Insurers Do No Have Discretionary Authority, Absent Clear Language in Official Plan Documents

Posted in: Abuse of Discretion, Administrative Record, Case Updates, De Novo Review, Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Insurance Questions and Concepts, Policy Interpretation, Standard of Review April 30, 2015

In actions brought under the Employee Retirement Income Security Act of 1974 (“ERISA”), two roads diverge in federal court—and the court’s choice regarding the applicable standard of review can make all the difference in the scope of permissible evidence.  If the court applies the abuse of discretion standard of review, the court more typically (but not always) only considers evidence received by the insurer in time for its decision and limits its review to the “administrative record” to determine whether the insurer’s denial was an abuse of discretion.  Alternatively, the court may review a case “de novo,” and may consider documents not previously provided to the insurer to determine whether the insured is entitled to benefits. 

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Third-Party ERISA Administrator Abused Discretion by Denying Medical Coverage: A Tale of What Not to Do

Posted in: Abuse of Discretion, Administrative Record, Conflict of Interest, ERISA, Fiduciary Duty, Health Insurance, Standard of Review September 16, 2014

Sometimes an administrator so unashamedly abuses its discretion in handling an insurance claim that its actions constitute a textbook example of “what not to do” for other administrators and the ensuing decision provides a clear illustration of how courts apply an abuse of discretion standard of review under the Employee Retirement Income Security Act (“ERISA”).  Indeed, a recent case clarified that plan administrators and third-party claims administrators alike are held to comparable standards when issuing claims decisions.  In Pacific Shores Hospital v. United Behavioral Health, 2014 WL 4086784; 2014 U.S. App. LEXIS 16062 (9th Cir. Cal. Aug. 20, 2014) (“Pacific Shores”) the Ninth Circuit Court of Appeal reversed the district court, finding the third-party administrator acted improperly by denying the insured’s claim based on clear factual errors.  Pacific Shores provides a clear example of how courts review a decision for an abuse of discretion, and shows that even third-party administrators, who purportedly have no conflict of interest with the insured, are still held to have the same duties in handling claims and must follow appropriate procedures.

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California District Court Rules That a Treating Physician's Observations are "More Persuasive" Than a Paper Reviewer's Contrary Opinions

Posted in: Case Updates, Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Standard of Review February 13, 2014

When reviewing a claim for disability insurance, insurers and other claim administrators often rely on the opinions of paid physicians to support their improper denial decisions.  For example, a disability insurance company will hire a doctor to conduct a “paper review” – that is, reviewing an insured’s medical records, without actually examining the insured – and then offer an opinion on the insured’s ability to return to work.  If the “paper reviewer” opines that the insured is capable of returning to work, the insurance company will then rely on that opinion to deny the claim for benefits; even if the insured’s own treating physicians repeatedly state that the insured is disabled.  However, in Oldoerp v. Wells Fargo & Co. Long Term Disability Plan, 2014 U.S. Dist. LEXIS 9847, 2014 WL 294641 (N.D. Cal. Jan. 27, 2014), the court held that with a psychological disability, a treating mental health professional’s observations are “more persuasive” than a paper reviewer’s opinion.  This opinon is beneficial for policyholder/insureds, espeically in ERISA cases, because insurers will have a harder time using the opinions of paid, so-called “experts” who do not examine the insured to support their improper claim decisions.

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McKennon Law Group Wins Disability Insurance Lawsuit Against Sun Life And Health Insurance Company Following Trial

Posted in: Abuse of Discretion, Conflict of Interest, Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, News, Standard of Review December 11, 2012

On November 27, 2012, following a trial before Judge Cormac J. Carney of the United States Federal District Court for the Central District of California, Robert J. McKennon and Scott E. Calvert of the McKennon Law Group secured a victory for their client in a lawsuit against Sun Life and Health Insurance Company.  Representing the claimant, Mr. Evans, the McKennon Law Group convinced the District Court that Sun Life abused its discretion in denying Mr. Evans’ claim for long-term disability benefits and that Mr. Evans is entitled to receive his disability benefits that Sun Life denied him.

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In an ERISA Case, What Actions Will Reduce the Level of Discretion Afforded the Claims Administrator/Insurer?

Posted in: Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Insurance Questions and Concepts, Standard of Review January 24, 2012

This article continues our series of articles answering basic questions about insurance law and the Employee Retirement Income Security Act of 1974 (commonly referred to as “ERISA”).  This one addresses:  In a lawsuit governed by ERISA, what actions taken by the claims administrator (usually an insurance company such as Blue Cross/Blue Shield or CIGNA) will reduce the level of discretion the court gives the insurance company’s decision when reviewing the decision for an abuse of discretion?

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California Bans the Inclusion of Policy Provisions Giving Insurance Companies Discretionary Authority to Decide Claims

Posted in: Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Insurance Commissioner, Legislation, News, Standard of Review October 07, 2011

In a major victory for consumers, Governor Jerry Brown signed a bill that makes discretionary clauses – typically contained in ERISA-governed life, health and disability insurance policies/ERISA plans void and unenforceable in new or renewed policies.  SB 621 was authored by Senate Insurance Committee Chair Ron Calderon (D-Montebello) and sponsored by Insurance Commissioner Dave Jones, and was similar to AB 1686 vetoed by Governor Schwarzenengger in 2010.  

Discretionary clauses are provisions typically found in group life, health and disability plans that give the administrator/insurer the sole discretion to interpret the policy and to decide if a plan participant or beneficiary is entitled to plan benefits.  In ERISA cases, federal courts have interpreted these clauses to give administrators/insurers a higher standard of review when courts review their decisions.  This meant that the federal courts were required to give greater deference to decisions denying plan benefits under life, health or disability coverages, rather than weighing all the evidence under a “de novo” standard of review and making their own determination as to whether the insured was entitled to benefits under the policy or employee welfare benefit plan.

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Boon or Bust for Employee Rights Under ERISA Plans?

Posted in: Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Standard of Review June 07, 2011

The Thursday June 3, 2011 edition of the Los Angeles Daily Journal featured Robert McKennon’s article entitled “Boon or Bust for Employee Rights Under ERISA Plans?” In it, Mr. McKennon discusses the U.S. Supreme Court’s landmark May 16, 2011 opinion in Cigna Corp. v. Amara, 563 U. S. ____ (2011).  The article is posted below with permission of Daily Journal Corp. (2011).

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In ERISA Cases, The Standard of Review Really Does Matter

Posted in: Abuse of Discretion, De Novo Review, Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Standard of Review December 06, 2010

The Thursday December 1, 2010 edition of the Los Angeles Daily Journal featured the article co-written by Robert J. McKennon and M. Scott Koller, entitled “In ERISA Cases, The Standard of Review Really Does Matter,” in the Perspective column. It explains why it is important to identify and appropriately utilize the Standard of Review in ERISA cases.  The article is posted below with permission of Daily Journal Corp. (2010).

Please click to view the article in Adobe

Please click the image to view/print the article in Adobe

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Governor Schwarzenegger Vetoes AB 1868 That Would Have Banned Discretionary Clauses in Group Insurance Policies

Posted in: ERISA, Legislation, News, Standard of Review October 07, 2010

Today Governor Schwarzenegger vetoed AB 1868 that would have banned discretionary clauses in group insurance policies.  This is a disappointment to consumer groups but not to insurers who rely on them.  Currently, the Department of Insurance bans them in group policies anyway.  Here are the Governor’s comments on why it was vetoed:

To the Members of the California State Assembly:

I am returning Assembly Bill 1868 without my signature.

This bill would prohibit the Insurance Commissioner from approving any disability or

life insurance policy if it includes a provision that would reserve discretionary authority

to the insurer to determine eligibility for benefits, and voids certain provisions of a policy

or agreement if it provides or funds life insurance or disability insurance coverage.

This bill is unnecessary, as the Insurance Commissioner already has the authority to

prohibit the use of discretionary clauses.

For this reason I cannot sign this bill.

Sincerely,

Arnold Schwarzenegger

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Disability Policy Discretionary Clauses Come Under Congressional Attack

Posted in: Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Legislation, News, Standard of Review September 30, 2010

Senate Finance CommitteePolicyholder/Employee groups who have group disability insurance coverage through their employers and who find themselves operating in the byzantine world of ERISA have long criticized discretionary clauses contained in such ERISA policies.  These often have the effect of giving insurance companies firmer ground to support claim denials because the “abuse of discretion” standard of review typically applies.  This higher standard of review makes it more difficult for policyholders/employees to challenge disability claim denials. 

California Governor Arnold Schwarzenegger has the opportunity to sign California Assembly Bill 1868 (“AB 1868”) and to prohibit these discretionary clauses.  In the recent case of Standard Insurance Company v. Morrison, the Ninth Circuit Court of Appeals ruled that the California Insurance Commissioner has the authority to disapprove any disability insurance policies that contain discretionary clauses.

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