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 Reliance Standards’ unreasonable and bad faith claims handling , was carefully scrutinized by Judge Reeves, sitting in the Southern District of Mississippi.  Reliance and its competitors in the industry, as the Judge notes, “have conflicting missions of deciding who qualifies for benefits and ensuring those decisions do not undermine their own bottom line.”  Nichols v. Reliance Std. Life Ins. Co., No. 3:17-CV-42-CWR-FKB, 2018 U.S. Dist. LEXIS 109526 (S.D. Miss. June 29, 2018).  This conflict of interest has become very evident to the courts, which frequently criticize the practices of disability insurers; yet insurers refuse to change their ways, seeking to preserve their financial interests.

The case involved 62 year old Ms. Nichols who spent her entire life working as a Hazard Analysis and Critical Control Points Coordinator at a chicken processing plant in Mississippi.  Her duties included training employees on quality assurance procedures and inspecting, packaging, and exporting meat products in processing areas, which were maintained at near-freezing temperatures. Ms. Nichols suffers from circulatory disorders, including Reynaud’s Syndrome rendering her unable to tolerate cold temperatures because doing so would cause her arteries to spasm and could lead to serious medical complications, such as gangrene.

Ms. Nichols’ medical conditions clearly prevented her from performing the duties of her occupation, which required exposure to cold.  Reliance sought a way to deny Ms. Nichols’ claim turning to the policy’s definition of  “regular occupation”—which defines a claimant’s occupational duties as they are “normally performed in the national economy,” rather than “the unique duties performed for a specific employer or specific locale.”  Reliance excluded Ms. Nichol’s duties associated with exposure to the cold by generally classifying her job to ignore the meat inspection, packaging, and exporting duties of Ms. Nichols’ occupation and denied her disability claim.  Ms. Nichols brought suit in federal court, and she won a resounding victory.

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Our clients often ask how to retain employee benefits while on disability leave.  A source of this information should be an employee handbook or summary of benefits available from the employer.  Often all benefits such as medical coverage or life insurance continues while the employee is on short term disability.  Then if the employee does not return to work and receives long term disability, they are offered to continue such ancillary benefits providing they start to pay the premiums or convert the coverage in some way.  For instance an employer will issue a letter explaining the employee is eligible for COBRA medical coverage for a set period of time if they pay the premiums for the coverage.

An issue arises when the employee indicates an interest in continuing the coverage but the employer fails to submit the necessary paperwork to them. A recent example of this problem occurred in Erwood v. Life Ins. Co. of N. Am._ 2017 U.S. Dist. LEXIS 56348. Erwood left work on disability, but the employer did not inform him or his family of his need to convert life insurance coverage to own it himself in order to remain covered and did not  provide him with the conversion forms. When Erwood died and his family sought life insurance, the carrier, CIGNA denied the claim because no conversion forms were on file. The employer defended its position by claiming that there was a packet of materials sent to Erwood, but the Court held  the packet was inadequate because it did not include the materials necessary to convert life insurance coverage or inform where to access such materials or even where to send them. The employer’s excuse that Dr. Erwood did have access to the life insurance program on its benefits internet portal was not enough. The Court held that “merely making an SPD on its portal does not satisfy its disclosure obligations of the plan administrator, the employer, especially in light of the fact that once Dr. Erwood’s FMLA leave expired, his access to the portal was terminated.” The Court entered judgment for the full life insurance benefit from the employer.

The Court explained that once Erwood, an ERISA beneficiary, requested information from the employer who was aware of his status and situation, the employer has a fiduciary obligation to convey complete and accurate information material to the beneficiary’s coverage and rights even if he has not specifically inquired about it. The fiduciary, in this case the employer, has a duty to inform when he knows that silence might be harmful. So if an employer makes an affirmative misrepresentation or fails to adequately inform a plan participant, that misrepresentation or inadequate disclosure can be material and when the employee detrimentally relies upon it and loses coverage, the employer can be liable.

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We often suggest to our clients that they carefully limit their exposure on social media. It is simple for insurance companies to track a claimant’s whereabouts if they are regularly posting on Facebook, and not making it private, uploading pictures on Instagram, or other people are tagging them in photos or discussing their whereabouts. An example of the use of social media to deny a claim occurred recently in Goros v. Sun Life Assurance Co., No. 2:16-cv-233-FtM-38CM, 2017 U.S. Dist. LEXIS 137446 (M.D. Fla. Aug. 28, 2017).  Mr. Goros claimed that while he had a motorcycle he was sorrowfully unable to use it due to his back and arthritic conditions. However, social media of his girlfriend reported their long trips and motorcycle rides. The Court took this into account when challenging his credibility and as establishing his ability to perform occasional travel which was one of his job duties.

People that are disabled do not have to stay indoors, they can continue to perform their daily activities and readjust to live a full life with their impairment. However, if they demonstrate through their non-work activities that they can perform physical or mental requirements which are similar to those of the workplace, or if they are more social than they claim to be, this creates potentially legitimate concerns by the disability insurance company of the veracity of the claim and the depth and breadth of the impairment.

It is notable that many states, including New Jersey have passed laws regulating an employer’s access to the personal account social media website of an employee.

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An action taken by the U.S. Department of Labor to protect the disabled fortunately passed on December 19, 2016, on the eve of the Obama’s departure and will go into effect January 1, 2018.  Claimants counsel breathed a sigh of relief when the amendments to the Employee Retirement Income Security Act of 1974 (ERISA) remained intact despite the new administration’s clawing back on many consumer rights.

We will issue several blogs on the important changes to the regulations to demonstrate how significant the changes are to repair fundamental flaws in ERISA.  The Department of Labor explained that the regulations were enacted

“to promote fairness and accuracy in the claims review process and protect participants and beneficiaries in ERISA-covered disability plans by ensuring they receive benefits that otherwise might be denied by plan administrators in the absence of the fuller protections provided by this final regulation.”

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We have been following the Courts’ treatment of mental or nervous disorders limitations in group long term disability policies. (See blog, Disability Caused by Physical Impairment, July 2015)  Recently, the 6th Circuit Court of Appeals joined other courts holding that a claimant is disabled by physical conditions alone, then the mere presence of a psychiatric component does not justify application of a mental health limitation to a claim.  In Okuno v. Reliance Std. Life Ins.Co., 2016 U.S. App. LEXIS 16423 (6th Cir. Sept. 7, 2016),  Reliance applied the one year limit on benefits because there was the presence of a psychiatric component to her claim regardless of the physical component to her disability. The court rejected Reliance’s rationale that as so long as there is a comorbid psychiatric condition the limitation applies.

Every federal circuit court to consider the meaning of the phrase “caused or contributed to by” has read it to exclude coverage only when the claimant’s physical disability was insufficient alone to render him totally disabled. See George v. Reliance Standard Life Ins. Co, 776 F.3d 349 (5th Cir. 2015).  The insurer bears the burden to show that the exclusion applies to the case.  “The effect of an applicant’s physical ailments must be considered separately to satisfy the requirement that the review be reasoned and deliberate.”  See Okuno . In order to overcome the insurers’ application of this mental health limitation to continued benefits, the claimant must claim total disability as the result of a purely physical condition.

What if a physical condition is covered, but the symptoms include depression, which is a mental illness? Courts caution that policy terms and precise medical facts of the claim must be examined.  See, for example, Leight v. Union Sec. Ins. Co. 2016 U.S. Dist. LEXIS 68412 (D.Or. May 24, 2016).   Leight’s Aspergers’ Disorder is expressly exempt from the definition of “mental illness” in the policy but Union Security attempted to apply the mental illness limitation, since the disorder produces disabling symptoms of anxiety and depression.   The court determined that the mental illness limitation did not apply since Aspergers was a ‘covered condition.”

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Insurers often balk at paying a disability claim for a condition that has existed for a long time before the individual stops working.  It seems that people that struggle to continue working despite progressive medical impairment are not rewarded for their heroism. An interesting case was recently published in California regarding a woman suffering from pain from chronic migraines.  In Leetzow v. Metro. Life Ins. Co., 2016 U.S. Dist. LEXIS 173698 (C.D. Cal. Dec. 5, 2016), the court recognized that long absences from work show that her condition worsened over time and that it is likely that she was unable to perform with reasonable continuity the substantial and material acts necessary to perform her job, leading up to her disability claim.   The court found it unnecessary for Plaintiff’s condition to abruptly change on that particular day, for her to be disabled for the entirety of the elimination period.

Ms. Leetzow suffered from migraines for 20 years getting more severe, more frequent, (2-5 per week) and more resistant to treatment. Metropolitan Life challenged the viability of the claim, since there was no “objective evidence” of her crippling pain.  Another roadblock to recovering disability benefits is if the impairment is based on a claim of chronic pain.  The court laid the groundwork for a claim such as this.  Since there are no neurological exams for migraines that are likely to be positive, claimant’s personal accounts of her migraine related pain are to be credited, “migraines are an invisible illness and there is often no objective medical evidence to confirm their existence, patients’ personal accounts are the strongest, and often only, evidence of disability in such cases”.

The frequency of medical visits to the doctor was less critical to the Court, since Ms. Leetzow stated that her disability makes it harder for her to initiate and arrange and attend doctors appointments. And she had in the past tried all reasonable treatment for her condition. The court noted,

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Many physicians in private practice are offered group discounts for signing up for disability insurance through their medical practice.  While the policies seem to be private contacts, when it comes time for file for benefits, often the insurers assert that the contract is governed by ERISA which grossly limits the rights of policyholders to benefits and suitable, just relief in Court if benefits are denied or terminated.  The Department of Labor’s safe-harbor provision (29 C.F.R. Section 2510.3-1(j).) exempts from ERISA any group-type insurance program an insurer offers to employees or members of an employee organization if all of certain criteria are met.  This fact sensitive analysis requires consideration of who pays the premiums, who collects them; whether the employer endorses the plan whether the employer receives consideration in connection to the program and how involved the employer is in the program administration. In Gooden v. Unum Life Ins. Co. of Am._ 2016 U.S. Dist. LEXIS 75363 (E.D. TN 3/30/16) the court analyzed the facts and determined, against Unum’s objection that the plan qualified under the safe harbour provision.  The clinic received correspondence from UNUM as a request for updated income information. The court determined that a plan that gives group discount solely on the basis that a group of doctors used their employer’s payroll deductions in a  “Flex-bill” arrangement to pay insurance premiums is not considered to be an employer financial contribution.  Here the clinic, the doctor’s employer’s organization did not endorse the program  but remained neutral.  Allowing an insurer to publicize its program is permitted under safe-harbor.  The court explained, “[T]he safe-harbor nowhere requires an employer to stay out of the arrangement altogether-remaining neutral does not require an employer to build a moat around a program or to separate itself from all aspects of program administration”. Finally merely completing a claim form for an employee seeking disability benefits is not a strong indication of endorsement of the policy.

Here at Bonny G. Rafel, LLC  we litigate against the application of ERISA when the facts justify safe harbor protection.  Our clients deserve the right to access to the justice system, and all available remedies, not blunted by the constricts of ERISA regulation.   Bonny G. Rafel, Esq.  www.disabilitycounsel.com

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Disability insurers love to deny claims based on their medical consultant’s conclusion that the claimant has “sedentary capacity.” The insurer’s vocational counselor swiftly identifies various jobs that the claimant can allegedly perform without performing a full or fair investigation of the transferable skills. Does the inquiry end at the point it is established that the individual can sit in a chair at a desk for a period of time?

Just as important is whether the individual has marketable skills to perform a “desk job”, since virtually every “sedentary” job requires strong computer skills.  In our experience, the qualifications related to real time computer and technology use are under investigated in the insurers’ rush to deny.

We have seen some changes in the collateral information the insurers collect regarding our clients.  For instance. on the “activities of daily living” forms they must complete, our disabled clients are asked whether they own a computer, whether it is a desktop or laptop, what they use the computer for (pay bills, read news, facebook).  Be prepared for these are not innocent questions. It’s direct purpose is to establish that the claimant has full use of a computer and a skill that is “transferable” to the workforce.   In short, claimants should not overstate their computer use at home.

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In  a groundbreaking decision that coincides with the ruling from our Third Circuit Court of Appeals in Mirza v. Insurance Administrator of America, Inc., 800 F.3d 129 (3d Cir.2015) the First Circuit Court of Appeals decided that ERISA regulations require a plan administrator in its denial of benefits letter to inform a claimant of the deadline for filing a lawsuit.

ERISA itself does not contain a statute of limitations for bringing a civil action. 29 U.S.C. § 1132(a)(1)(B), so federal courts usually “borrow the most closely analogous statute of limitations in the forum state.” The Supreme Court has already held enforceable a contractual limitations period that commenced when the proof of disability was due, instead of the date of the final denial letter. Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604, 610 (2013).

Insurers have been allowed to establish oppressive deadlines for lawsuits that are almost impossible to meet.  Short deadlines even six months has been enforced by the court. However, when the plan fails to inform clients of impending deadlines for litigation, the claimant may mistakenly think that they have plenty of time to find counsel to file suit on their behalf if their benefits are denied.

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There are two basic types of insurance coverage available for a disability that impairs ones’ ability to continue working, total disability or residual disability. “Residual disability” pertains to those participants who cannot perform all of their pre – disability material and substantial duties on a full time basis, but can perform them part -time, or can perform some of their pre-disability duties.

Residual disability benefit payments are based on what the individual is earning from engaging in their occupation. When our disabled clients return to work, and make a claim for residual disability, their earnings offset what the disability insurer continues to pay them. In cases where individuals are on a set monthly salary, the monthly benefits can be easily calculated. All policies require that the insured sustain a loss of at least 20% of their pre-disability earnings to qualify for the benefits. For a person earning periodic “bonuses” usually the insurer will give the participant the choice of either averaging the “bonus” over the course of the year, so each month the income is increased, or charge the bonus offset all at once, which may cause that monthly loss of income to be below the 20% minimum. For a professional, such as physicians, their monthly income relates directly to the payments by third parties. This may cause a significant problem in continuing residual disability benefits.

A recent case points out an example of how earnings during a residual disability claim can end a claim. In Safdi Md. v. Covered Employer’s Long Term Disability Plan Under the Union Central Employee Security Benefit Trust 2015 WL 7434695 (6th Cir. 2015) his Union Central policy provided that “benefits are terminated if a participant is either no longer disabled or exceeds the earnings threshold of 20%.” Dr. Safdi reduced his work hours after treating for prostate cancer. He lost income due to fewer hours billed. Once in a while, due a spike in collecting payments, his income did exceed the 80% threshold.  Once an audit occurred Union Central stopped benefits and demanded a repayment of over $500,000. It was accurate that Safdi did earn over 80% of his pre-disability earnings on certain months, due to the payment of collectables. However, on average, he still sustained a loss which would have justified the continued payment of the claim under the policy if it did not have this “all or nothing clause.” Safdi claimed that participants will be “victimized” by a one-time spike in current monthly earnings which is an acute risk under a plan designed for professionals because “payments from professional services (through insurance reimbursements and government benefits) are normally significantly in arrears after provision of the … services.” The court rejected his plea that the variability of professional earnings inures to the benefit of the insurer more than often than not and applied the policy terms as written.

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