December 8, 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:

 I have 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, and the proposal to delay their implementation. 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.

 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 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.

 ERISA is intended to be a system which accurately and fairly processes claims with 

minimal litigation and administrative expenses. But the process only works when plan 

administrators follow the plan, honor their fiduciary and regulatory duties, are honest and fair in 

processing claims, and make decisions grounded in the facts. Essential to the ERISA 

administrative adjudicative process is the fiduciary's duty of loyalty to claimants and its 

obligation to provide full and fair claims investigations and appeals consistent with regulatory 

standards. Basically, a fiduciary must tell the claimant what he/she needs to present to perfect 

his/her claim, do so at a time when he/she can present such evidence, and fairly consider the 

evidence presented. One of the underlying purposes of the Final Rule is to implement these 

fiduciary obligations.

 A threshold issue presented in every ERISA disability benefits claim is the requirement 

that the administrator reasonably interpret and apply the provisions of the plan. ERISA plans are 

construed according to federal common law and the plan is reviewed as a whole giving terms 
their plain meanings. Fay v. Oxford Health Plan, 287 F. 3d 96, 104 (2d Cir. 2002). A claim 

under §1132(a)(1)(B), "in essence is the assertion of a contractual right." Feifer v. Prudential 

Insurance Company of America, 306 F. 3d 1202, 1210 (2d Cir. 2002). ERISA's written 

instrument requirement, set forth in 29 U.S.C. §1102(a)(1), essentially operates as a strong 

integration clause, statutorily inserted in every plan document. Feifer, supra, at 

1210. Administrators may not override this inclusive integration clause with a reference to terms 

that do not exist in written form. Id. at 1210-1211.

 Administrators also may not "rewrite, under the guise of interpretation, a term of the 

contract when the term is clear and unambiguous." Burke v. Pricewaterhouse Coopers LLP LTD 

Plan, 572 F.3d 76, 81 (2d Cir. 2009). "[W]here the administrator imposes a standard not required 

by the plan's provisions, or interprets the plan in a manner inconsistent with its plain words, its 

actions may well be found to be arbitrary and capricious." McCauley v. First Unum Life 

Insurance Company, 551 F. 3d 126, 133 (2d Cir. 2008). If the plan sponsor wanted other terms, 

"it could have drafted a plan that made this clear." But, a plan sponsor "may not transform an 

existing plan to achieve [a specified] end by construing it in a fashion contrary to its 

terms." When it does so, the construction of the plan is unreasonable and a determination 

denying benefits is an abuse of discretion. D&H Therapy Associates, LLC., v. Boston Mutual 

Life Insurance Company, 640 F. 3d 27, 41 (1st Cir. 2011). 

 Sometimes, some insurers “game” the system by denying disability benefits claims based 

on strained interpretations of policy language, frequently contrary to their own internal 

protocols. Those insurers do not want to be required to disclose such documentation because 

that will prevent them from denying valid claims by misconstruing policy terms in a manner 

inconsistent with their own internal protocols. One purpose of the Final Rule is to prevent or at 

least minimize such conduct. 

 The administrator procedurally must handle the claim fairly. ERISA represents a careful 

balancing between insuring fair and prompt enforcement of rights under a plan and the 

encouragement of the creation of such plans. Conkright v. Frommert, 130 S. Ct. 1640, 1648-

1649 (2010). Congress sought to create a system that is not so complex that administrative costs 

or litigation expenses unduly discourage employers from offering ERISA plans in the first place. 

Id. Deferential review promotes efficiency by encouraging resolution of benefits disputes 

through internal administrative proceedings rather than costly litigation. Id. The system does not 

utilize the adversarial process to investigate the truth of assertions made, but instead utilizes an 

inquisitorial process in which the plan must provide an opportunity for a full and fair review of 

any claim denial. Vaught v. Scottsdale Healthcare Corporation Health Plan, 546 F. 3d 620, 631 

(9th Cir. 2008). 

 This process is undermined - - and the result is expensive and often protracted litigation -

- when insurers fail to disclose all of their reasons and all of their evidence to claimants before

making final decisions on internal appeals. The Final Rule seeks to remedy that problem. It will 

minimize litigation and litigation expenses by giving both sides access to all the information 

without resort to litigation. So, it won’t cost money, it will save money and it will make the 

process more fair, more transparent, and consequently more reliable.
 ERISA imposes higher-than-marketplace quality standards on insurers. ERISA obligates 

administrators to discharge their duties in respect to discretionary claims "solely in the interest of 

the participants and beneficiaries" of the plan. 29 U.S.C. §1104(a)(1). It simultaneously 

underscores the particular importance of accurate claims processing by insisting that 

administrators "provide a full and fair review" of claim denials. 29 U.S.C §1133(2). Finally, it 

supplements marketplace and regulatory controls with judicial review of individual claim 

denials. 29 U.S.C. § 1132 (a)(1)(B). 

 Central to an ERISA fiduciary's obligations is a prohibition against knowingly and 

significantly deceiving a plan's beneficiaries in order to save money at the beneficiaries' 

expense. Varity Corporation v. Howe, 516 U.S. 489, 506, 116 S.Ct. 1065 (1996). "[L]ying is 

inconsistent with the duty of loyalty owed by all fiduciaries" and codified in 29 U.S.C. 

§1104(a)(1). Varity Corp., supra, 516 U.S. at 506. Thus, "a fiduciary has an obligation to 

convey complete and accurate information material to the beneficiary's circumstance, even when 

a beneficiary is not specifically asked for the information." Barker v. American Mobile Power 

Corp., 64 F. 3d 1397, 1403 (9th Cir. 1995). The administrator may not deceive the 

claimant. "[T]he notice and review principles of ERISA require that a plan member be given the 

ability and opportunity to effectively respond to [an administrator's] denial of benefits, which 

includes the ability to take whatever further action might be necessary to entitle him or her to the 

benefits in question. [A plan] cannot be rewarded for successfully playing a game of 'hide and 

seek' with its participants." Juliano v. The Health Maintenance Organization of New Jersey, Inc. 

221 F. 3d 270, 291 (2d Cir. 2000). Thus, plan administrators have a fiduciary duty to provide 

complete information. The Final Rule merely formalizes that obligation. 

 Central to accurate claims processing is 29 U.S.C. §1133 and its accompanying 

regulations, which set forth the minimum procedures for a full and fair review. An 

administrator's compliance with 29 U.S.C. §1133 in making an adverse benefit determination is 

probative of whether the decision to deny benefits was arbitrary and capricious. Miller v. 

American Airlines, Inc., 632 F. 3d 837, 851 (3d Cir. 2011). The existing Regulations require: 

administrative processes and safeguards designed to insure and verify that benefit claim 

determinations are made in accordance with governing plan documents and that plan provisions 

have been applied consistently with respect to similarly situated claimants; notification of 

adverse benefit determinations which state the specific reason or reasons, reference specific plan 

provisions on which the determination is based, and describe any additional material or 

information necessary for the claimant to perfect the claim and explain why such material or 

information is necessary; a full and fair review on appeal in which the claimant has the 

opportunity to submit written comments, documents, records, and other information, and which 

provides for review into all comments, documents, records, and other information submitted by 

the claimant, requiring the fiduciary to consult with a healthcare professional who has 

appropriate training and experience when deciding an appeal, and specifying that an appeal 

denial shall state the specific reason or reasons, and reference the specific plan provisions. 29 

C.F.R. § 2560.503-1. 

 In brief, what this process calls for is a "meaningful dialogue" between the administrator 

and the beneficiary. Booton v. Lockheed Medical Benefit Plan, 110 F. 3d 1461, 1463 (9th Cir. 

1997). The "plan administrator has a fiduciary duty to the insured to conduct an investigation 
and to seek out information necessary for a fair and accurate assessment of the claim." Rasenack 

v. AIG Life Insurance Company, 585 F. 3d 1311, 1324 (10th Cir. 2009). This is not an adversary 

process. If the administrator needs or wants additional information or if the information is 

insufficient, the administrator has an affirmative duty to tell the claimant and let the claimant 

provide it.

 

 The Final Rule more comprehensively sets forth what constitutes a “meaningful 

dialogue” and thereby enhances accurate claim processing. 

 "When an administrator asks for additional information in broad terms, it is too easy to 

find later a reason to deem what it was given to be insufficient." Holmstrom v. Metropolitan Life 

Insurance Company, 615 F. 3d 758, 774 (7th Cir. 2010). An administrator may not "move the 

target" by inviting additional evidence to establish disability, but when such evidence is provided 

repeatedly find that the new evidence is not sufficient under new standards or expectations that 

have not been communicated to the claimant. "Such conduct frustrates fair claim resolution and 

is evidence of arbitrary and capricious behavior." Id. at 776. The Final Rule minimizes the 

possibility of such gamesmanship. 

 

 A practical problem arises because the claimant is not entitled to receive or rebut medical 

opinion reports or other evidence generated in the course of an administrative appeal. Metzger v. 

Unum Life Insurance Company of America, 476 F. 3d 1161, 1166 (10th Cir. 2007). This means 

that new grounds may be raised in response to an appeal without the claimant having the 

opportunity to respond to them. This is unfair. "When an administrator tacks on a new reason for 

denying benefits in a final decision, thereby precluding the plan participant from responding to 

that rationale for denial at the administrative level, the administrator violates ERISA's 

procedures." Abatie v. Alta Health & Life Insurance Co., 458 F. 3d 955, 974 (9th Cir. 

2006). This "has the effect of insulating the rationale from review, [which] contravenes the 

purposes of ERISA. This procedural violation must be weighed by the district court in deciding 

whether [the administrator] abused his discretion." Id. The Final Rule corrects this defect. 

 Another obvious procedural violation is raising new reasons for the first time in litigation 

and thus denying ERISA claimants the timely and specific explanation to which the law entitles 

them by "sand-bagging" them with after-the-fact plan interpretations devised for the purposes of 

litigation. Juliano v. The Health Maintenance Organization of New Jersey, Inc., supra, 221 F. 

3d at 289. It is improper for an administrator to "try the easiest and least expensive means of 

denying the claim while holding and reserving another, perhaps stronger, defense, should the 

first one fail." Lauder v. First Unum Life insurance Company, 284 F. 3d 375, 382 (2d Cir. 

2002). " To ensure the full and fair review contemplated by ERISA, the specific reason or 

reasons for denial must be clearly identified at the administrative level in order to give the parties 

an opportunity for meaningful dialogue." LaFleur v. Louisiana Health Service and Indemnity 

Company, 563 F. 3d 148, 156 (5th Cir. 2009). The Final Rule will tend to minimize such issues.

 Thus, the effect of the Final Rule is to minimize gamesmanship and enhance the 

transparency, integrity, and effectiveness of the process. Even if that costs money, it is worth it.
 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 nonERISA 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 decision–making in litigation, but to 

delay the process, impose costs on claimants, and hide evidence developed during the claims 

process 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 and state-specific, saved-from preemption standards beyond the 

Department’s authority) 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.

 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 postappeal 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 

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. 

 Finally, I don’t have data, while the insurance industry claims it does. Obviously, the 

industry cannot really have data regarding actual costs of compliance with the Final Rule - -

because the Final Rule has not yet been implemented. Second, as I explain above, even if 

implementation increases industry costs, that would be proper because the Final Rule also will 

increase transparency, accuracy and fairness and it effectuates the goals of section 1133. Third, 

analyzing cost, factors in ERISA disability benefits claims is not a simple thing. One would 
need to design and implement a multi-variable study - - identifying all the possible factors that 

potentially drive costs, creating a study protocol, obtaining usually confidential data from both 

industry sources and claimants’ attorneys, and then analyzing the data. That would require an 

elaborate and time-consuming process and assumes that relevant persons will disclose 

confidential information.

 I have some appreciation of how daunting a task that would be: as a law student in the 

early 1980s I was a research assistant on a multi-year study of California’s then-newly 

reintroduced death penalty. I was also one of the subjects of a far-less elaborate analysis by the 

California State Bar of the impact of changes in California’s bar exam in 1983. I have identified 

several cost-drivers which would have to be analyzed, but certainly there are more and certainly 

the insurance industry’s speculation - - and that’s all it is - - that complying with the Final Rule 

will raise costs - - is not credible or reliable. 

 I know that the insurance industry routinely provides objective data to an independent 

actuary in order to analyze trends and developments in disability claims; the industry does not 

share either the data or the comprehensive reports with me, but some information becomes 

available from these studies. It appears that there is generally a multi-year lag between the data 

and the reports, suggesting that it takes years to collect, organize and analyze the data. Second, it 

appears that these studies analyze objectively determinable data points. So, any “data” analyzing 

costs of the Final Rule: won’t exist for a couple of years; will then have to be collected and 

analyzed; will have to take into account numerous variables not readily reduced to objective 

information or data points; and will have to weigh the social benefit of more fair, transparent and 

accurate disability claim processing. Let’s face it: implementation of the Final Rule likely will 

result in more disability claims being paid but also likely will save the insurance industry money 

by reducing its litigation costs because it will reduce the number of disability claims improperly 

denied, thus the subject of litigation. Overall the insurance industry may save money by 

implementing the Final Rule, paying more valid claims and reducing litigation costs!

 In conclusion, the Final Rule should be implemented, as adopted.

Very Truly Yours,

/s/ Robert J. Rosati 

 6485 N. Palm Ave., Ste. 105

 Fresno, California 93704

 T: (559) 478-4119, ext. 225

F: (559) 478-5939