Debra Rose worked for a company which provided health benefits to its employees. Due to severe illness, she needed a liver transplant. The company handling the health claim required Debra to sign an authorization; with that authorization, the claim management continuously notified Debra’s employer of her health status without her express permission. Once Debra’s employer learned of her dire medical condition and the increased expense they would incur to continue coverage of her health benefits, she was fired. Debra brought a claim against the claim management company for invasion of privacy and unfair business practices. The case is pending in the district court in California. Rose v. HealthComp, Inc., 2015 U.S. Dist. LEXIS 104706 (E.D. Cal. Aug. 10, 2015).

Debra’s claim was brought under state law but the claim administrator tried to dismiss it as preempted by ERISA. Debra alleged that the claim management company received private health information while performing case management duties under the health plan and improperly disclosed them to her employer. She alleges that by providing personal health information to her employer the claim administrator did not act solely in the interest of the employees and the beneficiaries but rather in the “competing interest of the employer, to provide the employer with notice that the employee would likely be incurring high medical costs”. The court agreed that Debra’s privacy and unfair business practice cause of action could be brought as a breach of fiduciary duty under ERISA but decided that California’s Constitution providing a right of privacy was violated and this violation is not preempted by ERISA because it arises independent of ERISA or the plan.
This case is reminiscent of another right of privacy case for a disabled employee, brought in California, Dishman v. Unum Life Insurance Company of America, 269 F. 3d 974 (9th Cir. 2011). In that case, while on claim, Dishman’s privacy was invaded by an investigative firm who conducted surveillance, elicited private information about Dishman’s employment status by falsely claiming to be a Bank Loan Officer, solicited information from neighbors and friends, obtained credit information by impersonating him and committed other false acts. The 9th Circuit Court of Appeals in Dishman decided that this conduct was an independent tort committed by this company and thus Dishman could continue her lawsuit against them in state court. The court’s turning point was use of the “but for” test, which means that if the cause of action would remain independent of a claim for benefits under ERISA then the state law cause of action was proper. In this case, the state law cause of action for disclosure of plaintiff’s medical information would exist regardless of the case management undertaken in administering the health plan.

The takeaway from these cases is that ERISA does not provide a cloak of protection against a third party’s tortious actions. If the surveillance company, investigator, or even third party claim administrator violates your rights, an action separate from the ERISA claim may be viable. We at Bonny G. Rafel, LLC as the Voice of the Disabled, often uncover actions by third parties performing investigations of our disabled clients that shocks us. It is wonderful that the courts are recognizing this private cause of action is not preempted (or prevented) by ERISA. While we keep a close watch on authorizations signed by our clients, and cross out items such as “bank statements”, “driving records”, which is completely irrelevant to a disability claim and invasive! We inform our clients to keep social networking to a minimum as investigators can be relentless in their pursuit of some evidence to malign the credibility of our clients.

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Disability insurance is intended to provide financial protection for the individual who becomes unable to work due to a disability. There are two kinds of disability insurance coverage; one through individually purchased insurance policies and the other through employment at a company, or through an association or specific affiliation. Group policies are regulated through the Employee Retirement Income Security Act of 1974 (ERISA). ERISA was enacted to protect participants of an employee benefit plan but in practice, it often enables insurers to avoid their responsibility to pay valid claims. This is the focus of our practice at Bonny G. Rafel, LLC.

A group disability claim must be filed with the Plan and if denied, the claimant must first appeal the decision back to the insurer or claim administrator! Once this “administrative appeal” is exhausted, then and only then can the claimant have his/her day in court. A problem has arisen over when is the deadline for filing a lawsuit in these cases?

Most insurance contracts or plan documents contain a deadline for filing a lawsuit, known as a statute of limitations. Once this deadline has passed, a claimant cannot file the lawsuit. While most plans contain a three-year deadline for filing a lawsuit, we have come across several instances where the deadline is much shorter, in one case only providing the claimant six months after the decision to file a suit! This is a pothole into which many claimants unwillingly fall. They fail to recognize the deadline and thus do not hire legal counsel in time to protect their rights in federal court! To add further roadblocks to justice, the insurers rarely would notify the claimant, in the final denial letter of the deadline. Refer to our previous blogs which address when the clock starts to run for this strict deadline.

Disabled attorneys have a specific challenge to overcome when filing for disability benefits. Due to the generally sedentary setting of the occupation, physical illness must impact one’s ability to work in an office at a computer and present cases in court. Often the insurers simply focus on whether an attorney can physically “sit” rather than whether they can continue to represent clients and perform the necessary duties inherent in the practice of law. See for example, Hertan v. Unum Life Ins. Co. of Am., 2015 U.S. Dist. LEXIS 75261 (C.D. Cal. June 9, 2015) where the Court found that “[r]ather than address the cognitive demands of Hertan’s occupation as an attorney, Unum consistently focused almost entirely on the physical requirements of what they concluded was a sedentary occupation. Hertan suffered from chronic pain and had to take narcotic pain medication. The court recognized that “[e]ven minimal loss of cognitive abilities could.. prevent her form working as an attorney will under the influence.” Both her pain and the use of pain medication impaired her cognitive skills.

Cognitive disabilities resulting from mental health issues, cardiac illness, Multiple Sclerosis, Parkinson’s disease, chronic pain, present unique challenges to overcome to obtain disability benefits. Cognitive decline for an individual may include difficulty concentrating, inability to process, retain or integrate information, impairments in memory, reduction of attention and processing speed. Such deficits are difficult to tease out when the attorney enjoyed a high baseline of functioning to begin with. We have represented many attorneys over the years, and know that insurance companies typically require objective evidence of cognitive decline to support a claim. Neuropsychological testing can be a valid and reliable tool to prove cognitive decline and is recommended where a claimant experiences an impairment that affects their brain functioning. Courts recognize how cognitive skills are vital to the practice of law.

In Teicher v. Regence Health & Life Ins. Co., 562 F. Supp. 2d 1128, 1140 (D. Or. 2008) the claimant attorney filed a claim based on cognitive decline following a traumatic closed head injury, post concussion syndrome and TBI. He scored within the average percentile on neuropsychological tests and benefits were denied. Yet, Mr. Teicher’s neuropsychologist opined that “the critical measure of impairment of an intelligent person such as Plaintiff is the relative change from his pre-injury abilities . . . a drop from the 99th percentile to the 50th percentile reflects a drastic change indicative of an impairment.” The court agreed, as “the record reflects Plaintiff’s high-level executive functions, including his ability to process and to learn new and complex information are, fundamentally impaired” and are so detrimental to his ability to practice law that he is totally disabled. The court further concluded that Mr. Teicher’s ability to read and write does not satisfy the requirements of his profession because “an attorney is not permitted to satisfy only some of the standards required by the profession.”

Cognitive deficits are an important consideration when determining disability. However, insurance companies tend to undervalue the debilitating impact that pain medication can have on a person’s mental state. If a claimant is suffering from cognitive deficits, the insurance company will usually handle the claim in one of two ways.

First, insurance companies will ignore the claimant’s cognitive complaints and proclaim work capacity in a sedentary occupation. This claim mishandling was seen in Mossler v. Aetna Life Ins. Co., 2014 U.S. Dist. LEXIS 89046 (C.D. Cal. June 30, 2014), where the court reviewed the denial of Long Term Disability benefits to a Senior Vice President, who had become disabled due to symptoms including widespread pain, fatigue, side-effects of medications, and cognitive deficits. Aetna denied Mossler’s benefits based on the opinion that he could perform a “sedentary” occupation. However, the court rejected Aetna’s basis as incorrect, pointing out that “even assuming Plaintiff could perform sedentary work, [Mossler] has many other intellectual responsibilities that require both financial expertise as well as a high level of interpersonal skills.”

Second, insurance companies are quick to disregard cognitive complaints when attributed to necessary narcotic pain medication. Many of our clients suffer from chronic pain and treat with pain management specialists. Prescribed narcotic pain medication is problematic because it can impact cognition. Courts recognize that effects of narcotic medication cause disability. For example, a court in determining that Unum unreasonably denied a claim based on its assumption that Bencivenga’s medical condition had improved with his reduction in the number and strength of prescribed pain medication does not automatically mean that his chronic pain has improved. A change in a claimant’s “medication regimen is [not] evidence of any vast improvement to his underlying medical condition” given his prolonged use of narcotic medication. Bencivenga v. Unum Life Ins. Co. of Am., 2015 U.S. Dist. LEXIS 39117 (E.D. Mich. Mar. 27, 2015).

In many long-term disability insurance policies, insurance companies struggle to almost always apply a mental illness limitation when the insured has both mental and physical complaints. The language in these mental illness limitations vary by policy. In George v. Reliance Std. Life Ins. Co., 776 F.3d 349 (5th Cir. Tex. 2015), the Court grappled with the “caused by or contributed to by” language in the mental illness limitation in Reliance Standard Life Insurance Co.’s policy, which reads “Monthly Benefit for Total Disability caused by or contributed to by mental or nervous disorders will not be payable beyond an aggregate lifetime maximum duration of twenty-four (24) months.”

This Court had never considered the meaning of this phrase, but other courts concluded that this language excludes “coverage only when the claimant’s physical disability was insufficient to render him totally disabled”. The Fifth Circuit agreed with this “but-for cause” interpretation, especially since Reliance had advocated for this interpretation in the past. For example, in Gunn v. Reliance Std. Life Ins. Co., 2010 U.S. App. LEXIS 17436 (9th Cir. Cal. 2010), Gunn was required to show that he was totally disabled “solely due to his physical conditions stemming from his multiple sclerosis, without taking into account the disabling effects of any mental or nervous disorders”.

In light of this interpretation, the Court had to consider whether George’s physical disabilities were independently sufficient to render him Totally Disabled. George, as a United States Army helicopter pilot, had his leg amputated following a helicopter crash. Although George’s depression and post-traumatic stress disorder contributed to his employment status, the Court determined that he was disabled due to his physical impairments irrespective of his psychiatric condition, taking him outside of the mental illness limitation.

Litigation to recover denied disability benefits is costly. Not only must the claimant suffer the absence of any disability benefits during the court case, but they must pay counsel for representing them in court. Most attorneys charge a contingency fee for representing disabled claimants in federal litigation; our office is no exception. This means, that if our client is successful, then our fee is paid. Fortunately, ERISA provides that the court, in its discretion, may order that the successful party receives counsel fees from the culpable party. This means that the court may decide that a claimant’s attorney’s fees are paid in part, by the insurer! In our experience, this occurs about 50% of the time. This is totally up to the court’s discretion. See 29 U.S.C. §1132(g).

It is important to understand how the court gauges whether the claimant is the successful party. What happens if the case settles soon after the Complaint is filed, and before the court is substantially involved in the case? What if, as a result of the lawsuit, the defendant voluntarily pays the benefits due? What should the court use as its barometer? Our third circuit court of appeals recently had an opportunity to clarify the law on this subject.

The usual standard for fee awards is the achievement of “some degree of success on the merits.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010). Just recently in Templin v. Independence Blue Cross, No. 13-4493 (3d Cir. May 8, 2015), the Third Circuit decided that the standard, “success on the merits” can be met without any judicial action. In Templin, plaintiffs brought claims under ERISA based on the refusal of the defendants/insurance companies to honor claims for payment of blood-clotting-factor products. After settling the case, the claimants sought $349,385.15 in attorney’s fees. The lower court ruled that the claimants had failed to achieve “some degree of success on the merits”. The claimants argued that they were entitled to attorney’s fees under a catalyst theory.

When you become unable to continue working for an employer due to disability which is long-lasting, you may approach the employer for a severance if it is determined you will never be able to return to that employment. If you are fortunate enough to obtain a severance, be careful, because the agreement you are required to sign with your employer may reduce or even eliminate your rights to later pursue your disability claim. This may be the case even if the insurer of the disability plan is not specifically identified in the severance agreement by name.

Additionally, if you have a dispute with your employer which culminates in termination after the disability claim begins, an agreement to resolve that dispute may impair your rights to pursue a disability claim. That is what occurred in Gonda v. Permanente Med. Group, Inc., 2015 U.S. Dist. LEXIS 18892 (N.D. Cal. Feb. 17, 2015).

Gonda signed a settlement agreement with his employer following his termination. That agreement did not include any language referring to the disability plan other than to state in general terms that all ERISA claims are released. The agreement stated in part: “Dr. Gonda and his agents, successors and assigns agree to release and forever discharge TPMG, KFH, Kaiser Foundation Health Plan, Inc., . . . of and from any and all claims, charges, demands, actions, obligations, liabilities, and causes of action of whatever kind or nature, whether known or unknown . . . concerning or related to his employment by TPMG and Kaiser Foundation Health Plan credentials or his staff privileges at KFH whether based on . . . the Employee Retirement Income Security Act.”