ERISA Archives - Page 2 of 8 - McKennon Law Group

It should not surprise anyone that health insurance companies are motivated and incentivized to deny coverage of costly surgical procedures. Most insurers deny health insurance claims by claiming that a recommended surgery is “not medically necessary” or that the claimant “did not try conservative treatment” prior to undergoing surgery. Does a health insurer abuse its discretion by denying a claim without providing a reviewing doctor with important records that would assist in proving medical necessity? The Fourth Circuit Court of Appeals recently answered this question in the affirmative, ruling that insurers who do not provide important records to their medical reviewers abuse their discretion by denying claims on the grounds that medical procedures are not medically necessary. In Garner v. Central States, __ F.4th __, 2022 WL 1160386 (4th Cir. 2022), the claimant, Dorothy Garner, suffered from back and neck pain that continued to increase despite her taking medication and treating with postural exercise like yoga. Her doctor recommended surgery, based on the results of an MRI. To cover the cost of the surgery, Ms. Garner submitted a claim with Central States as a beneficiary of her husband’s ERISA employee health benefit plan sponsored by United Parcel Service, Inc.

Central States denied Ms. Garner’s claim on the grounds that her $90,000 surgery was not “medically necessary” under the plan provisions. This decision was based on an independent medical review (“IMR”) of Ms. Garner’s claim, conducted by Dr. Francesco Serafini, a physician who is Board-certified in general surgery. But the records that Central States provided to Dr. Serafini for his IMR did not contain either the MRI report that had led her doctor to recommend surgery or his office notes that explained this recommendation. Without access to these missing documents, Dr. Serafini concluded that there was no basis in the provided records to justify Ms. Garner’s surgery, and this conclusion formed the basis for Central States’ denial letter.

Ms. Garner submitted another appeal after having a physician review her file, and Central States conducted another IMR of Garner’s claim, this time by Dr. Brad Ward, a physician who is Board-certified in neurological surgery. Unlike Dr. Serafini, Dr. Ward had full access to Ms. Garner’s medical records, including the MRI report and the office notes. But Dr. Ward also concluded that the surgery was not medically necessary, relying in part on the fact that Ms. Garner had not taken “any conservative measures other than medication.” Central States thus upheld its denial decision.

Ms. Garner filed an ERISA lawsuit against Central States, seeking coverage under the plan for her surgery. The district court, ruling on the parties’ summary judgment motions, found for Ms. Garner because Central States “had not engaged in a ‘reasoned and principled’ decision-making process.” The court’s ruling was based on three points: (1) Central States had not provided Dr. Serafini with the “critically important” MRI records and office visit records, (2) “nothing in the plan required covered individuals to exhaust conservative treatment options before undergoing surgery” and (3) it was undisputed that Garner had unsuccessfully tried postural exercises to relieve her pain.

On Central States’ appeal of the district court’s finding, the Fourth Circuit reviewed Central States’ claim denial to determine whether it had abused its discretion under the plan by denying Ms. Garner’s claim. Even under this abuse-of-discretion standard, which affords deference to Central States in its claims decisions, the Court affirmed that the district court’s decision to deny her claim was an abuse of discretion. The Court provided various substantive items that supported its finding.

First, the court noted that Central States “utterly failed to disclose” Ms. Garner’s pertinent medical records to Dr. Serafini, including her MRI results and her doctor’s notes explaining his surgery recommendation. The court found that these documents “were critical” — the MRI report because it established the underlying medical basis for her surgery, and the office visit notes because they explained why her doctor recommended the surgery. Notably, the reviewing physician had complained of a lack of information during the initial review, and after he completed his report, Central States did not follow up with him or provide him with the MRI or doctor’s notes.

While the Court stopped short of concluding that Central States “acted in bad faith or deliberately withheld documentation,” it emphasized that under ERISA, Central States owed Ms. Garner a “deliberate, principled reasoning process,” but that it had failed to provide such a review. Central States argued that it cured the flaws in its initial review by providing all of Ms. Garner’s relevant records, including the MRI report and the doctor’s notes, to Dr. Ward. However, the Court did not accept this reasoning because Central States had repeatedly indicated that it relied on both doctors’ reports in upholding its decision. Central States’ denial was not “a reasoned determination” because it relied on Dr. Serafini’s report that did not consider the MRI report or the doctor’s notes.

Second, the Court focused on Central States’ basing its denial on Ms. Garner’s not trying conservative treatment before having surgery. The record indicated that Ms. Garner “had tried postural exercises such as yoga without relief.” Also, the reason why she had the MRI done was that her pain had continued “despite her efforts at conservative treatment over the past several months,” including medication. Central States could not require Ms. Garner to receive conservative treatment “as an absolute condition” to finding that her surgery was medically necessary. By not allowing Central States to “add a new term to the plan, a term for which Garner did not bargain, and about which she lacked any notice,” the Court precluded it from using subjective terminology to “move the goal posts” by requiring ever more “conservative” treatment in order to find her surgery to be medically necessary.

Third, the court observed Central States’ persistence in attempting to justify its improper denial of Ms. Garner’s claim through vague terms. The court noted that Central States “repeatedly failed to handle Garner’s claim in a sensitive and fair-minded manner.” After “no fewer than three opportunities to give [Ms.] Garner’s claim the reasoned consideration that it deserved…[i]t would neither encourage the careful and efficient resolution of benefits claims, nor would it be fair to [Ms.] Garner, to permit Central States a fourth opportunity. Three strikes are enough.”

While the court’s reasoning hints that insurers have significant leeway in their claims review processes under the abuse-of-discretion standard of review, insurers must use a fair and reasoned claim review process in deciding claims. When they do not do so, the courts will not condone this conduct.

The claims review process can be daunting for claimants who are simply trying to obtain much-needed care or treatment, and even more so when insurance companies use unfair means to justify denying legitimate health insurance claims. McKennon Law Group PC is highly experienced in handling denied ERISA health insurance claims, especially those based on an alleged lack of medical necessity.

When an insured under an accidental death and dismemberment policy governed by ERISA dies, coverage often turns on whether the death resulted from an “accident,” which is covered, or from the insured’s own intentional conduct which a reasonable person would have viewed as substantially certain to lead to death, which is not covered. In Wolf v. Life Insurance Co. of North America, 2021 WL 2105316, (W.D. Wash. 2021), the court had to determine whether the death of an insured who drowned after a car wreck was an “accident.” The case turned on whether driving 70-80 miles per hour the wrong way down a one-way road next to a bay, with a .17 blood alcohol level, would have led a reasonable person in the insured’s shoes to view death as substantially certain. While calling it a very close call, the court ruled in favor of the insured in finding the death was accidental, for which insurance benefits were due under the policy.

In the Ninth Circuit Court of Appeals, the standard for determining whether an insured’s intentional conduct leading to death was an “accident” for purposes of an accidental death policy governed by ERISA was decided in Padfield v. AIG Life Insurance Company, 290 F.3d 1121, at 1126–27 (9th Cir. 2002). In Padfield, the insured had died while engaged in autoerotic asphyxiation. The Ninth Circuit first had to decide what standard should apply.

The seminal case on this issue was decided by the First Circuit Court of Appeals, in Wickman v. Northwestern National Insurance Company, 908 F.2d 1077, 1088 (1st Cir. 1990). In Wickman, the First Circuit adopted a two-part test for deciding the issue. First, the court looks at whether the insured has a subjective expectation of death from the conduct. The court is to make the subjective intent analysis “from the perspective of the insured, allowing the insured a great deal of latitude and taking into account the insured’s personal characteristics and experiences.” Second, the court is to apply an objective standard if the court cannot determine whether the insured had a subjective expectation of death, or if the court determines that the insured did not have a subjective expectation of death, the court is to apply an objective test to determine whether the insured’s expectations were reasonable. The objective test adopted in Wickman is “whether a reasonable person, with background and characteristics similar to the insured, would have viewed the injury as highly likely to occur as a result of the insured’s intentional conduct.”

In Padfield, the Ninth Circuit adopted the Wickman two-part test with a modified version of the second part of the test –whether a reasonable person, with a background and characteristics similar to the insured, would have viewed death as “substantially certain” to occur as a result of the insured’s intentional conduct. Padfield, 290 F.3d at 1127. Under this standard, the Ninth Circuit determined that a reasonable person with the insured’s experience would not have viewed death as substantially certain from autoerotic asphyxiation. Indeed, the court held that these facts “fell far short” of the substantially certain to result in death standard. The court found that this insured had engaged in autoerotic asphyxiation without dying in the past and also relied on “the uniform medical and behavioral science evidence indicating that autoerotic activity ordinarily has a nonfatal outcome.” On the other end of the spectrum, the court noted that courts have found that playing Russian roulette does involve a reasonable expectation of a substantial certainty of death, regardless of the insured’s subjective expectations.

The Padfield court noted that courts use various formulations to indicate the degree of certainty with which an insured must expect injury for an injury to be nonaccidental, but concluded that “the ‘substantially certain’ test is the most appropriate one, for it best allows the objective inquiry to ‘serve [ ] as a good proxy for actual expectation.’ ” Id. at 1127 (citing Wickman, 908 F.2d at 1088; Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1456 (5th Cir. 1995)).

In Wolf, the court applied the Ninth Circuit’s two-part standard to Wolf’s behavior leading up to his death. The court found that the evidentiary record was inconclusive regarding Wolf’s subjective expectations, although the court observed that his wearing of a seatbelt and use of emergency flashers possibly indicated a subjective intention that his conduct not be fatal. The court ruled that Wolf’s conduct, while “extremely reckless behavior,” was nonetheless an accident under the substantial certainty of death standard:

Speeding along a one-way road the wrong direction in the dark alongside a body of water does not ‘fall far short’ of what a reasonable person might expect to lead to death, [citation], but neither would a reasonable person . . . view death as “substantially certain” in these circumstances.

In contrast, the court in Wolf gave examples of reckless driving scenarios which a reasonable person would consider substantially certain to lead to death:

driving into oncoming highway traffic or driving alongside a cliff without a guardrail with one’s eyes closed.

In Wolf, the court made its decision under the de novo review standard. It emphasized that these facts would have presented a much closer call for the court under the “abuse of discretion” standard, in which the insurance company’s decision to interpret policy language and make coverage decisions is accorded deference by the court. The court cited to cases holding it was not an abuse of discretion for an administrator to deny coverage for claims involving very similar drunk driving scenarios.

Wolf provides a useful roadmap in how the “substantially certain” standard would be applied to other circumstances in which an insured dies while engaged in intentional conduct that was a cause of the death. For example, dying from jumping off a five-story building would not be an accidental death. But dying from jumping off that same building while bungy jumping, due to an equipment failure, would be.

Wolf shows the advantages to the insured beneficiary of having a court review a denial of benefits under an ERISA governed insurance policy under the de novo standard, rather than under an abuse of discretion standard.

Wolf shows the necessity of an insured seeking coverage under an accidental death and disability policy to hire a knowledgeable ERISA accidental death attorney to carefully analyze the factual circumstances of an insured beneficiary’s death, and to successfully navigate the insurance claim through the ERISA appeals process and, if necessary, litigation.

In the April 21, 2021 issue of the Los Angeles Daily Journal, the Daily Journal published an article entitled “Ruling Clarifies who Qualifies as an ERISA Fiduciary” written by the McKennon Law Group PC’s Managing Shareholder, Robert J. McKennon. The article addresses a recent case by the Ninth Circuit Court of Appeals, Bafford v. Northrop Grumman Corp., which addressed the available legal remedies for ERISA plan members who are harmed as the result of repeated gross misstatements of pension benefits. The court held that the ministerial conduct of a third-party delegee who made incorrect pension calculations pursuant to a formula provided to it and transmitted the calculations to the plaintiffs did not constitute fiduciary actions. It also held that pension plan participants could bring state-law professional negligence and negligent misrepresentation claims against non-fiduciaries who make representations regarding plan benefits because such claims are not preempted by ERISA. The ruling provides an important avenue for relief for plan members who are harmed as the result of such repeated gross misrepresentations of plan benefits.

Ruling Clarifies who Qualifies as an ERISA Fiduciary

By Robert McKennon

In its landmark 2011 decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), the U.S. Supreme Court signaled a broad expansion of the availability of equitable remedies to plan participants and their beneficiaries under the Employee Retirement Income Security Act of 1974. The claims are typically brought through actions for breach of fiduciary duty against plan fiduciaries. Courts continue to grapple with issues such as: Who are ERISA fiduciaries and when do they engage in fiduciary acts?

ERISA has been interpreted to limit legal recourse to conduct of plan fiduciaries that is “fiduciary” in nature, as opposed to “ministerial.” Thus, an ERISA breach of fiduciary duty claim will depend on whether the actions at issue involve a fiduciary function.

But what happens when a pension plan’s third-party delegee grossly miscalculates the level of plan benefits and the plan administrator communicates this misinformation to plan members who rely on them? Can the plan sponsor, the plan administrator, or the third-party delegee be liable for breach of fiduciary duty? If the third-party delegee is not liable for breach of fiduciary duty, can it be sued for state law claims because such claims are not preempted by ERISA?

The 9th U.S. Circuit Court of Appeals recently answered these questions in Bafford v. Northrop Grumman Corp., 2021 DJDAR 3501 (April 15. 2021).

Northrop Grumman sponsored an employee pension plan governed by ERISA. Northrop delegated administration of the plan to an administrative committee, which in turn contracted with Hewitt, a company that provided outside administrative services for the plan. One of Hewitt’s responsibilities was to generate statements showing plan participants what their monthly pension benefit would be when they retired. Plaintiffs Stephen Bafford and Evelyn Wilson both requested these statements using an online platform Hewitt provided.

The statements mailed to the plaintiffs in response to their online platform requests grossly overestimated the benefits to which each plaintiff would be entitled. After the plaintiffs retired and began collecting benefits in the amount the statements predicted they would, Northrop sent them notices that the statements generated by the online platform had been incorrect. Instead of the approximately $2,000 and $1,600 per month benefit Hewitt previously estimated, Bafford and Wilson were only entitled to receive $807 and $823 per month, respectively.

The plaintiffs sued. They alleged that Hewitt, the committee, and Northrop had breached their fiduciary duties, and that the committee failed to provide ERISA-required benefit information. In an alternative to their ERISA claims, the plaintiffs asserted state-law professional negligence and negligent misrepresentation claims against Hewitt. The district court granted the defendants’ motion to dismiss, and the plaintiffs appealed.

The Bafford court affirmed in part and reversed in part. The court found that because the calculation of benefits was a “ministerial” task requiring no fiduciary skill or judgment, there was no legal liability under ERISA of the employer, its administrative committee, or of the entity that “ran the numbers” and communicated the grossly inaccurate information to plan members. The court found the Department of Labor regulatory guidance as persuasive evidence regarding whether a task is fiduciary or ministerial. The DOL’s interpretive bulletin identifies a variety of tasks as “ministerial” if they are done by persons who “have no power to make any decisions as to plan policy, interpretations, practices or procedures” and who merely implementing the “policies, interpretations, rules, practices and procedures” in a framework created by other persons, including: “preparation of employee communication material” and “calculation of benefits.” See 29 C.F.R. Section 2509.75-8 (Cmt. D-2). Because, in its view, the error was merely a miscalculation of benefits by a non-fiduciary who was provided a formula to follow — a ministerial duty — the Bafford court found no ERISA legal liability for any of the companies responsible for the error. And it was a big error — Bafford’s benefit amount was overstated by nearly 60%.

The 9th Circuit panel did, however, reverse the district court’s dismissal of the state law claims, holding that the company that miscalculated the benefit amount could be potentially liable for its negligence in the performance of its duties under its contract with Northrop, noting that plaintiffs were intended beneficiaries of that contract. The court concluded that ERISA did not preempt state common law professional negligence and negligent misrepresentation claims for relief. Following Paulsen v. CNF, Inc., 559 F.3d 1061, 1082 (9th Cir. 2009), it held that “the state-law professional negligence claim does not have a ‘connection with’ an ERISA plan … , and ERISA does not preempt the cause of action.”

The Bafford court also recognized that sometimes plan administrators perform fiduciary functions through ministerial agents and that those actions will be imputed to the named and functional fiduciaries. The court cited approvingly the recent 2d Circuit opinion in Sullivan-Mestecky v. Verizon Communications Inc., 961 F.3d 91, 104 (2d Cir. 2020), where the court permitted a suit for breach of fiduciary duty against an employer based on the imputed gross negligence of a third-party ministerial benefits administrator.

Sullivan-Mestecky involved clerical errors by a life insurer that created a higher coverage amount than believed covered by the insurer. Due to a calculation error, Aon Hewitt had coded Sullivan’s annual $18,600 income as her weekly income and represented that her life insurance policy had a death benefit of $582,600. But this mistake was not caught until after she died. Sullivan did not obtain an additional life insurance policy due to the generous value of her employer policy. Based on her mother’s age at the time of her death, the plaintiff believed her mother’s life insurance policy was worth $582,600. After her mother’s death, the plaintiff submitted a claim to Prudential, but Prudential paid only $11,400, which amount it stated was the policy’s correct death benefit. The plaintiff filed suit. The court held that the plaintiff could proceed against Verizon under the equitable remedies of estoppel, surcharge, reformation and breach of fiduciary duty because of Verizon’s continuing negligent misrepresentations regarding the amount of coverage, actions that were undoubtedly fiduciary in nature.

The 9th Circuit distinguished Sullivan-Mestecky because that case involved gross misrepresentations by a plan fiduciary to a plan beneficiary regarding plan benefits: “In other words, if a fiduciary delegates a fiduciary function to an entity that normally performs a ministerial function, that entity’s performance of a fiduciary function can still constitute a breach of fiduciary duty, imputed to the delegating fiduciary.” In Bafford, Northrop’s ministerial delegee Hewitt did nothing more than calculate plan benefits pursuant to a formula provided to it and send estimates of plan benefits based on additional information provided by plan members. The court found the activity to be ministerial “because Plaintiffs [did] not allege that Hewitt was ‘issuing written plan materials like summary plan descriptions,’ or providing ‘individualized consultations with benefits counselors,’” both activities that are clearly fiduciary in nature.

In addition to miscommunication of benefits, the negligence in handling other fiduciary functions that have been held to support claims against ERISA fiduciaries include:

Cases where the benefit calculation under the plan is based on ambiguous plan language. See Kenseth v. Dean Health Plan, Inc., 722 F.3d 869, 883 (7th Cir. 2013); Daniels v. Thomas & Betts Corp., 263 F.3d 66, 74-75.

Cases where the plan accepts premiums and misrepresents coverage based on a misstatement to the plan member of eligibility for the benefit. See McBean v. United of Omaha Life Ins. Co., 2019 WL 1508456 (S.D. Cal. Apr. 5, 2019); Curcio v. John Hancock Mut. Life Ins. Co., 33 F.3d 226 (3d Cir. 1993); Smith v. Hartford Ins. Group, 6 F.3d 131 (3d Cir. 1993).

Cases where the plan approves benefits and then, based on the same information, denies coverage. See Cohorst v. Anthem Health Plans of Kentucky, Inc., 2017 WL 6343592, at *2 (C.D. Cal. Dec. 12, 2017).

In these cases, very often key elements are material misrepresentations to a plan member, which misrepresentations can be imputed to the employer or to the insurers administering the plans. Such circumstances can and do provide aggrieved plan members and their beneficiaries important equitable relief, including surcharge, reformation, estoppel, and waiver.

The Bafford ruling will have limited impact on ERISA claims against plan administrators based on the broad scope of fiduciary functions and the availability of equitable remedies under ERISA. The main significance is its holding is that state-law professional negligence and negligent misrepresentation claims against plan delegees who perform “ministerial “ duties are not preempted by ERISA, thereby providing a potential remedy to plaintiffs for the harm caused by the negligence of the entities performing the ministerial tasks. This is a just and fair result for employees and their beneficiaries, who would potentially be significantly harmed by losing their expected benefits if such a remedy were unavailable.

Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith and ERISA litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at www.californiainsurancelitigation.com.

Insurance companies acting as ERISA plan administrators often misinterpret the definition of “disability” when considering a claimant for long-term disability (“LTD”) benefits. In Reyes v. USAble Life, 2019 WL 1549430 (W.D. Ark. Apr. 9, 2019), this misinterpretation proved costly because the District Court awarded attorneys’ fees against the plan administrator and remanded with instructions to reopen the administrative record.

In Reyes, the District Court found that Dinora Reyes was deprived a full and fair review of her claim for LTD because, at each stage of the review process, USAble Life, the administrator of a group policy for LTD benefits, failed to follow the definition of “disability” as written in the Policy. The Policy required USAble to identify the material duties of a Mental Health Professional.

Dinora Reyes was a Mental Health Professional at Western Arkansas Counseling & Guidance Center, Inc. (“WACGC”). On June 30, 2015, Reyes applied for LTD. WACGC sponsors a group policy for LTD benefits administered by USAble Life (the “Policy”). Reyes submitted statements from three physicians indicating she was “totally disabled.” In evaluating Reyes’s claim for LTD, USAble declined her claim because there was no evidence of her disability. Reyes appealed the first denial of benefits. After further review, Reyes’s appeal was denied because she did not meet the definition of disability.

The Policy defined disability or disabled through two tests: the Occupation Test or the Earnings Test. The Occupation Test applied to employees who have not received disability payments or are within the first 24 months of their disability, to be under regular care of a physician and prevents them from performing material duties. The Earnings Test applied to employees receiving disability payments after 24 months and they are able to perform one of the material duties. Material duties were defined as a set of tasks or skills generally required by the employers.

After the denial of her second appeal, Reyes filed suit in the United States District Court for the Western District of Arkansas. Reyes had to show evidence that she was disabled under the terms of the Policy. Because the Policy was issued after March 1, 2013, Rule 101 of the Arkansas Insurance Department required a de novo review. Ark. Admin. Code 054.00.101-7.

The Occupation Test applied to Reyes’s claim for LTD; the court had to determine if the administrator had correctly denied benefits during the initial 24 months of Reyes’s disability as section 1 of the Test. If the District Court determines the administrator incorrectly denied benefits, they must decide if Reyes meets the definition of disability under section 2 of the Test.

The District Court was unable to determine whether USAble correctly denied Reyes’s initial application for benefits because USAble, failed to identify and consider the material duties of Reyes’s occupation and failed to follow the Policy’s definition of “disability.” The District Court was left to speculate as to what duties were “material” to Reyes’s regular occupation. In their initial review of Reyes’s application, USAble only sought information pertaining to her physical capacity to perform her job and not her material duties.

The District Court’s ruling resulted in remanding the case to the plan administrator. The District Court also found it appropriate to award attorney’s fees to Reyes in its discretion. On remand, USAble was to evaluate Reyes’s claim based on the definition of “disability” as written in the Policy. USAble must identify the material duties of a Mental Health Professional and not solely the physical demands of Reyes’s occupation.

Reyes last worked at WACGC on April 20, 2015 and applied for LTD benefits on June 30, 2015. She suffered from severe neck, joint pain, headaches, infection, and fatigue. Her case was remanded to the plan administrator nearly four years later. If she does ultimately receive LTD benefits, it will be at great cost, but for both sides. The Reyes case demonstrates the importance of a thorough review of the policy at issue.

Categories: Disability Insurance, ERISA, Insurance Litigation Blog, Policy Interpretation, Standard of Review

Tagged: Claims, Claims Administrator, Denial, disability claims, Disability Insurance, Discretion, discretionary authority, ERISA, healthcare professional, insureds, insurers, Long Term Disability, LTD, plan administrator, policy, policy interpretation

The Employee Retirement Income Security Act of 1974 (“ERISA”) mandates that claimants under an ERISA plan have access to the federal courts. But courts have ruled that prior to litigation, a claimant must exhaust all administrative remedies, such as appealing insurers’ denials of claims. However, the futility doctrine provides an exception to this requirement that, while narrow, can prove valuable for some claimants.

Joni Dioquino (“Dioquino”) was eligible for short-term disability (“STD”) and long-term disability (“LTD”) benefits through United of Omaha Life Insurance Co (“Omaha”), which served as claims administrator and claims fiduciary for the plan. When she was diagnosed with conditions causing her leg pain, especially when sitting for more than a few minutes, which her job required, she made an STD claim to Omaha. Omaha denied her claim, supporting its denial with the opinions of an unknown nurse case manager and two “paper review” doctors, each of whom had clearly ignored at least some of her medical records. She appealed Omaha’s decision twice and Omaha upheld its denial both times, despite clear and extensive medical evidence supporting her claim. The reasoning provided for its decisions made it clear that Omaha simply ignored substantial medical evidence, including statements contradicting the evidence.

Dioquino sued Omaha to recover both STD and LTD benefits. Omaha filed a Motion for Summary Judgment arguing in part that Dioquino lacked standing to sue for LTD benefits because she never filed an LTD claim to Omaha. Dioquino opposed Omaha’s motion, arguing under the futility doctrine that she had legal standing to sue for LTD benefits as well as STD benefits because submitting an LTD claim with Omaha would have been futile. The Court agreed with Dioquino and denied Omaha’s Motion for Summary Judgment, finding that Dioquino’s allegations could demonstrate that for her to submit an LTD claim to Omaha would be an act of futility.

The futility doctrine provides an exception to the jurisprudential rule that claimants must exhaust all administrative remedies prior to filing legal action. It applies in cases in which an administrative review is demonstrated to be doomed to fail. Diaz v. United Agr. Emp. Welfare Ben. Plan & Tr., 50 F.3d 1478 (9th Cir. 1995). In Burnett v. Raytheon Co. Short Term Disability Basic Benefits Plan, 784 F.Supp.2d 1170 (C.D. Cal. 2011), the Court provided four factors to be considered in determining whether the futility exception applies: 1) whether the definitions for “fully disabled” for purposes of STD and LTD benefits are substantially the same; 2) whether the plans are integrated, such that they rely on and refer to each other; 3) whether the denial or termination of STD benefits essentially dooms any LTD claim; and 4) whether the plans are administered by the same entity.

The presence of the Burnett factors in Dioquino’s case was the basis on which the Court denied Omaha’s Motion for Summary Judgment, thus allowing her case to move forward. While plan terms can be widely varied and vastly different for any claimant, situations like Dioquino’s can and do occur. To go through the LTD claim process can set a claimant’s ability to recover benefits back by several months. Thus, awareness of plan terms can be of vital importance for some claimants. McKennon Law Group PC has significant experience in handling ERISA and non-ERISA insurance cases in which an insurer denied a claim. If your insurer or plan administrator has denied your claim, please contact us for a free consultation so that we may assess your matter.

A California Federal District Court has granted a motion for summary judgment under F.R.C.P. Rule 52 in favor of a disability claimant, holding that an insurer must consider a long-term disability (“LTD”) claim in accordance with the correct classification of the claimant’s “occupation” as determined by the claimant’s “actual duties.”

In McCulloch v. Hartford Life and Accident, 2020 WL 7711257 (N.D. Cal. 2020), the plaintiff suffered from “involuntary tremors and body jerking, fatigue, and cognitive impairment” that, inter alia, affected her ability to drive. Id., *1. The insurer denied the disability claim and ensuing appeal, whereupon the “plaintiff filed a complaint against [the insurer], alleging a cause of action under 29 U.S.C. § 1132(a)(1)(B) to recover LTD benefits under the terms of [the insurer’s] Plan.” Id.

The Court found that, after having been bitten by a tick, the plaintiff developed various symptoms, including an impairment of “cognitive capacity”, whereupon one of her physicians wrote to the insurer, “I believe that [claimant’s] health issues are serious and limiting. She cannot work because of cognitive impairment as corroborated by her decidingly [sic] abnormal SPECT scan.” Id., *4. The insurer, however, determined that plaintiff’s occupation involved “light work” in the workplace, and denied the claim on the ostensible basis that “plaintiff’s medical records ‘did not provide any objective exam findings or other assessments to support the severity of … symptoms’ and did not state specific work restrictions.” Id., *5. Although the plaintiff appealed on the basis of the reports of several health care practitioners, the insurer denied the appeal on November 20, 2019. Id., *7. Notably, on August 30, 2020, the Social Security Administration (“SSA”) awarded the plaintiff monthly benefits because “under SSA’s rules, [the claimant] became disabled on March 12, 2018.” Id., *8.

The Court observed, “the issue before this Court is whether plaintiff qualifies as disabled under the Plan’s ‘Your Occupation’ definition” and whether the plaintiff was disabled thereunder. Id., *7. The Court first addressed the plaintiff’s “occupation.” The term, “Your Occupation,” was defined in the LTD Plan as “the [e]ssential [d]uties of the job [claimant] is performing for [her] [e]mployer.” Id. Observing that a determination of disability must be based on the plaintiff’s “actual duties”, the Court held that the insurer applied the incorrect definition of “occupation;” rather than “light work” as proffered by the insurer, the plaintiff’s “occupation involved concentration, frequent driving, traveling by airplane, and keyboarding.” Id. *7-8.

The Court then concluded that the plaintiff was, in fact, disabled under the foregoing definition of “occupation.” The Court rejected the insurer’s assertion that the plaintiff’s “real problem seems to be that she found her job and lifestyle extremely stressful.” Id., *8. Rather, because “[o]bjective tests support plaintiff’s disability”, the Court concluded that “plaintiff’s condition prevents her from driving and significantly impairs her physical and cognitive ability” such that “the Court finds that plaintiff is disabled under Hartford’s LTD Plan.” Id., *8-9. In reaching this conclusion, the Court was not persuaded by the insurer’s consulting physicians, concluding that the consultants neither correctly addressed the actual work required of the plaintiff nor the effects of her disability thereon. Id., *9-10.

McCulloch underscores that a disability claim must be evaluated under the proper classification of a claimant’s “occupation” as determined by the claimant’s actual duties. In making this determination, evidence is relevant as to the effects of the disability on the tasks inherent to the claimant’s actual work. Accordingly, delineating the claimant’s actual duties may preclude an insurer from introducing evidence not relevant to the claimant’s “occupation.”

We have significant experience in handling ERISA and non-ERISA disability insurance cases in which an insurer denied a claim based on a lack of objective evidence or a claimant has a disability condition that is subjective in nature and difficult to prove and measure. If your insurer or plan administrator has denied your disability claim, please contact McKennon Law Group PC for a free consultation so that we may assess your matter.

Fourth Circuit Appeals Court Finds Insurer Abused Its Discretion by Denying ERISA Health Insurance Benefits Where the Insurer Denied Her Claim as “Not Medically Necessary” Despite Failing to Review Critical Evidence of Medical Necessity

Ruling Clarifies who Qualifies as an ERISA Fiduciary

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