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Cigna Exposes Disability Plan Administrator To $9,900 ERISA Penalty For Failure To Produce Plan Documents

The Employee Retirement Income Security Act of 1974, better known as ERISA, the federal law which governs most employer provided insurance benefit plans (ie. group disability, health, life, etc.), is not known for its favorable treatment of claimants seeking recourse and recovery of monetary damages through the federal courts. However, there can be penalties for an insurance company’s or plan administrator’s wrongful actions which violate ERISA regulations. In most ERISA lawsuits the claimant has exhausted their insurance plan’s administrative remedies and is pursuing the recovery of benefits in federal court. The recovery of past due insurance benefits are generally the only recovery allowed by the courts. In some instances, the federal court will award the claimant seeking benefits an award of attorney fees, however, such an award is in the court’s discretion, and not always awarded.

Penalties Can Be Imposed When The Plan Administrator Fails To Timely Provide Documents Requested By The Claimant

In some cases the claimant, in conjunction with their claim for benefits, is also pursuing a claim for ERISA statutory damages predicated on the plan administrator’s failure to provide documents expressly relied upon by the plan administrator in making its claim determination. Prior to commencing any sort of action under ERISA for recovery of statutory damages for failure to provide documentation, the claimant must have first expressly requested the specific documentation. The documentation could be anything ranging from the master plan/policy, a report from the insurance companies medical consultant, or in some instances even communications between the claims personnel and the plan administrator’s in-house attorneys. The penalties for failure on the part of the plan administrator to timely release documentation to the claimant can range from $1.00 to $110 a day for every day that the plan administrator fails to comply with the claimant’s request, following the expiration of 30 day deadline.
No case serves as a better example of the penalties imposed on a plan administrator that fails to comply with a request for documents than Mondry v. American Family Mutual Insurance Company, a case which appeared before the 7th Circuit Court of Appeal twice on distinct issues.

Sharon Mondry worked for American Family Mutual Insurance Company (“American”) until September 2003. American self-funded its employee health plan, but contracted with CIGNA to act as its health plan’s third-party claims administrator. This meant that CIGNA would handle any and all benefit claims against the Plan, and American would pay the benefits if CIGNA determined there was compensable claim. Ms. Mondry’s son Zev, whom she had enrolled as a Plan beneficiary, required speech therapy so Ms. Mondry enrolled her son in a speech therapy center that submitted invoices to the CIGNA seeking reimbursement for the services it provided to Zev.

CIGNA declined the claim for reimbursement, stating that Zev’s speech therapy was not medically necessary nor covered under the terms of the Plan. As required under the Plan, Ms. Mondry appealed the denial of benefits directly with CIGNA. CIGNA denied Mondry’s first appeal, and in the denial letter cited two documents in its reasoning. CIGNA cited its Benefit Interpretation Resource Tool for Speech Therapy (“BIRT”), and its Clinical Resource Tool for Speech (“CRT”). However, both documents were inconsistent with the terms of the actual Plan. Ms. Mondry sought the assistance of legal counsel to submit her second appeal with CIGNA. Upon being retained, and seeing that CIGNA had referenced the BIRT AND CRT, Ms. Mondry’s legal counsel wrote a letter to CIGNA and American Family requesting the BIRT AND CRT. After a combined total of 309 (94 to produce the BIRT and 215 to produce the CRT) days, American Family and CIGNA produced the documents requested by Ms. Mondry’s legal counsel. Eventually (2 years after the claim was initiated), and only after Ms. Mondry’s legal counsel was able to succeed in obtaining the BIRT and CRT, did CIGNA realize its error and agree to pay all of Ms. Mondry’s out of pocket costs related to Zev’s speech therapy.

Court Orders Disability Plan Administrator to Pay $9,900 in statutory Penalties to Claimant

Ms. Mondry, through her legal counsel, sued American Family and CIGNA in federal court, pursuant to ERISA, for their failures to timely provide her with the BIRT and CRT following her request, and for violating their fiduciary duties to her as a Plan participant by withholding key documents from her. The 7th Circuit Court of Appeal determined that CIGNA’s express reliance on the BIRT and CRT effectively rendered the two internal documents “Plan Documents” that were subject to timely production pursuant to ERISA. In addition, the Court held that even though CIGNA had sole possession of the BIRT and CRT, the liability for the failure to produce such documents fell upon American Family alone. The Court was also not convinced that it was beyond American Family’s power to obtain access to the BIRT and CRT. The Court separately concluded that American Family was also liable for the lost time value of money Ms. Mondry was forced to expend for Zev’s speech therapy until she finally obtained copies of the CRT and BIRT and was able to prevail in her appeal with CIGNA. Ms. Mondry was awarded $9,270 ($30 per day for 309 days) in damages from American Family, due to CIGNA failure to produce the plan documents, and was awarded $630 in stipulated damages for breach of fiduciary duty, representing the time value of the money Ms. Mondry was forced to expend for Zev’s speech therapy, while she waited for CIGNA to reverse its decision.

Although ERISA can often be unkind to claimants seeking disability and other insurance benefits, Mondry is an example of how employers/plan administrators can be held to task for the failures of their third-party administrators to timely produce requested plan documents, as CIGNA was in this case. Although the monetary damages were certainly no windfall for Ms. Mondry, it can be safely assumed that American Family and CIGNA expended a considerable sum in defending themselves, and there is no question that their ignorance and/or misplaced beliefs concerning the plan documents in question proved to be a cost prohibitive risk not worth taking.

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We represent Cigna clients nationwide and we encourage you to contact us for a FREE immediate phone consultation with one of our experienced disability insurance attorneys.

Can you help with a Cigna disability insurance policy?

Our disability insurance lawyers help policy holders seeking short or long term disability insurance benefits from Cigna. We have helped thousands of disability insurance claimants nationwide with monthly disability benefits. With more than 40 years of disability insurance experience we have helped individuals in almost every occupation and we are familiar with the disability income policies offered by Cigna.

How do you help Cigna claimants?

Our lawyers help individuals that have either purchased a Cigna long term disability insurance policy from an insurance company or obtained short or long term disability insurance coverage as a benefit from their employer.

Our experienced lawyers can assist with Cigna:

  • ERISA and Non-ERISA Appeals of Disability Benefit Denials
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Yes. We are a national disability insurance law firm that is available to represent you regardless of where you live in the United States. We have partner lawyers in every state and we have filed lawsuits in most federal courts nationwide. Our disability lawyers represent disability claimants at all stages of a claim for disability insurance benefits. There is nothing that our lawyers have not seen in the disability insurance world.

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Since we represent disability insurance claimants at different stages of a disability insurance claim we offer a variety of different fee options. We understand that claimants living on disability insurance benefits have a limited source of income; therefore we always try to work with the claimant to make our attorney fees as affordable as possible.

The three available fee options are a contingency fee agreement (no attorney fee or cost unless we make a recovery), hourly fee or fixed flat rate.

In every case we provide each client with a written fee agreement detailing the terms and conditions. We always offer a free initial phone consultation and we appreciate the opportunity to work with you in obtaining payment of your disability insurance benefits.

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No. For purposes of efficiency and to reduce expenses for our clients we have found that 99% of our clients prefer to communicate via telephone, e-mail, fax, GoToMeeting.com sessions, or Skype. If you prefer an initial in-person meeting please let us know. A disability company will never require you to come to their office and similarly we are set up so that we handle your entire claim without the need for you to come to our office.

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