Persons seeking insurance coverage for a disability, when the insurance was issued as part of an employer group plan, are governed by Employee Retirement Income Security Act, commonly known as ERISA. When a medical or disability insurance plan is covered by ERISA, the standard for liability and the remedies available to an insured, if he or she believes an insurance claim has been wrongfully denied, are far more favorable to insurance companies, than if the policy is governed by California common law.
This discrepancy between ERISA and non-ERISA insurance policies is illustrated by a recent case, Emmerling v. Standard Insurance Company (E.D. Penn. 2015) 2015 WL 5729240, involving a disability claim arising out of a diagnosis of Complex Regional Pain Syndrome (CRPS). CRPS is a debilitating, incurable pain condition well-known to cause disability. Yet, in Emmerling, the Court upheld the denial of a disability claim under an ERISA plan, even though the diagnosis of CRPS was undisputed.
Emmerling tells a fairly typical story related to CRPS of an insured suffering from chronic pain and visiting a myriad of doctors in search of a diagnosis. This is common. Patients afflicted with CRPS often experience difficulty obtaining a diagnosis, and need to see many physicians before finding someone familiar with the condition and able to recognize it. Eventually, however, in Emmering, the insured is diagnosed with CRPS, and that diagnosis is accepted by the insurance company.
The insurance company, however, disputed that the symptoms from CRPS rendered the insured disabled, and on that basis denied the disability claim. It is here where the difference between an ERISA plan and common law comes in to stark contrast. Under ERISA, courts engage in a “deferential standard of review” in evaluating an insurance company’s actions. Thus, to overturn the insurer’s decision to deny a claim under an ERISA policy, the insured must prove the decision was “arbitrary and capricious.” This is a much higher standard than proving the insurance policy covers the condition, which is the standard under common law. The “arbitrary and capricious” standard for challenging a denial under ERISA poses a significant hurdle to insureds, a hurdle they would not face if the policy was governed by California common law.
The court concluded in Emmerling that, although the insured had CRPS, the condition “did not support the severity of limitations advocated . . .” The insured argued that the insurance company’s acceptance of the CRPS diagnosis, “but not the restrictions and limitations related to that diagnosis,” was improper. Essentially, the insured was arguing that the CRPS rendered him disabled, and the insurance company disagreed. The insurer based its decision on the assertion that the insured’s doctors’ “treatment records were inconsistent” with the limitations the insured was contending resulted from CRPS. Noting that an ERISA insurer has discretion “to weigh medical evidence,” the Emmerling court concluded that the decision to deny the insureds disability claim was not arbitrary and capricious, and the decision was affirmed.
The decision in Emmerling illustrates the difficulty insureds can have in challenging denials of insurance claims under ERISA plans. It also illustrates the importance of properly working up a CRPS claim, with supporting evidence of both the condition and the resulting disability. This includes obtaining medical care by medical professionals that are experienced with CRPS.