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Judge Weighs LTD Insurer Conflict Of Interest And Claimant Rights

Monday, April 16th, 2018

On February 26, the U.S. District Court for the Western District of Oklahoma issued a decision under the Employee Retirement Income Security Act, known as ERISA, in which the judge meaningfully interpreted the law casting favorable light on the claimant’s legal rights. The plaintiff had sought review of the insurer’s denial of her long-term disability claim under the policy offered by her employer and this opinion looked at an important issue of evidence. 

ERISA is a federal law establishing standards and procedures for the insurance claim process under employee disability insurance policies obtained as part of employment benefit packages. ERISA is complex and an experienced disability insurance attorney can help protect a disabled claimant’s rights throughout the claim process and secure rightful benefits.

The Oklahoma case 

In Clark v. Lincoln Nat’l Life Ins. Co., the issue was whether the court could admit new evidence that was not part of the administrative record considered by Lincoln National Life when it denied Clark’s claim. While ordinarily a reviewing court is limited to only the medical, vocational and other evidence that was considered by the insurance company when it denied coverage, a few exceptions apply. 

“Dual-role” conflict of interest

Clark argued that the new evidence should be admitted because it was “necessary to show Defendant’s inherent conflict of interest in denying her claim.” The court said it had narrow discretion to consider evidence that supplements the administrative record when important to a claim of intrinsic, structural conflict of interest because of the insurer’s dual roles of being both decision maker on a disability claim as well as the party liable for the payments if it says yes. It is in the insurer’s self-interest to deny claims, making the fairness of the process suspect.

Relying on a previous Tenth Circuit case, the court said that to inform the conflict-of-interest issue, it would admit plaintiff’s vocational report and the credentials of its creator, a vocational expert.

Claimant protections before ERISA 

Significant to the court’s decision, the judge stated that his decision to admit the extra-record evidence was also supported by other reasons, including an important consideration and ERISA priority to provide “employees with at least as much protection as they had enjoyed prior to ERISA’s enactment.” 

Instead of simply opting for the competing interest of “providing prompt resolution of claims,” this judge credited the need to protect claimants, who more often than not, are in the lesser position of strength when dealing with these issues, particularly when they are disabled. 

The judge’s embrace of these ERISA claimant protections reinforces strong, positive policy toward people seeking fair insurer consideration of LTD claims. Unfortunately, it is not often enough seen that judges are embracing the need to better protect claimants, so we applaud this well-reasoned decision.

Justin C Frankel

Written By:

Justin C. Frankel - Disability Insurance Attorney

Justin Frankel is a founding partner of the disability insurance law firm Frankel & Newfield and is a highly skilled litigator and advocate. He has published numerous articles on the challenges facing clients with private or individual disability insurance policies and those who own group or ERISA disability insurance policies.

Learn more about Justin | See Justin’s Publications



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