Department of Labor
October 26, 2017
Page 5

First, insurers will not provide the requested data, if only because insurers which provide such
data, even sanitized through a third party, to You, will be in no position to refuse such data to me
(and others) when it is requested in litigation. Let’s face it: such data would certainly potentially
be discoverable and relevant in insurance bad faith litigation in jurisdictions (such as California)
which recognize that tort. Second, is the Department asking for such data only as to ERISA
claims? Do you really think insurers will provide such differentiated data? Or even know? In
my experience, insurers often mischaracterize non-ERISA claims as subject to ERISA. In my
experience, individual policies are sometimes subject to ERISA. I am a sole practitioner, my
current active (in litigation or in the process of an internal appeal) cases include one disability
claim involving an individual policy subject to ERISA because of the manner in which the policy
was marketed and one claim arising out of a group policy not subject to ERISA, but in which the
insurer regularly asserted that it was subject to ERISA in letters to my client. My point: It’s not
likely the Department will get any meaningful data and if it does get any data, it will take much
more than 90 days to analyze and evaluate it.

In conclusion, the request to delay implementation of the Final Rule, in light of “new
information” from the insurance industry should be denied and the Final Rule should be
implemented on schedule, as adopted. Certainly, the Department can properly thereafter evaluate
the effectiveness and costs of the Final Rule. I will address that issue more comprehensively
later. For now, it is sufficient to note that such a multi-variable analysis will require both
comprehensive and candid data from the insurance industry, including, quite obviously,
information and data that insurers routinely assert to be proprietary and trade secrets. There is a
very strong argument that insurers which voluntarily provide such information waive trade
secrets, etc. protections, so they won’t. Realistically, while the Department can “work with
stakeholders to ensure that any trade secrets and proprietary business information are protected
from public disclosure, “ the mere act of providing such information voluntarily puts such
information into the public sphere and outside trade secret protections, something insurers clearly
understand. I was primarily an insurance defense lawyer for 20 years; I suspect that my friends in
the defense bar will advise their clients not to disclose this information. So, the proposed delay
will serve no real purpose - - other than delay for delay’s sake.

BERT J. ROSATI

RJR/Ike


Department of Labor
October 26, 2017
Page 4

disingenuous and not founded on facts, Here is the reality: Every insurance carrier and third
party administrator has standard processes and practices for evaluating, adjudicating, and
managing disability claims. All of them routinely train their personnel and routinely provide
updated on-the-job training. (I have deposed claims and appeal representatives of numerous
insurance companies, mostly in bad faith claims, but also in ERISA claims, about precisely these
issues.) It will be simple enough - - and not at all costly - - to implement new procedures to
effectuate the Final Rule. These procedures only impact the outcomes and thus cost factors to
the extent that they increase the likelihood that claims will be paid rather than not paid. Since the
procedures encourage transparency, that is wholly appropriate. But it is likely, in my opinion,
that these procedures do not increase the number of claims being paid at the claim level, they just
make it more likely that the claimant can prevail at the litigation level because the claimant will
have access to complete information. That is a good thing. So it is likely that is what may drive
cost increases, if any, - - because likely improving prospects for claims to be granted - - are issues
beyond the scope of the Final Rule or beyond the scope of the jurisdiction of the Department,
such as bans on discretion and parity acts. (I also believe that requiring transparency as to
medical reviews and vocational reviews will increase prospects for claimants to prevail in
litigation. This is a point I made in my comment of January 19, 2016.)

The Department is obligated to comply with E.O. 13771, but that does not require or
permit the Department to delay implementation of the Final Rule. That is, the adopted Final
Rule should be effective on schedule and the Department can now and thereafter investigate and
evaluate whether modifications are thereafter warranted if the regulations appear to be
burdensome. But merely because the insurance industry claims that the regulations are
burdensome without providing any documentation or data to support that claim or demonstrating
that increased costs are attributable to state action beyond the scope of the Department’s
jurisdiction or to its own litigation practices is misplaced. The industry suggests that there will
be a complex data collection and sanitation process required to provide the data, if the data is to
be relied upon. Candidly, I would love to see that data, as well, but I doubt any of us ever will.
Second, even if the industry provides data, it will be meaningless because there are simply too
many variables to test and analyze. It will prove to be at least very difficult, and likely
impossible, to design an analytical protocol to identify and test for the possible variables, and to
collect the data, and analyze the data. Even if designing the protocol is possible and the data
collection goes forward, it will undoubtedly take years, not months, to collect the data, analyze it,
and provide a report. Let’s face it: it’s not enough, in effect, to hand the Department a figurative
snow ball and say, “look, isn’t this proof that there is no global warming?” So, what the industry
is proposing is delay for delay’s sake and for no other reason.

Finally, the Department’s rationale for the 90-day delay in implementing the Final Rule
appears to be that the delay will allow it to obtain 11 categories of data from the insurance
industry and analyze that data to assess impacts of the Final Rule on disability insurance costs.


ERISA LAW CENTER

REPRESENTING THE DISABLED

6485 North Palm Avenue, Suite 105
Fresno, California 93704

Phone: 559-478-4119

Fax: 559-478-5939

Robert J. Rosati, Esq.
robert @erisalg.com

Jill Fulkes
Office Manager/Paralegal
jill@erisalg.com

Raquel Busani
Paralegal
raquel@erisalg.com

Leanne Capuchin
Litigation Assistant
leanne@erisalg.com
Mai Vang

Litigation Assistant
mai@erisalg.com

www.theerisalawgroup.com

October 26, 2017

VIA E-MAIL (e-ORI@dol.gov) ONLY

U.S. Department of Labor
DOL Regulations Department
200 Constitution Ave. NW
Washington DC 20210

Re: RIN 1210-AB39
To Whom It May Concern:

Ihave represented hundreds of disability claimants in internal appeals
and litigation in both ERISA (the vast majority) and non-ERISA claims. I
previously commented on the then proposed Claim Procedure Regulations,
thereafter adopted, which are now due for implementation January 1, 2018. I
read many of the numerous comments submitted by representatives of the
insurance industry. I also read the Final Rule, adopted on December 19, 2016.

The current efforts by representatives of the insurance industry to delay
implementation of the Final Rule and to alter these regulations are
procedurally improper and substantively without merit.

As to procedure: all interested parties had the opportunity to participate
in the notice and comment process of the rulemaking procedure. There is
simply no legitimate reason to have a “redo.” The insurance industry had
ample opportunity to comment on the proposed regulations - - and clearly did
so. Nothing in the Administrative Procedures Act permits the Department of
Labor, after notice and comment and after adopting regulations, to reopen the
notice and comment process in order to allow stakeholders to “try again.” Of
course, the Department may amend or repeal a rule following the same
procedures it did to adopt arule. APA §1.

Second, substantively, the new - - actually old - - concerns of the
insurance industry representatives are invalid. They claim that implementing
the new regulations will cost the insurance industry more money. They have
made similar claims before and the Department of Labor found that those


Department of Labor
October 26, 2017
Page 2

claims to be without merit. What the insurance industry is really saying, in my opinion, is that
the additional transparency of the new regulations will make it much more difficult for claims
personnel to deny valid claims and therefore, instead of denying valid claims for improper
reasons, the insurance industry will have to grant those claims - - which will cost it more money.
One of the purposes of the Final Rule is to encourage transparency and honesty. If transparency
and honesty result in more valid claims being paid instead of valid claims being denied, that’s a
good thing.

After the Final Rule was adopted, the insurance industry claimed that a confidential
survey of carriers estimated that the new regulations (the Final Rule) would cause average
premium increases of 5 to 8% in 2018. Of course, the industry representatives provided no data
to support this, did not provide the referenced survey information, and made no representation
that they ever would or could. Let’s be realistic: survey data is notoriously susceptible to
influence by the nature of the inquiries made. Without actually seeing the data and evaluating the
protocols utilized to collect and evaluate that data, these representations are pure speculation.

Furthermore, the variables that might impact disability benefits claims experience and
litigation are numerous. The industry’s “survey” is meaningless unless all relevant variables
have been evaluated, These variables include, but are not limited to:

1. The impact of state bans on discretionary clauses. Obviously, the Department has
no standing or authority on this point because state insurance laws are saved from ERISA
preemption. Logically, state bans on discretionary clauses have made it more likely that
claimants prevail in litigation, On the other hand, the standard of review has no impact on claim
decisions or appeal decisions as such; I have deposed claims and appeals personnel from
numerous insurance companies and have asked virtually all of them such questions they assert
that the standard of review is irrelevant to their decision. (The depositions are typically in non-
ERISA cases.)

2. The industry representatives note a referenced increase in premiums resulting in a
decrease in covered employees due to Vermont mental health parity statutes. Again, that is an
issue of state regulation, saved from preemption and beyond the scope of the Department’s
authority. Furthermore, other states have similar mental health parity statutes; apparently there is
no claim of similar increases in premiums and decreases in participation there. But in any event,
the Department has no jurisdiction over state action.

3. The Department is obviously aware that the insurance industry litigation practices
substantially increase the cost of litigation - - and thus the overall cost of claims - - by aggressive
defense practices intended not to enhance reliability of decisionmaking in litigation, but to delay
the process, impose costs on claimants, and hide evidence developed during the claims process


Department of Labor
October 26, 2017
Page 3

which demonstrates the invalidity of a claim denial. For example:

a. Insurers routinely dispute that review is de novo in litigation under
circumstances in which either state bans on discretionary clauses clearly apply or no
discretion is reserved in the policy.

b. Insurers and plans routinely omit, delete, or withhold from the
Administrative Record documents created, relied upon or otherwise relevant to a claim
and force claimants to engage in protracted and expensive discovery contests merely to
obtain the complete Administrative Record of a claim.

c Insurers and plans train/instruct their personnel to routinely violate their
fiduciary duties to claimants by misrepresenting or withholding relevant information
about, e.g., contractual or statutes of limitation, forcing claimants to engage in expensive
litigation contests to enforce their rights not to get benefits, but to pursue claims for
benefits.

In my opinion, the Final Rule will likely have no impact on the cost of administering and
managing most (likely the vast majority) of disability claims because most disability claims are
routine and are routinely granted. In my opinion, what likely drives cost factors (beyond the
actual costs of paying claims) are those disability claims which are denied or terminated - - and
which likely are ones with more complicated medical issues resulting in longer duration claims
and producing virtually all the litigation.

The analysis of these issues is beyond the scope of the 90-day delay proposal. (I intend to
provide a further, more comprehensive comment on the merits of rescinding, modifying, etc. the
rule by the December 11, 2017 deadline.)

Most of the procedural requirements of the Final Rule are mandated (although not
necessary always followed) by case law in some circuits. For example, the requirement to give
appropriate weight to a Social Security award and the requirement that medical reviews
post-appeal be provided for comment to the claimant are enforced (usually) in the Ninth Circuit.
Therefore, whether or not that standard is adopted by regulation, it is nonetheless in effect for at
least part of the country.

The Final Rule requires more detailed disclosure requirements by requiring insurers and
plans to provide the claim file and internal protocols, allow review and responses to new
information, minimize conflicts, and deemed exhaustion standards are routinely enforced by
courts - - although admittedly not consistently so. The assertion that these regulations, as such,
will increase premium rates and thus decrease participation rates, appears to me to be utterly