For those who have successfully fought to have a disability claim approved, they want it to stay that way. When the letter arrives from an insurance company seeking an update in status, most claimants begin to worry – and rightly so. As the Western District of Michigan federal court wisely observed fifteen years ago:

The plan and insurance language did not say, but the world should take notice, that when you buy insurance like this you are purchasing an invitation to a legal ritual in which you will be perfunctorily examined by expert physicians whose objective it is to find you not disabled, you will be determined not disabled by the insurance company principally because of the opinions of the unfriendly experts, and you will be denied benefits.

Loucks v. Liberty Life Assurance Co. of Boston, 337 F. Supp. 2d 990, 991 (W.D. Mich. 2004) (vacated following settlement).

Under the terms of their contracts, disability insurers are entitled to request continuing proof of loss.  So, it is also reasonable to expect that that a disability claimant will be called upon to provide updated medical proof of their condition and disability. This does not mean that an insurer may act unreasonably in requesting continuing proof of disability, only that an insurer may reasonably request updates on a claimant’s medical status.  For a disability claimant receiving a monthly payment, it should be acknowledged that once the payments begin the claim is not over.  The only way to effectively deal with this climate is get out in front of it.

Here are our suggestions:

  1. Go to every doctor’s appointment with a list of continuing physical (or if applicable psychological) limitations. Don’t leave a single thing out.
  2. Document and report every single side effect of your treatment or medication.
  3. Document and report every unique episode (a fall, a forgetful spell, or a day spent in bed) and timely make your doctor aware.
  4. Do not miss doctor’s appointments. If you anticipate a problem, reschedule right away. Under no circumstances should it ever be listed that the claimant was a “no show.”
  5. Make sure the doctor has documented everything before you leave.
  6. Routinely request copies of your records and make sure they are complete and correct – before they are requested from an insurance company.  Best practice would be to request a report be sent to you after every visit.

Successfully securing a disability claim approval is a victory to be sure – yet take care to follow the steps set forth above, or it can be short lived.

It appears questions raised by the Ninth Circuit’s decision in Dorman v. Charles Schwab Corp., Case No. 18-15281 (9th Cir., Aug. 20, 2019), may move towards resolution sooner than anticipated, with the plaintiff filing an en banc petition last week.

Arguments within the statement and supporting memorandum center on the Dorman court’s application of the Supreme Court’s Epic Systems Corp. v. Lewis precedent, chiefly that its applicability is limited in relation to ERISA claims brought in a representative capacity:

Epic Systems “did not address whether ERISA, an entirely different statute, creates a right to bring a representative action.  Mass. Mutual, LaRue and Munro, by contrast, have all ruled that fiduciary breach claims under ERISA are inherently representative.”  En Banc Petition Brief, p. 12, n.5.

The petition also claims that

the panel’s decision crashes head-on with the Supreme Court’s concern about arbitration-related waivers eliminating the enforcement of federal rights; namely, when they purport to eliminate the right to pursue a remedy guaranteed by statute.

EP Brief, p. 13. The petition argues that if an ERISA plaintiff brings claims subject to a valid arbitration clause, under the Dorman court’s ruling, any relief sought would be limited to individual relief, and fiduciary defendants “would be relieved of virtually all of their liability under  § 1109, except to the extent that liability relates to an individual’s account.” EP Brief, pp. 12-13.

The Dorman court distinguished the case from those in Munro v. University of Southern California, No. 16-cv-06191, 2018 WL 3542996 (9th Cir., Jul. 24, 2018) on two separate fronts.

The first obvious factual difference is that the Dorman plans contained an arbitration agreement (as opposed to the clause appearing in an employment agreement in Munro).  The second difference was the scope of the agreements at issue.  In Dorman, the plaintiff’s relief could, conceptually at least, be resolved as an individual claim – ultimately the recovery of losses sustained on his individual retirement account(s) owing to alleged fiduciary breach.

The larger issue is, hypothetically, somewhere between both Dorman and Munro – a class of plaintiffs seeking to litigate claims clearly brought on behalf of their plan (removal of breaching fiduciaries and reformation) yet faced with an arbitration provision contained within the relevant plan itself and barring class-wide arbitration.  Consistent with the Munro holding, an ERISA plaintiff seeking judicial remedy which exists for the benefit of a plan may not alone settle a claim.  Munro, Slip Op. at 11.  If arbitration were compelled, would a plan-appointed representative step in or is that not the position already occupied by a plaintiff bringing a derivative action? Would a split of the individual claims and the ‘clear’ plan-relief claims be compelled, resulting in the possibility of two distinct resolutions on fact?

While these specific questions may not be directly answered even through an en banc rehearing, the hope is that clarity in some form regarding protection guaranteed to ERISA plans of a right to representational adjudication of plan-wide relief, in the context of an (arguably) otherwise valid arbitration clause, may emerge.[1]

[1] The Dorman plaintiff’s brief also argues that “§ 1110(a) renders void the arbitration provision’s prohibition on seeking plan-wide relief under § 1109 in a representative capacity.”  EB Brief, p. 15.  ERISA Section 410, 29 U.S.C. § 1110(a), bars any contractual provision which would relieve a fiduciary from liability.  In this sense, clarification of the general rights guaranteed to an ERISA plan, as a whole, for a “deputized” plan-appointed representative may hold the answers toward the validity of broad ERISA arbitration clauses, such as that at issue in Dorman.

“My doctor will support me.”

This is one of the most common expressions heard from clients dealing with an ERISA long-term disability insurance claim. Disability claimants know, perhaps without formal recognition, that their disability insurance claim requires a solid evidentiary foundation. Most claimants realize they carry the burden to prove their claim and recognize that a claim requires medical proof – not merely a statement of one’s inability to work. In fact, most of our clients recognize this immediately, even before meeting with us. A disability claimant’s treating physician will likely play the most important evidentiary role in a disability claim, as they are the one providing at least the baseline medical foundation to support a claimant’s contention that they are occupationally disabled.

While disability plan insurers are not bound to accept a treating physician’s opinions without scrutiny, “plan administrators, of course, may not arbitrarily refuse to credit a claimant’s reliable evidence, including the opinions of a treating physician.”  Black & Decker Disability Plan v. Nord, 538 U.S. 822, 834 (2003).

What is important for not just disability claimants but also their physicians to understand is the integral role treating physicians play in a disability claim, and how to successfully navigate that interdependent relationship as it moves from providing treatment to providing evidence.  Below are a few suggestions for consideration toward understanding and enhancing these critical relationships.

1)            Establish a Trusted Relationship.   First, it is important to let your doctor know about your disability claim and keep them updated on its status. Most treating physicians are familiar with disability claims and are willing to help their patients through the process. It is best to tell your physician, up front, that you are filing a claim and are likely to need some help with the claim forms. You may also want to use this as an opportunity to thank your physician for his or her anticipated cooperation and to communicate that you will try not to impose too much.

Some physicians do refuse to be a part of the disability application or appeal process. If your physician is unwilling to assist, do not be upset – it is better to know, preferably as early as possible. Nothing is worse than sending Attending Physician forms to a doctor whose office says they refuse to deal with insurance companies. While unhelpful, this position is somewhat understandable since paperwork is time-consuming and often uncompensated. In our experience, physicians work extremely hard and their compensation, often dictated by insurance companies, is below their fair value. They simply may not be able to financially perform this extra work.  (Note: your disability insurer knows this).

2)            Consider A Referral to A Specialist.  Depending on your condition, you may need to consult a specialist.  Again, timing is critical.  Specialists can book appointments three to four months out.  You need to consult, begin treatment with, and then, once the relationship is established, enlist their assistance. When it comes to the requirement for submitting “proof of disability” or “proof of claim,” sometimes more is required than the findings of a family doctor or internist. Here, the medical examination is centered on establishing one’s functional abilities. A treating physician may be fully capable of assessing the patient’s condition. For others, a specialist such as a Physical Medicine and Rehabilitation (PM&R) doctor may be appropriate.

3)            Allow the Physician Plenty of Time to Respond.  All claims forms have a due date, so don’t delay.  These forms are sometimes ambiguous and confusing – if there is any confusion over what is being requested, you may want to consider hiring counsel since even a minor mistake on a form can exponentially complicate the claims process or even lead to a denial.  That said, the forms should be in the hands of the doctors as soon as reasonably possible. The forms should also be reviewed after completion by a physician but before return to the insurance company.  A mistake or misunderstanding can add as much as one year of delay in resolving a valid claim.

Given the importance of these forms, a claimant should be considerate of a physician’s time and understand that a physician is typically not compensated for efforts toward supporting a disability claim.  Most physicians will help with a claim as an act of professional courtesy.  We have written about this previously.  See, Do You Have An ERISA Disability Claim? Print This Article, And Take It To Your Doctor.

4)            Be Willing to Compensate the Physician for Administrative Time. This is self-explanatory.  Politely inquire whether the physician is typically compensated for filling out forms and be willing to pay all reasonable charges.

5)            Explain that the Physician’s Involvement Will Be Minimal – No Depositions or Trial.

This is perhaps the most important and often overlooked part of an ERISA disability claim.  Most physicians are familiar with accident cases and workers compensation cases, yet lack familiarity with ERISA disability case. This presents a slight problem when physicians mistakenly believe they may be “called to testify” if they provide a professional opinion on a claimant’s medical and/or functional status. In practice, however, ERISA does not provide for trials, depositions, or live testimony.  At most, the physician will be asked (usually by the claimant’s lawyer) to supply a sworn statement or medical narrative.  This is part of a written submission or appeal for the claimant.  A physician will not be called to testify in a deposition or trial in an ERISA case.

In the Sixth Circuit (Michigan, Ohio, Kentucky, and Tennessee), there is a special “framework” for resolving disability cases, allowing federal courts to conduct a “review based solely upon the administrative record and render findings of fact and conclusions of law accordingly.”  Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609, 619 (6th Cir. 1998).  This means that cases are decided on written submissions such as motions. While Wilkins did recognize that there are times when discovery is appropriate against an insurer or plan administrator, this does not include depositions of the treating physician.[1]

Bottom Line:      Establish a strong and courteous relationship with all treating physicians.

Explain to your physicians your need for their assistance with your claim.

Be willing to pay all reasonable charges for any administrative work, including completion of forms and preparation of medical narratives.

Don’t Delay!

[1] For more information about the Wilkins review process, see, see, John J. Conway & Trever M. Sims, Refining Wilkins: A 20-Year Look at the Recurring Factors Used in the Sixth Circuit’s Resolution of Disability Claims Under ERISA Section 502(a)(1)(B), Sec. II.B, WMU-Cooley Law (2018), available at: https://issuu.com/cooleylawschool/docs/wmu-cooleylawreview-34-2/94.

It is one of the most commonly asked questions by disability claimants who have successfully battled their disability insurance companies to overturn a denied or terminated disability claim. They have won, but there is one lingering question:

Can my insurance company cut me off again?

Technically, the answer is “yes.” Most disability law practitioners have tried to couch the answer to that question based on their experience with the nation’s major insurance companies.  For some insurers, once you have beaten them, they are reluctant to put you through it again.  For others, it is one successive battle after another until they skate dangerously close to violating ERISA Section 510 (the statute’s prohibition on the intentional interference with one’s benefits).

Now, some federal courts are providing claimants a little more optimism about the future.  There is an oft cited, little used provision, tucked away in ERISA Section 502(a)(1)(B) which empowers a participant “to clarify his rights to future benefits under the terms of the plan.” (Emphasis added).

That portion of the (a)(1)(B) provision is gaining new potency after a series of decisions where federal courts in the Pacific Northwest have weighed in on its meaning.

In Gorena v. Aetna Life Ins. Co., No. 17-532, 2018 WL 3008873 (W.D. Wash., Jun. 15, 2018), while reviewing that provision, the district court ordered the payment of past due disability benefits to the claimant and placed real, substantive limits on an insurer’s ability to terminate a claimant’s monthly payments.  The district court held that the defendant was

directed to pay [the plaintiff’s] LTD claim to the policy’s maximum benefit duration absent a showing of improvement in her medical condition such that a reasonable physician would conclude that she could work in “any gainful activity for which [she is], or may reasonably become, fitted by education, training, or experience and which results in, or can be expected to result in, an income of more than 60% of [her] adjusted predisability earnings.” Unless Defendant can establish that Plaintiff is capable of performing such work productively, full-time, and without undue disruptions and/or absences due to her MS and its related symptoms, she is to continue to receive LTD benefits to the Plan’s maximum duration.

(Internal citations omitted). A similar resolution was reached in Bethany Coleman-Fire v. Standard Ins. Co., No. 18-cv-00180, 2019 WL 2011039, at *13 (D. Or., May 7, 2019), where the district court cited to a previous version of the Gorena ruling and held:

Accordingly, and in accordance with 1132(a)(1)(B), the Court offers the following clarification regarding Plaintiff’s right to future benefits: Subject to the terms and conditions of the Plan, Defendant shall pay Plaintiff’s LTD claim to the Plan’s maximum benefit duration absent a showing of improvement in her TBI/PCS symptoms such that a reasonable physician would conclude that Plaintiff could work more than forty hours per week in her Own Occupation.

With federal courts now appearing more apt to tackle the meaning of ERISA’s clarification provision, hopefully practitioners will be able to provide more resolute answers when a client asks the question, “will my insurance company cut me off again?”

Stay off social media if you have a long-term disability claim.

We have written about this issue before. See, Long-Term Disability Insurance Update: An Online ‘Friend’ You May Not ‘Like.’

Perhaps one of the most overlooked features about ERISA disability claims is the fact that, since most jurisdictions generally restrict the ability of parties to conduct discovery, the fact gathering process is a little like the Wild West.  Claimants gather their own evidence outside of the formal discovery rules used in federal court.  Disability insurance companies gather their own evidence in this way as well.

Nearly every claim we review for our clients contains the insurer’s detailed social media investigation report – this is part of why disability claimants are being asked for their email addresses on claims forms. Disability insurers like Aetna, Unum, Reliance Standard, CIGNA, and Life Insurance Company of North America, as well as administrators like Sedgwick, are now reviewing social media activity as a part of their investigatory process.

Armed with an email address, the insurance company’s investigators can track Facebook, Twitter, and perhaps even dating sites. Exploiting the failure to activate privacy controls on publicly-viewable pages, these insurance companies can examine your life as told through your family and friend’s posted photographs and videos.   Those images are downloaded or screen-captured and then put into the claims file – sometimes in a totally dishonest or misrepresentative arrangement.

For those accustomed to litigation under the Federal Rules, the fact that much of this stuff has not been authenticated is particularly galling.  Nevertheless, it is usually admitted without so much as an objection when those administrative records are filed with a federal court.

Recently, a Nevada federal court put the brakes on the weight given to such social media posts in terminating a benefit claim.  In Williamson v. Aetna, No. 2:17-cv-02653 (D. Nev. March 31, 2019), the disability insurer terminated a long-term disability claim based, exclusively, on its capture of social media posts (which it failed to independently verify) and an 11-minute surveillance video. The district court found that the insurer’s decision to base its determination on this type of non-medical evidence violated ERISA.  Here the Court opined that it found

that Defendant abused its discretion when it terminated Plaintiff’s disability benefits absent medical evidence that her disabilities had improved. To the extent Defendant relied upon Plaintiff’s Facebook and dating website postings, the Court finds that such evidence is an illogical, implausible, and unreasonable basis for a revocation of disability benefits compared to the use of medical records. First, Defendant was aware of the inherent accuracy issues with such postings. Second, Defendant never sought to independently verify the posted information beyond the limited surveillance.

Notably, the district court zeroed in on the authentication issues without necessarily putting the case through an F.R.E. 901 formal analysis.  The district court found that “Defendant possessed no external evidence of when or where the posted photographs were taken.” The district court continued that “the Defendant did not ask Plaintiff when those pictures were taken or seek additional context” or seek “to actually verify the explanations provided by Plaintiff.”

Critically, however, the district court did find “it was not an abuse of discretion for Defendant to use the information gleaned from Plaintiff’s social media accounts as a trigger to investigate Plaintiff’s ongoing disability status.”  The district court held “that social media postings are minimally informative and inherently inaccurate as to a person’s medical symptoms and capacity for sustained employment. Such postings cannot plausibly constitute a basis for Defendant’s 2016 disability determination.”

Even though the district court narrowed in on the unreliability of social media evidence in disability cases, it still does not alter the bottom line:  Stay off social media during a disability claim.

What is the single greatest mistake long term disability claimants make?

Preparing their own internal disability appeal.

It is that simple.

A case worth hundreds of thousands of dollars can be converted to zero – near instantly – when a disability insurance claimant attempts to prepare his or her own administrative appeal.  There are several reasons for this, as discussed below.

No. 1.    Disability Claimants and Disability Insurers Have Grossly Unequal Resources

There is a complete disparity of resources when disability claimants attempt to take on their disability insurers.  Viewing this from the claimant’s perspective, what resources are typically available to the average insured person?  Presumably, there is a home computer or tablet, a printer, access to an internet fax program, and copies of pertinent medical records.   All these instruments and evidence can be used to assemble a homemade disability appeal.

By contrast, however, a disability insurer is often a multi-billion-dollar company, publicly traded on the stock market, with profit motivations designed to satisfy shareholders, including institutional investors.  It has significant financial resources – all of which are at the ready to be deployed against a disability claimant.  This is just the macro-picture of the disparity.

On the micro-level, disability insurance claims departments are populated by claims adjusters who have been trained to handle and process disability claims, oversee medical exams, and have been taught how to selectively read medical exam records.  Disability insurance companies have in-house physicians, nurses, and large expense accounts to pay unfriendly experts who routinely perform thousands of reviews and exams favorable to the insurers. Finally, the disability claim is one of typically 300 to 400 other claims these claims adjusters oversee simultaneously.  In short, they know how to deny a claim and are not able (or willing) to dedicate a material amount of time to review your medical as a true fiduciary should.

No. 2.    Not Fully Understanding the Reason for the Denial

A disability insurance denial is usually a lengthy letter. These letters contain required notices, citations to insurance contract language, several addresses, claims identifying information, and so on.   Sandwiched in-between all this writing is the rationale for denying the claim.  The rationale is the “why,” or explanation for why, a sought-after disability benefit is not being paid.  This can be confusing, even to the lawyers who work on these claims regularly.

For example, based on the language a disability insurance company uses to deny a claim, a claimant might mistakenly believe that the insurer is claiming they are not actually suffering from an illness when, in fact, the insurer is really disputing whether a person who is ill can still work.  Another often confusing rationale is the challenge to the supportive medical evidence.  By way of further example, is the insurer saying the evidence is non-existent or inadequate or is the insurer seeking another type of evidence altogether?  Furthering the opportunity for confusion, an insurer typically will not explain to a claimant the difference between objective and subjective evidence.  Misunderstanding why a claim is being denied can doom it.

No. 3.    Overlooking Critical Supporting Documentation

Medical records are obviously key evidence in supporting a disability claim.  The trouble is that medical records, alone, are rarely enough to the win a case.  The records require in depth explanation.  The records must be tied to showing a physical or mental limitation.  Often the records, themselves, provide foundation evidence for other documentation – such as a Functional Capacity Examination (FCE) or vocational rehabilitation analysis.  These are areas of expertise to which a claimant may not have ready access to make their case. Leaving out this crucial documentation can also doom a claim during the appeal process and leave a lawyer little to work with if the case eventually goes to court.

No. 4.    “Writing a Letter”

When was the last time you wrote a letter and the reader was so moved to start paying you instantly?  Has that ever occurred?  Has it even occurred to anyone you know personally?  In short, it does not happen.  As fine a person as you may be, no one will ever approve a disability benefit based on a written letter – no matter how beautifully composed or compelling in narration.

Somewhat cynically, disability insurers love receiving ‘a letter’ explaining why a person cannot work.   So long as that letter is not accompanied by medical evidence, the insurer will always be able to deny the claim based on no ‘proof of loss’ or ‘proof of claim.’  A disability claimant will likely never be treated better by an insurance company than in the 30-day period following their ‘writing a letter.’  The case is over, the insurer knows it, but the insurer does not want you to know it – yet.

The Bottom Line

While disability claims are not (lawfully) supposed to be adversarial, they truly are.  It is you against them.  You forget that rule at your peril.  No claims adjuster is there to help – their intention, and job, is to keep costs down by paying on claims as infrequently as possible.  They do their job the way that you did your job – they aim to do it well.  And doing it well means denying your claim.

The Ninth Circuit Court of Appeals ruled yesterday that, contrary to prior Circuit precedent, the presence of an arbitration provision in an employee benefits plan could compel arbitration.  See, Dorman v. Charles Schwab Corp., Case No. 18-15281 (9th Cir., Aug. 20, 2019).  The plaintiff had filed a class action suit in district court alleging that the defendants, plan fiduciaries, administrators, and employers, had improperly selected proprietary funds for inclusion within the offerings of multiple 401(k) plans, despite their poor performance, and to the detriment of the plans and individual participants.

Relying principally on the holding of American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013), the court ruled that Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), was no longer good law and ERISA claims could be subject to contractually-mandated arbitration.

The relevant arbitration provision, contained within the plan document itself, was wide-reaching, stating that “[a]ny claim, dispute or breach arising out of or in any way related to the Plan shall be settled by binding arbitration….”  The provision also included a waiver of class or other collective action, “even if absent the waiver [the plaintiff] could have represented the interests of other Plan participants. The arbitration provision within the second plan at issue was materially identical.

The plaintiff sought to recover under both ERISA Section 502(a)(2) and (3), “seeking plan-wide relief on behalf of a class comprising all participants in, and beneficiaries of, the Plan at any time within six years of the filing of the Complaint.” The complaint’s claims were focused on violation of ERISA’s prohibited transaction rules through demonstrated preference of inclusion of investment funds affiliated with Schwab, despite mounting evidence of poor performance across benchmarks.

The district court had previously denied the motion to compel arbitration, holding the provisions were inapplicable since enacted after the plaintiff’s participation in the plan ended and that “the claims were ‘claims for benefits’ that were expressly carved out of the arbitration agreement in the Compensation Plan.” Further, the district court ruled that even if the agreements were applicable, they were unenforceable as the plaintiff’s claims were “brought on behalf of the Plan,” not for individual relief, and an individual “cannot waive rights that belong to the Plan, such as the right to file this action in court.”

While the Dorman opinion cites Munro v. University of Southern California, No. 17-55550 (9th Cir., Jul. 24, 2018), multiple times throughout as complimentary, the outcome in Munro was, notably, the opposite of that within Dorman – the Ninth Circuit held that the Plaintiffs, who had been required to sign arbitration agreements as part of their employment contracts, were asserting claims squarely on behalf of their plans and, accordingly, arbitration clauses executed on behalf of the individuals themselves, pursuant to employment contracts, would not compel arbitration of claims clearly brought on behalf of the plans.

Under the Munro court’s holding, employees

seek[ing] financial and equitable remedies to benefit the Plans and all affected participants… including a determination as to the method of calculating losses, removal of breaching fiduciaries, a full accounting of Plan losses, reformation of the Plans, and an order regarding appropriate future investments” are clearly “bringing their claims to benefit their respective Plans across the board, not just to benefit their own accounts as in LaRue.

Munro slip op. at 12-13. The Dorman court was arguably facing a distinguishable analysis on two separate fronts – while the obvious difference is the fact the plans at issue in Dorman contained the relevant arbitration agreement (rather than individual employment agreements, as in Munro), the scope and direction of the separate plaintiffs’ claims would also seem to be critically different.  The Dorman plaintiff was seeking relief which could, conceptually at least, be segregated into an individual claim – ultimately, the recovery of losses sustained on his individual retirement account(s) owing to alleged fiduciary breach, versus the clear plan-wide relief sought in Munro.

But take for instance a hybrid-hypothetical, somewhere between both Dorman and Munro – a class of plaintiffs seeking to litigate claims clearly brought on behalf of their plan (removal of breaching fiduciaries and reformation) yet faced with an arbitration provision contained within the relevant plan itself and barring class-wide or collective arbitration.  Consistent with the Munro holding, an ERISA plaintiff seeking judicial remedy which exists for the benefit of a plan may not alone settle a claim.  Id. at 11.  If arbitration was compelled, would a plan-appointed representative step-in or is that not the position already occupied by a plaintiff bringing a derivative action? Would a split of the individual claims and the ‘clear’ plan relief-related claims be compelled, resulting in the possibility of two distinct resolutions on fact?

The Dorman court also addressed, in a separate memorandum, the effectiveness of an arbitration provision in barring class-wide arbitration of 502(a)(2) claims brought by a plaintiff.  However those claims are, as articulated in the memorandum, and under LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (2008), “inherently individualized when brought in the context of a defined contribution plan….”  Dorman, et al. v. The Charles Schwab Corporation, et al., No. 17-cv-00285, ECF No. 53, at 5-6 (Aug. 20, 2019).

Despite the protections ERISA offers a beneficiary, every now and then relief available outside of the statute tempts a plaintiff to argue against ERISA qualification – in this instance, the plaintiff was a former President and CEO of Safelite Group, Inc.  In 2005, Safelite’s Board of Directors created the Safelite Group, Inc. 2005 Transaction Incentive Plan (“TIP,”) which provided substantial bonus payments to the five Safelite executive participants, dependent on their securing a strategic buyer for the company.

After a likely buyer emerged, the size of the TIP participants’ tax obligations in the event a purchase went through became evident, prompting the board to adopt the Safelite Group, Inc. Nonqualified Deferred Compensation Plan (the “NDCP”).  At the date of its creation, only the four executives who were participants in the TIP were eligible for the Safelite NDCP.

The NDCP allowed its participants to defer two types of income – compensation and TIP amounts.  These deferments were made by individual election forms indicating percentages of TIP Amounts, base annual salary, and bonuses sought to be deferred, as well as the year or years distributions were desired.

Between 2006 and 2014, the plaintiff deferred a total of $9,111,384 – until a federal audit revealed some of his elections failed to comply with a tax statute regulating deferred compensation plans.  The plaintiff brought suit against Safelite, asserting breach of contract and negligent misrepresentation.  In federal court, Safelite asserted in its motion to dismiss that plaintiff’s claims were preempted under ERISA as the NDCP constituted an “employee pension benefit plan” under ERISA Section 3(2)(A)(ii), 29 U.S.C. § 1002(2).  The district court granted the motion but permitted the plaintiff 28 days to amend his complaint.  With no amendment, the district court entered final judgment and the plaintiff appealed.

On appeal the court considered (1) whether the Safelite Plan was an employee pension benefit plan covered by 29 U.S.C. § 1002(2)(A)(ii), and (2) whether the Safelite Plan was exempt from ERISA pursuant to DOL regulation 29 C.F.R. § 2510.3-2(c).

 

Did the NDCP Qualify as an Employee Pension Benefit Plan?

Under ERISA and Sixth Circuit precedent, an employee pension benefit plan must “by its express terms or as a result of surrounding circumstances,” either

(i) provide retirement income to employees, or

(ii) result in a deferral of income by employees for periods extending to the termination of covered employment or beyond…

29 U.S.C. § 1002(2)(A). The court noted that ERISA’s overarching purpose in the scope of EPBP’s is to “protect[ ] monies belonging to plan beneficiaries while such funds are held and managed by others.”  Accordingly, any state law remedy which duplicates or supplements ERISA’s available remedies is preempted.

Attempting to move the plan outside of the scope of preemption, the plaintiff argued that in order to fit within the “results” stratum, a plan “‘must require’ deferrals to the termination of covered employment or beyond.”  The court was not persuaded, noting the difference between “results” and “requires,” as well as Congresses’ use of the actual term “require” within other sections of ERISA.

Was the NDCP an exempt bonus plan under DOL regulations?

DOL regulations exclude “payments made by an employer… as bonuses for work performed, unless such payments are systematically deferred to the termination of covered employment or beyond….” 29 C.F.R. § 2510.3-2(c). The court interpreted the regulation as “envision[ing] bonuses, not pay for regular compensation, such as annual salaries.”  Id. at p. 8.  “A bonus plan may defer payment of bonuses and remain exempt, ‘unless such payments are systematically deferred to the termination of covered employment or beyond, or so as to provide retirement income to employees.’” – Systematic deferral would suggest the payments were not ‘merit’ based but rather an ERISA-exempt proxy for retirement income.

Hoping to slot the plan into the exception, the plaintiff disputed whether the plan actually resulted in a deferral of income by employees for periods extending to the termination of covered employment or beyond.

The court noted that the NDCP “expressly provides for employees to defer income from several sources to the future” and accordingly fit within the meaning of 29 U.S.C. § 1002(2)(A)(ii) and fell outside the ambit of the DOL exclusion.  Id. at 10-11 (Emphasis added). The inclusion of multiple sources of income in the NDCP (general wages and other incentives outside of the TIP amounts) factored into the court’s decision, leading the court to conclude that the “Safelite Plan [was] not designed as a bonus plan and instead distributes deferred amounts of non-bonus income, [therefore] it is not a plan providing for payments made ‘as bonuses for work performed.’”  Id. at 11-12.

Analytics Brings the Past Back to the Future

While the majority opinion was directed toward assessing the ERISA-qualified nature of the plan at issue, the concurrence diverged considerably – advocating for the utility of “corpus linguistics,” crediting it with focusing “on the common knowledge of the lay person by showing us the ordinary uses of words in our common language.”  Id. at 15 (Thapar, J., concurring).

Specific arguments in Safelite may have been novel, but there exists at the very least tens of cases interpreting the provisions at issue here – more interesting perhaps is the potential application of corpus linguistics to the interpretation of plan terms.  Consider an arguably ambiguous term or phrase in a plan which an insured asserts led him or her to reasonably expect a greater level of coverage than that actually provided.  Rather than expecting attorneys and judges to unwind years of legal experience and analyze the language at issue from the perspective of a hypothetical, reasonable reader (one lacking any formal legal training), could not analytics aid in evaluating the general import of a term or phrase at its time of publication?

The concurrence endorses this possibility of a greater incorporation of corpus linguistics into legal analysis, drawing upon millions of examples of everyday word usage” to divine the “ordinary meaning” of language at a particular point in time – with the

corresponding search results… yield[ing] a broader and more empirically-based understanding of the ordinary meaning of a word or phrase by giving us different situations in which the word or phrase was used across a wide variety of common usages… corpus linguistics is a powerful tool for discerning how the public would have understood a staute’s text at the time it was enacted.

* * *

[T]he entire practice of law – and certainly the practice of interpretation – involves judgment calls about whether a particular source is relevant.  And at least with corpus linguistics, those calls can be vetted by the public in a more transparent way.

Responding to another concurring opinion’s suggestion that corpus linguistics is redundant when compared with dictionaries, Judge Thapar notes that rather than a meaning arrived at in an indistinguishable point in time, “corpus linguistics… help[s] pinpoint the ordinary uses of a word at the time a statute was enacted.”

While Judge Thapar was not advocating for contract interpretation to devolve into administration by “automatons of algorithms” (and neither are we), perhaps it is time to introduce a more formulaic – and arguably representative – portrait of the idealized ‘reasonable insured’ into the traditional legal algorithm.

 

For the full opinion, see, Wilson v. Safelite Group, Inc., No. 18-3408 (6th Cir., Jul. 10, 2019)

Recently, we participated in a mediation with a large national insurer who is showing up more and more in our litigation files. Our client is a thirty-year employee who suffered from a terrible spinal condition and failed back surgery. Three medical treating physicians and an independent medical examiner found her totally disabled. One opined she was incapable of ever working again. She drained her 401(k) to pay her living expenses. She has applied for Social Security and is awaiting a decision.

The insurer denied the claim and has paid nothing for two and a half years while this financial wreckage has ensued.

The insurer’s claim denial was based upon a file review performed by a single East Coast doctor who never examined the insured and was contracted through a national vendor. The national vendor has a contractual relationship with the insurer.

The file reviewer’s report lists the medical evidence she claimed to have reviewed which includes MRIs (both actual images and reports). The file reviewer then opines that the restrictions could not be “substantiated” because there were “no MRI reports” in the file. This is not a misprint – the insurance company doctor lists the MRIs in the reviewed materials portion of the report and then somehow writes that those images do not exist.

Obviously, the denial is made in bad faith and is particularly sloppy.

At mediation, the insurer who has paid nothing now argues that the insured should get a mere stipend of because her “estimated” disability income is really the responsibility of the Social Security Administration, and the insurer merely provides a secondary benefit. We told the insurer to take a hike, and we will fight to get the decision and try to set precedent.

Unfortunately, this is the typical scenario in an ERISA group long-term disability case today.

More and more, private disability insurers who collect hundreds of millions in premiums are basically turning over the financial responsibility to the federal government to re-insure these private insurance contracts. Disability insurance companies argue this other income “offsetting” is keeping insurance rates low, but what they omit mention of is that this same “low-rate insurance” is not really insurance at all. All the insured has purchased is the right to apply for Social Security and maybe get a small stipend from the insurer.

The insurers have figured this out. The long-term disability contracts require an application to Social Security to get benefits flowing from the federal government, regardless of whether the insured even qualifies. Long-term disability contracts typically contain a 180-day waiting period (the same as Social Security). These same long-term disability contracts contain a “minimum” benefit usually of $100 per month.

Why do the insurance companies pay a $100 per month? Disability insurers know that an employee earning $40,000.00 a year with one or more dependents is really is never going to collect much private disability insurance, and if they don’t pay just a little something to the insured, the contract will fail for want of consideration. In other words, the contract will fail because the insured is getting nothing in return.

So, you have a long-term disability insurance contract, but do you really have any insurance coverage?

In a sprawling trial opinion following a bench trial, the Northern District of California Federal District Court held that United Behavioral Health’s standard of care guidelines from at least 2013 through 2017 failed to comply with guaranteed terms of insurance, various laws of several states, and overall to “set forth a unified standard that is inconsistent with generally accepted standards of care.”  Wit, et al. v. United Behavioral Health, et al., No. 14-cv-02346, 2019 WL 1033730 at *33 (N.D. Cal. Mar. 5, 2019).

A class of plaintiffs asserted that UBH breached its duties by: “1) developing guidelines for making coverage determinations that are far more restrictive than those that are generally accepted even though Plaintiffs’ health insurance plans provide for coverage of treatment that is consistent with generally accepted standards of care; and 2) prioritizing cost savings over members’ interests.”

The court seized on one of UBH’s chief witness’ testimony, the individual primarily responsible for developing and maintaining the Level of Care Guidelines for over a decade, stating in part that his testimony made “it crystal clear that the primary focus of the Guideline development process… was the implementation of a ‘utilization management’ model that keeps benefit expenses down by placing a heavy emphasis on crisis stabilization and an insufficient emphasis on the effective treatment of co-occurring and chronic conditions.”  Id. at *9.

The company’s internal processing guidelines made processing claims manifestly unfair.  Here the court found “that UBH employees apply the Guidelines as written, that is, their exercise of clinical judgment is constrained by the criteria for coverage set forth in the Guidelines, which are mandatory.”  Id. at *10.

Scrutinizing UBH’s Guidelines, the court found they failed to account for the fact that “in the area of mental health and substance use disorder treatment, there is a continuum of intensity at which services are delivered.”  Id. at *16.

The court articulated seven separate “Generally Accepted Standards of Care” which framed analysis of the challenged UBH guidelines, including:

  • Effective treatment requires treatment of the individual’s underlying condition and is not limited to alleviation of the individual’s current symptoms;
  • Effective treatment requires treatment of co-occurring behavioral health disorders and/or medical conditions in a coordinated manner which considers the interactions of the disorders and conditions;
  • Patients should receive treatment for mental health and substance use disorders at the least intensive and restrictive level of care that is safe and effective;
  • When there is ambiguity as to the appropriate level of care, the practitioner should err on the side of caution by placing the patient in a higher level of care; and
  • Effective treatment of mental health and substance use disorders includes services needed to maintain functioning or prevent deterioration.

The court held that “by a preponderance of evidence… in every level of care that is at issue in this case, there is an excessive emphasis on addressing acute symptoms and stabilizing crises while ignoring the effective treatment of members’ underlying conditions.  While the particular form this focus on acuity takes varies somewhat between the versions, in each version of the Guidelines at issue in this case the defect is pervasive and results in a significantly narrower scope of coverage than is consistent with generally accepted standards of care.”  Id. at *22 (Emphasis added).

 

Problem Number One – An Emphasis on Requiring Improvement

Each of the Guidelines displayed an overemphasis on acuity through requiring that “in order to obtain coverage upon admission, there must be a reasonable expectation that services will improve the member’s ‘presenting problems’ within a reasonable period of time.”  Id. at *23.  The court held that the ‘presenting problems’ requirement, in combination with contemporaneous evidence, “reflects that UBH knowingly and purposefully drafted its Guidelines to limit coverage to acute signs and symptoms.”  Id. at *24.

These defects were present in “all versions of the Guidelines [which] imposed the same ‘presenting problems’ requirement, regardless of whether they used the term ‘acute’ to describe it…”  Id. at *24. Requiring improvement in ‘acute’ symptoms as a sine qua non of continuing treatment fails the standards of care test.

Problem Number Two – The “Why Now” Requirement

Similarly, the UBH Guidelines required a ‘why now’ trigger for coverage, necessitating “acute changes in the member’s signs and symptoms and/or psychosocial and environmental factors leading to admission.”  Id. at *25.

UBH witness testimony attempted to style the ‘why now’ factors as aimed to “focus people more on thinking about the whole person and everything they’re bringing to the point of request for this level of care…” Id. at *25.

The court held the ‘why now’ definition in the Guidelines themselves contradicted this testimony, specifically in that the “definition makes clear that the focus of ‘why now’ is the member’s recent severe changes and that it does not encompass factors related to the member’s chronic condition that are not directly tied to those acute changes.”  Id. Thus, the definition required a recent severe change in a condition.  Further, distinct factors within the UBH Guidelines were duplicative of the ‘why now’ testimonial explanation and evidenced a post-hoc attempt to re-craft the ‘why now’ definition.  Finally, the court also concluded that the chief witness was unconvincing, in that while he stated the ‘why now’ concept was borrowed from “crisis intervention literature,” he was unable to remember any specific sources that addressed the concept, “much less supported his explanation of its meaning.”

For 2014-2016, coverage was predicated on fulfilling the requirements that there was both no less of an intensive setting for treatment to be rendered and that the reason the patient required a higher level of care was the ‘why now’ factors.  The 2015 and 2016 guidelines also incorporated a third requirement that signs, symptoms and environmental factors require the requested intensity of services.

The court held broadly that these requirements failed the standard of care test because they were overly focused on treatment of acute symptoms.  These requirements worked to deny a member coverage, even if the other criteria were met, “if the reason the patient requires the prescribed level of care and ‘cannot’ be treated in a lower level of care is anything other than ‘acute changes in the member’s signs and symptoms and/or psychosocial and environmental factors.”  Id. at *26.  The court was clear that “neither ‘acute symptoms’ nor ‘acute changes’ should be a mandatory prerequisite for coverage of outpatient, intensive outpatient or residential treatment.” The guidelines functionally required that

just as a showing of acute symptoms is necessary for admission to a level of care, the patient must continue to suffer from those acute symptoms for coverage to continue at that level of care… The discharge criteria for the Guidelines in these years further reinforce the rule that treatment services will not be covered once the immediate crisis has passed.

Even more worrisome, “[w]here coverage at a particular level of care has been denied or terminated on the ground that the member’s acute symptoms have been alleviated, services even at a lower level of care may not be covered because of the focus on acute symptoms in the admissions criteria for all levels of care.”  Id. at *27.

Altogether, the application, flawed testimony, and reality of UBH’s Guidelines, particularly in consideration of the ‘why now’ factors, led the court to conclude that “under UBH’s Guidelines patients may be denied coverage at a higher level of care because their acute symptoms have been addressed and it is safe to move them to a lower level of care even though treatment at a lower level of care may not be effective or even covered.”  Id. at *27.

The court further held the UBH “Guiding Principles,” while emphasizing a more holistic focus on the member’s overall well-being, were essentially meaningless: “while these statements of principle are consistent with generally accepted standards of care, they are not incorporated into the specific Guidelines that establish rules for making coverage determinations.”  Id. at *28.

Additionally, the UBH Guidelines failed to take into account the challenges and unique necessity in treatment required of the combined effects of co-occurring conditions:

[D]etermination of the appropriate level of care for the purposes of making coverage decisions should be based only on whether treatment of the current condition is likely to be effective at that level of care whereas treatment of co-occurring conditions need only be sufficient to ‘safely manage’ them or to ensure that their treatment does not undermine treatment of the current condition.  Conversely, the Guidelines omit any evaluation of whether… those conditions complicate or aggravate the member’s situation such that an effective treatment plan requires a more intensive level of care than might otherwise be appropriate.

Id. at *28 (Emphasis added).  The court held that UBH’s witness testimony amounted to nothing more than “post hoc rationalizations for Guidelines that transparently fail to provide for the effective treatment of co-occurring conditions.”  Id. at 29.

 

Failing to Err on the Side of Caution in Favor of Higher Levels of Care

From the viewpoint that “it is a generally accepted standard of care that patients should be placed at the least restrictive level of care that is both safe and effective,” movement to a less restrictive level of care is not justified if “it is also likely to be less effective in treating the patient’s overall condition….”  Id. at *29.  Rather than embrace these principles, UBH’s Guidelines were found to, essentially, actively seek movement of patients to the least restrictive level of care.

Newly adopted annual Guidelines featured separate, additional provisions which “push[ed] patients to lower levels of care even though services at the lower level of care may not be as effective in treating the patient’s condition.”  Id. at *30.[1]  The Guidelines read to improperly direct clinicians to place an emphasis on the safety of a diminishment in level of treatment, rather than on any resultant drop in effectiveness.[2]

Defining the Purpose of Treatment

The court also determined that, beginning in 2014, UBH’s Guidelines displayed a concentrated “drive to lower levels of care, even if they were likely to be less effective in treating a patient’s overall condition,” even in how the Guidelines defined “purpose of treatment.”  Id. at *31.

While effective treatment of mental health and substance use disorders includes treatment “aimed at preventing relapse or deterioration of the patient’s condition and maintaining the patient’s level of functioning[,]” the Guidelines departed from this through requiring both marked improvement in a patient’s condition and that the improvement occur within a “reasonable time,” evidenced through a reduction or control of acute symptoms which necessitated treatment.

While UBH modeled a portion of it’s criteria to measure improvement off of the CMS Manual (a questionable decision alone), it also “modified the language used in the CMS Manual to provide for more limited coverage of services aimed at maintaining level of function.”  Id. at *31.  While the CMS Manual focused any evaluation of improvement on a comparison of “the effect of continuing treatment versus discontinuing it… UBH made important modifications in its Guidelines that focused on acuity and precluded coverage of treatment services aimed at maintenance.”  Id. at *32.  From a meta perspective, UBH shifted the focus from maintenance of perspective to crisis stabilization – thereby depriving its insureds of the right to seek treatment which managed their conditions and allowed them to live their best life in light of those conditions.

 

The court further found that UBH Guidelines violated generally accepted standards of care in:

  • Providing that continued stay criteria was no longer met when a member was unwilling or unable to participate in treatment;
  • Failing to adopt separate level-of-care criteria tailored to the unique needs of children and adolescents, specifically in failing to take into account stages of development and the slower pace at which children and adolescents generally respond to treatment;
  • Failing to provide for coverage at the less severe end of the American Society of Addiction Medicine spectrum; and
  • Consistent with the findings discussed above, through applying a definition of “custodial care” which generally precludes the coverage of services which are aimed at maintaining function.[3]

UBH Guidelines were also held to be out of compliance with the coverage laws of multiple states.

Capping the opinion, the court analyzed UBH’s Guideline Development process, focusing on the “why” and the executive decision-making process behind UBH’s implementation of insufficient coverage criteria.  Among other markers of financial incentives carrying an outweighed impact on the formation process behind the Guidelines, the court noted UBH’s detailed utilization data relating to average length of stay and related monthly targets, UBH’s decision in late 2016 not to amend its Guidelines with respect to Applied Behavioral Analysis, including its CEO’s statement that “[w]e need to be more mindful of the business implications of guideline change recommendations” and UBH’s decision-makers’ repeated refusal to adopt its own clinicians recommendations to integrate the ASAM criteria into its Guidelines.

While the scope of inadequacies in UBH’s coverage guidelines, spanning a period of at least five years, is staggering, perhaps even more sobering is the possibility that the flaws identified by the court are industry standard contractual cost-control mechanisms – private insured nationwide may be routinely denied adequate, necessary treatment on the basis of an overemphasis on evidencing acute improvement and an under emphasis of the treatment and maintenance of underlying conditions.

[1] E.g., the requirement that a member demonstrate “a significant likelihood of deterioration in functioning/relapse if transitioned to a less intensive level of care” for continued coverage essentially requires that coverage be discontinued unless movement to a lower level of care is unsafe, regardless of the effectiveness of treatment at a lower level of coverage.

[2] One of the noted points of agreement between the parties’ experts was that one of the year’s Guideline’s requirement that “clear and compelling” evidence be provided was an “impossible metric.”  Id. at *30.

[3] Under UBH’s Guidelines, “only those services that are expected to reduce or control acute symptoms count as ‘active treatment’ sufficient to avoid a finding that the services are custodial (and consequently excluded from coverage).”