Western Michigan University-Cooley Law Review has published an article authored by J.J. Conway, Esq. and Trever M. Sims analyzing the Wilkins v. Baptist Healthcare Systems decision and its impact on ERISA benefits dispute resolution within the Sixth Circuit. The article, published in WMU-Cooley Law Review’s Summer 2018 issue, serves in part as a 20-year retrospective of what was, at the time, a concurring opinion in a seemingly routine disability benefits dispute. The article is entitled “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).”

The typical scenario in a benefits claim works something like this:  An employee becomes ill or injured.  An employee takes a medical leave of absence.  If the employer has sponsored a disability program, a claim for benefits is filed.  If there is a short-term disability plan, that benefit program may or may not be ERISA-qualified.  If the condition continues past the short-term period, then a claim would normally be expected to transition into a long-term disability claim. Often, the short-term disability claims administrator is also the administrator (and perhaps the insurer) for the long-term program.

In practice however, the rules and regulations applicable to disability claims tend to complicate matters.   If, for example, the short-term disability claim is denied or prematurely terminated, an appeal period is triggered. The appeal period runs 180 days, which can overlap with the commencement of the long-term disability coverage.

This is where trouble can start.

Sometimes a plan is written so there is a seamless transition from short-term to long-term disability.  The long-term disability benefit period will not start until the short-term benefit claim has been exhausted or paid out in full.   In other words, the filing of the short-term application will preserve an employee’s right to long-term disability benefits.  Sometimes, an application must be filed, regardless.

That is what the disability claimant in Kennedy v. Life Ins. Co. of North America, 718 Fed. Appx. 409, 410 (6th Cir. 2018) found out, the hard way, in a recent Sixth Circuit Court of Appeals decision.  In Kennedy, the claimant was receiving short-term disability benefits but had yet to file a claim for long-term disability benefits.  According to the Court, the “the first time” long-term disability was ever mentioned was in a demand letter, not an application. As a consequence, in a terse opinion, the Court affirmed the claim’s dismissal.  Writing for the majority, Judge Thapar wrote:

The district court was right: Kennedy never applied for long-term benefits. The first time he even mentioned long-term benefits was in his attorney’s letters—both of which came long after any such claim was due under the plan’s terms. Kennedy therefore failed to exhaust LINA’s administrative process.”  Id. (citing Garst v. Wal-Mart Stores, Inc., 30 Fed. Appx. 585, 593 (6th Cir. 2002)).

Bottom line: always file the long-term disability application or secure a written confirmation from the plan that the long-term disability claim is preserved while the short-term claim is being evaluated or appealed.

The U.S. Department of Labor has decided to implement ERISA disability benefits claims regulations. The regulations were proposed at the end of 2016, with a scheduled January 1, 2018 effective date.  The regulations were designed to ensure various due process protections of ERISA disability claimants under 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503-1, as well provide guidelines for claims administrators for the treatment of certain evidence submitted in support of disability claims. The regulations are set to take effect on April 1, 2018 and will be applicable to all claims filed after that date.

On January 5, 2018 the USDOL announced the implementation would be delayed in order to assess the reasonableness of the regulation. The announcement issued by the USDOL stated:

The Department announced a 90-day delay of the applicability date of the final rule – from Jan. 1, 2018, through April 1, 2018 – to give stakeholders the opportunity to submit data and information on the costs and benefits of the final rule. The Department received approximately 200 comment letters from the insurance industry, employer groups, consumer advocates, and lawyers representing disability benefit claimants, all of which are posted on the Department’s website. Only a few comments responded substantively to the Department’s request for quantitative data to support assertions that the final rule would drive up disability benefit plan costs by more than the Department had predicted, cause an increase in litigation, and consequently reduce workers’ access to disability insurance protections.

Notably, the USDOL announcement also stated:

The information provided in the comments did not establish that the final rule imposes unnecessary regulatory burdens or significantly impairs workers’ access to disability insurance benefits.

The Summit previously discussed the changes in-depth in a prior post, which may be found here.

The Tort Trial & Insurance Practice Section of the American Bar Association has published an article authored by J.J. Conway, Esq. discussing the history and usage of Social Security Disability Insurance awards in long-term disability insurance cases.  The article, published in the Health and Disability Law Committee Newsletter, discusses the interplay between Social Security Disability Insurance Benefits and ERISA long-term disability benefits from both a financial and evidentiary standpoint. The article is entitled, “Tracing the Evidentiary Path of Social Security ‘Other Income’ Offsets in Disability Cases Through Statutes, Case Law, and Regulations.” (Winter 2017). The article is available here, Tracing the Evidentiary Path of Social Security Other Income Offsets in Disability Cases

The Litigation Section of State Bar of Michigan has published an article authored by J.J. Conway, Esq. discussing the importance of developing a theory of the case early in the litigation process.  The article, published in the The Litigation Journal, discusses ways that litigators should formulate a theory of the case early in the pretrial process in order to litigate more effectively. The article is entitled, “A Strong Theory of the Case: The Faster It Is Developed, The Better The Results” (Fall 2017). The article is available here, The Litigation Journal (Fall 2017) – A Strong Theory of the Case

J.J. Conway was a featured speaker at the State Bar of Michigan’s Annual Meeting and NEXT lawyer development conference held in the Cobo Convention Center in Detroit, Michigan on Friday, September 29, 2017. Conway made presentation to new attorneys and those interested in self-employment in a presentation entitled, Hanging Out Your Shingle in 2017.  Conway has presented similar lectures to the State Bar Annual Meeting’s attendees in Grand Rapids, Lansing, and Detroit at prior annual meetings. He has also written on the topic for various legal publications.

The Michigan Court of Appeals has held that, for the purposes of a claim under the Court of Claims Act, the statute of limitations may begin to run prior to any actual deprivation of financial benefit.

In Bauserman v. Unemployment Insurance Agency, No. 333181 (Mich. Ct. App. Jul. 18, 2017), the Michigan Unemployment Insurance Agency (defendant) appealed a trial court’s decision denying the defendant’s motion for summary disposition.  The Court of Appeals held that a violation of the Court of Claims Act did exist, reversing the trial court’s decision.

The dispute centered on the defendant’s use of an automated decision-making system to both “detect and adjudicate suspected instances of employment benefit fraud.”  Id. at 1.  Once the system ‘detected’ an instance of benefit fraud, it would issue a notice and questionnaire in regards, either to the employee’s home address or an online unemployment portal which was rarely, if ever, accessed by employees.  Following the notice, defendant would routinely “intercept” tax refunds, garnish wages and initiate collection activity through a court of law.  Id. at 2.

Plaintiffs alleged that the Unemployment Insurance Agency’s use of “an automated decision-making system for the detection and determination of fraud cases, whereby the computer code in the automated decision-making process contains the rules that are used to determine a claimant’s guilt, and those rules change the substantive standard for guilt or are otherwise inconsistent with the requirements of due process.”  Id. at 8.

The Court of Claims Act, MCL 600.6431(1), provides, in relevant part, that “[n]o claim may be maintained against the state unless the claimant, within 1 year after such claim has accrued, files in the office of the clerk of the court of claims either a written claim or a written notice of intention to file a claim against the state or any of its departments….”  In actions for property damage or personal injuries, the claimant only has “6 months following the happening of the event giving rise to the cause of action” to file a written claim.  MCL 600.6431(3).

The court identified the determinative question as “what event gave rise to [the plaintiffs’] cause of action.”  Bauserman at 5.  The triggering event was either when the defendant issued notices informing the plaintiffs they were disqualified from receiving unemployment benefits or when the defendant actually seized the plaintiffs’ property.  Id.

In McCahan v. Brennan, the court held that MCL 600.6431 is to be “understood as a cohesive whole.  Subsection (1) sets forth the general rule, for which subsection (2) sets forth additional requirements and which subsection (3) modifies for particular classes of cases that would otherwise fall under the provisions of subsection (1).”  492 Mich. 730, 742 (2012).  Thus, while subsection (1) of MCL 600.6431 may provide a longer time frame to file a notice with the Court of Claims, subsection (3) shortens the time period for applicable claims to six months after the plaintiff’s cause of action accrues, or “when the wrong on which they base their claims was done.”  Bauserman at 7.

The Bauserman plaintiffs alleged a violation of the Michigan Constitution, Article 1, § 17, which provides that “[n]o person shall be… deprived of life, liberty or property, without due process of law….”  Specifically, the plaintiffs alleged that the defendant failed to “follow the minimum due process standards required under federal law with respect to the collection of unemployment debts, including overpayment and penalties.”  Id. at 8.

The court held that while the plaintiffs claimed “the wrong on which their claims are based took place when defendant intercepted federal and state tax refunds, garnished their wages and forced repayment of unemployment benefits[,]” the alleged wrong actually took place “when defendant issued notices informing plaintiffs of its determination that plaintiffs had engaged in fraudulent conduct, and they were not given the requisite notice and opportunity to be heard.”  Id. at 9.  Therefore, the “economic deprivation” encountered by the plaintiffs was a secondary result of the original deprivation of due process, and not the proper point to adjudge the applicable statute of limitations.  Id.  Therefore, it was the notification of the deprivation of unemployment benefits, not the actual seizure of said benefits, which constituted the statutory point of claim accrual.

The Bauserman court cited Frank v. Linkner, a 2017 Sixth Circuit decision, which held in part that a plaintiff’s claims could accrue prior to a plaintiff incurring “calculable financial injury….”  894 NW2d 574 (2017) (Docket No. 151888), slip op at 14.

Following this decision, it is clear that a plaintiff’s pre-suit inquiry into the possible statute of limitations for claims arising against the State of Michigan must not be limited simply to the date the actual harm accrued, but should also account for any conduct preceding the harm which may have actually triggered the statutory cause of action.

In twenty years of handling employee benefit disputes, I have made a few observations of the ways to keep a long-term disability insurance claim in “approved status” or “open” as insurance companies say. A disability claimant’s medical file should include accurate and documented history of disability and should always be up to date. A disability claimant should avoid common pitfalls that can doom an otherwise valid claim.

Employees who file for disability insurance benefits have legitimate and provable claims. Many wait until their medical situations become unbearable before beginning the disability claims process. So why are so many claims denied by disability insurance companies? The reason is simple.

The filing of a long-term disability claim is an adversary process, and given this reality, appearances matter.

The claims departments of long-term disability insurers are populated with adjusters who believe that people seeking disability benefits do not want to work. In some of the most serious medical cases our firm has handled, the insurers have denied the claims for patently absurd reasons, bred of a kind of cynicism rather than objective factual consideration. A claimant seeking disability benefits cannot make the insurance company’s job easier. The interests are adverse. It is best to accept this, not fight it, and to adjust to avoid common claims filing mistakes.

What can a claimant do to make the process smoother?

1.Stop Using Social Media Now. Searching social media sites is the new weapon of choice in disability claims departments. Online searches are replacing surveillance as the preferred form of “gotcha” by the nation’s insurer. Claims files now regularly contain public images downloaded from Facebook or Instagram that are cited as evidence that a disabled claimant is essentially leading a normal life and should be able to work. We have written before about this before in the Summit. (See Long-Term Disability Insurance Update: An Online ‘Friend You May Not ‘Like’.)  Often, claimants do not heed the warning. Social media in this context is misleading. Unless a post is time-tagged, it is difficult to determine whether a posted picture of the claimant was taken recently (i.e., while claiming disability benefits) or years earlier. Sometimes insurers do not produce these materials until after a long-term disability appeal is filed, to deny the claimant the opportunity to explain the images or provide some context such as, ‘this photo was actually taken before I became sick.’ We can longer recommend a middle ground, sign off social media until the claim is over.

2. Reasonable Requests for Information Are Reasonable. Many claimants have experienced long delays in payment after they initiated a claim. Once the claim is approved, they are surprised when the insurer then asks for subsequent medical updates. Providing updates every year is likely to be found to be reasonable by a court unless there are some unique circumstances. By contrast, requesting monthly or bimonthly is likely to be found to be excessive.

3. Keep All Doctor Appointments.  A doctor’s appointment has a primary and secondary function.  The primary function is obviously to address and care for your medical condition. The secondary function is  to document (medically) the history of restrictions and limitations.  A claimant must be candid and forthcoming with treating doctors about how a condition is affecting one’s life.  Having a contemporaneous record of one’s health struggles will greatly assist in both the approval and continuation of a claim.

4. If You Can Work, Work. Many policies provide for partial or rehabilitative disability benefits. This means that if a claimant returns to work on a part-time basis, the insurer will make up the financial difference between the amount of the monthly disability benefit and the pay received from part-time employment.

5. Two Wrongs Don’t Make a Right: Just Because Disability Insurers Lie, Never Stop Telling the Truth. Honesty is at the heart of any successful disability claim.  Honesty requires the truthful explanation of what limits a claimant’s ability to work. A claimant need not exaggerate any symptoms, but simply explain why a condition prevents performing the duties of a certain job.  For example, a cashier with a serious wrist injury can easily explain how that condition (loss of movement) prevents the regular performance of an essential job duty (counting back change).

These are but a few suggestions for taking a practical approach a disability claims and minimizing the adversity that exists between claimant and insurance company during the process.

The State Bar of Michigan has published an article authored by J.J. Conway, Esq. discussing the judicially mandated administrative claims process required by ERISA Section 503, 29 U.S.C. 1133.  The article, published in the Michigan Bar Journal, discusses ways that claimants may use the pretrial process more effectively. The article is entitled,”The Private Resolution of Employee Benefit Disputes: Section 503 and the Meaning of Evidentiary Materials in ERISA Cases”  (Sept. 2016). The article is available here.

J.J. Conway has been named a 2017 SuperLawyer by Thomson Reuters.  J.J. has been listed as SuperLawyer or SuperLawyer Rising Star on ten occasions. SuperLawyers is a “rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer-recognition and professional achievement.” The selection process “includes independent research, peer nominations, and peer evaluations.” www.superlawyers.com.

For more information and to view J.J.’s Superlawyer profile, please visit:
J.J. Conway’s SuperLawyer Profile.

J.J. Conway Law is an employee benefits law firm representing clients in the matters involving ERISA, pension, long-term disability insurance, healthcare, life insurance, as well as other benefit matters. Based on Royal Oak, Michigan, the firm represents clients throughout the United States in ERISA and employee benefits matters, including complex benefit class action cases.