Long-term Disability Claims

As some of you have been following on other blogs and websites the internet community has kicked up quite a fuss at Sony and its recent attempts to prevent music pirating. Click here for the blog of the person who first discovered it. Very technical. Click here for something not so technical and more current.

Sometimes things are not always, as they seem. In the recent case Allsup, Inc. v. Advantage 2000 Consultants, Inc., -- F.3d --, 2005 WL 3054130 (8th Cir. 2005) discovery revealed some things that Allsup may not want its Social Security claimants to know. Both Allsup and Advantage2000 are in the business of assisting disabled persons obtain Social Security benefits. Often the major disability carriers hire one of the two (or one of the others) to help the claimant obtain benefits from the Social Security Administration. The insurance disability carriers are not doing this for altruistic motives. Often the insurance policy allows the insurance company to reduce the amount of benefits the SSA pays to the insured. Thus, it is in the insurance companies’ best interest for you to get Social Security.

Often the SSA makes its claim determination long after the insurance company has paid benefits. The policies usually allow the insurance companies to offset retroactively the Social Security benefits. Paying the LTD benefits before the Social Security benefit is determined results in an overpayment. Since the insurance policy requires the claimants to repay the overpayment the insurance companies want to recover the money. However, the United States Supreme Court in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708 (2002) (See PDF page 391), issued a ruling that made it extremely difficult to sue a claimant who did not repay the overpayment.

Allsup, even before the Court issued Knudson, began to develop a system to help the insurance carriers recover that overpayment. Allsup called its program the “Overpayment Recovery System™” or “Seamless ORS™” This system is what led to the lawsuit in Allsup. As Professor Tushnet explains, the Allsup case involved false advertising among other non-ERISA claims. The dispute involved Allsup’s concerns that Advantage2000 may have taken overpayment recovery business from it. Advantage2000 claims it did not enter the overpayment recovery business.

What this intramural squabble revealed is how much money there is in the overpayment recovery business. Allsup claimed that it spent over a $1, 000,000 developing its overpayment recovery mechanism. Allsup, Inc. page 2. What does Seamless ORS™ do? According to Allsup, it involves the ACH backbone and electronic funds transfer. It is a wire transfer (or automatic debit) from the claimant’s bank account to the bank account of the insurance company (after Allsup) gets its fee. Why does Allsup offer this service to the insurance carrier? It is paid for it and paid well if the development costs are any indication. In addition, as Allsup explains “[s]ometimes they [the claimants] can’t resist using this “found” money to pay off mortgages or their medical bills.” Click here to read the brochure.

Another service that Allsup offers to the insurance companies is its ability to identify those claimants who may be interested in a lump sum settlement. Allsup states, “[b]ecause our representatives develop strong and trusting relationships with claimants, many share information with us that they may not share with their employers or insurers.” Since insurance companies agree to settle if it makes economic sense to them this statement should give you a warm fuzzy feeling. Click here to read the brochure.

As the Knudson court and its progeny have held, it is extremely difficult for the insurance carrier to sue a claimant successfully to recover an overpayment. By authorizing the automatic debit the claimant is giving, a third party the authority to make a payment on a debt that he/she may not be subject to a successful lawsuit. Of course, the contract requires that you repay it. However, you need an experienced ERISA litigator on your side to explain Knudson to you. You can find such a person here.

As most you know, NMR (Network Medical Review, Inc.) and its sister company/subsidiary perform a large number of "independent" medical reviews at the request of various insurance companies.

In Denmark, the Plaintiff's counsel, Jonathan M. Feigenbaum [JonF@Phillips-Angley.Com] propounded discovery on Liberty Life to learn how much it pays to NMR each year and how may cases NMR reviewed at Liberty's request and how many NMR actually found were disabled.

Liberty provided this information under a protective order so neither side could disclose it.

Despite finding for Liberty, the Court did disclose the following:

The supplemental evidence shows that Liberty paid over two million dollars ($2,004,656.00 to be exact) to Network Medical Review--Elite Physicians from 2001 through 2003. While this amount shows that NMR certainly has a financial interest in maintaining its medical consulting business with Liberty, any reviewing physician or network of physicians hired by an administrator/insurer has the potential to be affected by the inherent pressure of giving conservative opinions in order to receive more consulting contracts. To demand greater scrutiny on review, there must therefore be something more.


Denmark v. Liberty Life Assur. Co. of Boston, 2005 WL 3008684, * 11 (D.Mass. Nov. 10, 2005). Although the Court did not believe the dollar amount in and of itself was enough to show conflict I believe the Court is wrong. For that kind of money there will be a lot of competition to get the business. There cannot be too much competition on price since the cost of these reviews is relatively cheap. This is true in light of the Court's further disclosure that, during the 2001 - 2003 time frame, Liberty referred 1,204 files to NMR. Denmark, 2005 WL 3008684, *11. This is an average cost per case of $1,665. Thus there is not a lot of room to lower the price and still stay in business.

The Court did draw an inference in favor of the plaintiff as a sanction for not following a court order. The Court ordered Liberty to tell the court how many times (out of that 1,204 opportunities) NMR found in favor of the claimant and not in Liberty's favor. As the Court said,

"I also ordered Liberty to stipulate the number of cases where "they [NMR] have accepted a claim", which Liberty understood to mean stipulating "the number of claims accepted or granted and rejected or denied after a review by a physician retained through NMR and/or Elite Physicians, Ltd." Without moving to modify my order, Liberty refused to make such a stipulation claiming that it was "unable to provide this information ... due to the very substantial burden and expense that would be involved in retrieving and manually reviewing the over 1,200 claims files that were referred to NMR physicians from 2001 to 2003." "

Denmark, 2005 WL 3008684, *11.

As a sanction for refusing to provide the information, the court drew the inference that NMR decided all 1204 claims in Liberty's favor. Ibid. However, it turned out not to be much of a sanction. Instead of closely scrutinizing Liberty's decision, the Judge stated he would give close scrutiny only to the NMR's report. Thus, the Court applied the very lax abuse of discretion standard of review to Liberty's decision and the evidence that Liberty obtained from all sources other than NMR. The Judge should have applied the abuse of discretion standard of review with more bite (closer scrutiny) to all evidence Liberty obtained. If it was willing to contract with a company who always finds in its favor, as the Court inferred as a sanction, then the Court should have cast a jaundiced eye on Liberty's evidence and its behavior.

The Court also accepted the opinion of a nurse over a Harvard rheumatologist. Nurse Kaye...also questioned the usefulness of Dr. Schur's opinion in assessing the Plaintiff's condition for the past six months because his report only provides information for the particular date of the independent medical exam.

Denmark, 2005 WL 3008684, *4.

The next time your insurance company relies upon an IME (or one day of video surveillance) you to quote Nurse Kay's opinion that the opinion is not useful since it is only one point in time.

Allowing a nurse to overrule a doctor is something the Court, in a case in which i was the lawyer, found troubling. As Judge Hoyt noted:


"...when an administrator relies on nurses to override highly trained physicians, the court should decrease the level of deference afforded the administrator. Research reveals no published case directly on point, but indicates that other courts, at least in the context of determining medical necessity, have been wary of giving nurses broad deference. See C.N.S., Inc. v. Conn. Gen. Life Ins. Co., 9 F.Supp.2d 194, 198 (E.D.N.Y.1998); Pritt v. United Mine Workers of Am., 847 F.Supp. 427 (S.D.W.Va.1994).


Gellerman v. Jefferson Pilot Financial Ins. Co., 376 F.Supp.2d 724, 735 -736 (S.D.Tex. 2005).

Mr. Feigenbaum made the argument but the Court did not even mention it.

You need to make sure that your disability lawyer has a shredder or has contracted with a shredding service to dispose of your medical records when they are no longer needed. Often lawyers make extra copies of your medical records and do not use them in your case. This new statute requires that the attorneys have a "disposal policy."

We have a shredder for small jobs-5 pages at a time or less. We have also hired a shredding service to take care of the big jobs. The shredding service provides a free locked bin for us to fill. At the end of each month, or earlier if we fill the bin, they take the bin and destroy the medical records. All ERISA disability firms should be doing something similar.

Thanks to Sheppard Mullin and the laboremploymentlawblog.com for bringing this to my attention. You can read their blog here.

Labor Employment Law Blog: Federal Disposal Rule

According to UNUMProvident, the leading provider of disability insurance, the following are the five leading causes of long-term disability claims:

12 percent – Cancer
10 percent – Complications of pregnancy
10 percent – Joint/muscle/connective tissue diseases
9 percent – Back injuries
8 percent – Cardiovascular disease


UnumProvident Corporation: "CANCER TOPS MOST FREQUENT CAUSES OF LONG TERM DISABILITY CLAIMS IN 2004"

Penalties for COBRA notice violations can be substantial.
A federal court in Nebraska recently
imposed penalties of over $300,000 plus attorneys
fees. Delcastillo v. Odyssey Resource Management Inc., 320 F. Supp. 2d 889 (D. Neb. 6/11/2004). Here, the court found that the participant and his family suffered particularly severe consequences as a result of the lack of health care coverage.

Blair Brininger
blair@erisa.md

Whaley v CNF Transportation, Inc. Long Term Disability Plan, C. A. No. 03-363 (Southern District of Ohio (Order Granting Plaintiff's Motion For Judgment On The Administrative Record (June 14, 2005))

In Whaley, Judge Thomas M. Rose found that the Defendant claims administrator abused its discretion. Dr. Fantasia, Plaintiff's chiropractor, opined that Plaintiff was disabled. That was the extent of Dr. Fantasia’s role. However, Dr. Fantasia’s name alone rates a headline.
Whaley was diagnosed with fibromyalgia. She completed a Daily Activities Questionnaire (“DAQ”) and an Employee Assessment Report (“EAR”). After completing those two forms, Ms. Whaley provided various doctor reports indicating she was disabled. The DAQ was 13 months old and the EAR was 11 months old on the date the claims administrator denied the claim.
Judge Rose found that the claims administrator abused its discretion in denying Plaintiff’s benefit claim. Judge Rose reasoned that, since the claims administrator had more current evidence from Whaley’s doctors at the time of the denial, at the very least it should have obtained updated DAQ’s and EAR’s at the time it denied Whaley’s claim.

You can read the order here.

Blair Brininger
blair@erisa.md
http://www.erisa.md

I have a number of cases against Life Insurance Company of North America (LINA or CIGNA). As you know one of the first things you do when appealing a denied disability claim is request the entire file from the insurance company. LINA does not always send the entire file in response to such a request. To assist you in getting the complete file I have prepared a letter in which I identify the documents that I expect to find in a LINA file. I then tell LINA which of those documents I received and which documents I did not. I have published the sample letter “rat cheer.”

Advisory Opinion 2005-16A