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

Applying California’s Total Disability Standard

Under California law, “the term ‘total disability’ does not signify an absolute state of helplessness but means such a disability as renders the insured unable to perform the substantial and material acts necessary to the prosecution of a business or occupation in the usual or customary way.  Recovery is not precluded under a total disability provision because the insured is able to perform sporadic tasks, or give attention to simple or inconsequential details incident to the conduct of business.”  Erreca v. Western States Life Ins. Co., 19 Cal.2d 388, 396 (1942).  Thus, a disability claimant may be “totally disabled” in California despite being physically capable of performing some occupational duties.  However, California courts are generally chary to find total disability if a disabled claimant continues working after filing for disability benefits, notwithstanding his physical limitations, and when the income generated from that work is substantially the same as it was before becoming disabled.

Hecht v. Paul Revere Life Ins. Co. offers a good illustration of this.  In Hecht v. Paul Revere Life Ins. Co., an executive owner of a successful retail clothing business in Southern California filed for disability benefits with his disability insurance company, Paul Revere, after a car accident resulted in his suffering from neck pain and upper and lower back pain.  Although the disability claimant was President and Owner, he involved himself with significant portions of laborious tasks such as lifting, loading and unloading merchandise and climbing ladders.  After the accident, he could no longer perform the physical labor.

The disability claimant argued he was “totally disabled” under his disability insurance policy because he could no longer perform the physical labor aspect of his work in “the usual or customary way” as he did pre-disability.  The California court agreed that he could no longer perform the physical labor; however, it concluded that such was not a “substantial and material” aspect necessary to the prosecution of his business.  In reaching this conclusion, the California court found persuasive the fact that the disabled claimant continued to work every day, notwithstanding his physical limitations, and that the income generated from his contributions to the business was substantially the same as the income pre-disability.  Applying Erreca’s “total disability” standard, the California court said:

He has proven by his own actions that he is able to perform “substantial and material acts necessary to the prosecution of a business,” that he is doing more than “sporadic tasks,” and that he is performing more than “simple or inconsequential details incident to the conduct of business.

Therefore, for the purposes of the disability insurance policy, he could not be considered “totally disabled.”

In California, what constitutes “substantial and material acts necessary to the prosecution of a business” is a fact-intensive inquiry.  In this case, the facts favored the disability insurance company because the disabled business executive was still capable of performing some occupational duties post-injury, and his participation in these occupational duties generated significant income.  When total disability cases involve disabled doctors and disabled dentists, however, they may not be so black-and-white (for an example, check out this blog post).  In part, this is because the success of doctor and dental practices depends almost exclusively on a doctor’s or dentist’s ability to perform certain physical acts, such as drilling a hole in a patient’s tooth or performing surgery; this is quite different than the physical demands required of the disability claimant in the California case above.  Additionally, injuries deemed less crippling in other fields could have a more substantial impact on medical and dental professionals whose highly specialized skills require greater precision to ensure patient safety.

Thus, even though the California standard for “total disability” is the same across the board, it applies differently to different professions.  For this reason, when you file for disability benefits, you should seek a disability insurance attorney who has experience representing clients within your own occupation.

Disabled Woman Denied Access to Disneyland

The 9th Circuit Court of Appeals in San Francisco, California told Disneyland it must consider permitting use of Segways by disabled people in its theme park.  A Segway is a two-wheeled mobility device operated while standing.

The dispute arose when Disneyland denied the request of a disabled woman, who suffered from limb girdle muscular dystrophy, to use a Segway in the park rather than a motorized wheelchair.  The disabled woman wanted to celebrate the birthday of eight-year-old daughter by taking her to the happiest place on earth.  She wanted to use a Segway rather than a motorized wheelchair because the Segway would enable her to remain standing, which she prefers because her disability makes it very difficult for her to stand up from a seated position.

The Court of Appeals in California held that federal law required Disneyland to consider permission of Segway-use by people with disabilities: “As new devices become available, public accommodations must consider using or adapting them to help disabled guests have an experience more akin to that of non-disabled.”  In order to disallow the Segway, Disneyland will have to demonstrate at trial how its usage would be unreasonably dangerous to patrons.

To read the news article from the Los Angeles Times, click here.

Disability Rights Discussed by U.S. Senate

The United States Senate convened last week in Washington D.C. to discuss for the first time two disability rights issues: (1) Ratification of the United Nations (U.N.) international treaty signed at the U.N. Convention on the Rights of Persons with Disabilities and (2) legislation which would regulate the use of restraint and seclusion in schools.

The United States has already signed the international treaty on disability rights, but in order for the nation to officially participate the Senate must approve its ratification.  The disability rights treaty has been signed by 153 countries already and calls for greater community access and improved standards of living for disabled people worldwide, according to a article.  Although some representatives in the Senate do not want to ratify the disability rights treaty, disability advocates are hopeful that the Senate will approve ratification by the 22nd anniversary of the Americans with Disability Act on July 26, 2012.

The Senate also convened to consider passing federal legislation which would regulate the use of restraint and exclusion techniques in schools.  Disability advocates are pushing for the legislation because students with disabilities are the ones who most often become subject to these questionable practices, which in some extreme instances have resulted in severe injury and death.  The issue has been met with considerable resistance, however, because many Senators believe it unnecessary for Congress to supplant states’ laws regulating the use of restraint and exclusion with federal law.

To read the article, click here.

Private Investigators “Pretexting” to Deny Disability Claims

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.

Cigna Denies Breast Cancer Survivor Disability Benefits

A Good Morning America (GMA) episode has caused some commotion within the disability insurance industry.  GMA recently aired the story of a breast cancer survivor, Susan Kristoff, who was wrongfully denied disability benefits by Cigna Group Insurance, her disability insurance company.  Even though Susan was diagnosed with stage 4 metastatic breast cancer by her doctor, who also said she could no longer work, Cigna refused to honor Susan’s disability claim.  The GMA story tells how Susan went from battling breast cancer to battling her disability insurance company for her disability benefits.

After the episode aired, GMA began receiving numerous e-mails from disabled people across the country that were also unfairly denied disability benefits by Cigna and other disability insurance companies.  The stories are eye-opening.  One disability insurance lawyer in the article said the numerous e-mails was more evidence of disability insurers’ bad faith in administering claims: “The insurance companies know if they deny and deny claims that many of the claimants will never pursue their claims.”

More details from the story can be found here: