A recent Fifth Circuit case reminds us of one of the tactics insurance companies may use to wear down claimants. As we all know, many claimants who suffer from restrictions or chronic pain go through difficult times and grow weary of pressing on with their case. They want to give up, which is exactly what the insurer desires. As ERISA disability attorneys, we have to keep encouraging our clients, but at the same time, we cannot promise a victory. The case Martinez v. Standard Ins. Co., No. 20-10475, 2021 WL 4592430 (5th Cir. Oct. 5, 2021) demonstrates the “never give up resolve” that must be part of the plaintiff's counsel's arsenal of encouraging words. The plaintiff did not give up but died while his case was on appeal. His surviving wife was substituted as the plaintiff which is why there are two different names involved – Chavez and Martinez.
Chavez had a long term disability benefit through Standard Insurance Company. He filed for benefits and was found disabled from his own occupation by Standard. The policy had an “own occupation” definition of disability which lasted for the first two years, and then it switched to an “any occupation” disability- similar to that used by the Social Security Administration.
The plan had limited benefits for certain conditions. It limited benefits to one year for carpal tunnel, or repetitive motion syndrome, arthritis, or any sprains or strains of joints or muscles. Standard, realizing a missed opportunity with its initial decision, seized on that limitation, and contended that the restrictions which related to Chavez's wrist fit that limitation. It terminated the claim after 12 months.
Chavez challenged that decision, clearly demonstrating that he did not have carpal tunnel syndrome or a sprain. Standard turned a deaf ear. Chavez filed a lawsuit. The district court agreed with him and found that the limitation did not apply. The district court went further, since now Chavez was well past the 24-month mark as to the definition of disability, and found that Chavez also met the any occupation definition of disability. It ordered benefits paid up to the time of the judgment. The district court found that Standard should have instituted its own any occupation review while the case was pending.
Standard appealed the district court's determination that it had waived the right to decide whether Chavez was disabled from any occupation and the district court's award of benefits to the date of the judgment. The Fifth Circuit agreed that there was no waiver of Standard's right to decide any occupation disability finding that the district court should have remanded the case to Standard to decide. The Fifth Circuit followed a Seventh Circuit case, Pakovich v. Broadspire Servs., Inc., 535 F.3d 601 (7th Cir. 2008). The court in that case rejected a rule that would require ERISA administrators who deny benefits under an own occupation standard to spend valuable company resources evaluating a claimant under the any occupation standard in case of a potential reversal on appeal.
The focus by the Fifth Circuit was on the insurer having an “administrative” right to review the claim in the first instance, regardless that the claimant was without benefits for an extended period. The downside of this “right” is that it can be abused by insurers who want to play “games” with the claim process. Insurers may intentionally deny a claim late in the own occupation stage with only one or two months of benefits left. Or the insurer may decide the original decision was wrong and should only have been paid under a limitation, as here, so that the insured can only challenge a few months of benefits. Then he must go back through the claim process again for an any occupation decision even if he wins his case. He can be worn down without income over an extended time frame with no recourse other than to wait it out. Here, before his appeal was heard, Mr. Chavez died. Even with very limited benefits at stake, Standard pressed on with its appeal.
Cases like this illustrate the fallacy of ERISA being an administrative process. If it were, ERISA disability cases would be handled more like Social Security disability cases. There would be more safeguards against bias, conflict of interest, and breaches of fiduciary duties. Our disability lawyers and ERISA attorneys regularly see games played by insurers. Standard's “wearing down” game outlived the insured. I am glad his widow pressed on. Despite the Fifth Circuit's ruling, I hope she continues to challenge Standard and that fees are awarded.