California lawmakers want to assist disability insurance claimants

A recent article written by Evan George of the Los Angeles Daily Journal, documents a new bill that would be a great thing for long-term disability claims that are governed by ERISA. If this bill passess, we can only hope that other states across the country would adopt similar legislation. Discretionary clauses do nothing other than tie the hands of judges and increase the profits of disability isnurance companies. A special thanks to Evan for sharing this article with our law firm and for his efforts in independently reporting the actions of long-term disability insurance companies.

Lawmaker Wants to Level Field for Disabled

by Evan George

Spurred by stories of sick and injured policyholders whose disability claims are improperly denied and then tied up in court, a Sacramento lawmaker has introduced legislation that experts say would level the playing field for the disabled.

State assemblyman Dave Jones said his bill, AB 1868, “will help disabled people across California who have suffered from disability insurers’ refusal to make good on their promise.”

The bill seeks a quick fix to what Jones called the “unfair and unequal” legal standing policyholders have suffered in federal courts because of certain clauses that insurance companies insert into the policies, making the companies, and their paid doctors, the sole authority on whether a claimant is disabled.

Under the proposed legislation, those “discretionary clauses” would be null and void.

It would require the state Insurance Commissioner to reject policies that contain those previsions and strike them from existing policies.

The Assembly’s Insurance Committee will hold a hearing on AB 1868 today.

The legislation comes nine months after an investigation by the Daily Journal revealed that hundreds of disabled Californians who are denied benefits face a long and difficult fight on their own, without the aid of government regulators and in an arena that favors insurers.

State and national trade groups for the insurance industry have pledged to fight the bill, saying it removes the insurers’ ability to adjudicate claims and weed out malingering claimants.

“Your bill would turn the claims paying process into chaos,” wrote one lobbyist for the California Association of Health Underwriters in a letter to Jones.

Experts on health law applauded the effort as a strong and necessary consumer protection.

It also has the backing of the Consumer Attorneys of California and individual lawyers who represent policyholders.

Disability insurance, which now covers more than a third of the workforce, typically promises to pay two-thirds of workers’ wages if they become too sick or injured to work.

In most cases, when a worker who has paid for disability benefits files a claim, the insurer will review it and pay.

But some cases – particularly those where the insured reports suffering from complex symptoms like long-term injuries of the back, neck and spine – are denied, even if treating physicians and the Social Security Administration say they can’t work.

The result is that workers who believed they had a safety net find themselves fighting for benefits at the same time they are dealing with health problems and medical bills.

That was the case with Sandra Frost, a former Wells Fargo Bank manager in the East Bay, who plans to testify at today’s hearing.

Frost, 47, has been diagnosed with narcolepsy, chronic pain and another rare condition called Chiari Malformation, which makes working impossible.

She had a group policy with MetLife and received disability coverage in 2002. But by 2004, the insurer and its doctors decided she could return to work, despite what her physicians and the federal government said.

She has been fighting ever since, Frost said.

During a limited bench trial, a district judge found that MetLife did not “abuse its discretion” and dismissed her case. The U.S. 9th Circuit Court of Appeal in 2007 found she should be paid for 3 months of disability, but confirmed that the district court was right to apply a high burden of proof because of that discretionary clause.

MetLife was owed deference in deciding her case, the court found.

“They have no accountability,” Frost said in an interview. “I lost my house, my car, and my good credit rating, and it just wasn’t fair.”

A MetLife spokeswoman on the East Coast could not be reached for comment late Tuesday and a MetLife defense lawyer in California did not return a telephone call seeking comment. The New York-based insurance company has had more than 177 lawsuits like Frost’s brought against it between 2004 and 2009 in California alone.

That legal battle would be made easier for plaintiffs if the bill passes, said Bryan Liang, executive director of the Institute of Health Law Studies at California Western Center School of Law.

“What this bill really does is requires some enforcement,” Liang said.

Brietta Clark, another health law professor at Loyola Law School, said she backed the measure even though she believed it did not go far enough.

“It’s still reactive,” said Clark, because it fails to address the practice of paying a stable of doctors to justify denying legitimate claims. “It doesn’t help patients until they get to trial.”

Both experts said it accomplished the goal of letting judges, not insurers, decide a case based on evidence.

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