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 Insurers Revamping Consumer Image

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.

New Case Explains ERISA Payroll Practice Exemption

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 “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.

Report Says Insurance Software Unfair to Disabled Insureds

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.

Dental Hygienist Awarded $4.2 Million in Disability Insurance Lawsuit Against Unum

A jury in the Los Angeles Superior Court has awarded dental hygienist Laura Kieffer $4.2 million in damages against Unum Group for wrongfully terminating her disability benefits.   Ms. Kieffer purchased her individual disability insurance policy from Paul Revere in 1988.  In 1996, she developed disabling conditions, including carpal tunnel syndrome and severe cervical pain.  By 1999, she had to stop working.  After paying her disability benefits for nearly ten years, Unum terminated her claim despite recommendations from Ms. Kieffer’s treating physician.

Ms. Kieffer sued for breach of contract, insurance bad faith, and for punitive damages.  The $4.2 million jury verdict included compensatory and punitive damages.

Update (April 18, 2011):  The Los Angeles Superior Court upheld the 4.2 million verdict and denied Unum’s motion for a new trial.

California Insurance Commissioner Petitioned to “Kick [UnumProvident] the Hell Out” of California

Disability insurer UnumProvident was recently fined $15 million and ordered to reopen 115,000 claims in a multi-state regulatory settlement, and the California Department of Insurance separately fined Unum $8 million and ordered the insurance company to reopen an additional 26,000 claims.  The fines against UnumProvident were the largest in insurance regulatory history.  Now one of the San Francisco attorneys who assisted in the three-year investigation of Unum, Ray Bourhis, has petitioned California Insurance Commissioner John Garamendi to “make good on his promise to kick the Company the hell out of the largest insurance market in the world.  And that’s what I’m calling on Garamendi to do.  Period.”

Bourhis tells the Insurance Journal:

John Garamendi was right last October when he called UnumProvident an “outlaw company.”  That’s exactly what they are.  And Garamendi should make good on his promise to kick them out of California if they continue breaking the law.

The investigation of Unum concluded that the disability insurance company was engaged in widespread violations of state insurance regulations and bad faith claim denials and terminations. According to Bourhis, “The truth is that no matter how much you fine them, it still pays for them to do this. . . The company is making the disabled destitute, policyholders whose claims it was ordered to reopen, wait — often for years — for their reevaluations.  This is despite the fact that the law requires claims to be handled ‘promptly, fairly and expeditiously.”