Articles Posted in ERISA

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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From the Insurance Companies perspective, the answer is simple- there is no reason for them to pay.

My clients are universally surprised to learn that under ERISA the only thing you can sue for are the unpaid LTD benefits. There is no claim for emotional distress, or pain and suffering. There is no claim for bad faith or anything else. The vast majority of Long Term Disability claims are governed by a federal law (ERISA) because they are part of an employer provided benefits package.

I regularly hear tragic tales of financial devastation. Clients are unable to pay their bills, are losing their cars and their homes. Clients are forced to rely on their friends and families and the charity of strangers.

Guess what? The insurance companies could care less. You see, the LTD insurer gets to review your claim and decide if they want to pay or not. If they decide they don’t want pay your claim, they simply deny your application and hope you give up. If they approve your claim, then they have to pay and in turn make less money. Every dollar they pay on your claim is a dollar less of profit to line their pockets.
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Most Long Term Disability cases in our office are governed by ERISA as they are non-governmental employer provided benefits. The fact that they are ERISA claims is usually all bad for our clients as the law in this area has a number of inherent anti-claimant aspects. Primary among those aspects is that discovery was typically extremely limited or, more often simply not allowed.

What is discovery and why is it important?
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In a tremendously important decision, the 6th Ciruit court of appeals affirmed today a decision limiting the language that disability insurance carriers can include in their policies to protect themselves from making payments. In American Council Of Life Insurers v. Ross, No. 08-1406 , the panel agreed that the Michigan Insurance Commissioner could restrict an ERISA plan from including language giving itself discretion to interpret the plan language and determine the participant’s eligibility for those benefits.

This is critically important because up to this point in time Court’s were forced to review these cases using the very deferential “arbitrary and capricious” standard of review. In non lawyer speak, the court did not review the evidence to determine if the insurance company made the correct decision. Instead, the court was forced to determine whether there was any reasonable basis for the decision. The practical effect of this limited standard of review was to make it exceedingly difficult for a claimant to win. After all, if the insurance company hires a qualified doctor to review the claim and that doctor says the claimant is not disabled then there is a reasonable basis for the claims decision. (And oh by the way, never mind that we use that same doctor over and over and over and pay him and the reviewing company that he works for hundreds of thousands of dollars a year. they can be fair an impartial. yeah right.)

Now, the courts will review these claims de novo. In other words, the Court will be empowered to determine whether or not the correct decision was made-Whether or not the claimant meets the policies definition of disability. This is really huge.

The Second Circuit Court of Appeals cited First Unum’s deception as one of the grounds for granting an attorney’s claim for long term disability insurance benefits. In McCauley v First Unum the Court the Court cited several isntances of biased and deceptive claims review in granting McCauley’s claim for disability benefits.

In an important decision the Court analyzed the claim under the new standard set forth by the Supreme Court in Metlife v Glenn. The Court cited in detail First Unum’s history of deceptive claims handling and abusive tactics in reversing the denial decision.

Dr. Ghandi Gutta filed a claim for Long Term Disability Insurance when he was no longer able to continue his practice as a laparoscopic surgeon due to multiple medical conditions. When his definition of disability changed to “any occupation” at the end of two years his insurer, Standard Select, terminated his benefits contending that, even with his multiple medical conditions, he was able to work in the medical field.

Utilizing the the arbitrary and capricious standard of review, the court accepeted the insurer’s argument that Dr. Gutti failed to provide persuasive evidence that he was unable to perform other work in the medical field and that he had the skills necessary to work as a medical director or assistant medical director. To make matters worse, the court also ordered Dr. Gutti to repay $74,000 in overpayments as a result of payments he recieved under a different disability policy.

This case illustrates how difficult it can be for claimaints to obtain benefits that are governed by ERISA.

A Louisiana court recently rejected a long term disability insurer’s attempts to hide behind the protections afforded insurance companies by ERISA. In Gulf Coast Plastic Surgery v Standard Insurance Co. the Court determined that a claim that the insurance agent failed to increase the policy limits despite the doctors request and the agent’s promise was not preempted by ERISA. Rather, it was a simple negligence claim, even though it involved an ERISA policy.

The Court found that the claims against Hillyer(the insurance agent) were not subject to preemption under ERISA, because they did not implicate a relationship governed by ERISA and because the resolution of the claims does not require interpreting an ERISA plan. THe insurance agent was not an ERISA fiduciary, and the resolution of such allegations did not require the interpretation of an ERISA plan.

At least they weren’t ranked as the worst insurance company for consumers. (That award goes to Allstate.) Long Term Disability Insurer-Unum was ranked second from worst in a recent study cited by the Despite agreeing to pay a massive fine and review thousands of its Long Term Disability claims decisions in a Multi-State Regulatory Settlement Agreement, Unum was still ranked near the absolute bottom of insurers.

According to the article Unum earned a profit in 2007 of more than 679 million dollars while paying its CEO a whopping 7.3 million dollars. Unum was joined in the study by Allstate, AIG, State Farm and Conseco as the most anti-consumer insurance companies in the U.S.

On June 19 the Supreme Court issued its much anticipated decision in Metlife v Glenn regarding the conflict of interest created by a long term disability insurer who both determines whether an insured is eligible for benefits and pays benefits out of its own pockets.

Justice Breyer authored the majority opinion confirming that when a plan administrator both evaluates claims for benefits and pays those benefits a conflict of interest is created which requires the reviewing court to weigh that conflict as a factor in determining whether there was an abuse of discretion.

The majority opinion reaffirms the principles first identified in the Firestone decision. Any practitioners who were hoping this decision might change the landscape are sure to be dissapointed as the Court specfically recognized that it was not providing any detailed set of instructions on determining the effect of the insurer’s conflict on its ultimate decision to deny benefits.

Recently, the US District Court (Judge Richard Enslen) upheld the Michigan Insurance Commissioner’s right to prevent any Long Term Disability Insurer from including discretionary clauses in their insurance contracts in the case American Council of Life Insurer’s v Waters.

This could be a tremendously important decision for anyone with a long term disability claim. For years now the insurance companies have included clauses giving themselves the discretionary authority to interpret and enforce the provisions of their own insurance policies. The natural result of this power grab was to restrict the Court’s ability to review the appropriateness of the insurance companies decisions. As a result countless otherwise meritorious claims were denied. The insurance companies racked up huge profits while the individuals who filed claims lost their homes and were forced into poverty.

It remains to be seen whether this well reasoned decision is upheld on appeal. The AARP filed an amicus brief in support of the Michigan Insurance Commissioner.