COVID-19 Update: Impact on Long Term Disability/ERISA Claims

Articles Posted in New and Newsworthy

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In many long-term disability insurance policies, insurance companies struggle to almost always apply a mental illness limitation when the insured has both mental and physical complaints. The language in these mental illness limitations vary by policy. In George v. Reliance Std. Life Ins. Co., 776 F.3d 349 (5th Cir. Tex. 2015), the Court grappled with the “caused by or contributed to by” language in the mental illness limitation in Reliance Standard Life Insurance Co.’s policy, which reads “Monthly Benefit for Total Disability caused by or contributed to by mental or nervous disorders will not be payable beyond an aggregate lifetime maximum duration of twenty-four (24) months.”

This Court had never considered the meaning of this phrase, but other courts concluded that this language excludes “coverage only when the claimant’s physical disability was insufficient to render him totally disabled”. The Fifth Circuit agreed with this “but-for cause” interpretation, especially since Reliance had advocated for this interpretation in the past. For example, in Gunn v. Reliance Std. Life Ins. Co., 2010 U.S. App. LEXIS 17436 (9th Cir. Cal. 2010), Gunn was required to show that he was totally disabled “solely due to his physical conditions stemming from his multiple sclerosis, without taking into account the disabling effects of any mental or nervous disorders”.

In light of this interpretation, the Court had to consider whether George’s physical disabilities were independently sufficient to render him Totally Disabled. George, as a United States Army helicopter pilot, had his leg amputated following a helicopter crash. Although George’s depression and post-traumatic stress disorder contributed to his employment status, the Court determined that he was disabled due to his physical impairments irrespective of his psychiatric condition, taking him outside of the mental illness limitation.

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Litigation to recover denied disability benefits is costly. Not only must the claimant suffer the absence of any disability benefits during the court case, but they must pay counsel for representing them in court. Most attorneys charge a contingency fee for representing disabled claimants in federal litigation; our office is no exception. This means, that if our client is successful, then our fee is paid. Fortunately, ERISA provides that the court, in its discretion, may order that the successful party receives counsel fees from the culpable party. This means that the court may decide that a claimant’s attorney’s fees are paid in part, by the insurer! In our experience, this occurs about 50% of the time. This is totally up to the court’s discretion. See 29 U.S.C. §1132(g).

It is important to understand how the court gauges whether the claimant is the successful party. What happens if the case settles soon after the Complaint is filed, and before the court is substantially involved in the case? What if, as a result of the lawsuit, the defendant voluntarily pays the benefits due? What should the court use as its barometer? Our third circuit court of appeals recently had an opportunity to clarify the law on this subject.

The usual standard for fee awards is the achievement of “some degree of success on the merits.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010). Just recently in Templin v. Independence Blue Cross, No. 13-4493 (3d Cir. May 8, 2015), the Third Circuit decided that the standard, “success on the merits” can be met without any judicial action. In Templin, plaintiffs brought claims under ERISA based on the refusal of the defendants/insurance companies to honor claims for payment of blood-clotting-factor products. After settling the case, the claimants sought $349,385.15 in attorney’s fees. The lower court ruled that the claimants had failed to achieve “some degree of success on the merits”. The claimants argued that they were entitled to attorney’s fees under a catalyst theory.

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When you become unable to continue working for an employer due to disability which is long-lasting, you may approach the employer for a severance if it is determined you will never be able to return to that employment. If you are fortunate enough to obtain a severance, be careful, because the agreement you are required to sign with your employer may reduce or even eliminate your rights to later pursue your disability claim. This may be the case even if the insurer of the disability plan is not specifically identified in the severance agreement by name.

Additionally, if you have a dispute with your employer which culminates in termination after the disability claim begins, an agreement to resolve that dispute may impair your rights to pursue a disability claim. That is what occurred in Gonda v. Permanente Med. Group, Inc., 2015 U.S. Dist. LEXIS 18892 (N.D. Cal. Feb. 17, 2015).

Gonda signed a settlement agreement with his employer following his termination. That agreement did not include any language referring to the disability plan other than to state in general terms that all ERISA claims are released. The agreement stated in part: “Dr. Gonda and his agents, successors and assigns agree to release and forever discharge TPMG, KFH, Kaiser Foundation Health Plan, Inc., . . . of and from any and all claims, charges, demands, actions, obligations, liabilities, and causes of action of whatever kind or nature, whether known or unknown . . . concerning or related to his employment by TPMG and Kaiser Foundation Health Plan credentials or his staff privileges at KFH whether based on . . . the Employee Retirement Income Security Act.”

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In Stevens v. Liberty Mutual together with esteemed attorney, Mark D. DeBofsky, Esq. of DeBofsky & Associates, P.C. we continue our battle against Liberty to reverse their denial of disability benefits to a disabled bank employee. We won our motion for summary judgment in January, and the Court ordered that Liberty pay Mr. Stevens his short term disability benefits, plus our counsel fees. Our claim for Long Term Disability Benefits was remanded to Liberty to review the evidence and made another benefits determination. Instead of proceeding with the remand, Liberty appealed the entire decision to the Third Circuit Court of Appeals.

Oral argument before the Court of Appeals on May 20, 2015 will center on whether the Court of Appeals has jurisdiction to hear Liberty’s appeal since the case is not concluded and the district court retains jurisdiction over the case.

Joseph Stevens suffers from ankylosing spondylitis, joint swelling, pain, fatigue, and cognitive issues. His case continues and will not be completed until we have a determination on the long term disability claim. Our success before the district court is available. Stevens v. Liberty. We will update the blog once the Third Circuit decides our case. Hopefully the result of tomorrow’s argument will change the law in the State of New Jersey. Contact us at Bonny G. Rafel, LLC, and let us fight for your disability.

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Often our clients are denied disability benefits on the basis of the insurers’ conclusion that they can work in a “sedentary occupation.” Insurers also base their analysis often on something known as the “national economy.” By ignoring the demands of our client’s individual job workplace and environment, the insurers misclassify a job and the duties required to perform it. This unfairness permeates many vocational reviews. Fortunately, the courts have addressed this situation in several cases.

Courts have consistently rejected the argument that the specific tasks listed by a claimant’s own employer are irrelevant to an occupational analysis, noting that “while the correct standard is the occupation in the general economy and not the specific job for a specific employer, the specific duties of the employee’s job, as described by the employer, are relevant.” See Burtch v. Hartford Life & Accident Ins. Co., 314 Fed. Appx. 750, at 4 (5th Cir. 2009). The law is clear, that the disability assessment must be based on the occupation that the insured was actually performing: the actual job duties and not a reference to how the position might be performed in the local economy. Polnicky v. Liberty Life Assur. Co. of Boston, 2014 U.S. Dist. LEXIS 164890 (N.D. CA Nov. 25, 2014).In the ERISA context, an administrator must consider a claimant’s inability to perform his specific job requirements of a position in light of the relevant symptoms and medical conditions. Miller v. Am. Airlines, Inc., 632 F.3d at 854-55 (3d Cir. 2011).

The 1st Circuit Court of Appeals recently addressed this situation in McDonough v. Aetna Life Ins. Co., 2015 U.S. App. LEXIS 6153 (1st Cir. Mass. Apr. 15, 2015). In deciding that McDonough was no longer disabled, none of Aetna’s medical consultants or vocational reviewers considered the demands of his high-pressured position in the national economy or how “his symptoms would affect his ability to meet those demands.”

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A recent ruling received by Bonny G. Rafel, LLC examined the recent habit of insurers tampering with the ERISA regulated mandates for deciding appeals of denied ERISA claims. We have received many letters from insurers advising us that they will not start the appeal review until we notify them that we will not be furnishing anymore medical records to them for consideration. We have always contested that unilateral roadblock to providing proof during the appeal that our clients remain disabled! The law is clear as to the obligation of the insurer to decide the appeal no later than 90 days after the submission of the appeal.

ERISA requires all employee benefits plans to “afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” 29 U.S.C. § 1133(2). The Secretary of Labor has established regulations implementing the minimum requirements under ERISA for employee benefit plan procedures pertaining to beneficiary claims. These regulations include time limits by which an appeal of a denial of benefits must be decided. ERISA provides: “the plan administrator shall notify a claimant . . . of the plan’s benefit determination on review within a reasonable period of time, but not later than [45] days after receipt of the claimant’s request for review by the plan, unless the plan administrator determines that special circumstances (such as the need to hold a hearing, if the plan’s procedures provide for a hearing) require an extension of time for processing the claim. If the plan administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial [45]-day period. In no event shall such extension exceed a period of [45] days from the end of the initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the plan expects to render the determination on review.” 29 C.F.R. § 2560.503-1(i)(1)(i) & (i)(3)(i). (emphasis added).

There is a regulation that provides a plan the right to “toll” the deadline if they request certain documentation missing from the submission. But that is not at all what happened here to our client.

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In general, if a group insurance benefits plan pays benefits such as medical bills or disability benefits related to an event caused by another “third party”, such as an automobile accident, the plan has the right to recoup their payment from the claimant’s collection of money (“recovery”) from the “third party.” This often stymies the rights of the sick, ill and disabled because after reimbursing the bills paid by the plan, there may be little left for their pain and suffering and permanent injuries or loss of income.

The United States Supreme Court recognizes these rights and how “a health-plan administrator . . . may enforce such a reimbursement provision [in a benefits plan] by filing suit under § 502(a)(3) of ERISA.” US Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1542 (2013).

An interesting case was decided recently in Indiana that brought to light a provision in a plan that I had not seen before. In Smith v. Walmart Stores, Inc. Assocs. Health & Welfare Plan, 2014 U.S. Dist. LEXIS 143716 (S.D. Ind. Oct. 9, 2014), the Plan sought reimbursement for the benefits Smith had received. Walmart’s plan had a clause that if notified that the claimant had become totally disabled, within the first year they would waive their right for reimbursement. Smith had twelve months after being notified of the reimbursement claim, to seek a waiver of the reimbursement due to “total disability.”

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The law on marijuana use is rapidly changing nationwide. To date, 23 states have legalized some medicinal use of marijuana, with legislation pending in three additional states. Most notably, 2012 ballot initiatives in Colorado and Oregon legalized recreational marijuana use. Further, additional jurisdictions have decriminalized marijuana, and some prosecutors, such as the Brooklyn District Attorney’s Office, no longer pursue low-level possession charges. This quickly evolving area of law will impact not only our criminal justice system, but also disability benefits claims. As legalized medicinal use of marijuana becomes more common, employers and their workers will face tough questions. Employers are understandably unlikely to allow a worker under the influence of marijuana to work. However, if an employee has not been able to find relief for their disabling conditions through any other means, should they be allowed to work if it is controlled through marijuana use? And if they work in a particularly sensitive occupation where driving or the operation of heavy machinery is necessary, is an employee’s use of marijuana to control their symptoms disabling? Unfortunately, there are no documented cases of medicinal marijuana use and disability, but we do expect to see some in the near future as access to the drug increases. However, other cases dealing with medicinal use of controlled substances and disability are instructive of how medicinal marijuana use may be disabling.

Certain jobs come with zero-tolerance for the use of even prescribed controlled substances. The Federal Aviation Administration’s (FAA) Office of Aerospace Medicine has published a lengthy and non-exhaustive list of prohibited medications, and Aviation Medical Examiners have been instructed to refuse issuance of an FAA medical certification to any person who use any drug on this list. In

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Often times, we are approached by clients who are denied disability claims because of mental health issues (i.e., posttraumatic stress disorder, social anxiety, or major depressive disorder). The main reason why these clients are denied disability is because mental illnesses are hard to prove, and it is even harder to prove that such a condition makes an individual incapable of performing his or her occupation. Insurance companies often times prove that an individual is not physically disabled by way of surveillance video; however, there is no equivalent when it comes to “testing” mental illnesses.

However, those with mental illnesses should not be discouraged from filing a claim for disability. This is because courts have previously faulted an insurer’s failure to “give meaningful consideration as to how Plaintiff’s chronic fatigue, as well as memory and concentration problems, would impact upon her performance.” Engel v. Jefferson Pilot Financial Ins. Co., 2009 U.S.Dist LEXIS 89396 (W.D. Pa. Sept. 28, 2009); see Olive v. Am. Express Long Term Disability Benefit Plan, 183 F. Supp. 2d 1191 (C.D. Cal. 2002) (claimant’s ability to focus and concentrate must be considered as an essential occupational duty and must be taken into account in determining whether he/she is disabled).

Generally, the guide used for “proving” mental illness is the Diagnostic and Statistical Manual of Mental Disorders (“DSM”). This manual has been broadly used by psychiatrists and mental health professionals for decades and was just recently revised, as it is now in its fifth edition. Recently, an interesting article appeared in Corporate Counsel, Will the DSM 5 Lead to Crazy Employment Law?, where it discussed how the new edition will impact employment law; mainly because the new edition of the DSM adds new diagnoses, while also broadening already existing diagnoses. For example, the new DSM adds the diagnoses of “social (pragmatic) communication disorder,” where this disorder applies to individuals with “persistent difficulties in the social use of verbal and nonverbal communications.” Essentially, employees who were previously thought of as being shy may qualify under this new “disorder.”

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We are often faced with assisting a disabled client who has been denied benefits from Cigna, Prudential, Aetna, Hartford or Unum based on a brief video surveillance of their daily activities. Our clients ask us, how can a company justify a denial on the flimsy basis that they saw me walking my dog, or taking my daughter to school? And, do they even have the right to videotape me?

The answer to that question derives from the influential case of Creel v. I.C.E. & Accocs., 771 N.E.2d 1276 (Ind. Ct. App. 2002), where the court determined that videotaping an individual where their actions are open to the public does not surmount to an invasion of privacy. This is because, and as the court explains, invasion of privacy can occur when there is an invasion of one’s private or “physical space,” such as a person’s home. Therefore, there is no invasion of privacy when people are videotaped outside of their private space, such as walking their dog or taking their daughter to school.

Although videotaping claimants cannot generally be considered an invasion of privacy if their actions are recorded in public places, this does not mean that insurance companies can use this surveillance to deny disability claims. In a recent case, Ingravallo v. Hartford Life & Accident Ins. Co., 2013 U.S. Dist. LEXIS 48397 (E.D.N.Y. Mar. 29, 2013), the video surveillance showed the claimant “pushing a baby stroller from her home to a pharmacy two blocks away” and “unloading grocery bags from the trunk of her car.” From this surveillance, the insurance company hypothesized claimant’s ability to work a sedentary job; however, the court determined that this was an inappropriate use of the surveillance video because the classification of disabled depends on claimant’s ability to do work, not “chores.” Therefore, it is improper for an insurance company to use short clips of surveillance video to justify denial of a disability claim where such footage does not depict a claimant’s ability to perform his or her job requirements, but rather, depicts his or her ability to perform “normal activities.” This case was similar to Rigg v. Cont’l Cas. Co., 2004 U.S. Dist. LEXIS 8009, at *16 (N.D. Cal. May 5, 2004), where the court found no correlation between claimant’s limited ability to perform some daily tasks, with the ability to work “as a project manager, facilitating business requirements, and the implementation of accounting software on a global scale.”

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