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Submission of the Claim File: Seal or Redact?

For most insurance litigation, the majority of the evidence used by both sides comes from the claim file, also known as the administrative record in ERISA cases.  The claim file represents the insurance carrier’s written record of its handling and processing of an insurance claim.  Obviously, this information is highly relevant whenever coverage or a claim is disputed.  Moreover, in the case of life, health, or disability insurance cases, the claim file will also be full of personal and confidential information such as medical records and social security numbers.

The question becomes how best to utilize the information in the claim file during the course of litigation while still addressing the privacy concerns of a public court record.  Generally, there are two courses of action.  The first is to go through the entire record and redact any personal information, also known as “personal identifiers.”  See Federal Rule of Civil Procedure 5.2(a).  This can be a very time consuming and expensive process since the claim file can easily encompass several hundred or thousand pages.  The second course of action is to submit the claim file under seal.   This is usually the quickest, easiest and most cost effective choice when dealing with confidential medical information.  The downside to this course of action is that counsel must demonstrate to the court a “compelling reason” to file records under seal.  See Foltz v. State Farm Mut. Auto. Ins. Co., 331 F.3d 1122, 1135 (9th Cir. 2003).  Many federal courts have their own Local Rules regarding filing documents under seal.  For example, in the Central District of California, Local Rule 79-5.1 provides:

L.R. 79-5.1* Filing Under Seal – Procedures . Except when authorized by statute or federal rule, or the Judicial Conference of the United States, no case or document shall be filed under seal without prior approval by the Court. Where approval is required, a written application and a proposed order shall be presented to the judge along with the document submitted for filing under seal. The proposed order shall address both the sealing of the application and order itself, if appropriate. The original and judge’s copy of the document shall be sealed in separate envelopes with a copy of the title page attached to the front of each envelope. Conformed copies need not be placed in sealed envelopes. Where under-seal filings are authorized by statute or rule, the authority therefor shall appear on the title page of the proposed filing. Applications and Orders to Seal, along with the material to be placed under seal, shall not be electronically filed but shall be filed manually in the manner prescribed by Local Rule 79-5. A Notice of Manual Filing shall also be electronically filed identifying materials being manually filed.

If you opt to file the claim file under seal, what constitutes a compelling reason to do so?  At least one court in the Ninth Circuit has held that difficulty in redacting thousands of pages of documents does not, by itself, qualify as a “compelling reason.”  In Nash v. Life Insurance Company of North America, 2010 WL 2044935 (Decided May 18, 2010), both parties submitted a joint motion to file a unredacted copy of the administrative record under seal, citing difficulty in redacting 4,500 pages of documents.  The parties argued that redacting social security numbers, dates of birth, the names of minor children, and financial account numbers from the administrative record is “impracticable”  However, despite being unopposed, the court nonetheless declined to grant the motion, stating:

Historically, courts have recognized a ‘general right to inspect and copy public records and documents, including judicial records and documents. Except for documents that are traditionally kept secret, there is a strong presumption in favor of access to court records. A party seeking to seal a judicial record then bears the burden of overcoming this strong presumption by meeting the compelling reasons standard. That is, the party must articulate compelling reasons supported by specific factual findings, … that outweigh the general history of access and the public policies favoring disclosure, such as the public interest in understanding the judicial process.

Id. (internal citations omitted).  Although Nash is unpublished and can be factually distinguishable based on the contents of the claim file at issue, its holding should serve as a warning to future litigants to be wary about filing under seal.  That does not mean that filing under seal is never appropriate.  Instead, the lesson is to approach the court early in the litigation and seek permission to file under seal.  The last thing any attorney wants to do on the eve of a motion filing deadline is to spend countless hours redacting documents.

The California Insurance and Life, Health, Disability Blog at californiainsurancelitigation.com and at mslawllp.com
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Ninth Circuit Court of Appeals Applies Montour to the Conflict of Interest Analysis in ERISA Case

In the aftermath of the United States Supreme Court holding in Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 128 S.Ct. 2343, 2348 (2008), the courts have struggled to apply this holding. The Ninth Circuit did so in Montour v. Hartford Life & Accid. Ins. Co., 582 F.3d 933 (9th Cir. 2009). In turn, the District Courts have applied Montour in several decisions.

One of the latest is the unpublished opinion in Sterio v. HM Life, 2010 U.S. App. LEXIS 4615 (E.D. Cal., Mar. 4, 2010) which represents the first case out of the Ninth Circuit Court of Appeals to substantively discuss the application of the conflict of interest analysis set forth in Montour. This case provides valuable insight into how may courts will apply the factors set forth in Montour.

In Sterio, the plaintiff Barabara Sterio, sought long term disability benefits under an ERISA benefits plan sponsored by her former employer, Diabetes Well. Sterio suffered post-operative complications following total hip replacement surgery which she claims left her permanently disabled. HD Life, the insurer and administrator of the ERISA plan , eventually concluded that the medical evidence did not support Sterio’s claim. HD Life denied benefits and Sterio sued in federal court. At issue on appeal was the proper standard of review and the weight to give the conflict of interest.

As with many insurance cases, the ultimate benefits decision was made by HD Life, who was also the insurer of the plan. This situation creates a structural conflict of interest. In Glenn, supra, the Court held that the presence of a conflict of interest does not change the standard of review, but instead becomes a factor in determining whether an administrator abused its discretion. Here in Sterio, the court discussed five factors which it held, demonstrated that HD Life abused its discretion. The first was HD Life’s failure to address what the court believed was reliable medical evidence. This conflicted with HD Life’s claim that there was no objective medical evidence supporting her disability. Second, HD Life failed to address or even acknowledge the Social Security Administration’s determination that Sterio was permanently disabled. Although the SSA’s determination would not be binding on HD Life, their failure to even address the issue was suspect. The third factor was the failure to conduct an in-person medical evaluation. Independent medical exams are not required but in this case, HD Life engaged six different independent reviewing physicians, each of whom conducted only a paper review of the evidence. The fourth factor addressed by the court is the failure of the administrator to communicate to the claimant the specific evidence necessary to establish the claim. Here, HD Life discounted Sterio’s Functional Capacity Evaluation because there was no bone density study performed. However, HD Life failed to communicate to Sterio that information which prevented her from taking steps to prove her claim by undergoing a bone density study. The final factor discussed by the court was HD Life’s violation of ERISA procedures by “tacking on a new reason for denying benefits in its final decision, thereby precluding Sterio from responding to that rational for denial at the administrative level.” (internal citations omitted). This action, the court reasoned, was evidence of the conflict of interest and demonstrated that the decision may not have been entirely based on the medical evidence.

Based on the abovementioned factors, the court held that HD Life abused its discretion when it denied Sterio’s LTD benefits. For the purposes of future litigation, this case highlights the application of the conflict of interest analysis and is useful to both plaintiffs and defendants, by discussing in detail the Ninth Circuit’s desired application of Montour.

The California Insurance and Life, Health, Disability Blog at californiainsurancelitigation.com and at mslawllp.com
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Documents Reviewed by Independent Medical Examiner Sufficient to Satisfy Plan Obligation to Consider All Relevant Documents

The United States Court of Appeals for the Ninth Circuit, in an unpublished decision, addressed the question of whether documents reviewed by an independent medical examiner, but not by the plan administrator, was sufficient to satisfy the Plan’s obligation to consider all relevant documents. Sun Sun Lin v. Mellon Long Term Disability Plan, 2010 WL 1917305 (Decided May 13, 2010).

In Sun Sun Lin, the Mellon Long Term Disability Plan was administered by a Corporate Benefits Committee (“CBC”). The plaintiff, Sun Sun Lin (“Lin”), challenged the district court’s grant of summary judgment by arguing that CBC failed to give her a full and fair review of the denial of her claim for long term disability benefits. In making this argument, she relied on a statement from the Plan’s attorney “that the CBC did not directly consider those documents in making its determination to deny [Lin’s] claim,” but did “‘indirectly’ consider[ ] these documents to the extent they were reviewed and considered by” an independent medical examiner retained by the CBC in its review of Lin’s appeal. The question before the court was whether the review by the independent examiner was sufficient.

 

On appeal, the Ninth Circuit focused on the language of the Plan which did not contain any “direct consideration” requirement. Instead, the terms of the Plan required CBC to “take into account all comments, documents, records, and other information submitted by the participant relating to the Claim.” This language did not impose a requirement upon CBC to directly review each and every document. Instead, it was sufficient that the documents were reviewed and considered by the independent medical expert. The Court explained:

In light of the plain language of the Plan, which provides that the CBC need only “take into account,” not “directly consider,” all documentation, and which actually requires that the CBC consult an independent expert on questions of medical judgment, the CBC did not abuse its discretion in “indirectly consider[ing]” certain medical documents relating to an earlier benefits determination under a different disability standard.

As a result, the Court affirmed the district court’s grant of summary judgment. This result is not surprising given the plan language and the fact that the plan did consider an opinion by an independent medical expert.

The California Insurance and Life, Health, Disability Blog at californiainsurancelitigation.com and at mslawllp.com
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New California Health Insurance Legislation Moves Forward

The debate over national health care reform has moved to the California Legislature, which will begin taking the initial steps to implement the complex series of health insurance overhauls prescribed by the federal government.

The Legislature seeks to enact reforms signed into law by President Obama this year. Among other things, certain Bills would prohibit health insurers from denying coverage because of preexisting conditions and create an exchange through which individuals could buy insurance.  In addition, they would require prior approval of health insurance rates and create a new independent review panel.

AB  2578 (Jones and Feuer), which was recently introduced, has passed the California Assembly.  This Bill would require HMOs and health insurers to seek “prior approval” from the state Department of Insurance or the Department of Managed Health Care for rate increases and to justify overhead costs as is required in connection with many lines of insurance under California’s Proposition 103, including auto, home, earthquake, medical malpractice, and others.  Proposition 103 does not apply to health insurers.

AB 2470 (De La Torre), has also passed the Assembly.  The Bill, sponsored by California Medical Association, would require an independent review and approval of decisions made by health insurers and health plans to rescind coverage for patients after they get sick.  Patients would retain their insurance until the review determined whether the proposed rescission is legal and justified.  The Bill would require the independent review organization, in reviewing a proposed rescission, to determine whether a health plan enrollee “intentionally misrepresented” material information on his or her application in order to obtain health care.  The federal health care Bill requires guaranteed issuance of health care policies despite pre-existing conditions and only permits rescissions for fraud.  The federal legislation does not include an outside review of insurers’ rescission decisions, as mandated by AB 2470.

According to the CMA website, “California’s physicians have fought rescissions for years, and we’re determined to put a stop to this awful practice,” said Brennan Cassidy, M.D., president of the CMA.’  AB 2470 would force insurers to honor their commitment to provide coverage for their policyholders, instead of pulling the rug out from patients when they are weak and sick.”

AB 2470 follows two other similar bills – AB 1945 and AB 2, both by De La Torre and sponsored by CMA – that the governor vetoed.

The California Insurance and Life, Health, Disability Blog at californiainsurancelitigation.com and at mslawllp.com All rights reserved

U.S. Supreme Court Hands ERISA Plan Participants Major Victory in Allowing Recovery of Attorneys’ Fees

As predicted in my April blog post, the U.S. Supreme Court today handed ERISA plan participants a big victory when they decided the important ERISA disability case of Hardt v. Reliance Standard Life Insurance, __ U.S. __ (Decided May 24, 2010) holding that an ERISA plan participant may be able to collect attorneys’ fees from a plan or claim administrator without obtaining a judgment in the action. 

In that case, Bridget Hardt filed suit against the plan’s disability insurer, arguing that Reliance Standard Life Insurance Co. wrongly denied her claim for long-term disability benefits.  The district court found that Reliance’s original decision denying benefits disregarded pertinent medical evidence in violation of ERISA and found that the decision was otherwise unsupported by substantial evidence. Based on those findings, the district court remanded the matter to Reliance for reconsideration, ordering it to make a new benefits determination, after which it finally granted the benefits due. The district court then awarded Hardt $39,149 in attorney fees.

The Fourth Circuit Court of Appeals reversed, holding that 29 U.S.C. Section 1132(g)(1)of ERISA provides a district court discretion to award attorney fees only to a prevailing party, and Hardt was not a prevailing party because her only request for relief was the award of benefits, which the district court did not award.

The questions presented were: (1) Whether ERISA section 502(g)(1) provides a district court with discretion to award reasonable attorney’s fees only to a prevailing party; and (2) whether a party is entitled to attorney’s fees pursuant to section 502(g)(1) when she persuades a district court that a violation of ERISA has occurred, successfully secures a judicially ordered remand requiring a redetermination of entitlement to benefits, and subsequently receives the benefits sought on remand.

In a 9-0 decision authored by Justice Thomas, the United States Supreme Court reversed, holding that because Section 1132(g)(1) does not use the term “prevailing party,” district court judges have discretion to award attorneys’ fees to either party, even in a situation where there is no judgment in favor of the plan participant.  “We hold instead that a court ‘in its discretion’ may award fees and costs ‘to either party,’ ibid., as long as the fee claimant has achieved ‘some degree of success on the merits,’ Ruckelshaus v. Sierra Club, 463 U. S. 680, 694 (1983).”

The Court further explained its holding:

Ruckelshaus lays down the proper markers to guide a court in exercising the discretion that §1132(g)(1) grants. As in the statute at issue in Ruckelshaus, Congress failed to indicate clearly in §1132(g)(1) that it “meant to abandon historic fee-shifting principles and intuitive notions of fairness.” 463 U. S., at 686. Accordingly, a fees claimant must show “some degree of success on the merits” before a court may award attorney’s fees under §1132(g)(1), id., at 694. A claimant does not satisfy that requirement by achieving “trivial success on the merits” or a “purely procedural victor[y],” but does satisfy it if the court can fairly call the outcome of the litigation some success on the merits without conducting a “lengthy inquir[y] into the question whether a particular party’s success was ‘substantial’ or occurred on a ‘central issue.’” Id., at 688, n. 9.

This decision will encourage the proper adjudication of ERISA rights so that when plan participants achieve some measure of success in their actions against plan/claim administrators, they will be in a position to collect their attorney’s fees.

The California Insurance and Life, Health, Disability Blog at californiainsurancelitigation.com and at mslawllp.com All rights reserved

Differential Standard of Review in ERISA Cases Clarified

The Tuesday May 4, 2010 edition of the Los Angeles Daily Journal featured my article, entitled “Deferential Standard of Review in ERISA case Clarified,” in the Perspective column. It explains the latest case from the United States Supreme Court, Conkright v. Frommert and discusses what it means and how it should be read in conjunction with other Supreme Court and Ninth Circuit cases. The article is posted below with permission of Daily Journal Corp. (2010).

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