In the January 4, 2021 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon entitled “ERISA Ruling Expands Protection for Employees, Beneficiaries.” The article addresses a recent case by the Ninth Circuit Court of Appeals, Beverly Oaks Physicians Surgical Center, LLC v. Blue Cross and Blue Shield of Illinois, which found that while anti-assignment provisions in ERISA matters are valid and enforceable, plan administrators can waive the right to assert and enforce these provisions when their actions are inconsistent with the provision or they are aware that the claimant is acting as an assignee. This opinion will greatly benefit employees who have medical insurance and sign agreements with their medical providers to assign their rights to collect payment from their health insurers. The Ninth Circuit’s opinion will be not only useful for claimants/employees who have health insurance claims, but also those who have disability, life or other employee benefit claims as the decision in Beverly Oaks will serve to prevent employers and insurers from making misrepresentations regarding ERISA plan terms and/or taking actions inconsistent that which they had previously represented.
In the January 4, 2021 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon entitled “ERISA Ruling Expands Protection for Employees, Beneficiaries.” The article addresses a recent case by the Ninth Circuit Court of Appeals, Beverly Oaks Physicians Surgical Center, LLC v. Blue Cross and Blue Shield of Illinois, which found that while anti-assignment provisions in ERISA matters are valid and enforceable, plan administrators can waive the right to assert and enforce these provisions when their actions are inconsistent with the provision or they are aware that the claimant is acting as an assignee. This opinion will greatly benefit employees who have medical insurance and sign agreements with their medical providers to assign their rights to collect payment from their health insurers. The Ninth Circuit’s opinion will be not only useful for claimants/employees who have health insurance claims, but also those who have disability, life or other employee benefit claims as the decision in Beverly Oaks will serve to prevent employers and insurers from making misrepresentations regarding ERISA plan terms and/or taking actions inconsistent that which they had previously represented.
By Robert J. McKennon
The Employee Retirement Income Security Act of 1974, or ERISA, governs most employer-sponsored benefit plans. ERISA establishes protections for employees in the administration of their employer-sponsored benefits, requiring that the administrator adhere to certain requirements when determining a plan participant’s eligibility for benefits. Typically the ERISA plan’s terms govern, although that is not always the case.
All too familiar to patients of health care providers are agreements that assign to the health care providers their right under an ERISA plan to collect insurance benefits under their patients’ health insurance plans. However, most health insurance plans have anti- assignment provisions that prohibit insureds from assigning their right to collect insurance proceeds directly. Anti-assignment provisions in ERISA plans are valid and enforceable. Davidowitz v. Delta Dental Plan of Cal., Inc., 946 F.2d 1476, 1481 (9th Cir.1991); Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc., 770 F.3d 1282, 1296 (9th Cir. 2014). Therefore, courts have prevented health care providers from suing insurers under ERISA where health insurance plans have anti-assignment provisions, thus frustrating the efforts of health care providers to collect insurance proceeds to satisfy unpaid claims.
In its landmark 2011 decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), the U.S. Supreme Court signaled a broad expansion of the availability of equitable remedies under ERISA. The doctrines of equitable estoppel and waiver have provided plan participants with methods of forcing an employer or insurance company to honor their representations and take responsibility for previous conduct. But what about applying these equitable doctrines for the benefit of health care providers? There has been some recent good news for them.
The recent case of Beverly Oaks Physicians Surgical Center, LLC v. Blue Cross and Blue Shield of Illinois, 2020 DJDAR 132372 (Dec. 18, 2020) further expands protection for employees and their beneficiaries by expanding the circumstances their medical providers can sue insurers directly based on an assignment, even where the plan at issue contained an anti-assignment provision. In Beverly Oaks, the U.S. 9th Circuit Appeals Court allowed an out-of-network healthcare provider to assert equitable claims under ERISA seeking a direct recovery of unpaid claims from Blue Cross and Blue Shield of Illinois (BCBS).
Beverly Oaks Physicians Surgical Center, LLC (Beverly Oaks) performed out-of-network procedures on 14 patients who had employer-sponsored health insurance plans administered by BCBS. Each patient signed a form granting the center the right to collect benefits on their behalf. The center sought and obtained preapproval for each claim from BCBS, the latter stating it would typically pay between 50% to 100% of the claim.
After performing the procedures, the Beverly Oaks submitted the claims to collect ERISA benefits. BCBS either denied every claim or paid a small reimbursement amount and paying only $140,000 of the total $1.4 million of benefits sought. At no time during the pre-surgery conversations or during the administrative claim process did BCBS advise Beverly Oaks that it intended to assert an anti-assignment provision as a basis for denying reimbursement sought under a patient assignment of benefits.
Beverly Oaks filed a lawsuit alleging that BCBS waived or was equitably estopped from asserting the anti-assignment provision in the plan since BCBS did not assert that provision in pre-surgery telephone conversations or the administrative claim process. BCBS argued that the anti-assignment provision was valid and enforceable, even though the first time BCBS asserted the provision as a defense to payment was in litigation. The district court agreed that the anti-assignment provision was valid and enforceable. Beverly Oaks appealed.
In reversing the trial court’s order, the appeals court found that while anti-assignment clauses are valid and enforceable, plan administrators can waive the right to assert and enforce these provisions when their actions are inconsistent with the provision or they are aware that the claimant is acting as an assignee.
The court defined waiver as follows: “Waiver is ‘the intentional relinquishment of a known right.’ Gordon v. Deloitte & Touche LLP Grp. Long Term Disability Plan, 749 F.3d 746, 752 (9th Cir. 2014) (citing Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1559 (9th Cir. 1991) (Waiver occurs when ‘a party intentionally relinquishes a right, or when that party’s acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished.’)).
The court found that Beverly Oaks had plead adequate facts to support waiver, including Beverly Oaks indicated on the claim form submitted to BCBS that it was acting as its patient’s assignee, BCBS processed each claim, denied in full or underpaid Beverly Oaks’ billed charges, and at no time during pre-surgery telephone conversations or the administrative claim process did BCBS raise the anti-assignment provision as a basis to deny benefits. This was to enough to show that BCBS should have been aware that Beverly Oaks sought to collect plan benefits through a patient assignment. The court also commented on BCBS’ silence and payment during the claims process, commenting that this behavior was “’so inconsistent with an intent to enforce’ the anti-assignment clause as to ‘induce a reasonable belief that [the right to enforce the clause] ha[d] been relinquished.’” The court held that “Blue Cross thus cannot raise the anti-assignment provision for the first time in litigation when Blue Cross held that provision in reserve as a reason to deny benefits.”
In addition to waiver, the court found the alleged facts also plausibly showed that BCBS made actionable misrepresentations upon which Beverly Oaks reasonably relied and therefore, were equitably estopped from raising the anti-assignment provisions. “Equitable estoppel ‘holds the fiduciary to what it had promised and operates to place the person entitled to its benefit in the same position he would have been in had the representations been true.” Specifically, the court pointed to telephone conversations between BCBS representative and Beverly Oaks wherein the representative stated that Beverly Oaks was eligible to receive payment, thus inducing Beverly Oaks to move forward with the claims process. In addition to traditional requirements to establish equitable estoppel, under 9th Circuit authority, Beverly Oaks also had to allege (1) extraordinary circumstances; (2) that the provisions of the plan at issue were ambiguous such that reasonable persons could disagree as to their meaning or effect; and (3) that the representations made about the plan were an interpretation of the plan, not an amendment or modification of the plan. The court held that these requirements were properly alleged facts that show a BCBS made a promise that it reasonably should have expected to induce action or forbearance on Beverly Oaks’ part, combined with a showing of repeated misrepresentations over time. Thus, the 9th Circuit reversed and remanded the case the case to the district court.
While federal courts consistently find anti-assignment clauses in ERISA matters enforceable, the decision in Beverly Oaks will have wide-reaching implications not only for medical providers, but also for plan participants and their beneficiaries. Plan and claim administrators must beware that making misrepresentations regarding plan terms, making representations about whether a procedure is covered or failing to raise certain defenses during the pre-claim and claim administrative review process could give rise to equitable claims that inure to the benefit of plan participants, their beneficiaries, and to their assignees. Because waiver and equitable estoppel serve as some of the legal systems’ fundamental checks on the fairness of a party’s actions and these doctrines serve to prevent employers and insurers from performing actions contradictory to what they have previously guaranteed or established via their words or conduct, decisions like Beverly Oaks are to be lauded.
On May 28, 2019, Bloomberg Law published an article involving one of McKennon Law Group PC’s cases in Bloomberg Law’s Benefits & Executive Compensation News section. For a full view of the article, read here. The article addresses forum selection provisions in employee benefits plans which can limit where plan participants can file a lawsuit. It discusses the firm’s client Theodore Rapp and his pension case that McKennon Law Group PC litigated and in which our client obtained a very favorable result. As the article explains, these provisions can drive up the cost of litigation, discourage people from suing for benefits they are owed and also violate the law Congress passed to protect the millions of people who participate in employee benefit plans. The article discusses the enforceability and legality of these provisions as well as the Supreme Court’s review of the issue.
Pension Lawsuit Puts Court Choice Test Back Before High Court
By Lydia Wheeler
Theodore Rapp lives and works in California, but the legal fight to recoup his pension benefits is playing out in a courtroom across the country in Connecticut.
The lawsuit, originally filed in the U.S. District Court for the Central District of California, was moved to the District of Connecticut because the company that acquired Rapp’s former employer has a provision in its pension plan that only allows disputes to be litigated in the federal court in Hartford, said Robert McKennon, Rapp’s Newport Beach, Calif.-based attorney.
These forum selection provisions—tucked into employee benefits plans—limit where plan participants can file a lawsuit. Attorneys say they not only drive up the cost of litigation and discourage people from suing for benefits they’re owed, they violate the law Congress passed to protect the millions of people who participate in employee benefit plans, which include retirement, pension, 401(k), health-care, disability and life insurance plans.
Rapp, who earned a middle-class income in sales, alleges the new company failed to keep records of his pension, which as of June 29, 2018, amounted to $46,843. McKennon, managing shareholder of McKennon Law Group PC, said he was forced to hire a local lawyer to help him fight Rapp’s case after it was transferred to Connecticut. Luckily for Rapp, the judge in Connecticut has allowed McKennon to participate by phone in a number of hearings, but he said the change of venue is still going to cost Rapp thousands of dollars more in attorneys’ fees and costs.
The Supreme Court, in a separate case, is now being asked for the fourth time whether forum selection provisions are enforceable under the Employee Retirement Income Security Act. The court previously has refused to weigh in on the issue.
Enforceable?
The case pending the Supreme Court’s review stems from a lawsuit Jeffrey Robertson, a former Pfizer executive, brought against the Pfizer Retirement Committee and the company it contracted with to provide retirement information services.
Robertson alleges the committee and the Fidelity Employer Services Company LLC failed to inform him that the $715,507 he had racked up under the Pfizer Pension Plan couldn’t be rolled over to another qualified plan. As a result, he was forced to cash out his benefits and pay federal and state taxes.
Robertson sued for breach of fiduciary duty in the U.S. District Court for the Eastern District of Pennsylvania, where both the committee and Fidelity resided and where the claimed ERISA breach occurred.
But Pfizer, citing the plan’s forum selection clause, got the Pennsylvania court to transfer the case to the Southern District of New York. The court in Pennsylvania stayed the transfer until the Supreme Court decides whether or not to take Robertson’s case.
Attorneys say forum selection provisions shouldn’t be enforceable under ERISA because the law specifically allows participants and their beneficiaries to file a lawsuit against employee benefit plans in any one of three venues: where the plan is administered, where the breach occurred, or where the defendant plan resides or may be found.
“ERISA was enacted to protect plan participants and their beneficiaries, and it goes on to expressly give the participant the right to pick the venue,” said Eva Cantarella, a partner at Hertz Schram PC in Michigan.
Cantarella said her callers often comment on how hard is to find an attorney who will litigate their claims. She said forum selection clauses can it make it even more difficult.
“They may effectively be deprived of representation if they can’t find an attorney who will handle their claim for them,” she said.
A spokeswoman for Pfizer said, “We believe that this matter was correctly decided by the lower courts and will file our opposition to the petition later this summer.”
Letting the Issue Percolate
Appeal courts for the Sixth and Seventh circuits have ruled in favor of employers who say forum selection provisions are enforceable under ERISA.
The Sixth Circuit in 2016 said it had previously upheld the validity of mandatory arbitration clauses in ERISA plans, “which are, in effect, a specialized kind of forum-selection clause.” The ruling came despite the friend-of-the-court brief the labor secretary filed calling the provision unenforceable.
In a dissenting opinion, Judge Eric Clay said Congress expressly sought to eliminate “jurisdictional and procedural obstacles which in the past appear to have hampered effective enforcement of fiduciary responsibilities.”
When that case was appealed to the Supreme Court, the justices asked Solicitor General Donald Verrilli Jr. for his view. He told the court the Sixth Circuit was wrong to enforce the venue selection clause, but asked the justices not to weigh in and instead let the issue percolate in the lower federal courts for a little longer.
Neither the Department of Justice nor the Labor Department responded to requests for comment as to whether the current administration maintains that opinion. The court has not received any briefs from the government. It is still waiting for the committee and Fidelity to respond.
Ripe for Review
Robertson, in his petition to the Supreme Court, said the case is now ripe for review, but not everyone agrees.
“There is no split yet in the circuits on this issue, and therefore it seems unlikely the Court would agree to accept the case,” said Charles Dyke, an attorney in the San Francisco Office of Nixon Peabody who leads the firm’s ERISA litigation practice. “The Sixth and Seventh Circuits have both held that forum selection clauses in plans are enforceable.”
Under ERISA, plaintiffs can recoup only their reasonable attorney’s fees if they achieve some degree of success on the merits. Dyke said a plaintiff who challenges a forum selection clause and loses on that issue may not be able to recover fees incurred litigating it. The defendant, he said, has to consider whether it’s worth the risk to try to enforce its forum selection clause if the plaintiff sues in a jurisdiction other than the one specified in the plan.
“The law is not yet settled, and that means each side has to think carefully about this issue when it comes up,” Dyke said.
Robertson’s case has not been scheduled for the court’s consideration.
A circuit split is typically a criteria for the justices to grant review of a case. Without differing opinions from the regional appeals courts on this issue, attorneys say it’s unlikely the court will agree to take the case.
But if they do, it may not go the way some plaintiff’s attorneys are hoping.
“Given their position on arbitration clauses and the current makeup of the court, they might land with the employers here,” said Chris Lockman, an attorney at Verrill Dana in Portland, Maine. He thinks they should.
“One of the major goals of ERISA is to advance uniformity and predictability in plan administration,” he said.
The case is Robertson vs. U.S. District Court for the Eastern District of Pa., U.S., No. 18-1341.
To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com
To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Bernie Kohn at bkohn@bloomberglaw.com
The McKennon Law Group PC periodically publishes articles on its California Insurance Litigation Blog that deal with frequently asked questions in the insurance bad faith, life insurance, long term disability insurance, annuities, accidental death insurance, ERISA and other areas of the law. To speak with a highly skilled Los Angeles long-term disability insurance lawyer at the McKennon Law Group PC, call (949) 387-9595 for a free consultation or go to our website at www.mckennonlawgroup.com and complete the free consultation form.
Which state law will govern your disability insurance claim? That often is a very important question. Whereas each state has its own collection of laws governing insurance companies and various types of insurance policies, ERISA is a uniform federal law that applies throughout the entire country. ERISA preempts state law under the Constitution’s Supremacy Clause. However, in certain circumstances, some state laws are not preempted and therefore apply to policies governed by ERISA. Given that ERISA litigation often entails an insured and an insurer who are domiciled/reside in different states, an important question naturally arises: Which state’s laws apply?
An important aspect of any litigation over the denial of benefits under a policy governed by ERISA is the standard of review. This affects life insurance, disability insurance and even medical insurance. We have previously written about the standard of review. As we noted in a previous blog, the standard of review determines how much deference an insurance company has to deny a claim and how difficult it will be for an insured to establish their entitlement to their benefits in any resulting litigation. Many states have laws firmly establishing that, even under policies governed by ERISA, the standard of review is always de novo, a standard that is more favorable to the insured/plan participant. Not all states have those laws. In light of this difference between states, the answer to the above question about the application of state law can potentially become significant. This is something that the insured in Earle v. UNUM Life Insurance Co. of America, 2020 WL 4434951 (C.D. Cal. July 23, 2020), learned firsthand.
Ms. Elaine Earl had an accidental death and dismemberment (“AD&D”) policy with UNUM. She acquired her policy through her employment at the University of Southern California. This policy provided that she would receive a benefit under the policy if she suffered one or more various types of injuries, such as going blind. One day, while walking, she fell down stairs. Initially, her injuries did not seem particularly severe. However, over time, she started to develop significant vision problems that eventually resulted in her becoming legally blind. After a protracted administrative appeals process, UNUM denied her AD&D claim. Ms. Earl sued to enforce her rights under the AD&D policy.
Ms. Earl lived in California. Unum is a legal entity of Maine. A Summary of Benefits for the policy contained a choice-of-law provision that stated that the laws of Maine apply to the extent not preempted by federal law. Ms. Earl wanted California law to apply for one key reason: Under the law of California, the standard of review for her claim would be de novo, while if the law of Maine applied, then the abuse-of-discretion standard would apply. In short, if California law applied, Ms. Earl would have a better standard of review available to her in litigation. As such, a key question of the case was whether a clause in the policy stating that the law of Maine applied was valid.
The district court ruled that Maine law applied. The district court explained that “The Ninth Circuit has consistently held that ‘[w]here a choice of law is made by an ERISA contract, it should be followed, if not ‘unreasonable or fundamentally unfair.’ Wang Labs., Inc. v. Kagan, 990 F.2d 1126, 1128 (9th Cir. 1993)[.]” Id. at 10. The district court concluded, “that it would not be ‘unreasonable or unfair’ to enforce the Maine choice of law provision in the Summary of Benefits.” Id. at 11. The district court based its reasoning on the fact that USC, the contracting employer, was aware that it was contracting with Unum, an entity from Maine, and that the contract was quite clear as to what law applied. It also emphasized how it was reasonable, in the district court’s opinion, for an insurer domiciled in another state to insist that its law applies.
Unfortunately for Ms. Earl, this conclusion of law resulted in the more stringent abuse-of-discretion standard being applied to her case. The district court granted summary judgment for UNUM, concluding that Unum had not abused its discretion in denying her claim.
For many areas of the law, the differences between states can be minimal. In those situations, a choice-of-law provision does not significantly affect the case. However, under certain circumstances, such as those related to the standard of review, the differences can determine whether an insured will receive benefits versus being sent home with nothing.
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 Twelve of this series, we discuss the standard of review. The standard of review can greatly affect the outcome of any litigation for insurance benefits.
As we previously noted in this series, before suing an insurer over denial of benefits under a policy governed by ERISA, an insured must usually file an administrative appeal. In theory, this gives the insurer and insured a chance to “have a meaningful dialogue” regarding the disability, life, health, or accidental death and dismemberment claim over the benefits and gives the insurer another opportunity to make the correct decision. In reality, more often than not, insurers just use this time to create as compelling a case as possible to deny the claim for benefits and to set themselves up to win in litigation. If the claim is denied and the insured has pursued all mandatory appeals, the insured can sue the insurer. In the resulting ERISA litigation, the federal court will examine the insurer’s decision, records and reasoning to determine whether to affirm the denial.
The standard of review is a measure of how much discretion the insurer has to deny a claim. This applies during any litigation arising from the denial of an ERISA claim. If the claim for benefits is approved, then the standard of review is irrelevant.
Generally speaking, there are two standards of review: “abuse of discretion/arbitrary and capricious” and “de novo.” The terms “abuse of discretion” and “arbitrary and capricious” tend to be used interchangeably. Under the abuse-of-discretion standard, the court should overturn a ruling when it is “without reason, unsupported by substantial evidence or erroneous as a matter of law.” Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011). Under the de novo standard of review, “the burden of proof is placed on the claimant” to establish entitlement to plan benefits. Muniz v. Amec Const. Mgmt., Inc., 623 F.3d 1290, 1294 (9th Cir. 2010). “When conducting a de novo review of the record, the court does not give deference to the claim administrator’s decision, but rather determines in the first instance if the claimant has adequately established that he or she [qualified for benefits] under the terms of the plan.” Id. at 1295-96. The trial court performs an “independent and thorough inspection” of the plan administrator’s decision in order to determine if the plan administrator correctly or incorrectly denied benefits. Silver v. Executive Car Leasing Long–Term Disability Plan, 466 F.3d 727, 733 (9th Cir. 2006). De novo review permits the trial court to “evaluate the persuasiveness of conflicting testimony and decide which is more likely true.” Kearney v. Standard Ins. Co., 175 F.3d 1084, 1095 (9th Cir.1999).
The easiest way to think of the standard of review is to think of a meter measuring how much an insured has convinced the court that he or she is entitled to benefits. Under de novo review, the insured need only establish 50.01% on the meter. Under the abuse-of-discretion standard, that number is much higher. With that standard, it helps to think of that number perhaps being 60% or even higher. An ERISA claimant/insured wants the de novo review standard to apply. Under the abuse-of-discretion standard, an insurer may be able to deny claims that, to a layman, are clearly meritorious. For example, a court may uphold an insurer’s decision where the insured’s treating physician stated that the claimant is disabled, but the insurer hired a doctor to conduct a “paper review” of the insured’s file without examining the insured and then denying the claim based on the resulting report. Because the hired paper reviewing doctor concluded that the person did not have a serious medical condition or did not have sufficiently disabling restrictions and limitations, the insurer’s resulting decision was not “without reason, unsupported by substantial evidence or erroneous as a matter of law.” Miller, 632 F.3d at 845. In short, the standard of review is critically important in most cases and may be outcome determinative.
The standard of review exists because insurance policies/ERISA plans have language that gives discretion to the claims administrator or employer in determining coverage and benefits issues. The standard of review is based on such a grant of discretion clause. If there is no such clause, then the default standard of review is de novo. Most ERISA plans in the United States include a discretionary clause if the applicable law permits the clause’s inclusion. Insurers and employers like these clauses because it makes their determinations more likely to be affirmed by the courts.
We all know that insurance companies generally seek profit over making claims decisions that result in paying claims and thus readily deny many valid claims merely to avoid paying benefits under the plan. Because of this, many states have banned clauses that grant discretion to insurance companies. These states want the courts to review the evidence and decide whether a person is entitled to the benefits without a presumption in favor of the insurer’s or employer’s claim decision. For example, such clauses are banned in California. California Insurance Code Section 10110.6 invalidates discretionary clauses for all life insurance and disability insurance plans. As a result, for a disability plan that insures an individual residing in California, an insurer’s decision will almost always be subjected to de novo review. Furthermore, some courts in California have interpreted Section 10110.6’s language as applying to medical insurance plans as well. See Ticconi v. Blue Shield of California Life & Health Ins. Co., 160 Cal.App.4th 528, 540, n.7 (2008); Mahlon D. v. Cigna Health and Life Ins. Co., 291 F.Supp.3d 1029, 1031-32 (N.D. Cal. 2018).
Even though ERISA is federal law, many of these state laws still apply to contracts governed by ERISA. In many circumstances, ERISA preempts state law. However, laws such as California’s Section 10110.6 are not preempted by ERISA because of ERISA’s “saving clause that saves from preemption ‘any law of any State which regulates insurance, banking, or securities.’” See, e.g., Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan, Plan Number 625, 856 F.3d 686, 692-695 (9th Cir. 2017). Furthermore, this applies to all ERISA plans and insurance policies. See id. at 695. As such, in California, there is little dispute that, for a disability, life insurance or accidental death claim, the standard of review will be de novo. In many other states, there are similar laws that alter the standard of review for many types of policies.
Another temperance on the abuse-of-discretion standard lies in the fact that courts have ruled that discretionary clauses are disfavored as a matter of public policy. This means that an insurer must be careful about how the clause is worded. If the court concludes that the clause is less than clear or has any a defect that the court can locate, the clause will be deemed invalid, and the standard of review will be de novo.
Ultimately, the standard of review is a critical aspect of any ERISA lawsuit for pension or insurance benefits. Even when filing a mandatory administrative appeal, a claimant, or his or her attorneys, must always keep in mind how the standard of review will influence the court’s decision on a claimant’s entitlement to benefits. Such considerations are paramount in pursuing a claim.
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, through preparing a case for litigation. In Part Eleven of this series, we discuss personal statements from claimants and third-party witness statements in support of a claimant’s disability, which can help to support a disability claim that is based upon subjective symptoms like pain and fatigue.
We often see claimants who suffer from subjective conditions like Chronic Fatigue Syndrome, fibromyalgia or generalized chronic pain face difficult hurdles in getting their disability benefits paid precisely because of the subjective nature of these conditions. See our blog post regarding our recent trial victory in DeVries v. Aetna in which our client suffered from Chronic Fatigue Syndrome.
Under the Employee Retirement Income Security Act of 1974 (“ERISA”), judicial review of an insurer’s denial of benefits is typically limited to the administrative record that existed at the time the appeal was denied. After a complaint has been filed in federal court against an insurance company, generally, very limited discovery is allowed, and witnesses are normally not permitted to testify. Therefore, before an insurer reaches an appeal decision, it is important that the claimant submit as much information as possible to the insurer in support of their disability. For conditions like depression, chronic headaches, chronic pain, Chronic Fatigue Syndrome, fibromyalgia and other ailments, it may be impossible to supply objective evidence to prove that one suffers from these conditions. Because of this, courts recognize the importance of personal statements and third-party witnesses in support of a disability claim.
The Ninth Circuit’s recent decisions require insurers and the courts reviewing disability claim denials to take these types of statements into account when deciding an employee’s claim, including the claimant’s subjective self-reports of their symptoms and pain level. In a fairly recent long-term disability insurance case governed by ERISA, Kibel v. Aetna Life Ins. Co., 725 F.App’x. 475 (9th Cir. 2018), the Ninth Circuit emphasized the importance of these statements. In Kibel, the claimant, Margueritte Kibel, submitted a personal statement to her disability insurer Aetna regarding the subjective symptoms that she suffered, such as pain, fatigue and other such complaints. The court found that “the district court clearly erred in failing to consider the personal statement that Ms. Kibel submitted explaining that her fatigue did, in fact, render her totally disabled.” In her personal statement, Ms. Kibel described her fatigue as “an overpowering feeling of extreme tiredness, exhaustion, [and] weakness[.]” In this personal statement, Kibel further explained how it left her “completely drained” and caused “a complete slowdown of [her] brain and body[.]” The Court found that this evidence in the form of Ms. Kibel’s own personal statement, when appropriately considered, further supported a finding that Ms. Kibel’s condition prevented her from performing the duties of her occupation. For that reason, the Ninth Circuit reversed and remanded, and instructed the district court to direct an award of benefits to Ms. Kibel and conduct any further proceedings consistent with the order.
The Kibel court relied on the Ninth Circuit’s opinion in Demer v. IBM Corp. LTD Plan, 835 F.3d 893, 904‑07 (9th Cir. 2016)for the rule that both a district court and a disability insurer must “consider a claimant’s subjective account of pain” and corroborating friend/colleague statements when deciding whether she is disabled. See also Godmar v. Hewlett-Packard Co., 631 F.App’x 397 (6th Cir. 2015). In Godmar,the court considered the claimant’s statement that was submitted with his appeal, in which he explained that he was on morphine 24 hours per day, could no longer drive and slept more than 20 hours per day several times per week, to support a finding that the insurer had abused its discretion in denying benefits. Similarly, in Leetzow v. Metro. Life Ins. Co., 2016 WL 7324092, *12‑13 (C.D. Cal. Dec. 5, 2016), the court considered the claimant’s subjective personal accounts of her migraine-related pain and found that her policy did not require objective medical evidence to support her disability claim.
These findings are further supported by the Ninth Circuit’s holding in Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 678 (9th Cir. 2011), in which the court held that a “lack of objective physical findings” does not necessarily justify a denial of benefits; that is, a disability insurer may not condition coverage on proof by objective indicators such as blood tests when the condition is recognized even though no such proof is possible. In Salomaa, the court looked at a statement by the insured’s boss, who wrote that before his disability Samuel Salomaa “was one of the few people in southern California to walk or jog to work, and had been a superb employee until he got sick, and that those at Honda aware of his difficulty getting his disability benefits were ‘appalled.’” The court also considered a statement by Mr. Salomaa’s brother-in-law, who wrote that he got to know Mr. Salomaa when they were students at Harvard and MIT, that Mr. Salomaa had been very energetic and intelligent, but that more recently he had noticed that Mr. Salomaa had profound apparent changes in comprehension, ability to plan and stamina. His brother-in-law recounted the time when he “drove [Mr. Salomaa] and their daughter from Los Angeles to Arkansas. For the entire trip [Mr. Salomaa] was either fully or partially reclined in the back of their Honda Element… When stopping to eat, [Mr. Salomaa] could not manage to eat in the restaurant. I would go in to order the food, and then bring it back to [Mr. Salomaa] to eat in the car.” These accounts are compelling evidence of disabling conditions that can be hard to objectively measure, like Chronic Fatigue Syndrome, chronic pain syndrome, fibromyalgia and chronic migraines. In addition, observations made by persons with first-hand knowledge of a claimant’s disability must be considered by the administrator, but administrators rarely address or scrutinize these statements in their denials. Indeed, we typically see administrators ignore these types of statements. Courts often place emphasis on these omissions by administrators in choosing to overturn a denial of benefits.
Personal statements and third-party witness statements can be the difference between a denial and an award of long-term disability benefits; this was the case for Ms. Kibel. With this in mind, personal statements must be relevant to the circumstances and should include the following information: (1) a detailed description of the duties of your occupation as you performed them; (2) a detailed discussion of the history of your condition; (3) a detailed discussion of your symptoms; (4) how those symptoms, such as pain and fatigue, impact your ability to perform the duties of your occupation; (5) how your disability has also impacted your overall quality of life; and (6) a discussion of the things you could previously do but no longer can. It is also important that you write your own personal statement. It should sound authentic, and the best way to achieve that is by writing it in your own words. Moreover, because personal testimony is a form of proof that typically raises credibility issues, it is likewise important that you gather corroborating statements from colleagues, friends and family. We often see powerful corroborating statements from spouses who witnessed first-hand how the claimant has been affected by the disability, close friends who saw a marked decline in a claimant’s activity level or abilities or co-workers who could speak to a claimant’s work capacity both before and after the onset of disability.
Even though disability plan language rarely requires objective proof of conditions that are subjective in nature, we often see insurers deny disability benefits for claims based on such absence. At the appeal stage, it is important, often crucial, to send to the insurer a personal statement written by the claimant. In addition, witness statements from friends, family members or co-workers can have a powerful impact on a reviewing court when it assesses the credibility of the claimant. Given the lack of discovery in ERISA matters, these statements could mean the difference between a benefit denial and a favorable result.
We have significant experience in handling ERISA and non-ERISA disability insurance cases in which an insurer denied a claim based on a lack of objective evidence or a claimant has a disability condition that is subjective in nature and difficult to prove and measure. If your insurer or plan administrator has denied your disability claim, please contact McKennon Law Group PC for a free consultation so that we may assess your matter.