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 Six of this series, we discuss Independent Medical Evaluations and Peer Reviews.  Our focus in this article will be mostly on disability insurance claim denials.

When an insurer examines a disability claim or appeal, it has the medical records examined by medical evaluators, typically a nurse or doctor.  In theory, this allows the insurer to determine whether the claim has merit.  In practice, it is typically a way for an insurer to set up a claim denial by having medical and other records evaluated by biased medical personnel.

ERISA regulations require that “the appropriate named fiduciary shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.”  29 C.F.R. § 2560.503-1(h)(3)(iii); § 2650.503-1(h)(4).

Sometimes, insurance companies rely on their own employees to perform such evaluations.  The employee may be referred to as a “Medical Director,” “Medical Consultant” or some other similar title.  Of course, this individual is paid by the very insurer with a financial interest in denying claims.  Consequently, courts often look with disfavor upon such medical opinions.  The Eighth Circuit has noted that “the administrator’s use of an in-house physician rather than a specialist to review a disability claim involving an uncommon disease can be a serious procedural irregularity affecting the administrator’s decision.”  Morgan v. UNUM Life Ins. Co. of Am., 346 F.3d 1173, 1177 (8th Cir. 2003).  In Morgan, the court found that the insurer’s decision to deny benefits was not supported by substantial evidence, in part because “[n]othing in the record show[ed] that [the insurer’s in-house physician] had any expertise or experience whatsoever in dealing with [the claimant’s disease].”  Id. at 1177-78.

An entire industry has arisen that consists of supposedly “independent” medical evaluators, typically doctors, who examine medical records for insurance companies to render opinions on medical conditions and restrictions and limitations caused by these medical conditions.  Oftentimes, as noted above, these medical evaluators are not independent because they are beholden to the insurer who hired them and the insurance industry for whom they work most of the time and from whom they derive most of their income.  Courts are often wary of opinions given by these doctors because of the obvious potential bias.  See Demer v. IBM, 835 F.3d 893, 901-03 (9th Cir. 2016).

A disability-claim review that consists of only a review of medical records is often referred to as a “peer review” or, somewhat derogatorily, as a “paper review.”  Courts often criticize reliance on these reviews over the opinions of treating physicians.  See Montour v. Hartford Life & Accident, 588 F.3d 623, 630 (9th Cir. 2009); see also Schramm v. CNA Fin. Corp. Insured Grp. Ben. Program, 718 F.Supp.2d 1151, 1164 (N.D. Cal. 2010) (“The Court likewise gives little weight to the opinions of Drs. Marion and Fuchs [the paper reviewers]. Although they reviewed plaintiff’s medical records, they did not examine her in person.”).  Furthermore, these reviewers often make careless mistakes which make courts view them even more harshly.  For example, it is common for a reviewer to not consider all of the disabling conditions and, instead, to focus on only one or two conditions.  A court may take note of such an error and conclude that it renders the reviewing opinion unreliable.  See, e.g., Cushman v. Motor Car Dealers Servs., Inc., 652 F.Supp.2d 1122, 1133 (C.D. Cal. 2009).  Another common problem is that insurers often use doctors who are not qualified to discuss the claimant’s particular condition, which is also in violation of ERISA.  See 29 C.F.R. § 2560.503-1(h)(3)(iii); § 2650.503-1(h)(4).

Whereas paper reviews are often shallow and problematic, there is a second more thorough form of medical review, the so-called independent medical examination (“IME”).  These medical opinions are often given more weight by courts than simple paper reviews.  See Shaw v. AT&T, 795 F.3d 538, 550 (6th Cir. 2015).  In an IME, a physician chosen by the insurer examines the claimant.  The physician then attempts to determine whether the claimant is disabled.  A well-reasoned IME report concluding that the claimant is not disabled can seriously harm the claim.  A well-reasoned IME report concluding that the claimant is disabled often results in the insurance company agreeing to pay the claim.

As a general rule, the type of medical review shows how seriously the insurer is considering paying the claim.  A claim it does not take as seriously will often be decided with a paper review.  Often, if the insurer believes the claim is otherwise weak, it will be willing to take that risk to save money.  If the claim is stronger, it may seek to have the claim evaluated by an outside doctor, but not be willing to pay for a more expensive IME.  In particularly difficult cases, the insurer is more likely to request an IME.  Of course, some claimants are clearly disabled, and the insurer simply pays the claim because it knows it cannot avoid payment.

If a claimant attends an IME and the results are unfavorable, the claimant should strongly consider pursuing a second IME or at least having one her attending physicians review it and critique it.  If the second IME is more favorable, that can greatly help the claimant.  Even a strong rebuttal to the IME conclusions can be very effective.  This is especially true for mental health claims, which can be difficult to evaluate.

There has long been a duty for an insurer to engage in a full and fair dialogue with a claimant about the claim.  One thing a claimant should be aware of, however, is that under new regulations, an insurance company must give the claimant an opportunity to respond to “new evidence.”  29 C.F.R. Section 2560.503-1(4)(i) and (ii) “Provide that before the plan can issue an adverse benefit determination on review on a disability benefit claim, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination (or at the direction of the plan, insurer or such other person) in connection with the claim[.]”  The results of an IME or peer review are considered new or additional evidence.  As such, a claimant is entitled to be notified of any such opinions.  A peer review or IME may be particularly biased.  These regulations guarantee that a claimant has a chance to challenge such bias.  The claimant may demand to have a new evaluation.  And, as noted above, the claimant can also seek to have his own doctor respond to the new medical opinion and point out its flaws.  Claimants are now guaranteed an opportunity to address any perceived bias.  However, if the bias is particularly severe and overly blatant, then it may be prudent to do nothing further.  This will leave an avenue to discredit the reviewing doctor and the insurer for relying on the clearly erroneous opinion.