1st Circuit: LTD Denial Letters Must State Time Period to File Suit

Last week, the First Circuit Court of Appeals held that a plan administrator must include the time period for filing a lawsuit in its denial of benefits letter.  In Santana-Díaz v. Metro. Life Ins. Co., 2016 U.S. App. LEXIS 4670 (1st Cir. P.R. Mar. 14, 2016, a disability claimant failed to commence a legal action within the three year limitation period set forth in the long term disability policy.  The final termination of benefits letter sent to the claimant made him aware that he had the right to bring legal action but did not specify the time period to file the lawsuit.  The Court of Appeals held that Defendant MetLife's failure to state the specific time period in the letter violated the requirements of ERISA regulations.  (29 C.F.R. § 2560.503-1(g)(1)(iv)).

Furthermore, the Court held that due to MetLife's failure the comply with ERISA regulations, the three year limitation period was inapplicable to Mr. Santana-Diaz's claim.  The Court of Appeals was not persuaded by MetLife's argument that the plaintiff had received notice of the three year limitation period by receiving a copy of the disability policy.  The First Circuit's decision is consistent with opinions from the Third and Sixth Circuit Court of Appeals.  See Mirza v. Insurance Administrator of America, Inc., 800 F.3d 129 (3d Cir. 2015) and  Moyer v. Metropolitan Life Insurance Co., 762 F.3d 503 (6th Cir. 2014).

Interestingly, in the District of Connecticut, Judge Janet Bond Arterton appears to have issued a decision which is contrary to Santana-Diaz, Mirza and Moyer.  See Heimeshoff v. Hartford Life& Accident Ins. Co., 2012 U.S. Dist. LEXIS 6882, 2012 WL 171325 (D. Conn.Jan. 16, 2012).  (Note that Connecticut is within the Second Circuit Court of Appeals.)  Judge Arterton held that even though the Hartford failed to state in the denial letter that there was a three year limitation for filing a lawsuit, the limitation period applied because it was stated in the summary plan description documents. 

Social Security Presents "CARES" Initiative to Reduce Disability Case Backlog

The number of disability claimants waiting for a hearing before an Administrative Law Judge (ALJ) has now reached 1.1 million.  By the end of 2015, the average waiting time for a hearing was 512 days.  Just a few weeks ago, the SSA's Office of Disability Adjudication and Review (ODAR) unveiled a new plan to help alleviate this backlog.  The plan has been called "Compassionate And REsponsive Service (CARES).  If successful, the SSA believes that CARES will reduce average processing times to 270 days.

One major problem with CARES is that it will only be successful if Congress provides the SSA with the funding needed to implement it.  Nonetheless, even if CARES is implemented, the backlog will not be reduced in the near future.  It is expected the backlog will continue to climb in 2016.

Many a the initiatives of the CARES plan have been used before.  Here is a summary of some of the components of CARES:

• Hire more ALJ's and ODAR staff.
• Use Administrative Appeal Judges (AAJ's) instead of ALJ's to decide non-disability cases such as over payment appeals and claims involving retirees and survivors.
• Expanding the teams of agency lawyers who pull cases from around the country to consider them for favorable on the record decisions.  
• Have more pre-hearing conferences with senior attorneys from ODAR.
• Provide "More Robust Case Screening" of cases that have a high probability of favorable decisions.  Apparently, under this part of the plan, cases will be sent back to DDS for additional review.  The SSA has given very few specifics about this part of the plan.
•  Create more hearing office space, particularly for video hearings.   
• Allow claimants to file electronic appeals to the Appeals Council. 

Of all the proposals made in the plan, the only one that will make a significant impact is the initiative to have more agency lawyers pull cases from around the country to consider them for fully favorable decisions.  This initiative worked well in the past but for reasons that are not entirely clear, it was discontinued.   

The Obligation to Exhaust Administrative Remedies in ERISA LTD Lawsuits

Once your Long Term Disability clam is denied, you have a period of 180 days to file an administrative appeal.  If your disability plan is governed by the Employment Retirement Income Security Act of 1974 ("ERISA"), the denial letter that you have received, --in all likely hood--, states that you must file an appeal within this time period.  It is imperative that you complete this appeal, otherwise you will loose your right to contest the denial.  

The legal principle that requires you to file an administrative appeal before being able to go to court is known as the "Exhaustion of Remedies" doctrine.  In essence, this doctrine precludes a party from contesting a matter in court until the issue in dispute has been presented before at a lower administrative forum.  Very recently, the 5th Circuit Court of Appeals had the opportunity to consider an ERISA LTD case dealing with this doctrine.  In Moss v. Unum, (Click here for a copy of the unpublished decision.), the Court of Appeals considered whether a phone call from a claimant's lawyer to a disability insurance company (Unum) was sufficient to constitute an exhaustion of administrative remedies. According to the decision, the claimant's attorney called Unum and verbally informed them that he disagreed with their decision to deny his client benefits.  However, he did not file a formal written appeal.  Instead, shortly thereafter, he filed a lawsuit.  

The 5th Circuit ruled that the telephone call to Unum did not constitute an administrative appeal. Furthermore, the Court explained: "[A]llowing informal attempts to substitute for the formal claims procedure would frustrate the primary purpose of the exhaustion requirement."  

Moss v. Unum, shows the importance of writing a formal appeal letter in an ERISA LTD case. Although, it is possible that other Circuit Courts may allow for more informal appeal methods such as a phone call, it is never a good idea for a claimant to take any risks when filing an administrative appeal.  

The plaintiff in Moss also argued that an administrative appeal in his case was not required because the denial letter stated: "Unless there are special circumstances, the administrative appeal process must be completed before you begin legal action..."  Moss argued that since there had been bad faith by Unum in denying the claim, the "bad faith" constituted "special circumstances".  The Court rejected this argument also.  It stated that under such an argument virtually anyone could make a claim of bad faith and circumvent the requirement of filing an administrative appeal. 

The Social Security Administration Faces Lawsuit Over Two Suicides

Last May, the Social Security Administration attempted to stop the disability checks of nearly 1,800 Kentucky and West Virginia recipients who it alleged had obtained their benefits through fraud. The SSA sent letters stating that their disability checks would be cut off immediately.  SSDI recipients were told that they had only ten days to gather all their medical records to contest the decision.   

Understandably, many persons became despondent when they heard of the SSA's plan to stop their benefits.  Most of them were the innocent victims of an unscrupulous lawyer and a corrupt administrative law judge.  It is very clear that the vast majority of them didn't participate in any efforts to deceive the Social Security Administration.  It now turns out that the termination of benefits letters sent by the SSA appear to have played a significant role in two suicides.

Just a few weeks ago the estate of the two who committed suicide, Melissa Jude and Leroy Burchett, filed a lawsuit blaming the SSA for their deaths.  The lawsuit alleges that the SSA acted negligently, carelessly and recklessly in sending the suspension notices.  Furthermore, the plaintiffs state in their complaint that the SSA should have known that sending out hundreds of immediate suspension letters to vulnerable persons, many with serious mental health conditions, would lead to suicides. 

  

The ALJ's Duty to Develop the Record in a Social Security Disability Hearing

Because Social Security proceedings are not strictly adversarial in nature, the Secretary of Health and Human Services has a duty to develop an adequate record from which a reasonable conclusion can be drawn. This responsibility increases in cases where the claimant is unrepresented, where the claim itself seems on its face to be substantial, where there are gaps in the evidence necessary to a reasoned evaluation of the claim, and where it is within the power of the administrative law judge (ALJ), without undue effort, to see that the gaps are somewhat filled. The Secretary's duty is even greater when the claimant is obviously mentally impaired. If the ALJ fails to fill those evidentiary gaps, and if they prejudice a plaintiff's claim, remand is appropriate.

In an action for social security benefits, if the evidence does not support a source's opinion and the administrative law judge (ALJ) cannot ascertain the basis for the source's opinion, theALJ has an obligation tomake every reasonable effort to recontact the source for clarification. Specifically, the ALJ must recontact the treating doctor when the doctor's records are inadequate, contain conflict or ambiguity, do not appear to be based on medically acceptable diagnostic techniques, or appear incomplete. The ALJ may carry out this duty by seeking additional evidence or clarification from the source, telephoning the medical provider, or requesting copies of the records, a new report, or more detailed report. In an action for social security benefits, one can demonstrate prejudice by showing that additional evidence would have been produced if the administrative law judge had fully developed the record, and that the additional evidence might.

The Commissioner of Social Security's failure to develop an adequate

record is grounds for reversing theCommissioner's decision pursuant to sentence four of § 205(g) of the Social Security Act, 42 U.S.C.S. § 405(g), and ordering the case remanded for further proceedings have led to a different decision.

Social Security Retirees and the Worker's Comp Offset

Social Security Disability Claimants also qualify for worker's compensations benefits.  When a worker is injured on the job, he or she receives periodic checks or a lump sum amount as compensation for his or her injuries.  However, by law the total amount received in SSDI benefits is offset by the amount received in worker's comp payments.   Under the law, the combined amount of worker's comp and Social Security Disability benefits cannot exceed 80% of the worker's earnings prior to his or her disability.  This reduction in benefits is commonly referred to by Social Security Disability Lawyers as the "Worker's Comp Offset" ("Offset").  

Up to now, the the Worker's Comp Offset applied only to disability benefits, not to retirement benefits.  Historically the offset ended at age 65 when the worker reached retirement age. However, as a result of a new law passed by Congress in order to keep pace with the new retirement age, Congress recently increased the age at which the offset will end. PL 113-295, Section 201 (December 19, 2014) amended 42 USC 424a to provide that, effective December 19, 2015, SSDI benefits will be offset until the worker reaches full retirement age. This provision applies to any individual whose DI benefit is currently offset for WC/PDB and who attains age 65 on December 19, 2015, or later.

This change is yet another reason why worker's comp claimants need to discuss their case with a lawyer who is well aware of Social Security laws and its complex regulations.  Unfortunately, I have met many worker's comp claimant's who hire lawyers that do not understand the how the offset works.  There are several ways in which a lawyer who knows Social Security laws can help you reduce any potential worker's comp offset.  For this reason, if you are currently considering settling your worker's comp case, you should insist that your lawyer include language in the settlement agreement that reduces your offset in the future.  Failure to include this language in your settlement agreement can be a fatal mistake that cannot be corrected later on with an amendment.   

The "Mental Illness Limitation Clause" in Long Term Disability Policies

If you are covered by a long term disability policy, it is very likely that your policy contains a limitation as to how long you can be paid benefits when your disability is caused by mental illness. Most disability insurance policies contain a standard provision that states that if your disability is caused by a mental health problem, the maximum period for which you can receive LTD benefits is 24 months.  However, the length of the limitation for mental illness might vary depending on the language on your particular policy.

It is extremely important to check your long term disability policy to determine the exact term of the limitations for mental illness.  In some rare cases, policies don't contain any limitations for disability claims based on mental health. 

Generally, limitations for claims based on mental illness have been held to be legal.   In my opinion, clauses limiting the payment of disability benefits for mental illness are extremely unfair. Moreover, such actions by insurance companies show a clear bias against persons who suffer from mental disabilities.  A mental health condition can be just as disabling as a physical one.  About a year ago, I participated in a disability law conference where a guest speaker, who was a psychiatrist, explained that science now believes that most mental health problems have a psychical cause inside a persons's brain and that it is erroneous to think that mental illness is caused by environmental or emotional factors.

One legal issue that comes up very frequently is whether the cause of a person's disability is a mental health condition or a physical illness. Take for example the case of someone who has suffered a stroke.  Many times stroke victims suffer from symptoms that go beyond physical limitations.  For example, after a stroke some patients suffer from severe depression symptoms.  Such cases are generally decided on a case by case basis. The determination as to whether the mental health exclusion applies or not depends on the exact language used in the policy as well as the specific facts of the case.  For example, if the language of the mental health limitation clause is expressed in very general terms and the claimant never had a history of depression before the stroke, it is possible that the person might have a good argument against the application of any limitations due to mental health.

If you are currently receiving disability benefits or have recently applied an you suffer from mental and physical health limitations, it is good idea to consult with a long term disability lawyer.  A lawyer can determine whether any limitations for payment will apply.  Moreover, an attorney can assist you in developing a claim strategy that makes it difficult for the insurance company to limit your disability benefit payments to 24 months or less.