Reliance on Conflict

It seems like just about everyone these days is talking about conflicts of interest. The dems say the repubs are conflicted. The repubs say the dems are conflicted. Chaucer says everyone’s conflicted (“doctors & druggists wash each other’s hands”). A Canterbury Tales reference? Super hip, ERISA group. Way to catch the reader’s attention.

But we here at Essex Richards are all about finding common grounds; traversing needless conflicts. You know, finding small points of agreement we can all get behind – those quantitatively verifiable, indisputable truths:

  • Tacos are delicious.
  • The Dallas Cowboys are objectively evil.
  • Peeps are the foulest Easter candy.

Of course, no reasonable person disputes these truths. They are — self-evident.

And so too is the deleterious effect of Reliance Standard’s ongoing and pervasive conflict of interest, as was recently discussed in Nichols v. Reliance Standard Life Ins. Co., 2018 WL 3213618, 2018 U.S. Dist. LEXIS 109526 (S.D. Miss. June 20, 2018).

In Nichols, District Court Judge Carlton W. Reeves of the United States District Court for the Southern District of Mississippi issued a scathing opinion lambasting Reliance’s “decades-long pattern of arbitrary claim denials and other misdeeds.” Indeed, Judge Reeves set the tone for his decision in the first few lines of the opinion when he cited noted ERISA scholar John Langbein for the proposition that:

      When guarding the hen-house, some foxes are bound to go rogue.

Nichols involved a 62 year old, long-time inspector at a chicken processing factory, where much of her time was spent in temperatures of 8 degrees above freezing. In 2016, Ms. Nichols was diagnosed with multiple circulatory system problems, including Raynaud’s disease, which caused her to experience significant health issues when exposed to cold, including susceptibility to gangrene. Unsurprisingly, her treatment plan included avoiding cold environments. As a result, she was understandably forced to stop working at the chicken processing plant.

Thereafter, Ms. Nichols applied for long-term disability (“LTD”) benefits through an employer-sponsored ERISA plan insured by Reliance, and her claim was denied. In denying her claim, Reliance acknowledged that Ms. Nichols’ condition kept her from working in a cold environment, but because their own vocational reviewer determined that Ms. Nichols’ “occupation” was a “sanitarian,” and the generic understanding of the occupation of a sanitarian could be performed without exposure to cold temperatures, it denied her claim and upheld the denial on appeal. In other words, Reliance took the position that although Ms. Nichols’ specific “job” subjected her to cold working conditions, her generalized, hypothetical “occupation” theoretically might not.

Of course, this isn’t a new ploy. We see this argument from insurers all the time, as we discussed in our last blog entry. It is continuously frustrating when an insurance company agrees that an insured is disabled from working at their actual job, but then denies benefits anyway based on a technicality because of a flawed reliance on some grossly outdated website (the Dictionary of Occupational Titles, last revised nearly 30 years ago) that with a keystroke, spits out generic, similar-sounding occupations that probably do not exist within a thousand miles of the disabled person’s residence, if they exist at all.

Think about that for a minute. Under their interpretation of what’s required of them by law, insurance companies can admit that you’re totally disabled from your job and still lawfully deny your contractually-owed disability benefits because they can identify a theoretical job that might be similar to yours, but that doesn’t have to be open or available, doesn’t have to be located anywhere near you, and doesn’t even have to actually exist.

Okay, deep breath. What are some more conflict-free grounds we can agree on?

  • Shipping should always be free. And lightning fast.
  • Qdoba > Chipotle.
  • Facebook kinda sorta makes reunions pointless.

Agree to agree?

Back to Nichols. In reviewing Reliance’s process and decision, the court found that an insurer’s conflict of interest is always a factor to be weighed when evaluating the critical issue to be decided in every ERISA case: whether the insurer based its decision on substantial evidence. Here, the court found that under Fifth Circuit precedent (specifically, House v. Am. United Life Ins. Co., 499 F.3d 443 (5th Cir. 2007)), Reliance must look at Ms. Nichols’ actual job duties performed for her specific employer, no matter where they are performed. This is in spite of the policy requirement allowing them to look at how her duties are “normally performed in the national economy” because that’s simply not a license to print a totally new job.

The evidence showed that Ms. Nichols’ job duties consisted of: (1) teaching sanitary practices to other employees; (2) meat inspecting; and (3) meat packaging. Thus, her actual job – even as performed in the national economy – would necessarily entail a significant amount of work in cold temperatures. After all, it’s only common sense that if she has to perform meat inspection and packaging duties as core functions of her job, no matter where she performs these duties in the country, she will be exposed to refrigeration (and if not, we’re not eating that chicken). As such, the court heavily criticized Reliance’s vocational reviewer for relying on an occupational analysis that does not refer to those specific duties, focusing instead exclusively on her first job duty – sanitation. In other words, you can’t just call Ms. Nichols a “sanitarian” because one of her duties can be categorized that way and then, on that basis alone, deny her claim.

The court then went on to evaluate whether Reliance’s conflict of interest impacted Reliance’s analysis and ensuing adverse determination. Boy, howdy, did it ever. The court found and cited to over 100 (!) decisions involving Reliance that showed a persistent history of bias and clear acting in self-interest. See Nichols, fn. 79. The cases variously criticized Reliance’s disability decisions, flawed claims process, and arbitrary determinations, including ones that specifically addressed problems with the very same vocational reviewer utilized in Nichols. The court found that Reliance had instituted no procedural safeguards and otherwise did nothing to mitigate its clear and pervasive conflict. I think we can agree, Reliance did not enjoy receiving this decision.

I think we can also agree that there is no reasonable conflicting position that:

  • Yellow Starbursts are trash. Likewise, red is the best Skittle.
  • One cannot relax at home wearing clothing that meets societal norms.
  • Dogs. Are. Best.

What’s also extraordinary about Nichols is that the court not only awarded back benefits and attorneys’ fees (as would be typical in a claimant’s successful ERISA challenge), but it also ordered Reliance to pay her benefits into the future. That part of the decision is, frankly, pretty remarkable. The court’s reasoning for awarding such relief was to confront the pervasive and systemic nature of Reliance’s abuses. In fact, the court foreshadowed that other and further relief may also be necessary in future Reliance cases, stating:

Many courts have, after recounting Reliance’s abuses, ordered the insurer to pay benefits and attorney’s fees. Apparently these costs have not caused Reliance to change course, as it has spent decades ignoring them with impunity—perhaps treating them as the price of doing business. In future cases, courts may be asked to order further relief to curb Reliance’s perceived abuses. That relief can be quite broad.

In other words, Reliance has been dinged so often for so many years for their bad acts, but nothing has changed their conduct. Something needs to. This is a start. As our colleague and fellow ERISA practitioner, Mark DeBofsky, put it in his monthly publication “Disability E-News Alert!” (which we highly recommend):

Reliance has been repeatedly criticized for the same misconduct, yet it goes on.  Why? And why can’t something be done about it?  More cases like this will eventually open the door to extracontractual remedies. When the breach is so flagrant and repeated so frequently with impunity, the only way to make it stop is with a powerful sanction.

 We predict that this part of the remedy – awarding future benefits to cull future abuses – will be strongly contested by Reliance on appeal to the Fifth Circuit (which, by the way, was filed on July 11th), as it could potentially open the doors for broader remedies in future cases that have not typically been available to ERISA plaintiffs in the typical ERISA single-plaintiff context. That development could be very damaging to Reliance so we don’t expect them to go away quietly.

We’ll leave you with one final point of agreement that we should all be able to get behind:

  • Judge Reeves is really onto something here with this decision. Without question, something needs to be done in order to help remedy and bring an end to decades of abuses by inarguably conflicted, billion dollar insurance companies. That’s right, companies. Not just Reliance Standard. And not just insurance companies. There are many repeat offenders out there – companies that continue to implement practices and procedures that violate both their regulatory mandates and the important fiduciary principles that govern their conduct. All so that they may freely continue to profit-maximize – unchecked – at the expense of disabled American workers.

If you would like assistance with your ERISA claim, we’re here to help. Simply click here or call (704) 377-4300 to speak to a member of our ERISA team.

Disclaimer: We are ERISA attorneys, but we are not your attorneys and this article does not create an attorney-client relationship. The information in this blog post is provided for general information purposes only, and may not reflect the current law in your jurisdiction. No information in this blog post should be construed or seen as legal advice, nor is it intended to be a substitute for legal counsel on any subject matter.