

Since 2004, when the California Supreme Court ruled that a “portion” of contingency attorney’s fees are recoverable in bad-faith insurance cases, plaintiffs and their lawyers have been able to recover attorney’s fees based in part on the specific terms of the contingency-fee retainer agreement. For starters, in order to recover attorney’s fees in these actions, a policyholder must prove that (1) contractual benefits were withheld in bad faith, and (2) reasonable fees were incurred by the policyholder to recover those benefits. However, any attorney’s fees incurred merely to prove the alleged “bad faith” claims are not recoverable at all; only fees incurred to prove actual coverage are recoverable. Cassim v. Allstate Insurance, 33 Cal.4th 780, 811 (2004).

In Cassim, plaintiffs Fareed and Rashida Cassim purchased a home in Palmdale in 1989 and insured the property against loss with Allstate Insurance. In December 1990, a fire (later determined to be arson) caused damage to the home. Although the fire burned only in the master bedroom and kitchen, the extensive heat, smoke and water damage to the rest of the structure rendered the entire home uninhabitable. After plaintiffs proved “bad faith” on the part of Allstate Insurance, a jury awarded plaintiffs a combined $3,594,600 in compensatory damages and $5 million in punitive damages. The plaintiffs’ attorney had a 40%-contingency-fee agreement.

The Cassim court held that a proper calculation of attorney’s fees requires the trier of fact to determine the percentage of fees attributable to securing just the contract recovery. This formula is based on the percentage of the attorney’s overall efforts devoted to the contractual recovery portion of the case and is divided into three categories: contract claim only, bad-faith claim only, and both claims. The Supreme Court remanded the case to the trial judge to make the calculation.

Using hypothetical numbers, and assuming a total compensatory award of $1 million, the 40% contingency fee would be $400,000. If the policyholder’s lawyer spent 1,500 total hours on the case and can prove the breakdown as follows: 200 hours on the contract claim only, 800 hours on the bad-faith claim only and 500 hours on both claims, then the trier of fact could, reasonably, conclude that one-half of the hours spent on the joint “contract and bad faith” issues are fairly attributable to the contract; i.e., half of 500 hours, or 250 hours, plus the 200 hours from the contract claim only, would total 30%. That 30% of the total attorney’s fee ($400,000) would be recoverable as well: $120,000 extra paid to the plaintiffs.

However, the Cassim court also cautioned judges to disregard fee agreements designed solely to manipulate the calculation of recoverable costs to the policyholder’s benefit, as have been shown to exist in some cases in the intervening years. For instance, the case of Pulte Home Corporation v. American Safety Indemnity, 14 Cal.App.5th 1086 (2017) disallowed a last-minute modification of a fee agreement from contingency to hourly, as an improper attempt to inflate the attorney’s fee (and punitive damage) award. This case involved the development of two residential housing projects that were built beginning in 2003 and sold between 2005-2006. The various subcontractors were required to name the developer as an “additional insured” on their policies, some of which were issued by American Safety. In 2013, several homeowners sued Pulte for alleged defects in the work performed by the subcontractors who were insured by American Safety. American Safety denied coverage and refused to provide a defense to Pulte because the construction had taken place 10 years prior.

Pulte sued American Safety, and prevailed on the “bad faith” claims, but American Safety then appealed the trial court’s award of attorney’s fees and punitive damages as violating the dictates set forth in the Cassim case, specifically improperly attempting to inflate the attorney’s fee (and punitive damage) award. Pulte’s lawyer in the bad-faith case originally had entered into a contingency-fee agreement with Pulte, which would have resulted in a fee award of only $371,000 under the Cassim formula, set forth above.

After the trial on bad faith, but before the punitive damage phase, Pulte “modified” the fee agreement to be based on an hourly rate instead and, thereafter, claimed an additional $274,000 in attorney’s fees actually incurred and paid, for a total of $645,000. The trial court disagreed with American Safety’s assertion that the change in the fee agreement was to manipulate the process. After making deductions for fees unrelated to pursuing amounts due under the insurance contract, the trial court awarded Pulte $471,313.52 in attorney’s fees. Based on the one-to-one ratio with attorney’s fees, the trial court also awarded $500,000 in punitive damages.

The Court of Appeal reversed, stating, “We have serious concerns that this change in Pulte’s fee agreement was apparently ‘designed to manipulate the calculation of Brandt fees’ to the plaintiff’s benefit.” Id. at 1132. The court also rejected Pulte’s argument that, because Pulte had actually incurred and paid the hourly fee, that amount must be considered as the proper amount for the attorney-fee award. The court concluded that the judge should have based the attorney-fee award on the agreement in force during the trial and, therefore, remanded the case to recalculate the proper amount of attorney’s fees (and to adjust the punitive damage award, since because it was based on the improper attorney-fee award). Id. at 1133.

The good news for plaintiffs’ attorneys is that any “bad faith” case can be prosecuted under a contingency-fee agreement, based on the Cassim case, and an award of attorney’s fees based on that fee agreement may be possible. California courts continue to define the outlying boundaries for recovering contingency attorney’s fees, but at least there is no question that “reasonable” fees (attributable to proving actual coverage) are recoverable.

McBean v. United of Omaha Life: Judge Anello Finds Employer Liable for Breach of Fiduciary Duty, Orders Payment of Life Insurance Policies’ Face Value under Equitable Surcharge Theory

McBean v. United of Omaha Life: Judge Anello Finds Employer Liable for Breach of Fiduciary Duty, Orders Payment of Life Insurance Policies’ Face Value under Equitable Surcharge Theory

Application of the doctrine of “equitable surcharge” in ERISA has become a very significant theory of recovery for ERISA plan participants in obtaining their life insurance and medical insurance benefits. In a recent decision by the U.S. District Court for the Southern District of California, McBean v. United of Omaha Life Insurance Company, 2019 WL 1508456, the ERISA surcharge theory was used to overturn the denial of a life insurance claim, thus salvaging substantial life insurance benefits that would otherwise have been lost through breach of fiduciary duty and misrepresentation.

In McBean, the Plaintiff won a significant victory in a case involving a claim for life insurance benefits under an ERISA-governed plan. The Plaintiff’s mother (“Decedent”) was covered by United of Omaha’s (“United”) Basic Life Insurance Policy and Voluntary Life Insurance Policy (“Policies”). United was the Claims Administrator, and the Plan Administrator/fiduciary was the employer By Referral Only, Inc. (“Referral”). The benefits at issue under the Policies were $43,550.00 and $100,000.00. At the age of 67, the Decedent was diagnosed with breast cancer, and left work on June 9, 2015 to have surgery. She returned to work part-time thereafter, but by August 10, 2016, she had to stop working, and died on August 5, 2017. United accepted the premium payments for the Policies made by Referral up to the date of the Decedent’s death.

According to the Policies, coverage ends “the last day of the month in which … [y]ou are no longer Actively Employed….” To be “Actively Employed” according to the Policies means to work 40 hours or more per week regularly, and to receive “compensation from the Policyholder for work performed for the Policyholder.” Among other provisions involving eligibility and enrollment updates, the Policies required Referral to inform United when an employee’s eligibility status changes, and they contained a conversion provision that allowed the covered employee to apply for an individual policy without providing health information. On February 6, 2017, the Decedent was granted long-term-disability benefits retroactive to September 6, 2015. On August 21, 2017, the Plaintiff (as trustee of his mother’s trust) submitted a claim to United for benefits under the Policies. United denied the claim, responding that the Policies were “not in force at the time of [Decedent’s] death on August 5, 2017” because she was no longer working. The Plaintiff appealed, explaining that Referral’s managing director told the Decedent and her family that the company would ensure payment of the premiums. On December 12, 2017, United affirmed its earlier claim decision that the Decedent was no longer covered when she died, and then it refunded the premiums Referral had paid for the Decedent during her period of ineligibility.

The Plaintiff filed an ERISA lawsuit setting forth a claim for breach of fiduciary duty against United and Referral. The Plaintiff’s first argued that United had waived the “active employment” eligibility requirements (which, on their own, would mean that the Decedent’s coverage had ended in June 2015 for the Voluntary Life Policy and June 2016 for the Basic Life Policy) because it continued to accept premiums even though it knew that the Decedent was not actively employed. The Plaintiff also claimed that United had waived the “written notice” requirements for extension of coverage. However, the court found that such an argument would create coverage where it did not exist in the Policies, and found as well that the Plaintiff had not shown sufficient evidence of “an intentional and voluntary relinquishment of United’s right to require a written request for continued coverage . . . .”

With regard to the Plaintiff’s claim for equitable surcharge under 29 U.S.C. Section 1132(a)(3) against United for breach of fiduciary duty—a remedy that would provide “compensatory damages for actual harm caused by . . . breach of duty”—Plaintiff argued that United had a duty to develop a system to confirm eligibility before it accepted premiums, rather than waiting until a mistake occurred to implement a system. Citing Fink v. Union Cent. Life Ins. Co., 94 F.3d 489, 492 (8th Cir. 1996), the court rejected that argument, finding that “United had no duty to train or supervise Referral because United did not have the authority to select or remove the plan administrator.” In addition, Referral was responsible for determining eligibility and updating United on which employees should be covered under the Policies.

Referral was also found to be a fiduciary under the policy because it is the plan sponsor and plan administrator, and breach of duty, the court ruled, was indicated by Referral’s misrepresentation to the Decedent that she would continue to have life insurance coverage. That promise was false and material and led to “detrimental reliance by the plaintiff.” In re Computer Scis. Corp. ERISA Litig., 635 F.Supp.2d 1128, 1140 (C.D. Cal. 2009). The standard for material misrepresentation involves “a substantial likelihood that it [the misrepresentation] would materially mislead a reasonable employee in making an adequately informed . . . decision.” (Id. At 1141.) With respect to detrimental reliance, that standard was met because the Decedent, trusting in what Referral told her, “lost the opportunity to convert or port her coverage, or obtain coverage she wanted through another channel, such as on the individual market for life insurance.”

It is noteworthy that the court rejected Plaintiff’s claim of derivative liability on the part of United based on Referral being its agent, and granted summary judgment in favor of the Plaintiff onhis claim against Referral in the amount of the Policies’ combined face value, $143,550.00; it also allowed Plaintiff to file a motion for reasonable attorneys’ fees and costs. It appears that Plaintiff’s counsel did not cite important and relevant Ninth Circuit authority that clearly would have made the insurer liable for the acts of the employer (this is why it’s important to hire the best ERISA lawyers in California, the McKennon Law Group PC). Even though the court awarded summary judgment against the employer on all claims but one, that one claim for the value of the life insurance policies under the doctrine of equitable surcharge proved invaluable for the family of the deceased employee.

In Harlow v. MetLife, Judge Bernal Brings Clarity to Disputes Involving “Reasonable” Attorneys’ Fees Adopting Standards Favorable to ERISA Claimants

The topic of attorneys’ fees has long been of interest to insurance lawyers and clients alike. Recently, the courts have grappled with issues such as: When are attorneys’ fees recoverable? What types of billing practices are reasonable? What are reasonable hourly rates? Attorneys want the assurance that the fees they charge will be deemed “reasonable,” and defendants (the insurance companies) want to know when they can raise defenses to the amount of an attorneys’ fees they may be expected to pay. In this article, we will consider a recent case that has helped bring some clarity to the issue of “reasonable” fees for legal work. Robert J. McKennon of McKennon Law Group PC acted as an expert in this case as to reasonable hourly rates. The court adopted his testimony in full.

In a recent decision by the U.S. District Court for the Central District of California, Harlow v. Metropolitan Life Insurance Company, 2019 WL 2265136, the Plaintiff successfully challenged the insurer’s decision to terminate her long-term disability payments. She then moved for attorney’s fees, with each side submitting multiple declarations and exhibits for or against specific amounts and practices. There was no question about the court’s discretionary authority to award reasonable attorneys’ fees in an ERISA case, and case law holds that a court must initially determine whether the plaintiff has “achieved some degree of success on the merits.” Simonia v. Glendale Nissan/Infinity Disability Plan, 608 F.3d 1118, 1119 (9th Cir. 2010). That success must go beyond a victory on mere procedural issues or some “trivial” matter. Beyond this test, a court must consider the five factors derived from Hummell v. S. E. Rykoff & Co., 634 F.2d 446, 452 (9th Cir. 1980). These “Hummell factors” are as follows:

(1) the degree of the opposing parties’ culpability or bad faith;

(2) the ability of the opposing parties to satisfy an award of fees;

(3) whether an award of fees against the opposing parties would deter others from acting under similar circumstances;

(4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and

(5) the relative merits of the parties’ positions.

The Harlow court ruled that the Plaintiff was entitled to reasonable attorney’s fees, pointing out that MetLife itself made no argument denying the Plaintiff had “achieved success on the merits of her action,” nor cited any “special circumstances” that might have precluded the fee demand. Moreover, the Hummell factors only apply when the merits of the Plaintiff’s claim are still under serious consideration.

The court next addressed what makes an attorney’s fee “reasonable.” A reasonable fee is determined by means of “a hybrid lodestar/multiplier approach.” McElwaine v. US West, Inc., 176 F.3d 1167, 1173 (9th Cir. 1999) (citations omitted). A lodestar amount is determined by “multiplying the number of hours reasonably expended by each attorney’s reasonable hourly rate.” Id. This determination notwithstanding, a court would be within its rights to disallow “excessive, redundant, or otherwise unnecessary” claims. Id. When—as in Harlow—a Plaintiff seeks an award of $184,750 for attorneys’ fees, the issue of “reasonableness” deserves scrutiny. The court first cited case law in favor of looking to “the prevailing market rate for similar services ‘by lawyers of reasonable comparable skill, experience, and reputation.’” Mardirossian v. Guardian Life Ins. Co. of Am., 457 F.Supp.2d 1038 (C.D. Cal. 2006), citing Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984). The Plaintiff’s counsel charged $400 per hour, a figure she reached upon making partner, while her fellow counsel billed at $700 per hour. The court found these sums reasonable due to the respective attorneys’ long experience with ERISA claims. In support of the Plaintiff’s counsel on this matter of relevant experience, Robert J. McKennon, managing shareholder of The McKennon Law Group PC, submitted evidence via testimony based on his more than thirty years in insurance law and ERISA law, especially in the areas of life, disability and health.

In opposition to MetLife’s assertion that the fees quoted run contrary to “policy considerations” and ERISA’s purpose “to provide inexpensive, expeditious resolution to disputes concerning qualifying employee benefit plans” (citations omitted), the court pointed to the Ninth Circuit’s determination that courts should not arrive at an appropriate rate “by reference to the rates actually charged the prevailing party” but instead “by reference to the fees that private attorneys of an ability and reputation comparable to that of prevailing counsel charge their paying clients for legal work of similar complexity.” Welch v. Metro. Life Ins. Co., 480 F.3d 942, 947 (9th Cir. 2007). With regard to the claim made by MetLife about ERISA’s public policy imperative, the court again cited the Ninth Circuit, which determined that among ERISA’s goals were “protect[ing] employee rights” and “secur[ing] access to federal courts.” Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir. 1984). The court found that allowing “reasonable” attorneys’ fees would in fact help clients gain such access. If attorneys cannot charge the prevailing rate, they might be unwilling to take on ERISA clients, which would effectively deprive such clients of access to the courts.

MetLife also made a number of unavailing arguments against the sums charged by the Plaintiff’s counsel. MetLife argued that the hours billed were excessive, duplicative, overly reliant on prefabricated “boilerplate” language, prone to non-itemized block-billing, and inclusive of inappropriate administrative or merely clerical labor. The court’s responses to these concerns testified to the complexity and dynamic quality of the labor involved in lawyering, and affirmed the awarding of reasonable attorneys’ fees to be in line with ERISA’s overarching purpose: providing plaintiffs with access to the federal court system in their attempts to recover benefits to which they believe they are entitled. With respect to supposedly “duplicative” hours billed, the court cited case law: “a lot of legal work product will grow stale; a competent lawyer won’t rely on last year’s, or even last month’s, research.” Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008). Essentially, the court inferred that since the law itself changes, so must an attorney’s research undergo diligent updating. As for the tendency of several lawyers to work on the same set of tasks, while the court acknowledged it as a genuine concern, it found that where there is appropriate division of labor among the attorneys—in their example from the present case, one attorney drafts a document while others review it carefully—there is little need to worry about the reasonableness of work thus accomplished. The court deducted only $2,100 from the total of the Plaintiff’s counsel’s fees, stemming from a charge of 7.8 hours for half a day’s mediation work. With regard to the issue of “boilerplate” language in legal pleadings and other documents, the court accepted the view of the Plaintiff’s counsel that not using such language would only have occupied more of their time: “the time spent preparing this Motion would have been substantially greater had they not efficiently re-used past efforts.” Finally, the court did not find that the Plaintiff’s counsel’s block-billing reached the point where a reviewer could not tell “how much time was spent on particular activities,” and neither did it accept MetLife’s argument that preparing subpoenas using partially recycled language, or preparing exhibits, was too “clerical” to call for an attorney’s full hourly fee.

In summary, the court’s decision prevents defendant insurers from too easily challenging the fees claimed by counsel in their efforts to help ERISA clients recover duly owed long-term disability benefits.

Tenth Circuit Finds that Policy Terms in an ERISA Plan Did Not Unequivocally Grant an ERISA Administrator Discretion to Interpret Plan Terms, Applies De Novo Review

Insurance companies acting as ERISA plan administrators often are guilty of abusing their discretion to interpret policy language related to the level of benefits payable to a claimant under a long-term disability (“LTD”) policy in a manner most beneficial to them, rather than the claimant. In a recent decision by the Tenth Circuit Court of Appeals, Hodges v. Life Insurance Company of North America, 920 F.3d 669 (10th Cir. 2019), the court addressed the ability of insurance companies such as Life Insurance Company of North America (“LINA”) from interpreting policy language that may determine the level of benefits payable to a claimant.

In Hodges, the Tenth Circuit Court of Appeals affirmed the ruling of the district court that LINA failed to meet its burden to show it was entitled to deference in deciding who qualified as “Sales Personnel” and who did not under a group LTD policy issued to Endo Pharmaceuticals, Inc. The policy language did not give the Plan Administrator the authority to interpret the meaning of Sales Personnel yet LINA did so, depriving the claimant of thousands of dollars in benefits.

Lou Hodges was a cryotherapy technician for Endo Pharmaceuticals, Inc. (“Endo”) until he was forced to retire due to a degenerative eye condition in 2012. Hodges was insured under Endo’s group LTD insurance policy which was part of its ERISA Plan, administered by LINA. The Policy divided Endo’s employees into two classes: Class I employees included “all active, Full-time and part-time Employees of the Employer, excluding Sales Personnel, regularly working a minimum of 20 hours per week.” Class 2 employees included “all active, Full-time Employees of the Employer classified as Sales Personnel regularly working a minimum of 20 hours per week.”

The policy entitled all Class 1 and Class 2 employees to monthly LTD benefits of 60% of their average pre-disability earnings, but defined the earnings of Class 2 Sales Personnel far more broadly than non-Sales Personnel. The definition of earnings for all Class 2 Sales Personnel included payments “received from bonuses or target incentive compensation bonus[es].”

In evaluating Hodges’s claim for LTD benefits, although concluding he was medically eligible, LINA sought information on his job description and duties from both Hodges and his employer, Endo, to determine whether he qualified as Class 2 “Sales Personnel” for determining the level of benefits to which he was entitled. LINA informed Hodges his claim for benefits was approved but that they deemed him a Class 1 employee. This meant a much lower amount of benefits would be paid to Hodges because he would not be able to include his bonus and/or incentive compensation in LINA’s calculation of 60% of his pre-disability income.

Hodges challenged LINA’s determination, appealing twice. After the denial of his second appeal, Hodges filed suit in the United States District Court for the District of Colorado. In February 2017, the district court concluded the policy failed to reserve LINA discretion to decide employee-classification questions and remanded the case for LINA to conduct further fact finding on Hodges’s employment classification. On remand, LINA again determined that Hodges was a Class 1 employee, relying upon a statement from Endo’s Senior Vice President and Associate General Counsel.

After Hodges asked the district court to reopen the case, in June 2018 it ruled that LINA had once again failed to adequately investigate Hodges’s employment classification. Concluding that a second remand would be futile, the district court determined that Hodges was a salesperson under the ordinary meaning of that term, reversed LINA’s contrary decision, and awarded Hodges Class 2 benefits.

Upon appeal by LINA, the Tenth Circuit agreed with the district court that Hodges indeed qualified as a Class 2 Sales Personnel employee due to his responsibilities to sell and promote Endo’s commercial products and services at every available juncture; to sell doctors on performing more cryotherapy procedures; to assist in the growth and development of existing and new business lines, to market the technology and submit a minimum of one lead a month for new cryotherapy users, new applications for existing cryotherapy users, or any other lead for any of Endo’s business.

The Tenth Circuit based its decision on a lack of discretionary authority granted to LINA in construing the terms of the plan. The Tenth Circuit noted that it reviews de novo a plan administrator’s denial of benefits “unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Hodges, 920 F.3d at 675 citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). However, the court considered whether the plan granted discretion to determine whether or not benefits were payable in accordance with the terms of the policy. The court acknowledged that plans which contain clear and unambiguous discretion-conveying language afford the court the ability to grant discretion over all decisions that arise in the claims process. Here, however, the court found that nothing in the policy granted LINA the discretion to conclude who qualified as a salesperson under the plan, and noted that thirty years have passed since the Supreme Court’s holding in Firestone. Thus, plan drafters have had ample time to include language giving discretion if they so desired.

Turning to the issue of whether Hodges qualified as a salesperson, the record reflected that Hodges received a significant portion of his income from bonuses when he did sell products and services and those earnings were designated as bonuses on his pay stubs. Hodges received $3,000 for every $100,000 of pathology work that a doctor performed using Endo’s equipment and services and a monthly bonus for every case he worked on. The Tenth Circuit found that these substantial sales responsibilities and sales driven compensation would cause a reasonable person such as Hodges to believe he was a salesperson and devote his efforts to sales to increase his compensation. In addition, although he derived a majority of his compensation from performing cryotherapy services, he could not continue cryotherapy services without selling the company’s products.

The Court of Appeal’s ruling resulted in a higher level of LTD benefits payable to Hodges than he would have received had the Court determined the plan administrator had discretionary authority to interpret policy definitions regarding employee job classifications. This set an important precedent that without the clear and unambiguous authority to do so, a plan administrator does not have the discretionary authority to interpret policy language related to an employee’s job classification that would negatively affect his or her level of benefits payable under an ERISA Plan.

Hodges’s case against LINA reveals that skilled and aggressive legal representation is often necessary if you have any concerns regarding an ERISA plan administrator’s interpretation of a long-term disability policy under which you are insured and the level of disability benefits payable to you. Insurers are notorious for interpreting policy language in their favor in order to protect their own financial interests, to the detriment of ERISA claimants and in conscious disregard of their rights.

The Basics of an ERISA Life, Health and Disability Insurance Claim – Part Three: Procedural and Practical Considerations to an ERISA Claim

In this several part Blog Series entitled 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, handling a claim denial and through preparing a case for litigation. In Part Three of this Series, we discuss procedural considerations to an ERISA claim, as well as deadlines and timeframes to carefully monitor.

When first reviewing a potential ERISA matter, it is crucial to first determine the procedural history of your client’s claim and whether there have been any denials. Most denial letters in ERISA cases set forth specific deadlines to file to an appeal. In fact, the Department of Labor regulations specifically dictate that a claimant be advised of her appeal rights.

The federal statue governing claims procedures under ERISA requires that “in accordance with regulations of the Secretary [of Labor], every employee benefit plan shall … afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” 29 U.S.C. § 1132(2). The regulation implementing 29 U.S.C. § 1133 states that a “reasonable opportunity for a full and fair review” is “at least 180 days following receipt of a notification of an adverse benefit determination within which to appeal…” (Emphasis added.) 29 C.F.R. § 2560.503-1(h)(3), (h)(3)(i), (h)(4). Further, in terms of calculating the 180-day deadline, courts interpreting this provision have held that if the deadline falls on a weekend, it extends to the following business day. LeGras v. AETNA Life Ins. Co., 786 F.3d 1233, 1237-38 (9th Cir. 2015).

However, if the deadline to submit an appeal has already run, this is largely accepted as being similar to missing a statute of limitations. If a claimant has missed the deadline to appeal, it is known as a failure to exhaust administrative remedies. It still may be worthwhile to ask the claim administrator to accept a late appeal or check the plan language to determine if administrative remedies be exhausted as a prerequisite to filing suit. However, if this does not work, there still may be a way to pursue litigation against the insurer or employer to get your life, medical or disability benefits paid. One way is to see if there is a recognized exception to the failure to exhaust administrative remedies doctrine. One such exception is the futility doctrine. We have discussed this previously here.

If a client has not submitted an appeal, and the deadline is quickly approaching, request an extension of time from the claims administrator. If the extension is not granted or the claims administrator does not respond in a timely fashion, the claimant should advise the administrator in writing that he is submitting an appeal of the denial, and provide as much supportive documentation as possible under the circumstances. After this initial appeal request is sent, gather the additional information, supportive medical records and documents and submit the appeal to the claims administrator. Courts typically require additional evidence of disability to be considered up until the date the appeal is denied, which will likely be after the submission of additional evidence if the appeal is sent promptly.

Some plans allow for a second appeal of a denial to be submitted. These denial deadlines are treated similarly with the first claim denials, and have similar deadlines to submit information. Remember, the appeal process allows the client to add additional supportive evidence of disability to the Administrative Record, which often includes certification letters from treating physicians, personal statements, updated medical records, updated occupational information, etc. It is necessary to have a strong Administrative Record that includes all of the critical evidence needed to support a life, medical or disability claim before commencing litigation. Therefore, it is important to enclose as much documentary support as may be needed in litigation, as courts may not allow you to supplement the record with evidence during litigation.

Sometimes, claimants may request attorney representation before a denial has been received. Nervous of the unscrupulous nature of some disability insurers, many claimants are worried that one of their main (and sometimes only) income source will be improperly ended by their insurer. Most first-party insurance policies, including life insurance, disability insurance, property insurance and liability insurance policies, require that an insured policyholder provide notice of a claim within a specified period of time, typically, “as soon as practicable,” “during the Elimination Period” or a similar formulation. See e.g. Ins. Code § 10350.7 (requirement in disability policies). For this reason, be wary of situations where your client may not have given timely notice of their claim. But, even where a policy specifies that timely notice is a condition precedent to coverage, a policyholder-friendly rule known as the “notice-prejudice” rule has been adopted by California courts to help subvert these provisions. We discussed the application of that rule here.

Next, many of the same considerations for the post-denial period apply where the claimant has not yet received the denial. The goal remains the same—obtain medical records, attending physician statements that certify your client’s disability, and submit these records to the insurer in a timely fashion. With this, the insurer will have as much information as needed to make a favorable benefit determination.

Ten Things to Consider and Look For in Your ERISA Life and/or Accidental Death and Dismemberment (AD&D) Insurance Plans When You Select Benefits or File a Claim

1. Obtain a full copy of your plan. The full plan will not typically be a benefit summary or a print-out from a website. It will be fairly long and many definitions and it will recite your ERISA plan terms, policies and procedures for filing a life insurance or AD&D claim and handling the claim, claim denials, appeals of claim denials, etc. The claims administrator will likely not have a copy of the full plan. You can request a copy of the full plan from your Employer’s Human Resources department or often from the claims administrator (the insurer or third-party administrator).

2. Read the plan. Your plan document controls the rights and obligations of the parties, including all plan participants and beneficiaries. Thus, if you have an ERISA claim for life insurance benefits or AD&D benefits, you should read the plan carefully. A human resources representative, a customer service representative for the insurance company that administers your life and/or AD&D benefits, or your claims administrator may tell you what your benefits are over the telephone or in an e-mail. You cannot necessarily rely on what a representative tells you over the phone. The plan document controls the benefits available, not what someone tells you over the telephone or via e-mail. If there is any confusion, ask the representative to tell you what specific plan provision they are referencing and ask them to send you a letter documenting what they are telling you.

3. Read the definitions, provisions, and exclusions. Be aware that life and AD&D insurance policies may exclude certain types of losses, such as suicide within the first two years of life insurance coverage. Pre-existing conditions or sicknesses may exclude an insured’s death or dismemberment from coverage under an AD&D policy as well. “Dismemberment” is often defined by an AD&D policy provision. Terms like “pre-existing condition,” “sickness,” “intoxication,” and other words may have special definitions under your policy. Under an AD&D policy, you will have to prove that the claimed loss resulted from an accident or accidental bodily injury. This can be complicated, especially where the accidental bodily injury may have been caused in part by a preexisting medical condition. If this is the case, you will need to consult an attorney immediately as there are complex and technical rules that are only found in applicable case law. McKennon Law Group PC is highly experienced in this area. Make sure you know what is required under your plan’s specific definitions in order to successfully claim life and/or AD&D benefits.

4. Select the appropriate coverage amount. Some employers will provide you with a base amount of life or accidental death and dismemberment (AD&D) insurance coverage, and some may not. Be sure to select the level of coverage that you want, and make sure you fill out any forms, like a Statement of Health, to ensure that you receive the coverage you select. You may also be able to select a level of life or AD&D insurance coverage for your spouse as well. Read the plan and policy documents carefully; your policy may state that, if selected, your spouse coverage will only be a percentage of your coverage, but your policy may also provide for spouse coverage in an amount independent of your coverage.

5. Confirm your coverage. Get a confirmation of coverage in writing, either a print-out of the premiums that you are paying for each insurance coverage you have chosen through your employer or a certificate that states the exact coverage you receive. Make sure you always have a current document showing your benefits coverage, which will usually be once a year after coverage selection or two to four months after you begin new employment. Review your premiums statements to ensure that you are paying the correct amounts for the coverages that you selected. Put all communications with your employer or insurer in writing and insist on the same in return.

6. Understand the conversion period to individual coverage. Many insurance companies permit you to continue your life and AD&D insurance coverage with them if you leave your employer. Usually, you need to contact the insurance company for your life and AD&D benefits within 30 days of your last day of work to convert your policy. Read through your plan documents and policy to understand the time period you must convert your group policy to an individual one and to know who you need to call or write to in order to continue your insurance coverage through an individual policy. If you decide to convert your policy, keep detailed records on when you called or wrote to the insurance company, what number you called, and who you spoke to regarding conversion of your policy or policies. You may be limited to a 30- or 31-day period, so make sure you follow up every couple of days until you receive confirmation that your policy has been converted. However, by law, if the insurance company does not convert your policy in a timely manner despite your requests to do so, you may be able to extend the time period in which you may convert your policy. You should contact an attorney for advice if you encounter this problem.

7. Time to appeal a claims decision. Read the appeals or grievance section to determine your appeal rights and deadlines. The first appeal must be submitted within 60 days of the date you receive the initial denial, pursuant to ERISA’s regulations. However, there may be a second appeal, which may be mandatory or voluntary. Whether there is a second appeal and whether it is mandatory or voluntary is critical to pursuing your life and/or AD&D benefits claim in court if it is denied. Additionally, although ERISA requires that you have 60 days to file your first appeal, the insurance company may dictate that a second appeal be filed in shorter amount of time. Be aware that you can and should contact an attorney as soon as you receive any notice, oral or written, from your insurance company that your claim will be or has been denied. An attorney can help you with your first and second appeals of the denial of your life and/or AD&D benefits, which will also help if you need to go to court to force the insurance company to pay you your benefits because the attorney will ensure that your life and/or AD&D claim record during the administrative appeals is complete and will help a judge understand that the insured’s death or dismemberment qualifies for payment of benefits.

8. Obtain a full copy of the claim file or administrative record. If your claim for benefits has been denied once, make sure you obtain a full copy of the claim file and/or Administrative Record so you can see what the insurance company considered in denying your claim. You can request a copy of the administrative record from the claims administrator, which is often an insurance company such as MetLife, Unum, and Liberty Mutual. If your claim for benefits has been denied after one (or two) appeals, make sure you obtain another copy of the claim file, which is also called the “administrative record” in insurance litigation, because it will contain updated records of what the insurance company considered in denying your appeal(s).

9. Find the statute of limitations and contractual limitations period as stated in your plan. The statute of limitations and contractual limitations period will be the period of time by which you must file a lawsuit to obtain disputed benefits. To file a lawsuit for benefits pursuant to an ERISA plan, you must first submit appeals (at least one, but no more than two). The contractual limitations period may appear in a section titled, “Legal Action.”

10. Find out who the plan administrator is and seek necessary information from it. Look for a name and address of the plan administrator in the plan. If your claim has been denied, send a written request to the plan administrator for all plan documents. The plan administrator is required to provide the plan documents to you within 30 days. 29 U.S.C. § 1024. Federal regulations allow you to file a lawsuit to seek penalties from the plan administrator in the amount of $110 per day for each day the plan documents are not provided beyond the 30-day period. 20 U.S.C. § 1132(c)(3); 29 C.F.R. § 2575.502c-1.

If your ERISA claim has been denied, knowing when to sue may be integral to the success of your claim. It is important to have experienced and highly qualified disability, health, life and accidental death or dismemberment insurance attorneys, like those at the McKennon Law Group PC. Fill out our free consultation form today to set a time to discuss your claim with one of our attorneys, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.

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