Insurance Claims And Issues

ERISA Plan Administrators' Conflict of Interest Now in Plain View.

     In a landmark opinion released yesterday, the Supreme Court of the United States changed the factors to review in employee challenges to adverse disability benefit decisions.  The High Court ruling was by an overwhelming vote, 6 to 3.  From now on, judicial review of a plan administrator's denial of benefits must include the administrator's conflict of interest, it is reported by Mary Williams Walsh, "In a Ruling on Benefits, Justices Aid the Worker" p. C3, col. 6 (New York Times Nat'l Ed., Friday, June 20, 2008).

     Plan administrators are hired by employers to run group health and disability plans for insurance benefits given to employees.  By statute, plan administrators are mandated to act in the best interests of the employee, it is reported, when they decide whether the employer's plan extends the requested insurance benefits to that particular employee.   The review applied before yesterday's decision allowed Federal Courts to overturn an administrator's decision only if the decision was proven to be "arbitrary, capricious or unprincipled," in basic terms.  The Supreme Court's ruling adds another factor into the mix for a Court reviewing a plan administrator's insurance benefit decisions. 

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Autism Costs, Insurance Considered.

        This post updates "And A Little Child With Autism, Shall Lead Them":
                See posts here on September 26, 2007 and December 30, 2007.   

    The costs of therapy for autism reportedly range between $40,000.00 and $80,000.00 in a year.  Jason Parsley, "Mother of Autistic Son Shares Her Story to Help Others" (South Florida Sun-Sentinel.com, Wed., Feb. 27, 2008).   A bill to provide Insurance Coverage for some or all of these costs is pending in the Florida Legislature.  It has the reported backing of Autism Speaks, described as an advocacy group, and of Mr. Donald Trump.

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"Review Insurance Policies Now" Says Orlando Newspaper.

   Good advice with related links in this newspaper article published in the Orlando Sentinel, February 22, 2008, by Greg Groeller, "Review Insurance Policies Now".  Every Policyholder and their Agents and Brokers holding every kind of Insurance Policy can benefit from following the good advice published by this linked newspaper article.

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California Postclaims Disability Insurance Underwriting Class Action Revisited.

    On December 4, 2007 California's Second District Court of Appeal certified this 20-page opinion for publication "following rehearing":  Ticconi_v. Blue Shield of California (Cal. 2d DCA Dec. 4, 2007).pdf.  On January 3, 2008 according to the Court's docket available online, the Court granted a petition for rehearing.  Rehearing is pending at this time.

    On December 4, 2007 the Second District issued a ruling in the Ticconi case in which the California Appellate Court reversed a Trial Court's Order that denied a motion to certify a Class Action.  The Plaintiff-Policyholder in that case, Mr. Augusto Ticconi, alleged that he applied for and received "a policy of short-term health and accidental insurance from Blue Shield Life.  Blue Shield Life markets such policies as temporary, 12-month coverage to individuals, such as college students or those changing jobs, who need insurance while they are waiting for permanent coverage."  The attached official opinion does not have page numbers.  This quote is taken from the bottom of the second page ("page 2") of the linked pdf of the California Appellate Court's official opinion.

    Allegedly after Mr. Ticconi presented more than $100,000.00 of medical bills to Blue Shield Life for payment under the Policy, Blue Shield Life rescinded the Policy on the ground of misrepresentations in the application.  Id. at "page 3".   However, Blue Shield Life did not attach the application to the Policy or endorse the application on the Policy as a California Statute required it to do.  For that reason, arguably it could not rely on the application as the source of any representations.   In essence, Mr. Ticconi alleged that Blue Shield Life did this sort of thing frequently enough to justify a Class Action concerning what amounted to "postclaims underwriting" of Disability or Health Insurance subject to California Statutes.

    "Postclaims underwriting of disability, i.e., health insurance ... is flatly prohibited" by the California Insurance Code, wrote California's Second District Court of Appeal in its original opinion in this case.  Id. at "page 8".

    As was noted at the beginning, the original opinion in this case is the subject of a rehearing which is pending at this time.

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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.