Recently, the 9th Circuit Court of Appeals released a decision that may have a significant impact upon long-term disability insurance matters in California. The ruling could potentially limit some of the power that insurance companies have to deny claims for benefits.
The case concerned a woman who worked for Boeing. As a benefit of employment, the employee was covered by a health and wellness plan provided to those who worked for the company. The plan had a clause that allowed Aetna, the insurance company that handled the health and wellness plan, substantial discretion when deciding whether or not an individual qualified as disabled.
In 2004, the woman was diagnosed with fibromyalgia. The condition took a serious toll on the woman’s health, and in 2009, she applied for short-term disability benefits under the plan. This request was approved, and a more detailed review was conducted to determine if she should receive long-term disability benefits. This review determined that she qualified for these benefits, and she began to receive payments.
After about a year, Aetna informed the woman that the standard used to determine disability would change. She would have to submit materials from her doctors again that showed she would meet this new standard.
The report from the woman’s doctors was then submitted to two other physicians for review. One concluded that it would be impossible for her to perform any work, while the other stated that she would be able to perform certain tasks with no restrictions or limitations. Based on this second review, the insurance company rejected her disability benefits claim.
This resulted in substantial litigation between the parties. At issue in this case, was whether or not a particular California statute applied to the woman’s insurance policy. Since this was a plan provided by an employer, it falls under the ERISA laws. However, there is an exclusion clause in ERISA that allows states to regulate insurance matters.
This clause means that the California statute would apply in the woman’s case. That statute says that if an insurance policy has a discretionary clause, that is where the insurer determines whether or not benefits are paid, that clause is held to be invalid. Because the court ruled that this statue applies, the courts must use a different standard when reviewing the woman’s claims.
What this means for you
This ruling could mean that those individuals who have their claims for benefits denied get a much better opportunity to challenge those decisions by insurers. Individuals who find themselves in a similar position should consult an experienced insurance law attorney to determine if they may have a case.