In the back and forth of the disability claims process, decisions on whether someone is disabled can change. Claims administrators are “entitled to seek and consider new information and, in appropriate cases, to change its mind.” In fact, a record showing that the claims administrator changed its decision over time can help disprove allegations that a “conflict of interest” played a role in the claims decision.
The recent case of Geiger v. Aetna Life Ins. Co., __ F.3d __ (7th Cir. January 6, 2017) highlights the point, and explains four ways to inoculate claims from allegations that a conflict of interest affected the claims decision.
FACTS: Geiger had back and ankle problems and sought ERISA-governed disability benefits in 2009. The plan vested discretion with Aetna. Aetna concluded Geiger could not perform her “own occupation” as an account executive. After 24 months Aetna assessed whether Geiger could perform “any occupation.” Aetna initially concluded Geiger also could not perform “any occupation”.
But then new surveillance, medical reviews and a transferable skills analysis resulted in Aetna changing its decision and determining Geiger could perform a sedentary job. After benefits were discontinued, Geiger sued claiming Aetna’s conflict of interest (because it funded the benefit and determined eligibility) affected the decision.
DISTRICT COURT: GRANTED Aetna’s Motion for Summary Judgment, concluding Aetna properly exercised discretion.
SEVENTH CIRCUIT: AFFIRMS
- “[N]ew surveillance evidence supported [independent peer review report] and refuted [Geiger’s physician report]. …Aetna was ‘entitled to seek and consider new information and, in appropriate cases, to change its mind.’” Op. at 4.
- “Aetna minimized any conflict of interest by implementing multiple safeguards. First, Aetna obtained numerous independent physician peer reviews. Second, Aetna and the independent physicians reached out to Geiger’s own physicians and addressed their concerns. Third, Aetna sent the surveillance video to Geiger’s physicians to ensure the video was assessed objectively. Finally, Aetna previously reversed its own decision and reinstated her benefits.” Op. at 5. (Bold print added).
Have a great week…
The Department of Labor’s Employee Benefits Security Administration just published final regulations that change the ERISA disability claims and appeals process.
Here are 10 things you should know about these new regulations.
- These new regulations apply to all claims for disability benefits filed on or after January 1, 2018. (Many of the changes were initially proposed in 2015.) So, give some thought now about putting in place new processes to address these upcoming changes.
- There should be no incentives to deny claims. Bonuses based on the number of claim denials are not allowed.
- Review the factors used to select a medical expert. Basing your selection on the physician’s reputation for outcomes in contested cases should be reassessed.
- Denial letters must include an explanation stating why the opinions offered by the claimant’s health care provider or vocational expert were rejected (or agreed with).
- Denial letters must explain why disability determinations made by the Social Security Administration were rejected.
- Denial letters must inform the claimant about the right to obtain the claim file, and other relevant documents. The denial letter should state any internal rules or guidelines the claims administrator relied upon in deciding the claim. If no such internal rule or guideline exists, the letter should disclose this as well.
- Denial letters must include a discussion about translation services under certain circumstances. When a claimant’s address is located in a county where 10% or more of the population is literate only in the same non-English language, the denial letter must include a notice in that non-English language about the availability of translation services. A copy of this letter (containing the notice of non-English translation services) must be provided upon request. Oral translation services must be provided.
- During an appeal, the claimant must be given notice and a fair opportunity to respond if the appeal denial is based on new or additional rationales or evidence.
- The appeal denial letter must specify plan imposed deadlines for filing a lawsuit, and the date the limitations period expires.
- Generally, if the claims administrator fails to follow its own claims procedures, then a claimant can sue without exhausting administrative remedies.
Some of these new provisions have been adopted already by claims administrators to address certain judicial decisions. There also is some chance that these regulations, attached in the link above, could be changed. But it is good to know now how you might be expected to handle claims starting about one year from now…
Happy New Year!
What happens when an employer provides a disabled employee continued regular wages, paid out of general employer assets? This is known as a “payroll practice”… and ERISA may not apply.
A new case that highlights the point is Foster v. Sedgwick Claims Management Services, Inc. and Sun Trust Bank Short Term and Long Term Disability Plans, __ F.3d __ (D.C. Cir. November 29, 2016).
Also notable from this case:
(1) This is the D. C. appellate court’s newest application of the abuse of discretion standard in ERISA cases;
(2) Even post Amara, a Summary Plan Description “may ‘be examined to determine the appropriate standard of review.’” Op. at 16.
FACTS: Foster sought short term and long term disability benefits under ERISA plans adopted by her employer. Her claims were denied because she failed to provide “objective medical documentation” of disability. She brought suit under ERISA claiming both her short term and long term disability benefits were improperly denied.
HELD: Plaintiff’s claim for short term disability benefits under ERISA DISMISSED.
DISTRICT OF COLUMBIA CIRCUIT COURT OF APPEALS RATIONALE:
- “The Department of Labor exempts from ERISA certain ‘payroll practices,’ including: ‘[p]ayment of employee’s normal compensation, out of the employer’s general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons.” Op. at 4 (citing 29 C.F.R. Section 2510.3-1(b)(2)).
- “[T]he employer’s short-term disability benefit plan was a payroll practice because it was paid from [the employer’s] general assets and was ‘entirely separate’ from [the employers] ERISA-covered Employee Benefit Plan. Op. at 6.
- Here’s the “trifold” test to establish the short term disability benefit is exempt from ERISA as a “payroll practice”: (a) “paying normal wages, (b) from [the employer’s] general assets, (c) on account of work missed due to medical reasons.” Op. at 12.
- Plaintiff argued (belatedly) on appeal that eligibility under the short term and long term disability is “intertwined” and therefore ERISA should also govern the short term disability claim. The Court rejected this argument because “‘eligibility for [short-term] benefits is not at all affected by the [long- term plan….]” Op. at 24.
- Even post Amara, a Summary Plan Description “may ‘be examined to determine the appropriate standard of review.’” Op. at 16.
So how do you define “sedentary work”? Can you define it by using a Functional Capacity Assessment?
Can you disregard the Dictionary of Occupational Titles (DOT) in your assessment? Probably not.
Here’s the case of Armani v. Northwestern Mutual Life Insurance Company, __ F.3d __ (9th Cir. November 4, 2016)(District Court erred by not considering the DOT definition of “sedentary work.”)
FACTS: Armani, a controller for Renaissance, injured his back. He could sit for two-four hours, and stand or walk for two hours, out of an 8 hour work-day. Northwestern initially approved disability payments, and then discontinued them concluding he could perform sedentary work, based on a Functional Capacity Assessment.
Plaintiff refused to take Northwestern’s decision sitting down, however, and argued that the DOT defined sedentary work as “sitting most of the time, but may involve walking or standing for brief periods of time.”
DISTRICT COURT HELD: Northwestern properly concluded, based on a Functional Capacity Assessment and doctor reviews, that Plaintiff was not disabled from working “any occupation.” Northwestern was not bound by the DOT definition of sedentary (requiring the ability to sit 6 out of 8 hours per workday) because the DOT is “limited to the Social Security [disability] context.”
NINTH CIRCUIT COURT OF APPEALS: REVERSED
- “[C]ourts evaluating ERISA claims and interpreting the DOT have consistently held that an employee who cannot sit for more than four hours in an eight-hour workday cannot perform work classified as ‘sedentary.’” Op. at 9.
- “Some… courts have further noted that ‘sedentary work’ generally requires the ability to sit for at least six hours.” Op. at 9.
- The District Court erred by concluding that the DOT definition of “sedentary” was “limited to the Social Security context.” Op. at 10.
- Note: The DOT was published by the Department of Labor until 1999. It was replaced by the Occupational Information Network, online database. https://www.doleta.gov/programs/onet/eta_default.cfm
You know that courts can expect a claimant to establish “objective evidence of impairment” from a physical condition.
But does this apply to claims arising out of a mental condition?
Courts can require the claimant to establish objective impairment related to a diagnosable mental condition, too.
Here’s the case of Gailey v Life Insurance Company of North America, 2016 WL 6082112 ( M.D. Penn. October 17, 2016)(Disability based on diagnosable mental condition properly denied because, among other things, Claimant presented “no objective findings” of mental impairment, and yet did present “subjective complaints” supporting the diagnosis of Major Depressive Disorder).
FACTS: Gailey was an office manager with anxiety and depression. She sought ERISA-governed disability benefits which had a 24 month limitation for mental/nervous disability, relying on a diagnosis from a Certified Nurse Practitioner. Life Insurance Company of North America (LINA) granted disability benefits while Gailey attended in-patient therapy, but denied continued benefits after release from in-patient therapy.
During Gailey’s administrative appeal, LINA had her claim reviewed by a psychiatrist who concluded Gailey had “no objective findings” of mental impairment, but did have “subjective complaints” supporting the diagnosis of Major Depressive Disorder. Mental examination findings indicated, however, Gailey was psychiatrically stable with no impairments. LINA affirmed the claim denial and Gailey filed suit.
ISSUE: Did LINA Properly Deny the Claim?
HELD: YES—Court GRANTS LINA’s Motion for Summary Judgment Dismissing the Claim.
- The “Appointment of Claim Fiduciary” agreement “gave [LINA] ‘the authority, in its discretion….’ This delegation of discretionary power is exactly what the Supreme Court contemplated….” Op. at 4. (Emphasis in original).
- Even in a case with a conflict of interest, “courts reviewing the decisions of ERISA plan administrators or fiduciaries…should apply deferential abuse of discretion review across the board and consider any conflict of interest as one of several factors in considering whether the administrator or the fiduciary abused its discretion.” Op. at 4.
- LINA “cited to a multitude of evidence that it considered in finding that Gailey was not ‘disabled’ under the Plan…” Op. at 4. This included the board-certified psychiatrist report confirming there was no objective evidence of impairment from the diagnosable mental condition.
Are Social Security Administration disability determinations, issued after the final appeal decision, part of the ERISA administrative record? NO.
Plaintiffs often seek reversal of a denial of ERISA-governed disability benefits because the claim administrator failed to conduct an independent medical exam (IME).
But is the failure to conduct an IME fatal to a claim denial? NO. Check to see if the plan language expressly “reserved the right” to an IME.
Here’s the case of Folds v. Liberty Life Assur. Comp., 2016 WL 5661615 (N.D. Ohio September 30, 2016) (attached) that highlights these points, some other nice pearls of thought, too.
FACTS: Folds had “inflammation of the digestive tract” and sought ERISA-governed disability benefits administered by Liberty Life. Liberty provided disability benefits for ten months and then determined Folds was no longer disabled because there was no evidence he could not perform the essential functions of his desk job.
Folds could not stomach this decision and appealed. When multiple appeals were denied he filed suit, claiming Liberty’s decision was arbitrary because: (1) no IME had occurred; (2) Liberty did not give due weight or overlooked Plaintiff’s treating physician’s opinions and vocational assessment; and (3) Liberty’s decision differed from the Social Security (SSA) disability determination.
DISTRICT COURT HELD: Liberty’s decision to discontinue benefits AFFIRMED.
- Plaintiff claimed Liberty should have conducted an independent medical exam before claim denial because the medical record review made “credibility determinations” and in those situations an IME is required. However, the court determined no IME was required here because the “Plan [did not] explicitly reserve the right to mandate a physical examination.” Op. at 17.
- The SSA determination was NOT part of the administrative record and was excluded. Four days after Liberty had denied his appeal, the SSA issued a decision concluding Folds was disabled. “Because the SSA’s notice was issued after [Liberty’s final appeal decision], it was not part of the evidence considered…[and] is not part of the administrative record….” Op. at 13.
- The Court concluded Liberty “need only ‘provide an explanation for resolving conflicts between the treating physician and [Liberty’s] consulting physician.” Op. at 19.
- “’[I]t is entirely reasonable for an insurer to request objective evidence of a claimant’s functional capacity.’” Op. at 27.
In an ERISA case, what does it take to assert a claim for equitable relief? If the complaint does not assert an alleged breach of fiduciary duty, the claim for equitable relief should be dismissed…
Here’s the case of Owens v. Liberty Life Assurance Co., 2016 WL4746212 (W.D. KY. September 12, 2016)(In an ERISA case, to bring a claim for equitable relief “the Court would expect allegations in the complaint to refer to an alleged breach of fiduciary duty and subsequent facts presented at the summary judgment to suggest a genuine dispute as to whether Defendant breached its duty.”)
FACTS: Plaintiff, a Walmart employee, sought ERISA-governed disability benefits under a plan funded by Liberty Life. After initially providing benefits, Liberty Life discontinued benefits, concluding Plaintiff was not totally disabled. Plaintiff brought claims for wrongful denial of benefits and at the summary judgment stage asserted for the first time a claim for equitable relief. The plan conferred discretion.
ISSUE: Whether Plaintiff can belatedly assert a claim for equitable relief (at the summary judgment stage) when the complaint does not assert any purported breach of fiduciary duty.
DISTRICT COURT HELD: Liberty Life’s Motion for Summary Judgment GRANTED – Equitable Relief Claim Dismissed.
- “The Supreme Court has recognized the possibility of an equitable remedy, such as a surcharge, under ERISA for breaches of fiduciary obligations by plan administrators.” Op. at 2.
- A claimant can pursue a breach-of-fiduciary-duty claim only “where the Section 1132(a)(3) claim is based on an injury separate and distinct from the denial of benefits or where the remedy afforded by Congress under Section 1132(a)(1)(B) is otherwise shown to be inadequate.” Op. at 2.
- Plaintiff alleges she did not have to specifically “assert a breach of fiduciary claim to be entitled to equitable relief under Section 1132(a)(3)….[but] the Court would expect allegations in the complaint to refer to an alleged breach of fiduciary duty and subsequent facts presented at the summary judgment to suggest a genuine dispute as to whether Defendant breached its duty.” Op. at 2.
- Plaintiff also failed to set forth evidence of “an injury separate and distinct from the denial of benefits.” Op. at 2.
You know that in ERISA cases most courts typically will limit review to the administrative record, absent special circumstances. Courts may also allow limited discovery when assessing whether a “conflict of interest” affected the claim determination. A conflict of interest can arise, for example, when the insurer of the ERISA governed benefit is both the “evaluator and the payor.”
But watch out when Plaintiff asserts a breach of fiduciary duty claim. There is very strong precedent to obtain early dismissal of these claims. See, e.g., Rochow v. LINA, 780 F. 3d 364 (6th Cir. 2015).
AND…if you don’t move early to dismiss these dubious claims, the court may allow very broad discovery.
Here’s the case of Milby v. Liberty Life Assurance Co. of Boston, 2016 WL 4599919 (W. D. Ky. September 2, 2016)(Since the dubious breach of fiduciary duty claim had not been dismissed, the court allowed broad discovery).
FACTS: Plaintiff sought broad discovery in a claim involving ERISA-governed long term disability benefits. Plaintiff alleged Liberty Life was both the evaluator and payor of the claim and therefore sought discovery into Liberty’s conflict of interest. Liberty argued review of the claim denial should be limited to the administrative record, and there should be no discovery, or significantly limited “conflict” discovery.
ISSUE: What discovery is allowed when Plaintiff asserts a breach of fiduciary duty claim?
U.S. DISTRICT COURT HELD:
- “An ERISA plaintiff may pursue a claim under § 1132(a)(3), but only when it “is based on an injury separate and distinct from the denial of benefits or where the remedy afforded by Congress under § (a)(1)(B) is otherwise shown to be inadequate.” Op. at 3.
- Plaintiff “alleges numerous flaws in Hartford’s claims process, but only one injury: the denial of benefits. He contends that without discovery, it is impossible to determine what remedies are adequate…. But [Plaintiff’s] alleged injury—the denial of benefits—can be remedied by § 1132(a)(1)(B), which allows [Plaintiff] “to recover benefits due to him.” 29 U.S.C. § 1132(a)(1)(B). No discovery is necessary to make this determination. …[Plaintiff]… has failed to allege “an injury separate and distinct from the denial of benefits” or show why “the remedy afforded by Congress under § (a)(1)(B) is … inadequate,” the Court will dismiss his § 1132(a)(3) claim. Op. at 3.
- “Despite Liberty’s strenuous arguments in favor of the eventual dismissal of Milby’s breach of fiduciary duty claim, it has not filed any motion that could potentially dispose of the claim. Even if Liberty might succeed if it filed the long-promised motion for partial judgment on the pleadings, it cannot escape the fact that Milby currently has a pending cause of action pursuant to Section 1132(a)(3).” Op. at 5.
- Since the breach of fiduciary duty claim has not been dismissed yet, the scope of discovery will not be limited to the administrative record. [T]his Court finds that discovery is permissible in this case due to the existence of a breach of fiduciary duty claim pursuant to § 1132(a)(3). Op. at 5.
KEY TAKE AWAY: When Plaintiff asserts a breach of fiduciary duty claim (like the one in Rochow v. LINA), move to dismiss the claim early. This can help foreclose arguments for broad discovery.
Alaska’s prompt pay statute—which requires insurers to pay benefit claims within 30 days of submission—is preempted by federal laws governing employer-provided benefits and benefits for government workers, a federal judge ruled.
The case is Zipperer v. Premera Blue Cross & Blue Shield of Alaska, 2016 BL 265226, D. Alaska, No. 3:15-CV-00208 JWS, 8/16/16. (Kudos to my partner, Gwendolyn Payton, on this big win).
The judge’s Aug. 16 decision is the latest in a string of decisions striking down or scaling back state prompt pay laws as preempted by the Employee Retirement Income Security Act and the Federal Employees Health Benefits Act.
Earlier this year, a federal appeals court partly struck down Texas’s prompt pay law under the FEHBA and found it inapplicable to self-funded ERISA plans. Georgia’s prompt pay law was partly struck down as ERISA-preempted by a different appeals court in 2014. A district judge in Illinois reached a similar conclusion with respect to that state’s law in 2014.
You know that many insurance policies and ERISA-governed plans exclude from coverage disabilities “resulting from, or related to…any accident related to the voluntary influence of any drug, narcotic, intoxicant or chemical….”
The next time you are enjoying a fine beer or wine, a single malt scotch or even a Kamikazi, ponder this question…
Is it sufficient to rely solely on a blood alcohol test to establish the intoxication exclusion? NO.
Here’s the case of Prelutsky v. Greater Georgia Life Insurance Co., 2016 WL 4177469 (N.D. Ga. August 8, 2016) (Relying solely on a .25 blood alcohol test is insufficient to establish Intoxication Exclusion, especially when witnesses could have been interviewed to obtain facts regarding the claimant’s “physical and mental state immediately preceding the fall.”)
FACTS: Maneuvering at Aspen with a .25 alcohol level, Prelustky fell down 20 stairs and sustained a brain injury. He sought ERISA-governed long term disability from his law practice because of short and long term memory deficits. Greater Georgia Life denied the claim under the Intoxication Exclusion based upon medical records showing a .25 blood test, and a doctor’s diagnosis of “intoxication.” Prelustky appealed, claiming Greater Georgia failed to fully investigate, and that a witness confirmed he did not appear intoxicated but that he had actually tripped on his ski pants.
ISSUE: Was there sufficient evidence to sustain the Intoxication Exclusion?
DISTRICT COURT HELD: No. (Applying de novo and abuse of discretion standards)
- For the intoxication exclusion, the issue is whether Plaintiff was under the voluntary influence of an intoxicant when he was injured initially. Op. at 20.
- To investigate the exclusion, the insurer should obtain a blood test and a list of physical symptoms expected at a certain blood alcohol level to “determine if the [claimant’s] intoxication resulted in a degradation of his physical and cognitive abilities such that the causal link can reasonably be drawn between the injury and causation.” Op. at 21.
- “The Court concludes that Defendant failed to conduct a sufficient investigation that would allow the administrator to reasonably find a causal link between Plaintiff’s alcohol consumption and his fall.” Op. at 21.
- “‘[U]nder the language of the Policies there must be some evidence of the role of alcohol in the loss, beyond the insured’s intoxicated state, to establish applicability of the exclusion.’” Op. at 24.
- Greater Georgia “failed to meet its burden to show Plaintiff’s injury was caused by, resulted from, or was related to his intoxication” because the record “lacks any clear indication that [Plaintiff] exhibited any of the purportedly typical effects associated with a blood alcohol level of [0.25%].” Op. at 25.
- Merely having an independent reviewing physician consider the blood test and opining that certain physical symptoms are present is insufficient. Op. at 21, fn 6 and 7.
- Witnesses could have been interviewed to obtain facts regarding the claimant’s “physical and mental state immediately preceding the fall.” Op. at 21, fn 6 and 7.