Unum Loses Big To Quadriplegic Insured

A court opinion from the U.S. Court of Appeals for the Ninth Circuit came down hard on Unum, the nation’s largest disability insurer, after it tried to underpay benefits owed to its insured, who was paralyzed in a severe bicycling accident. Stephan v. Unum Life Insurance Company of America, 697 F.3d 917 (9th Cir. 2012), is already being widely cited for its landmark legal rulings in the area of Employee Retirement Income Security Act (ERISA) governed insurance plans.

Evidence of Unum’s Well-Established Bias Is Admissible

First, the decision makes clear that in determining if an insurer abused its discretion, the district court must consider “any relevant evidence” of an insurer’s “history of biased claims administration”, whether it be evidence shown in prior cases (including in prior court opinions), or any evidence of biased decision making in the individual case. 697 F.3d at 930, 933-34. The court made clear that findings in other cases against Unum must be considered when weighing the insurer’s conflict of interest. Id. The court also made clear that evidence of bias in the case at hand also had to be considered to determine if “bias infiltrated the entire decision-making process”, finding that Unum’s handling of Stephan’s claim demonstrated such a bias. Id. at 930-34.

Discovery Is Permitted In ERISA

Second, the court made clear that claimants are entitled to discovery regarding evidence relating to the insurer’s conflict of interest, specifically stating that Unum was required to provide its attorney-client memos. Id. at 930-31. This is the Ninth Circuit’s most explicit finding that discovery should be permitted in ERISA cases.

Insurers Can’t Hide Its In-house Attorneys’ Memos

Third and most importantly, the court made clear that because insurers administering claims are considered fiduciaries under ERISA, attorney-client communications that are created before a final appeal denial are subject to the “fiduciary exception” to the attorney-client privilege and must be provided to the insured upon request. Id. at 931-33. The court made clear that insurers have a duty as fiduciaries to process claims “solely in the interests of the [plan] participants and beneficiaries.” Id. at 929 (citing Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 106 (2008). Thus, if insurers use attorneys during the administrative appeals process, attorney-client communications must be made public and the privilege cannot be used to secretly drive claims decisions.

ERISA insurance claims involve complex issues

ERISA generally provides the exclusive remedy available for those wanting to recover on policies covered by ERISA – including life, health and long term disability plans that are employer-sponsored and considered employee benefit plans under ERISA.

Unfortunately, here in California, ERISA takes the place of many favorable consumer rights usually available, meaning, among other things, that policyholders can generally only recover actual benefits owned if an insurer wrongfully withholds benefits.

When former employees believe they are being denied or not receiving the full amount of ERISA-protected benefits, they have to challenge the denial of their claim.

Whether you have an employer-provided disability insurance policy that is governed by ERISA law or you have a private disability insurance policy, if your claim has been denied, you have the right to appeal. ERISA claims and appeals are complex. Therefore, it is extremely important to have the guidance of an experienced ERISA attorney on your side.