Pennsylvania and California Market Conduct Examinations of Guardian Life Insurance Company/Berkshire Life Insurance Company
Pennsylvania: On February 28, 2013, the Commonwealth of Pennsylvania Insurance Department issued a report on its Market Conduct Examination of Guardian Life Insurance Company during the period of January 1 – December 31, 2010. Guardian Life Insurance Company is also commonly known by the name of its subsidiary Berkshire Life Insurance Company of America and is one of the nation’s largest providers of disability insurance.
While Pennsylvania’s market conduct examination reviewed both Guardian health insurance and individual disability insurance in order to ensure compliance with Pennsylvania laws and regulations, for purposes of this blog we will only summarize the Insurance Department’s findings relating to Guardian/Berkshire’s individual disability insurance claims handling.
The claims review portion of the Market Conduct Examination consisted of reviewing Berkshire’s claim manuals and reviewing the claim files for any inconsistencies which could be considered discriminatory, specifically prohibited by statute or regulation or unusual in nature. The Department of Insurance noted 17 violations and further noted that Berkshire’s claims handling documents did not adhere to the examination because their procedures had changed during the examination period but the prior records were not retained. “The company indicated to the department that when new claim procedures or manuals are updated, the prior editions are not retained.” In this digital age, it is difficult to understand why prior records could not and would not be retained.
The Department of Insurance also raised a Department Concern that, “[Berkshire] should implement guidelines and standards to avoid any potential discriminatory action in the processing and handling of claims relevant to reservation of rights and advance payment.”
Finally, the Pennsylvania Department of Insurance found Guardian/Berkshire in violation of the regulation that “every insurer shall completion investigation of a claim within 30 days after notification of a claim . . . If the investigation cannot be completed within 30 days, and every 45 days thereafter, the insurer shall provide the claimant with a reasonable written explanation for the delay and state when a decision on the claim may be expected.”
A full copy of the Pennsylvania Market Conduct Examination of Guardian Life, as well as Guardian’s response to same, is available at the following link (in PDF format): Guardian-PA Market Conduct Exam 2013
California: On October 19, 2009, the California Department of Insurance issued a report regarding the results of its limited desk examination of the claims, rating, and underwriting practices of Berkshire Life Insurance Company of America during the period of May 1, 2008 through April 30, 2009. The Department of Insurance found that Berkshire was in violation of California Code of Regulations § 2695.6(b) which requires that “All licensees shall provide thorough and adequate training regarding the regulations to all their claims agents. Licensees shall certify that their claims agents have been trained regarding these regulations and any revisions thereto…” Berkshire Life responded that it did not certify that its claims adjusters had received the required training in accordance with California law but stated that instead their adjusters are trained on a “one-on-one basis.” Berkshire was asked whether it intended to take appropriate action in all jurisdictions where applicable and responded that it would implement corrective actions.
A complete copy of the California Market Conduct Examination of Berkshire report is available at the following link (in PDF format): Berkshire-CA Market Conduct Exam 2009
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:
- Giving significant weight in a claimant’s favor if the SSA has awarded SSDI disability income;
- Improving procedures for gathering medical information, attempting to resolve discrepancies in medical statements or conclusions, documenting and outlining the medical conclusions upon which a determination of disability is made, and evaluating functional capacity with the presence of co-existing or co-morbid conditions;
- Following written guidelines for using external medical resources if medical opinion/information is unclear or contradictory or if the claims adjuster disagrees with the opinions of the treating physician(s); Continue reading “CIGNA fined in Multi-State Regulatory Settlement Agreement Re Group Long-Term Disability Claims Handling; Some CIGNA Claims to be Re-Evaluated”
Pima County Medical Society Publishes Ed Comitz and Karla Thompson’s Article Re Surveillance in Disability Insurance Claims
The January 2013 edition of Sombrero, the publication of the Pima County Medical Society, features an article by Comitz | Beethe’s disability insurance attorneys, Edward O. Comitz and Karla Baker Thompson. The article, “Surveillance Misuse in Claims Investigations,” reviews some of the ways in which evolving technology has led to overly intrusive surveillance of claimants by insurance companies.
Among the surveillance techniques being utilized are stakeout operations, tailing (sometimes using a “decoy” investigator), pretexting (obtaining your personal information under false pretenses), and GPS and cell phone tracking. For example, some private investigators use a stingray, which is a cell phone tracking device that operates as a miniature cellular tower from inside of the PI’s vehicle. The device enables an investigator to connect to a claimant’s cell phone, even when it’s not in use, and, after taking measurements of the phone’s signal strength, triangulate its location. Since most people tend to carry their cell phones at all times, the device then allows the investigator to track the insured’s movements remotely.
The law surrounding some of these intrusive surveillance techniques, which have been made possible by modern technology, is not yet settled, and it is important that anyone on claim with their disability insurance carrier remain vigilant to the possibility of surveillance at all times, regardless of whether a human being is conducting the surveillance. Long gone are the days when surveillance was only conducted by someone with a camera sitting in a car outside an insured’s home.
The language of state regulations and other publications by the State of California will be amended to remove terms such as “mental retardation,” and “retarded” from the official lexicon provided Governor Jerry Brown signs SB 1381, which was introduced by Sen. Fran Pavley, D-Santa Monica, and passed unanimously by both the California State Assembly and California State Senate.
Assuming Gov. Brown signs the bill, California will join the federal government and 42 other states — including Arizona — in striking “retardation” language from the government lexicon.
The term “mental retardation” was first introduced in medical texts over a century ago, at that time replacing words such as “imbecile” and “idiot” which had taken on negative connotations. Now that “mental retardation” is likewise considered offensive to many people, the terms “intellectual disability” and “person with an intellectual disability” will replace the old terminology in California.
Santa Monica’s Sen. Fran Pavley said in a statement to California Watch:
“As a former school teacher, I can tell you that words do matter. The use of the ‘R-word’ can be very offensive to many people with intellectual disabilities and their families, and as people have become accustomed to casually using the ‘R-word’ as a joke or to demean someone, it’s shaped the perception of and, undoubtedly, the self-worth of these individuals.”
Many healthcare providers, some of whom also offer disability insurance such as Aetna and Cigna, have introduced elaborate marketing campaigns this past year in an effort to change their image, according to Tanzina Vega of the NY Times. These insurers want to be perceived as consumer-friendly healthcare companies, rather than merely insurance providers. The timing of the major shift in marketing makes sense as speculation increases over the pending U.S. Supreme Court decision on the Affordable Care Act. If the Supreme Court upholds the individual mandate, which would require millions of uninsured Americans to purchase insurance, then the market will expand considerably. Therefore, a favorable ruling would enable insurers like Aetna and Cigna to target the uninsured Americans directly, instead of marketing health care packages to employers.
But even if the individual mandate in the Affordable Care Act is struck down, Vega says that many insurers will likely continue their direct-consumer marketing campaigns. Why? Many healthcare providers believe their future economic success largely depends on their ability to market directly to the consumer. Therefore, they will continue designing, marketing and selling insurance packages tailored to individuals, the end consumer.
Although the NY Times article focuses primarily on marketing campaigns of healthcare providers, we may see a similar, albeit less dramatic shift in the way disability insurance companies market their products as well. Disability insurance companies are already focusing on the end consumer because, like healthcare providers, they believe that future economic success depends on their ability to reach people directly. Furthermore, it makes sense that disability insurers would implement similar marketing strategies as healthcare providers because often times the health insurance companies are also disability insurers, like Aetna and Cigna.
But actions often speak louder than words. Although disability insurers may try to alter their marketing strategies to reposition themselves as consumer-friendly companies, there likely will not be a corresponding shift in the way they treat disabled professionals when handling disability claims. Unfortunately, their own financial interests too often trump those of disabled persons.
The Life and Health Insurance Foundation for Education (LIFE) published a disability insurance consumer guide for those with, or looking for disability insurance. LIFE is a nonprofit organization whose mission is to educate people about the importance of health, life and disability insurance. It does not endorse any particular product or company.
The LIFE consumer guide, What You Need to Know about Disability Insurance, gives an overview of different disability insurance plans and explains important disability insurance concepts you should know, such as the difference between social security and private employer-sponsored disability insurance plans. Did you know that 3 in 10 workers will become disabled for three months or more during their career? This statistic is unsettling, but it becomes even more unnerving when you compare it with the fact that less than 1/3 of workers in the private industry even have long-term disability insurance plans. In the brochure, LIFE explains the implications of this data and provides other statistics regarding disabled persons. The disability insurance consumer guide also offers a worksheet to help you assess the income you would need to sustain your current standard of living if you were to become injured or disabled. This information can be helpful for those looking to modify or purchase a private disability insurance plan.
Choosing an appropriate plan that is tailored to your needs can save you money and help you avoid litigation. Disability insurance attorneys at Comitz | Beethe can answer your questions about private disability insurance claims and disability insurance bad faith. We make sure disability insurance companies honor their agreements when they evaluate your disability insurance claim. For more resources about disability insurance plans and disability insurance bad faith, and for answers to common questions about disability insurance claims, be sure to check out the resources tab on our website.
In a recent case from the Northern District of California, Behjou v. Bank of Am. Group Benefits Program, Omid Behjou filed suit against his employer, Bank of America, after his disability insurance benefits were denied when he became injured. The issue before the court was whether Behjou’s disability insurance plan was an ERISA plan, which would preempt his California state law claims, or whether the disability insurance plan was exempt as a payroll practice under 29 C.F.R. § 2510.3–1(b)(2). The court in California held that the plan was not subject to ERISA-application. It reasoned as follows:
1. A regulation from the Secretary of Labor, 29 C.F.R. § 2510.3–1(b)(2), excludes certain “payroll practices” from application of ERISA.
2. Under this regulation, an ERISA plan does not include: “Payment of an employee’s normal compensation, out of the employer’s general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons. . . .” 29 C.F.R. § 2510.3–1(b)(2) (emphasis added).
3. To determine whether regulation or ERISA applies, a court must look to the actual method of payment to see if it constitutes “normal compensation.” The payment need only “closely resemble wages or salary to constitute normal compensation.” If the payment method constitutes normal compensation, then the court must next determine whether it is paid out of the employer’s general assets. The “salient inquiry here is the source from which the benefits are actually paid.”
4. In this case, the court in the Northern District of California determined that Bank of America’s method of payment constituted normal compensation because payments “[were] made through the regular payroll process with deductions taken for tax withholding, insurance coverage, 401(k) contributions, and [were] considered taxable income.” After making this initial determination, the court in California then looked to whether payment came out of the employer’s general assets. It did in this case: “the uncontroverted evidence shows that the payment of short term disability benefits is made from Bank of America’s general assets.”
The court order can be found here.
Private investigators hired by disability insurance companies pretext to acquire your personal information from others. They do this by pretending to be someone else (often you), contacting people you know, and then probing them for your sensitive information. Pretexting is not only deceptive and unprincipled, but it may also be illegal. Private investigators engage in this conduct to produce evidence that will enable insurance companies to deny your disability insurance claim.
The Gramm-Leach-Bliley Act specifically addresses pretexting as it pertains to obtaining personal information from financial institutions. Many private investigators believe the scope of the Act is limited to pretexting with financial institutions only, therefore, they assume other pretexts—those not involving contacts with your financial institution—are legal. This is a misconception, however, according to Joel Winston, the Associate Director of the FTC, Division of Financial Practices. In an interview with PI Magazine, Winston clarifies the scope of the Act:
First, we should dispel the misimpression, if there is one, that the pretexting provisions of [the Gramm-Leach-Bliley Act] only apply if the pretexter is getting “financial information.” Actually, what the statute says is if you are getting any personal, non-public information from a financial institution or the consumer, that is covered by the statute.
(emphasis added). Winston also answers other questions about pretexting as they relate to private investigators. Although the Q-A session is mainly designed to illuminate private investigators of legal fences surrounding the practice of pretexting, it is also an excellent source of information for those who fear they might become victims of unlawful pretexts, or for people who want to learn more about the illegality of pretexting.
To view the article click here.
Many large insurance companies use claims software that enables them to “low-ball” consumers and manipulate claims payments, according to a new report from Consumer Federation of America. This software may also enable insurance companies to more easily deny disability insurance claims.
The report examines Colossus, injury evaluation software widely used in the insurance industry. According to the report, Computer Sciences Corporation (“CSC”) developed the software and originally marketed it to insurance companies as a cost-saving product. The marketing campaign changed quickly, though, as companies became concerned that the word “savings” would expose them to litigation—injured consumers could argue the so-called “savings” were actually a result of unjustifiably low claims offers. The “savings” concept was familiar to insurance companies, but according to the report, CSC never mentioned the “savings” word when it presented the software to the California Department of Insurance.
Even though CSC changed the marketing semantics, it did not modify Colossus in any important way. The report shows how insurance companies manipulate the software to achieve significant savings. These “savings” are actually the result of computer-generated “low-ball” claims offers and payments to consumers, according to the report.
To read Consumer Federation of America’s the full report click here.
Insurance companies often will hire a private investigator to aid in terminating disability insurance claims. Ostensibly, the purpose of a private investigator is to expose dishonest individuals of fraudulent disability insurance claims. A private investigator may even advertise as a “Disability Insurance Fraud Specialist.” All too often, however, insurance companies and their investigators are not seeking to expose fraud, but to manufacture it. They produce “evidence” only to aid in denying disability insurance claims—even wholly legitimate ones. They do so because there is a strong financial incentive to deny disability insurance claims.
At Comitz | Beethe, we have dealt with these insurance companies and their private investigators time and again. We know how they operate and how to prepare our clients. We have developed a short list of basic information about private investigators so you can know what to expect:
- When are they watching? In a previous post, we noted the five most popular times for disability surveillance: (1) holidays, (2) birthdays, (3) weekends, (4) activities claimant listed in insurance company’s activity log; and (5) near the end of fiscal quarters.
- Who are they? Typically, private investigators are just as the name indicates – private people from private companies. Disability insurance companies contract with these private companies to conduct surveillance on disability claimants.
- What are their surveillance methods? Particular tactics will vary depending upon the private investigator, the disability insurance company and the disability claimant. However, many methods are common across the board. Basically, the private investigator will inconspicuously follow a disabled claimant with a video-capturing device as the disabled claimant undergoes day-to-day activities. If the private investigator has difficulty locating the disabled claimant, the investigator may use different tactics, such as pretexting, stake-outs or tracking devices, to locate and track the claimant. Our last blog post describes these other tactics in detail.
The private investigation industry has a reputation for its shady practices. At Comitz | Beethe, we uncover and expose private investigators’ objectionable “tracking” methods to protect our clients. We hold insurance companies and their private investigators accountable under the law.
Private investigators use a variety of tactics to produce evidence that may be used to deny your disability insurance claim. Below is a list of different private investigator surveillance methods and terms.
Disability Surveillance – refers to the monitoring, recording and documenting of activities or behavior of another. In the disability context, this surveillance is called sub rosa surveillance. Sub rosa, a Latin phrase which translated means “under the rose,” denotes the secretive and clandestine nature of private investigator actions.
Disability Stake outs – according to Shannon Detective Service, Inc.—a private investigation company whose client list includes Arizona Counties Insurance Pool, CNA Commercial Insurance, Danielson Insurance, Farmers Insurance, Federated Mutual Insurance Company, Hartford Insurance, Insurance Company of the West, Liberty Mutual Insurance, Nationwide Insurance, Progressive Insurance, Seabright Insurance Company, Sedgwick Claims Service, Travelers Insurance and Westfield Insurance—this is a stationary surveillance method by which a private investigator documents and records a claimant’s activities. The hallmark feature of a stake out is that the private investigator does not move or follow the disabled claimant. In a typical stake out operation the private investigator may station in front of your home or office and record you as you come and go. The goal of the stake out is to produce evidence that will enable the insurance company to deny your disability insurance claim. An ABC News story shows how an insurance company successfully denied a doctor’s disability claim with evidence produced during a stake out.
Disability Pretexting – the Federal Trade Commission (FTC) defines pretexting as “the practice of getting your personal information under false pretenses.” Private investigators are engaging in illegal conduct when they use pretexting to obtain your personal information from a financial institution. See 15 U.S.C. § 6801, et seq.
Here’s an example of how this works: someone pretends to be you and calls your bank. The person claims to have forgotten your checkbook, account number, social security number or other sensitive information. He then tries to get this information from the bank. Such conduct constitutes pretexting and violates federal law. Id.
Although private investigators claim to use only “appropriate” pretexting methods, methods which are not illegal per se, these are the same techniques which are used to facilitate identity theft and consumer fraud. Check out the FTC website for more information about pretexting and how you can protect yourself.
Disability Tracking Devices and GPS – this area of the law is still evolving. In a recent Supreme Court case, United States v. Jones, the Court held that attaching a GPS device to a vehicle constitutes a “search” under the Fourth Amendment; therefore, law enforcement officials need a warrant before installing the device. 132 S. Ct. 945, 949 (2012). Although the Court did not address the attachment of GPS devices in the private investigation context, its decision largely turned on the physical trespass involved in attaching a GPS device to another person’s vehicle. Id. The Court stated:
It is important to be clear about what occurred in this case: The Government physically occupied private property for the purpose of obtaining information. We have no doubt that such a physical intrusion would have been considered a “search” within the meaning of the Fourth Amendment when it was adopted.
Id. Therefore, this ruling may be used to argue against private investigator installations of GPS devices since such installation would also constitute a physical trespass. Private investigation companies, such as Shannon Detective Services, Inc. (SDS), are now looking how to bypass the physical trespass issue altogether through implementation of other technologies that do not require physical attachment. Here are two examples of other technologies cited from the SDS website:
- Disability stingrays (a device that can triangulate a cell phone signal to locate a user) will become popular in the future as a way to skirt around the new GPS laws for law enforcement.
- Disability ping of cell phones (by accessing a user’s cell phone GPS chip) will also fill the gap created by GPS legislation since the FCC has mandated GPS chips to be installed in all new cell phones by 2018.
When it comes to disability insurance, your treating physician’s support can be critical to getting your legitimate claim approved. If your doctor can’t provide adequate documentation of your condition or is reluctant to get involved, there is a much higher chance that your claim will be denied. However, fully discussing your condition with a professional, compassionate treating physician will help ensure supportive medical records. When you are involved in a disability insurance claim, it is important to understand how to approach your treating doctor so that he or she can help you.
When to discuss your potential claim with a physician is an important timing issue. Instead of trying to enlist your doctor’s help at the very first visit, you should wait to talk to your treating physician until after he or she knows you and your condition well enough to opine accurately as to your ability to work. It is vital that you develop a relationship of trust and confidence with your doctor before inviting him or her to assist you in your claim. hysicians are often reluctant to support claims for benefits if they question the motivations behind the claims. A physician who has treated, without success, the policyholder making a legitimate disability claim will be more willing to cooperate with the extensive process.