Winning Isn't Easy: Long-Term Disability ERISA Claims

At The Crossroads Between ERISA Disability & Life Insurance Claims

November 08, 2022 Nancy L. Cavey Season 2 Episode 65
Winning Isn't Easy: Long-Term Disability ERISA Claims
At The Crossroads Between ERISA Disability & Life Insurance Claims
Show Notes Transcript

In this weeks Episode of Winning Isn't Easy Nationwide ERISA Long Term Disability Attorney Nancy L. Cavey talks about 3 major topics:
1 - Can You Sue a Fiduciary Who Failed to Properly Enroll Your Spouse in an ERISA Life Insurance Plan?

2 - Is Speeding a Crime That Can Result in a Life Insurance Claim Being Denied?

3 - Can a Life Insurance Company Deny Payment of Benefits Based on Alleged Contaminated Blood Alcohol Testing?

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ERISA Attorney Nancy L. Cavey:

Welcome to Winning Isn't Easy. I'm Nancy Cavey. I'm a national ERISA and individual disability attorney. Before we get started, I've gotta give you a legal disclaimer. This podcast is not legal advice. The Florida Bar Association says I have to say it. So I said it. Nothing, however, will ever prevent me from giving you an easy to understand overview of the disability insurance world, the games that carriers play, and what you need to know to get the disability benefits you deserve. So, off we go. Life insurance claims are a whole other ballpark in the disability claims world. And today I'm gonna walk you through some of these claims stories and discuss how it might be relevant to you. The topics are going to include, can you sue a fiduciary who fails to properly enroll your spouse in an ERISA life plan? In other words, it's not gonna be you, by the way, it'll be your estate. Number two, is speeding a crime that can result in a life insurance claim being denied? And three, can a life insurance company deny payment of benefits based on alleged contaminated blood alcohol testing? This is really exciting stuff. I find it fascinating. But we're gonna take a break before we get started and dive in.

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ERISA Attorney Nancy L. Cavey:

Welcome back to Winning Isn't Easy. Can your estate sue a fiduciary who's failed to properly enroll your spouse in an ERISA life insurance plan when you pass away in the carrier, denies the claim? Well, unfortunately, many human resource staff doesn't properly help their employees enroll in life insurance plans. That can be disastrous. If an employee passes away and the beneficiary claims life insurance benefits, one of the most common defenses a life insurance carrier is going to raise is, Hey, you're loved one wasn't properly enrolled in this ERISA life insurance plan. So we're sorry that they've passed, but we're not gonna pay any benefits. That's the first line of defense. It's called, There is no coverage. Now what is going to happen is they are, the life insurance company is gonna open up a claims file and they're gonna get material from the employer, uh, from the employee benefit department, and they're gonna be looking for, uh, what the plan enrollment process was and whether or not the plan enrollment process was followed. Now, that is exactly what happened in the case of Jimino versus nch md Jim O's spouse, Dr. Pga, uh, was a physician who worked at N C H M D. The human resources staff at nch MD helped Dr. Pegga enroll for life insurance benefits, and he named his spouse as the primary beneficiary. He accepted life insurance benefits in the amount of$150,000, which is paid for by his employer. He also elected to pay for a$350,000 supplemental life insurance policy. But he was required under the terms of the plan to submit evidence of insurability. Guess what? The human resource staff didn't provide him with the form, and they never told him that it was necessary to complete the form. And as a result, he never completed or submitted the form but his employer to Dr. Premiums for the supplemental coverage from his paycheck for three years. And they repeatedly told him that he had coverage when Dr. PGA died. Uh, and, and his, uh, spouse submitted a claim for the life insurance proceeds. The Life insurance company said, Too bad. So sad, you know, we'll, we'll certainly pay the underlying base benefits, but we're not paying the supplemental benefits because the evidence of insurability form was never submitted. Of course, this case ends up in federal court in the 11th circuit where there was a question as to what type of claim, if any, the spouse had under ERISA law. Now, ERISA is a federal statute and it governs employee benefit plans and policies such as life insurance. So, uh, the spouse sued C H M D and nch H M D Healthcare for the benefits under arisa section 5 0 2 a1 B, the claim was dismissed on the basis that they didn't have any obligation under the plan to pay supplemental benefits. So what happened was, uh, the lawsuit was amended to assert a claim for what's called Equitable Relief under 5 0 2 80. Now, the spouse alleged that both c h MD and N C H MD were, uh, fiduciaries and under the fiduciary obligation, they had a good faith and obligation to explain, uh, to the doctor. Uh, the enrollment process makes sure that the, uh, forms were submitted, uh, complete and completed and submitted. And so, ultimately, um, the court has to decide whether or not the complaint can be amended based on this particular motion. And the courts, the district court says, Look, we're not gonna allow you to amend this lawsuit on the basis, uh, that you are seeking monetary relief because that's not equitable relief, which is allowed under ERISA 5 0 2 83. Ultimately, a lot of gys happen. The court case ends up in front of the 11th circuit, and the 11th Circuit says, Look, we've looked at every other circuit case law and they've recognized the availability of equitable remedies against the breaching fiduciary, and that remedy is available under the Arisa statute. So the 11th Circuit said, Look, under Arisa section 5 0 2 A three, there is a cause of action for Risa beneficiary, uh, the spouse to recover monetary benefits, the supplemental life insurance that were lost due to the breach of the fiduciary duty in the enrollment process. So the court granted the motion to amend the complaint. What's happening, of course, is that the court is recognizing that a fiduciary has a responsibility to guide an employee through the enrollment process, uh, to deduct the premiums from the paycheck and to provide benefits, uh, information to them in a correct fashion to submit the enrollment plan and make sure that the enrollee really does have coverage. I don't think the court was particularly happy that there had been reassurances made to the doctor that he was enrolled, and that the employer was deducting premiums for over three years. So clearly, um, under the, um, case law, an employer can be sued for their failure to, uh, make sure that the enrollment process is, uh, explained and completed properly and implemented properly. That was a great win and let's hope, uh, ultimately that the spouse was able to collect the, uh, other$350,000 that was due as a result of, uh, the doctor's untimely death. Got it. All right, let's take a break. Welcome back to Winning Isn't Easy. Is speeding a crime that can result in a life insurance claim being denied? Now, many accidental death life insurance policies have exclusions for deaths that are caused when the insured was killed because of committing a crime. That's pretty obvious. You know, if you're killed while committing a robbery, you shouldn't be entitled to life insurance benefits, and that's a crime. But how about traffic offenses? Can a life insurance company deny a life insurance claim when the deceased policy holder was killed while committing a traffic offense like speeding or reckless driving? Great question. Where do we start to find the answer? Well, the analysis is going to start with the terms of the policy of the plan. What's the definition of a crime? And once we understand that, we need to also understand how it's applied. Now, there are many times that policies will say, you know, we're not gonna pay benefits if there's a crime being committed and the person dies, but they don't define the term crime. Now, isn't that crazy? Or they may not clearly define the term so many times the court has to go to the dictionary. Yeah, the dictionary, the simplest definition of crime can be found in Blacks Law Dictionary, Websters Dictionary, or even the American Heritage Dictionary. So how is crime defined? Well, it's defined broadly to mean an illegal act for which someone can be punished by the government. You know, that's, that's pretty darn broad, isn't it? Now, in the case of focus in versus Unum, the sixth Circuit was asked to determine if speeding more than 60 miles an hour above the speed limit and driving recklessly was a crime. Now that's pretty darn fast, isn't it? After her son Daniel was killed in a car crash, his mother, Ms. Fulkerson, filed a claim for accidental death benefits under her son's unit life insurance policy. Unum said, Heck no, we're sorry he's passed, but we aren't paying benefits because he was committing a crime. Now, she successfully, uh, convinced the Federal District court that Unum's interpretation of the crime exclusion was wrong, and they awarded the accidental death benefits. But Unum said, Oh no, not too soon, we're taking this to the sixth circuit. The court reversed and said, Look, we agree with Unum. Reckless driving is a willful wa and disregard of the safety of persons and property. And that's generally illegal in most states. Now, Fulkerson said, Wait a second. If you define crime that broadly, it could lead to unfair results. When an insurer invokes the crime exclusion for jaywalking minor speeding blue laws, or other seldomly enforced offenses, I mean, I'm guilty of jaywalk, I'm sure you are too. So if I were to be killed in, in an accident, would my estate be entitled to benefits? I think that was a great point, but the court said, Well, good argument, but not for today. We'll take it up on another day. It's not relevant to the question of whether reckless driving falls within the Unum policy exclusion. So the Sixth Circuit Report versus the District Court's decision and ruled in favor of Unum denying the benefits. I guess the bottom line is drive pursuant to the speed limit. Let's take a break.

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ERISA Attorney Nancy L. Cavey:

Welcome back to Winning Isn't Easy. Can a life insurance company deny payments of life insurance death benefits based on an alleged contaminated blood alcohol test? Now, the most common defense to a life insurance, uh, uh, claim is the argument that the deceased was under the influence of drugs or alcohol at the time of the death in violation of the policy. This is called a drug or alcohol exclusion. And obviously it requires blood work to prove the presence of and the level of drugs or alcohol in the decedents blood stream at the time of death. A common exclusion will say that a policy does not cover any loss caused in whole or part or resulting in whole part from the insured person being under the influence of drugs or I intoxicants unless taken under the advice of physician. Now, I'm asked, could there be an argument that the results of incorrect testing should be excluded as the basis of denial and whether a life insurance carrier's destruction of sample should bar the carrier from raising the drug or alcohol exclusion? That's a lot of problematic issues, but they actually arose in the tragic story of Cody Waters. Uh, and Cody was killed in a single car rollover accident and his parents sued AIG for Cody's life insurance benefits because he had been employed with Express Jess and, and had a policy. There was a witness who observed him weave in and out of traffic before he flipped the car, and Cody was ejected from the car and killed his parents, uh, filed ultimately this life insurance death claim. Um, but the autopsy that was performed, uh, by a doctor less than 12 hours after his death, uh, and uh, of cardiac blood vitreous fluid in urine samples, um, were tested. So there was an autopsy, there was blood vitreous fluid, urine samples, all of which were, were drawn and tested. Now only the cardiac blood and urine test were sent for testing and they revealed a blood alcohol of one 13, which was more than Louisiana's 0.08, legal limit to operate a motor vehicle. The urine test was negative for drugs, and all of these test results were included in the autopsy report. The Shreveport Police Department traffic reconstruction and crash investigator, uh, closed the case concluding that Cody's death was an accident with a causal factor of the crash, determined to be the careless operation of a motor vehicle due to alcohol impairment. So the family, uh, files a claim with aig. AIG says, Well, wait a second, we're gonna have these medical records reviewed by a toxicologist because we wanna understand the level of impairment due to being under the influence of the into AIG's toxicologist noted that there were some liability questions, uh, involving the testing because they had used the cardiac blood and not the vitreous fluid. Um, AIG's toxicologist said that cardiac blood isn't ideal due to the fact that it's possible that if the, that, that there is still a large amount of alcohol in the stomach at the time of the death and that can diffuse from the stomach to the heart, resulting in a false elevation of the blood alcohol. So the use of the cardiac blood raised an issue as to the accuracy of the blood alcohol results. Now, why that was an issue, I'm not quite sure since it was still above the legal limit. But in any event, um, the AIG toxicologist concluded that the blood alcohol level was more than the legal blood alcohol limit, that he was impaired at the time of the accident and that the intoxication and the impairment were the cause of the death. So AIG denies the claim. Now, from the very beginning, the water's family and their attorney raised issues about the use of the cardiac blood, and they submit a report from a, a toxicologist that they hired, um, that toxicologist appointed the use of the cardiac blood to conclude that codeine was intoxicated at the time of the accident, could be the result of postmortem fermentation and redistribution and diffusion. Um, so obviously there's a huge dispute about the accuracy of the testing. Was there contamination? Um, so did you use the right testing? Um, did you use the right sample? Is the sample accurate? Does it really show a level of legal intoxication? Well, AIG discovered that the vitreous samples still existed and the samples were sent to an independent laboratory. The shipping instructions did not have any shipping instructions like hmm, send this via cold shipping, and it didn't instruct the lab to store the samples or return the samples to, uh, lsu, AIG or even the waters. And what's worse is that the shipping paperwork authorized the lab to destroy the samples. Every six after six weeks, AIG ultimately cancels the testing because the samples weren't properly stored at lsu. AIG was notified prior to the destruction, but they didn't do anything to preserve the evidence. And of course, they never advised the family of any of this. Ultimately, the vitreous sample is destroyed. So AIG says, Hm, we've got a problem. So you have a second toxicologist review it. And that second toxicologist agrees that he was intoxicated based on the cardiac blood sample, and that because the vitreous blood sample hadn't been kept properly, that the results of that sample were, um, invalid. So this ends up in court on the question of whether the expert toxicology reports should be thrown out, what sanctions AIG should face for failing to preserve the evidence, whether Cody was intoxicated, whether the denial was proper. Obviously a lot of issues writing on these blood tests. The ultimate issue, of course, is what's the level of alcohol that existed in Cody's SY system at the time of the accident and did it contribute to the death? So this is a battle of toxicologists. Each side argues that the other side's experts aren't qualified and that the report was not scientifically sound under the dber standard of evidence. These are standard, um, arguments that those lawyers make. But the judge quickly rejected those arguments and they found that both toxicologists were qualified as experts to review a blood alcohol test. Pine on the strengths and weakness of these tests respond to the testimony and positions of others. The court, by the way, found that the downward standard is in applicable to a court's review of the administrative record in an ERISA case, and that's a topic for another day. But for us lawyers, it's a big deal. The court indicated however, it would factor the parties criticisms of each toxicologist in its analysis and weighing the weight that should be given teach toxicologist opinions. Now, the court obviously has to address the destruction of vitri samples, and the court was not impressed with AIG's conduct. They found that AIG was a sophisticated party represented by counsel and thoroughly familiar with litigation and the need to preserve evidence, noting that the destroyed evidence was crucial to both parties, that the court decided that the appropriate remedy for AIG's conduct was a presumption that the vitreous sample would've revealed an alcohol content less than the results of the cardiac blood test. So now that the court has cleaned the deck, the court looks at the official investigation of the crash and what the third party accident investigator concluded. Now, the investigator, as I said, it concluded that alcohol had contributed to the accident and to Cody's death, the judge accepted the opinion of the investigator and upheld the denial of benefits. So even after we go through all this rigamarole, if you will, um, and I'll mean to make light of it, but the judge ultimately says, I'm going to, um, sort of decide this case based on what the investigator said. And, and probably I'm sure, based on what that third party witness had to, to say. You can see that even if there's a darn good argument for, uh, throwing out or constraining the use of a blood alcohol test, the denial of an insurance, uh, claim for death, uh, based on drug or alcohol exclusions can be tough. If you've had this situation, I'm so sorry for your loss. Um, these cases, uh, can be tough, heartbreaking, not only for the family, but heartbreaking to be in court to be fighting about life insurance benefits. I hope that you've learned a lot today in this episode. If you've enjoyed this episode, please consider liking this page, leaving a review, or sharing it with your friends and family. Please subscribe to this podcast. I think this podcast is a good vehicle to learn what you need to know about disability claims, life insurance claims, and I want you to be educated about the games that carriers play. I hope you tune in next week for another insightful episode of Winning Isn't Easy. Thanks.