ERISA “welfare” (i.e. non-pension) benefit claims usually fall into one of five categories, Long Term Disability (LTD), Health, Life Insurance, Dental and Accidental Death & Dismemberment. LTD claims are by far the most common type of “welfare benefit” claims we see in ERISA practice and litigation. The reason is simple. They present the highest dollar exposure for insurers and are thus subject to intense scrutiny and are often contested. Although the protections of ERISA are sometimes few and far between, in my experience when it comes to LTD claims, courts have been somewhat vigilant in protecting claimant’s rights.
The amount of a person’s LTD benefit is a stated percentage of pre-disability earnings, which sometimes includes commissions and bonuses as well. From this gross benefit amount is subtracted certain “other income” offsets, such as state unemployment, workers compensation, and social security benefits to yield a net monthly benefit amount. The maximum payout period is usually to age 65 or the age of retirement, which differs depending on your year of birth. However, most policies have certain stated “limitations”, such as “mental/nervous” disorders, which are usually limited to a payout period of two years.
If a person leaves work due to disability, LTD coverage on a benefit claim commences after a waiting period, also known as an “elimination period” (e.g. six months), after which benefits are paid if the claimant is “totally disabled” or "partially disabled", as defined by the plan. Most plans have a two-tiered definition of “disability”. For example, during the first two years a claimant may be considered disabled if he is unable to perform the duties of his “Own Occupation” (“Own Occ.”). After that initial period, the definition of disability ordinarily changes and the claimant will be considered disabled only if he is unable to perform the duties of “Any Occupation” (“Any Occ.”). Under that standard, a claimant is considered “disabled” if he cannot perform the material duties of any occupation, consistent with his education, training and / or experience. But what exactly does that mean? The answer is often unclear and as a result this issue gives rise to most LTD disputes.
“Any Occupation” Disability – How Disabled is Disabled?
As mentioned above, if an insured remains disabled for the remainder of his working years, LTD policies provide for a payout to age 65 or a little beyond. That's the promise anyway. It’s one that sounds good when the insurance company is selling the policy and collecting the premium dollars. But it’s a promise an insurance company may not likely keep in the absence of a potential court judgment. If an insurer accepts liability on a claim and pays benefits for the "Own Occ." period, it is not uncommon for those benefits to be terminated as soon as a claimant falls under the second-tier “Any Occ.” definition of “disability”. The reason is obvious. It’s one thing to pay out benefits for 24 months. It’s quite another to be “stuck with” a claimant for perhaps 20 or 30 years. The dollar exposure increases exponentially, once a claimant passes the “Any Occ.” test. The insurer may contend that there must be some job out there somewhere that the claimant can do. But an age old question arises as to how disabled you have to be in order to be considered “disabled” under an LTD policy’s definition of “Any Occ.” disability? The question pre-dates ERISA by many years and has been the subject of LTD disputes for decades.
The terminology can be misleading. The first thing you have to understand is that “any occupation” doesn't really mean any occupation. If it did, then as long as a disabled nuclear physicist could sell pencils on the street, he would not be entitled to LTD benefits. State courts have very clearly rejected excessively stringent interpretations of “total disability” definitions in private LTD policies, and at least to some extent federal courts have followed suit in interpreting ERISA plans. Long before ERISA was ever enacted, it was well settled as a matter of California state common law that “Any Occ.” clauses in LTD plans are not to be interpreted literally.
The California rule is clear and has been for more than 70 years. It’s often referred to as the Erreca standard, since the banner case on point is Erreca v. Western States Life Ins Co.  That case and its progeny firmly establish that “total disability does not signify an absolute state of helplessness but means such a disability as renders the insured unable to perform the substantial and material acts necessary to the prosecution of a business or occupation in the usual or customary way.”  “When coverage provisions in general disability policies require total inability to perform ‘any occupation’, the courts have assigned a common sense interpretation to the term ‘total disability’ so that total disability for purposes of coverage results whenever the employee is prevented from working ‘with reasonable continuity in his customary occupation or in any other occupation in which he might reasonably be expected to engage in view of his station and physical and mental capacity.’”  “(I)t is the established rule that ‘in determining whether the insured is disabled to such an extent as to prevent him from engaging in any occupation or performing any work for any kind of compensation within the meaning of a[disability] policy, the test is not some fanciful or imaginary occupation in which there is no likelihood of anyone employing the insured.’ [citation omitted] This rule recognizes that the ability of an insured to work cannot be rationally divorced from a consideration of the market for the insured's skills or services.” 
What all this means in plain English is that “any occupation” clauses are to be interpreted in a manner that takes into account various factors. A total state of helplessness is not required. Courts have held that LTD plans must consider all of the relevant circumstances, including the claimant’s age, educational background, training, and availability of suitable employment in the claimant’s geographical area. Actual employment prospects and the job market for the claimant's services must be considered.
State Law Saved From ERISA Preemption
Whether the Erreca state law rule applies in the context of a federal ERISA LTD case has been the subject of debate. Under ERISA’s savings clause any state law that regulates insurance is saved from ERISA preemption.  In order to fall under that clause, the law must be “specifically directed toward entities engaged in insurance” and “substantially affect the risk pooling arrangement between the insurer and the insured”. State laws of general applicability that have only some bearing on insurers do not qualify.  In Wible v. Aetna Life Ins. Co.  the California Central District held that Erreca was “unpreempted California law relating to regulation of insurance policies”. But seven years later, the Northern District held differently in Brady v. United of Omaha Life Ins. Co. In that case, the court found that Wible did not sufficiently explain why it thought California law was not preempted by federal common law on this point, nor did it acknowledge the Ninth Circuit's countervailing precedent. 
A year after that in Ramos v. United Omaha Life Insurance Company,  the Northern District, citing Brady, again found that “that California's definition of ‘total disability’ is not applicable to an ERISA disability insurance policy”. Later that same month, in Smith v. Hartford Life & Accident, a magistrate judge, in the Northern District, likewise opined that the Erreca Standard does not apply in an ERISA case. The court’s reasoning was that: “In enacting the enforcement provisions of ERISA, 29 U.S.C. § 1132, Congress clearly expressed an intent that those provisions be the exclusive vehicle for actions by ERISA plan participants and beneficiaries asserting improper processing of claims for benefits, and that varying state law causes of action for claims within the scope of 29 U.S.C. § 1132 would pose an obstacle to the purposes and objectives of Congress. . . . Accordingly, the Ninth Circuit has ‘held that state laws of insurance policy interpretation do not qualify for the saving[s] clause exception and are preempted.’” 
The judge’s analysis in Smith v. Hartford, neglected the United States Supreme Court decision in Unum Life Ins. Co. of America v. Ward,  the most important case on point as far as addressing what is and what is not a state law that “regulates insurance”. The law at issue in Ward was California’s judicially created “notice prejudice rule”, which prohibits an insurance company from denying an untimely insurance claim unless the insurer can establish actual prejudice by the late filing. The Court noted that the law “effectively creates a mandatory contract term that requires the insurer to prove prejudice before enforcing a timeliness-of-claim provision.” The Court reaffirmed that general laws of contract interpretation are preempted by ERISA, but when a state common law rule is specific to the insurance industry only and not an application of a general rule that merely applies incidentally to the insurance industry. The Court held that: “Common-law rules developed by decisions of state courts are ‘State law’ under ERISA. See 29 U.S.C. § 1144(c)(1) (‘The term ‘State law’ includes all laws, decisions, rules, regulations, or other State action having the effect of law.’)”. 
“Our precedent provides a framework for resolving whether a state law ‘regulates insurance’ within the meaning of the saving clause. First, we ask whether, from a ‘common-sense view of the matter,’ the contested prescription regulates insurance. . . Second, we consider three factors employed to determine whether the regulation fits within the ‘business of insurance’ as that phrase is used in the McCarran-Ferguson Act . . . ‘first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.’” 
Four years later, in Kentucky Ass 'n of Health Plan, Inc. v. Miller,  the Supreme Court held that in order to be “saved” from preemption, the law had to meet a two-part test, in that it had to: 1) be specifically directed toward the insurance industry; and 2) it must substantially affect the risk pooling arrangement between the insurer and the insured.  Consistent with Miller, a law affects the risk pooling arrangement by affecting the cost to the insurer of providing insurance for the premiums that insureds pay. Accordingly, court’s decision in Wible made perfect sense because Erreca most certainly did state a “common law developed by decisions of state courts”, consistent with the precedent announced in Ward. The California Erreca definition of disability also clearly meets the two-part test under Miller. First, like the notice-prejudice rule in Ward, the California definition is aimed at the insurance industry and does not merely have an impact on it.  Second, it is clear that the definition substantially affects risk pooling. Insureds cannot forego the California definition of total disability in exchange for a more affordable premium, because it is read into all California insurance disability policies. 
The following year, the issue was raised in Sethi v. Seagate US LLC Group Disability Income Plan,  but the Ninth Circuit declined to reach the issue, stating that, “Sethi argues for the first time in her reply brief that Liberty's interpretation of the Plan should have been governed by Erreca . . . Sethi waived these arguments by failing to raise them in her opening brief.” Therefore, as of this date, the Ninth Circuit has yet to directly address the issue.
Federal Common Law
Even if the Erreca standard were held to be preempted, the Ninth Circuit has held that Federal courts are to refer to and be “guided by principles of state law when appropriate.”  Some federal courts, in the post-ERISA era, have rejected excessively stringent interpretations of “disability” definitions in ERISA plans, as well as private insurance policies. One court has indicated that before denying benefits, an LTD plan should, in a proper case, consider alternative arrangements, such as rehabilitative employment and the possibility of return to work on a trial basis.  Another court has held that in order for an LTD plan to find a claimant not disabled, under an “Any Occ.” definition, there must be evidence as to the actual existence of jobs for those of the claimant's qualifications or potential qualifications, in light of his or her impairment. 
In Helms v. Monsanto, the Eleventh Circuit noted: “Common knowledge of the occupations in the lives of men and women teach us that there is scarcely any kind of disability that prevents them from following some vocation or other, except in cases of complete mental incapacity.”  The Helms court also discarded a literal reading of an “Any Occ.” definition of “disability” because it would, in the court’s view, render the plan totally meaningless if benefits could only be paid if the claimant had no conscious life. Helms required that “gainful activity means performance of substantial services with reasonable regularity, either in competitive or self-employment.”  Helms has been cited, approvingly by the Ninth Circuit.  But until the until the Ninth Circuit further addresses the issue, the answer to the question, “How disabled is disabled, when it comes to any occupation disability” may sometimes depend on which judge hears the case.
These developments in the federal case law present a potential problem for those insurers seeking to maximize profits by cutting off LTD benefits as soon as a claimant falls under an “Any Occ.” definition. Never fear. Insurance companies are incredibly creative in devising ways to skirt the law.
The “IME-TSA Swindle” - Getting Around the Law
In the ERISA field things are generally not what they seem and words lose meaning. Two examples are the “Independent Medical Examination” (IME) and the “Transferable Skills Analysis” (TSA). In reality, IME's are almost never “independent” and TSA's seldom provide any kind of reliable “analysis”. These are fictions, but they're important fictions that insurance companies are allowed to rely upon. These two contrivances are combined so as to deny LTD claims. If a lawsuit is filed, a court’s review is generally limited to the “administrative record”. Insurance companies use IMEs and TSAs to slant the evidence in that record in their favor. This usually happens without the claimant even knowing about it, until it’s too late to do anything about it.
For plans containing a two-tiered definition of “disability”, once a claimant falls under the second-tier “Any Occ.” definition, access to benefits becomes much more restricted. The claimant bears the burden of proving that he is incapable of performing the material and substantial duties of any occupation for which he is qualified by reason of education, training or experience. Usually, claimants are older workers, who have only done one job for perhaps 15 or 20 years. Those individuals may have no “education, training or experience” beyond their own job. In such cases the distinction between “Any Occ.” and “Own Occ” disability gets rather blurred. For example, what if the claimant has worked as a mechanic for 20 years, but develops severe arthritis in his hands and can no longer reliably grip or hold his tools. Everyone agrees he can’t work as a mechanic, but he has no other work experience or skills. So how can an insurance company deny his disability claim even under the “Any Occ.” definition? By shifting the focus away from his actual job skills to what are called “transferable skills”, that's how.
Even though our mechanic may have no other specifically identifiable job skills, he will certainly have general skills that could theoretically transfer to some other occupation. For example, his unique knowledge of nuts and bolts might permit him to work as a quality control inspector at a “nut and bolt” factory. It does not matter that there are no jobs available for such a position anywhere near his residence. The fact that there might be some such position available somewhere in the national economy is all it takes. There are no doubt numerous hypothetical jobs that we could dream up that our mechanic friend would be capable of doing. All an insurance company needs to do is to find a few and document it for the administrative record and that's where special types of medical and vocational reports come in. Insurance companies combine biased medical exams or medical record reviews with bogus self-generated vocational reports to slant the evidence in their favor. And since it’s likely the only evidence on that issue that a judge will ever see, they can get away with denying legitimate disability claims.
“Peer Reviews” and the Independent Medical Examination (IME)
Before an insurance company concocts the TSA report, it will first seek to define a claimant’s medical “restrictions and limitations”. (A “restriction” is what a physician orders the patient not to do so as to prevent further harm or injury. A “limitation” is something the patient cannot do, because of his medical condition.) This is sometimes done by conducting an “independent medical examination” (IME) and having the examining physician prepare a report. However, in recent years, insurers have more often opted for cheaper “peer review” reports, which are nothing more than a paper review of the medical file by a doctor, who never even sees the claimant. As far as an IME is concerned, “independent” doesn’t really mean “independent”. The last thing any insurer wants is a fair objective evaluation by a truly independent expert. The IME doctor is paid directly or indirectly by the insurance company and has a financial interest in saying exactly what the insurance company wants to hear. And what it wants to hear is that the claimant has some ability to sit, stand, walk, lift, bend, etc.
When it comes to more common “peer review”, a report is obtained from a paper-reviewing doctor. Since that doctor has never seen the claimant, in an effort to lend some credibility to the report, he will often contact the claimant’s treating doctor by telephone, for a “doctor to doctor” discussion of the case. Nothing good ever comes from those contacts. If the treating physician has already stated an opinion as to a claimant’s, impairment, there is absolutely no evidentiary value in the hearsay recitations of doctors talking on the telephone. The only purpose of these contacts is to undermine the opinion of the treating physician. This is sometimes accomplished by outright trickery to get the doctor to say anything damaging about the claim. If he makes some careless, off-the-cuff remark, the “peer review” doctor will take that down, and put it into a written report for the insurance company to use.
In one case I handled, a reviewing doctor outright lied about what three treating doctors had told him over the telephone. In that case the insurance company approved the claim and paid LTD benefits for more than a decade. However, documents in the claim file indicated that when the company initially approved the claim, it only reserved three years of benefits, apparently believing that he would be dead within that time. But because of certain medical advances, the client committed the inexcusable sin of refusing to die on schedule. So at that point the insurer implemented what it called a “Clinical Management Plan”, which euphemistically meant, “Let’s terminate his benefits.” As part of this scheme, the insurance company secured the services of a reviewing medical doctor to conduct an oversimplified review of the medical records. This doctor, made three separate phone calls to three of the client’s treating physicians.
There were copies of three letters in the insurance company’s claim file from the reviewing doctor to each one of the treating doctors, purporting to confirm the substance of each of those phone conversations. Each of those letters stated that the treating doctor had ten days to respond and that if no response was received, he would assume everything stated in his confirming letters was accurate and complete. Then, the very next day, he sent his report to the insurance company. (i.e. The idiot didn’t even wait the ten days for a response). According his report, each of the treating doctors concurred with his opinion that since the claimant’s condition was “stable”, he was no longer totally disabled and could go back to work. After that, the insurer had its own, in-house vocational consultant write a report, stating that given the duties of the occupation, as she understood them and given the reviewing doctor’s medical conclusions, the claimant was suddenly ready and able to return to work. Based solely upon those two reports, the insurance company terminated benefits.
I personally contacted the three treating doctors. Each one of them not only denied the alleged substance of the phone conversations with the reviewing doctor, but each of them emphatically stated that his statements were misquoted and distorted in the report to the insurer. And each treating doctor said that he vehemently disagreed with the reviewing doctor’s conclusions regarding the client’s impairment, who each said the claimant remained 100% disabled from all work. But it got even way better than that. Each of the treating doctors categorically stated, in writing, that he had never received any letter at all from the reviewing doctor, purporting to confirm the substance of any of the phone conversations. Now once, could be an oversight. Two could be incompetence. But three? That's what's commonly known in the law as fraud. As a result of that fraud, not one of those treating doctors had any opportunity to respond to the mischaracterizations in the report to the insurance company. When I called this to the attention of the LTD carrier, to its credit it immediately reversed the denial and reinstated benefits. But then, what else was it going to do, stand firm and defend the case in court? Unlikely.
Also, in keeping with the notion that for every wrong there is a remedy that should not have ended the matter. A lawsuit was later filed in state court for “bad faith”, intentional misrepresentation (i.e. fraud), and a host of other civil torts, seeking punitive damages against the insurer, the reviewing doctor and the review organization responsible for hiring him. The case was predictably removed to federal court and a motion to dismiss the lawsuit was filed, based on ERISA preemption. Just as predictably, the federal judge held that ERISA preempted all of the state law remedies and granted the motion to dismiss. I knew it was a long shot at the time but just had to give it a try.
The Transferable Skills Analysis (TSA) report
Once it’s established, by “independent” medical evidence that a claimant is capable of some physical activity and thus has some “functional capacity” to work, then the claims examiner assigned to the file will present this bogus medical evidence to an in-house vocational consultant, so that a report can be prepared, consistent with the IME or “peer review” findings. From an evidentiary standpoint the TSA report will perhaps be the single most critical document in the administrative record, because it will be the only evidence in existence, linking the medically documented work restrictions and limitations stated in the IME or “peer review” report to identifiable jobs. The report will identify several jobs for which it will be said that the claimant has “transferable skills” to perform and it will state that the duties of those jobs are consistent with the restrictions and limitations stated in the newly-generated medical reports. It will also invariably confirm the existence of actual jobs, in the “general economy” that are said to be compatible with the claimant's education, training, and experience. Once the report makes its way back to the claims examiner’s desk, that person will issue a denial or termination of LTD benefits, based upon all of this medical and vocational evidence.
Just like the IME, the pretense is that the TSA report involves some kind of assessment by an independent expert to ascertain if the claimant has any marketable job skills. In reality, however, nothing could be further from the truth. Back in the old days, when I started doing this work that might have been half-true. Back then, there were independent vocational consultants, who sometimes cranked out an objective assessment of the claimant's work capacity. However, today the report will be always be done by an employee of the insurance company. The reason is obvious. Because the TSA report is so critical to its efforts to “paper the record”, there is no way any insurer is going to entrust it to a truly independent outside expert. It wants complete control over what that report says and what better control is there than to have it done by someone, who draws a paycheck from the insurance company. It also wants the ability to bury the report, if by some chance the in-house “consultant” displays an unanticipated streak of honesty or naiveté.
There are many ways to attack TSA reports. In many cases, they’re sloppily prepared. Frequently they list several sedentary-type jobs. But often, nothing in the report matches the listed jobs with the listed restrictions and limitations. There may be nothing linking any of the jobs identified with the claimant’s specific job skills. There may be nothing establishing that any one of the identified jobs involve employment in the same industry as the claimant's work history; or nothing establishing that the claimant is even qualified (by virtue of education, training or experience) to actually do any one of the jobs identified; or nothing, disclosing the alleged degree of transferability of the claimant's job skills to the jobs identified (e.g. low, fair, excellent); or nothing, revealing the amount of additional training, if any, that would be required for a claimant to assume the duties of any of the jobs identified. Finally, there may be nothing in the report showing that the actual physical demands of the jobs identified are indeed within the scope of the claimant’s physical restrictions and limitations; or that the claimant is physically capable of doing any of the jobs identified.
Simply put, “Transferable Skills Analysis” reports prepared by insurance company vocational consultants usually contain no “analysis” at all. They frequently rely upon vocational software programs and are often nothing more than hearsay recitations of computer-generated reports, which supposedly identify jobs from the Dictionary of Occupational Titles (DOT) that are said to be consistent with a claimant's vocational preparation and general educational development. Obviously, the results from such programs can only be as good as the data inputted into the computer; however, I can assure you that the raw data that was inputted will never see the light of day outside the insurance company offices. The only thing that will ultimately be disclosed to the claimant is the TSA report itself, not the vitally important source data that that was relied upon to prepare it.
In the final analysis, a TSA report will likely contain nothing except bare conclusions concerning the transferability of the claimant's job skills, and his supposed employability. For that reason alone, it can often be argued that the report does not constitute substantial evidence upon which to deny a claim. Furthermore, if nothing in the report establishes that any prospective employers in the identified job categories would be willing to hire a person with the claimant's disability, then it can further be argued that the TSA report is evidence of nothing. (This would be especially true if the claimant's disability is progressive and degenerative).
Another common inadequacy of TSA reports is that they frequently identify jobs that are not consistent with the claimant's “station in life”. For example, our mechanic friend may have been earning $40,000 a year on his old job, but the jobs identified in the TSA report may only pay $25,000 to $35,000 a year. The reason for this common mistake is that the vocational consultant may use the monthly LTD benefit payment as a benchmark, instead of using the claimant's pre-disability income. (LTD benefits are usually in the range of 60% to 80% of the claimant's pre-disability income). That is not the proper measurement. For one thing, quite often, the LTD benefit is non-taxable, whereas the stated income for the jobs listed in the TSA report would be taxable.
Finally, the whole concept of “transferable” skills is a bit esoteric anyway and anything that claims an ability to identify such skills should be treated with skepticism. TSA reports are often nothing more than hearsay recitations of undisclosed, in-house, computer-generated reports that rely upon unknown software programs and suspect raw data to spit out job descriptions from the DOT, with no analysis at all as to whether the claimant could physically do the jobs identified, let alone whether the jobs are consistent with his education, training or experience. In order for there to be at least the pretense of objectivity, any such reports should be independently prepared and all of the data relied upon by the vocational expert should be disclosed.
Buying Time - Common Tactics to Extend Time for Review
When a claim is denied and an administrative appeal of that denial timely submitted, that appeal is obviously directed at the previous denial. Indeed, how could it be directed at anything else? But once the appeal process starts, the gamesmanship gets dialed up to a whole new level. The insurer may want to launch an entirely new investigation of the claim at that stage so that it can gather up enough evidence to try to overcome the appeal. More times than not, such investigations are inherently flawed, resulting in conclusions that are patently absurd, but nevertheless relied upon to support a final denial of the appeal.
If an insurer wants to reverse its initial denial and pay benefits current to that date and then start a brand new investigation into a claimant’s eligibility, it may do that under the law, as LTD benefits (unlike pension benefits) do not vest.  But it’s another thing to try to get a “do-over” of the initial claim review that led to the denial or termination of benefits and “move the target” in the process. Neither the regulations, nor the case law provide for any such review.  But what should be and what is are two entirely different things, because insurers very often try to expand the administrative record to prop up an initial denial. But when it does that, it faces a problem – one of time.
Once an appeal is submitted, an insurer must consistent with the regulations, make a timely decision on it, yes or no – pay or deny. Any failure to do so results in the claimant having exhausted all administrative remedies under the plan and he may at that point in the process file suit.  But sometimes insurers run into difficulty finding the right whore doctor, who will provide the necessary support for a contemplated denial. Sometimes, although rarely, their own reviewing or examining doctor will shoot them in the foot. When that happens it can send an insurer scrambling, as it’s under the clock regulation-wise. The first way for the insurer to deal with the problem is to devise ways to try to extend the time limit for completion of the review.
The regulations provide that an insurer must issue its decision on an administrative appeal within 45 days after receipt of the appeal, unless “special circumstances” require an extension of that time.  But in order to take such an extension, the insurer has to issue a written notice within the initial 45 day period, describing “the special circumstances requiring an extension of time and the date by which the plan expects to render the determination on review.” “In no event shall such extension exceed a period” of 45 days from the end of the initial period.” 
It is now common practice for every insurer to take such a 45-day extension; although, nine times out of ten the extension notice is as deficient as hell -- usually for two reasons. First, many times the notice will fail to state a specific date for completion of the review. The second and more common is that most fail to describe any “special circumstance”, entitling the insurer to an extension. Sometimes an insurer will say it needs to obtain additional medical reviews or an IME. The regulations specifically describe the type of event that would constitute a “special circumstance”, justifying an extension of the review time and the perceived need to conduct additional medical reviews or an IME are not the type described.  Oftentimes no special circumstance at all is described. There is merely a recitation of a professed need for such an extension in order to complete its review.
The next tactic commonly relied upon arises when an insurer still can’t find the right doctor even after 90 days. Then they’re left to unilaterally invoke a “tolling” of the time allowed by the regulations for completion of the appeal review. Seldom do grounds for such tolling exist. Once an appeal is submitted, the regulations start the clock running “without regard to whether all the information necessary to make a benefit determination on review accompanies the filing.”  The regulations only allow tolling due to a claimant's failure to submit information necessary to decide a claim.  The obvious reason for that limitation is because if an insurer doesn’t have enough information about a claim, it shouldn't have denied it in the first place. Nevertheless, insurers often employ this tactic in an effort to conduct a post-denial IME, which is a maneuver that courts have frowned upon. 
Yet another tactic is payment under a so-called “reservation of rights” (ROR), which means the insurer agrees to make payments on the claim going forward, while continuing its investigation and reserving the right to ultimately not accept liability for unpaid back benefits if the extended investigation does not result in determining that the claimant is eligible for benefits. This is said to be done as a “courtesy” to the claimant. This, of course, is total nonsense. The insurer already refused to accept liability for the claim when it first denied it. Therefore, absent some suspicion of fraud, it has no rights to “reserve”, other than those provided by the by the policy and / or by the law. It certainly has no such rights with regard to benefits that are accrued, owing and unpaid and it has no right to withhold benefits, while it extends its investigation beyond the time limits allowed by the regulations. Nor can it effectively buy such an extension by making monthly payments, while wrongfully withholding past due payments.
Historically, the concept of the ROR arose in insurance law in connection with providing a liability defense against litigation. Its purpose is to allow a liability carrier to defend an insured, while investigating whether a particular claim is covered.  This is done so as to not prejudice an insured who is being sued. Although the procedure might be cognizable for disability claims arising under state law, it has no applicability to the payment of any disability claim under ERISA and in fact it contravenes the regulations, which set forth specific time limits for processing a claim, as well as for an administrative appeal and for issuing a final determination on review. Accordingly, the procedure is nothing more than a ruse and a device used to skirt the federal regulations and delay a decision on an appeal by carrying out an investigation indefinitely.
In one case an insurer paid my client’s claim under its ROR procedure for more than 2 years. During that 2-plus year period it required that he complete what are known as “Claimant's Statements” and that his treating physician complete “Attending Physician Statements” on a monthly basis. That involved basically stating and restating the same information over and over again, month after month to the client’s aggravation and at his expense. However, during that period, the insurer conducted no diligent investigation at all into what his occupation actually involved or what the material duties of it were. Nor did the insurer seek to ascertain what the nature of his impairment was or how it related to his resulting disability. Instead it conducted a practically endless inquiry into every aspect of his life; including multiple surveillances, spanning the entire two year period (even peeking into his living room window on one occasion); amassing medical records going as far back into the his past as it could go; gathering tax returns; prying into his personal information, and attempting to obtain his personnel file from his employer. The insurer did these acts, while feigning ignorance as to his job title and the duties of his occupation. The insurer’s bad faith could not have been more evident.
The Impossible Disability Dilemma – Insufferable Pain or Impairment from Medication
In a heartbreaking case I handled some time back my client, John, had been an accomplished swimmer in high school, setting seven county records and he swam competitively in college, while earning a master’s degree. He was also an avid mountain biker and a high level bridge player. He worked as an Engineering Manager at a major telecommunications company, where he had worked for many years.
One day while at a hotel swimming pool, a young boy jumped into the pool landing squarely on John’s neck and back. After that day he suffered chronic pain, increasing in intensity. He tried chiropractic and physical therapy treatments, but neither helped. He then tried a low-level narcotic pain killer, but found himself unable to work while taking the drug because it affected his concentration and problem-solving ability. That impacted both the quality and amount of work he could do. He tried adjusting the usage of the drug throughout his work day to try to limit its impact on his work performance.
For three and a half years he struggled to continue working, but had increasing difficulty juggling the pain and the effects of the medication. He would reach a point on any given work day, where the pain became too intense for him to work. But when he took the pain medication, he was too “zonked”, as he described it, by the drug to get any work done at all. He took time off work, using up all of his sick time for the year, which was something he had never done in his career. He tried shifting his hours around in an effort to work around the pain. If he couldn’t work a full day, he would try to make the time up the next day. He tried every coping device he could think of.
Eventually, he reached a point where he could no longer endure it. His doctor told him that a medical leave from work was “long overdue” and took him off work for 3 months. While on leave, his doctor prescribed high-level narcotic drugs to control pain. The effect was dramatic, reducing the pain to a point where John could tolerate it, but there still some days when his pain was not controlled, even with the new drugs. Unfortunately, the side effect of those drugs was that he was “even more zonked” than before and the cognitive impairment caused by the drugs increased significantly. But John felt it was a trade-off that he was willing to make after years of dealing with constant pain. The cognitive effects were present 24 hours a day, 7 days a week, leaving him completely unable to work. He was lethargic, drowsy and unable to concentrate. But if he stopped taking the medications, his pain level became unbearable. This is the unfortunate dilemma faced by many people, impaired by debilitating pain.
Unable to return to work, John submitted a claim to his insurer for LTD benefits. Of course his claim was denied. The insurer pointed to an absence neuropsychological testing to support his cognitive impairment. John’s occupation required a high level of cognitive ability and application of analytical skills. It wouldn’t take a genius to figure out that heavy doses of a potent narcotic drug would likely interfere with that ability in about 999 out of a 1000 cases. Furthermore, no such testing had been requested or conducted by the insurer.
John submitted an appeal of the denial, along with additional medical reports by a neurologist, numerous other examining specialists and the findings of the Social Security Administration, all of which provided further support for his disability claim. The insurer sent the medical records for a “peer review” by its chosen specialist and arranged for an IME by a neuropsychologist. The paper-reviewing doctor took issue with the use of narcotic medications to control pain, but neither doctor disputed the impairment resulting from either pain or medication. Nevertheless, the insurance company issued yet another absurd denial.
John’s plan provided for an optional second voluntary appeal and at that point I was retained in the matter. I immediately asked the insurer to provide me with the raw data of the neuro-psychological testing done, so that I could have it examined by an independent neuropsychologist. The insurer responded that it didn’t have any raw data in its possession. I asked that it instruct the doctor, who did have it to release the information or that it provide me with a written authorization so that I could get it directly. The insurance company refused.
Ultimately, I submitted a further administrative appeal, along with a letter from John’s supervisor, which described how he struggled to continue working in pain. I included a neuropsychological report, with additional testing, conducted by a well-known and respected and truly independent neuropsychologist. The new neuropsychological tests showed measurable impairments in cognitive function. I also submitted a report of a vocational assessment from a very well respected vocational expert. It too was highly supportive of the claim. In addition I submitted reports of the investigation done by the Social Security Administration (SSA), which clearly found John disabled under the SSA rules. After that, to its credit, the insurer administratively reversed the denial and paid the claim in full. But the case demonstrates the impossible choice so many people face of either struggling to work with debilitating pain or taking narcotic medications, which are impairing in and of themselves.
“A Failure to Communicate”
The regulations provide that, an initial notification of benefit determination: “shall set forth, in a manner calculated to be understood by the claimant -- (i) The specific reason or reasons for the adverse determination; (ii) Reference to the specific plan provisions on which the determination is based; (iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary. . . .” 29 CFR 2560.503-1(g).  These requirements exist for a purpose. As explained by the court in Halpin v. W.W. Grainger, Inc. 962 F.2d 685 at 689 (7th Cir., 1992): “(T)hese regulations are designed to afford the beneficiary an explanation of the denial of benefits that is adequate to ensure meaningful review of that denial. . . .” And as the Ninth Circuit has explained, “Conclusory statements which do not give reasons for denial do not satisfy the requirement of specificity . . . .”  and as former Ninth Circuit Judge, Alex Kozinski, wrote in the landmark decision, Booton v. Lockheed Medical Benefit Plan: 
“In simple English, what this regulation calls for is a meaningful dialogue between ERISA plan administrators and their beneficiaries. If benefits are denied in whole or in part, the reason for the denial must be stated in reasonably clear language, with specific reference to the plan provisions that form the basis for the denial . . . Aetna's conduct in handling Booton's claim did not comply with this common sense standard; not close. Aetna's rejection letters . . . denied benefits without a rational explanation, without even acknowledging Booton's argument . . . (“(I)f the plan administrators believe that more information is needed to make a reasoned decision, they must ask for it. There is
nothing extraordinary about this; it's how civilized people communicate with each other regarding important matters.” 
Judge Kozinski, famously known for his wit, as well as his intellect, humorously quoted the actor, Strother Martin, in the movie Cool Hand Luke  also stated:
“‘What we got here . . . is a failure to communicate.’ This is an all-too-common occurrence when ERISA-covered health benefit plans deny claims. . . . If the plan is unable to make a rational decision on the basis of the materials submitted by the claimant, it must explain what else it needs. If ERISA plan administrators want to enjoy the deference to which they are statutorily entitled, they must comply with these simple, common-sense requirements embodied in the regulations and our case law. The plan here did not.” 
As the Ninth Circuit further explained in Salomaa v. Honda Long Term Disability Plan: “An administrator does not do its duty under the statute and regulations by saying merely ‘we are not persuaded’ or ‘your evidence is insufficient.’ Nor does it do its duty by elaborating upon its negative answer with meaningless medical mumbo jumbo.” 
Insurers are also notorious for shifting rationales and constantly coming up with new reasons to justify their decisions. This tactic has been soundly rejected by the courts. 
Denials Based on Erroneous Assertions of Facts
Even under a deferential standard of review, it is an abuse of discretion to make a decision based on clearly erroneous findings of fact.  But that doesn’t seem to stop the practice and there are too many examples to name. A common tactic insurers use, when confronted with the facts, is to twist them into falsehoods. This is frequently done by baldly asserting observations by those who have never seen a thing. For example, a reviewing doctor or nurse makes certain statements that are not borne out by anything factual in the record whatsoever, such as “the claimant appears to be stable”; or “the claimant would appear to have sedentary function”. Notice that these statements are based on “appearances”. But how can anything “appear” to someone who has never seen the person. Nevertheless, these remarks are then repeated by successive claims personnel, as if the mere act of repetition lends credibility to the unsubstantiated or even outright false remarks. Ultimately a conclusion is expressed, such as “there is no indication of impairment”. It is not uncommon for such conclusions to be conjured up “out of the blue” and be inconsistent with the medical reports by treating physicians, who have observed their patient for a long period of time.
It’s also not that unusual for insurance personnel to state facts that are not only inconsistent with, but diametrically opposed to the facts, such as “no abnormal physical examination findings indicated”, when the medical records are replete with “abnormal” examination findings that would substantiate impairment. Another ploy is to find the absence of something that could never be present in the first place, such as concluding that there is no objective abnormal examination finding to prove the existence of a condition, such as migraine. From this, insurers go further to conclude that a person does not meet certain unspecified “diagnostic criteria”.
 Erreca v. Western States Life Ins Co., (1942) 19 Cal.2d 388.
 Erreca, at 394-395; See also: Moore v. American United Life Ins. Co. (1984) 150 Cal.App.3d 610, 618, 632, 630; 197 Cal.Rptr. 878; Austero v. National Cas. Co. (1978) 84 Cal.App.3d 1, 22, 148 Cal.Rptr. 653.
 Moore, supra at 618, quoting Erreca, supra at 394-395.
 Moore, supra at 630.
 29 U.S.C. § 1144.
 Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329, 334, 341-42 (2003).
 Wible v. Aetna Life Ins. Co., 375 F. Supp. 2d 956 (CD CA, 2005).
 Brady v. United of Omaha Life Ins. Co., 902 F. Supp. 2d 1274, 1286, fn 2 (ND CA, 2012). (“Wible did not explain why it thought California law was not preempted by federal common law on this point, nor did it acknowledge the Ninth Circuit's countervailing precedent in [Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1439 (9th Cir.1990) and McClure v. Life Ins. Co. of N. Am., 84 F.3d 1129, 1133 (9th Cir.1996)] As such, the Court finds Wible unpersuasive.”
 Ramos v. United Omaha Life Insurance Company, Case No. C 12-3761 ND CA (January 3, 2013).
 Smith v. Hartford Life & Accident, Case No. 11-03495, Dist. Court, ND CA (January 30, 2013).
 Unum Life Ins. Co. of America v. Ward, 526 U.S. 358, 367 n.1 (1999).
 Id at 367, n. 1.
 Id at 472, quoting Metropolitan Life Ins. Co. v. Massachusetts 471 U.S. 724, 740, 743, 85 L. Ed. 2d 728, 105 S. Ct. 2380 (1985).
 Kentucky Ass 'n of Health Plan, Inc. v. Miller, 538 U.S. 329, 334 (2003).
 Id at 338 (2003).
 Ward, 526 U.S. at 368; see also, Standard Ins. Co. v. Morrison, 584 F.3d 837, 843 (9t Cir. 2009).
 See, e.g., Ward, 562 U.S. at 358 (insureds cannot reject notice-prejudice rule); Metropolitan Life Ins. Co. v. Massachusetts 471 U.S. 724, 740, 743, 85 L. Ed. 2d 728, 105 S. Ct. 2380 (1985). (insureds are denied the ability to accept plans without minimum mental-health coverage).
 Sethi v. Seagate US LLC Group Disability Income Plan, Case No. 12-17215 (9th Cir. 2014).
 Saltarelli v. Bob Baker Group Medical Trust, 35 F.3d 382, 386 (9th Cir. 1994).
 Halpin v. Grainger 962 F.2d 685, 695 (7th Cir. 1992).
 Jenkinson v. Chevron Corp., 634 F. Supp. 375, 379 (N.D. Cal. 1986), citing Heckler v. Campbell, 461 U.S. 458, 460-61, 76 L. Ed. 2d 66, 103 S. Ct. 1952 (1983).
 Helms v. Monsanto 728 F.2d 1416 (11th Cir., 1984).
 Id at 1420 - 1421.
 Saffle v. Sierra Pacific Power Company Bargaining Unit 85 F.3d 455, 458-450 (9th Cir. 1996).
 Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (9th Cir. 2001).
 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.”); 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.’”); Dabertin v. HCR Manor Care, Inc., 373 F.3d 822, 831 (7th Cir.2004) (administrator unfairly imposed new, undisclosed requirements on claimant for severance benefits; an ERISA benefit “cannot be a moving target where the plan administrator continues to add conditions precedent to the award of benefits”); Bard v. Boston Shipping Ass'n, 471 F.3d 229, 237 (1st Cir.2006) (awarding disability benefits where claimant “was faced with a constant shift in what he was required to show,” and thus administrator's conduct was arbitrary and capricious in that it failed to consider the evidence he submitted “in an attempt to meet a moving target”).
 29 C.F.R. §§ 2560.503-1(l) provides: “(l) Failure to establish and follow reasonable claims procedures. In the case of the failure of a plan to establish or follow claims procedures consistent with the requirements of this section, a claimant shall be deemed to have exhausted the administrative remedies available under the plan and shall be entitled to pursue any availableremedies under section 502(a) of the Act on the basis that the plan has failed to provide a reasonable claims procedure that would yield a decision on the merits of the claim.”
 29 CFR 2560.503-1(i) (in conjunction with Subsection (i)(3) applicable to “disability claims”) provides that a notification of benefit determination on review must be provided “within a reasonable period of time, but not later than” 45 days after receipt of the request for review, unless the plan administrator determines that special circumstances require an extension of time for processing the claim.
 29 CFR 2560.503(f)(1).
 See: 29 C.F.R. § 2560.503-1(i)(1)(i)). (“such as the need to hold a hearing, if the plan's procedures provide for a hearing”). See: Harper v. Reliance Standard Life Ins. Co., 2008 U.S. Dist. LEXIS 36788 (N.D. Ill. May 8, 2008). (The court noted that 29 C.F.R. § 2560.503-1(i)(4) starts the clock when the appeal is filed, “without regard to whether all the information necessary to make a benefit determination on review accompanies the filing.”). See, e.g. Sidou v. Unumprovident Corp., 245 F.Supp.2d 207, 216 (D.Me.2003) (“[I]t is simply unreasonable to request that a claimant submit to medical examinations after the applicable deadline for ruling on her appeal has expired when the sole reason for the independent medical examination can only be to supplement a final decision that has already been made.”). (Emphasis added).
 29 C.F.R. § 2560.503-1(i)(4).
 Id. See: Kowalski v. Farella, Braun & Martel, LLP, C-06-3341 MMC, 2007 WL 1342475 (N.D. Cal. 5/7/07). (With the sole exception of the tolling provided in § 2560.503-1(i)(4), the regulations, as noted, preclude an extension in excess of 45 days. See 29 C.F.R. §§ 2560.503-1(i)(1)(i) and (i)(3)(i).”); Langlois v. Metropolitan Life Ins. Co. 833 F.Supp.2d 1182 (ND, Cal. 2011). See also, Lavino v. Metropolitan Life Ins. Co. 779 F. Supp. 2d 1095, 1102 (C.D., Cal. 2011).
 See, Sidou v. Unumprovident Corp., 245 F.Supp.2d 207, 216 (D. Me.2003) (“[I]t is simply unreasonable to request that a claimant submit to medical examinations after the applicable deadline for ruling on her appeal has expired when the sole reason for the independent medical examination can only be to supplement a final decision that has already been made.”). In Lavino, supra, the District Court, Central District of California specifically cited Sidou on this point at 1102; See also, Cherry v. Digital Equipment Corp. Long Term Disability Plan, 2006 U.S. Dist. LEXIS 68099, 2006 WL 2594465 (E.D. Cal. Sept. 11, 2006) (“although plaintiff did not submit to an IME, Prudential delayed meeting its obligations and plaintiff did not fail to meet the deadlines provided in the plan.”. at *22. Harper v. Reliance Standard Life Ins. Co., 2008 U.S.Dist.LEXIS 36788 (N.D.Ill. May 8, 2008) (The court noted that 29 C.F.R. § 2560.503-1(i)(4) starts the clock when the appeal is filed, “without regard to whether all the information necessary to make a benefit determination on review accompanies the filing.” “The Policy provision that allows Reliance ‘the right to have a Claimant interviewed and/or examined . . . while a claim is pending’ (AR 103), does not allow Reliance to determine that a claim is ‘pending’ simply because Reliance has not yet decided it.” at *28). Lewis-Burroughs v. The Prudential Ins. Co. of America, et al., 2015 U.S. Dist. LEXIS 57584 at *13-14 (April 30, 2015) (finding Prudential could not “restart the clock” by requesting a last minute IME); Tomassi v. The Prudential Ins. Co. of Amer., 2007 U.S. Dist. LEXIS 44223 (June 19, 2007) (dismissing Prudential’s last minute IME requests and finding “29 C.F.R. § 2560.503-1(i)(4) is strong support” for the plaintiff because the regulation “provides that the 45-day time period starts when an appeal is filed, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing.”). See also, Nichols v. Prudential Ins. Co., 406 F.3d 98, 102 (2d Cir. 2005).
 See 14 Williston on Contracts § 41:31 (4th ed.) “Assumption of Defense Under Nonwaiver Agreement Or Reservation Of Rights”.
 29 CFR 2560.503-1(g).
 Lee v. California Butchers' Pension Trust Fund 154 F.3d 1075, 1080 (9th Cir. 1998).
 Booton v. Lockheed Medical Benefit Plan 110 F.3d 1461, (9th Cir., 1997).
 Id at 1463.
 "Cool Hand Luke" (Warner Bros. © 1967).
 Booton at 1465.
 Salomaa v. Honda Long Term Disability Plan 642 F.3d 666, 680 (9th Cir., 2011).
 See, e.g.: Saffon v. Wells Fargo & Co. Long Term Disability, 522 F. 3d 863, 872 (9th Cir., 2008). (“(C)oming 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.”); Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 974 (9th Cir. 2006) (en banc) ((A)n 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.
 See, e.g. Snow v. Standard Insurance Company 87 F.3d 327, 331-332 (9th Cir., 1996)), quoting Atwood v. Newmont Gold Co., 45 F.3d 1317, at 1323-24 (9th Cir 1995) and Taft v. Equitable Life Assurance Soc’y, 9 F.3d 1469, at 1472-73 (9th Cir. 1993).
Insurance Company Denials of ERISA
Long Term Disability Claims
By: Michael A. McKuin
ERISA Disability Lawyer