One day, either out of ignorance or a perverse sense of humor my wife, Janet, decided to have me take a “short cut” to wherever we were going. Not knowing better, I followed her directions. It didn’t take me long to realize we were smack dab in the middle of an area of Los Angeles marred by gang rivalries, turf wars, and violence - definitely in the wrong place. My South St. Louis instincts kicked in and I immediately altered my driving behavior. I started slowing down well before an upcoming intersection red light. “Why are you braking this far away?” she asked. “To keep moving”, I said. "With luck the light will be green by the time we get to it.” “Why are you doing that?” asked the former Orange County mall rat. I shot back, “Because gunfire in this neighborhood is common, and a moving target is a lot harder to hit.”
Little did I realize that within my instinct for survival, I had stumbled onto a basic rule of human nature -- one that would
even translate into a common defense strategy. As I would later learn, defense counsel play the “moving target” game all the time. And so do their insurance company clients, when it comes to making benefit claims determinations. Long term disability carriers are notorious for constantly shifting rationales for their decisions, so that they can’t be pinned down to any particular position. They know that if they ever are, they’re vulnerable. So if a claimant tries to shoot down the stated grounds for denying a benefit claim, the insurer will simply invent new reasons for denying it. For the claimant, it is like trying to hit a moving target.
But before a claimant can even get that far in the process, he must overcome yet another obstacle – ascertaining exactly why the insurance company denied his claim to begin with. That tactic is called “hiding the ball”. Insurance companies often deny claims, reciting indecipherable gobbledygook as their reason – because they know the clearer they state it, the easier it is for the claimant to overcome it.
It is for that very reason ERISA, the federal regulations and the case law require that insurers communicate effectively with claimants, by providing the information that is most essential to perfecting a claim. The ERISA statute states that insurers are to provide claimants with a “full and fair review” of any adverse claim decision.
The regulations are even more precise. 29 C.F.R. 2560.503-1(h) very clearly states that “full and fair review” requires that “a claimant shall be provided, upon request . . . copies of all documents, records, and other information relevant to the claimant's claim for benefits.” But just exactly what kind of information is “relevant” to the claim? Fortunately, for all of us, the regulation, itself explains that too. It says, “Whether a document, record, or other information is relevant to a claim for benefits shall be determined by reference to paragraph (m)(8) of this section.” OK, I know this is a little mind-numbing, but stay with me. Because paragraph m(8) of that regulation (Definitions) very clearly states: “A document, record, or other information shall be considered ‘relevant’ to a claimant's claim if such document, record, or other information . . . (i) Was relied upon in making the benefit determination; (ii) Was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination.” So basically, any document or other information generated during the course of the insurer’s investigation, review and decision-making process, must be produced for the claimant’s own review.
But what exactly is the claimant supposed to do with this evidence, once it’s produced? The case law answers that question. Palmer v. University Medical Group 994 F. Supp. 1221, 1240 (Ore. Dist., 1998) (Emphasis added). (". . . Meaningful participation in this internal review process . . . requires that the claimant have an opportunity to review the relevant documents in the claim file so the claimant may submit any additional documents, correct any errors in the record, point to any favorable evidence that would tend to support the claim, fully understand the reasons for the decision that is being appealed, and to otherwise prepare an informed response to that decision. . . .".). D’Emanuele v. Montgomery Ward & Co, Inc. 1987 U.S. Dist. LEXIS 16830 (C.D. CA 1987). ("(I)n order to afford a plan participant whose claim has been denied a reasonable opportunity for full and fair review, the fiduciary must inform the participant of what evidence he relied upon and provide him with an opportunity to examine the evidence and to submit written comments or rebuttal documentary evidence."). Halpin v. Grainger 962 F.2d 685, 689 (7th Cir. 1992) ("The persistent core requirements of review intended to be full and fair include knowing what evidence the decision-maker relied upon, having an opportunity to address the accuracy and reliability of that evidence, and having the decision-maker consider the evidence presented by both parties prior to reaching and rendering his decision. . . . These requirements enable the claimant to prepare adequately for any further administrative review, as well as appeal to the federal courts.").
Likewise, the regulations 29 CFR 2560.503-1 (h)(2) provide:
“(h) Appeal of adverse benefit determinations. (1) In general. Every employee benefit plan shall establish and maintain a procedure by which a claimant shall have a reasonable opportunity to appeal an adverse benefit determination to an appropriate named fiduciary of the plan, and under which there will be a full and fair review of the claim and the adverse benefit determination. (2) Full and fair review. . . . the claims procedures of a plan will not be deemed to provide a claimant with a reasonable opportunity for a full and fair review of a claim and adverse benefit determination unless the claims procedures. . . . (ii) Provide claimants the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits; (iii) Provide that a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits. . . . (iv) Provide for a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim. . . .”
So assume that we succeed in obtaining all of the “relevant” information pertaining to the claim. We can review and understand it, which enables us to submit further written comments and evidence to effectively rebut the initial claim denial. Is that the end of the story? Hardly. Now we play a new game, called “hit the moving target”. Because it is at that precise point in the review process that the insurer will simply change reasons for the denial.
One way insurers try to pull off this maneuver is by loading into the administrative record additional evidence that it purports to “rely” upon, which the claimant never sees until after it’s too late to rebut it. Sometimes they throw in undisclosed video surveillance of the claimant. Sometimes they concoct “post denial” (and “denial-friendly”) reviews of the medical records by their own self-chosen medical doctors. Sometimes they’ll even try to put together a “post-denial” “Independent Medical Examination” (IME). Although insurers frequently use third-party vendors to arrange these reviews or exams, giving them an aura of independence and objectivity, the fact is the same insurers use the same vendors over and over again; and those same vendors use the same doctors, over and over. All these folks know full well which side their bread is buttered on.
As a part of this further “independent” review or examination, the insurance company doctor will often contact the claimant’s treating doctor by telephone, for a “peer review” discussion of the case. Nothing good ever comes out of those “peer review” contacts. If the attorney submitting the appeal has done his or her job, the treating physicians will have already made it abundantly clear for the record their opinions as to the claimant’s restrictions, limitations and resulting impairment. So there is absolutely no evidentiary value in the hearsay recitations of doctors talking on the telephone. Moreover, the federal regulations require a written decision on the merits of the claim as revealed by the record, not a review decision based on hearsay recitations that are neither reliable nor verifiable. During these “off the record” phone conversations, the “peer review” doctor will try to get the treating doctor to say anything that can be possibly used to shoot down the claim. If the treating doctor makes some careless, off-the-cuff remark, the “peer review” doctors will take that down, and put it into a written report for the insurance company to use.
It certainly goes without saying that an insurance company may investigate a claim. And whenever a medical judgment is made, an insurer may have a responsibility under the federal regulations, to consult with an independent health care professional with appropriate training and experience in the field of medicine involved in the medical judgment. 29 CFR 2560.503-1 (h)(3). But that does not equate to a right to conduct a post-denial medical review or IME for the purpose of generating new reports and thus constructing a new administrative record to prop up the initial denial. Insurers should obtain whatever medical examinations or record reviews they need, before a claim is denied, not after. And insurers must disclose any reports generated as a result of such examinations or reviews before a claim is denied, not after. If an insurance company initially denies a claim, ERISA provides that it must specifically state its reasons for doing so and it must afford the claimant a reasonable opportunity to administratively appeal that denial. Then, when a claimant (or his/her attorney) submits such an appeal, that appeal by necessity must be specifically directed to the grounds stated in the initial denial letter. (Indeed, how could it be directed at anything else?). The insurer’s review of the administrative appeal is to be limited to the record before it at the time the appeal was submitted. It is not to be based on some other record that it seeks to construct after the fact. Simple logic commands this. And so does the case law. See: Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F. 3d 863, 872 (9th Cir., 2008). (“coming up with a new reason for rejecting the claim at the last minute suggests that the claim administrator may be casting about for an excuse to reject the claim rather than conducting an objective evaluation.”).
But rather than limiting the final review to the appeal and the evidence submitted in support of it, insurance companies invariably try to expand the administrative record further so as to bolster their initial denial. That circumvents the entire ERISA review process, which contemplates an administrative review based on a closed record. See: Palmer v. University Medical Group 994 F. Supp. 1221, 1240 (Ore. Dist., 1998; D’Emanuele v. Montgomery Ward 1987 U.S. Dist. LEXIS 16830 (C.D. CA 1987); Halpin v. W.W. Grainger 962 F.2d 685, 689 (7th Cir. 1992), (cited, approvingly by 9th Circuit in Booton v. Lockheed supra, at 1464 (9th Cir., 1997); also cited approvingly in Vizcaino v. Microsoft Corp., 120 F. 3d 1006, at 1016 (9th Cir., 1997).
The post hoc rounding up of additional medical evidence, in the form of an “IME” report or a so-called “medical records peer review”, with no opportunity afforded a participant to review and respond to such reports prior to any final decision on the claim, is not indicative of a “full and fair” review, required by the federal regulations.
But even if (for the sake of argument) an insurance company had the right to augment the administrative record with additional reports or other evidence, it may not do so without first disclosing such adverse evidence, and giving the claimant a fair opportunity to review and respond to it. The law is clear on this. Such conduct demonstrates conflicted decision-making and self-dealing. Winebarger v. Liberty Life Assur. Co. of Boston, 571 F.Supp.2d. 716,726 (W.D. Va. 2008). (“the plan administrator's initial grounds of denial will be considered by the court as justification for withholding benefits, and not any later rational relied upon in an administrative appeal, in order to prevent beneficiaries from being sandbagged by post-hoc justifications of plan decisions.”). Abatie v. Alta Health & Life Insurance Company 458 F.3d 955, 974 (9th Cir.; 2006). (“administrator that adds, in its final decision, a new reason for denial, a maneuver that has the effect of insulating the rationale from review, contravenes the purpose of ERISA. This procedural violation must be weighed by the district court in deciding whether Alta abused its discretion.”); Holmstrom v. Metropolitan Life Insurance Company, 615 F.3d 758, 775-776 (7th Cir., 2010) (“Another sign of MetLife's arbitrary and capricious decision-making is that it repeatedly ‘moved the target.’”); Lee v. California Butchers' Pension Trust Fund 154 F.3d 1075, 1080 (9th Cir. 1998). (“(T)he plan made it impossible for Mr. Lee to know exactly what was at issue between himself and the plan.”).
HIDING THE BALL AND MOVING THE TARGET
Insurance Industry Tricks of the Trade
By: Michael A. McKuin
ERISA Disability Lawyer