Throwback Thursday: Tricks Insurers Play with the Definition of “Disability”

Today we revisit the case of LaVertu v. Unum Life Ins.Co. of Amer., 2014 U.S.Dist.LEXIS 40442 (C.D.Cal. March 25, 2014), a case which highlights some of the tactics insurers use to stop paying long term disability claims. Kantor & Kantor represented the plaintiff and was successful in getting her disability payments reinstated.

The Plaintiff worked as an administrative assistant for an insurance agency. She became disabled in 2007 due to back pain. Unum approved the claim, began paying benefits in 2008 after the expiration of the six-month elimination period, and continued paying benefits for more than two years. However, benefits were terminated as of March 21, 2012 based on Unum’s conclusion that LaVertu no longer met the contractual definition of disability. The plaintiff’s pre-litigation appeal was unsuccessful and she filed suit.

LaVertu introduced evidence that she had undergone three spinal surgeries. None of the treatment improved the plaintiff’s condition, however. The Social Security Administration concurred, and awarded LaVertu disability benefits under the Social Security Act. Unum obtained a copy of the entire Social Security disability insurance claim file. After reviewing the contents of the file, Unum’s in-house vocational consultant determined that the file supported sitting for no more than four hours per day; thus, the plaintiff could not meet the exertional demands of a sedentary occupation. Following that review, which took place in 2009, Unum internally noted, "Clmt is [totally disabled] any occ and R&Ls are permanent." That information was communicated to the plaintiff in a follow-up letter stating, “we do not anticipate a change in your medical status and therefore, have made the decision to extend our approval of your benefits through February 20, 2030."

In late 2011, a paper review of the file by a physician resulted in an opinion that LaVertu was capable of full-time sedentary work activity, and corroboration through an independent medical examination was suggested. The exam, which was performed by Dr. Kamran Hakimian in February 2012, reported the plaintiff could perform a part-time sedentary job if allowed rest periods every hour. Dr. Hakimian also opined that the plaintiff could engage in a 40-hour work schedule within 6 months. Unum advised him that his prediction of a six-month return to work was “vocationally problematic,” and asked for clarification. He then agreed that the plaintiff could work full-time after a four-to-six week work hardening program without any explanation, although he retained the restrictions that a 10-minute break would be required every hour.

Unum then sought a legal opinion from in-house counsel as to whether benefits could be terminated based on part-time work capacity. Although Unum’s attorney advised that benefits could not be terminated under that scenario without the claimant’s consent, Unum terminated the benefits anyway.

The plaintiff appealed that decision. With her appeal, she provided assessments by her treating doctors, including her pain management specialist. She also provided a functional capacity evaluation finding her capable of less than sedentary work activity. Upon receipt of the appeal, Dr. William Sniger at Unum performed a review and concluded that she possessed sedentary work capacity, a conclusion confirmed by Richard Byard, a vocational consultant at Unum. The court overturned that decision.

In addressing the merits, the court determined that the evidence showed the plaintiff remained disabled since there was no evidence of improvement in her condition. Moreover, the court determined that limited sit, stand, and walk capabilities precluded sedentary work. Gordon v. Northwest Airlines, Inc. Long-Term Disability Income Plan, 606 F. Supp. 2d 1017, 1037 (D. Minn. 2009) ("Common sense dictates that someone who cannot walk, sit, or stand more than 2.5 hours per day cannot do sedentary work."). The court further held that Unum lacked a basis for disregarding the FCE findings, but even if the FCE were excluded, the evidence still supported the claimant’s lack of ability to perform sedentary work.

The court also barred Unum from raising new reasons in court that were not listed earlier, citing Harlick v. Blue Shield of California, 686 F.3d 699, 719-20 (9th Cir. 2012) (stating that "a court will not allow an ERISA plan administrator to assert a reason for denial of benefits that it had not given during the administrative process."). Cf. Abatie, 458 F.3d at 974 ("When an administrator tacks on a new reason for denying benefits in a final decision, thereby precluding the plan participant from responding to that rationale for denial at the administrative level, the administrator violates ERISA's procedures.").

The court also rejected Unum’s termination based on part-time work capacity or “hypothetical future work capacity.”

We at Kantor & Kantor strive to help individuals get the insurance coverage to which they are entitled. If you or someone you know is having trouble getting their long term disability payments paid, call us today for a free consultation on 888-569-6013. We care and we can help.

Host of insurance-coverage questions tied to Legionnaires’ disease

A recent outbreak of Legionnaires’ disease in New York has, according to published news reports, been responsible for the death of 12 people. According to those same reports, more than 100 other people have become ill as a result of the outbreak, which has been traced to a rooftop cooling tower(s).

For better or worse, when an outbreak of a disease occurs, lawsuits may soon follow. Indeed, recent news stories report that one individual who contracted Legionnaires’ disease in New York just sued the hotel where the outbreak allegedly began. According to published reports, that person is alleging that the hotel was “negligen[t], careless[], and reckless[].”

When such third-party lawsuits – relating to Legionnaires’ disease or some other disease – are filed against an insured, insurance coverage may be available under its commercial general liability (“CGL”) insurance policy(ies). CGL policies typically provide coverage for “damages” on account of “personal injuries” or “property damage.” Relying on various policy exclusions, insurers, however, may try to deny coverage for disease-related lawsuits. So, faced with such a suit, a policyholder should carefully review its policy(ies) and make sure its interests are adequately protected.

Legionnaires’ disease in particular has been at the center of a number of insurance-coverage disputes. According to the U.S. Centers for Disease Control and Prevention, “Legionnaires’ disease … is caused by a type of bacterium called Legionella …. The bacterium is named after a 1976 outbreak, when many people who went to a Philadelphia convention of the American Legion suffered from this disease, a type of pneumonia (lung infection).”

In the past, insurers have invoked different policy exclusions in their attempts to defeat coverage for third-party claims involving bodily injury relating to this bacterium.

For example, they have argued that exclusions pertaining to fungi or bacteria may bar coverage under a CGL policy. Such exclusions often preclude coverage for “‘bodily injury’ … which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any ‘fungi’ or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.”

However, many such exclusions also contain an exception, providing that the “exclusion does not apply to any ‘fungi’ or bacteria that are on, or contained in, a good or product intended for [bodily] consumption.”

Thus, in cases involving Legionnaires’ disease, courts have had to resolve disputes about, for example, what “good or product” the Legionella bacteria was “on or contained in.” For example, was the relevant “good or product” a hot tub or the water in the tub? Courts also have had to determine whether the relevant “good or product” was “intended for [bodily] consumption.” For example, do people using a hotel swimming pool or whirlpool tub “consume” the water in it? Arguably, “yes.” As the U.S. District Court for the District of South Carolina observed: “[W]hile water in either a swimming pool or whirlpool tub may not be noticeably ‘used up’ every time a person makes use of one of these amenities, the Hotel surely puts water in them for the guests’ consumption.” Conversely, at least one state appellate court has held that water in a decorative hotel fountain is not consumed by guests who look at the “art.”

Insurers also have relied on the pollution exclusion to attempt to deny coverage. Such an exclusion typically provides that the relevant policy or insurance does not apply to, or provide coverage for – among other things – bodily injury arising out of “the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants [anywhere] at any time.” “Pollutants” are typically defined to mean “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapors, soot, fumes, acids, alkali, chemicals, and waste.”

Insurers have argued that bacteria (or a virus) – such as the Legionella bacteria – is a “pollutant.” This argument has been met with mixed success. While at least one federal district court held that the Coxsackie virus constitutes a “pollutant,” at least two other federal district courts have held that the Legionella bacteria is not a “pollutant.” In reaching that latter conclusion, the U.S. District Court for the Eastern District of Louisiana explained that the relevant bacteria “are significantly different than a typical environmental pollutant …. Rather, these bacteria are simply microorganisms existing in a natural environment.”

These are just some of the issues that may arise when a policyholder seeks coverage under a CGL policy for a third-party claim relating to a disease outbreak. As these issues often require court involvement, a prudent policyholder should consider involving insurance-coverage counsel from the outset to ensure that its interests are adequately represented.


The California Supreme Court Issues Its Landmark Decision in Fluor

On August 20, 2015, the California Supreme Court issued its landmark decision in Fluor v. Superior Court, overruling its prior holding in Henkel Corp. v Hartford, which precluded successor entities from tapping into their predecessors’ insurance assets for inherited long-tail liabilities.  In Henkel, the Court held that a contractual assignment of insurance assets in a corporate transaction was ineffective due to the insurance policies’ anti-assignment clauses, which require the insurer’s consent before any assignment is valid.  The parties to Henkel, however, did not apprise the Court of California Insurance Code Section 520.  Section 520 bars an insurer, “after the loss has happened,” from refusing to honor an insured’s assignment of coverage for that loss. Reed Smith filed an amicus brief in Fluor urging the Court to apply Section 520 to hold that anti-assignment clauses do not preclude the transfer of coverage for liability relating to historic conduct.  The Fluor Court agreed, holding that Section 520 compels that result.

Fluor prevents an insurer from unfairly blocking an assignment of coverage due to past events for which the insured already paid its premiums.  It further facilitates the transfer of assets and liabilities to between business entities without fear of jeopardizing insurance coverage for prior conduct.  Fluor is an important and positive decision for corporate policyholders involved in corporate acquisitions and transactions.

Conflict of Interest Can Arise When Insurers has Duty to Determine Whether Claimant Qualified for Benefits and The Responsibility to Pay Benefits

As part of Kantor & Kantor's "Throwback Thursday", we take a look at Mondolo v. Unum Life Ins. Co. of Amer., CV-11-07435 CAS (MRWx) (C.D. Cal. 2013).

Kantor & Kantor LLP achieved a victory on behalf of client Tanya Mondolo, who sued Unum Life Insurance Co. in U.S. District Court for the Central District of California for wrongfully denying her disability insurance benefits. The court ruled that Unum, a Fortune 500 company and the largest group and individual disability carrier in the United States, abused its discretion in terminating Mondolo’s disability benefits. The court ordered Unum to reinstate benefits, with interest, and that Kantor & Kantor could make a motion for attorneys’ fees and costs.

Mondolo suffered from fibromyalgia and avascular necrosis, often called bone death. Her physicians believed the bone death was a late developing side effect from the chemotherapy regimen used years ago to treat her leukemia. She had difficulty walking, suffered from uncontrolled pain, and was too weak to tolerate prolonged sitting or typing.
“Like so many group disability insurers, Unum labored under a structural conflict of interest because Unum has both the duty to determine whether claimants qualified for benefits and the responsibility for paying those benefits,” said Kantor & Kantor partner Alan E. Kassan, who assisted associate Brent Dorian Brehm on the case. “Unum’s bias led the court to review Unum’s decision regarding Mondolo’s benefits with enhanced skepticism and the denial could not withstand scrutiny.”

In reaching its decision, the court noted Unum’s history of biased claims administration and case specific facts that the Kantor lawyers argued aggravated Unum’s conflict of interest. The court found the following:
• Unum failed to properly investigate Mondolo’s claim, neglecting to determine how much sitting she could tolerate without significant pain.
• Unum did not investigate whether the alternative jobs it claimed Mondolo could perform were appropriate for her limited ability.
• Unum and its reviewing physicians failed to consider psychological evidence, even though the policy expressly stated that such evidence must be considered.

In addition, attorneys Kassan and Brehm argued that Unum’s conclusions were unreasonable. For example, Unum insisted Mondolo could sit between one-third and two-thirds of a work day. The Kantor attorneys proved even if Unum’s supposition was accurate, Mondolo was still not able to meet the requirements of, or perform the sedentary work Unum argued she was capable of.

Kantor & Kantor Wins 2014 Best Business Award

Kantor and Kantor LLP was nominated and has now been awarded the 2015 Best of Business Award for the Small Business category.

The Small Business Community Association has been dedicated to empowering and recognizing small business owners who make a difference in their respective communities since 2006.

We are honored to accept this award and grateful that our firm is recognized in this way.

We at Kantor & Kantor strive to help individuals get the insurance coverage to which they are entitled. If you or someone you know has been denied health, life, or disability insurance, call Kantor & Kantor today for a free consultation on 888-569-6013. We care and we can help.

Three Strikes Against Recidivism

Every year, thousands of Illinoisans are denied the opportunity to work because of past mistakes. These men and women, who have paid their debts to society and turned their lives around, are far too often unable to secure reliable employment, and they--and even the loved ones they care for--are forced to serve what is tantamount to a lifelong sentence of poverty.

That is unacceptable.

Reducing crime requires more than just incarcerating people who make mistakes; it also requires being courageous enough to remove barriers to basic necessities like employment for the hard-working men and women in Illinois who have made mistakes in their past.

Thankfully, Illinois Governor Bruce Rauner signed three bills yesterday that will go a long way towards addressing this problem.

The first bill, HB 3475, expands eligibility for Certificates of Good Conduct and Certificates of Relief from Disability. Individuals who are able to prove with clear and convincing evidence that they have turned their lives around may petition the court to receive one of these certificates, which may help these individuals to obtain employment or licensure.  

HB 3149 allows hard-working men and women with certain offenses who have completed higher education, vocational certification, or a similar program to ask the courts and law enforcement to limit who can look at their old records – through a process called “sealing” – sooner than allowed under current law.

Finally, SB 844 gives individuals with old convictions a chance to petition to limit who can look at their old records three years after they complete their sentence – a year sooner than under current law.

These bills will breathe new opportunity into the lives of over 1 million Illinois residents whose potential was previously squandered for lack of second chances. Now, people who have made mistakes, served their sentence, and been rehabilitated, can move beyond their past and into their future.

I cannot thank Governor Rauner, Governor Rauner’s Public Safety Senior Policy Advisory Samantha Gaddy, our diverse coalition, outspoken community members, and the courageous and committed leaders in the General Assembly enough for recognizing this and doing whatever was in their power to ensure that more hard-working men and women in Illinois can get an opportunity to take care of themselves and their families.

Special thanks are due to Rep. Rita Mayfield and Sen. Kimberly Lightford for sponsoring HB 3475, to Rep. John Cabello and Sen. Terry Link for their work on HB 2149, and Rep. Esther Golar and Sen. James Clayborne for their tireless efforts on SB 844. 

The Vital Role of Cyber Insurance in Protecting a Team’s “Analytic Property”

Professional sports organizations are facing a new off-field risk: potential exposure of their proprietary data. In this new age of data in professional sports, teams are spending millions of dollars on sabermetrics and other data science techniques to obtain a competitive edge. But as the recent alleged breach of the Houston Astros’ computer database by individuals working for the St. Louis Cardinals demonstrated, teams’ management of the security and legal risks related to their proprietary data and statistical tools (“Analytic Property” or “AP”) may be falling short.

As with the Astros/Cardinals incident, threats to data security can arise from teams’ on-the-field competitors. But rogue employees, malicious third parties, and human error also pose serious threats to teams’ AP. The fallout can be significant, with a breach of AP potentially resulting in the loss of competitive advantage and organizational goodwill, as well as third-party lawsuits and substantial costs incurred while investigating the breach and notifying effected individuals.

As further discussed by the authors in a recent article in the Sports Business Journal, teams can take important steps to protect against exposing their AP. Chief among them: purchasing appropriate cyber insurance. An organization’s general liability, property, and other common insurance policies may exclude data breaches and their resulting losses from coverage. Cyber insurance can fill the gap. This insurance commonly covers (or helps defray) the cost of investigating a breach, responding to regulators, defending against lawsuits, notifying affected persons and restoring or recreating any lost data, among other expenses.

In light of the increasing importance to professional teams of their ever-growing stockpiles of proprietary data, it Is vital that organizations procure robust cyber coverage before an incident occurs, and also negotiate appropriate defense, indemnification, and additional insured coverage in contracts with their vendors and other third parties who could be implicated In a data breach.

Insurance coverage counsel can assist in negotiating appropriate cyber insurance and contractual risk transfer provisions, and in advising on coverage issues in the unfortunate (but all too common) event of a data breach.