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Robert J. McKennon Recognized as 2017 “Super Lawyer” and “Top 100 Insurance Lawyers in the State of California” for 2017

McKennon Law Group PC is proud to announce that its founding shareholder Robert J. McKennon has been recognized as one of Southern California’s “Super Lawyers” and appears in the 2017 edition of Southern California Super Lawyers magazine published this month. Mr. McKennon has received this designation every year since 2011.

Each year, Super Lawyers magazine, which is published in all 50 states and reaches more than 14 million readers, names attorneys in each state who attain a high degree of peer recognition and professional achievement. The Super Lawyer designation is given to less than 5% of lawyers nationally after being nominated and voted on by their peers.
In addition, the American Society of Legal Advocates has recognized Mr. McKennon as one of the top 100 Insurance lawyers in the State of California for 2017. Mr. McKennon has received this designation every year since 2013. The American Society of Legal Advocates is an invitation-only, nationwide organization of top lawyers in practice today who combine excellent legal credentials with a proven commitment to community engagement and the highest professional standards.

Mr. McKennon was also awarded the designation of 2016 “Top Rated Lawyer in Insurance Law and Coverage” by American Lawyer Media and Martindale Hubbell, leading providers of news and rating information to the legal industry.

Robert McKennon and Scott Calvert Publish Article in the Los Angeles Daily Journal: “New Regulations Will Benefit Claimants in Disability Insurance Cases”

In the January 12, 2017 edition of the Los Angeles Daily Journal, Robert McKennon and Scott Calvert of the McKennon Law Group PC published an article summarizing the new U.S. Department of Labor disability insurance claims regulations aimed at reducing the inherent conflicts of interest present when ERISA plan administrators review long-term disability and short-term disability insurance benefit claims. In the article entitled “New Regulations Will Benefit Claimants in Disability Insurance Cases,” Mr. McKennon and Mr. Calvert explain that the new regulations require that insurance companies and ERISA plan administrators keep individual claimants much more informed throughout the claim process, which the Department of Labor believed was necessary to ensure a full and fair review of short-term disability and long-term disability claims.

The article is posted below with the permission of the Los Angeles Daily Journal.

New Regulations Will Benefit Claimants in Disability Insurance Cases

By Robert J. McKennon and Scott E. Calvert

Disability insurance cases dominate the Employee Retirement Income Security Act litigation landscape today. According to the U.S. Department of Labor, ERISA employee benefits litigation from 2006 to 2010 involving long-term disability claims accounted for 64.5 percent of benefits litigation, whereas lawsuits involving health care plans and pension plans accounted for only 14.4 and 9.3 percent, respectively. It is no secret that insurers and plans looking to contain disability benefit costs are motivated to aggressively dispute disability claims. Indeed, the DOL estimates that roughly 75 percent of long-term disability claims are denied.

The DOL is charged with promulgating new regulations governing disability insurance and health insurance benefit claims that are governed by ERISA. In late December 2016, the DOL finalized new regulations, codified at 29 C.F.R. Section 2560.503-1 and discussed at 81 Fed. Reg. 92316, aimed at minimizing the conflicts of interest inherent in the administration of ERISA plans and providing individual claimants with additional information regarding the reasons why their disability claim was denied. The DOL indicated that the regulations were “necessary to ensure that disability claimants receive a full and fair review of their claims, as required by ERISA section 503.”

The new regulations must be followed by plan and claim administrators when reviewing disability insurance benefit claims submitted by plan participants and their beneficiaries. The regulations take effect on Jan. 18, 2017, but only apply to claims for disability benefits that are filed on or after Jan. 1, 2018.

The primary change is to reinforce and strengthen the rules designed to avoid conflicts of interest. Paragraph (b)(7) of the rule is designed to “ensure that all claims and appeals for disability benefits are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision.” The rule requires that decisions regarding hiring, compensation, termination and promotion must not be made based upon the likelihood that a person will support the denial of disability benefits. For example, a plan is not permitted to hire an “independent” medical expert based on that expert’s reputation for providing administrator-favored reports.

The biggest change is the expansion of what information must be disclosed and included in any denial letter.

First, a denial letter must specially include the bases for disagreeing with any disability determination by the Social Security administration. It requires that a denial letter explain why the plan agreed or disagreed with the conclusions reached by the Social Security administration after it evaluated the same disabling conditions, medical evidence, and job duties.

Similarly, a denial letter must now also include a discussion as to why the denial decision differs from the opinions offered by a claimant’s treating physician. This is important because, typically, a claimant’s treating physicians support the claim for disability benefits. By forcing the administrator to specifically address the contrary positions offered by the treating physicians, the administrator will be forced to confront and refute this significant evidence supporting the claim.

Additionally, the denial letter must include the internal rules, guidelines, protocols, standards, or other similar criteria that were relied upon in denying the claim. Providing a claimant with this information will allow him or her to specially address those rules and standards in seeking to overturn a claim denial.

The final disclosure requirement imposed by the new regulations is that the plan administrator must explain its basis for disagreeing with any experts whose advice was initially sought but not followed. This requirement was added to prevent “intentional expert shopping” by a claims administrator. That is, when an insurance company “may consult several experts and deny a claim based on the view of one expert when advice from other experts who were consulted supported a decision to grant the claim.” By forcing the administrator to acknowledge and explain why it did not follow the recommendation of its hired experts, the DOL seeks to prevent the hiring of multiple experts until an administrator-favorable opinion is secured.

Another significant change to the regulations, codified at paragraph (h)(4), requires the plan administrator to provide claimants, free of charge, any new or additional evidence considered or relied upon when making the benefit determination, thus giving the claimant the right to review and respond to new information even before the final claim decision is made. The new evidence must be provided to a claimant as soon as possible and sufficiently in advance of the date on which the notice of adverse benefit determination is required, thus giving the claimant a reasonable opportunity to address the new evidence or rationale prior to the denial decision being made. This important new rule will allow claimants to augment the Administrative Record because they will have another opportunity to present evidence in support of their claim.

Other changes relate to when a claim is “deemed denied,” freeing a claimant to initiate litigation despite the fact that his or her administrative remedies were not yet exhausted. If a claim for benefits is denied, the claimant is required to appeal that decision before initiating litigation.

Under the new regulations, if a plan fails to adhere to all the requirements in the claims procedure regulations, the claim is “deemed denied” without the exercise of discretionary authority. This gives the claimant the right to file a lawsuit without further delay and will allow a court to decide the merits of the claim de novo, without any deference to the fiduciary who violated the rules. Thus, the claimant would be deemed to have exhausted administrative remedies, with a limited exception where the violation was (i) de minimis; (ii) non-prejudicial; (iii) attributable to good cause or matters beyond the plan’s control; (iv) in the context of an ongoing good-faith exchange of information; and (v) not reflective of a pattern or practice of non-compliance.

The regulations also include a provision that allows a claimant to request a written explanation of any asserted violation. The administrator is required to respond to such a request within 10 days and include a specific description as to why the violation should not render the claim “deemed denied.” However, if a court finds the violation to be “de minimis,” then the matter would be remanded back to the plan administrator for further review.

Importantly, the regulations require a final denial to describe “any applicable contractual limitations period that applies to the claimant’s right to bring … an action [under ERISA], including the calendar date on which the contractual limitations period expires for the claim.” The DOL clearly states in the preamble to the new regulations its belief that any contractual limitations period that expires before the final denial is issued (or even less than a reasonable amount of time thereafter) is per se impermissible.

Finally, the claims procedures apply to any “adverse benefit determination,” which now specifically includes any rescission of disability coverage (unless it was caused by a failure to pay required premiums or contributions on time).

With these regulations, the DOL has acted to protect claimants from ERISA administrators by attempting to minimize their conflicts of interest, promoting an open and robust discussion of the claim, and ensuring that administrators strictly comply with the regulations. These are positive steps for ERISA claimants who file claims for short-term and long-term disability benefits.

As a whole, these changes will greatly benefit claimants and should make it easier to understand the claim review process and the reasons for denial, as well as make it easier to provide documents to support their claims. Indeed, the regulations finally “give some teeth” to the long-standing requirement that administrators engage in a “meaningful dialogue” with disability claimants.

Robert McKennon and Scott Calvert Publish Article: Insurers turn to Drones

In the October 18, 2016 edition of the Los Angeles Daily Journal, Robert McKennon and Scott Calvert of the McKennon Law Group published an article regarding the use of drones by insurance companies in their insurance claims investigations. In the article entitled “Insurers Turn to Drones,” Mr. McKennon and Mr. Calvert explained that insurers are increasingly using drones as part of the insurance claims handling/investigation process, including disability insurance claims, but noted the use of drones is regulated by a series of Federal, State and local laws. In addition, the article noted that courts are increasingly questioning the use of and reliance on surveillance by insurance companies in ERISA and non-ERISA insurance cases.

The article is posted below with the permission of the Los Angeles Daily Journal.

Insurers Turn to Drones

By Robert J. McKennon and Scott E. Calvert

Insurance companies have the right, and indeed the duty, to thoroughly investigate claims. In California, an insurer’s failure to reasonably investigate an insurance claim may result in bad faith liability.See Egan v. Mutual of Omaha Ins. Co., 24 Cal. 3d 809, 819 (1979);Guebara v. Allstate Ins. Co., 237 F.3d 987, 996 (9th Cir. 2001).

In the process of those investigations, insurers often secretly enlist private investigators to gather information on their insureds. With respect to disability insurance claims, for example, insurers typically hire private investigators to follow and videotape their insureds whenever they ventured out of the home, whether to take the trash out, go to a doctor’s office, or travel to the grocery store. Typically, insurers will attempt to use that surveillance to assert that their insureds are capable of working and not entitled to disability benefits, often overstating the level of activity depicted on tape and the conclusions that can be drawn from such surveillance.

However, with technological advances, the methods of surveillance are changing. Recently, insurance companies started moving beyond the proverbial “guy in a van” method of surveillance, and began using unmanned drones to conduct photographic and video surveillance. There are many different kinds of drones, but some can travel on auto-pilot to a preset location, and slowly fly above an insured and his property, undetected, while taking high-resolution photos and video. Others need to be operated by someone who keeps the aerial vehicle within the line of sight.

Drones, also referred to as unmanned aerial systems (UASs) or unmanned aerial vehicles (UAVs), are increasingly being used for commercial purposes. The use of drones is regulated both by the Federal Aviation Administration (FAA), and a variety of state and local laws and regulations. Those regulations have not prevented insurance companies from making drones part of the claim review process. In 2015, multiple insurance companies, including AIG, State Farm Mutual and USAA, were granted permission by the FAA to use drones for commercial purposes. More recently, in July, the FAA promulgated rules permitting the use of drones weighing less than 55 pounds for all commercial applications, including by insurance companies.

Most often, drones are used for claims involving property and casualty insurance, to examine the condition of tall buildings or inspect property in hard-to-reach locations or even disaster areas. However, the neither the FAA nor any other authority strictly limits the use of drones to these specific situations.

Some private investigators believe that drones are preferable to more traditional methods of surveillance, as they can often provide quicker, cheaper and safer surveillance and documentation while also reducing the risk than an investigator will be spotted, and can be used to gain access to otherwise inaccessible locations.

With FAA approval, insurers are working to research and develop best practices, safety and privacy protocols, and procedures as they further develop plans for operational use. Privacy protocols will be especially important as insurers can be sued if they obtain surveillance that impermissibly intrudes on an insured’s privacy. Thus, even with FAA approval to utilize drones, insurance companies are not simply permitted to use drones in every situation in order to attempt to assert that an insured does not qualify for benefits. They will have to be prudent using them.

As drones multiply in number and category, cities and states are setting their own boundaries. For example, while over the last two years Gov. Jerry Brown repeatedly vetoed bills that would have criminalized the use of drones in certain situations, including over wildfires, schools, prisons and jails, he did sign a law modifying California Civil Code Section 1708.8 so that the definition of a “physical invasion of privacy” now includes sending a drone into the airspace above someone’s land in order to make a recording or take a photo. A person who violates the “airspace above the land of another person” is now liable for up to three times the amount of any general and special damages caused by the invasion, as well as a civil fine between $5,000 and $50,000. While this change was developed mainly to prevent paparazzi from flying drones over private property, it would equally apply to insurance company employees and contractors conducting surveillance of insureds.

Florida has gone a step further, as the Freedom from Unwarranted Surveillance Act provides a private right of action which can be pursued when a drone is used to take pictures or video that would not be otherwise available to someone standing on ground level. Cities are also passing similar laws. For example in 2015, Poway, in San Diego County, passed an ordinance banning the use of drones in any open space or rural residential area.

In light of these rules, in any case involving photographs or videos taken by drone, attorneys on either side of litigation involving such evidence are well-advised to ensure that the evidence was gathered within the confines of the law.

While insurers often use the results of surveillance to assert that an insured does not qualify for insurance benefits, courts are increasingly weary of how insurance companies use and interpret video footage. For example, in one influential 9th U.S. Circuit Court of Appeals case involving a long-term disability insurance claim,Montour v. Hartford Life & Accident Insurance Co., 588 F.3d 623 (9th Cir. Cal. 2009), the insurer relied on surveillance footage of the claimant engaged in short periods of activity over four nonconsecutive days and concluded he was capable of sustaining this activity in a full-time occupation. The court criticized the insurer’s decision, explaining the insurer over-relied on footage and this bias pervaded its decision process, eventually ruling that the claimant was entitled to long-term disability benefits.

Similarly, inBeaty v. Prudential Insurance Co., 313 Fed. Appx. 46, 49 (9th Cir. 2009), the 9th Circuit rejected the insurer’s attempt to rely on “unsupportable inferences from a surveillance video and reports which show the plaintiff engaging in a variety of normal day-to-day activities” and criticized the insurer’s failure to explain how activities show “she can perform the duties of her occupation.”

Other courts have likewise ruled that an overstatement of a claimant’s activities in surveillance is improper, and warn that activities observed for a short amount of time do not necessarily translate into full-time work capacity. For example, inThivierge v. Hartford Life, 2006 WL 823751, *11 (N.D. Cal. Mar. 28, 2006), the district court held that activities observed “for a couple of hours on five out of six days she was under surveillance does not mean that Plaintiff is able to work an eight-hour a day job.”

Thus, while insurers increasingly use drones to gather information on their claimants, gathering and using that information to support claims denials may not be as easy as it seems. This is especially true in the case of disability insurance claims. Not only are insurers obligated to obey an increasingly number of federal, state and local rules and regulations limiting the use of drones, but courts are growing increasingly weary of insurers’ attempts to over-rely on surveillance. Thus, while surveillance, especially the use of drones, becomes increasingly popular in insurance investigations, insurers will have to be especially wary of its use in making decisions on their insurance claims.

McKennon Law Group PC Voted Top USA Insurance Litigation Firm for 2016

The Lawyers Worldwide Awards Magazine has announced McKennon Law Group PC as “Insurance Litigation Law Firm of the Year – USA” for 2016. The Magazine recognizes each year a select number of leading professional firms, across the globe, for their individual areas of specialization, within their geographical location.

McKennon Law Group’s California Insurance Litigation Blog Nominated for The Expert Institute’s Best Legal Blog Contest

Newport Beach, Ca. October 4, 2016 – McKennon Law Group’s California Insurance Litigation Blog has been selected to compete in The Expert Institute’s Best Legal Blog Competition.

From a field of hundreds of potential nominees, McKennon Law Group’s California Insurance Litigation Blog has received enough nominations to join the one of the largest competitions for legal blog writing online today.

Now that the blogs have been nominated and placed into their respective categories, it is up to their readers to select the very best. With an open voting format that allows participants one vote per blog, the competition will be a true test of the dedication of each blog’s existing readers, while also giving up-and-coming players in the legal blogging space exposure to a wider audience.

Each blog will compete for rank within its category, while the three blogs that receive the most votes in any category will be crowned overall winners.

The competition will run fromOctober 3rduntil the close of voting at12:00 AM on November 14th, at which point the votes will be tallied and the winners announced.

The competition can be found athttps://www.theexpertinstitute.com/blog-contest/. Here is a direct link to our blog’s listing, which will allow our readers to vote for our blog.

https://www.theexpertinstitute.com/legal-blog/insurance-litigation-blog/

About The Expert Institute:

Founded in 2011, The Expert Institute is a technology-driven platform for connecting qualified experts in every field with lawyers, investment firms, and journalists looking for technical expertise and guidance. The Expert Institute combines a vast database of pre-screened experts with a talented case management team capable of custom recruiting experts to fit the specific needs of our clients. The Expert Institute also maintains one of the internet’s most visited blogs on expert witnesses, in addition to an extensive case study archive and expert witness resource center.

Robert McKennon Publishes Article: Ninth Circuit: ‘Independent’ Physicians may Favor Insurers

In the September 8, 2016 edition of the Los Angeles Daily Journal, Robert McKennon of the McKennon Law Group published an article regarding the use of so-called “independent” physicians used by insurance companies as a pretense to deny valid claims. In the article entitled “9th: ‘Independent’ Physicians may Favor Insurers,” Mr. McKennon summarized the recent U.S. Court of Appeals for the Ninth Circuit case, Demer v. IBM Corporation LTD Pan, 2016 DJDAR 8929 (9th Cir. Aug. 29, 2016), in which the Court noted that insurance companies frequently pay doctors a substantial amount of money to review files, and therefore their opinions are likely biased in favor of the insurance company that pays them.

The article is postedbelowwith the permission of the Los Angeles Daily Journal.

9th: ‘Independent’ Physicians may Favor Insurers

By Robert J. McKennon

Insurance companies that provide group long-term disability insurance benefits governed by the Employee Retirement Income Security Act of 1974 (ERISA) usually hire a doctor which they typically refer to as an “Independent Physician Consultant” (IPC) to review the insured’s medical records and give an opinion about whether the insured is disabled. But is the insurance company’s doctor really independent and unbiased? Often times, the IPC never meets with or examines the insured, and does not even discuss the matter with the insured’s physicians. Yet, the IPC determines that the insured is capable of working simply by spending a few hours reviewing his medical records. The IPC typically disagrees with the opinions of the insured’s treating physicians, who have treated the insured for months or even years. Almost invariably, the insurer favors the opinion of its IPC over the opinions of the insured’s physicians. When this happens, what is an insured to do?

In a published opinion favorable to insureds that addresses this issue,Demer v. IBM Corporation LTD Pan, 2016 DJDAR 8929 (Aug. 29, 2016), the 9th U.S. Circuit Court of Appeals demonstrated that it understands that insurance companies frequently use doctors and pay them a substantial amount of money for their services, and therefore their opinions are likely biased in favor of the insurance company that pays them. The 9th Circuit held that a district court’s review of an insurance company’s benefits decision, when it is based upon the opinion of an IPC, should be tempered by skepticism because of the financial incentive that the IPC has to pander to the insurer’s interests (again, who uses them often and pays them significant amounts of money).

InDemer, the plan participant, Daniel Demer, was an employee of IBM Corporation LTD Plan. Suffering from severe recurrent depression, spinal stenosis, chronic osteoarthritic pain, and chronic headaches and unable to continue working, he filed a claim for long-term disability benefits. MetLife, which had a structural conflict of interest because it both evaluated claims made against the plan and funded claims, initially approved his claim after concluding he was incapable of performing the duties of his occupation. However, after two years, the plan required that Demer be unable to work in any occupation for which he was suited by education, training and experience in order to qualify for benefits, and MetLife denied his claim relying primarily on the opinion of its IPC indicating that despite his supported functional limitations, Demer was capable of working in a sedentary position.

Demer appealed MetLife’s claim denial, and MetLife subsequently upheld its denial relying on the opinions of two other IPCs. One of the IPCs was board certified in physical medicine and rehabilitation. He determined that while Demer “likely had a modicum of discomfort” from “neck and back pain related to spinal degeneration,” he retained physical functional capacity to perform a sedentary occupation despite a contrary conclusion from Demer’s treating physician. MetLife’s other “independent” physician consultant, board certified in psychiatry, claimed that despite the fact that Demer was taking powerful narcotic and neurological medications and asserted that he suffered from significant medication side-effects that cause fatigue and an impediment to his comprehension and communication, there was no objective data to establish functional impairment as a result of the medications he was taking.

Demer filed suit, arguing in part that MetLife operated under a conflict of interest because two of the IPCs that MetLife hired to review the medical record previously conducted a substantial number of reviews for Metlife and received significant compensation from MetLife for their services. For 2009 and 2010, one IPC performed more than 250 reviews/addendums per year, earning more than $125,000 each year. For the same time period, the other IPC performed between 200-300 reviews/addendums each year, and received more than $175,000 from MetLife each year. Based on the number of reviews and the amount of compensation, Demer asserted that the IPCs’ opinions should be questioned because the doctors had financial incentives to render opinions favorable to MetLife. Demer further argued that, because MetLife relied on the doctors’ opinions in denying him relief, the doctors’ conflict is imparted to MetLife and therefore the court should view their opinions with skepticism. The court noted that this argument is comparable to conventional approaches to discrediting the testimony of retained experts whose objectivity may be challenged based on the number of times he or she has served as an expert in support of a party and the amount of compensation received.

The district court entered judgment in favor of IBM and MetLife finding no abuse of discretion, but the 9th Circuit reversed. Thec court concluded that because MetLife’s consulting physicians earned a substantial amount of money from, and performed numerous medical record reviews for, MetLife, an inference was raised that there was a financial conflict which influenced the physicians’ assessment. It held that this conflict was a factor to be considered in reviewing MetLife’s decision under the abuse of discretion standard. Since MetLife failed to negate any inference of a financial conflict of interest, the court determined that “the number of examinations referred and the size of the professional fees paid to a reviewer may compromise the neutrality of an expert.”

The court further concluded that MetLife abused its discretion in denying Demer’s claim that his mental functional capacity was affected by his medications. The court determined that since it was undisputed that Demer took powerful narcotic medications, that these medications were medically necessary, and because they have known strong side-effects, MetLife’s conclusion (that Demer’s complaints regarding medication side-effects was not credible) was unsupported. A dissent disagreed, and stated that he would abandon “skepticism” as a separate standard of review in ERISA cases.

Even though theDemercase involved the abuse of discretion standard of review, insurers will argue that this case will have little application in de novo review cases in which the conflict analysis is not used. In California, the abuse of discretion standard of review will likely become uncommon in future cases because of California Insurance Code Section 10110.6, which renders discretionary language “void and unenforceable” in policies, contracts and certificates that provide funds for life insurance or disability insurance coverage for California residents. However, even in de novo review cases, it is advisable to remind the courts of the rationale behind the “skepticism” rule as even the 9th Circuit noted the similarity to the arguments made in non-ERISA cases. Thus, this case is useful to establish that the opinion of an insurance company IPC who never examined the insured and who undermines or rejects an insured’s credible evidence of disability should be viewed skeptically where the insured’s disability is supported and verified by the insured’s treating physicians who treated and examined the insured.

New Regulations Will Benefit Claimants in Disability Insurance Cases

Insurers Turn to Drones

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