Navigating through your group long term disability policy, or simply sifting through documents from your insurance company, can be very tedious — and even more so when you do not understand the “language.” Below is a short list of words that are frequently used in the group insurance world. Understanding these terms will empower you as a more effective advocate for your rights.
1. The Plan: In simple terms, this is the benefit plan established by the employer under ERISA (Employee Retirement Income Security Act) to provide employee benefits. The Plan itself is actually a separate entity. The benefits provided under the Plan are usually funded by an insurance policy. Occasionally, the employer funds the Plan itself with its own money, and/or with employee contributions. In ERISA terminology, both the legal entity, and the insurance policy specifying the terms of coverage, are commonly referred to as “the Plan.”
2. The Administrators: There are two types of administrators in an ERISA plan. The Plan Administrator is the entity establishing the plan and is typically the entity upon which legal process is served. The Claims Administrator is the entity that decides eligibility for coverage and benefits. In most instances, this is the insurance company who issued the policy to fund the benefits under the Plan.
3. The Claimant/Participant/Insured/Plaintiff: An individual insured under a disability policy is commonly referred to as “the insured.” Under ERISA, individual employees are “participants” in an ERISA plan. If the dispute involves coverage for an employee’s dependent, they are referred to as a plan “beneficiary.” Once a claim is filed, the insured, participant or beneficiary might also be referred to as the “claimant;” and once a lawsuit has been filed, “the plaintiff.”
4. The Administrative Record: The Administrative Record consists of all papers and evidence presented to and generated by the Claim Administrator during the claim and pre-litigation appeal process. (The pre-litigation appeal process must be timely completed or a plan participant may lose his or her right to file a lawsuit. The “appeal” of a denial of a claim is sometimes referred to as a “request for reconsideration of a claim denial.”) Practically speaking, the Administrative Record is usually the claim file maintained by the insurer related to the particular claim. In any subsequent civil action for benefits, it is likely the only evidence to be considered by the trial court on the merits of the claim is that which is contained in the Administrative Record. Thus, it is very important that all evidence substantiating disability be sent to the Plan (or insurance company) so it will be included in the Record during the claim and appeal process.
5. Standard of Review: This is the test employed by the District Court Judge to decide if the Claim Administrator properly decided the claim. The standard of review is frequently the key issue in determining whether an insured will prevail in court. The standards currently utilized by the 9th Circuit are de novo, strict abuse of discretion, and that of “tempered abuse of discretion.”
6. De Novo Standard of Review: Under the de novo standard of review, the Judge decides whether the insured is entitled to benefits without giving any deference to the decision of the insurance company; e.g., the court evaluates the claim strictly on its merits. The issue the trial court will decide is whether or not the insured is disabled.
7. Strict Abuse of Discretion Standard of Review: The Judge will give full deference to the decision of an independent Claims Administrator and will overturn the decision only if it is determined that the decision was not grounded on “any reasonable basis.” It may be very difficult for a claimant to overturn an administrator’s decision under this standard of review.
8. Tempered Abuse of DiscretionStandard of Review: If the entity making the benefit decision is the same entity that would be paying the benefits from its own funds (such as an insurance company), the decision maker is inherently a “conflicted administrator.” If there is a conflicted decision-maker and a grant of discretion, the financial conflict will affect the amount of deference provided by the trial court to the administrator’s decision. The deference that a trial court gives will vary depending upon the type of evidence that is submitted on the issue of the administrator’s bias. If the insured submits evidence that an insurer’s financial incentive to deny the claim tainted the claim process, this should substantially lower the deference given to the claims decision by the trial court.
9. Independent Medical Exam (IME): This is an exam arranged by the insurance company, with a physician of its choice, for the purpose of evaluating an insured’s medical condition and symptoms. There is usually nothing “independent” about it. Insurance companies are known to utilize the service of the same doctors over and over, and have an expectation as to the results of the report before the doctor has ever seen the insured.
10. Functional Capacity Examination (FCE): This is similar to an IME, only it is conducted for the purpose of assessing an insured’s ability to perform physical tasks, such as bending, stooping, lifting, pushing, pulling, etc. A FCE is usually conducted by a physical therapist and may or may not be an accurate depiction of one’s ability to perform an occupation. For example, a 3 or 4 hour FCE cannot adequately measure one’s ability to perform a 40 hour workweek with regularity. Similarly, it will not address cognitive abilities.
11. Vocational Capacity Exam (VCE): When an insurance company recognizes that in insured has physical restrictions and limitations, they will sometimes retain a vocational counselor to ascertain what type of job an insured might be qualified to perform, taking into account both their restrictions and limitations, and their age, education, experience, and training. Much like the FCE, it is often necessary to have your own VCE to ensure impartiality.
We hope that the vocabulary above will enhance your understanding of the language related to your policy or claim; and strengthen your proficiency in communicating with insurance companies. At Kantor & Kantor, we represent clients whose insurance companies have failed or refused to pay claims arising out of disability. If you have questions about your long term disability claim, call (800) 446-7529 or find us at www.kantorlaw.net.