Articles Posted in Recent Court Decisions of Interest

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.

One of the only saving graces of disability cases falling under the ERISA regulation, is that if the Court decides that we have had “success on the merits” of the claim on behalf of our clients, the Court may, in its discretion order that our counsel fees must be paid by the insurer. This is so important, because without that happening, when we win cases in litigation in federal court, our client pays our contingency fee from the settlement or judgment.
On June 26, 2015 we blogged on the issue of counsel fee awards in ERISA claims and explained how the court may decide that a claimant’s attorney’s fees are paid by the insurer. To receive attorney’s fees from the insurance company rather than our client, the court must conclude that we have achieved “some degree of success on the merits.” Then it must then determine the appropriate amount which is based on our timekeeper records of our legal work on the case multiplied by a lodestar, an hourly rate. Keep in mind that our clients only pay us for litigation on a contingency basis; that means, if we win the case, they pay a set percentage of the award, not by the hour.
Over the years, courts have awarded our firm, particularly, Bonny G. Rafel, Esq., counsel fees to be paid by the insurer. This obviously reduces our client’s burden of paying our fees. We would love nothing more than to get our clients all of the disability benefits they deserve, and be paid for our efforts by the insurance company who terminated or denied the benefits in the first place.
Even when we are successful in litigation, the insurer has argued that the fees should be reduced for one reason or another. They have often tried to reduce fees based on what they think would be fair, and sometimes even try to get a “southern NJ” rate, (if our cases are in Federal Court in Trenton) suggesting that lawyers working in south New Jersey charge less than the northern NJ, Manhattan corridor amount.
On May 20, 2015 the Third Circuit Court of Appeals heard oral argument in one of our cases, and after deciding in favor of our client, ordered that the insurance company, Liberty, pay all of our legal fees associated with the Third Circuit Appeal. Moreover, the Third Circuit determined that the hourly rate for counsel, Mark Debofsky, Esq. counsel from Chicago, Illinois should be $600.00 per hour and the hourly rate for counsel, Bonny G. Rafel, counsel from Florham Park, New Jersey should be $500.00 per hour.
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The 11th Circuit recently decided an important case in the grey area of when does the deadline for filing litigation expire in a disability claim. In Witt v. MetLife,2014 U.S. App. LEXIS 22321 (11th Circuit 11/25/14), Mr. Witt was denied benefits in 1997 but did not contact MetLife to contest the denial until 12 years later. MetLife performed a courtesy review consisting of an administrative review of documentation and evidence. MetLife ultimately upheld its earlier denial of 12 years before and in its final letter to Witt, noted that he had exhausted his administrative remedies under the plan and had the right to bring civil action under Section 502a or ERISA.

MetLife’s letter did not assert a time bar or statute of limitations defense, and MetLife never noted in its letters or interaction with Witt’s attorney that it would ever exert a statute of limitations as a defense to litigation. When Witt filed a lawsuit several years later, MetLife successfully dismissed the claim and the 11th Circuit upheld the District Court’s decision. The court reasoned that it was not necessary for MetLife to expressly state in writing that it was preserving its right to exert the statute of limitations as a defense.

MetLife was entitled to perform a “courtesy review” of the claim without thereafter binding it to a re-initiation of a statute of limitations. The court was concerned that if they require an insurer to expressly state that its reconsideration of a stale claim preserved its right to a statutory timeliness defense, “that outcome would prevent plan participants with meritorious though untimely claims from receiving a review and possibly benefits. At the same time, it would aid only those individuals who fail to file claim in a timely fashion and then have their subsequent claims denied on the merits”.

Oftentimes, when reviewing a disability claim, the insurer will not consider how the insured was actually required to perform his occupation. Instead, the insurer, relying on the clause in its policy “the Covered Person’s occupation is as it is normally performed in the local economy” will define “own occupation” solely be reference to how the position could be performed in the local (or national) economy. This issue arises when the particular job requires additional duties such as travel to solicit business as was the case with Polnicky v. Liberty Life Assur. Co. of Boston, 2014 U.S. Dist. LEXIS (N.D.Cal. Nov. 25, 2014). Mr. Polnicky was required to travel out of the office to attend open houses, conduct presentations, deliver loan documents, meet with realtors but Liberty’s vocational case manager determined that the occupation of Reverse Mortgage Consultant could be performed without traveling. The court disagreed with Liberty’s analysis because although it was permitted to consider his occupation as it is normally performed, it must also consider the material and substantial job duties that Mr. Polnicky was required to perform in his position for Wells Fargo.

Insurers cannot agree to provide coverage for an employee’s “own occupation” and then fail to consider the precise elements of the material and substantial duties of the occupation when evaluating a disability claim.

We at Bonny G. Rafel can help if your claim is denied because the insurer does not consider all of the duties of your occupation. Bonny G. Rafel, LLC We advocate for patients with disabling conditions and may be able to assist you in getting the benefits you deserve.

Recipients of long term disability benefits often experience improvement in their condition when they stop working. For example, a construction worker who experiences severe back pain may experience a health improvement when he is not engaged in intensive physical activity on a daily basis. When you have been approved for long term disability, the benefits administrator will continue to request updates from your physician regarding your treatment progress. If there is any indication of a health improvement while on long term disability, the administrator may request an independent medical evaluation (“IME”), a functional capacity evaluation (“FCE”), or even hire a third-party vendor to follow and video your public activities. Your medical improvement could potentially be used against you to terminate your benefits.

A recent case from Michigan provides a great window into how this process can work. In Gillespie v. Liberty Life Assurance Co. of Boston, the plaintiff was a former bank teller who underwent surgery to relieve persistent back and neck pain. The plaintiff briefly attempted to return to work following her surgery. However, this exacerbated her pain symptoms. After she stopped working, her condition improved, she was able to see her doctors less frequently, and to reduce the amount of pain medication she took. However, this improvement triggered a heightened review by Liberty. Her treating physicians reported to Liberty that she was still unable to work, but Liberty, unsatisfied, requested an independent medical examination (IME). The IME doctor reported that she could return to a sedentary position. Liberty terminated her benefits in a month after the IME. Despite appealing, her denial was upheld and she filed suit against Liberty.

Thankfully, the court found that Liberty’s decision was improper on a number of grounds. Liberty over-relied on their own doctors and consultants, as there is nothing in the record to indicate that Gillespie’s treating physicians’ opinions were considered. Most importantly, Liberty failed to address the fact that work exacerbated Gillespie’s pain symptoms and did not consider how a return to work again would not end in the same result.

Following the U.S. Supreme Court’s Decision in Heimeshoff, Lawyers are being extra-careful in determining the deadline for filing a lawsuit in court to protect a clients’ rights. Unfortunately, the insurers do not believe they are responsible to advise their insured if a deadline is approaching. A recent example of the insurer outfoxing the insured is Gordon v. Deloitte & Touche, LLP Group Long Term Disability Plan, 2014 U.S.App. LEXIS 6688 (9th Cir. April 11, 2014).

Ms. Gordon had appealed the denial of her claim several times. She let the claim lay stagnant, and then recontacted MetLife and requested they consider another appeal. Following intervention by the Department of Insurance, MetLife agreed to reevaluate the claim and did so. Detailed exchanges commenced, and the ultimate outcome was MetLife’s upholding its denial. Gordon filed a lawsuit and the 9th Circuit upheld the application of the Plans’ statute of limitations deadline for filing a lawsuit. The court held that MetLife’s reopening of Gordon’s claim file does not in and of itself revive the statute of limitations because it would discourage reconsideration by insurers even when reconsideration might be warranted.

Commentary: One would consider estoppel or waiver in this circumstance. Firstly, it is well established law that “a defendant will be estopped from setting up a statute of limitations defense when its own prior representations or conduct have caused the plaintiff to run afoul of the statute and it is equitable to hold the defendant responsible for that result.” However, in this case, the statute of limitations had already run before MetLife agreed to review the appeal again. Secondly, caselaw suggests that waiver requires an intentional relinquishment of a known right and consideration for the alleged waiver. In this case, there is no evidence that MetLife intentionally relinquished its right for the statute of limitations defense. However, MetLife did advise Gordon that she should file an appeal of their decision and in the event her appeal is denied she would then have the right to bring a civil action under ERISA. Unfortunately for Gordon, she embarked on a costly comprehensive appeal expecting that she would have the right to contest a denial in court, but that would not be the outcome.