Category Archives: ERISA

Don’t Owe Your Insurer Money – Be Aware of Overpayment Provisions

 

In previous posts, we’ve discussed how insurance companies typically place caps on how much coverage a policyholder can receive.  For physicians and dentists, this typically results in monthly disability benefit amounts that are lower (and sometimes much lower) than the monthly income you would bring in if you were still able to practice.

In some cases, policyholders are able to supplement their income by working in another field, but this is only possible if your policy allows you to work in another occupation.  Alternatively, your policy could contain a “no work” provision, which would foreclose this as an option. And some newer policies even require you to be working in order to collect benefits, so you don’t have a choice–you must find another job if you want to receive your disability benefits each month.

If you are not able to work in another occupation, due to the nature of your disabling condition and/or the contractual terms of your policy, you may be placed in a position where you must either cut expenses, find another source of income, or both.  If you find yourself in this unenviable position, or you are planning ahead and contemplating what you might do in this sort of situation, you will want to keep in mind that some policies–particularly employer-sponsored plans–can contain offset provisions, which allow the insurance company to reduce your monthly benefit if you receive additional income from certain enumerated sources.

What Types of “Other Income” Can Be Offset?

There are many types of income that your insurer might include in an offset provision.  Some examples include:

  1. Social Security benefits;
  2. Pension plans;
  3. Sick leave or a salary continuation plan of an employer;
  4. Income from other disability insurance policies;
  5. Retirement benefits funded by an employer;
  6. Workers’ compensation;
  7. Partnership or shareholder distributions; or
  8. Amounts paid because of loss of earning capacity through settlement, judgment, or arbitration.

The list above is by no means exhaustive and, again, you should carefully review your policy for its specific list of offsets.

What are Overpayment Provisions?

If your policy contains an offset provision, it will also likely contain an overpayment provision.  In most instances, if your policy contains an offset provision, your insurer will be able collect information about your income from other sources prior to issuing the benefit, and calculate the amount due accordingly. However, in some cases this is not possible.

For example, say you applied for Social Security disability benefits.  In some cases, it can take several years before a Social Security determination is made.  Then, at that point, if your claim was approved, you would receive a lump sum of benefits covering the time period from the date of disability you reported to the date your claim was approved.

This is where the overpayment provision kicks in.  If your policy has an overpayment provision, upon learning of the lump sum payment from Social Security, your insurer could potentially require you to pay the entire lump sum of benefits back to your insurance company (depending on the terms of your policy). This is because the lump sum payment represents several monthly payments you would have received over the relevant time frame.  If your insurer paid the full monthly disability benefit for those months and your policy has an offset provision, your insurer will likely ask for the Social Security benefits as payment for the amounts that should have been offset each month over that time period.

What Happens if You Cannot Pay Back the Overpayment in a Lump Sum?

If you are not in a position to pay back an overpayment in a lump sum, your insurer will seek to collect the overpayment amount in other ways.  One way is reducing and/or withholding future benefits until the full amount of the overpayment has been recouped by the insurer.  Your insurer may also work out a payment plan with you, initiate collection efforts against you and/or file suit to recover the overpayment.

The Takeaway

Offset and overpayment provisions can be particularly devastating if you are caught unaware and find yourself with considerably less income than expected, or an obligation to repay a large sum to your insurer.  When selecting a policy, you should try and avoid these types of provisions if at all possible.  If you already have a policy, you should read it carefully, so that you are fully aware of any offsets that could occur and any overpayments that you could potentially be responsible for under the terms of your policy

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The Devil Is In the Details: Long Term Disability Policies and Benefit Offsets

In a previous post, we discussed a feature of long-term disability insurance policies that is easily overlooked and frequently leaves policyholders feeling cheated and deceived by their insurer:  the benefit offset provision.  When a person signs up for a disability insurance policy, he or she expects to pay a certain premium in exchange for the assurance that the insurance company will provide the agreed-upon monthly benefit listed in the policy, should they ever become disabled.  What many people do not realize is that some disability insurance policies contain language that permits the insurer to reduce the amount of monthly benefits it is required to pay if the policyholder receives other benefits from another source.

Worker’s compensation, supplementary disability insurance policies, state disability benefits, and social security are some of the most common “other sources” from which policyholders may unexpectedly find their disability insurance benefits subject to an offset.  The frequency of offset provisions varies by policy type.  They are more likely to appear in group policies and employer-sponsored ERISA policies, and are rarely found in individual disability insurance policies.

Benefit offset provisions can have significant and often unforeseen financial repercussions, as illustrated by the recent account of a couple from Fremont, Nebraska.  As reported by WOWT Channel 6 News, Mike Rydel and his wife Carla were receiving monthly benefits under Mr. Rydel’s disability insurance policy with Cigna.  Mr. Rydel had suffered a stroke in the fall of 2015 that had left him incapacitated and unable to work.  The Rydels’ financial situation was made even more dire by Mr. Rydel’s need for 24-hour care, which prevented Mrs. Rydel from working as well.

In an effort to supplement his family’s income, Mr. Rydel applied for Social Security disability benefits.  When his claim was approved, the Rydels expected a much needed boost to their monthly income.  Unfortunately, due to an offset provision in Mr. Rydel’s policy, his monthly benefits under the Cigna policy were reduced as a result of the approved Social Security claim, and his family did not realize any increase in income.

The Rydels were understandably shocked when they were informed by Cigna that Mr. Rydel’s monthly disability insurance benefits would be reduced by the amount he was now receiving from Social Security, and that Cigna would be pocketing the difference.  Perversely, the only party that benefited from Mr. Rydel’s SSDI benefits was Cigna, which was off the hook for a portion of Mr. Rydel’s monthly benefits.  In response to an inquiry from WOWT, Cigna simply asserted that “coordination” of private insurance benefits and government benefits was a long-standing practice – an assurance that likely provided no solace to the Rydels.

The Rydels’ story highlights the importance of carefully reviewing every aspect of your disability insurance policy before signing.  Benefit offsets, policy riders, occupational definitions, and appropriate care standards in your policy can significantly impact your ability to collect full benefits if you become disabled.  You should review your policy carefully to determine if it contains any offset provisions that may affect your benefits.  If it does, you will need to take them into account when estimating your monthly benefits.

References:

http://www.wowt.com/content/news/Stroke-Victim-Suffers-Disability-Insurance-Set-Back-385758411.html

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Case Study: Mental Health Disability Claims – Part 2

In Part 1 of this post, we started looking at a case involving a mental disability claim where the court reversed Unum’s claim denial under ERISA de novo review. In Part 2, we are going to look at how the same court determined the extent of claimant’s benefits.

Turning back to the Doe case we examined in Part 1, after the court reversed the denial, the parties could not agree on the amount of benefits claimants was entitled to. In previous posts, we have discussed how many policies have a mental health exclusion that limits recovery to a particular period—usually 2-3 years. Unfortunately for our claimant, he had such a provision in his policy, which provided that his “lifetime cumulative maximum benefit period for all disabilities due to mental illness” was “24 months.”[1]

Not surprisingly, Unum invoked this provision and asserted that it only had to pay benefits for a 24 month period. The court agreed, for several reasons:

  • To begin, the policy defined “mental illness” as “a psychiatric or psychological condition classified in the [DSM], published by the American Psychiatric Association, most current at the start of disability.” All of claimant’s conditions (major depression, OCD, ADHD, OCPD, and Asperger’s) were classified in the DSM-IV.
  • Claimant attempted to assert that his disability was not a “mental illness” because it was “biologically based.” Id. While this type of argument had been accepted by some other courts, the court in Doe determined that it was not convincing in this particular instance because the claimant’s policy expressly defined “mental illness” as a condition classified in the DSM-IV. The court also noted that DSM-IV itself notes that “there is much ‘physical’ in ‘mental’ disorders and much ‘mental’ in ‘physical’ disorders” Id.
  • Accordingly, the court concluded that because the policy was “concerned only with whether a condition is classified in the DSM,” whether claimant’s conditions had “biological bases” was “immaterial.”

Thus, even though the Doe claimant was successful in obtaining a reversal of the claim denial, in the end, he only received 24 months of benefits due to the mental health exclusion.

If you are purchasing a new policy, you will want to avoid such exclusions where possible. If you have a mental disability and are concerned about your chances of recovering benefits, an experienced disability insurance attorney can look over your policy and give you a sense of the likelihood that your claim will be approved, and the extent of the benefits you would be entitled to.

[1] See Doe v. Unum Life Ins. Co. of Am., No. 12 CIV. 9327 LAK, 2015 WL 5826696 (S.D.N.Y. Oct. 5, 2015).

 

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Case Study: Mental Health Disability Claims – Part 1

In a previous post, we have discussed how ERISA claims are different from other disability claims. We have also looked at an ERISA case involving “abuse of discretion” review. However, there is another type of review under ERISA—“de novo” review. Unlike abuse of discretion review, under de novo review, the court assesses the merits of the disability claim without affording any deference to the insurer’s decision. Whether your claim is governed by abuse of discretion review or de novo review will depend on the terms of your plan. An experienced disability attorney can look at your policy and let you know which standard will apply.

In this post, we will be looking at two things. First, we will be looking at a case where the court reversed the denial of benefits under de novo review. Second, we will be looking at some of the issues that commonly arise in mental health disability claims. In Part 1, we will be looking at the initial determination made by the court regarding whether the claimant was entitled to benefits. In Part 2, we will be looking at how the court determined the amount of benefits the claimant was entitled to.

In Doe v. Unum Life Insurance Company of America[1], the claimant was a trial attorney with a specialty in bankruptcy law. After several stressful events, including his wife being diagnosed with cancer, claimant started experiencing debilitating psychological symptoms. The claimant was ultimately diagnosed with anxiety, major depression, obsessive compulsive disorder (OCD), attention deficit hyperactive disorder (ADHD), obsessive compulsive personality disorder (OCPD), and Asperberger’s syndrome. He filed for long term disability benefits, but the insurer, Unum, denied his claim. The court reversed Unum’s claim denial under de novo review, for the following reasons:

  • First, the court found the opinions and medical records of the claimant’s treatment providers to be “reliable and probative.” Id. More specifically, the court determined that claimant’s conditions fell within the expertise of the treating psychiatrist and that the psychiatrist’s conclusions were corroborated by neuropsychological testing.
  • Second, the court determined that the opinions provided by Unum’s file reviewers were not credible or reliable. The court noted that while Unum’s in-house consultants claimed that the neuropsychological testing did not provide sufficient evidence of disability, the single outside independent reviewer hired by Unum concluded the opposite and determined that there was no evidence of malingering and that the tests were valid.
  • Finally, the court rejected Unum’s argument that claimant’s psychiatrist should have provided more than a treatment summary. The court determined that this was “a problem of Unum’s own making,” because the evidence showed that Unum expressly stated in written correspondence that it was willing to accept a summary of care letter in lieu of the claimant’s original medical records.

Stay tuned for Part 2, where we will look at how much benefits the claimant actually ended up receiving.

[1] No. 12-CV-9327 LAK, 2015 WL 4139694, at *1 (S.D.N.Y. July 9, 2015).

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Case Study: Abuse of Discretion Under ERISA

In previous posts, we have discussed how it is oftentimes harder to collect under ERISA policies. One of the primary reasons ERISA claims are more difficult is the fact that in most ERISA cases courts are required to defer to the insurer’s decision unless the insurer “abused its discretion.” Under the abuse of discretion standard, an insurer’s decision is only reversed if the claimant can demonstrate that the insurer’s actions were “arbitrary and capricious.” This is a high standard to meet.

While ERISA claims can be more difficult, particularly under the “abuse of discretion” standard, they are not impossible. Sometimes a court will determine that the insurer did, in fact, abuse its discretion. In this post, we will be looking at the recent court case Jalowiec v. Aetna Life Insurance Company[1] to illustrate some of the things that a court may find to be an abuse of discretion.

In Jalowiec, the claimant suffered from chronic migraine headaches, dizziness, nausea, vertigo, insomnia and fatigue after suffering a blow to the back of his head at a Tae Kwon Do event. After over a year of testing and treatment, the claimant was initially diagnosed with postural orthostatic tachycardia syndrome (“POTS”). Later on, claimant was diagnosed with an “unspecified disorder of autonomic nervous system.”

The insurer, Aetna, initially awarded the claimant short term disability benefits, but subsequently denied claimant’s claim for long term disability benefits. Ultimately, the court determined that Aetna’s denial of long term disability benefits was an abuse of discretion, for the following reasons:

  • Aetna changed the classification of claimant’s occupation multiple times throughout the claims process, from “sedentary” at the short term disability phase, to “light’ at the initial stages of the long term disability claim, and then back to “sedentary” in order to deny the claim.
  • Aetna relied on file reviews conducted by reviewers who were relying on incorrect and incomplete information about the claimant’s job classification (i.e. that the job was “sedentary,” not “light”).
  • Aetna relied on file reviews conducted by reviewers who did not have the proper expertise to review claimant’s diagnosis of “unspecified disorder of autonomic nervous system.”
  • Aetna relied on file reviews that were not based on informed consultation with the claimant’s treating physicians.

These are just a few examples of things that courts have found to be an “abuse of discretion” under ERISA. Remember, the law in each jurisdiction varies, so the courts in your state may not necessarily agree with the court in this case. An experienced disability insurance attorney should be able to give you a sense of whether a court would uphold or reverse your claim denial, under ERISA or otherwise.

[1] No. CV 14-4332 (DWF/LIB), 2015 WL 9294269, at *1 (D. Minn. Dec. 21, 2015).

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Case Study: Can You Sue Your Insurer For Emotional Distress?

At least one court thinks so. In Daie v. The Reed Grp., Ltd.[1], the claimant was denied long term disability benefits under an ERISA plan. Instead of merely asking the court to reverse the denial of benefits (a result that can be difficult to achieve under ERISA), claimant filed a complaint in state court alleging intentional infliction of emotional distress.

The claimant asserted that the insurer “repeatedly engaged in extreme and outrageous conduct with the aim of forcing plaintiff to drop his claim and return to work.”  Id. More specifically, the claimant alleged that the insurer had falsely claimed the claimant was “lying” about his disability and “exaggerating” his symptoms. Id. According to the claimant, the insurer had also urged claimant to take “experimental medications,” induced claimant to “increase his medications,” forced claimant “to undergo a litany of rigorous medical examinations without considering their results,” and pressured claimant “to engage in further medical testing that it knew would cause . . . pain, emotional distress and anxiety.” Id.

The insurer filed a motion to dismiss, arguing that ERISA preempted claimant from bringing the state law claim. The court denied the motion to dismiss for two reasons. First, the court determined that the claim was based on “harassing and oppressive conduct independent of the duties of administering an ERISA plan.” Id. Second, the court determined the insurer had a “duty not to engage in the alleged tortious conduct” that existed “independent of defendants’ duties under the ERISA plan.”  Id.

The federal court then sent the case back to state court, where, as of the date of this post, the state court has not yet determined whether claimant should be awarded damages for emotional distress.

At this point, this ruling has only been adopted by the District Court, and not the Court of Appeals, so it is not binding upon other courts. However, it could potentially persuade other courts to recognize similar claims. It will be interesting to see how many other courts follow suit, and whether this ruling will ultimately be adopted by courts at the appellate level.

[1] No. C 15-03813 WHA, 2015 WL 6954915, at *1 (N.D. Cal. Nov. 10, 2015).

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DOL Proposes Changes to ERISA

In prior posts, we have noted that employer-sponsored disability plans are generally governed by ERISA. We have also discussed some of the challenges claimants may face when filing a claim under ERISA.

Recently, the Department of Labor (DOL) proposed some new regulations that could make filing a claim under ERISA more claimant-friendly. If finalized, the regulations will change several aspects of the claims process under ERISA. Some of the most notable changes are as follows:

  • At both the initial claim stage and the appeal stage, insurers will have to provide a detailed explanation for their denial, including their bases for disagreeing with the claimant’s treating physician, the Social Security Administration, and/or other insurers who are paying benefits under other policies the claimant may have.
  • Insurers will have to notify claimants at the initial claim phase that the claimant is entitled to receive and review a copy of their claim file (right now, insurers only have to do this at the appeal stage).
  • During the appeal stage, insurers must automatically provide claimants with any new information that was not considered at the initial claim stage so that the claimants can review and respond to the new information.
  • If an insurer violates the new rules (and it is not a minor violation) claimants can file suit immediately and the court must review the dispute de novo (i.e. without giving special deference to the insurer’s claim decision).

Some of these rules have already been established by case law, but as of right now, they are not uniformly applied across the country. If the DOL moves forward and finalizes the regulations, insurers and plan administrators will have to uniformly comply with these new rules when administrating ERISA claims.

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What to Do When Your Disability Insurance Claim Is Denied

claim denied man - black and white

A large part of our practice consists of helping physicians and dentists whose disability insurance claims have been denied or terminated.  When our clients come to us, we carefully analyze their medical records, the claim file, and the law to craft a specific strategy for getting the insurer to reverse its adverse determination.  Unfortunately, we sometimes find that in between receiving notice that their claim has been denied or terminated and getting in touch with our firm, doctors will inadvertently take actions that prejudice their claims.  With that in mind, it’s important to review what to do and what not to do in the first few days after your claim is denied or terminated.

  1. In all likelihood, you will first find out that your insurer is denying or ending your disability benefits via a telephone call from the claims consultant who analyzed your claim.  As we’ve explained before, the consultant will be taking detailed notes about anything you say during that call.  Therefore, even if you are justifiably upset or angry, be very mindful of what you say.  Anything you tell the consultant will certainly be written down and saved in your file.
  2. During the call with your consultant, make your own notes.  You don’t have to ask a lot of questions at this stage, but you do want to make sure to record whatever information the consultant gives you.
  3. Following the phone call, you should receive a letter from the insurance company stating that it has denied your claim or discontinued your benefit payments.  According to most state and federal law, the letter should have a detailed explanation of the evidence the company reviewed and why the insurer thinks that evidence shows you aren’t entitled to benefits.  When you receive the letter, read through it carefully.  Make notes on a separate document about any inaccuracies you identify.
  4. Make sure you keep a copy of the denial or termination letter as well as the envelope it came in.  You should also make a note of the date on which you received the letter.  The date the letter was actually mailed and received could be important to your legal rights in the future.  Then, the best thing to do is to scan the documents electronically or make a photocopy for your file, just in case the original denial letter gets lost or damaged.
  5. Once you find out that your claim has been denied or terminated, you should contact a disability insurance attorney.  Some doctors and dentists attempt to handle an appeal of their claim on their own, but we strongly suggest at least consulting with a law firm.  Every insurance  company has its own team of highly-trained claims analysts, in-house doctors, and specialized insurance lawyers to help it support the denial of your claim.  Having your own counsel can level the playing field by making sure you know your rights under your policy and what leverage the applicable law provides you, and help you avoid the common traps that insurance companies lay for claimants on appeal.
  6. The lawyer you consult can be in your area, or it can be a firm with a national practice that’s physically located in another state.  You may want to review these questions to ask potential attorneys before you decide who you would like to represent you.
  7. Whatever attorney you choose to contact, make sure you do so as soon as possible.  In many circumstances, you will only have a limited amount of time to appeal the insurance company’s decision.  Particularly in claims governed by the federal law ERISA, the clock starts ticking as soon as you find out your claim has been denied or terminated.
  8. It’s usually best to contact an attorney before you respond to the denial letter, to avoid saying anything that could prejudice your appeal.  For instance, if you have a policy that is governed by ERISA, and you submit some additional information, the insurance company may not allow you to submit any additional information after your initial response.
  9. Before you meet with potential disability insurance lawyers, gather whatever documents you can to help them evaluate what’s going on with your claim.  Our firm will always want to review the insurance policy or policies.  (Here’s information on how to get a copy of your policy). We typically also like to see your relevant medical records and any correspondence between you and your insurance company.  If you aren’t able to locate this information, it could cause delays in starting the appeal process.
  10. If you are a physician or dentist that is totally disabled, you should not try to go back to work just because your insurance company thinks you don’t qualify for benefits.  Trying to practice when you aren’t in a physical or mental condition to do so could cause you to re-injure yourself or accidentally harm your patients.  Of course, trying to work on patients after you’ve claimed that you are totally disabled can expose you to professional liability as well.  Further, trying to return to work could impair your ability to collect your benefits upon appeal.
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CIGNA fined in Multi-State Regulatory Settlement Agreement Re Group Long-Term Disability Claims Handling; Some CIGNA Claims to be Re-Evaluated

Following a Targeted Market Conduct Examination of CIGNA’s disability insurance claims handling practices, CIGNA companies — Life Insurance Company of North America, Connecticut General Life Insurance Company, and Cigna Health and Life Insurance Company (fka Alta Health and Life Insurance Company) — entered into a Regulatory Settlement Agreement in May 2013 with the California Department of Insurance, the Connecticut Department of Insurance, the Maine Bureau of Insurance, the Massachusetts Division of Insurance, and the Pennsylvania Insurance Department.  Insurance regulators of other states may adopt the terms by becoming a Participating State.  As of this time, Arizona is not amongst the Participating States.

The targeted market conduct examinations were initiated by the Maine Superintendent of Insurance and the Massachusetts Commissioner of Insurance in 2009 to investigate whether CIGNA’s claim handling practices conformed with the standards upheld by the National Association of Insurance Commissioners.  The regulatory concerns raised by the initial examinations prompted Connecticut and Pennsylvania’s insurance commissioners to open similar examinations and for the California Department of Insurance to reopen its 2006 examination.

As a result of the examination, the CIGNA companies were ordered to pay fines in the amounts of $500,000.00 to the California Commissioner of Insurance, $175,000.00 to the Maine Superintendent of Insurance, and $250,000.00 to the Massachusetts Commissioner of Insurance, and to take certain corrective actions in the handling of group disability insurance claims, to include:

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When Are Internal Insurer Memos Discoverable?

The recent 9th Circuit case Stephan v. Unum Life Insurance provides new guidance on when an insurance company’s internal documents may be discoverable.

Mark Stephan, a resident of California, suffered a bicycle accident that injured his spinal cord, rendering him quadriplegic. He filed for total disability benefits under his employer-sponsored Unum disability insurance policy, which was part of a plan governed by ERISA.

Mr. Stephan’s policy required Unum to pay him a benefit equal to a percentage of his pre-disability earnings. When Unum calculated how much Mr. Stephan was earning, it included his monthly salary, but not his annual bonus. This allowed Unum to calculate a much lower earnings rate—and thus a much lower amount that Unum had to pay in disability benefits.

Mr. Stephan sued Unum, seeking to overturn its benefit determination. After the trial court found in Unum’s favor, Mr. Stephan appealed, and the 9th Circuit Court of Appeals examined his case. Continue reading When Are Internal Insurer Memos Discoverable?

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