ERISA allows for certain circumstances which create inherent conflicts of interest. Each must be addressed in order to rebuild the justice that they undermine. It is easy for clients to see that an insurance company terminating or refusing to pay an ERISA claim has a serious conflict of interest. Every claim decision impacts its profits. To our clients, it looks like a racket because the companies' incentive is to increase profits by denying claims.
Fortunately, many courts have recognized this unfairness and permitted conflict of interest discovery when an insurer decides a claim. Defense counsel strenuously object, contending that the “administrative record” has already been established, so the court need only look at the decision and the record to decide the case. ERISA allows a plan document to reserve discretion for its administrator and requires a court to give deference to its decision.
That pillar of justice had to be constructed one case at a time with capable ERISA counsel making the appropriate arguments in favor of discovery. Occasionally, additional work is necessary to keep that pillar in place.
When a plan is self-funded, courts often rule that maintaining the fund from which claims are paid separately from the company's other assets is sufficient to show that a conflict of interest does exist. In those cases, such objections from defense counsel often carry the day with the court. Our clients still see unfairness. After all, the employer ultimately has to make contributions into that separate account when its balance is depleted.
That is a pillar that must be built to support justice.
Another conflict of interest arises when a self-funded plan hires physicians or other professionals to conduct peer reviews or medical examinations. The same physicians are often selected and are paid handsomely to review some paperwork and render an opinion without ever laying eyes on the claimant. Other regularly retained experts conduct a brief 10-20 minute examination of claimants for which they receive a sizable sum and whom they amazingly routinely find are not disabled (despite the findings of several treating doctors who say otherwise).
Yet another pillar that must be constructed if justice is to be preserved.
Fortunately, a few courts have seen the unfairness of physicians and other experts who have a financial incentive to render favorable opinions for a plan. These courts have started to allow discovery as to this conflict of interest even when the fund is self-funded in an account maintained separately from the employer's other assets. For example, in Demer v. IBM Corporation LTD Plan, 835 F.3d 893 (9th Cir. 2016), the Ninth Circuit found that “The lack of any structural conflict of interest on the part of MetLife does not preclude MetLife from having a conflict of interest based on an [Independent Physician Consultant's] financial interests.” That case was cited recently in Dimry v. Bert Bell/Pete Rozelle NFL Player Ret. Plan, No. 19-CV-05360-JSC, 2020 WL 1865192 (N.D. Cal. Apr. 14, 2020), which noted, “The Court cannot find that the amount of compensation the Plan paid each physician during the year the physician prepared the report on Plaintiff, and the amount the physician was paid for evaluating Plaintiff, is wholly irrelevant and thus not discoverable in light of Demer …” See also, Chacko v. AT&T Umbrella Benefit Plan No. 3, No. 2:19-CV-01837-JAM-DB, 2020 WL 1984171 (E.D. Cal. Apr. 27, 2020) (court allowed discovery regarding the potential financial conflicts of physician consultants). The foundation for another pillar has been established and bolstered.
There is a great deal of unfairness in the ERISA. Capable and experienced ERISA counsel must continue their work daily to keep the pillars of justice in place, shoring up those already there and installing new ones when and where needed. We choose to be builders, rebuilding justice one case at a time.