Policy Exclusions or Limitations.

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Holding an insurer to its explanation for denying benefits articulated during its internal claims review process.

“In Glista, we held an insurer to its internal claims review process.”   Dutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015)(citing Glista v. Unum Life Insurance Co. of America, 378, F.3d 113, 132 (1st Cir. 2004). 

 

The court has a range of options available to it in such circumstances.  Glista v. Unum Life Insurance Co. of America, 378, F.3d 113, 116 (1st Cir. 2004). 

 

The court reasoned in Dutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015) that the insurer’s reliance on the limited conditions provision in the plan took place before there was any litigation and that plaintiff had adequate notice during the administration process, in declining to find the insurer’s use of the provision during litigation to be a post hoc rationalization.

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Burden of Proof Shifting for limitations period provisions.

The court did not have to decide whether to characterize such provisions as exclusions (which would presumably lead to burden shifting) or limitations (which presumably would not) because the insurer would prevail regardless.  Dutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015)

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

Reimbursement Provisions in ERISA Disability Policies

Alesia v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981). New Jersey state law preempted allowing enforcement of plan language offsetting workers' compensation benefits from vested pension benefits. Not contrary to ERISA because vested benefits were not "forfeited" only the amount of the vested benefit was reduced. Case allowed broad pre-emption of a state law that prohibited offset of workers' compensation from vested pension benefits.

 

Massachusetts Mutual Life Insurance Company v. Russell, 473 U.S. 134 (1985).

 

Mertens v. Hewitt Associates, 508 U.S. 248 (1993). (Scalia)

 

Great-West Life &Annuity Insurance Company v. Knudsen, 534 U.S. 204 (2002). (Scalia). Plan attempted to enforce an equitable lien by obtaining a money judgment, however, the Defendants had never come into possession of a fund. The third party settlement went to the defendants' attorneys and to a restricted trust. (Claim and remedy were equitable therefore plan could not recover under section 502(a)(3)).  [502(a)(3) authorizes a civil action for other appropriate equitable relief.  Court says it must mean something less than all relief.  Says in Mertins it must refer to categories of relief typically available in equity.  Here the plan sought an amount of money owed from the participant but the participant’s settlement had gone into a trust.  Court said the plan was therefore seeking money owed which is an action at law.  Plan said it was seeking restitution.  Court said restitution actions can be at law or in equity.  Depends on the basis of the claim and the remedy sought.  Actions in which plaintiff cannot assert a right to possession of particular property are essentially viewed as actions at law for breach of contract.  But where money or property in defendant’s possession can be identified as belonging to plaintiff, the action is in equity.  What is sought is to restore to plaintiff the particular funds in defendant’s possession.  Since here the plan was seeking money to which they were contractually entitled, not some particular funds held by the participant, their claim was a law and therefore not available under 502(a)(3).

 

(Line of cases read by lower courts to preclude remedy under ERISA in situations where wrongful plan administration in violation of ERISA fiduciary obligations causes so-called extra-contractual damage such as physical harm, expense or other suffering. E.g., Bast v Prudential Ins. Corp. of Am., 150 F.3d 1003 (9th Cir. 1998). Holding ERISA section 502 (a)(3) prevents recovering damages as "appropriate equitable relief." Delay in approving medical treatment caused death.)

 

See, Langbein, What ERISA Means by "Equitable": The Supreme Court's Trail of Error in Russell, Mertens, and Great-West, 103 Columbia L. Rev. 1317 (2003).

 

Sereboff v. Mid Atlantic Medical Services, Inc. 547 U.S. 356, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006). Reimbursement claims by Heath-care benefit plans are analogous to enforcement of attorney lien claims, and the right to reimbursement attaches to settlement funds prior to distribution. Claims were equitable because the beneficiaries agreed to reimburse funds from third party settlement and funds were held in a separate account.  (Fund becomes a "thing"). The fund was an identifiable thing within the possession and control of the beneficiaries and not recoverable from "assets generally."  Court looks for an action typically available in equity, and to do that looks at both the basis and the remedy sought.  The problem with Great-West/Knudson – attempting to recover a sum of money instead of a specific fund, which made the remedy legal and not equitable – was not present here.  The bigger question was whether the basis for the claim was equitable.  The Court cited the equitable rule that a contract to convey a specific object even before it is acquired will make the contractor a trustee as soon as he gets title to the thing.  Here the plan terms specified a particular fund and a particular share thereof, so the plan could follow that into the hands of the participant.  The Court construed this to be an equitable lien by agreement, not a lien for equitable restitution (where defendant wrongly obtains the fund), and therefore strict tracing rules did not apply.  Court also addressed the participant’s argument that it should have equitable defenses arising from principles of subrogation.  The Court said since this action qualified as an equitable remedy because it was to enforce an equitable lien by agreement and not a subrogation lien, which is a lien impressed on moneys on the ground that they ought to go to the insurer, subrogation defenses did not apply.

 

CIGNA Corp. v. Amara, 563 U.S. 421 (2011).

 

 

 

US Airways, Inc. v. McCutchen, 569 U.S. ....., 133 S.Ct. 1537 (2013). (Kagan, Scalia dissenting). Inter-Alia, absent specific language in the plan, the plan pays its proportionate share of fees and costs. This is the "common fund" rule and is the default rule. This was another equitable lien by agreement enforced against a third party automobile accident injury settlement in which the Court held the make-whole doctrine not applicable and that the plan had a right to enforce its lien against the fund even though the amount was wholly inadequate to compensate for the injury.  The attorney took the third party settlement, took attorney fees and put the rest in escrow.  The suit sought a lien on the escrow money and the attorney fee amount ‘in the participant’s possession’ (which is weird b/c it was in the attorney’s possession).  The plan called for full reimbursement.  The Court said that this was an equitable lien by agreement just like in Sereboff, because in both cases they claimed specifically identifiable funds – a portion of the third party settlement.  The court skipped over the fact that the attorney funds were no longer identifiable and were never in the participants’ possession.  It went on to address equitable defenses of unjust enrichment (or double recovery) and the common fund doctrine which says an attorney who recovers a common fund for persons other than his client is entitled to a reasonable attorney fee from the fund as a whole.  In Sereboff the participant did not argue that although the relief was equitable it was not appropriate because it contravened principles like the make whole doctrine.  The Court explained that enforcing a lien by agreement arises from and carries out a contract’s provisions, and these equitable rules do not trump the agreement.  But in this case the plan was silent on the allocation of attorney’s fees, and in such a case the common-fund doctrine provides the best indication of the parties’ intent. 

 

Montile v. National Elevator, 577 U.S. __, (2016).  Thomas.  Montanile got a third party settlement for $500,000, the health plan had a subrogation provision, attorneys took $260,000, put the rest in escrow, negotiations broke down, they distributed it to the participant after a 14 day notice, plan sued to enforce an equitable lien.  Participant still had some of the settlement funds.  Held that the plan cannot enforce an equitable lien against participant’s general funds.  The lien was equitable but the remedy is not. The treatises re equity treatises establish that plaintiffs can enforce an equitable lien only against specifically identified funds that remain in defendant’s possession or against traceable items purchased with the fund.  All that plaintiff has here is a personal claim against the wrongdoer – an action at law.  So Montile differes from Sereboff in that the participant dissipated some of the funds.  In Sereboff the Court said strict tracing rules do not apply to liens by agreement.  But they were responding to an argument by the participant.  In Montile they seemed to hold that strict tracing rules do in fact apply to liens by agreement.  I think it’s clear that where the participant stipulates that there is an identifiable amount that is the fund or part of the fund, then it is.  It must be traced at least that far.  Montile holds that once comingled or dissipated it is general assets and cannot be subject to the lien.

 

 

 

Lyme Disease

“We need not and do not decide whether crhonic Lyme disease is a valid diagnosis in general, or as applied to Dutkewych specifically.”  Dutkewych v. Standard, 781 F.3d 623 (1st Cir. 2015). 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

The Limited rights of Claimants in ERISA Claims According to the Department of Labor

In the Supplementary Information to the revision of the claims procedure regulations under the ERISA statute for employee benefit plans providing disability benefits, The Department of Labor noted the extremely limited rights of claimants to litigate denied claims.  The DOL pointed out that, under the ERISA statutes, as interpreted by the courts, “claims are often reviewed by a court under an abuse of discretion standard based on the administrative record.” 

Let’s break down this statement.  The first part of the statement is that when you get to federal court your claim will be ‘reviewed by a court.’  That’s curious.  Aren’t courts supposed to be where you get to prove your case at a trial?  Not so under ERISA law. You don’t get to have a trial.  You don’t get a jury.  You don’t get to depose witnesses or request that the insurer or self-insurer produce all relevant documents.  You don’t get to file motions, bring in experts and do all the things that have come to represent a full and fair trial.  You just get a review by a judge.

The second part of the statement is that the court will review the case ‘under an abuse of discretion standard.’  What that means in lay terms is that the judge can only overturn the insurer’s decision if it was ‘irrational,’ or is not supported by substantial evidence.  The judge must defer to the insurer’s decision unless you can show that it doesn’t have reasonable support based on the administrative record.  The judge does not get to determine whether the claimant is disabled or not.  She only gets to decide whether the adverse determination was reasonable.  Exactly why the system leaves so much power in the hands of insurers to review and decide the claims when they are the ones who must pay benefits on approved claims is hard to understand without taking a very pro-business view of the economy. 

The last part of the statement is that what the court is reviewing is ‘the administrative record.’  Generally, the documents provided by you during the appeal process, if any, along with the documents obtained or generated by the insurer or self-insurer, constitute the administrative record for your claim.  That record can only be supplemented under very narrow circumstances.  If you are not savvy enough to submit medical records, neuropsychological exams, FCE exams, sworn statements or anything else that a sophisticated lawyer might obtain and submit on your behalf, you are very unlikely to have enough evidence in the record to show that the insurer or self-insurer abused its discretion in denying your benefits. 

As you can imagine, with this system firmly in place the Department of Labor has limited power to add protections for claimants.  But in the next article we will review what they have done, or tried to do, with these new Regulations.

 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.

 

A Guide To The New ERISA Regulations In Effect As Of April 1, 2018

Article 1: I. Background: Insurers Aggressively Disputing Claims Created A Need for Even Stronger Regulations.  

Claimants who are applying for or have been denied long term disability benefits provided by their employers and subject to the federal ERISA statute will want to know about the revisions to the federal regulations promulgated by the Department of Labor (DOL) that went into effect on April 1, 2018.  I will review the Supplementary Information and the new provisions in a way that I hope is helpful to claimants.  The following articles will track the Supplementary Information provided by the Department of Labor, which appears with the new Regulations in the Federal Register.

First, a word about the force of these Regulations.  The ERISA statute grants authority to the Secretary of Labor to promulgate rule-making authority to the Secretary of Labor.  You can find the statutory provisions here.  Although they may be challenged, the Regulations generally operate with the force of law and for purposes of this article are treated as such.

The Background provided in the Supplementary Information section of the new regulations (I.  Background), which you can find here, paints a stark picture of the systemic unfairness to claimants in the administration of disability benefit claims.  It recounts that the ERISA statute as enacted (in 1974) requires a “full and fair review” of a claims denial; the DOL promulgated rules in 1977 establishing minimum requirements for claims procedures; and that it revised and updated those rules in 2000 to strengthen the minimum requirements, in order to reduce lawsuits, promote consistency and provide a non-adversarial method for claims reviews.  Despite all of this, the DOL found that disability lawsuits dominated the ERISA litigation landscape based on a study of the years 2006 – 2010. 

The reasons for this – which are the reasons for the recent changes – are not hard to find.  First, “[i]nsurers and plans looking to contain disability costs may be motivated to aggressively dispute disability claims.”  The DOL cited numerous court cases in which judges had found just that.  See here.

Second, the DOL’s independent ERISA advisory group conducted a study in 2012 in which it received public input that “[n]ot all results have been positive for the participant…even though these rules were intended to protect [them].”  It is hard not to be cynical at a finding that insurers that adjudicate claims might find reasons to deny meritorious claims rather than pay benefits.  The DOL summed up the systemic problem this way:  “The Department’s determination to revise the claims procedures was additionally affected by the aggressive posture insurers and plans can take to disability claims as described above coupled with the judicially recognized conflicts of interest insurers and plans often have in deciding benefit claims.” 

To sum up: to protect disability benefits for those who need them, i.e. some of our most vulnerable citizens, those citizens almost always apply for benefits to companies that both evaluate and pay claims.  After 40 years and many revisions, the companies were found still to be aggressively disputing claims in order to “contain costs,” i.e. increase profits. 

 

Disclaimer:  The information you obtain in this article is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship.