California Disability Insurance Attorneys Battle Discretionary Clauses Daily
In California, Federal Judges are often limited in their ability to reverse a denial of disability insurance benefits if a disability insurance policy is governed by ERISA. A California disability attorney must be very experienced in handling ERISA disability denials to have any chance of convincing a Judge to reverse a disability claim denial. Not every policy is governed by ERISA, but if your policy is then you must be prepared.
The first key question in every ERISA disability denial lawsuit is whether the claimant’s disability insurance policy contains a “discretionary clause.” This clause gives the insurance company the right to interpret the terms of the disability policy and make a final claim decision. If a disability policy does not contain a discretionary clause, then a court is not restricted in their review of a disability denial. But if there is a discretionary clause, then the court is limited in its analysis to an “arbitrary and capricious” review of the claim denial.
A California Court’s Review of a Claim Denial
The Ninth Circuit Court of Appeals, California’s highest federal court, explained “the arbitrary and capricious” standard of review in the case of Abatie v. Alta Health and Life Insurance Company. That case involved a dispute over life insurance benefits, but the same law applies to disability insurance claims. The plaintiff’s husband worked as a doctor for a Santa Barbara clinic from 1971 until November 1992, when he developed non-Hodgkin’s lymphoma and took a leave of absence. He never returned to work and, beginning in 1993, received permanent disability benefits. After his death in 2000, his widow filed a claim for life insurance benefits.
Alta Health and Life Insurance Company denied benefits. In its view, the policy was no longer in force when the plaintiff’s husband died. The case turned on whether the doctor had to continue to pay policy premiums even though he was on disability at the time. Under the language of his policy, his coverage ended when his employment ended unless he became totally disabled and the insurance company granted him what was called a waiver of premium.
Alta Health initially denied coverage because it asserted the doctor had not filed a request for the waiver of premium. However, the doctor had in fact filed the request but the insurance agent had not initially sent it to Alta Health. When the doctor’s widow filed suit, Alta Health added another reason for its denial: the doctor was not entitled to a waiver of premium because he was not totally disabled. It claimed for the first time that the doctor had to pay premiums because his non-Hodgkin’s lymphoma went into partial remission in the two years before his death. In the insurance company’s view, he wasn’t totally disabled and had to pay the premium to keep the policy in force and, in turn, be entitled to life insurance benefits.
The California Court’s Basis For Overruling the Insurance Company Denial
The Ninth Circuit Court of Appeals found that Alta Health had improperly denied coverage. The court’s decision was based on a number of factors including:
- Alta Health had a conflict of interest, as the insurance company was both the claims administrator and the source of funds for paying claims;
- The reasons for Alta Health’s denial of coverage changed over time; and
- Alta Health’s reasons for the denial of coverage were directly contradicted by its own files as well as by the discovery produced in the lawsuit.
Even though the policy contained a discretionary clause and gave Alta Health the right to make some decisions, the Ninth Circuit Court of Appeals determined that the decision to deny coverage could not stand. The court said these “procedural irregularities” showed that the denial of coverage was arbitrary and capricious, which resulted in a victory for the claimant.
Abatie v. Alta Health and Life Insurance Company, 458 F.3d 955 (9th Cir. 2006) (en banc)
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Disability Company Reviews
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Sun Life
What a mess
This place has no idea what day it even is. First they attach my claim to my previous claim in which was a new claim. They messed up and denied me then made me wait yet ag... read more >
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Sedgwick
I was disabled 2003 by SS. I got SSDI 7 years too late.
I believe if Sedgwick would have moved on my Claim. They absolutely did everything not to answer my calls, change dates. I had already been through WV comp. Ins. Sold out,... read more >
MetLife
Only care about $$$$$
PLAY THEIR GAME FIGHT FIRE WITH FIRE.....after getting a copy of the insurance policy from my HR. I nipped a lot of the headaches quickly by calling their bluff word for w... read more >
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Sedgwick
They falsify documents and avoid contact as much as possible.
They avoided sending the documents needed for the claim for two weeks. I had to escalate with a call from my company's HR and Sedgwick (the only way I was ever able to get... read more >
Hartford
This company is a scam!
The Hartford does not pay claims. The Hartford only collects premiums. The Hartford doesn’t care if you are terminally ill. I’ve been employed at my employer since 201... read more >
Prudential
California State Disabilty "OFFSET" never mentioned or outlined when enrolling for STD coverage.
All terms and conditions of receiving a claim benefit not made available when enrolling. Hidden elements of eligibility... not fully transparent with issues that might eff... read more >
Sedgwick
Not getting paid
I been battling Sedgwick about my claim. I was to get paid today and I did not get paid.Sledges is the worse company I ever had to deal with. I been fighting with my b... read more >
Sedgwick
Sedgewich is the worst-immediate denial of all requests for treatment. Rubber stamps DENIED ALL RFA’s
Sedgewich immediately denies all RFA. They’re ur team are THEMSELVES not a independent medical team…
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