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

Articles Posted in New and Newsworthy

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In May of this year, a four year Targeted Market Conduct Examination of CIGNA and Life Insurance Company of America (LINA)’s Disability Income Insurance Claim Handling Practices was concluded by the Departments of Insurance in 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 now be made in their handling of disability claims, as set forth in the Regulatory Settlement Agreement. Cigna will pay significant fines and set aside up to 77 million dollars to pay disabled claimant’s whose claims were wrongfully denied.

Our persistent efforts to initiate proactive communications with the New Jersey Department of Banking and Insurance (DOBI), specifically with Julie Stockman, an Investigator at DOBI, has paid off. She verified our suspicions, and made available to us through public record, confirmation that New Jersey is, in fact, a part of this settlement agreement. This essentially means that New Jersey’s consumers whose disability claims were denied by CIGNA and LINA from January 2009-December 2010 are entitled to a review of those claims. DOBI’s confirmation of New Jersey’s status regarding this agreement holds significant weight as it is DOBI’s goal to protect and educate “consumers regarding insurance, money matters, and real estate transactions.” We, like DOBI, are interested in protecting our state’s consumers.

Further, with New Jersey’s confirmed participation in this recent agreement, this will serve as a 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.

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A key to a successful disability claim is support from your treating doctors. They will be called upon to complete forms and often are requested to speak with medical consultants from the insurance companies who will ask them to confirm your restrictions and limitations. We recognize the importance of working with doctors, and having them understand their patients’ impairments. Recently, an interesting article appeared in the New York Times, For New Doctors, 8-Minutes Per Patient where Doctor Pauline W. Chen commented on the astonishing truth that “doctors-in-training” are only allowed to spend minutes with each patient.

This unfortunate reality is in stark contrast to the fundamental care services, which doctors provide to their patients. Today, doctors-in-training are not allowed to spend more than 80 hours per week at the hospital. To compensate for this strict time restriction, some doctors-in-training “sneak” back into the hospital to check on patients. This is a significant drawback to the healthcare profession, especially since most individuals choose to pursue a career in healthcare with the hope of interacting with patients.

This dramatic change was spawned by medical centers transitioning into an era of electronic-based record keeping. This, together with the Accreditation Council for Graduate Medical Education limiting the number of hours that interns are allowed to work, created this devastating reality. Regrettably, “current interns spend the majority of their time in activities only indirectly related to patient care, like reading patient charts, writing notes, entering orders, speaking with other team members and transporting patients.”

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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.

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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.

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The Supreme Court is hearing oral arguments on the Patient Protection and Affordable Care Act (commonly known as “Obamacare”) this week, and one of the tenets of the act contains new standards governing the application of pre-existing condition exclusions in insurance policies (see See Report of Congressional Research Service). Against the backdrop of the current legal debate in Washington, the Middle District of Pennsylvania in Lafferty v. Unum Life Ins. Co. of Am. recently addressed the meaning of a pre-existing condition in an insurance contract, and the extent to which an insurance company could apply such a limitation against its insured.

Mr. Lafferty became disabled due to congestive heart failure. He applied for disability benefits to Unum, who denied the claim on the basis that Mr. Lafferty had a pre-existing condition for which he had treatment during the three month look back period in the policy. Mr. Lafferty had a long-standing heart condition and was taking medication (aspirin) as a preventative measure against further cardiac events.

The pre-existing provision in the policy excluded medical conditions for which the insured “received medical treatment, consultation, care or services including diagnostic measures, or took prescribed drugs or medicines” three months before the policy’s effective date. Unum argued that, since hypertension, hypercholesterolemia, and coronary artery disease could lead to congestive heart failure and the need for a pacemaker, Lafferty’s congestive heart failure was a pre-existing condition.

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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.

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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.

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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).

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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.

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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

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