Life, Health and Disability Insurance Law Blog : Life, Health and Disability Insurance Law Blog : California Disability Lawyer & Attorney : Barger & Wolen Law Firm : CA Life Insurance & ERISA Law, Life Health Disability

Allison Bell of the National Underwriter reported on September 11, 2009 that approved disability claims rose more quickly in 2008 at the Social Security Disability Insurance program than at private disability insurers. She explained that the Council for Disability Awareness in Portland, Maine reported that findings in a summary of results from an analysis of SSDI program data and a survey of the 15 CDA member disability insurance companies were as follows:

SSDI applications rose 5.9% in 2008, to 2.3 million, and the number of workers approved for SSDI benefits increased 8.7%, to 895,000, the CDA reports.

The percentage of workers covered by the SSDI program who are receiving SSDI benefits increased to 4.8% in 2008, from 3.5% in 1998.

At CDA member companies, the number of individuals receiving long-term disability benefits payments increased 1.5% in 2008, to 573,500, and 30% of the member companies’ LTD claimants do not qualify for SSDI benefits, the CDA says.

Because of the aging of the U.S. workforce, the percentage of claims filed by workers under age 50 has been declining, and the number filed by workers over that age has been increasing.

But 27% of the survey participants said the overall claims rate has stayed about the same, and 64% said the incidence rate has been falling.

Only one of the participating companies said the recession has had any noticeable effect on disability claims.
 

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Out of the hundreds of potential amendments to the health care reform bill currently before Congress, two amendments in particular have drawn the attention of the insurance industry.

Arthur Postal with the National Underwriter discusses both amendments in his September 24, 2009 article:

Property and casualty insurance trade groups are uniting to oppose a proposed Senate health care reform amendment to merge medical components of workers’ compensation and auto insurance with health insurance.

The provision, known in industry parlance as “24-hour health coverage,” was proposed yesterday by Sen. Jay Rockefeller, D-W.Va.

In a letter to the Senate Finance Committee, which was not expected to take up the amendment today, the p&c industry argues that, “the amendment would upend the systems now in place to protect injured workers, drivers and passengers.”

The second amendment would impose an approximate $6.7 billion dollar “annual fee on health insurance providers.” Postal described the reaction from the insurance industry article stating:

If the proposed taxes are included in final legislation, the insurers said, it “would undermine the shared goals of achieving universal coverage and improving the affordability and quality of healthcare for the uninsured and for those currently with coverage.”

The insurers added that the new taxes would “likely be borne principally by those obtaining individual coverage in the exchange and by small businesses.”

As previously discussed on this blog, these amendments represent a potentially dramatic change to the insurance industry and therefore we will continue to monitor these developments.

Source:

Health Insurers Blast Tax Language In Health Reform Bill

Another Health Care Amendment Draws P&C Industry Fire

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In Williams v. Hilb, Rogal & Hobbs Insurance Services of California, Inc., __ Cal. App. 4th __, 2009 WL 2872403 (September 9, 2009), the court held that an insurance agent who portrays herself as having expertise in the particular insurance sought by an insured may owe the insured a heightened duty of care. Further, the failure of an insured to read the policy does not, as a matter of law, render the insured’s reliance on the agent’s advice unjustifiable.

This case involved a franchise business owner’s purchase of an “insurance package” that did not contain workers’ compensation insurance, which, under California law, is mandatory. The owners discovered their lack of coverage following a fire that severely injured an employee. The employee sued the owners who in turn sued the insurance agent for negligence for failing to provide the appropriate insurance necessary for their business. In her defense, the agent argued that she did not have a duty to volunteer additional or different insurance coverage and that insured was bound by the “clear and conspicuous” terms of the policy even if they failed to read or understand them. However, the court was not convinced by these arguments.

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In Marin General Hospital v. Modesto & Empire Traction Co., 581 F.3d 941 (2009), the Ninth Circuit Court of Appeals considered whether section 502(a)(1)(B) of ERISA completely preempted state-law causes of actions for breach of contract, negligent misrepresentation, quantum meruit and estoppel brought by a hospital against a patient’s employer and its claims administrator based on an alleged oral agreement between the hospital and claims administrator to pay for services provided by the hospital. Because the claims could not be pursued under section 502(a)(1)(B), but rather relied on legal duties that were independent from duties required by the ERISA plan, the Ninth Circuit concluded that the state-law claims were not preempted, depriving the court of subject matter jurisdiction. Accordingly, removal from state court was improper and the case was remanded to the district court with instructions to remand the matter to state court.

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In Scharff v. Raytheon Company Short Term Disability Plan, et al., ___ F.3d. ___, 2009 WL 2871229 (9th Cir. September 9, 2009), the Ninth Circuit Court of Appeals affirmed the district court’s dismissal of a lawsuit filed a mere twenty days after expiration of the ERISA plan provision requiring an action to be filed within one year following the denial of the appeal from an initial disability-claim denial, holding that the summary plan description’s placement and display of a that contractual limitations period met statutory and regulatory requirements. The court specifically rejected Donna Scharff’s arguments that the doctrine of reasonable expectations should be adopted in analyzing Raytheon’s SPD and that the placement and display violated her reasonable expectations: “We hold that even if the doctrine of ‘reasonable expectations’ applied here, the one-year statute of limitations met its requirements and also met the statutory and regulatory standards for disclosure.” The court also declined Scharff’s call for the importation into federal common law a California regulation requiring insurers to expressly inform claimants of statutes of limitations that may bar their claims. Noting that other circuits had expressly rejected a rule requiring plan administrators to inform participants of provisions already contained in the SPD, the court explained that Scharff’s position “would place the Ninth Circuit out of line with current federal common law and would inject a lack of uniformity into ERISA law.” In that latter regard, a lack of uniformity among the circuits would be detrimental, particularly to large multi-state employers who issue the same welfare benefit plan to cover all employees, regardless of their location.

Circuit Judge Susan P. Graber authored the majority opinion, joined by Judge Kim McLane Wardlaw. Judge Harry Pregerson dissented.

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The Ninth Circuit Court of Appeals in Montour v. Hartford Life & Accident, 582 F.3d 933 (9th Cir. 2009), adopted a new standard of reviewing ERISA abuse of discretion cases where the insurer has a conflict of interest. The court held that a “modicum of evidence in the record supporting the administrator’s decision will not alone suffice in the face of such a conflict, since this more traditional application of the abuse of discretion standard allowed no room for weighing the extent to which the administrator’s decision may have been motivated by improper considerations.”

Robert Montour was a telecommunications manager for Conexant Systems, Inc. His employer provided him with a group long-term disability plan governed by ERISA. Hartford was both the insurer and claims administrator of the plan. The plan granted Hartford discretionary authority to interpret plan terms and to determine eligibility for benefits.

Montour applied for and received disability benefits, initially for an acute stress disorder, in 2003. In 2004, Montour consulted an orthopedic surgeon, Dr. Kenneth Kengla, about knee and back pain and subsequently underwent surgery. Dr. Kengla diagnosed Montour with degenerative changes in both areas and notified Hartford that Montour was suffering from physical disability which prevented him from returning to the labor force. Dr. Kengla listed numerous restrictions on Montour’s physical activities.

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