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Illinois Insurance Law update.

Recent cases help define the Burden of proof / Standard of review

March 2019: Wit v. United: Judge finds United applied financial criteria to deny mental health benefits when it created its own guidelines. Thus the judge ruled United's actions could be used to determine United breached its duty.

April 1, 2018 Update:
All ERISA employee benefit plans that condition a benefit upon a determination that a claimant is disabled must apply new rules as of April 1, 2018.

A plan denying a claim must include the following protections:

For initial claim denials, the notice must also include a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records and other information relevant to the claim.

For appeal denials, the notice must include a description of any plan-specific limitations period that applies to the claimant's right to bring a civil action, including the calendar date on which the contractual limitations period expires for the claim.

These requirements do not apply just to  those plans  providing long-term or short-term disability benefits, but to any decision affecting benefits where disability is a consideration, for example,

Burden of proof / Standard of review

In insurance litigation, the outcome often depends on which party has the burden of proof and which party has the right to interpret the written terms of the plan and the meaning of the medical evidence presented by the patient.  However, recent cases have made the task more difficult.

During 2003, the U.S. Supreme Court and the Seventh Circuit discussed the deference a plan must give to a treating physician's opinion against a health plan's witness. The current rule is that the plan is not required to give the doctor who actually treats your child deference (a presumption that the treating physician's opinion is the best).  Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003)  (pdf)  More recent cases state however that he treating physician may have better information than the plan's doctor, and a plan cannot refuse to consider the treating physician's opinion. In Hawkins, the 7th Circuit overruled a plan which relied on mere scraps of evidence to counter a treating physician's evidence.  Hawkins v. First Union Corporation Long-term Disability Plan, 326 F.3d 914 (7th Cir. 2003); see Govindarajan v. FMC Corp., 932 F.2d 634, 637 (7th Cir. 1991) (holding that a selective review of medical evidence and a conclusion based on that selectivity was unreasonable).  "Deferential review is not no review." Hess v. Hartford Ins Co., 274 F.3d 456, 461 (7th Cir. 2001).  (See also Elliott v. Metro Life Ins. Co.  (6th Cir. 2006): "Logically, MetLife could have made a reasoned judgment only if it relied on medical evidence that assessed Elliott’s physical ability to perform job-related tasks. McDonald, 347 F.3d at 172 (citing Quinn v. Blue Cross & Blue Shield Ass’n, 161 F.3d 472, 476 (7th Cir. 1998) (The plan “was under a duty to make a reasonable inquiry into the types of skills [the claimant] possesses and whether those skills may be used at another job.”)).

A 2006 opinion by a Federal New York court also reflects some ot the earlier reasoning of the Seventh Circuit with a thorough analysis of the advantages the treating physician has over the reviewing physician in evaluating a patient's condition. For psychiatric cases, an important aspect of the assessment of the patient's condition comes from observation of the patient's demeanor, watching affect, evaluating nuances of speech, etc. These types of factors, and there are many of them, simply cannot be recorded in written medical records. In addition, the ethics code of the American Psychiatric Association prohibits a doctor from offering a professional opinion unless he or she has examined the patient. In Westphal the court determined that the plan-insurer acted in an arbitrary and capricious manner by relying on the opinions of non-treating, non-examining doctors to override the prescription of care offered by the treating physician. This rationale of this opinion could go a long way toward tipping relatively balanced scales in close cases in the provider's and patient's favor.
Westphal v. Eastman Kodak Co, 2006 U.S. Dist. LEXIS 41494 (June 21, 2006, WD NY).

In Mondry v. American Family Mutual Insurance Co., (W.D. Wisc., Nov. 21, 2006) the Plan and Cigna six times stonewalled the participant's efforts to obtain the written plan documents determining when the Plan would cover speech therapy.    Only after lawyers were involved did the plan provide the documents and reverse its denial of the service, which it had initially denied under the habilitation guise.  

Similarly, the Sixth Circuit has ruled that the claims determination must be a deliberate, reasoned process. Elliott v. Metro Life Ins. Co.  (6th Cir. 2006).

March 6, 2009: The 7th Circuit Court of Appeals reviewed Mondry, writing
In particular, nothing in the SPD suggests that  therapy must be “restorative” in order to qualify as
“medically necessary.” In short, CIGNA had been relying on [its internal criteria manuals] as the equivalent of plan language, treating the former documents as if they were dispositive and citing them to Mondry as such....
Because Cigna relied on the documents, ERISA required the Plan to produce them.  The wrinkle was that while Cigna had these secret documents, American Family was the Plan, and it was the Plan's duty, and not Cigna's to deliver the documents.  The court found the Plan liable for statutory penalties for not delivering the documents, suggesting that the Plan should have forced its claims administrator, Cigna, to deliver the documents which showed Cigna's position was wrong. While the documents eventually helped Mondry recover the cost of the speech therapy. the deliver came too late for her to elect COBRA coverage.  Since Cigna misrepresented that speech therapy was not covered, Mondry did not continue the coverage.  The court ruled that ERISA did not provide a remedy for this injury, and that topic is beyond the scope of this article.

  The Seventh Circuit reversed another claims denial:
Because the Plan's determination failed to consider Ms. Leger's complete medical history and rejected, without
explanation, important aspects of the [Functional Capacity Evaluation], we believe that the Plan acted in an arbitrary and capricious manner in terminating Ms. Leger's benefits.
Leger v. Tribune Company Long Term Disability Plan, March 9, 2009.

A new case, Bard v. Boston Shipping Assoc., ___ F.3d. ___, 2006 U.S. App. LEXIS 31137 (1st Cir. 2006) focuses on a variety of violations of ERISA’s claims procedure requirements by a multiemployer trust fund:
  1. the trust fund failed to give Bard proper notice of the initial denial of his claim.
  2. the fund violated the claims procedure requirements when it allowed the same individual review Bard’s appeal as had originally evaluated and denied Bard’s claim review.
  3. the fund failed to comply with the time limits outlined in the claim procedure regulations for making a decision on Bard’s appeal and notifying him of that decision.
  4. the trust fund failed to consult an appropriate medical expert when reviewing Bard’s claim.
  5. the trust fund unreasonably refused to take into account updated medical records submitted by Bard’s treating physicians.
The court in Bard summarized the patient's predicament: "Bard is in a similar position: because of the Plan's failures to give proper notice, he did not learn about the Plan's interpretation until it was too late. By the time the Plan's interpretation was made clear to him, he was forced to argue his case to a Board that lacked the requisite objectivity, and that used his earlier submissions against him. Additionally, as in Glista, the defendant plan has "offered no explanation for why it did not explain earlier" its basis for the initial adverse benefit determination.  ...Accordingly, we grant relief similar to what we ordered in Glista. Thus we bar the defendant plan from using Bard's earlier medical evidence against him. In so doing, we essentially undo the prejudice that resulted from Bard's reliance on his initial reasonable interpretation of the Plan."

In a Feb.27, 2007, case, left unpublished, by the Eleventh Circuit criticized Aetna's denial of claims (Helms v. General Dynamics Corp):
Aetna's myopic and flawed reasoning and its procedural failures to properly inform Helms of the specific reasons for his denial in a timely fashion, coupled with the lack of an [Independent Medical Exam] IME of an admittedly subjective condition, is arbitrary and capricious. ... there was no evidence other than that of Helms's treating physician Dr. Epperson and Helms himself. Put another way, this is not a case wherein the plan administrator refused to credit the opinions of doctors that supported disability but instead accorded greater weight to conflicting opinions of doctors that did not support disability. See, e.g., Wangenstein, [unpublished case]... (upholding a plan administrator's weighing of multiple neurologists' examinations and reviews but ultimately crediting neurologists that did not support a finding of disability). With only Dr. Epperson's medical evaluation in the form of his office notes, test results, APSs, and narratives, Aetna excised narrow snippets of Dr. Epperson's notes, while it discredited or ignored whole tracts of his medical evaluation that supported Helms's STD claim, all without a peer review or an IME. Aetna's review in this case was malignant at worst, and arbitrary at best. See Nord, 538 U.S. at 834, 123 S.Ct. at 1972 ("plan administrators ... may not arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of a treating physician.").

The Seventh Circuit, however, is going in a different direction in 2006-07.  The Seventh Circuit's rulings would direct ERISA cases arising out of Illinois, Wisconsin and Indiana.  In Davis v. Unun Life Ins. Co., 444 F.3d 569 (7th Cir. 2006), the Court ignored the above cases and overturned a district court, saying:
The district court and Davis also fault Unum for relying on "a mere paper review," lamenting the fact that Unum's doctors did not personally examine Davis or speak with his doctors. However, neither the district court nor Davis has cited, and our research has not disclosed, any authority that generally prohibits the commonplace practice of doctors arriving at professional opinions after reviewing medical files. In such file reviews, doctors are fully able to evaluate medical information, balance the objective data against the subjective opinions of the treating physicians, and render an expert opinion without direct consultation. It is reasonable, therefore, for an administrator to rely on its doctors' assessments of the file and to save the plan the financial burden of conducting repetitive tests and examinations.
and citing Dougherty v. Indiana Bell Telephone Co., 440 F.3d 910 (7th Cir. 2006):
 "We will uphold a benefit decision so long as that decision has "rational support in the record." Leipzig, 362 F.3d at 409. " 'Questions of judgment are left to the plan administrator,' and 'it is not our function to decide whether we would reach the same conclusion' as the administrator." Sisto, 429 F.3d at 701 [cites]. Put simply, a decision will not be overturned unless it is "downright unreasonable."
Finally. the Seventh Circuit backtracked a little, by saying the abuse of discretion standard was not an absolute win for a plan, in Call v. Ameritech Management Pension Plan (Jan 9, 2007):
But "we have said many times that the term 'abuse of discretion' covers a range of degrees of deference rather than denoting a point within that range, and where a particular case falls in the range depends on the precise character of the ruling being reviewed."
It is true that the plan administrator, who is given discretion to interpret the plan, adopted the interpretation that the defendant is urging upon us; to reject his interpretation we must find an abuse of that discretion. But "we have said many times that the term 'abuse of discretion' covers a range of degrees of deference rather than denoting a point within that range, and where a particular case falls in the range depends on the precise character of the ruling being reviewed."  The deference   that we would normally give to an interpretation by the administrator of a pension plan, [cite], is overridden in this case by the lack of any reasoned basis for that interpretation. Deference is relative to the nature of the issues, including their complexity. [cite] The more complex, the greater the range of reasonable resolutions. In addition, "Deference depends on ambiguity." [cite]. The points are related. The more numerous and imponderable the factors  bearing on a decision, the harder it will be for a reviewing court to pronounce the decision unreasonable and hence an abuse of discretion. But the interpretation of written contracts in cases in which no extrinsic evidence (that is, no evidence--besides the contract itself) is presented is usually pretty straightforward. There are the contract's wording, some commonsensical principles of interpretation, and the commercial or other background of the contract insofar as that can be gleaned without taking evidence. When guides to meaning line up on one side of the case, as they do here, an adjudicator who decides the case the other way is likely to be acting unreasonably.

Also, given Leger, above, even the Seventh Circuit will hold the plan fidciaries up to their duty to review thoroughly the evidence presented to them.
Since medical claims, especially those involving autism, are more complex than the interpretation of documents, this sliding scale of deference tilts towards the plan and not the patient.

2015 Update:  Discretionary standard does not apply to Illinois Insured Plans
Illinois insurance regulations state:
No policy, contract, certificate, endorsement, rider application or agreement offered or issued in this State, by a health carrier, to provide, deliver, arrange for, pay for or reimburse any of the costs of health care services or of a disability may contain a provision purporting to reserve discretion to the health carrier to interpret the terms of the contract, or to provide standards of interpretation or review that are inconsistent with the laws of this State.
In other words, an insurance policy in Illinois may not contain a discretionary clause. The Seventh Circuit Court of appeals applied this prohibition to a claim for benefits under an ERISA plan.  Fontaine v. Met Life, 800 F.3d 883 (7th Cir. 2015).  The employer's plan could not use the discretionary clause to deny benefits.  The Illinois regulation, as an insurance law, was saved from preemption.  However, this decision will probably not apply to an employer which self-funds its benefit plan, since self-funded plans may not be deemed to be insurance companies.

2007 Update:

The Third Circuit issues a sweeping ruling that sets out a new framework for how judges should decide cases where the benefit determinator has a conflict of interest, but still tough going in the Seventh Circuit.

Excerpts from the Court's opinion:
ERISA does not specify the standard of review that a trial court should apply in an action for wrongful denial of benefits.
In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113 (1989), the Supreme Court held that the default standard of review in all § 1132(a)(1)(B) cases is de novo. The Court noted in a dictum that when a plan by its terms gives the administrator discretion, which the plan at issue in Firestone did not, the administrator’s decisions are upheld unless they abuse that discretion. Id. at 115. On the issue of conflicts of interest, the Court noted that “if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion.’” Id. (quoting Restatement (Second) of Trusts § 187 cmt. d (1959)). Addressing conflicts of interest in the post-Firestone era, most courts of appeals have adopted a “sliding scale” standard of review. This approach grants the administrator deference in accordance with the level of conflict. Thus, if the level of conflict is slight, most of the administrator’s deference remains
intact, and the court applies something similar to traditional arbitrary and capricious review; conversely, if the level of conflict is high, then most of its discretion is stripped away. Doe v. Group Hospitalization & Med. Servs., 3 F.3d 80, 87 (4th Cir. 1993).

In Judge Becker’s scholarly opinion in Pinto v. Reliance Standard Life Insurance Co., 214 F.3d 377, 392 (3d Cir. 2000), we cast our lot with the sliding scale approach. Among the eleven courts of appeals that have reported decisions in this area, six have adopted some version of the sliding scale.4 Id.;Vega v. Nat’l Life Ins. Servs., Inc., 188 F.3d 287, 296 (5th Cir. 1999) (en banc); Woo v. Deluxe Corp., 144 F.3d 1157, 1161–62 (8th Cir. 1998); Chojnacki v. Georgia-Pacific Corp., 108 F.3d 810, 815 (7th Cir. 1997); Doe, 3 F.3d at 87; Miller v. Metro. Life Ins. Co., 925 F.2d 979, 984 (6th Cir. 1991). In addition, the Ninth Circuit Court of Appeals follows a “substantially similar” approach, though it rejects the sliding-scale metaphor. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 967 (9th Cir. 2006) (en banc) (choosing simply to note that “[a] district court, whenfaced with all the facts and circumstances, must decide in each case how much or how little to credit the plan administrator's reason for denying insurance coverage”). In Pinto, we held that the sliding scale approach was most faithful to Firestone’s command that the level of conflict be considered as a factor in shaping arbitrary and capricious review. 214 F.3d at 392.

B. Contours of the Sliding Scale The premise of the sliding scale approach is that courts should examine benefit denials on their facts to determine whether the administrator abused its discretion. Id. at 391. To apply the approach, courts first consider the evidence that the administrator acted from an improper motive and heighten their level of scrutiny appropriately. Id. at 392. Second, they review the merits of the decision and the evidence of impropriety together to determine whether the administrator properly
exercised the discretion accorded it. Id. at 394. If so, its decision stands; if not, the court steps into the shoes of the
administrator and rules on the merits itself. At its best, the sliding scale reduces to making a common-sense decision based on the evidence whether the administrator appropriately exercised its discretion. This theme, rather than getting bogged down in trying to find the perfect point on the sliding scale, should be district courts’ touchstone.

In sharp disagreement, the Court of Appeals for the Seventh Circuit holds that it is improper to label those situations “conflicts of interest.” See Rud v. Liberty Life Assur. Co. of Boston, 438 F.3d 772, 776 (7th Cir 2006) (Posner, J.). The problem, it argues, is that we generally assume that parties to a contract are self-interested, and it is inimical to the law of contracts to confuse self-interest with a conflict of interest. Id. This is no doubt logical, yet the Supreme Court has held that ERISA places us in the realm of trust law, not contract law. Firestone, 489 U.S. at 110–11. Moreover, were we to apply contract law, we would review plans de novo from the start, for there is no analog to fiduciary discretion in the common law of contracts. But we are not, and our position, in strict accordance with Supreme Court precedent, follows the common law of trusts.

2008 starts with more confusion between the circuits

Evans v. Eaton Corp. Long Term Disability Plan, — F.3d —-, (C.A.4 (S.C.)) (January 8, 2008)
". . . the district court, faced with substantial conflicting medical
evidence and a good case on both sides, concluded that Evans’s position
was the stronger one. But Eaton was entitled to an abuse of discretion
standard of review, and the district court’s judgment, though abuse of
discretion in name, was de novo in fact. . . . But the delicate balance
persists. The district court lost sight of this balance. We therefore
reverse the district court’s award of benefits to Evans and remand with
directions that judgment be granted to Eaton."

Saffon v. Wells Fargo & Co. Long Term Disability Plan, — F.3d —-, (C.A.9 (Cal.)) (January 9, 2008)
As we read Abatie, when reviewing a discretionary denial of benefits by a
plan administrator who is subject to a conflict of interest, we must
determine the extent to which the conflict influenced the administrator’s
decision and discount to that extent the deference we accord the
administrator’s decision. In so doing, we seek to overcome the “serious …
danger of conflicted plan decisionmaking” illustrated by the Unum Provident scandal. Langbein, supra, at 1335.

In Abatie, we explained that a reviewing court must always consider the
“inherent conflict that exists when a plan administrator both administers
the plan and funds it.” Id. at 967. We “weigh” such a conflict more or
less “heavily” depending on what other evidence is available. Id. at 968.

We “view[ ]” the conflict with a “low” “level of skepticism” if there’s no
evidence “of malice, of self-dealing, or of a parsimonious claims-granting
history.” Id. But we may “weigh” the conflict “more heavily” if there’s
evidence that the administrator has given “inconsistent reasons for
denial,” has failed “adequately to investigate a claim or ask the
plaintiff for necessary evidence,” or has “repeatedly denied benefits to
deserving participants by interpreting plan terms incorrectly.” Id.

In explaining what it means to “weigh” a conflict of interest, Abatie
“conscious[ly]” rejected the “sliding scale” approach adopted by other

[W]eighing a conflict of interest as a factor in abuse of discretion
review requires a case-by-case balance …. A district court, when faced
with all the facts and circumstances, must decide in each case how much or
how little to credit the plan administrator’s reason for denying insurance
coverage. An egregious conflict may weigh more heavily (that is, may cause
the court to find an abuse of discretion more readily) than a minor,
technical conflict might.

Doyle v. Liberty Life Assur. Co. of Boston, — F.3d —-, (C.A.11 (Fla.)) (January 7, 2008)
“applying a burden shifting analysis to a claims administrator’s
factual determinations poses unique difficulties.”

2016 update: Ninth Circuit amends burden of proof standard when there is unequal access to information
As noted above, a plaintiff usually bears the burden of proving his or her claim for benefits.  I Estate of Barton v. ADT Secutrity Services Pension Plan, 820 F.3d 1060 (9th Cir. 2016),When Barton retired at age 65, ADT said it could not find his employment records and denied his pension benefits.  Barton produced employment records, but only the employer could produce the eligibility records.  The Ninth Circuit Court of Appeals held that where a claimant makes a prima facie case that he is entitled to benefits but lacks key information about corporate structure or the hours he worked necessary to substantiate a claim for benefits, but the employer controls the information, then the burden of proof shifts to the defendant to produce the information.

In 2008, look for the Supreme Court to accept a case to resolve the differences between the approaches taken by the Circuit Courts of Appeals.

Court rules that a plan's guidelines do not have to be revealed when they are not used by the insurer.

The court in Brooks decided whether an insurer's claims management guidelines should have been provided to an ERISA plan participant who unsuccessfully appealed the insurer's termination of her disability benefits. Under the claims procedure
regulations, plan participants and beneficiaries have a right to receive copies of "relevant" documents when appealing a denied claim. The participant Brooks argued that the guidelines were relevant within the meaning of the regulations because they were either (1) relied on in making the benefit determination or considered in the course of the determination, or (2) demonstrated compliance with
administrative processes and safeguards required under the regulations. The insurer countered that it had not considered the guidelines when it review the participant's appeal, and that, as a matter of practice, any reference to the guidelines would have been specifically noted in the participant's claim file. The court agreed with the insurer, based on the evidence submitted by the insurer, that since the guidelines were not considered in any way in the course of the appeal, the insurer did not have to produce them to the participant.  This insurer avoided having to provide its guidelines only because there was clear evidence that they were not implicated in any way with this particular appeal. Other plans may attempt to obtain the same result by adopting a procedure which requires adding a note to the claim file when guidelines were consulted. However, as the court acknowledged, other court cases have read the relevant document rule differently and might require production of this kind of guideline as a general rule.

The Court stated:
Brooks also asserts that the CMG is relevant because it demonstrates compliance with the administrative processes and safeguards that plans must adopt pursuant to ERISA's implementing regulations. See 29 C.F.R. § 2650.503-1(m)(8)(iii); Id. §2560.503-1(b)(5).
Brooks reads the regulations too broadly. The Department of Labor (DOL) has made clear that the disclosure requirement Brooks seeks to invoke is limited to materials specifically generated connection with a particular adverse benefit determination:
"[S]ubparagraph (m)(8)(iii) provides that, among the information that a plan must provide a claimant... is any information that the plan has generated or obtained in the process of ensuring and verifying that, in making the particular determination, the plan complied with its own administrative processes and safeguards[.]" 26 Fed.Reg. at 70,252. (Emphasis supplied). See also Palmiotti v. Metropolitan Life Ins. Co., 2006 WL 510387 (S.D.N.Y.).

2560.503-1  Claims procedure.
(h)(2) Full and fair review. Except as provided in paragraphs (h)(3) 
and (h)(4) of this section, the claims procedures of a plan will not be
deemed to provide a claimant with a reasonable opportunity for a full
and fair review of a claim and adverse benefit determination unless the
claims procedures--

(i) Provide claimants at least 60 days following receipt of a
notification of an adverse benefit determination within which to appeal
the determination;
(ii) Provide claimants the opportunity to submit written comments,
documents, records, and other information relating to the claim for
(iii) Provide that a claimant shall be provided, upon request and
free of charge, reasonable access to, and copies of, all documents,
records, and other information relevant to the claimant's claim for
benefits. Whether a document, record, or other information is relevant
to a claim for benefits shall be determined by reference to paragraph
(m)(8) of this section;

(m)(8) A document, record, or other information shall be considered
``relevant'' to a claimant's claim if such document, record, or other information
(i) Was relied upon in making the benefit determination;
(ii) Was submitted, considered, or generated in the course of making
the benefit determination, without regard to whether such document,
record, or other information was relied upon in making the benefit
(iii) Demonstrates compliance with the administrative processes and
safeguards required pursuant to paragraph (b)(5) of this section in
making the benefit determination; or
(iv) In the case of a group health plan or a plan providing
disability benefits, constitutes a statement of policy or guidance with
respect to the plan concerning the denied treatment option or benefit
for the claimant's diagnosis, without regard to whether such advice or
statement was relied upon in making the benefit determination.

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