Claims And Issues

MANY MOTIONS CAN BE RESOLVED BY GOOD FAITH.

"Many motions to dismiss can be avoided if the parties confer in good faith (as required by Local Rule 7-3), especially for perceived defects in a complaint, answer or counterclaim that could be corrected by amendment."  Miller v. Transamerica Life Ins. Co., No. CV 15-0583 FMO (PJWx), 2016 WL 7155779, at *1 (C.D. Cal. March 24, 2016) (Olguin, USDJ).

Westlaw just released this decision which was made in an ERISA case.  The words quoted above are universal.  They are not limited to ERISA cases.

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Related articles

Insurance Claims And Issues: NO GETTING AROUND IT. ERISA'S VACUUM LIKE POWERS ...

NO GETTING AROUND IT. ERISA'S VACUUM LIKE POWERS ...

... PREEMPT RELEASE OF MEDICALS, AIDS INFORMATION PROHIBITED BY ILLINOIS STATE LAWS.

No question of cyberinsurance here, it seems.  A person sued a health insurer and other group plan defendants because her medical and AIDS information was all allegedly released to public view in violation of Illinois State laws.

The insurance company swiftly removed her case to federal court and just as swiftly argued for ERISA preemption without filing an answer or a motion to dismiss (yet).  A federal judge agreed that the vacuum-like powers of ERISA preemption scooped up the plaintiff's claims here.

"For the reasons discussed, plaintiff's state law claims are preempted because they fall entirely within ERISA."   Doe v. Aetna Inc., No. 16 C 8390, 2017 WL 118417, at *3 (N.D. Ill. January 12, 2017).

TODAY IS DR. MARTIN LUTHER KING, JR. DAY.  PERFORM AN ACT OF KINDNESS, especially IF THE RECIPIENT HAS NOT EARNED IT!  IT'S ABOUT YOU, NOT ABOUT THE ONE WHO receives YOUR KINDNESS!

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

ERISA Claim for the Long Term: No Remand, No Dismissal.

   Mr. Glenn Herman was an insured under his Employer's long-term disability plan.  He successfully claimed long-term disability benefits and received monthly payments of $661.25 for a time.  Hartford, which issued the Disability Plan and Policy to Mr. Herman's Employer, adjusted Mr. Herman's benefits downward to reflect his receipt of individual disability benefits from the Social Security Administration.  The resulting payment by Hartford was an adjustment to $50.00 per month thereafter.  Download Herman v. Hartford Life and Accident Insurance Co. (S.D. Fla. Case No. 10.61661, Omnibus Order Filed April 15, 2011) PUBLIC ACCESS, also published as 2011 WL 1458050 (S.D. Fla. April 15, 2011)(authorized password required to access Westlaw).

   Mr. Herman filed suit in Florida State Court.  His Complaint against Hartford was in two counts:  Bad Faith failure to pay benefits under the Disability Plan, and a Declaratory Judgment to restore his previous level of disability insurance benefits.  Hartford removed the case to Federal Court and simultaneously filed a motion to dismiss based on failure to exhaust administrative remedies under ERISA, and the stage was set for the Federal Judge to hold both that ERISA applied to Mr. Herman's claims, and then to hold that it did not.

   First, the Federal Court denied Mr. Herman's motion to remand.  Hartford removed the case based on Federal question jurisdiction provided by ERISA.  The Federal Judge applied a "'general rule'" operating in the Eleventh Circuit that a case arises under Federal law only if it is Federal law that confers the claim or cause of action.  The Federal Judge in this case agreed that ERISA confers Mr. Herman's claim and denied his motion to remand.  Id. at *2.

   Second, the Federal Court denied Hartford's motion to dismiss based on Mr. Herman's alleged failure to exhaust administrative remedies.  Without mentioning a second time in this opinion that Mr. Herman was pursuing both a Bad Faith claim under Florida law, and as a claim for Declaratory Relief, the Court noted that "ERISA allows a plan 'participant or beneficiary' to bring a civil action to recover benefits due under the terms of a plan."  Id. at *2.  The Court was apparently convinced without further explanation that Mr. Herman had done this.  However, exhaustion of administrative remedies would depend upon the terms of the Disability Plan, said the Court.

   The Disability Plan in question in this case provided an administrative appeal process for outright denial of claims, but not for what the Court called "adjustment" of claims.  Mr. Herman's claim was not denied, it was adjusted, in the eyes of the Court.  Accordingly, there were no administrative remedies for Mr. Herman to exhaust and Hartford's motion to dismiss in this case was denied.  Id. at *2.

 The author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Associaton's Insurance Coverage Litigation Committee.

Preemption of Bad Faith Claims under ERISA is examined in Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" §9:16 (Shepard's/McGraw-Hill Second Edition, West Publishing Company 2010 Supplement and Third Edition in process).

 

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ERISA Plan, Preemption Questions of FACT.

   The existence of an ERISA Plan, and so the existence of Preemption due to the existence of an ERISA Plan, have been held to be questions of fact.  "The existence of an ERISA plan is a question of fact, to be answered in light of all of the surrounding facts and circumstances from the point of view of a reasonable person."  Webb v. Hartford Life & Accident Insurance Co., Download Webb v. Hartford Life and Accident Ins. Co. (D. Nev. Case No. 2.08cv1172, Order Filed November 19, 2010) PUBLIC ACCESS, also published as 2010 WL 4810719 *1 (D. Nev. November 19, 2010)(Lloyd D. George, J.)(authorized Westlaw password required to access Westlaw).  The Online Docket of this Case on Pacer reflects that Linda Webb filed a Notice of Appeal to the Ninth Circuit on November 29, 2010.

   The Court in the Webb case examined the surrounding facts and circumstances which may as in that Case, or may not, evidence the existence of an ERISA Plan (and thus of ERISA Preemption).  See Webb v. Hartford Life & Accident Insurance Co., 2010 WL 4810719 at *1-*3.

The author is Co-Chair of the Health, Life and Disability Insurance Subcommittee of the American Bar Association's Insurance Coverage Litigation Committee.

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Independent Reviews of Health Insurance Coverage Denials: Mandated, Offer Relief...

   ... to Insured Patients, if Not to Their Lawyers.

   Most in-house appeals of Insurance Claim Denials by Health Insurance Companies are decided in favor of the original Denials.  Michelle Andrews, "The New Landscape/For Denied Claims, a Bit of Help in the Health Law" p. D5, col. 1 (New York Times Nat'l ed., "Health" Section, Tuesday, June 22, 2010).  That is about to change at least a little, potentially a lot.  To the relief of Insured Patients.

   "Starting this fall, patients in all health plans can contest claim denials in an independent state-level review procedure -- a recourse that has not generally been available to employees of companies that pay their employees' health claims directly."  Id.  Most states offer "independent reviews" or "external reviews" by independent persons of Health Insurance Claim Denials.  The new Federal Healthcare Reform Law makes two potentially significant additions to that model, however:

   1.  Every State will now provide the option of independent review of Health Insurance Claim Denials; and

   2.  Independent review will be extended also to so-called "self-funded plans" administered directly by Employers paying -- and denying -- the Health Insurance Claims directly.

   Reportedly, "about half the time" the independent reviews overrule the Health Insurance Claim Denials, id., apparently based on previous experience.  This statistic alone reflects a great possibility of relief for Insured Patients in the future.

   In the meantime, no such relief appears likely for their lawyers.  The payment incentives for lawyers are still not there, given ERISA's continuing limitation on the amount of recovery to the amount of the Health Insurance Benefit that was denied.   Id.

The author is Co-Chair of the American Bar Association Subcommittee on Health, Life and Disability Insurance of the Section of Litigation.

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ERISA Claims Review.

    Denials of benefits challenged under ERISA are subject to at least two standards of review.  A de novo standard of review ordinarily applies.  However, where the employee benefits plan provides discretion to determine eligibility or benefits or to construe the plan's provisions, the appropriate standard of review is the more deferential "arbitrary and capricious standard".  Under the more deferential standard of review, the discretionary decision will be overturned only in the face of one or more of three things:  (1) the decision is without reason; (2) the decision is unsupported by substantial evidence, or (3) the decision is erroneous as a matter of law.  In particular, "substantial evidence" in this context means "'such evidence that a reasonable mind might accept as adequate to support the conclusion reached by the [decision-maker and] requires more than a scintilla but less than a preponderance.'"  Barnes v. American Int'l Life Assur. Co., Download Barnes v. American Int'l Life Assurance Co. (S.D.N.Y. Case No. 08 Civ. 06222, Opinion Filed 02.04.10) also published as Barnes v. American International Life Assurance Co.,  681 F. Supp. 513, 519, 2010 WL 376127 *5 (S.D.N.Y. February 4, 2010)(Chin, J.).

The author is Co-Chair of the American Bar Association Subcommittee on Health, Life and Disability Insurance of the Litigation Section.

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ERISA "Reverse Preempts" Secondary Health Benefits Claim.

   In Download Chorosevic v. Metlife Choices (8th Cir. Case No. 09.1880, Opinion Filed April 2, 2010).pdf, also published as Chorosevic v. Metlife Choices, Inc., 600 F.3d 934 (8th Cir. 2010)(subscription required), it was held that failure to exhaust administrative remedies under ERISA bars Secondary Health Benefits Claims alleged as a Class Action.  The exhaustion holding came out of ERISA and not out of the Class Action allegations, although these presented separate issues separately addressed by the Federal Courts.

   The Eighth Circuit Court of Appeals listed three features of the doctrine of exhaustion of remedies that the Court considered in reaching its decision in this case:

   1.  Exhaustion is a legal question.  The Federal Appellate Court reviewed the issue anew ("de novo"), i.e., on its own without deference to the Trial Court on this question.

   2.  "Exhaustion of available remedies enables employers and ERISA-covered plans 'to obtain full information about a claim for benefits, to compile an adequate record, and to make a reasoned decision.'"

   3.  For the same reasons, the doctrine benefits reviewing Courts by providing a complete record of fact with which to begin their review.

Chorosevic v. Metlife Choices, 600 F.3d at 941.

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Will Health Insurance Companies Reduce Coverage After Mandate?

   Caution flags are running up the flag pole.  If a Mandate passes the U.S. Congress that all persons in the United States shall have Health Insurance, thus delivering a bountiful pool of Policy Premiums to existing Health Insurance Companies, will the Health Insurance Companies nonetheless try to reduce the available Health Insurance Coverage?  Even without a "pre-existing condition" Exclusion?  See David S. Hilzenrath, "Discrimination by Insurers Likely Even With Reform, Experts Say/Economic Pressure Could Give Rise to New Biases Against Prior Conditions" (Washington Post Online, posted for Sunday, October 4, 2009).

   Focusing on only the supposed 'deletion' of the "pre-existing condition" Exclusion, there are three (3) ways in which Health Insurance Companies will or may try to reduce future Health Coverage, according to Experts consulted in the linked newspaper article:

   1.  Some or all Health Insurance Companies are expected to offer "free health-club memberships" to attract Policyholders.  Since ordinarily only healthy people will find the offer attractive, those Health Insurance Companies making this offer are more likely to insure healthy people and not people whose medical conditions tend to give rise to Health Insurance Claims.

   2.  Delaying or making difficult the payment and processing of Health Insurance Claims.  This may offer the promise of deterring Policyholders with medical conditions from purchasing or renewing their Health Insurance Coverage with Insurance Companies that engage in these sorts of settlement practices.  Although the existence of Good Faith and Fair Dealing requirements in local Insurance Law may seem to be a deterrence to engaging in unfair settlement practices, in general terms the Federal Statute, ERISA ("Employee Retirement Income Security Act") provides that penalties for improper denial of Health Insurance Claims falling under its protection are limited more or less to the amount of the denied payment.  Thus, in order to limit the Policyholder Pool to healthy people, an unchanged ERISA coupled with a Mandate for all persons in the U.S. to have Health Insurance, may actually provide an incentive to at least some Health Insurance Companies to engage in unfair claim settlement practices which are essentially immunized by ERISA.

   3.  Including in networks mainly general practice physicians and few specialists.  Potential Policyholders with medical conditions requiring specialized treatment would then be likely to gravitate to Health Insurance Companies offering Plans which provide networks of specialists who can treat the Policyholders' medical conditions, and away from Health Insurance Companies which do not offer such Plans and networks.

   Time will tell.

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No ERISA and No COBRA, But No Bad Faith Appeal.

   In a recent appeal from a ruling of the United States District Court for the Southern District of Florida, the Eleventh Circuit Court of Appeals was confronted with Issues, among others, of ERISA, COBRA, and whether there was Bad Faith in the appeal in Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).

    For several reasons not addressed by the District Judge, the Eleventh Circuit affirmed an Order of Dismissal With Prejudice under Federal Rule 12(b)(6).  The Plaintiff-Policyholder was an in-house Counsel for United Automobile Insurance Group, Inc.  The Case may be made a bit confusing because the Employer is an Insurance Company, but not the Plaintiff's former Health Insurance Company.  When the Plaintiff was terminated from employment, he signed up for continuing Health Insurance Coverage under COBRA.

    The Plaintiff dutifully paid Premiums until February, 2008.  The Premium payment was due to be postmarked by February 11, 2008.  The Premium payment for that month was paid, but unfortunately "the envelope containing the payment was not post-marked until February 12."  Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).

    The Plaintiff argued, among other things, that his Employer should be held to be bound by a Federal Regulation which, he further argued, would provide an additional timeframe for payment of Premiums.  The Eleventh Circuit held that the particular Federal Regulation "applies only to those plans that are fully-funded," and since Plaintiff's Employer's plan was "self-funding" and not "fully-funded," the Regulation did not apply, there was no extended timeframe for paying Premiums, and "UAIG was within its rights in terminating Harris's coverage."  Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).

    Not content with victory on the merits, the Appellee Employer did something rarely done in Appeals involving Insurance Companies, particularly in Appeals originating in Florida:  It requested fees from the Insured, arguing "that Harris acted in bad faith by filing this appeal ...."   Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).  [Emphasis added.]  As might have been anticipated before such a motion was even filed, the Eleventh Circuit refused to assess attorney's fees against Mr. Harris in addition to affirming the Order of Dismissal With Prejudice of Mr. Harris's Complaint:

    Considering these factors, an award of fees is not warranted in this case.  First, the district court made no finding that any party acted in bad faith, and the record on appeal does not establish any bad faith.

Download Harris v. United Auto Insurance Group, Inc., a Florida Corporation (11th Cir. Opinion Filed August 18, 2009).  [Emphasis added.]

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Conflicts of Interest Added to Judicial Review of ERISA Denials.

     Most if not all ERISA plan administrators for participating employers are also the ones who pay the benefits available under the ERISA plan.  Employers have an interest in paying the smallest lawful amount of beneifts, and it bears repeating that it is employers who hire ERISA plan administrators.

     A 5-to-4 majority of the United States Supreme Court has ruled that conflicts of interest are one among many factors for Judges to take into account when they are called upon to review denials of benefits by ERISA plan administrators.  Here is the United States Supreme Court's opinion from the Court's web site: 

Download Metropolitan_Life_Insurance_Co. v. Glenn (U.S. Case No. 06-923, Opinion Filed June 19, 2008)..pdf.  The opinion is also available, by subscription, at 2008 WL 2444796.

       The Court was careful to declare that this does not reflect a change in the legal standard of review.   The standard of review is still derived from trust law, which the Court noted "continues to apply a deferential standard of review to the discretionary decisionmaking of a conflicted trustee ...."  2008 WL 2444796 at *7.

     The ERISA plan administrator's conflict is now a factor for Judges reviewing benefits decisions to take into account, but it is one among many factors:

In principle, as we have said, conflicts are but one factor among many that a reviewing judge must take into account.  Benefits decisions arise in too many contexts, concern too many circumstances, and can relate in too many different ways to conflicts -- which themselves vary in kind and in degree of seriousness -- for us to come up with a one-size-fits-all procedural system that is likely to promote fair and accurate review.

Id. at *8.

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ERISA May Not Be Healthy.

    Employers in the United States are all but alone in the world in one respect, at least:  They bear the burden of the majority of Health Plans in the United States.  Governments shoulder that burden in virtually every other nation.  Yet Employers in the United States do not try to shift the burden, just to tweak the edges and "fix" it.  There are alternatives to the Health Insurance Crisis in the United States to making Health Insurance Employer-based, but no alternatives can be pursued if no-one brings them up.   The issue is thoughtfully explored in Joe Nocera, "Talking Business/Resolving to Reimagine Health Costs" (New York Times Nat'l ed., Saturday, November 18, 2006, page B1, col. 1)(subscription required to the article).

    If Employers are not responsible for Health Insurance and Health Plans, is ERISA necessary?

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

Employer Restaurants Sue San Francisco for Health ....

They May Lose Their Hearts, But Not Their Wallets:  ERISA Rules, They Say.

    There are 2,500 restaurants open for business in San Francisco.  After reportedly negotiating with the Government of the City of San Francisco, the Golden Gate Restaurant Association ("GGRA") has sued the City in Federal Court.  The group claims to represent San Francisco restaurants and their interests.  It seems that the City passed a Health Care Program contained in a "Health Care Security Ordinance" in July, 2006 which is set to take effect in July, 2007.

    The restaurant association says that it is in favor of health.   However, part of the City's Program mandates Employers to pay money to support the provision of health services to otherwise uninsured people in San Francisco. The GGRA alleges in its Federal Case that this provision of the San Francisco city ordinance violates the exclusive domain of a Federal Statute, the Federal Employee Retirement Income Security Act ("ERISA").

    Under the ordinance, the city does not offer Health Insurance as such.  Instead, the ordinance is directed at paying doctors and hospitals who will provide health care to some 82,000 presently uninsured people in San Francisco.  To accomplish this end, the ordinance requires payments into the Program from various sources including from businesses with 20 or more employees.

    The GGRA's Federal Court Complaint apparently contains the restaurant association's position that the rest of the San Francisco ordinance should remain intact even if the employer payment mandate is struck down.  An electronic search of the Federal Court for a copy of the Complaint has not yielded a copy to date.  However, the Case Number in the United States District Court for the Northern District of California is 3:06-cv-06997-JSW.  Perhaps an enterprising reader will send us a copy of the Complaint and I will be glad to then post it here.  In the meantime, see the news report of this new Federal Case invoking ERISA and Health Insurance in Carolyn Marshall, "Restaurant Group Sues Over Health Plan" (New York Times, Nat'l ed., Tuesday, November 14, 2006, page A14, col. 3) or in this article posted online:  Restaurant News Resource (11.08.2006).

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

Healthy Alternatives Considered For Health Insurance Plans.

    Health Insurance presents hotly contested issues in the United States.  With that said, proposals are being made for Health Insurance alternatives that would reduce or supplement the burden borne so heavily by Employers providing Health Insurance to employees.  The proposals have received initial and tentative support from "liberal" groups and from "conservative" groups alike.  Consumer groups are similarly recording favorable comments about these proposals.

    Who is making these current proposals?  Health Insurance Companies are.  The features are many but not terribly complicated.   For a comprehensive report see Robert Pear, "Health Insurance Industry Urges Expansion of Coverage" (New York Times, Nat'l ed., Tuesday, November 14, 2006,  page A14, col. 3).

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION. 

Discretionary Disability Determination, No ERISA Claim.

                    But the Administrator is Not Entitled to Attorney's Fees
                    Without Bad Faith or Harassment.   

    Ms. Brenda Motes was once a Human Resource Generalist employed by Arthur Andersen LLP.  She was enrolled in the Arthur Andersen LLP Group Long Term Disability Insurance Plan, which was underwritten by Aetna.  She worked until she could no longer perform her job on account of "back pain and physical complications, including fibromyalgia," at which time she began receiving long-term disability benefits under the Plan because she was totally disabled, reports the Federal Court in Download Brenda_Mote_v. Aetna Life Ins. Co. (N.D. Ill. Case No. 05C6212, Opinion Filed November 3, 2006).pdf.  Ms. Mote received disability benefits for five years and eight months.

    Aetna then "reevaluated her claim" and notified Brenda Mote that  she was no longer totally disabled or entitled to such benefits under the Plan based on a review of her file including "notes" from physicians, independent medical reports, and other medical records.  She appealed, the Plan stood by its initial reevaluation decision, and she filed suit under ERISA to reinstate her disability benefits.  The Plan provided the Plan Administrator, Aetna, with discretion to determine benefits due under the Plan and to interpret the Plan's provisions:  "That language explicitly spells out Aetna's discretionary authority both to make benefits determinations and to interpret the Plan's language."  (Slipsheet Op. at page 7.)

    Since the Plan provided the Adminstrator with such discretion, the Federal Court is powerless to review the Administrator's decision to terminate long-term disability benefits in this case unless the record establishes that the decision was "arbitrary and capricious".  This means that in a case like this, the Federal Courts do not ask whether the determination was correct.  "'Instead, the only question for us is whether the adminstrator's decision was completely unreasonable.'"  (Slipsheet Op. at page 9.)

    The Federal Judge in this new case could not say that on the record, Aetna's determination regarding Brenda Mote's conditions was completely unreasonable or arbitrary and capricious.  Accordingly, the Federal Court granted Aetna's Motion for Summary Judgment on Ms. Mote's ERISA Claim.  However, there is a postscript of sorts.

    Aetna claimed that its Attorney's Fees should be paid once Aetna defeated the ERISA Claim.  This is the legal standard applied by the Federal Court to Aetna's Attorney Fees Claim:  "'Was the losing party's position substantially justified and taken in good faith, or was that party simply out to harass its opponent?'"  Even though the ERISA Claim "has proved unsuccessful," it is supported here by "reasonable bona fides".  Aetna did not claim either Bad Faith or harassment by Brenda Motes.  Aetna's Attorney Fees Claim was concisely denied:  "In sum, this Court denies the request for an award of attorneys' fees to the Plan."

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.