Freezing an ERISA Claim to Death
I wish I could tell employees who have long term disability, life insurance, pension, or health insurance benefits, that insurance companies honor their fiduciary duties and evaluate each claim fairly. But I can't. And, they don't.
While it might be true that every now and then a claimant receives a fair shake during the claim process, the overall picture painted in court opinions is that the majority of claimants will lose their claim in court if they do not have a strong claim record presented to the insurance company by an experienced practitioner during the claim process.
Insurance companies frequently use the claim process to freeze out a claimant, making litigation thereafter an exercise in futility. A recent case, Catherine Verschelden v. Hartford Life and Accident Insurance Company, illustrates this very point.
Facts of the Case:
Matthew Verschelden worked for the same law firm for over 30 years. He was a well-respected attorney still going strong until his cancer. At the time, he had life insurance benefits in place totaling almost $1.2 million.
The plan document had a waiver of premium benefit, which provided that the life insurance would stay in place without payment of premiums if Mr. Verschelden proved he was disabled.
The definition of disability required that he show he was disabled for any occupation he was qualified to perform based on his education training or experience. Otherwise, he could also qualify as disabled if he was diagnosed with a life expectancy of 12 months or less.
Mr. Verschelden had a cancerous brain tumor, and his treating physician completed forms indicating that he was disabled from sedentary work, even on a part-time basis as of August 2015 and until February 2016.
After treatment, his physician reported that he was doing clinically well and thought he could do some light or sedentary work like housework or office work in July 2017.
Hartford terminated his claim upon receiving this change in opinion. In fact, Hartford used that point in time to freeze the claim. Hartford let him know that he had a right to convert the policy to a private policy and pay its steep premiums out of his own pocket.
However, the cancer came back, and another physician found he needed additional brain surgery in December 2017 and further found that he could not perform fine or gross finger manipulation including that needed on a keyboard or to grip, grasp or handle matters. The opinion was that this was a permanent condition.
In January 2018, right before his surgery, Verschelden sent in his own appeal, arguing that he could not work as a partner at his law firm, nor was he employable at any law firm on a part-time basis, so therefore, he was disabled.
There was no effort to rebut information in the claim record nor was there a submission of any additional information such as a vocational opinion or an explanation from his prior doctor as to whether "office work" meant part-time employment. There was no effort to relate his disability back to July 2017 prior to when the claim was terminated.
In the meantime, Hartford had Dr. Michael Snyder a neurologist, look over the claim record. Without any examination, he found a few restrictions and also a lot of things Mr. Verschelden could do. He submitted the information to Hartford. It performed its own vocational analysis. Hartford found five jobs that Mr. Verschelden could do. It denied the appeal presented by Mr. Verschelden in May 2018.
Sadly, in October 2018, Mr. Verschelden died. His surviving wife filed a claim for benefits, but Hartford denied the claim.
Hartford was wrong. It should have paid this claim especially given that Mr. Verschelden's life expectancy was likely less than a year when it denied his appeal. However, Mr. Verschelden did not pay the premiums for the policy to keep the insurance in place when his claim was first denied in July 2017. He did not know that his claim was frozen in time in July 2017. This created a gap which Hartford exploited. It also knew that ERISA gave it discretion to deny claims.
What mattered was whether “… Hartford reasonably determined Verschelden was not disabled starting July 24, 2017, that is the relevant date upon which Verschelden was required to show his continuing disability.” Based on the record before the court, the judge felt Hartford had acted reasonably. It did not matter that Mr. Verschelden may have been disabled again in December 2017. The claim died in July 2017 and could not be resuscitated at that point.