Articles Posted in New and Newsworthy

A four year Targeted Market Conduct Examination of CIGNA and Life Insurance Company of America (LINA),’s Disability Income Insurance Claim Handling Practices was just concluded by the Departments of Insurance of Maine, Massachusetts, California, Connecticut and Pennsylvania. Review the Regulatory Settlement Agreement of May 13, 2013. See CIGNA’s discussion of this in its SEC filing. As a result of this close examination, significant changes must be made in their handling of disability claims, as set forth in the Regulatory Settlement Agreement. Cigna will pay significant fines and set aside 77 million dollars to pay disabled claimant’s whose claims were denied.

This agreement is far-reaching in its application to ongoing disability claims managed by CIGNA because it creates a baseline of claims handling protocols which must be followed. We will use this benchmark in our review of our client’s claims, not only administered by CIGNA and LINA, but all other companies, including Hartford, Reliance Standard, Prudential and Unum, to name a few.

The last time this occurred was in 2005, when all 50 states joined in a massive Market Conduct Study of Unum’s claims handling practices. What emerged was the Multistate Regulatory Settlement Agreement, and the review of hundreds of thousands of claims denied during a certain time period.

As more and more individuals establish an online presence, insurance companies are looking to cyberspace to investigate – and in some cases find evidence which may support the denial of insurance disability claims. The implications are twofold. “E-investigations” provide a method of ensuring that only valid claims are paid and that insurance costs to consumers are mitigated. However, sometimes this research unveils irrelevant, dated or inconsequential information used to support an insurance company’s denial of disability benefits.

In the context of disability benefits, claimants must establish that they are unable to work in their own occupation and in some cases, any gainful occupation. If a claimant has an online presence which indicates participation in physical activities such as sports, or in social groups, the insurer is likely to find this data and compare it to what the claimant is noting in submissions to evaluate the actual limitations in place. Information reported online can be very damaging, as the Washington Post recently reported in an article about background checks. Washington Post, April 11, 2012. Information thought to be confidential may find its way to the internet in some format and into the hands of the insurance company.

An individual who claims to be unable to work should not be posting their availability to work on sites, such as by creating a Linkedin profile or an account on a job search engine. We recently had an experience where our client did not tell us that they had returned to work, but the insurance company found out by checking the client’s Linkedin profile. That case settled quickly! Another client’s reasonable attempts to keep her new employer’s identity confidential (since they did not know of her disability) was undermined since her employer noted on its website that she had joined their team of executives. While the company knew that she had returned to work, they did not know where.

Litigants should beware of posting information on social networking sites such as Facebook and MySpace. Not only can your public pages be viewed and possibly used against you in court, judges are now sometimes ordering litigants to reveal their usernames and passwords to opposing parties in litigation.

A Pennsylvania court in McMillen v. Hummingbird Speedway, Inc. recently did just that in a personal injury case. After the defendants reviewed the public portions of the plaintiff’s Facebook account, discovering comments regarding his trip when the alleged injury in question took place, they asked the court to compel production of his passwords to these accounts. The court ordered the plaintiff to produce his usernames and passwords, finding that no privilege exists for information posted on social networking sites.

In November 2011, another Pennsylvania court ordered a plaintiff in a personal injury auto accident case to disclose her Facebook password. Largent v. Reed. The defendant sought this information, claiming that the plaintiff posted photographs and status updates showing that she was not permanently disabled, as she claimed. The court found that the Stored Communications Act, which prevents the government from compelling Internet Service Providers and Facebook from providing passwords, does not stop the court from compelling the plaintiff in a civil action from releasing her password. The order was entered despite the fact that exchanging passwords violates Facebook’s terms of service. The court concluded that Facebook posts are not “truly private” and producing her password will result in little harm or burden. Also in November, a Connecticut court ordered that a divorcing couple exchange their Facebook and dating website passwords. Forbes, November 7, 2011.

For the approximately one million Americans living with Autism, proving their rights to insurance proceeds and coverage as well as SSDI may soon become even more difficult.

The American Psychiatric Association has appointed a panel that is reviewing the current definition of Autism as a prelude to publishing the newest version of the D.S.M. Currently, “a person can qualify for the diagnosis by exhibiting six or more of 12 behaviors; under the proposed definition, the person would have to exhibit three deficits in social interaction and communication and at least two repetitive behaviors – a much narrower menu.” New York Times Article, January 19, 2012. Additionally, the proposed definition would unite all Autism spectrum disorders – including Asperger’s Syndrome and Pervasive Developmental Disorder-under a single heading. The result, say some experts, will be a large drop in those who qualify for the diagnosis. The result of losing an Autism Diagnosis may be a loss of medical benefits, Social Security Disability, support groups and housing. Similar implications are likely for private insurance benefits.

We at Bonny G. Rafel are experienced in helping those with difficult-to-diagnose conditions prove their disability and obtain the benefits they deserve.

Insurance fraud is a major offense that can carry with it serious repercussions. In order to combat this problem, New Jersey instituted the Insurance Fraud Prevention Act, N.J. Stat. §§ 17:33A-1 to 30. The goal of the act is to prevent insurance fraud in the state of NJ by amongst other things, better fraud detection, developing fraud prevention programs, and requiring repayment for fraudulent insurance benefits received. N.J. Stat. § 17:33A-2.

It is extremely important that when providing information about a claim that you are accurate and honest. According to the act, knowingly making or providing false or misleading statements concerning any fact or thing material to a claim constitutes fraud. N.J. Stat. § 17:33A-4(a). Not only can insurance fraud lead to criminal charges but a person committing insurance fraud can face severe civil penalties as well. If the insurance commissioner has deemed someone to be in violation of the act, the commissioner may seek a civil action, place an administrative penalty on the person, and/or order restitution including but not limited to attorney fees and cost of prosecution. If the commissioner orders an administrative penalty or restitution be paid, a person may request a hearing within 20 days of receipt of the violation. Additionally, if criminal charges are not already brought against you, the commissioner may request that the Attorney General do so.

In addition to facing state imposed penalties and fines, anyone who violates this act may be sued by any insurance company damaged by the fraudulent act. The insurance company can recover compensatory damages that can include surveillance and investigation costs, attorney fees, and any costs related to the lawsuit. If successful the court may award treble damages (three times the amount of the damages) if it is determined that the person has engaged in a pattern of violating the act. N.J. Stat. § 17:33A-7(b). “Pattern” means five or more related violations of the Fraud Act. . Allstate Ins. Co. v. Greenberg, 376 N.J. Super. 623, 640 (Law Div. 2004).

An error made by the fiduciary to a defined contribution pension plan had to abide by a judgment requiring it to reimburse the plan participant whose funds were incorrectly distributed. In the recent Second Circuit case of Milgram v. The Orthopedic Assoc. Defined Contribution Pension Plan, even if the plan could not recoup the money it had wrongfully paid out, it must still honor its legal obligation to pay the pension participant.

The pension at issue was a Defined Contribution Plan. The plaintiff divorced his wife, and based on a property settlement agreement, the plan administrator erroneously transferred half of the plan funds to her, resulting in an overpayment to her of $763,847.93. The husband sued the plan under ERISA to recoup this money.

The plan argued, it could not distribute the money without first being repaid by the ex-wife, since doing otherwise would reduce the plan assets, which they refer to as alienating the benefits of other plan members.

Many health and disability group insurance contracts contain discretionary clauses—clauses that provide the company writing the contract with the discretion to determine the meaning of contractual terms or to determine the insured’s eligibility for benefits. If your disability insurance policy is subject to ERISA, meaning it was purchased by your employer as part of a group plan, it most likely includes a discretionary clause. In order to prevail in court against an insurer, the claimant must demonstrate not just that the insurer’s decision was wrong, but that the insurer abused its discretion in making that decision. Insurers use these clauses to deny claims, with knowledge of the added difficulty these clauses provide for their customers to succeed in court.

State legislators are reacting to these unfair clauses. California recently enacted a law, making discretionary clauses in disability and life insurance policies

The Third Circuit is finally catching up to other Circuits in recognizing the importance that a conflict of interest plays in an insurer’s decision to accept or deny a disability claim. The Third Circuit in Miller v. American Airlines noted that the claim administrator acted unreasonably by imposing additional requirements under the Plan; failing to include in its denial letter exactly what the claimant needed to provide in order to satisfy the plan requirements, failing to adequately consider all medical diagnoses and even the occupation in evaluating the case.

On the heels of Miller, our New Jersey Courts have issued another well considered opinion. Connor v. Sedgwick Claims Mgmt. Servs., 2011 U.S. Dist. LEXIS 67988 (D.N.J. June 24, 2011) The court in Connor embraced the reasoning of Miller, requiring that the termination letter provide the “precise information necessary to advise” a plaintiff “how to perfect his claim.”

The denial letter must detail how the claimant “could achieve a favorable disability determination.”