Articles Posted in ERISA

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Almost every Long Term Disability Insurance Policy I have ever reviewed contains a limited period (usually 24 months) of time that it will pay benefits if a claimant is unable to perform the duties of  his/her “Own” (see prior post on how “Own” occupation is misleading) occupation.  The plans most commonly contain a change in the definition of disability from “Own”occupation to “Any” occupation after the 24 month period runs.  So, after 24 months the claimant must be able to establish that they are unable to perform the duties of “Any” occupation in order to continue to receive benefits.  A few caveats-there is also usually a qualifier for “Any” occupation that the claimant may be qualified to perform the identified occupation by education, training or experience.   There is also usually an earnings qualified that the identified “Any” occupation  must usually pay some percentage (commonly 60 or 80%) of the  claimants “Own” occupation.

We see many claims where the Long Term Disability insurer refuses payment past the 24 month “Own” occupation period by identifying some less demanding occupation it asserts the claimant can perform.

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In this recent case out of Louisiana the court rejected Cigna’s (Life Insurance Company of North America) efforts to deny a claim by a man who was permanently paralyzed and wheelchair bound. The claimant, Mr. Hughes, had been employed as an electrician when he was forced to stop working as a result of his paralysis.  While Cigna initally approved his claim for LTD benefits in 1999, what followed was very troubling.

Despite the fact that he was permanently paralyzed and wheelchair bound, Cigna denied his claim for benefits on at least 4 different occasions.  The last denial because he “failed to provide requested documentation.”  After the last denial Mr. Hughes failed to file an administrative appeal within 180 days as the denial letter advised.  When he finally did appeal, Cigna denied the appeal as untimely.

Mr. Hughes hired an attorney who filed suit claiming that the actual Insurance Plan did not mandate an appeal within 180 days.  The Court agreed rejecting Cigna’s argument that Mr. Hughes administrative appeal was untimely.  The Court then found:

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Anyone familiar with LTD Insurance claims and ERISA knows that you must first exhaust your administrative remedies before filing suit. In other words, you have to try and convince the LTD insurer to reverse its decision to deny the claim for benefits. While this may seem like an difficult task since the LTD insurer who makes the claims decision is the same entity that pays the claim, it is not impossible.

SMDA has been fortunate to convince CIGNA to reverse its LTD claims denial decision in several consecutive recent claims.

The first client was experiencing significant back problems as a result of degenerative disc disease. She was unable to continue her job as a customer service representative for a dental services company. The second client had a number of medical problems including pretty severe carpal tunnel syndrome which caused problems with any repetitive hand movements. Unfortunately, she was unable to do her job which required non-stop typing.

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In Rochow v. Life Ins. Co. of N. Am., 2015 U.S. App. LEXIS 3532 (6th Cir. 2015), the Sixth Circuit Court of Appeals (the Court) en banc overturned a previous decision of a 3 judge panel that had allowed plaintiff’s claim for the disgorgement of profits earned by the disability insurer.

Background: Under the ERISA statute and regulations the only traditional remedy for a claimant was the recovery of the monthly LTD benefits that were wrongfully denied. This remedial scheme has one very large problem-there is no incentive for the LTD insurance company to pay the benefits. In other words, if the LTD insurance company denies a claim for benefits, it gets to keep and use the money during the time period it takes for the claimant to file his or her claim, administrative appeal and lawsuit. During that time the insurance company can invest this money and earn a significant return. At the same time, the claimant is deprived of the use of the money. So, at the end of the day, if a claimant wins their ERISA suit for LTD benefits, the LTD insurer only pays the past due monthly benefits and gets to keep the return on the investment. In Rochow’s case the Life Insurance Company of North America was eventually ordered to pay about $700,000 in disability benefits, but it got to keep almost 3 million dollars it had earned on the money while the claim and lawsuit was pending.
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The 6th Circuit recently granted a request for en banc review of the Rochow v Life Insurance of North America case where a three judge panel determined that the claimant could recover for unjust enrichment the profits the insurance company had earned on the wrongfully denied LTD benefits.

As most ERISA practitioners recognize this case could be a significant positive development for many ERISA claimants as it would provide a significant additional incentive for LTD insurance companies to review claims fairly. By forcing an insurer to disgorge the profits it has earned from the retention of wrongfully denied benefits instead of just paying the benefits that should have been paid in the first place, the Court has potentially removed ERISA’s inherent incentive for disability insurer’s to deny otherwise meritorious claims with impugnity.

Plaintiff’s will however have to wait for the en banc decision of the circuit court as:

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SMDA filed a lawsuit against Liberty Life Assurance Company of Boston (LLAC) after it denied a claim for LTD benefits filed by an employee of DTE energy who had significant orthopedic back problems. The claim was governed by ERISA since it was a group plan provided through the employer. Despite the fact that the client submitted significant documentation of her back problems including multiple objective tests (x-ray and MRI’s) demonstrating the source of her back pain LLAC denied her claim based on several paper reviews performed by doctors hired through an expert witness service frequently used by the insurance company.

The Court rejected the insurer’s argument that the client had failed to provide objective evidence of her claim noting that pain is subjective and not susceptible to measurement and there was ample objective evidence of her medical condition which is likely to result in pain.

The Court utilized a De Novo standard of review rejecting Defendant’s argument that the Michigan ban on discretionary clauses was inapplicable. A link to the decision can be found here.This case provides a good example of the importance of creating a good administrative record for the Court’s review. The judge ordered LLAC to pay all of the past due benefits plus interest, costs and attorney fees.

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The administrative record is simply all of the documents provided to the LTD insurance company during the claims process, the claims file, the documents provided during the administrative appeal and the contract documents.

One of the little known but critical rules in ERISA Long Term Disability cases is that the Court will only consider the documents contained in the administrative record. Accordingly, it is extremely important that the insurer be provided all favorable information during the administrative appeal process. Otherwise, the claimants chances of winning in court can be very slim.

SMDA has had a couple of recent examples of the importance of this fact. We recently represented a client who filed her own administrative appeal by simply writing a letter explaining to the LTD insurer why she believed the claims denial decision was erroneous. Also contained in the record was a form completed by her primary care physician that indicated she needed a functional capacity examination in order to determine if she was disabled. The client was not aware of her doctor’s opinion and took no steps to provide the information suggested necessary by her own doctor.

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We recently received notice that another administrative appeal of the denial of a client’s LTD claim has been successful.

When a claim for LTD benefits is denied, pursuant to the ERISA regulations the claimant must file an administrative appeal of the denial decision with the entity that denied the claim, usually an insurer. This is part of the requirement that the claimant exhaust their administrative remedies before suit can be filed.

In this claim, despite ongoing treatment our client continued to experience disabling Migraine headaches on a regular basis multiple times per week. When she experiences these headaches she is disabled from any activity. As a result of the ongoing headaches she experiences severe difficulty with focus and concentration. Her headaches are aggravated by routine physical activity. She also experience phonophobia and photophobia and nausea. As a result of her medical condition, the client has functional limitations related to any activity including sitting, standing, and routine computer usage.

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SMDA had the opportunity to represent a registered nurse who stopped working in the Emergency Department after two level cervical disc fusion surgery. Several months after the surgery the LTD insurer terminated her benefits when it determined “that the medical on file does not appear to support any significant functional impairment other than that contributed by your cervical fusion.” The insurer ignored the fact that after the surgery she developed significant fatigue and was referred to a rheumatologist. She has been diagnosed with Lupus, Sjorgen’s Syndrome, Mitral Valve Prolapse, Migraine Headaches and Raynaud’s Syndrome. As a result of her illness she experienced marked fatigue, joint pain and shortness of breath. She also had significant sit/stand restriction.

SMDA succesfully argued that her occupation as a registered nurse working in the emergency department required a high level of cognitive functioning. She must be able to effectively assess and immediately determine the appropriate response to emergent life-threatening medical developments. Given her cognitive limitations related to her fatigue and multiple medications, her ability to satisfactorily perform is impaired.

Upon considering the Administrative Appeal, the insurer reversed its denial decision and reinstated the client’s LTD benefits retroactive to the termination date.

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The Eastern District of Michigan federal court recently granted my motion for discovery in a long term disability insurance ERISA case without requiring a predicate showing.

In Back v Hartford I had submitted a limited number of questions to Hartford Insurance Company to try and investigate any potential bias on the part of Hartford and the doctors it hired to review the records. Hartford objected and refused to answer a single question. We filed a motion to compel which the Court granted with one small exception.
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