New Jersey Disability Lawyer Blog

Medical providers often serve as intermediaries between their patients and insurance carriers in order to secure payment for their services. This spares the patient the burden of negotiating the waters of insurer red-tape. The recent District of New Jersey case of Cohen v. Independence Blue Cross makes clear that, in the case of an out-of- network provider, the language in an insurance policy can make all the difference in determining the efficacy of this intermediary role.

In Cohen, the insured underwent spinal surgery by an out-of-network physician, and then issued the surgeon an assignment of benefits under his health insurance plan. The defendants (the insurer, the plan and the plan administrator) paid a fraction of the doctor's bill directly to the insured, but refused to pay the rest of the doctor's bill, which was $143,626.00. This fractional amount represented a substantially higher patient obligation for out-of-network services. The defendants grounded their non-payment on an anti-assignment clause in the insured's policy, which read, in pertinent part, "The right of a Covered Person to receive benefit payments under this coverage is personal to the Covered Person and is not assignable in whole or in part to any person, Hospital, or other entity nor may benefits of this coverage be transferred."

The Court found that the clause was not preempted by ERISA, and distinguished Neuner v. Horizon Blue Cross Blue Shield of New Jersey, 301 B.R. 662 (Bankr D.N.J. 2003) (providers have standing to demand payment in the absence of an anti-assignment clause), and Ambulatory Surgical Center of New Jersey v. Horizon Healthcare Services, 2008 U.S. Dist. LEXIS 13370 (D.N.J. Feb. 21, 2008) (finding that providers could be valid assignees, without addressing whether ERISA permits anti-assignment clauses in insurance contracts). Additionally, the defendants had not waived their right to enforce the anti-assignment clause by corresponding with the doctor directly during the claim process, because Pennsylvania State law, which governed that issue, required a "clear, unequivocal and decisive act" of waiver, which the defendants had not shown.

The Court did not address the doctor's recourse to payment of his full bill. Therefore, the combination of this provision with the procurement of out-of-network services may have created a precarious situation for both the doctor and the insurer in the Cohen case.

Consumers in need of medical care welcome the assistance of their doctors to obtain payment of their medical bills. However, the Cohen case makes clear that there can be problems attendant to placing medical providers in this role. Insureds need to check the language in their policies, as they in fact may not be able to assign their rights to benefits to their doctors.

Fighting insurance company denials can be stressful, but we at Bonny G. Rafel can help.

- Sara Kaplan, Esq.

Unum Group Corp. and its subsidiary, Paul Revere has once again been held liable for bad faith refusal to continue to pay disability benefits to its insured.

Paul Revere issued the own occupation benefits to this dental hygienist in 1988 and promised to pay her disability benefits if she became unable to perform her specialty occupation. In 1996, Kieffer, a dental hygienist, developed several disabling medical conditions, including carpal tunnel syndrome and severe cervical pain, which by 1999 forced her to stop working entirely. After paying benefits for some time, in March 2008, Unum terminated the plaintiff's benefits despite Kieffer's treating physician's opinion that she refrain from working as a dental hygienist.

The verdict included compensatory and punitive damages.

At Bonny G. Rafel LLC, we can help those that have had their benefits terminated unjustly.

It is common for employers to include mandatory arbitration clauses in employment contracts offered to new employees. Sitting in the room with your new boss, it is difficult to resist signing the contract as presented. How can one reasonably "make waves" even before being hired? Of course employees feel they have no choice but to sign the contract as a take it or leave it.

This past October, the U.S. Court of Appeals for the Third Circuit decided a case that will revurberate for a long time in many types of cases. The district court had held that a an employment contract containing a mandatory arbitration clause was valid, and simply severed the predispute employment arbitration agreement. However, the Third Circuit held that the employer-friendly provisions were so strong as to invalidate the entire agreement.

In this case, an employee was presented with a standard employment contract, which contained a "grievance and arbitration procedure" stating that it constituted the "sole final, binding and exclusive remedy for any and all employment-related disputes."

The requirements included: (1) filing a "detailed written grievance" with the employee's manager within five days of receiving notice of a disputed action; (2) refiling that grievance with a managing director within two days of receiving a response from the manager; and (3) filing a written request for arbitration within five days of receiving the managing directors decision.

The court ultimately decided that the contract presented to the employee was incredibly one sided. Since the employee was given no room for negotiation by the company, the court ruled that "the contract was procedurally unconscionable."

Bonny G. Rafel's commentary: Had the contract contained a "non binding" arbitration clause, I expect the court would not have invalidated the contract, but by forcing binding arbitration, the employee was signing away his constitutional right to a trial by jury.

New Jersey joins Pennsylvania as a state in the Third Circuit and benefits when a PA case is successful before the Third Circuit. A case in point is Kosiba v. Merck & Co. which found that Unum acted arbitrarily and capriciously in denying benefits to a claimant suffering from fibromyalgia and sarcoidosis. Kosiba v. Merck & Co., 2011 U.S. Dist. LEXIS 23247 (D.N.J. Mar. 7, 2011).

Kosiba addressed the Third Circuit's stance on issues such as scope of review, structural conflict, procedural conflict, selective consideration of medical history, financial conflict of interest, and remedy.

Following our Supreme Court's decision in Metropolitan Life Insurance Co. v. Glenn, the Court gave significant weight to Defendants' "reversal of position", "failure to address one or more of the diagnosis(es) and Defendants' failure to consider the claimant's objective functional capabilities.

The Court in Kosiba noted: "Rather than an initial disability determination, we are faced here with a situation where Defendants found [Plaintiff] totally disabled once, then sought to revisit the determination anew two years later, requiring her to provide entirely new information. Defendants then disregarded the historical medical record, including the portions that led to their own first finding of total disability. When [Plaintiff] provided her doctors' opinions that she was still disabled, Defendants chose to ignore them, and the other information that established her disability the first time, without any supporting information to the contrary. [The IME] opinion obtained during the appeal stage was helpful, but it did not comprise substantial evidence because it failed to address all of her ailments and did not address her functional capabilities."

Viewing the various factors as a whole, the Court found that Defendants' decision to terminate Plaintiff's LTD benefits was not the product of reasoned decision-making and substantial evidence. Rather, the numerous procedural irregularities led them to conclude that Defendants' termination of Plaintiff's benefits was arbitrary and capricious. Kosiba 2011 U.S. Dist. LEXIS 23247 (D.N.J. Mar. 7, 2011).

Adopting the Glenn rationale regarding financial pressures to deny claims, the Court noted that "Where an employer makes fixed contributions to a plan, evaluates claims, and pays claims through a trust...[e]ven in an actuarially grounded plan, the employer provides the monetary contribution and any money saved reduces the employer's projected benefit obligation."

This case will prove an important landmark for the clients of Bonny G. Rafel because the financial conflicts of insurers plainly influence their decisions and new our Courts will permit discovery on how the conflicts impaired the fair judgment on our cases for our disabled clients in New Jersey.

In a recent case in the Third Circuit, the District Court determined that Prudential's decision to accept the opinions and conclusions of its experts without explanation was arbitrary and capricious. Ricca v. Prudential Ins. Co. of America, 2010 U.S. Dist. LEXIS 106148 (E.D.Pa. September 30, 2010) The Eastern District of Pa Court found fault with Prudential's decision to rely entirely on reviews performed by clinicians who had not examined the claimant and selectively consider and credit medical opinions without articulating its thought processes for doing so.

This is particularly applicable where, as here, the evidence it claims to rely on favors its employer and consists of non-treating and nonexamining experts and there is substantial evidence to the contrary. See also Elms v. Prudential Ins. Co. of Am., No. 06-5127, 2008 U.S. Dist. LEXIS 76917, at *18-20 (E.D. Pa. Oct. 2, 2008) (rejecting as a self-serving, selective use of physicians' reports, Prudential's almost exclusive reliance on file reviews performed by non-examining physicians as weighed against evidence from doctors who had treated or examined and had concluded the patient was impaired by significant disabilities).

What was interesting about this case is that the District Court focused on Prudential's failure to discuss, specifically, in its three declination letters, why or how the medical data failed to support an injury or sickness within the Policy's definition of disability. They noted that the disparity between the voluminous administrative record and the conclusory evaluations of plaintiff's condition by Prudential's health experts, made it impossible to review Prudential's decision because it is unclear whether the evidence of her medical difficulties was credited in whole or in part or not at all -- or instead, was simply not considered. Based on this opinion, it appears as if courts are looking for insurance companies to better explain their rationales, and how they weigh the evidence, and not just fall back on "medical records fail to support a disability" argument.
"Given the conflicting evidence in the record, Prudential's decision to accept the opinions and conclusions of its experts without explanation is itself arbitrary and capricious."

This case was remanded to the administrator for a thorough and careful analysis of all of the evidence, including the rationale for accepting its experts' opinions in preference to those of plaintiff's treating and examining health experts. This is the type of claim in our Third Circuit that our firm, Bonny G. Rafel LLC relies on to convince the Courts to reverse a denial based only on a "peer review" rather than an in person, thorough medical examination.

The recent Good Morning America November 11, 2009 expose on Hartford's abusive use of video surveillance of its disabled policyholders is just a sample of the rampant use of video as a way to trap insureds and deny claims. Chris Cuomo reported that Jack Whitten, who suffers from a broken neck from a fall, pain and memory loss was captured on videotape reading a magazine, getting into a car and eating taco chips, which formed the basis of Hartford Insurance Company terminating his disability benefits. His doctors assured Hartford that Whitten has severe headaches, short term memory problems and cannot work at his prior job with Walmart. Hartford denied benefits anyway. Fortunately for Mr. Whitten, once the GMA story ran, his benefits were reinstated.
Other disabled people who are surveilled are not so fortunate. Some examples of Hartford's misuse of Video surveillance include Montour v. Hartford Life &Accident Ins. Co., 2009 WL 2914516 (9th Cir.)The 9th Circuit found that Hartford relied on surveillance which did not represent Montour's ability to engage in full time work.
Recently, in Finley v. Hartford, 2009 U.S. Dist. LEXIS 105516 (N.D.Cal. Oct. 26, 2009), Hartford was again admonished for shoddy surveillance. Hartford relied on three doctors who only reviewed medical records and did not examine Mr. Finley The court noted that the activity shown on the video did not prove that Finley can work full time.
The abuses are not limited to Hartford insurance company.
In fact, surveillance companies, hungry for the business send emails to clients offering reduced rates for special all day surveillance over holidays! We recently received an unsolicited offer from such a company, (confusing us with an insurance company), offering their services on Thanksgiving at a reduced rate of $499.00 for the day, since many people are more active on holidays and least suspecting of being followed. This gamesmanship being directed at the disabled is deplorable.

In the third of recent decisions in New Jersey District Court regarding Long Term Disability claims, "Dunn v. Reed Group, Inc and Johnson & Johnson" 2009 U.S.Dist. LEXIS 78857 (D.N.J. Sept. 2, 2009), the Court noted that deference should be given in the "lions share" of ERISA claims and that a conflict of interest should be simply one factor for the courts' consideration.

Here, Dunn pointed out that since Johnson & Johnson stopped all benefits such as medical and life insurance when they denied her disability claim, they benefited financially from their own decision. But the court noted that Johnson & Johnson did not pay for such benefits since the insurance benefits are funded through a trust. Further, the court held the Johnson & Johnson Pension Committee, the claims administrator is walled off from any conflict of interest since a trust funds the LTD program.

The court next considered whether a procedural irregularity, bias or unfairness in the processing of the claim exists. The court found that requesting an IME when all evidence in the record supported disability was a procedural irregularity. Deciding that Dunn could perform a sedentary job without a discussion of her skills or capacity and how these skills transferable to sedentary job was also not based upon substantial evidence. The court reasoned "Defendant has failed to connect the medical evidence to Dunn's actual physical capacity." The court remanded the case for further review by Johnson & Johnson.

B. Rafel commentary: The court's decision regarding the structural conflict disregards evidence regarding The Reed Group's incentive to recommend the denial of claims. The contractual relationship between such a third party claims administrator must be closely examined through discovery. The decision to remand this case will give the administrator the opportunity to repair its mistakes. In the meantime, this disabled person is deprived of disability benefits for years, and without the funds to pay its counsel. Although Dunn is the "prevailing party", the court did not make a decision regarding counsel fees. In such cases, the plaintiff should be awarded fees, as a deterrent to similar claim denials in the future. Otherwise, these ERISA abuses will continue unabated.

The second case, Kao v. Aetna and Towers Perrin Forster & Crosby, Inc. 2009 U.S.Dist LEXIS 75181 (D.N.J.August 25, 2009) involves a 59 year old woman disabled by the after affects of breast cancer. Her disability involved her cognitive problems which are caused by the chemotherapy, fatigue and arthralgias related to her disease process and treatment regimen, including medication. Her doctors viewed her as a credible historian and not malingering.

Aetna's peer reviewers denounced the disability without ever evaluating her, basing their opinions, in part, on Kao's ability to perform home chores such as laundry and her ADL's. The medical reviewers challenged Kao's claims of her cognitive impairment, claiming that there were no valid tests of her cognitive ability. The court upheld the denial on many bases.

The court rejected Kao's assertion that only in the final denial did Aetna disclose what type of clinical evidence Kao should have collected to refute the denial. Although Kao proved that Aetna's doctors had not reviewed a crucial medical form completed by her doctor, the Court found that to be inconsequential. The court rejected Kao's expert vocational analysis since it was based on the "platform of subjective data that Aetna rejected as untenable." The court rejected Kao's claim that she was entitled to review the medical reviews before the final decision was made so that she could rebut the evidence since there was no new evidence relied upon, only medical reviews conducted of the evidence in existence.

Bonny Rafel commentary: It remains to be seen how performing some home chores and taking walks correlates with an ability to work full time on a sustained basis for a demanding employer. We are troubled by the court's acceptance of an argument that Kao's disability needed to be proven with "objective evidence", when the very opinions of her board certified medical treating doctors are considered "objective."

One bright light in this otherwise dark outcome is that the court expressed no opinion as to whether, during the pendency of administrative appeal a claimant is entitled to rebut appeal-level documents that raise a novel ground for denial or otherwise implicate the issues that the claimant had no opportunity to address in preparing the appeal.

Three recent New Jersey District Court Decisions threaten to undo years of progress in the growing body of law pertaining to long term disability cases in New Jersey. In the aftermath of MetLife v. Glenn, 128 S.Ct. 2343 (2008), we expected that more, not less judicial scrutiny of the acts of claims administrators would occur. The closer the courts inspect the procedures utilized to decide disability claims, the better chance our disabled clients have for a full and fair review of their claim.
New Jersey has unfortunately been moving against this tide. The first case, Scotti v. The Prudential Welfare Benefits Plan, 2009 U.S.Dist LEXIS 64559 (D.N.J.July 23, 2009) involves a man disabled by depression, pseudodementia and cognitive impairments. All of Mr. Scotti's treating and examining physicians confirmed the diagnoses and the functional impairments. The court limited its review to whether Prudential abused its discretion, which means that Scotti carried the burden of proving that the administrative record did not contain substantial evidence to support Prudential's denial. The court found that Prudential had enacted sufficient safeguards to minimize the chance that its decision was tainted by its own self interest to promote its financial interests. The court denied summary judgment for each party, finding that whether Scott's impairments can be validly diagnosed by personal examination is a genuine issue of material fact.
RAFEL COMMENTARY: The Court accepted the opinions of the medical consultants hired by Prudential's captive third party without evaluating their credibility. In other circuits, the courts recognize that these doctors could be "doctors for hire", and their opinions far less than independent. See, for example the evidence discovered in Soloman v. MetLife, 2009 U.S.Dist. LEXIS 51507 (S.D.N.Y. June 18, 2009), showing that the reviewing doctors derived 90% of their income from paper medical reviews for third parties. We can learn alot from our neighbors across the Hudson River. BGRafel

In this New Jersey disability claim based on a back condition including disc herniations, the Court affirmed the District Court's opinion and outlines some important pointers to keep in mind when proving in an ERISA case that the insurer's procedural irregularities require the denial to be overturned.
The Court faulted Liberty who was acting under a conflict of interest {pursuant to Glenn v. MetLife} for its "decisions that disfavored the employee at each crossroads and reliance on experts who merely reviewed incomplete medical records."

Interestingly the peer reviewer suggested that Liberty undertake surveillance of its insured to check her functionality,which Liberty declined to do, noting "surveillance is an aggressive tactic" that itself may constitute procedural irregularity." How can Liberty then, in other cases rush to surveil our clients who have confirmed, significant medical problems which cause functional limitations and restrictions?

Liberty used a Nurse Case Manager to review the appeal, who acknowledged an inconsistency in the views of their hired medical reviewer and the treating physician but then failed to pursue further medical consult to clarify which view to accept. The court reasoned that Liberty cannot turn a "blind eye" to faults in the evidence supporting its consultant's opinions and then use that opinion to support a denial.

The New Jersey Supreme Court recently issued a disappointing decision in Shore Orthopedic Group, LLC v. The Equitable Life Assurance Society of the United States, 972 A. 2d 381 (NJ 2009) with regard to the payment of counsel fees in insurance disputes. Shore Orthopedic had purchased a disability policy to cover some of the expenses of the practice, if their associate orthopedist became disabled.
When the time came to pay on the policy, Equitable denied coverage, claiming the disabled doctor had not revealed a medical condition that had become apparent between the initial application for coverage and the payment of the first premium.
In litigation The Equitable failed to produce its own claim handling guidelines. In the lower court proceeding Shore Orthopedic obtained a court order requiring Equitable to produce its claims manual and awarded Shore Orthopedic $50,000 as a sanction against Equitable's improper conduct in intentionally misrepresenting that such a manual did not exist. However, the court denied plaintiff's counsel's motions for counsel fees.

In a disappointing decision, the New Jersey Supreme Court upheld the lower courts' decision to deny an award of counsel fees. Thus the insured remains saddled with both fighting the unjust denial of his case, and paying his own counsel fees. The Supreme Court refused to consider this a "third party claim" for insurance coverage, although the policy insured a doctor and the beneficiary of the policy proceeds was the entire orthopedic practice.
My concern is that our New Jersey Supreme Court overlooks the extreme financial distress experienced by insureds in New Jersey when their insurance company, who readily accepts the premium payments refuses to pay a legitimate claim without justifiable reason. When the insured is forced to litigate the action, he is faced with an additional expense, that of competent counsel to represent him. Experienced counsel will typically spend hundreds of hours fighting for their client's legal rights to insurance money. But when New Jersey counsel wins the case, the client has to pay their fee, often from the proceeds of the insurance claim. Therefore the insured is not "made whole" by the successful litigation. Until our Supreme Court and Legislature take a closer look at this issue, unfortunately insureds will continue to suffer financially even when they win the battle.