Insurer can’t keep manual from claimant

What's New

Insurer can't keep manual from claimant

Chicago Daily Law Bulletin
January 29, 2007

by MARK D. DEBOFSKY

In a short, but highly instructive ruling, U.S. District Judge Gerard Lynch ordered that CIGNA disclose its disability insurance claim manual without a protective order, overruling an objection that the insurer might suffer ''competitive injury'' if such information was disclosed.

Levy v. INA Life Insur.Co. of N.Y., 2006 U.S.Dist.LEXIS 83060 (S.D.N.Y. Nov. 14, 2006).

Because CIGNA failed to offer anything more than conclusory allegations, and because it failed to make any factual showing of actual harm, the court refused to accept ''unsworn and totally unspecific assertions by counsel of 'the possibility of competitive injury.' ''

The court was persuaded by evidence of Unum Provident's dissemination of its claim manual, which, to the court, ''suggests that claims-handling manuals are not regarded within the industry as sensitive or confidential materials that must be protected from disclosure to customers or competitors.'' Of even greater significance, though, were the Department of Labor regulations:

''The case for nondisclosure is further undermined by Department of Labor regulations requiring disclosure of procedures employed during claims processing as mandated under section 503 of ERISA. See 29 C.F.R. § 2560.503-1(g)(1), (h)(2), (i)(5), (j)(5), and (m)(8). Indeed, the Department of Labor 'has taken the position that internal rules, guidelines, protocols, or similar criteria would constitute instruments under which a plan is established or operated within the meaning of section 104(b)(4) of ERISA and, as such, must be disclosed to participants and beneficiaries.' U.S. Department of Labor, Frequently Asked Questions about the Benefit Claims Procedure Regulation, C-17.

''These requirements make plain that such claims-handling manuals, whether in whole or piecemeal, are likely to be disseminated widely to plan participants and to litigants challenging benefits denials. Under these circumstances, the effort to protect such materials as confidential is quixotic. The Department of Labor regulations, and the fundamental rules of discovery, require that ERISA participants and beneficiaries have access to the guidelines, rules, and criteria applied in granting or denying their claims. Such materials can therefore hardly be considered confidential business information.

''Defendant notes that at least one portion of the cited regulations 'focuses specifically on whether internal rules or guidelines were relied upon in making the adverse benefit determination in issue.' That is correct, as far as it goes, but makes little difference to the point made above. In this case alone, for example, defendant has agreed that 58 sections of its manual are relevant and discoverable. Assuming without deciding that defendant is correct that plan participants are guaranteed access only to those portions of insurers' manuals that are relevant to their individual cases, it is nevertheless unreasonable to think that, given the abundance of litigation of this sort, any provision of such manuals would remain unknown to the plaintiffs' bar for very long.''

While acknowledging that Palmiotti v. Metropolitan Life Ins. Co., No. 04 Civ. 718 (LTS), 2006 WL 510387 (S.D.N.Y. Mar. 1, 2006), overturned a magistrate judge's ruling allowing dissemination of a claim manual without a protective order, the court found the situations distinguishable. Further in Palmiotti, the magistrate judge was directed to allow disclosure of those portions of the claim manual to which the plaintiff would be entitled under the ERISA claim regulations. Nor was the court persuaded by defendant's claim that protective orders had been entered in other cases, calling the claim ''fatuous.'' First of all, a protective order in one case does not mean that others will not disclose the same documents. Nor did the court find the existence of other protective orders precedential, particularly when no reasoning for the protection of confidentiality had been provided in the order.

This ruling is entirely consistent with the ERISA regulations. The court cited but did not quote from the FAQ accompanying the claim regulations. The specific provision notes:

''Is a plan required to provide a copy of an internal rule, guideline, protocol, or similar criterion when the applicable rule, guideline, protocol, or criterion was developed by a third party which, for proprietary reasons, limits the disclosure of that information?

''Yes. It is the view of the department that where a rule, guideline, protocol, or similar criterion serves as a basis for making a benefit determination, either at the initial level or upon review, the rule, guideline, protocol, or criterion must be set forth in the notice of adverse benefit determination or, following disclosure of reliance and availability, provided to the claimant upon request. However, the underlying data or information used to develop any such rule, guideline, protocol, or similar criterion would not be required to be provided in order to satisfy this requirement. The department also has taken the position that internal rules, guidelines, protocols, or similar criteria would constitute instruments under which a plan is established or operated within the meaning of section 104(b)(4) of ERISA and, as such, must be disclosed to participants and beneficiaries. See § § 2560.503-1(g)(v) (A) and (j)(5)(i); 65 FR at 70251. Also see § § 2560.503-1(h)(2)(iii) and 2560.503-1(m)(8)(i); Advisory Opinion 96-14A (July 31, 1996).''

The Federal Register discussion of the regulations at the time of their adoption is also instructive. The regulations require disclosure of ''relevant'' documents, which include statements of policy or guidance in order to ensure ''appropriate decision making and consistency.'' 65 Fed.Reg. 70,246, 70,250-70,252 (Nov. 21, 2000), and the comments to the regulations stated:

''The Department continues to believe that claimants have a need to know the specific basis for an adverse benefit determination. Where a plan utilizes a specific internal rule or protocol, understanding the terms of the specific protocol may be crucial to a claimant's ability to successfully contest the denial on review. Therefore, subparagraph (g)(1)(v) generally retains the requirements that a plan inform a claimant that a protocol has been relied upon and furnish the protocol upon request. To reduce the potential burden of complying with these requirements, the regulation makes clear that the notice of adverse benefit determination may either set forth the protocol on which it was based or a statement that a protocol was relied upon and that a copy of such protocol will be made available to the claimant free of charge upon request.

''As a concomitant to this general requirement, subparagraph (m)(8)(iii) further provides that, among the information that a plan must provide a claimant upon request after receiving an adverse benefit determination, is any information that the plan has generated or obtained in the process of ensuring and verifying that, in making the particular determination, the plan complied with its own administrative processes and safeguards that ensure and verify appropriately consistent decision making in accordance with the plan's terms. It is not the Department's intention in this regard to require plans to artificially create new systems for the sole purpose of generating documents that can be handed to a claimant whose claim is denied in order to satisfy this disclosure requirement. The Department anticipates that plans generally will have systems for ensuring and verifying consistent decision making that may or may not result in there being disclosable documents or information pertaining to an individual claims decision.''

Nor is it a defense to production of a claim manual that such information was not relied on in rendering a decision. The Federal Register goes on to state:

''Subparagraph (m)(8) states that a document, record, or other information is considered 'relevant' if it was relied upon in making the determination, or was submitted to the plan, considered by the plan, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the determination. Subparagraph (m)(8) further provides that the claimant should receive any information demonstrating that, in making the adverse benefit determination, the plan complied with its own processes for ensuring appropriate decision making and consistency. Additionally with respect to group health and disability claims under subparagraph (m)(8), a document, record, or other information is considered ''relevant'' if it constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit for that claimant's diagnosis, without regard to whether such advice or statement was relied upon in making the determination. The department believes that this specification of the scope of the required disclosure of 'relevant' documents will serve the interests of both claimants and plans by providing clarity as to plans' disclosure obligations, while providing claimants with adequate access to the information necessary to determine whether to pursue further appeal.''

Hence, this decision, coupled with the 1st U.S. Circuit Court of Appeal's ruling in Glista v. Unum Life Insur.Co. of America, 378 F.3d 113 (1st Cir. 2004), which found a claim manual significant in establishing the insurer's interpretation of its preexisting condition clause, and Egert v. Connecticut General Life Insurance Company, 900 F.2d 1032 (7th Cir. 1990), which relied on internal documentation to show whether infertility was considered an illness under a health benefit policy, will virtually assure production of such documentation in future cases.