California Insurance Code section 10110.6 – Applies to Employer Group Plan Documents

Back in December 2013, we announced an early victory we won on behalf of a client under California Insurance Code section 10110.6. Well, we did it again!

First, some background. Section 10110.6 was enacted effective January 1, 2012. Its purpose is to preclude the application of “discretionary clauses” commonly found in health and disability insurance policies. What’s a discretionary clause you ask? It is language in an insurance policy that gives absolute discretion to an insurance company to make a claim determination under a group policy, such that a Court may be obligated to uphold the claim determination – even if the Court disagrees with the outcome. Discretionary clauses require Courts to look not at the facts surrounding the legitimacy of the health or disability claim, but instead to focus almost exclusively on the insurance company’s claims administration process. If it appears the insurance company communicated timely with the insured, and sought input from appropriate consultants, it might well be held not to have abused its “discretion.” Without an abuse of discretion, the Courts are bound to uphold the claims decisions, even in the face of compelling evidence of a health condition or disability.

Recently, in another one of our disability cases, MetLife argued it had absolute discretion to interpret a disability policy and deny a claim. In that case, MetLife insured benefits under a Kaiser Permanente group long term disability plan offered to Kaiser employees. The twist in this case was that the discretionary clause was not contained in the MetLife disability policy, but instead was found in the Kaiser documents which otherwise described the disability plan. MetLife argued, as have other insurance companies, that Cal. Ins. Code section 10110.6 is a law only relating to insurance, and since the discretionary clause in our case was not in the insurance policy, 10110.6 could not apply. Well, on March 3, 2015, the Honorable Judge Fernando M. Olguin in the United States District Court in the Central District of California, ruled otherwise. In Jahn-Derian v. Metropolitan Life Ins. Co. (C.D. Cal., Mar. 3, 2015, CV 13-7221 FMO SHX) 2015 WL 900717, handled by Kantor & Kantor Partner Alan E. Kassan, Esq., the Court stated: “Limiting § 10110.6 to insurance policies could effectively nullify [the right to hear cases on their merits], as its scope could be circumvented by inserting discretionary language in plan documents… Accordingly, the court adopts plaintiff's interpretation.”

This significant victory is sure to further the interests of not just our clients, but of many others who have suffered from unfair health and long term disability insurance denials.

If you have any questions, call us for a free consultation - 800-446-7529

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