While many people do not understand Constitutional due process, they do understand when they are being “ripped off” or treated unfairly. With ERISA claims, many insurance companies confuse the term “due process” with “do the process.”
If you have life or long-term disability insurance at work, you are paying or working for benefits that you reasonably assume will be there if you ever need them. The ERISA statute and its claim procedure regulations contain rules which require insurance companies to, among other things, honestly and fairly evaluate claims.
Insurance companies, however, sometimes fixate on their process and disregard fairness. Some courts have let insurers get away with this under the doctrine of “substantial compliance.” That is, if the insurer substantially follows the process, then its decision will be upheld by the court. That is “doing the process” not “due process.”
A good example is the case, Masuda-Cleveland v. Life Insurance Company of North America (LINA), which involved an accidental death claim. The original physician forensic-pathologist who conducted the autopsy found that the death was caused by an accident. LINA refused to pay the claim contending that the cause of death was a heart attack arising from a medical condition, not an accident.
The claimant's appeal thoroughly refuted LINA's basis for denying the claim. LINA obtained a new report. LINA renewed its denial based on the new report and refused to consider any evidence from the claimant rebutting that decision. It claimed the record was closed. The process was done. The claimant was forced to file suit.
Incredibly, the court ruled for LINA and dismissed the lawsuit. The court refused to allow the claimant to submit any evidence rebutting LINA's new reason for denying the claim. The court found that LINA substantially complied with procedure by allowing an appeal. Obtaining a new report during the appeal, developing a new basis for its denial, and refusing any rebuttal of the new evidence was inconsequential.
The claimant was understandably frustrated. It was like playing a football game where the home team is allowed to move the goalpost farther away any time the visiting team is about to score.
The claimant appealed to the Ninth Circuit. Fortunately, the Ninth Circuit understood the difference between due process and “do the process.” The court took note that (1) LINA never directly contacted the original physician forensic-pathologist who conducted the autopsy; (2) LINA obtained a new report after Plaintiff submitted the appeal and used that report to uphold the decision on a different basis; and (3) the evidence that the decedent actually had a fatal cardiac event was weak. The court vacated the judgment of the lower court and sent the case back for further proceedings.
While the end result was fair and just, the Ninth Circuit could have gone a step farther. Once an insurance company selects a reason for denying a claim, that ought to be it. If the claimant challenges, disputes and refutes that reason, too bad. The insurer cannot assert new reasons during the appeal.
The ERISA review process should not go on and on and on with the insurance company asserting new reasons for denying the claim throughout the process. “Doing the process” and ignoring fairness or due process is a common concern with ERISA life and long-term disability claims. Our experienced ERISA disability lawyers and long-term disability lawyers anticipate the arguments and the unreasonable positions that insurers often take. And, we do our best to prevent them.