Articles Posted in Life Insurance

At Kantor & Kantor, we see the same scenario over and over again.   An individual submits a claim to a life insurance company, seeking to receive the life insurance benefits due to them resulting from the death of a loved one.   However, instead of a check, the individual receives a letter from the insurance company telling them why they WON’T be receiving any benefits.     The beneficiary is shocked, but feels helpless.  

The insurance company must know what they are doing, RIGHT?   

The insurance company wouldn’t negligently or intentionally fail to pay which should be paid, RIGHT?

Okay, that headline is a simplification, and maybe even an overstatement, but that’s the attitude of insurance companies, and even courts, when looking at evidence related to life, health and disability claims.

At Kantor & Kantor, one of the most common complaints we hear from prospective clients goes something like this: “When I called the insurance company, they told me to do xxxxxx. So I did xxxxxx. But then they sent me a letter denying my claim/cancelling my coverage because I didn’t do yyyyyy, as the policy required.”

Unfortunately, no matter how much we want to believe the prospective client, our answer is almost always the same: you have to understand, and act as though someone will one day soon say to you,  “if you can’t prove it, it never happened.”

When you think of what lawyers do for a living, the first thing you probably think of is arguing over a case in front of a judge.

You may be surprised to learn, then, that in the federal courts this staple of practicing law seems to be on the way out. The federal district courts – the trial courts of the federal system – are increasingly holding fewer and fewer oral arguments. Some district courts even have a standing default rule that they won’t hear oral argument on a motion unless the presiding judge explicitly asks for it.

This trend is even more accentuated in the federal circuit courts – the appellate courts of the federal system. While the Supreme Court of the United States holds oral argument in almost all of its cases, the circuit courts of appeal do not.

As you know, churches occupy a special place in the law. For example, the First Amendment bars the government from prohibiting the free exercise of religion, and churches, indeed almost all religioous institutions, get special tax treatment from the IRS.

However, you may not know that this distinction can also affect your employee benefits. Almost all employee benefits are governed by a federal law called ERISA (the Employee Retirement Income Security Act of 1974). This law provides various protections, including imposing a fiduciary duty on your employer to act in your best interests in administering your benefits.

However, if you are a beneficiary of an employee benefit plan established by a church (or other religious organization), your benefits are not governed by ERISA, because ERISA has an exemption for “church plans.” (There is also an exemption for government plans.) As a result, you may lose protections under ERISA if you are a church employee.

There may come a time in your life when you will need to consult with a lawyer – whether it be good news or bad news. We routinely speak with individuals who have had life, health, and disability claims denied by their insurance companies. Understandably, this is a very difficult time for the individuals who call us. We understand that, and try to make the process simple…but we need your help.

As lawyers, we are well-versed in the practice of law, but we rely on the information from our clients to steer us in the right direction and guide each case. It takes TEAMWORK to get a successful outcome for our clients.

Here are a few tips for talking to your lawyer and sharing with them what they need to know.

On May 11, 2017, the US Court of Appeals for the Ninth Circuit issued a decision in Orzechowski v. Boeing Co. Non-Union LTD Plan, et al., Case No. 14-55919 (9th Circ. May 11, 2017) upholding the application of the California law which invalidates “discretionary clauses” in Long Term Disability (LTD) plans and other life and disability contracts of insurance.

Prior to 2012, insurers in California (and many other states) were allowed to place “discretionary clauses” into their insurance policies. These clauses, while seemingly innocuous, actually made it significantly harder for insureds to challenge wrongful denials of insurance benefits in court. These clauses forced Federal Courts to review denials of insurance benefits under an “abuse of discretion” standard. In order to prevail under this standard, an insured not only had to show that they were entitled to the benefits under the contract, but they also had to show that the insurer’s decision was “arbitrary and capricious.”  The effect of this was that Court’s were routinely deferring to the “discretion” of the insurer thereby upholding their denial. This created is a much more difficult standard of proof for insureds to meet than in an ordinary civil lawsuit, where one need only prove their case by a “preponderance” of the evidence, and where Courts do not give any special weight to the evidence presented by the other side.  The result of the so-called discretionary clauses was that many insureds lost their lawsuits for wrongfully denied benefits even when, technically, they were entitled to benefits under the term of the contract.  Court’s would simply hold they could not find evidence the insurer “abused its discretion” or acted unreasonably enough so as to justify overturning the insurer’s denial of benefits.

In 2012, the California legislature passed California Insurance Code §10110.6, which provides that all discretionary clauses in California insurance contracts are null and void, if the insurance policy or plan “renewed” as of January 1, 2012. As a result, Courts will now look at the evidence anew, or “de novo” to make a determination of whether the insured is entitled to benefits, instead of simply deferring to the insurance company’s conclusions.  This is a much easier burden for insureds to meet than the older “abuse of discretion” standard.

For over 25 years, I have been representing individuals who have had life, health, and disability claims denied by their insurance companies.   I have represented over 3,000 people.   What is so disheartening to me is that I hear from clients again and again that they “almost gave up before calling” me. They tell me they were beaten down by the process, convinced their insurance company must be right, or that they didn’t know there were lawyers who specialized in handling their kind of case on a contingent basis.   While sometimes the client HAS waited too long for us to help them, usually my law firm, Kantor & Kantor, is able to step in and successfully resolve their claim.

However, I wonder just how many DO give up unnecessarily.   While my view of the insurance industry may appear very cynical, I am 100% convinced that the industry employs a strategy of denying as many claims as possible in the hope that claimants will just give up and go away.   I could write pages upon pages of stories about clients who had almost given up, but for whom we were able to obtain benefits with nothing more than a well written letter.   It sometimes seems like the insurance company is daring their insured to challenge the denial, or to get a lawyer.   If they do, the insurance company will reconsider its denial. If not, the denial will stand and the insurance company will keep the benefits which are rightfully yours.

In the last month, I have obtained over a $1,000,000 in total benefits for several clients who separately told me that they had seriously considered giving up before calling my firm.   This led to me to come back to a familiar thought, which was to wonder about all the people who did simply give up.   I decided to write this blog in the hope that maybe ONE insured might read it, and decide not to give up.   I am not writing this to get business. I have more than I need.   I practice in California, but this blog might be read by someone in Florida, or Illinois, or New Jersey, for example. If it is, and you were considering giving up trying to get your benefits, I am not suggesting you call me.   Go on the internet, or call your State Bar, and find an experienced attorney in your State.   The worst thing that happens, is that no one will take your case  —  but what if they will?

Insurance denial, ERISA denial, claim denied
Every insurance policy requires that you give notice of your claim for benefits to the company before benefits can be paid.  It doesn’t matter if the claim is for medical services, disability benefits, life insurance, fire, flood, theft, etc. Obviously, notice and information about your claim is necessary before the insurance conpany can process and pay the claim. Policies also usually require that notice of a claim be given within a specified time period following the loss, for example, “30 days,” or “as soon as practicable,” or “as soon as reasonably possible,” etc.  Again, this is fair because evidence related to the claim is fresh, and most readily available nearer the time of the event.

But, what happens if you can’t, or don’t comply with the policy notice requirement?  What happens if don’t give notice until months, or even years after your claim accrued?

Good questions.

One of the most common mistakes we see with long term disability (“LTD”)  denials (ERISA and non-ERISA/bad faith) is claimants rushing to submit their appeal. The desire to move quickly is understandable:

  • You have no money coming in;
  • You are angry at the insurance company and want to give them a piece of your mind;

Many of the “rules” governing ERISA claims are not contained in the statute itself, but rather are the result of judicial decisions interpreting ERISA. In the landmark case of Firestone v. Bruch, 489 U.S. 101 (1989), the U.S. Supreme Court upheld the right of an ERISA fiduciary (including insurance companies!) to reserve “discretion” to decide eligibility for benefits under an ERISA plan. When “discretion” is granted to an insurance company or a claims administrator, a reviewing court does not decide whether or not the claimant is entitled to benefits under an insurance policy. Instead, a court is limited to deciding whether the insurance company abused its discretion or acted “unreasonably” when deciding the claim.   Under this standard of review, some courts have concluded they are compelled to uphold the insurer’s decision merely because there was some medical support for the decision. See, Carlo B v. Blue Cross Blue Shield, 2010 WL 1257755 (D. Utah, 2010 (It does not matter whether the Court agrees with the insurer or its physicians. The decision need not be the only logical decision or even the best one.)

After years of unfair decisions under this standard of review, some states, including California, have taken action. Effective January 1, 2012, the California legislature outlawed discretion in policies. California Insurance Code, Section 10110.6. The statute applies to any policy which “issued or renewed” after January 1, 2012 and which covered residents of California.  What this means is that courts can now actually look at the evidence and decide for themselves whether they think an insured person is entiteld to benefits.  This is called a “de novo” proceeding, meaning the court will look at the evidence “anew” instead of deferring to what the insurance company decided. (See one of our earlier blogs for more info: https://www.californiainsurancelawyerblog.com/2015/03/california_insurance_code_sect_1.html )

Insurance companies such as MetLife, Liberty Life, Prudential and others have tried making all kinds of arguments to avoid the impact of section 10110.6. Application of the statute can depend on the facts of the case, but, since January 1, 2012, Kantor & Kantor has been successful in persuading many Federal Judges, and even insurance company lawyers, to invalidate or ignore grants of discretion written into insurance plans. A number of other experienced ERISA practitioners have also been successful in this argument. To date, the statute has been applied in at least 15 court decisions in California.

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