McKean Evans

ERISA Plan Administrator Cannot Unilaterally Ignore Treating Physicians, Appeals Court Confirms

A recent appeals court ruling emphasizes that ERISA plan administrators cannot ignore the opinions of a claimant’s treating physicians absent tangible evidence those opinions are wrong. In Hennen v. Metropolitan Life Insurance Company, the appellate court ruled the plan administrator acted arbitrarily in discounting the opinions of the claimant’s treating physicians and remanded the claim for a full and fair review.

After a back injury, Hennen applied for long-term disability (“LTD”) benefits with her employer’s group policy insured by MetLife. MetLife agreed that Hennen was disabled and paid benefits for two years. But after two years, MetLife terminated Hennen’s benefits, finding that the Plan’s limitation for neuromusculoskeletal disorders cut off Hennen’s benefits after two years of payments. Hennen sued under ERISA, arguing she fell within an exception to the two-year cutoff because she had radiculopathy.

The U.S. Court of Appeals for the Seventh Circuit ruled for Hennen. Although the court acknowledge ERISA required deference to MetLife’s decision because the plan contained discretionary language, the court noted discretionary authority did not permit MetLife to act arbitrarily in deciding Hennen’s entitlement to benefits. The court determined MetLife acted arbitrarily when it discounted the opinions of four doctors who diagnosed Hennen with radiculopathy in favor of the opinion of one physician who ultimately disagreed, but only while recommending additional testing that MetLife declined to pursue.

The court noted that even though a plan administrator is typically permitted to chose which medical opinions to rely on, its decision must still have a rational explanation. Every physician who examined Hennen since 2012 concluded she had radiculopathy. These doctors’ opinions had substantial medical support. While MetLife chose to ignore these doctors’ opinions in favor of its own employee Dr. McPhee, that decision was arbitrary. Dr. McPhee recommended Hennen undergo further testing and an independent medical examination in order to determine whether Hennen’s radiculopathy diagnosis was correct, but MetLife ignored that suggestion. The court emphasized:

Here, MetLife took an extra step for its own benefit when it referred Hennen’s file to Dr. McPhee for review. But when Dr. McPhee recommended that MetLife take an additional step for Hennen’s benefit — to confirm whether his lone opinion that she did not suffer from radiculopathy was accurate—MetLife declined to take that step.That was arbitrary and capricious.

The court also emphasized “Although it is reasonable for MetLife to require objective support for a diagnosis of radiculopathy, it would be unreasonable to discount clinical observations of Hennen’s treating physicians in favor of testing that is inconclusive for the condition.”

The court ordered Hennen’s claims be remanded to MetLife for the full and fair evaluation ERISA mandates.

The Hennen decisions represents an important enforcement of ERISA’s requirement that insureds and claimants be afforded a fair and objective determination of their entitlement to benefits, even where the Plan affords the plan administrator discretionary authority.

Can The Insurance Company Cancel My Policy For Late Premiums?

It’s fairly easy to miss an insurance premium payment. You buy your policy online, set up monthly auto pay through your debit card, and forget about it. But then you have to replace your card, or get a new card number or bank, or the account is overdrawn, or something else happens. Or, maybe you’re paying manually each month and just plain get behind on your mail. You get a notice from the insurer that your policy’s been canceled for premium nonpayment. You call them and explain the problem and offer to pay, but they won’t let you do it.

Can they do that? Like most insurance questions, the answer is “it depends.”

The general rule is that insurers are free to cancel policy coverage without notice when the insured fails to timely pay premiums. Courts are traditionally unforgiving when policyholders miss premium payments. They emphasize that the basic insurance exchange is the insurer provides coverage in exchange for premium payments; since this is the heart of the bargain, insurers are within their rights to insist on timely premium payments and cancel coverage without notice if premiums aren’t paid on time.

There are exceptions to this rule, but they depend on the specific factual details and the language of the insurance policy:

Grace Periods: Sometimes the policy explicitly provides a grace period or lets the insured reinstate coverage after missing a payment. This is a common feature of life insurance policies in particular. Or, sometimes the policy doesn’t have a grace period but some applicable law requires the insurer to give you a grace period for missed premium payments. One prominent example is the federal Affordable Care Act (a/k/a “Obamacare”). The ACA provides for a grace period for certain covered health insurance plans, with the length of the grace period depending on whether the insured is receiving subsidies.
Insurer Misrepresentations. Courts may be receptive to insurer’s rights to collect premiums, but they don’t like it when insurers lie. Where the insurer misled the insured about whether premiums were outstanding, or lied about the availability of a grace period before coverage would be canceled, courts often allow the insured to reinstate coverage.
Insurer Errors. Even where the insurance company doesn’t lie, if the insurer’s own conduct prevents you from paying premiums on time then courts often bar the insurer from canceling coverage. For instance, sometimes insurers misapply or lose a payment, or don’t allow the insurer to make a payment because the company’s website or telephone is down.
Past Practices. Sometimes the insurer routinely accepts late payments, leading the insured to conclude that the premium deadline isn’t a big deal. In those cases, courts sometimes determine the insurer waived its right to cancel coverage for late payments.
Insurer Promises. In cases where the insurer’s agents promise the insured that they will “let it slide” and not cancel coverage for a missed premium payment, courts sometimes hold the insurer to its agent’s promise and deny the insured the right to cancel coverage.

It’s important to remember that, if the insurer cancels coverage improperly, the insured typically has recourse, including a claim for additional damages and attorneys’ fees, under Washington’s Insurance Fair Conduct Act and/or Consumer Protection Act.

Lawsuit Documents Allegations of Discriminatory Claims Handling By Insurer Who Kept A So-Called “Jewish Lawyer List”

Anyone who’s suspected their insurance company gave their claim closer scrutiny because of their race will likely find the allegations in this lawsuit alarming. In short, the insurance company was sued alleging it discriminated against insureds represented by attorneys identified on the insurance company’s secret “Jewish Lawyer List.” The insurer settled that lawsuit, but then turned around and sued the plaintiffs and their lawyers for defamation. The ensuing litigation provides a fascinating glimpse into some appalling racist insurance practices.

The case goes all the way back to 1987. Four drivers were involved in a car crash and sustained damages their insurer refused to cover, claiming the drivers’ claims were fraudulent. The drivers hired attorney Erwin Sobel to sue the insurer to obtain coverage.

In the course of litigating, attorney Sobel discovered documents suggesting his clients’ claims had been flagged as fraudulent because Sobel was Jewish. Sobel uncovered a 1983 insurer memo containing a list of about 160 Los Angeles lawyers, including Sobel – the majority of whom were Jewish. Insureds with lawyers on the so-called “Jewish Lawyer List” had their claims automatically sent to the insurer’s special fraud unit with instructions not to pay any claims. The memo directed the insurer’s agents to destroy the memo after forwarding all the lawyers’ clients to the fraud unit, and to keep the entire system secret from the insureds and their lawyers.

The insurer denied the allegations, but ultimately paid Sobel, his co-counsel and their clients $30 million to settle their allegations of discriminatory claims handling. Among other things, Sobol presented testimony from an economist showing the list contained wildly disproportionately Jewish attorneys.

The case is an unfortunate reminder that insurance practices aren’t immune from racism and discrimination.

What Are The Rules For Short Term Health Coverage?

Many people buy short term medical coverage to fill in gaps in long term coverage. For instance, if you start a new job, you’ll often lose coverage from your former employer’s medical plan prior to becoming eligible for coverage under your new employer’s medical plan. This gap can often last several months. To maintain coverage for medical expenses, people often purchase short term medical coverage for just a few weeks or months. Short term coverage isn’t designed to be your primary insurance but just to cover the gap while you transition between health insurance policies.

Short term medical coverage isn’t subject to all the same rules as typical medical coverage. In particular, short term coverage is not required to meet the Affordable Care Act’s minimum standards for health insurance. Moreover, the federal agencies responsible for overseeing short term medical plans, including the Department of Labor, Department of Health and Human Services, and IRS, frequently tweak the rules by issuing updated regulations, most recently on August 3, 2018.

So what are the current rules for short term medical insurance? Here are some of the highlights:

The ACA Individual Mandate: Under the current rule as of August 3, 2018, short term medical coverage isn’t considered “Minimum Essential Coverage” under the Affordable Care Act. Ordinarily, that would mean a person covered only by short term medical insurance isn’t complying with the Affordable Care Act’s individual mandate, and could be subject to tax penalties. However, Congress’ tax overall bill passed in late 2017 effectively eliminates the Affordable Care Act’s individual mandate. That means as of today, individuals covered solely under short term medical coverage won’t have to worry about paying the Affordable Care Act individual mandate penalty.
No Minimum Standards: Since short term medical insurance isn’t subject to the Affordable Care Act’s minimum standards, short term medical insurance can do things like exclude pre-existing conditions, refuse to cover essential health services like emergency care, and impose annual caps on coverage.
Duration of Coverage: Short term medical coverage with the same carrier may last no longer than 36 consecutive months. This also applies if a shorter-duration policy is renewed with the same carrier. This rule likely doesn’t preclude coverage under a short term medical policy for longer than 36 months so long as the coverage is under multiple carriers.
State Regulations Apply: Regardless of regulations under federal law, many states still regulate short-term medical coverage. Washington State’s insurance commissioner recently proposed new rules that, among other things, limit short term medical coverage plans’ duration to three months and establish certain minimum standards for coverage.

The rules for short term medical coverage are very much influx due to changes by federal regulators, Congress and states. It’s important to carefully review your policy and any applicable rules to determine your rights under short term medical coverage.

Title Insurance Covers Tribal Fishing Rights Claims Against Landowner Says Court of Appeals

Title insurance is a critical part of most real estate deals. In Washington and throughout the U.S., a piece of real estate has likely changed hands numerous times, including typical purchase money mortgage sales, foreclosures, bequests via a will or trust, or otherwise. As a result, prudent people about to buy land or a home buy title insurance, which protects the buyer from losing money if it subsequently turns out that there is a problem in the chain of prior transactions of the property. For example, a person might buy a new home and subsequently learn that, due to a defective transfer decades prior, the seller didn’t fully own the property and thus the new buyer’s ownership interest is in jeopardy. The new buyer might find themselves defending a lawsuit (a/k/a a “quite title” action) or otherwise taking a monetary loss on the property due to the defective title. In that case, the buyer would tender the claim to their title insurer who would defend the lawsuit or reimburse the buyer.

As a result, most prudent home-buyers and other parties to real estate transactions routinely buy title insurance. Unfortunately, the title insurer often resists paying claims when problems with title arise. This is particularly true where the claims against the title are more esoteric, such as tribal fishing treaty rights.

In Robbins v. Mason County Title Insurance Co., Case No. 50376-0-II, Washington’s Court of Appeals ruled in favor of buyers, the Robbinses, in their dispute with Mason County Title Insurance Company (“Mason Title”). In 1978, the Robbinses purchased land including tidelands formerly owned by the state of Washington (the “Property”), intending to use the tidelands for commercial shellfish harvesting. Being prudent land buyers, the Robbinses also purchased title insurance from Mason Title (the “Policy”). The Policy required Mason Title to insure the Robbinses against any loss resulting from defects in the Property’s title. Specifically, the policy stated:

[Mason Title] shall have the right to, and will, at its own expense, defend the insured with respect to all demands and legal proceedings founded upon a claim of title, encumbrance or defect which existed or is claimed to have existed prior to the date hereof and is not set forth or excepted herein.

Unfortunately for the Robbinses, their newly-purchased tidelands had a defect in title. The Sqaxin Island Tribe (“Tribe”) had a claim to the Property’s shellfish rights by virtue of the 1854 Treaty of Medicine Creek (“Treaty”). Upon learning of the Robbinses’ shellfish-harvesting aspirations, the Tribe sent the Robbinses a letter asserting its rights under the Treaty and demanding 50 percent of the harvestable shellfish from the Property.

The Robbinses tendered the Tribe’s claim to Mason Title and asked Mason Title to defend them as required by the Policy. Mason Title refused, claiming there was no coverage under the Policy for the Tribe’s claim. The Robbinses sued Mason Title for coverage under the Policy as well as for insurance bad faith.

The Court of Appeals ruled for the Robbinses. The court determined the Tribe’s claim constituted a “demand” “founded on a claim of encumbrance arising before the date of inception of the policy” which the Policy required Mason Title to defend the Robbinses against. Thus, the Robbinses had coverage under the plain language of the Policy.

Mason Title argued the Robbinses’ claim was excluded under the Policy’s exclusion for “public or private easements not disclosed by the public records.” The court disagreed, finding the Tribe’s rights under the Treaty were not “easements.” An easement is “a right to enter and use property for some specified purpose.” The Tribe’s shellfish harvesting rights were not a right granted to the Tribe to enter the Property but rather existing rights the Tribe had always possessed and which the Treaty simply reserved for the Tribe.

Besides ruling the Policy covered the Tribe’s claim against the Robbinses, the court also ruled Mason Title acted in bad faith in unreasonably refusing to defend the Robbinses. The court found Mason Title’s interpretation of the policy was, at best, an arguable reading of an ambiguous provision of the Policy. As such, Mason Title was required to, at least, defend the Robbinses from the Tribe’s claim while reserving its right to dispute coverage.

The Robbins case emphasizes property buyers should carefully review their title insurance policies to confirm they are covered in the event title is defective, and should insist the title insurer follow the policy and provide coverage in the event of a loss.