From: patrick@pmauselaw.com 

Sent: Sunday, December 10, 2017 11:22 AM

To: EBSA, E-ORI - EBSA

Cc: patrick@pmauselaw.com

Subject: 1210 - AB39 -- Opposition to Delay or Changes to Previously-Adopted ERISA Rules

Dear Deputy Assistant Secretary Hauser –

I have previously written in support of the DOL’s initial proposed ERISA 

disability rule changes, many of which were adopted, and then more 

recently in opposition to the DOL’s proposed delay of those rules. Briefly, I 

am an attorney who handles plaintiffs’ ERISA disability claims, as well as 

non-ERISA bad faith claims. The first six years I was a lawyer I did ERISA 

defense work for a large Arizona and southwest law firm. For the past 6-1/2 

years, I have been representing ERISA disability claimants in 

administrative appeals and litigation against disability carriers. I write to 

oppose the industry-requested delays and any changes they may propose 

to the final rules, which are now scheduled to take effect April 18, 2018. 

Initially I note that, in violation of the Administrative Procedures Act (APA), 

the industry representatives appear to be rearguing the final rules which the 

DOL properly considered and issued. I have seen nothing from industry 

that should permit them to avoid the requirements of the APA. And as 

discussed below, industry’s arguments are largely hollow, incorrect, or 

backwards. 

Industry’s Claim Costs Will Increase Is Dubious, Unlikely, And 

Ultimately Insufficient:

I have a difficult time believing industry claims that the final rules will

increase costs. Not only is this an argument industry should have (and I 

believe did) raise during the initial public comment period, and which was 

properly weighed by the DOL in the final rulemaking, but it is largely 

preposterous. I have been told repeatedly by experts and in-house 

disability insurer personnel that only about 10% of disability claimants 

appeal a claim denial or termination. Because nearly all of the adopted 

rules affect claim denials and administrative appeals, the portion of claims 

actually affected by the rule changes is quite small.

Additionally, the industry argument is completely speculative. To my 

knowledge, industry has not provided any actual, credible data supporting 
its position. And undercutting industry’s claims, after the previous rule 

changes in 2002 participation of private industry workers in short- and longterm disability insurance increased; as Bureau of Labor Statistics data 

shows. https://www.bls.gov/opub/btn/volume-4/disability-insuranceplans.htm In fact, from 2003, shortly after the rules’ adoption, to 2014, 

participation in employer-sponsored long-term disability plans increased 

from 28% to 33%. Industry’s new claims that the additional, properlyconsidered, properly-adopted, APA-compliant rule changes will decrease 

enrollment is fanciful conjecture. The BLS statistics speak volumes about 

the fallacy of industry’s claims.

The previously-adopted rule changes will lead to more fair claims 

procedures and help reduce (if slightly) industry malfeasance. Thus, if there 

is any increase in premiums (and I remain highly dubious because the BLS 

data shows an increase in participation), that is not necessarily a bad thing. 

In business, it can be more expensive to be honest and fair rather than 

dishonest and fraudulent. It would be cheaper to sell untested pacemakers 

that are actually just parts from a Fisher Price toy rather than selling 

pacemakers that have been properly designed, tested, manufactured, and 

ensured to work properly. That doesn’t mean we should allow Bob’s 

Discount, Untested Fisher Price Pacemakers to enter the market simply 

because it’s so much cheaper. A more fair ERISA process (or, more 

accurately, a slightly less industry-favoring process) is an absolute public 

good. If it costs industry slightly more to handle claims fairly, that is far 

better than having industry sell the public an illusory promise that purports 

to, but does not, protect them from financial calamity in the event they 

suffer a debilitating injury or sickness. I can’t tell you the number of clients 

I’ve had who are shocked when they learn how highly ERISA is stacked 

against them and say “But I paid for this benefit. How can they do this?” 

The properly considered and adopted rules will effect a slight shift toward 

fairness. That is a good thing and any alleged cost increases are dubious 

and undermined by the BLS statistics discussed above. Moreover, as also 

discussed above, because most of the properly-adopted rules pertain to 

claim denials and administrative appeal issues, and because only about 

10% of claimants appeal an improper benefits denial or termination any 

alleged costs will be negligible at best. I note that when considering 

industry’s objections to the previously-adopted rules, I would encourage the 

DOL to consider industry’s failure to submit information about the 
percentage of disability appeals or denials that are actually appealed to be 

a significant omission.

Plans Should Discuss The Basis For Rejecting A Social Security 

Disability Award:

Industry’s complaints about having to give a real explanation for rejecting a 

Social Security Disability Insurance (SSDI) award are likewise hard to 

accept. First, I note that two insurers – Unum and Cigna – are already 

required to do so by Regulatory Settlement Agreements they entered into 

to resolve unfair claims practices. Thus, if Unum and Cigna are 

complaining about the previously-adopted rule, the DOL should reject such 

complaints. In fact, if they want a more level playing field, they should be 

jumping for joy that other insurers will now have to abide by this common 

sense rule. 

As the DOL is likely aware, most or all ERISA disability carriers require

claimants whose LTD benefits are approved to apply for SSDI benefits in 

nearly every case. They even assist claimants with the SSDI process by, 

for example, explaining the benefits of an SSDI award and hiring an 

attorney or advocate to assist them with the process. Then, they reap the 

benefit of the SSDI award by reducing the claimant’s monthly LTD benefit 

by the amount of the claimant’s initial gross SSDI award. Then, however, 

carriers—including Unum and Cigna, which are supposed to give an SSDI 

award significant weight due to their RSAs—turn around and terminate 

benefits without giving any appreciable weight to the Social Security 

Administration’s recognition that the claimant is unable to perform any 

gainful work at any level in the national economy; a far stricter standard 

than any LTD plan’s “any-occupation” standard I am aware of. 

I have had multiple Unum cases in which my claimants have received SSDI 

awards and Unum concocts threadbare reasons for rejecting that award. 

The most popular is that Unum’s in-house physicians (it’s OSPs or “on-site 

physicians” and DMOs or “designated medical officers,” who are eligible for 

bonuses of up to 25% of their pay (see Warner v. Unum, 2014 WL 7497233 

(N.D.Ill. 2014)) disagreed with the SSDI award. In cases in which those 

doctors have been deposed, however, they have been unable to identify 

any specific reasons to reject the SSDI award. The same is true for Unum’s 

QCCs (quality compliance personnel mandated by the RSA who, according 

to the testimony of one such person, is supposed to act as a “watchdog” on 
behalf of the claimant) The Unum personnel simply reject the award with no 

reasoning, collect their bonuses, and move on to the next claim. 

Cigna actually seems to be worse. I believe Cigna has an internal policy or 

practice of terminating a claimants LTD benefits almost immediately after 

he or she receives an SSDI award. In probably 80% of my Cigna LTD 

cases in which my client is receiving benefits, Cigna has terminated my 

client’s LTD benefits within a few months of their SSDI award being 

approved. Cigna’s process appears to be: 1) LTD claim is approved, often 

only after the claimant files an appeal protesting an absurd denial; 2) Cigna 

demands the claimant file for SSDI; 3) the claimant files for SSDI and 

begins lengthy appeals process; 4) Cigna wrongfully terminates benefits at 

the own-occupation to any-occupation disability transition, probably hoping 

the claimant will be one of the 90% who do not appeal that decision; 5) 

Cigna reinstates LTD benefits following another appeal; 6) the claimant’s 

SSDI claim is finally approved by an ALJ after a hearing; 7) Cigna 

immediately demands the claimant reimburse the overpayment that 

occurred due to the receipt of retroactive SSDI benefits; 8) within usually 

one to five months of being notified of the SSDI award and demanding 

reimbursement of the overpayment, Cigna terminates the claimant’s LTD 

benefits; 9) in the benefits termination letter, Cigna includes a standard, 

copy-and-paste paragraph saying it considered the SSDI award but had 

“more recent” evidence, such as a 1-month post-SSDI-approval review 

from one of its “medical directors” saying the claimant was not disabled; 10) 

a review of the claim file shows either the “medical director” never 

considered the SSDI award or just included the same copy-and-paste 

language in his or her review as appears in other reviews. This is 

essentially what happened in a case I recently filed in the District of 

Arizona, Smith v. Life Insurance Company of North America, Case. No. 

4:17-cv-00488-RCC, filed October 3, 2017. Another variant of that 

scenario, again quite common, is that the claimants SSDI claim is approved 

following the any-occupation termination, that approval is included with the 

appeal, Cigna demands reimbursement of the overpayment, but Cigna then 

denies the appeal with the same copy-and-paste-type language dismissing 

the significant of the claimant’s SSDI claim having been recently approved 

by an ALJ. 

Sure, it will take a little more time for insurers to actually consider an SSDI 

award. And if they do so fairly (which does not appear to be the case, even 

for carriers subject to an RSA like Unum and Cigna), it might lead to fewer 
improper claim denials. But how is that a bad thing? Again, selling an 

illusory promise can be cheap. But that doesn’t afford claimants, many of 

whom actually pay premiums for their benefits, the protection promised to 

them by the disability plans they purchased. Moreover, if carriers actually 

do give more real, and not illusory or copy-and-paste-fraudulent weight to 

an SSDI award, it could actually reduce costs significantly by reducing the 

incidence of litigation relating to improperly denied claims; as discussed 

further below. 

Claimants Should Be Entitled To Review And Comment On New 

Evidence The Insurer Relies Upon For Denying An Appeal And Doing 

So Should Reduce—Not Increase—Costs:

Again, because only 10% of disability claimants appeal benefits denials or 

terminations, the actual pool of claims affected by this rule is quite small. 

Any effort by industry to magnify this alleged issue by discussing the total 

number of claims they manage should be rejected; and the industry’s 

failure to provide meaningful details regarding the number of claims that 

are actually appealed and would potentially be affected by this rule should 

be viewed as a significant omission. 

I again ask how promoting fairness is a bad thing? Industry has a long and 

bad habit of sandbagging claimants with new evidence or rationales on 

appeal and then refusing to look at evidence contradicting their 

conclusions. 

Beyond that though, and contrary to industry’s assertions, rather than 

increasing costs this rule should reduce costs to insurers and the public 

because it should lead to fewer lawsuits. To give one example, I had a 

client where the insurer denied the STD claim and we: a) appealed that 

denial and, b) simultaneously filed his claim for LTD benefits. On appeal for 

the STD claim, the carrier sent my client to an “independent medical 

examination” with a physician with an unfortunate history. See e.g. Ritchie 

v. Krasner, 221 Ariz. 288, 211 P.3d 1272 (Ct. App. 2009). Based on Dr. 

Krasner’s conclusions, the insurer upheld the denial of the STD claim, 

which represented a final decision under ERISA. The insurer then used the 

same IME to deny the application for LTD benefits. We then appealed the 

LTD denial based on the inadequacy of the IME and the insurer approved 

those benefits. 
We then asked the insurer to reinstate STD benefits because the approval 

of LTD benefits necessarily meant the claimant was disabled through the 

plan’s “elimination period,” which overlapped with the period during which 

he was eligible for STD benefits. The insurer agreed and reinstated STD 

benefits based on the same information that had been used to challenge 

the LTD denial. Thus, by being able to submit additional information 

responding to new evidence raised during the appeal—the IME—the 

parties were able to avoid having the case submitted to a judge to decide. 

This reduced the costs for the insurer, the public, and my client; whose 

claim was resolved within months and not years. In short, industry’s 

argument that permitting claimants to respond to new information raised 

during appeal is backwards. The rule should lower costs by enabling 

claimants to challenge flawed information quickly and more efficiently. 

Deemed Exhausted Is Already The Rule And Is Not Costly:

Under the existing rules, and under Jebian and Spinedex in the Ninth 

Circuit, a claimant may already file suit if an insurer fails to make a decision 

within 45 or 90 days of submitting his or her appeal. I understand this is 

also the rule in several other circuits, including the Second Circuit under 

Halo. Industry’s objection to this rule is hollow. This rule would not increase 

costs. And to the extent there may be a few circuits where this might not be 

the rule, the previously-adopted rule would promote uniformity, which 

industry has traditionally argued is a cost-reducing benefit. Again, only 

about 10% of people whose claims are denied or terminated appeal that 

decision. I suspect a lot of those are claimants who follow the 

recommendation of the carrier to submit a letter explaining why they 

disagree with the decision (I believe this apparently common practice is 

absolutely evil because industry, knowing ERISA cases are evaluated 

based on a closed administrative record, fail to disclose that issue and 

entice claimants to sandbag themselves with inadequate information on 

appeal). Thus, the number of untimely-decided appeals in circuits where 

exhaustion is not already the rule will be quite small. 

Experts Should Be Impartial:

This provision is a no-brainer. If an insurer repeatedly uses biased medical, 

vocational, or other experts, it deprives the claimants of the full and fair 

review to which they are entitled. I cannot conceive of a rational way for 

industry to challenge this rule. I can understand why they are doing so, 
though, because like Unum’s paying in-house physicians up to 25% of their 

annual pay in bonuses or relying on unfair IME or other physicians, having 

a stable of physicians it can rely upon to terminate ERISA claims would be 

quite profitable indeed. See e.g. Merrick v. Paul Revere Life Ins. Co., 500 

F.3d 1007, 1012 (9th Cir. 2007) (Unum’s “practices included pressuring 

claimants to settle for a fraction of total benefits, insisting upon ‘objective 

medical evidence’ of a disability even when the policy did not require such 

evidence, building a stable of biased Independent Medical Examiners who 

would support claim denials, and holding regular ‘round table’ meetings 

with lawyers, doctors, and claims handlers designed to ‘tri-age’ the most 

expensive claims. Merrick introduced a substantial number of internal 

Unum Provident memos showing the evolution of this scheme during the 

early 1990s, and Prater testified regarding the tremendous financial gains 

Unum Provident posted by adopting these ‘best practices.’”); see also 

Saffon v. Wells Fargo & Co. Long Term Disability Plan, 522 F.3d 863, 867 

(9th Cir. 2008) (“This nationwide vote of no confidence seems to have been 

precipitated by the cupidity of one particular insurer, Unum–Provident 

Corp., which boosted its profits by repeatedly denying benefits claims it 

knew to be valid. Unum–Provident's internal memos revealed that the 

company's senior officers relied on ERISA's deferential standard of review 

to avoid detection and liability. See John H. Langbein, Trust Law As 

Regulatory Law: The UNUM/Provident Scandal and Judicial Review of 

Benefit Denials Under ERISA, 101 Nw. U.L.Rev. 1315, 1317–21 (2007) 

(describing Unum–Provident's behavior).”).

There is no rational basis to challenge a rule requiring fairness under a 

statute that guarantees claimants a “full and fair” review of their claims. 29 

U.S.C. § 1133. Any objections to this rule should be rejected.

The Rule Requiring Disclosure Of Contractual Limitations Periods 

Should Be Upheld:

I struggle to understand how this rule would increase costs for insurers. 

Disability carriers typically calendar most important dates early on, 

including the effective date of the disability claim, the date for the ownoccupation to any-occupation transition, the date maximum periods for 

“mental/nervous” benefits end, and the date the claimant’s eligibility for 

benefits end. When insurers terminate or deny benefits, it will not be 

difficult for them to calculate and disclose one more date—the date(s) any 

internal limitations expire. Moreover, the benefits of this rule far outweigh 
any alleged costs. Disclosing the limitations date will lead to less 

uncertainty by claimants and insurers (and their lawyers) and reduce 

attorneys’ and court time and expense challenging and defending the date 

on which a lawsuit was filed (Heimeschoff went all the way to the U.S. 

Supreme Court on this issue). Uncertainty in administrative or legal cases 

leads to expense. This rule should reduce costs, not increase them. 

Internal Guidelines Should Be Disclosed:

Again, this rule falls into the no-brainer category. Disability claimants 

should be entitled to know, and challenge, any internal policies or 

procedures relied upon or related to his or her claim. Otherwise, the 

claimant will not receive the full and fair claim review ERISA guarantees. 

To give one example, Cigna frequently relies on “Reed Group Disability 

Guidelines” to support a claim decision. Cigna, however, always refuses to 

disclose these guidelines. In one case, Cigna twice denied benefits for a 

client of mine who had suffered a ruptured subarachnoid hemorrhage (and 

miraculously survived—the hospital had read her last rights and told her 

family to say their goodbyes). One of my client’s symptoms from the 

hemorrhage was severe, unrelenting headaches; in addition to severe 

cognitive dysfunction and other problems. After paying my client for two 

years for her “own occupation” benefits (after initially denying her claim, of 

course), Cigna denied her claim for “any occupation” benefits citing the 

Reed Group Guideline for “headache” which had a maximum disability 

period of either 3 or 7 days. I fought with Cigna for months to try to get 

these guidelines, and other potentially relevant guidelines, to determine 

whether Cigna had ignored or mischaracterized them. Finally, without 

providing the actual guidelines, Cigna informed me in a letter that there was 

another Reed Group guideline for stroke with a maximum possible benefit 

period of “lifetime.” Cigna, of course, had ignored this guideline when 

terminating my client’s benefits and instead relied on the obviouslyinapplicable guideline for “headache.” (My client, unfortunately, died not 

long after her claim was denied and I believe Cigna’s decision was a large, 

contributing factor to her death). 

I have had other cases with Cigna in which they have applied Reed Group 

Guidelines that, like that case, were obviously inaccurate and woodenly 

applied. Cigna, however, refuses to provide any information regarding the 

guidelines or its use of the guidelines. This is obviously abusive, a violation 
of Cigna’s fiduciary obligations under ERISA, and denies disability 

claimants the full and fair review to which they are entitled. 

To give another example, in a bad faith case with another insurer we 

obtained the insurer’s complete claims manual. Because the claims manual 

is subject to a protective order, I cannot specifically say what was in it. 

Generally speaking, however, I believe much of the information and 

procedures documented in that claims manual is relevant to almost all the 

ERISA cases I have had with that insurer. I also believe that same 

information would undermine a large portion of the decisions by that insurer 

to deny or terminate benefits. Thus, requiring the disclosure of that 

information would lead to more fair claim adjudications and would therefore 

likely reduce costs by reducing litigation related to improperly denied or 

terminated benefits. 

Insurers should be required to disclose any internal policies and 

procedures they rely upon—including claims manuals and “external” 

guidelines like the Reed Group Guidelines—to enable ERISA claimants to 

challenge an improper benefits denial or termination. Disclosing such 

information will enable the claimant to investigate and challenge whether 

the insurer’s decision is substantively or procedurally flawed because, for 

example, it ignored or violated other policies or guidelines that support the 

claim. That is only fair, and doing so should not increase insurer costs at 

all. In fact, I suspect it would reduce costs for them to do so—Unum 

voluntarily produces its claims manual upon request and therefore does not 

have to spend time and money challenging that issue in court. They simply 

burn it to a CD and send it out, which probably costs them a total of $0.25 

when they include it with other correspondence. 

The Benefits Of The Previously-Adopted Rules Far Outweigh Any 

Alleged Costs:

ERISA claims have been rife with abuse for decades. When I did defense 

work, the easiest cases to defend were those brought by an attorney (or a 

pro se litigant) in which the claimant had done his or her own appeal. Given 

the severe evidentiary and proof hurdles they faced—such as a closed 

administrative record, abuse of discretion review, and limited discovery—

defending such claims was a piece of cake and the insurers were largely 

insulated from a meaningful challenge. 
The previously-adopted rules fully complied with the APA. They considered 

the benefits of those changes, as well as the costs (which, at best, are 

illusory and speculative as discussed above). The previously-adopted rules 

will help level the ERISA playing field even if it is only a slight leveling.

I oppose any delay or modification of the previously-adopted rules. The 

DOL should reject industry’s untimely, improper requests to do so.

If you have any questions or would like to discuss this issue further, please 

feel free to contact me. 

Sincerely,

Law Office of Patrick Mause, PLLC

290 North Meyer Avenue

Tucson, AZ 85701

520-342-0000 (phone)

520-342-0001 (fax)

www.PMauseLaw.com

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