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Under Abatie, Discovery of Profitability Reports is Not Allowed

One of the most interesting questions in ERISA litigation is: What constitutes the administrative record for purposes of determining whether the administrator abused its discretion in making a claim determination?  Bartholomew v. Unum Life Ins. Co., 579 F. Supp. 2d 1339 (W.D. Wash. 2008) helped answer this question.

Plaintiff, who sued to recover benefits under her long-term disability (LTD) plan, sought to expand the scope of discovery under ERISA by seeking documents outside the Administrative Record. Among others, the Plaintiff requested; “Details of compensation and financial incentives,” “revenue and profitability reports for the last 10 years,” and “[a]ny document discussing the claims handling process published during the last 10 years.” Despite the recent rulings in Abatie allowing weight to be given to structural conflict of interest analysis, the District Court held that Plaintiff was not allowed to engage in a fishing expedition. Here, the discovery requests were not narrowly tailored to lead to discovery of admissible evidence. Therefore, Plaintiff’s request for discovery outside the statutory guidelines was appropriately denied.

Allison Bell of the National Underwriter reported on September 11, 2009 that approved disability claims rose more quickly in 2008 at the Social Security Disability Insurance program than at private disability insurers. She explained that the Council for Disability Awareness in Portland, Maine reported that findings in a summary of results from an analysis of SSDI program data and a survey of the 15 CDA member disability insurance companies were as follows:

SSDI applications rose 5.9% in 2008, to 2.3 million, and the number of workers approved for SSDI benefits increased 8.7%, to 895,000, the CDA reports.

The percentage of workers covered by the SSDI program who are receiving SSDI benefits increased to 4.8% in 2008, from 3.5% in 1998.

At CDA member companies, the number of individuals receiving long-term disability benefits payments increased 1.5% in 2008, to 573,500, and 30% of the member companies’ LTD claimants do not qualify for SSDI benefits, the CDA says.

Because of the aging of the U.S. workforce, the percentage of claims filed by workers under age 50 has been declining, and the number filed by workers over that age has been increasing.

  • But 27% of the survey participants said the overall claims rate has stayed about the same, and 64% said the incidence rate has been falling.

Only one of the participating companies said the recession has had any noticeable effect on disability claims.

2009 was an important year for insurance legislation in California.  An excellent review of this legislation was posted on December 4, 2009 by the Barger & Wolen LLP legal blog (quoted verbatim from the blog) as follows: “LIFE, HEALTH AND DISABILITY INSURANCE”

1. AB 23: Cal-COBRA Premium Assistance

  • Establishes notice requirements that must be provided to eligible qualified beneficiaries regarding the availability of premium assistance under the American Recovery and Reinvestment Act of 2009 (ARRA).
  • Qualified beneficiaries eligible for federal assistance may elect coverage under Cal-COBRA, and those enrolled in Cal-COBRA as of February 17, 2009 may request the federal premium assistance.

2. AB 76: Life and Annuity Consumer Protection Fund

  • Extends the provision creating the Life and Annuity Consumer Protection Fund to January 1, 2015.
  • Requires the California Insurance Commissioner (“Commissioner”) to publish an annual report on its Web site detailing certain protections for consumers of insurance products.

3. AB 108: Individual Health Care Coverage

  • Prohibits, except as specified, rescission, canceling, limiting the provisions, or raising premiums of a contract or policy due to omission, misrepresentation, or inaccuracy in the application after 24 months following issuance of the same.

4. AB 119: Pricing of Health Care Coverage

  • Prohibits premium, price or charge differentials based on the gender of specified individuals, commencing January 1, 2011.

5. AB 381: Unemployment Compensation Disability Benefits

  • Permits a community college district to elect to become an employer, subject to specified requirements pertaining to disability compensation.

6. AB 389: Long-Term Care Insurance

  • For long-term care insurance policies issued before new premium rate schedules are approved and for which rate revisions are filed on or after January 1, 2010, changes the calculation for determining what benefits are deemed “reasonable” in relation to premiums.
  • Permits the Commissioner to approve a rate revision based on less than a certain loss ratio in order to protect the financial condition of the insurer.
  • Revises the required qualifications of actuaries used by the Commissioner to review rate applications relative to long-term care insurance.

7.  AB 1541: Health Care Coverage (Late Enrollment)

  • An individual, or dependent, who has lost or will lose Healthy Families Program coverage, Access for Infants and Mothers Program coverage, or Medi-Cal program coverage can requests enrollment within 60 days (changed from 30 days) after termination of that coverage without being considered a “late enrollee.”

8. AB 1543: Medicare Supplement Coverage[1]

  • Adopts changes and provisions as required by the federal Medicare Improvements for Patients and Providers Act and Genetic Information Nondiscrimination Act.
  • Adopts other amendments relating to open enrollment and guaranteed-issue.

LIFE SETTLEMENTS

  • SB 98 defines when certain trusts and special interest entities do not have an insurance interest in a life insurance policy. It also establishes a number of new provisions to regulate viatical and life settlements. It adds two new license classifications for “Life Settlement Provider” and “Life Settlement Broker.”

PROPERTY AND CASUALTY INSURANCE 1. AB 63: Service Contract, Retailers

  • Requires retailers of service contracts to maintain certain information about a contract that is in effect and provide such information or a copy of the contract to the contract purchaser or beneficiary upon request.
  • Does not apply to vehicle service contracts.

2. AB 601: Motor Vehicle Insurance, Special Assessments

  • Extends until January 1, 2015, the special assessment imposed on insurers, which is charged per motor vehicle insured.

3. AB 1179: Motor Vehicle Insurance, Damage Assessments

  • Requires that additional information regarding right to independent estimate be included in the Auto Body Repair Consumer Bill of Rights.

4. AB 1200: Motor Vehicle Insurance, Direct Repair Programs

  • Provides that insurers may (notwithstanding prohibition against requiring use of specific auto repair shop) provide truthful and nondeceptive information regarding the services and benefits available to the claimant.

5. SB 291: Mortgage Guaranty Insurance Reserves

  • Amends definition of “face amount of an insured mortgage” for purposes of determining surplus requirements.
  • Requires notice to Commissioner before insurer falls below surplus threshold and creates ability to seek waiver of requirement.

MISCELLANEOUS 1. AB 299: Insurance Omnibus     Among other things, the bill:

  • Requires the California Department of Insurance to remove from, or clarify on, its Web site any pleading, order or document relating to an enforcement action that has been withdrawn.
  • Requires the Commissioner to consider additional criteria when examining the business and affairs of the insurer.
  • Allows the Commissioner to disclose market analysis data to any state or country insurance department, law enforcement officials, federal agency or NAIC.
  • All analyses pursuant to authorized examinations are at the expense of the insurer.
  • Requires insurer annual audits to be conducted in conformity with “standards adopted by the [NAIC],” and allows the Commissioner to grant multiple 30-day extensions to the audit due date.
  • Permits domestic insurers to invest in credit unions.
  • Prohibits excess fund investments in a loan or any other obligation to any one borrower or obligor as specified.
  • Requires insurers to provide to the Commissioner advance notice of the intent to enter into a tax sharing agreement.
  • Requires auto liability policy to provide for replacement of a child seat, as defined, that was damaged in a covered accident.

2. AB 328: Electronic Transactions

  • Deletes the exclusion of certain insurance statutes from applicability of Civil Code provisions permitting parties to conduct transactions by electronic means.
  • With respect to certain automobile insurance transactions, prohibits electronic delivery of certain documents unless the transaction commenced electronically.
  • Permits required notices related to certain types of insurance to be made electronically with consent of the parties, and imposes certain system and records requirements on the insurer related to the same.
  • Permits an insurer to pay claims with electronic fund transfer, with the consent of the insured.

3. AB 409: California Insurance Guarantee Association

  • Provides that the initial premium charge shall be adjusted by applying the same rate of premium charge as initially used to each insurer’s written premium as shown on the annual statement for the 2nd year following the year on which the initial premium charge “was based” (change from “is made”).

4. AB 470: Insurance Information Confidentiality

  • Authorizes the disclosure of information from an accident report, supplemental report, or investigative report to an insured’s lawyer if the insured is otherwise entitled to obtain the report.

5. AB 800: Insurance Producer Omnibus     Makes a number of changes with respect to producer licensing, including that it:

  • Deletes pre-licensing education requirement for resident applicants with current nonresident licenses.
  • For persons licensed in 2010 or after, eliminates certain exemptions from education requirement.
  • Permits licensed California nonresident business entity producers to use licensed California resident individual producers to transact insurance.”

[1] AB 1543 was enacted as an urgency statute. As such, it became effective when it was chaptered on July 2, 2009.

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