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ERISA protects employees from abuse of their employer-sponsored benefit plans by establishing procedural protections and codifying fiduciary relationships. Under ERISA, plan fiduciaries must administer the plan in accordance with their duties of loyalty and prudence. While the employer who formed the plan is always a fiduciary under ERISA, other parties, such as the insurer or claims administrator, may become fiduciaries through certain conduct. When insurers have discretion to deny benefits under an ERISA plan, they are typically considered claims fiduciaries. In the April 6, 2018 edition of the Los Angeles Daily Journal, Robert J. McKennon and Stephanie L. Talavera of the McKennon Law Group PC discuss a recent Ninth Circuit case that outlines the role that employers and other fiduciaries play under ERISA to “ensure that employees will not be left empty-handed.” In an article entitled “Ruling Addresses When A Third-party Acts as ERISA Fiduciary,” McKennon and Talavera evaluate the effect of the new Ninth Circuit Court of Appeals case, Santomenno v. Transamerica Life Ins. Co., 883 F.3d 833 (9th Cir. 2018), and explain how the decision’s effect is limited, but still underscores the ever-more important role that breach of fiduciary duty claims play in ERISA.
Agents, Brokers and Rescission of Insurance Policies
Generally, an insurer need not investigate statements made in an application for insurance, subject to certain exceptions. Instead, the potential policyholder or applicant must fully disclose all known material information. If a potential insured does not correctly disclose information on an application (even innocently), the insurer may later try to rescind the insurance policy. When an insurer “rescinds” a policy, it renders the contract as if it never existed and frees both parties from their obligations under the contract. Practically, this means that the insurance company is no longer obligated to pay the claims for life insurance, accident insurance, health insurance, long-term care insurance or long-term disability insurance benefits and the policyholder no longer has to pay the policy’s premiums. Insurers often look for ways to rescind insurance policies so they can deny insurance claims.
When can an insurer rescind?
Under California law, an injured party is entitled to rescind an insurance policy where there has been concealment on the application, regardless of intent to deceive, including where a representation is false in a material point. Upon discovery of the material misstatement or nondisclosure on the application, the insurer can promptly rescind the policy. The rescinding insurer must also give notice to the policyholder and return any benefits gained under the contract, such as all premium payments paid to the insurer. For example, if an applicant for life or accidental death and dismemberment insurance failed to disclose a history of smoking on the application, and then later died of cancer, the insurer would likely attempt to rescind the policy. If the insurer successfully rescinds the policy, it must also return the premium payments to the insured, but is no longer obligated to pay the death benefits.
“But I told the insurance agent when I applied for the policy…”
Oftentimes, potential insureds apply for insurance with the help of a licensed insurance agent or broker. Although both an insurance agent and an insurance broker assist a potential policyholder in the application process, the primary distinction between the two is who each represents. An insurance agent represents the insurer; a broker does not. Although this distinction has important legal implications, courts sometimes use “agent” and “broker” interchangeably. This usage confuses terminology that already relies on an unpredictable, independent factual examination of the relationship on a case-by-case basis.
Regardless, in practice, the broker vs. insurance agent distinction becomes particularly important when an insurer attempts to rescind a policy based on a material misrepresentation on the initial application, i.e., a failure to disclose pertinent medical or lifestyle history. Occasionally, a potential insured will make accurate disclosures to the insurance agent or broker as part of the application process, but the agent or broker will tell the potential insured that such disclosure on the application is unnecessary. Depending on whether the insurance agent is treated as an agent of the insurer, knowledge of the misrepresentation, and consequent liability, will be imputed differently.
O’Riordan v. Federal Kemper Life Assurance
In O’Riordan v. Federal Kemper Life Assur., 36 Cal.4th 281 (2005), the California Supreme Court discussed the importance of the distinction between an insurance agent and a broker when it comes to rescission. In O’Riordan, potential policyholder, Amy O’Riordan, applied for life insurance through an independent insurance agent, Robert Hoyme. The application for the life insurance policy asked the following two questions:
“Have you smoked cigarettes in the past 36 months?”
“Have you used tobacco in any other form in the past 36 months?”
Ms. O’Riordan answered “no” to both questions on the application, although she apparently told the insurance agent that she was a former smoker and “might have had a couple of cigarettes in the last couple of years.” In response, the insurance agent assured Ms. O’Riordan “[t]hat’s not really what they’re looking for. They’re looking for smokers.”
Several years later, Ms. O’Riordan died of breast cancer. When her husband attempted to collect the death benefits under the policy, the insurer attempted to rescind. The insurer conducted an investigation and found that Ms. O’Riordan’s physician, a year before she applied for the policy and within the thirty-six-month period, noted her request for a nicotine patch. The physician’s report said that, although she quit smoking years earlier, “recently due to some stressors, she did start to smoke a little bit again, but is not smoking as much as she smoked previously.” On this basis, the insurer rescinded the policy and refused to pay the death benefits to Mr. O’Riordan.
Mr. O’Riordan filed a lawsuit and the case made it all the way to the California Supreme Court. Ultimately, the Court determined that Ms. O’Riordan’s disclosure to the insurance agent raised an issue as to whether the insurer could rescind the policy. If the agent was acting as an agent of the insurer, then the agent’s knowledge of Ms. O’Riordan’s disclosures of a past history of smoking would be imputed to the insurer. In other words, because the agent knew, the insurance company had constructive knowledge of the disclosure. Thus, despite the fact that the agent had not actually communicated Ms. O’Riordan’s history of smoking to the insurer, the court still reversed the lower court opinion and allowed Mr. O’Riordan’s case to proceed since the insurer could not rescind the policy.
Insurers often use rescission of insurance policies to deny insurance claims, especially life, disability and health claims. Most policyholders do not understand their rights and assume insurers can rescind their policies. If you are a victim of an insurer’s attempt to rescind your life, health or disability insurance policy, do not cash the insurer’s check for premium refund until you call McKennon Law Group PC to assess your rights to fight this type of abusive insurance company practice. You may be able to sue your insurer for breach of contract and breach of the implied covenant of good faith and fair dealing (insurance bad faith) for attempting to rescind your valuable insurance policy.
The McKennon Law Group PC periodically publishes articles on its Insurance Litigation and Disability Insurance News blogs that deal with frequently asked questions in insurance bad faith, life insurance, long-term disability insurance, annuities, accidental death insurance, ERISA and other areas of law. To speak to 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 complete the free consultation form on the firm’s website.
How to Fight ERISA Long-Term Disability Claims Denials: The Use of Personal Statements
Pain is a highly subjective, personal phenomenon. Only the person suffering from pain can adequately describe that pain and how that person is affected by the pain. And we know that one person may be capable of tolerating a completely different threshold of pain when compared to another person. Similarly, reports of fatigue vary widely from person to person. Because of the nature of pain, fatigue and other such disabling symptoms, determining whether subjective complaints render an individual disabled for the purposes of long-term disability benefits necessarily relies on the individual claimant’s personal statement/description. Put another way, the individual must explain what he or she goes through firsthand. Not only does this aid in the insurer’s understanding of the insured’s disability, it also serves as a powerful, compelling statement of what the disabled individual has been through, in his or her own words.
In a recent long-term disability insurance case governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), Kibel v. Aetna Life Ins. Co., 2018 WL 832870 (9th Cir. Feb. 13, 2018), the Ninth Circuit emphasized the importance of a claimant’s personal statement regarding the subjective symptoms that she suffered, such as pain, fatigue and other such complaints. In this article, we discuss Kibel, and the value of a disability claimant’s personal statement. From a practical perspective, we outline some of the key features that every disability claimant’s personal statement should include, as well as further support in the form of corroborating statements from colleagues, friends and family members who have witnessed the disabling symptoms firsthand.
Kibel v. Aetna, 2018 WL 832870 (9th Cir. Feb. 13, 2018)
In Kibel v. Aetna, Plaintiff-Appellant Margueritte Kibel (“Kibel”) appealed from the district court’s judgment in favor of Defendant-Appellee Aetna Life Insurance Company (“Aetna”). The district court concluded that Aetna properly denied Kibel’s claim for long-term disability benefits. In doing so, it determined Kibel not totally disabled under her employer-sponsored long-term disability plan. On appeal, the Ninth Circuit reversed and remanded, finding that Kibel met her burden; she adequately proved that her multiple sclerosis (“MS”) prevented her from performing the duties of her occupation as a Relationship Manager at City National Bank from February 20, 2013 forward.
Like many plans, Aetna’s long-term disability plan provided the following definition of “Total Disability:”
[Y]ou will be deemed to be totally disabled on any day if, as a result of disease or injury, you are unable to perform with reasonable continuity the substantial and material acts necessary to pursue your own occupation and you are not working in your own occupation.
Applying that definition, the Ninth Circuit first underscored the client-centered nature of Kibel’s position. Her job placed a heavy emphasis on client development and management, requiring her to devote approximately sixty-five percent of her time to outside sales and finding, identifying and developing new clients while cultivating strong partnerships with centers of influence in and around the community.
Unlike Aetna and the district court, the Ninth Circuit placed little weight on the physician’s “labels” of Kibel as “healthy,” “doing ok,” and “normal.” Instead, the Court focused on the history and practical effects of Kibel’s condition, in particular, her fatigue. For example, in 2011 Kibel collapsed twice: first with clients and a second time with her supervisor. Following those incidents and her confirming diagnosis of MS, Kibel attempted to return to work several times to no avail.
Ultimately, the Kibel Court found that “the district court and Aetna clearly erred in failing to consider the personal statement that Kibel submitted explaining that her fatigue did, in fact, render her totally disabled.” In her personal statement, Kibel described her fatigue as “an overpowering feeling of extreme tiredness, exhaustion, [and] weakness[.]” In this personal statement, Kibel further explained how it left her “completely drained” and caused “a complete slowdown of [her] brain and body[.]” The Court found that, this evidence in the form of Kibel’s own personal statement, when appropriately considered, further supported a finding that Kibel’s condition prevented her from performing the duties of her occupation. For that reason, the Ninth Circuit reversed and remanded, instructing “the district court to direct an award of benefits to Kibel[.]”
The Kibel court relied on Demer v. IBM Corp. LTD Plan, 835 F.3d 893, 904–07 (9th Cir. 2016) for the rule that a district court and disability insurer must “consider a claimant’s subjective account of pain” when deciding whether she is disabled. Id. at *2.
As detailed above, a personal statement can be the difference between a denial and an award of long-term disability benefits; it was for Kibel. With this in mind, personal statements must be relevant to the circumstances and should include the following information: 1) a detailed description of the duties of your occupation as you performed them, 2) a detailed discussion of the history of your condition, 3) a detailed discussion of your symptoms and 4) how those symptoms, such as pain and fatigue, impact your ability to perform the duties of your occupation; 5) how your disability has also impacted your overall quality of life and 6) a discussion of the things you could previously do but can no longer do. It is also important that you write your own personal statement. It should sound authentic and the best way to achieve that is by writing it in your own words. Moreover, because personal testimony is a form of proof that typically raises credibility issues, it is likewise important that you gather corroborating statements from colleagues, friends and family. Like the disability claimant’s personal statement, these corroborating statements should discuss each person’s firsthand account of your decline as the result of your condition.
A positive for ERISA disability claimants, the Ninth Circuit’s ruling in Kibel has wider applicability than just ERISA cases. Because most long-term disability insurance policies do not define disability materially differently between ERISA and Non-ERISA policies, personal statements can be valuable whether you have an individual disability insurance policy governed by state insurance bad faith laws or an ERISA-governed group policy.
Robert McKennon Quoted in Super Lawyers’ Article: Does Suicide Invalidate an Insurance Claim?
On February 2, 2018, Robert J. McKennon, founding shareholder of McKennon Law Group PC, shared his insurance expertise with Trevor Kupfer of Super Lawyers for an article on important clauses in insurance policies entitled “Does Suicide Invalid an Insurance Claim? It All Depends on the Language in the Policy.” “Super Lawyers,” one of the most important and prestigious ratings services in the United States, that recognizes the top 5% of outstanding lawyers, published the article on its website. Mr. McKennon, an attorney who has practiced for over 30 years and mostly represents policyholders in life, health and disability insurance matters, has been a recognized Super Lawyer every year since 2011. He is an expert in insurance coverage and ERISA litigation. In this article he commented on clauses that regularly appear in life and accident insurance policies, such as suicide clauses, incontestability clauses, and accidental death clauses. The article can be found here.
Robert McKennon Quoted in Super Lawyers’ Article: Does Suicide Invalidate an Insurance Claim? It All Depends on the Language in the Policy
Robert J. McKennon, founding shareholder of McKennon Law Group PC, shared his comment for an article discussing important clauses in insurance policies entitled “Does Suicide Invalid an Insurance Claim? It All Depends on the Language in the Policy.” The author of the article, Trevor Kupfer, requested Mr. McKennon’s expertise as to several important clauses in insurance policies, including incontestability clauses, suicide clauses and accidental death and dismemberment clauses. Mr. McKennon is quoted extensively in the article and he discusses some of his cases dealing with the issue of suicide vs. accident. On February 2, 2018, the article was published to the “Super Lawyers” website, a ratings service that recognizes prominent lawyers for high levels of professional achievement. Mr. McKennon, an attorney who has practiced for over 30 years and mostly represents policyholders in life, health and disability insurance matters, has been a recognized Super Lawyer every year since 2011. The article appears in full below, reprinted with the permission of Super Lawyers.
DOES SUICIDE INVALIDATE AN INSURANCE CLAIM?
It all depends on the language in the policy
By Trevor Kupfer
There are two prevalent misconceptions about life insurance and suicide. One is informed by stories like It’s a Wonderful Life, Death of a Salesman and Bulworth, where the down-on-his-luck protagonist considers the insurance benefit to their loved ones if they commit suicide. The other is quite the opposite: that if you commit suicide, your insurance policy is void. So which is it?
“It all depends on the language of the policy,” says Robert J. McKennon, an insurance and employee benefits attorney at McKennon Law Group in Newport Beach. “It’s one of the first things I look at.”
Insurance policies are like any contract: It’s all about what’s in the fine print.
The Suicide Clause
Some life insurance policies may pay benefits regardless of suicide, others may require a certain amount of time to pass after finalizing the policy, and “a number of life insurance policies have exclusions for suicide or self-inflicted injury,” McKennon says.
But even if a policy has a “suicide clause,” the law says that the language must be plain, clear, and conspicuous. “That’s a grey area,” McKennon says. Several cases have set precedent on what it means to be conspicuous, but it ultimately depends on what a judge decides. “And if the court thinks it’s not clear and conspicuous, the clause is not enforceable.”
The Incontestability Clause
McKennon has handled several cases that deal with incontestability. This common policy clause allows an insurance company to argue that the policyholder provided inaccurate information, thus voiding the contract. The clause often contains a provision stating that the policy becomes incontestable after a period of time.
Depending on the terminology of the clause, however, it may make an exception for fraud. “That someone intentionally withheld information,” McKennon explains, “like a past history of mental illness or prior suicide attempts.” Failing to provide such information puts a policyholder at risk of fraud, and therefore no benefits.
Accidents & the Burden of Proof
In theory (and certainly in the movies), one could go from insurance company to insurance company taking out life insurance policies, and lying the entire time. Then, in the event of their death, if the insurance company doesn’t contest anything, their beneficiaries will receive the benefits.
In fact, 99 percent of all life insurance claims are paid in full, according to the American Council of Life Insurers. However, that doesn’t mean some don’t encounter denials, appeals, and legal fights that delay said payment. One doesn’t have to look far to find examples.
A famous one from 2011 involved a Montana man who was battling cancer when he died in a car accident. Shortly after, his life insurance claim was denied when the company argued it was suicide. A more recent example was a client of McKennon’s.
“She was standing outside the shower, slipped and fell, and her neck wrapped around the cord for the handheld part of the shower, in its holster. She lost consciousness and ended up dying a few days later,” he says. “The insurance company investigated and concluded it was a suicide. We said, ‘No, it was an accident.’ They decided we were correct on appeal, and paid the claim, and now we’re suing on the grounds of bad faith.”
The key in McKennon’s shower case was expert testimony that it was an accident. The burden of proof in such cases is an interesting wrinkle, he notes. If a policy excludes suicide, the insurance company has to prove it was suicide. “That can make the difference in your case. If the answer isn’t clear and can go either way, the party with the burden of proof could lose, and the insurance company always has the burden with respect to an exclusion in the policy,” he adds.
Seeking Help
As with anything, each case depends on the circumstances and verbiage in the policy. Insurance attorneys deal with this on a regular basis, and it’s always advisable to seek reputable legal advice in the event of a claim denial.
Accidental Death & Dismemberment Policies: When Is a Death Considered Accidental?
Accidental Death & Dismemberment (AD&D) insurance pays the insured and his or her beneficiaries a set amount of money if the insured’s death or dismemberment is the direct result of an “accident.” In the event of a death caused by an accident or an accident that results in the insured losing his or her eyesight, speech, hearing, or a limb, AD&D will pay the insured or his or her beneficiaries a specified amount. The term “accident” has been given many different meanings in insurance policies and has been heavily litigated throughout history. Courts have encountered significant difficulty attempting to determine when an event is an “accident” for insurance law purposes. While the definition of the term “accident” will vary based upon the specific provisions contained in the policy at issue, the following recent court decisions demonstrate the issues that can complicate the determination of whether a death or insuring event is accidental.
In Prather v. Sun Life & Health Ins. Co., 843 F.3d 733 (7th Cir. 2016), a case decided under ERISA, the insurance policy at issue limited coverage to “bodily injuries that result directly from an accident independently of all other causes.” An insured tore his Achilles tendon while playing basketball, and underwent surgery to repair his tendon. Despite the otherwise successful surgery, the insured collapsed at work and died shortly thereafter due to a blood clot that broke loose from his injured leg and traveled to his lung causing cardiac arrest. Sun Life argued that the insured’s cardiac arrest and ensuing death were not entirely consequences of his accident causing his Achilles tendon to tear, but was a consequence of the surgery he underwent. The court was not persuaded by Sun Life’s argument, instead determining that Sun Life failed to make any plausible showing that the surgery, rather than the accident that necessitated the surgery, caused the insured’s death. Even though a beneficiary has the burden to prove a death was accidental, the court explained that a beneficiary is not required to disprove any possible alternative cause of death, even when a policy requires a death result from an accident “independently of all other causes,” as such a requirement would give the insurer carte blanche to reject coverage in a case in which an accident is a conceded cause of death.
In McDonald v. Onebeacon Am. Ins. Co., 2015 WL 11439080 (N.D. Ga. 2015), the insured, a truck driver, was found unresponsive in his truck shortly after an accident, and he died later that day. The truck driver was massively overweight and suffered from an enlarged heart and other coronary issues, and an examining doctor concluded that heart disease and resulting arrhythmia were the cause of his death. The policy insuring the truck driver defined an “accident” as “a sudden, unexpected, specific and abrupt event that occurs by chance at an identifiable time and place.” The court denied the insurer’s motion for summary judgment in part, finding that even though the truck driver’s heart condition was quite possibly the only cause of his death and his crash, his heart episode could fall within the policy’s broad definition of an accident. The court reasoned that the truck driver’s heart episode, occurring at the moment he crashed his vehicle, was a sudden and specific event that appears to have been unexpected and independent of all other causes.
In Wichita Fireman’s Relief Ass’n v. Kansas City Life Ins. Co., 609 Fed. Appx. 530 (10th Cir. 2015), the chordal structures in a fireman’s heart ruptured while he was fighting a condominium fire. After the fire, the fireman underwent surgery revealing a damaged mitral valve and the three torn chordal structures. The fireman died shortly after surgery. The policy at issue provided benefits for a loss resulting “directly and independently of all other causes from accidental bodily injury.” The policy also excluded coverage for a loss resulting from “bodily or mental illness or disease of any kind, or medical or surgical treatment of the illness or disease.” The Wichita Fireman’s Relief Association argued that the fireman’s death was brought on by extreme physical exertion during the fire, and the insurance company argued that the fireman’s death was instead the product of chronic mitral valve disease. The appellate court found there were issues of material fact as to whether the fireman’s heart injury, brought upon by extreme exertion in fighting the fire, constituted accidental bodily injury. The court found that the rupture of the chordal structures within the firefighter’s heart could be found by a jury to be unexpected and unforeseen, even though the strenuous conditions were within his line of duty.
Given the varied interpretations that can apply to provisions within insurance policies covering accidental deaths, and the considerable difficulty courts have encountered when trying to determine what is an accident” for insurance purposes, having an experienced attorney matters to the success of your accidental death claim. If your claim for health, life, short-term disability, long-term disability, or AD&D insurance has been denied, call (949)387-9595 for a free consultation with the attorneys of the McKennon Law Group PC, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.
