Do You Feel Like You Are Flapping in the Wind?
When employees are offered long-term disability insurance in the workplace and then permit a deduction to their paycheck for that, they expect that they will receive something in return if they ever need it. Perhaps the employee accepted the position because of the benefits package offered, which included long-term disability insurance paid for by the company. The employee expects the benefit to have value. Unfortunately, some courts have interpreted ERISA, the law that governs most employer-provide plans, such that employees do not receive the benefit they bargained for and expected.
The United States Department of Labor understands the need for benefits to be paid promptly when due. It has authority to issue regulations governing ERISA, such as when claim decisions must be made. The regulations require prompt decision-making so that people receive the benefit to which they are entitled and are not left “flapping in the wind without resources” for an indefinite period of time. However, insurers find ways to skirt those time limits. By delaying payment, an insurance company can keep its resources longer and thus increase its investment earnings. And some courts have let them get away with it.
A recent decision illustrates how the “prompt payment” goals of the claim procedure regulation can be eviscerated. Bustetter v. Standard Insurance Company. This case highlights the need for appellate courts to remember the goals of ERISA and its regulations, as trial courts looks to them for guidance.
Mr. Bustetter was a tank truck driver who suffered an injury which left him with chronic left knee pain. He ceased working in October 2014. His long-term disability plan paid him for being disabled as to his own occupation for about 2 years. At that point the definition of disability in the plan changed. The company reviewed his condition to determine whether he was disabled from performing any occupation. As a result, in January 2017 the insurer terminated Mr. Bustetter’s benefits because it found that he could work some occupations. Mr. Bustetter challenged that finding and dutifully exhausted the claim process before he filed suit in January 2018. Having been without benefits for one full year, he was hopeful for a quick resolution. The company’s non-examining physician had ignored Mr. Bustetter’s complaints of chronic pain, even though all examining physicians that found them to be credible.
On September 24, 2019, the trial court agreed that the company acted arbitrarily and capriciously as to his long-term disability claim. However, the court refused to reinstate benefits. It remanded the case to for the company to reconsider whether he was entitled to benefits, thus giving the company another bite at the proverbial apple. The court relied on an unreported 6th circuit decision, Laake v. Benefits Comm., W. & S. Fin. Grp. Co. Flexible Benefits Plan, 793 F. App'x 413, 414 (6th Cir. 2019), which found that the lower court remand order merely vacated the eligibility determination and did not resolve the ultimate question of whether the plaintiff was eligible for benefits.
Mr. Bustetter requested his attorney’s fees as he had prevailed to that point. The court refused to permit Mr. Bustetter’s claim for attorney’s fees. The court held that an attorney fee petition is only proper upon entry of a final judgment from which an appeal would lie. It found the claim for attorney’s fees premature.
Upon reconsideration, the company had no problem coming up with additional reasons to deny the claim again, which occurred on December 17, 2019. Mr. Bustetter again went back to court. At that point he had been without benefits for almost 2 ½ years. So much for prompt determinations and payment of benefits.
Are changes needed to ERISA and its regulations? Yes. But this problem is court-caused.
This holding gives insurers no incentive whatsoever to properly decide a claim. If the insurer did not get it right the first time why should it be given a second bite at the apple? Claimants aren’t given a second bite at the apple to introduce new evidence which was not presented during the claim process.
Claimants should not be left to flap in the wind in the face of arbitrary and capricious claim decisions. Either courts adjudicate what occurred during the claim process and require the parties to live with their prior decisions during the claim process or let’s not require parties to go through the claim process. To give one party the advantage of a Mulligan is unfair. Once arbitrary and capricious conduct has been found, the court should order payment of all past due benefits (with interest) and only remand the case as to future benefits. Attorney’s fees should be awarded as well.
In some courts, insurers are essentially allowed to follow this roadmap in denying every claim:
1. Deny the long-term disability claim.
Pick a reason, any reason it really does not matter. Just make something up.
2. Require the claimant to appeal.
Many will be too sick or depressed to do that. On appeals, simply have your in-house physician or your paid physician consultant come up with a report to which ignores all restrictions, limitations and pain noted by the various treating doctors and deny the appeal, thus forcing the plaintiff to go to court.
3. Make the claimant file a lawsuit.
Many will not because they are too sick, tired, or depressed. Further many will not find an attorney willing to take on their case. Then litigate the matter to the bitter end. If you lose, the court will simply remand the matter back so you can start all over again with new and additional reasons to deny the claim (you will have the benefit of what you learned in this litigation).
4. When the matter is remanded, come up with a new reason to deny the claim.
Bolster your weak arguments with stronger opinions perhaps from an independent medical examination. The claimant may be so tired of it all by then that they simply give up. Even if they don’t, you have retained all of those benefits for about 3 years.