On August 28, 2019, the Los Angeles Daily Journal published an article written by Robert J. McKennon of the McKennon Law Group PC. The article addresses a recent case by the Ninth Circuit Court of Appeals, Dorman v. Charles Schwab, which overruled the Ninth Circuit precedent Amaro v. Continental Can Co. and enforced an arbitration clause in a pension plan on the basis that Supreme Court precedent had impliedly overruled its ruling in Amaro. Given the expansive reading of arbitration clauses by the Supreme Court and now the Ninth Circuit, it is likely that more ERISA pension claims will be litigated on an individualized basis and will be litigated in arbitration proceedings. For a full view of the article, take a look at our blog, here.
In the August 28, 2019 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon. The article addresses a recent case by the Ninth Circuit Court of Appeals, Dorman v. Charles Schwab, which overruled the Ninth Circuit precedent Amaro v. Continental Can Co. and enforced an arbitration clause in a pension plan on the basis that Supreme Court precedent had impliedly overruled its opinion in Amaro. Given the expansive reading of arbitration clauses by the Supreme Court and now the Ninth Circuit, it is likely that more ERISA pension claims will be litigated on an individualized basis and will be litigated in arbitration proceedings.
Ruling Could Send Shock Waves Through ERISA Claims Industry
A 9th Circuit ruling will have the effect of limiting claimants’ much-needed access to the federal courts and class actions.
By Robert J. McKennon
The Employee Retirement Income Security Act of 1974 was the largest statute ever passed by Congress at the time it was enacted. ERISA established pension and employee benefit plan standards for private employers. As the number of retirees and employees covered by ERISA retirement and benefit plans continued to grow, many found that their plan fiduciaries, including former employers and their insurers, were not meeting their obligations with respect to their retirement and other employee benefits. Thus, the last two decades have seen a significant rise in class action litigation involving fiduciaries of 401(k) and pension plans under various legal theories. These class actions typically allege some type of wrongful conduct by plan fiduciaries that resulted in the reduction of plan assets, usually because of excessive fees charged and/or some type of imprudent investment activity.
These actions have been almost exclusively litigated in the federal courts. This is because in the 9th Circuit, plan participants and their beneficiaries were protected from being forced into arbitrating these claims by Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), in which the 9th U.S. Circuit Court of Appeals held that ERISA claims were not arbitrable. The Amaro court based its decision in large part on the premise that arbitrators “lack the competence of courts to interpret and apply statutes as Congress intended.” Amaro was widely seen as rejecting binding arbitration in the ERISA context.
Since the Amaro decision, the U.S. Supreme Court has pushed back on its past criticism of arbitration clauses. In AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 345 (2010), ideologically split justices ruled 5-to-4 that an arbitration provision in consumer contracts requiring individual arbitration and preventing class actions or class-wide arbitration was enforceable. The Supreme Court noted that Congress enacted the Federal Arbitration Act in response to widespread judicial hostility to arbitration and that the principal purpose of the FAA is to ensure that private agreements are enforced according to their terms. Id. at 339. In American Exp. Co. v. Italian Colors Restaurant, 570 U.S. 228, 238 n.5 (2013), the Supreme Court ruled that arbitrators are competent to interpret and apply federal statutes and dismissed the interest in ensuring the prosecution of low-value claims in favor of arbitration, permitting the waiver of the class action procedure.
In a momentous decision in Dorman v. Charles Schwab Corp., 2019 DJDAR 7932 (9th Cir. Aug. 20, 2019), the 9th Circuit overruled Amaro and enforced an arbitration clause in a pension plan on the basis that Supreme Court precedent in cases such as American Exp. Co. had impliedly overruled its ruling in Amaro.
Michael Dorman was employed at Schwab from February 2009 to October 2015. Dorman joined the Schwab Retirement Savings and Investment Plan, and voluntarily contributed to his retirement account through payroll deductions until he left Schwab. In December 2014, the plan was amended to add an arbitration provision, which states that “[a]ny claim, dispute or breach arising out of or in any way related to the Plan shall be settled by binding arbitration.” The arbitration provision includes a waiver of class or collective action that requires individual arbitrations, even if, absent the waiver, Dorman could have represented the interests of other plan participants.
In 2017, Dorman filed a class action suit in district court alleging that the defendants violated ERISA and breached their fiduciary duties by including Schwab-affiliated investment funds in the plan, despite the funds’ poor performance, to generate fees for Schwab and its affiliates. In response to his complaint, the defendants moved to compel individual arbitration of the asserted claims pursuant to the arbitration provision in the plan. The district court denied Defendants’ motion.
The court in Dorman addressed these Supreme Court rulings and reasoned further that in Comer v. Micor, Inc., 436 F.3d 1098 (9th Cir. 2006), the 9th Circuit acknowledged in dicta that its past “expressed skepticism about the arbitrability of ERISA claims … seem[ed] to have been put to rest by the Supreme Court’s opinions.” The Dorman court further noted that in American Exp. Co., the Supreme Court expressed that arbitrators are competent to interpret and apply federal statutes and that its opinion in Amaro was thus no longer valid.
The 9th Circuit reasoned that while a three-judge panel may generally not overrule a prior decision of the court, if an intervening Supreme Court decision undermines an existing precedent of the 9th Circuit, the three-judge panel may then overrule prior circuit authority. The court found that the holding in American Exp. Co. that federal statutory claims are generally arbitrable and arbitrators can competently interpret and apply federal statutes constitutes intervening Supreme Court authority that is irreconcilable with Amaro. The court thus reversed and remanded the district court’s ruling. Id.
In an accompanying unpublished order, the same panel enforced the arbitration clause in the plan document, finding that Dorman was bound by the plan’s arbitration provision, that the dispute fell within the scope of the arbitration provision, and that the claims challenging the use of Schwab’s proprietary funds were subject to arbitration and had to be arbitrated on an individual rather than a class basis, with recovery limited to the individual plaintiff’s damages.
To be contrasted with Dorman is the 9th Circuit’s ruling in Munro v. University of Southern California, 896 F.3d 1088 (9th Cir. 2018), which recently addressed a situation where an employee sued his employer not on his own behalf, but on behalf of another entity for claims that the employee cannot bring in his individual capacity. In Munro, nine current and former employees of the University of Southern California brought suit against their employer for breach of fiduciary responsibility in the administration of two ERISA plans offered by the employer. The relief sought by the plaintiffs included the following: a determination as to the method of calculating losses, removal of breaching fiduciaries, a full accounting of plan losses, reformation of the plans and an order regarding appropriate future investments.
Since the plaintiffs all signed arbitration agreements as part of their employment contracts, USC filed a motion to compel arbitration. The district court denied USC’s motion and ruled that the arbitration agreements, which the employees entered into in their individual capacities, do not bind the plans because the plans did not themselves consent to arbitration of the claims. The 9th Circuit upheld the district court’s ruling, finding that the claims for breach of fiduciary duty fell outside the scope of the arbitration agreements. In reaching its decision, the court turned to the language of the arbitration agreements, which state that the parties agreed to arbitrate “all claims … that Employee may have against the University or any of its related entities … and all claims that the University may have against Employee.” The court noted that this language does not extend to claims that other entities have against the university.
The Munro court concluded that the ERISA claims for breach of fiduciary duty were not claims that the “Employee may have against the University or any of its related entities.” Rather, the employees brought the claims on behalf of the plans, and, since the plans never consented to arbitration of the claims, the arbitration provision did not apply in this instance. Specifically, the court noted that the ERISA plaintiffs did not seek relief for themselves, but rather sought recovery for injury done to the plans.
Unlike Munro, in Dorman, the arbitration provision was contained in the plan document itself and thus the plan is deemed to consent by virtue of the arbitration provision. Considering the expansive potential reading of the arbitration provision in Dorman and location in the plan document, a claim on behalf of the plan for breach of fiduciary duties under ERISA could reasonably be considered as falling under the purview of the clause.
Dorman has the potential to send shockwaves through ERISA claims industry and will have the effect of limiting claimants’ much-needed access to the federal courts and class actions. Dorman and the above-cited Supreme Court cases appear to stand for the proposition that many types of ERISA claims will be subject to arbitration if the plan documents are drafted properly. Expect that following the Dorman decision, arbitration and class action waiver clauses will become more prevalent in ERISA plans. Given the expansive reading of arbitration clauses by the Supreme Court and now the 9th Circuit, it is likely that more ERISA claims will be litigated on an individualized basis and will be litigated in arbitration proceedings. It remains to be seen whether employers and plans will benefit by this trend.
Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith, ERISA and unfair business practices litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at www.californiainsurancelitigation.com.
Ordinarily, a participant or beneficiary of a plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”) must avail himself or herself of the plan’s internal review procedures before bringing a civil action in federal court for recovery of plan benefits. This includes group ERISA plans offering long-term disability, life, health or accidental death benefits. Although ERISA does not explicitly require exhaustion of administrative remedies, federal courts have held that an ERISA plan participant must exhaust the plan’s administrative appeal procedure before filing a federal lawsuit. See Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620 (9th Cir. 2008). However, according to the Ninth Circuit, this exhaustion requirement applies only if the plan itself requires exhaustion. Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282 (9th Cir. 2014). But what if the plan documents are ambiguous and it is unclear whether administrative exhaustion is required? A recent decision grappled with this issue.
In Greiff v. Life Insurance Company of North America, 386 F.Supp.3d 1111 (D. Ariz. July 2019), the Court denied defendant Life Insurance Company of North America’s (“LINA”) motion to dismiss for failure to exhaust administrative remedies, finding that the plan documents were ambiguous as to whether administrative exhaustion was required. The plaintiff in Greiff sought to recover long-term disability benefits from LINA under a plan governed by ERISA. LINA moved to dismiss the complaint arguing that the plaintiff had failed to exhaust administrative remedies imposed by the plan. The plaintiff argued that the plan did not require exhaustion of administrative remedies.
In analyzing the plan language at issue, the Court recognized that the plan terms should be interpreted in an ordinary and popular sense as would a person of average intelligence and experience. The Court also acknowledged, pursuant to the Ninth Circuit ruling in Spinedex, that where plan documents could reasonably be read as making the administrative appeals process optional, administrative exhaustion is not required. The Ninth Circuit in Spinedex recognized that claimants may be affirmatively misled by plan language that appears to make the exhaustion requirement permissive when it is in fact mandatory.
In Greiff, to support its position that the plan documents required administrative exhaustion prior to filing a lawsuit, LINA relied on language contained in two sections of a claim procedures rider and language in the denial letter to the plaintiff. The language relied on in the first section of the claim procedures rider stated that written notice of a claim denial will include:
A statement regarding the right to appeal the decision, and an explanation of the appeal procedure, including a statement of the right to bring a civil action under Section 502(a) of ERISA if the appeal is denied.
The second section of the claim procedures rider stated that:
Whenever a claim is denied, there is the right to appeal the decision. A written request for appeal must be made to the Insurance Company within 60 days (180 days in the case of any claim for disability benefits) from the date the denial is received. If a request is not made within that time, the right to appeal will have been waived.
The Court found that this language would not alert an average claimant that failing to exhaust administrative remedies will preclude him from bringing a civil action under ERISA. With regard to the language in the first section, the Court pointed out that this language pertains to LINA’s obligations, rather than the claimant’s obligations. Furthermore, the Court stated that informing a claimant that he has a right to appeal is not the same as telling the claimant that he must appeal or he loses his right to prosecute his claim in federal court. In addition, telling a claimant that he has the right to bring a civil action if the appeal is denied is not the same as telling the claimant that he does not have a right to bring a civil action if he fails to appeal the denial. The Court determined that the language contained in the claim procedures rider could reasonably be read as making the administrative appeal process optional.
LINA also relied on language contained in a claim denial letter sent to plaintiff which stated, “ERISA requires that you go through the Company’s administrative appeal review process prior to pursuing any legal action challenging our claim determination.” The denial letter also stated that “[y]ou have the right to bring a legal action for benefits under . . . ERISA . . . following an adverse benefit determination on appeal.” The Court determined that the language in the denial letter did not constitute terms of the plan because claim denial letters were not among the documents that the plan specified as being part of the contract. The Court also stated that even if the claim denial letter was a part of the plan documents, the language in the denial letter did not clearly state that the plan required administrative exhaustion. The Court found the language in the denial letter insufficient to put a claimant on alert that he must exhaust administrative remedies for the same reasons that the language in the claim procedures rider was insufficient – stating that a claimant has a right to bring a legal action after a claim denial does not mean that he does not have a right to bring a civil action in any other circumstance. In addition, the Court noted that although the denial letter stated that ERISA required a claimant to go through the administrative appeal process as a prerequisite to filing suit, it did not clearly indicate that the plan required such exhaustion.
The Court in Greiff ruled that because the language at issue was ambiguous and could reasonably be read as making the administrative appeals process optional, the plan did not require administrative exhaustion, and, accordingly, LINA’s motion to dismiss was denied. As always, claimants should be extremely careful to ensure that all required administrative appeals are exhausted before filing a federal civil action. However, should claimants find themselves facing allegations that they did not exhaust administrative remedies, they should look closely to the plan language to determine if administrative exhaustion is clearly required.
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 Five 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 respond 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. [https://mslawllp.com/exceptions-to-the-exhaustion-requirement-when-is-an-appeal-futile-under-erisa/; https://mslawllp.com/exhaustion-of-administrative-remedies-under-erisa-not-required-if-exhaustion-would-have-been-futile/]
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.
ERISA guarantees claimants a “full and fair review” as well as an appeal of any denial by the insurance company. Can a disability claims insurer deny a claim too quickly and thus violate its duty to provide a full and fair review? A recent decision answered “yes” to this question. In Speca v. Aetna Life Ins. Co., 2019 WL 3754210 (D. Nev. August 8, 2019), the court ruled that Aetna Life Insurance Company (“Aetna”) did not provide a “full and fair review” and effectively cut off any meaningful access to an appeal when it denied a claim in just 14 days (without even waiting to receive any medical records).
Plaintiff, Paul Speca, worked at Home Depot until November 6, 2015 and suffered from narcolepsy (falling asleep unpredictably and uncontrollably). On November 7, 2015, he filed a claim for short-term-disability (“STD”) benefits with Aetna. That STD Policy contained a standard 45-day claim-determination period that could be extended twice, by 30 days each, for a total of 105 days, within which Aetna had to decide Mr. Speca’s STD claim. Although Aetna made several calls to Mr. Speca and his doctors, and sent at least one letter requesting medical records, after only 14 days (on November 20, 2015), Aetna denied Mr. Speca’s STD claim on the procedural ground that he had produced no medical records to support his claim. The Policy and 29 CFR § 2560.503-1 require that a claimant be given 45 days to provide requested records.
The district court reviewed this denial and remanded Mr. Speca’s claim back to Aetna. The judge wrote:
Considering that “ERISA was enacted to promote the interests of employees” [citation omitted], Defendant should have—at a minimum—waited a few more days to gather medical records before denying Plaintiff’s initial claim. There can be no question that denying Plaintiff’s initial claim on arbitrary procedural grounds not grounded in the Policy did not promote Plaintiff’s interests here. Of course, Plaintiff’s interest was to receive STD benefits, and he has not received them to date. But even if Defendant ultimately made the right decision on the merits during Plaintiff’s appeal, it never reached the merits of his claim until that appeal. And that deprived Plaintiff of an important right— the right to an appeal. Because of the way Defendant handled this claim, Plaintiff essentially received his initial claim review during his appeal with Defendant, and is now pursuing his appeal in this Court.
Defendant’s decision to essentially collapse its review of Plaintiff’s claim from two levels into one violates the spirit of both ERISA and the [STD] Policy. First, ERISA requires that Defendant “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.ˮ 29 U.S.C. § 1133(2). Plaintiff effectively presented his evidence for the first time on appeal, which did not allow for a full and fair review of his claim. Second, the Policy clearly provides for an appeal right. (ECF No. 17-7 at 2-3.) As noted, Plaintiff was denied meaningful access to an appeal. Thus, Defendant’s decision to deny Plaintiff’s initial claim on procedural grounds less than 45 days after he submitted it violated the spirit of both ERISA and the Policy—and was thus incorrect.
Id. at *5.
Since ERISA requires a “full and fair review” as well as a meaningful access to an appeal, Aetna clearly violated those rights when it denied this claim in just 14 days (without even waiting to receive any medical records). Because the Court found that Plaintiff is ineligible for long-term-disability benefits where, as here, his STD benefits claim has been denied —and the Court remanded Plaintiff’s STD-benefits claim to Defendant for further consideration —the Court also ordered Defendant (Aetna) to consider Plaintiff’s eligibility for long-term-disability benefits as well. Aetna’s “rush to judgment,” after just 14 days, failed. We often see long-term disability claims denied without a full and fair review provided. If you believe your long-term disability claim was denied without a full and fair review, please contact us.
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 with a highly skilled California/Nationwide disability insurance lawyer or ERISA lawyer at the McKennon Law Group PC, call (714)274-6322 for a free consultation or go to our website at www.mckennonlawgroup.com and complete our free consultation form today.
In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim, to handling a claim denial and through preparing a case for litigation. In Part Four of this series, we discuss ERISA claim denials. Our focus in this article will be mostly on disability insurance claim denials.
When denying a claim, an insurer is required to provide a written explanation of the basis of its denial. Under Section 503 of ERISA, “every employee benefit plan shall . . . provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant.” 29 U.S.C. § 1133(1). In any subsequent litigation, the insurer is mostly limited to the basis for the denial that is asserted in a denial letter. Once a claimant has sued the insurer, the insurer or its attorneys cannot formulate new reasons why it is believed that the denial was proper. See, e.g., Lauder v. First Unum Life Ins. Co., 284 F.3d 375, 380-82 (2d Cir. 2002).
Generally, denials of disability claims fall into two broad categories: (1) lack of objective evidence in support of the disability, and (2) insufficient medical evidence to support the disability (i.e., that even though the claimant may be suffering from a diagnosable medical condition, there exists insufficient support that the medical condition is so severe so as to render the claimant unable to work). As for a lack of objective evidence of a diagnosis or disability, unless a provision of the plan states otherwise, a claimant can rely on a variety of forms of evidence, even if there is no objective evidence to support the disability. Evidence may include: current symptoms; other medical conditions that might affect or lengthen the recovery period; existing abnormalities or deficiencies; results from physical examinations; observations made by the treatment provider during office visits / therapy sessions; diagnostic tests and their results; treatment plans; any prescribed medications and the responses to those medications; level of functionality (restrictions and limitations); clinical documentation that supports the rationale that the treatment provider used when determining level of functionality; and a description of the impact that the employee’s level of functionality has on her ability to perform her job or any other job assigned by the company.
Of course, insurance companies do not want to pay most claims, and they often look for an excuse to deny ERISA claims. Most of the time, they have their own medical personnel examine the medical evidence to determine whether the evidence supports a diagnosis and whether the evidence supports significant restrictions and limitations to the claimant’s ability to perform the substantial and material duties of his occupation. However, the insurer cannot arbitrarily refuse to credit a claimant’s reliable evidence that supports his disability. See Michaels v. Equitable Life Assur. Soc., 305 F.App’x 896, 906–07 (3d Cir. 2009). A letter from a treating physician explaining that a claimant has a particular condition and cannot work because of that condition is reliable evidence that cannot properly be ignored without a reasonable basis. When filing a claim, or appealing the denial of a claim, the ERISA claimant should always obtain letters from his treating physicians explaining the nature of the condition, the basis for the diagnosis, the claimant’s symptoms and the reason why the claimant cannot return to work. Even if the insurer refuses to give the letters adequate weight, a judge in a subsequent lawsuit will likely consider the treating physicians’ opinions strongly.
ERISA claimants should carefully examine the plan to see if it requires “objective” evidence of a diagnosis or disability. If so, the plan’s documents usually state what kind of evidence is required. The plan may limit the relevant objective evidence to a specific and narrow list of symptoms and results from tests such as magnetic resonance imaging or electromyography. Each plan is different, and the plan’s documents should be examined before deciding how to attempt to meet this requirement. Insurers very often state in denial letters that there is no objective evidence of disability or diagnosis, even though the plan does not require objective evidence. The denial letter may emphasize the lack of a test or documented restriction of movement. Unless the plan requires the specific evidence that the denial letter demands, this may be an improper attempt to require that a claimant meet a heightened standard of disability that is not found in the plan. Courts often criticize insurers for this type of conduct. See Saffle v. Sierra Pacific Power Co., 85 F.3d 455, 459–60 (9th Cir. 1996). Such conduct on the part of an insurer can compel a court to rule that the insurer improperly denied a claim and that it must pay a claimant’s benefits under a policy.
Insurers also often deny disability claims because there allegedly is insufficient support for the diagnosis, the disability and/or the claimant’s inability to perform his occupation. This reason often takes the form of an assertion that the given diagnosis and restrictions do not support the conclusion that the claimant cannot perform her job duties. For example, a claimant with chronic and severe irritable bowel syndrome may receive a denial letter stating that the claimant’s reported time spent in the bathroom is exaggerated and that, even if he suffers from the diagnosed condition, the claimant only needs ready access to a bathroom and permission to use it once every two hours. The insurer will then assert that the diagnosis does not support a determination that the claimant simply cannot work. Of course, this conclusion may be contradicted by the claimant’s treating physicians, but the insurer may discount those opinions because, in its opinion, the diagnosis does not support the level of restrictions prescribed.
Insurers often combine both of these methods when denying a claim. An insurer may emphasize that a claimant can perform a sedentary occupation and will only disagree with a narrow, but critical, range of restrictions on the claimant’s behavior. An example of this form of denial is one with regard to an office worker who has horrible back problems. His job requires that he sit at a desk all day and work on a computer. His back pain renders him incapable of performing a variety of tasks, including sitting for eight hours per day. The insurer may acknowledge all of the limitations except for the restriction on the claimant’s ability to sit, stating that the back condition is not sufficiently severe so as to prevent the office worker from sitting. The insurer then concludes that given that the claimant can allegedly perform the main requirement of the office job — sitting — the pain and other limitations are irrelevant, and the claimant is not entitled to benefits under the plan.
There are a variety of ways to overcome these denials. A claimant can obtain independent evaluations of the condition in question. This independent testing may reveal more evidence of the claimed restrictions. The claimant may also undergo vocational assessments. This testing by an independent evaluator may help to provide more concrete evidence that the claimant suffers from the contested condition and restrictions. A determination affirming disability by a governmental agency, such as the Social Security Administration, may also help to overcome this form of denial. Personal statements from the claimant, family and friends are also helpful.
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 with a highly skilled California/Nationwide disability insurance lawyer or ERISA lawyer at the McKennon Law Group PC, call (714)274-6322 for a free consultation or go to our website at www.mckennonlawgroup.com and complete our free consultation form today.