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December 7, 2017

Via US Mail and E-mail e-ORI(a)doL80v:

Office ofRegulations and Interpretations,

Employee Benefits Security Administration

Room M-5655

U.S. Dept, ofLabor

200 Constitution Avenue NW

Washington D.C. 20210

Re: Re-Examination ofClaims Procedure Regulations for Plans

Providing Disability Benefits

RINNo.: 1210-AB39

Regulation: 29 C.F.R. §2560.503

Dear Deputy Assistant Secretary Hauser:

I am writing to discourage the Department from modifying or further delaying the final disability

claims regulations (Final Regulation on Claims Procedure for Plans Providing Disability Benefits,

81 Fed. Reg. 92316 (Dec. 19, 2016)) that are now scheduled to go into effect on April 1, 2018.

In 1974, Congress enacted, and President Ford signed into law the Employee Retirement Income

Security Act. (“ERISA”). At the time the law was enacted, I was in high school. If as a high

school student, I was asked to explain the purpose ofthe bill based solely on its title, I would have

reasonably expected Congress had intended to EXPAND protections afforded Employees

regarding their retirement.

I graduated from law school in 1983, and found myself at a firm whose focus was the defense of

life and disability insurance carriers from bad faith law suits brought under California insurance

law. In 1987, when the Supreme Court issued its decision in Pilot Life v. Dedeaux, 1(987) 481

U.S. 4110, the bulk of my work shifted from defending cases under California insurance law, to

defending cases governed by ERISA. I, along with other attorneys practicing in this area of law,

was shocked to discover the extent to which the interpretation of ERISA contracted, rather than

expanded employee protections and rights. While California law provided insureds denied life or

disability benefits the right to a jury trial, the right to have witnesses testify on their behalf, and

the right to recover compensatory damages if the denial was made in bad faith, ERISA, a law

enacted to provide “security” to employees, eviscerated these protections.

As a defense attorney, I was not shocked to see my insurance company clients take full advantages

of ERISA. Claims which would never have been denied due to the insurers concerns for the

resulting damage awards, were denied with impunity by the disability carriers. While I make this

observation from what is now over 30 years of experience litigating ERISA cases, some Courts

have recognized the problem. (See, United States ofAmerica, v. Aegerion Pharmaceuticals, Inc.,

2017 WL 5586728, at *7 (D. Mass. Nov. 20, 2017):
Coupled with today's expansive preemption jurisprudence, business can (and does) make

a rational calculus that leads it to lobby for an ever-diminishing role

for the federal district courts.”). They have been enormously successful.

The insurance industry found it could largely immunize itself from suit due to the

Employee Retirement Income Security Act (“ERISA”).

(emphasis added)

After several years ofhaving to defend what I found to be indefensible conduct, I left the defense

firm where I was employed and opened a firm whose clients would be limited to insureds seeking

to recover employee benefits. In 95% ofthe cases, the claims were governed by ERISA.

For the past 25 years, I have practiced solely in this area of law. My firm employs 12 full time

attorneys whose cases are almost exclusively on behalf ofindividuals whose claims are governed

by ERISA, and are significantly impacted by the claims handling regulations put in place by the

Department of Labor which place some responsibility on insurers to take seriously their fiduciary

duties to ERISA beneficiaries and claimants.

While I am grateful for the opportunity to comment on the Department’s re-examination of the

costs ofthe final rules governing disability claims, the concerns raised by the industry are not new.

Rather, these objections appear to be simply re-argument ofthe merits ofthe final rules. Where

those rules are based on policy choices that have been made by Congress, by this Department, and

by the federal courts interpreting ERISA, another argument about the merits is unnecessary.

Nevertheless, I will address the objections that have been raised that I feel are most in need of a

response

The industry claims if the final rules go into effect there will be an increase in costs that will

increase premiums resulting in less access to disability benefits. These assertions do not ring true.

First, the claim that the regulations would significantly increase costs is unproven. I have yet to

see any actuarial study that would support such a claim; and I sincerely doubt that any such study

could be produced. But even ifthe costs may modestly increase, the specter that fewer employers

would offer benefits is sheer nonsense. Employers provide benefits to their employers for reasons

that go well beyond altruism. Employee benefits are valuable tool employers use to both recruit

and retain outstanding employees. Moreover, the cost of disability benefits is often passed on to

the employee, which, in turn, would make the benefits non-taxable under the Internal Revenue

Code. The IRS has repeatedly issued Revenue Rulings explaining that if disability insurance

premiums are paid with after-tax dollars, the resulting benefits are non-taxable.

Second, given the nature of litigation of disability benefit claims, a more robust and fairer claim

process may be the only means a claimant has to achieve due process. The federal courts treat

ERISA claims as quasi-administrative (“review of a record.” See, Perlman v. Swiss Bank Corp.,

195 F.3d 975 (7th Cir. 1999)). That means there is no trial (and obviously no jury trial), no

discovery permitted, and no further evidence allowed. As a result, the reality of our law practice

is that we often have to turn down potential clients who have already gone through the claim

process even though their claims would be meritorious ifonly we could submit additional evidence
or be permitted to submit testimony from a treating doctor. The most critical of the proposed

regulations is the one that gives the claimant the last word in the claim process. Without a

regulation permitting claimants the opportunity to comment on adverse evidence obtained by the

benefit plan administrator/insurer during the claim process, claimants can be sandbagged since

meaningful challenges to such adverse evidence are precluded.

Third, the importance of a Social Security determination cannot be overstated. As part of their

settlements of regulatory charges resulting from market conduct investigations, both Unum and

CIGNA agreed to give deference to favorable Social Security determinations. Every disability

insurer and plan administrator should be subjected to the same standard. The definition of

“disabled” under the Social Security Act (42 U.SC. Sec. 423) is far more stringent than the

definitions in disability insurance policies; and a favorable outcome of a Social Security claim

represents an objective process by a neutral administrative agency. While the rules may be

somewhat different, Social Security no longer gives deference to a treating doctor’s opinion just

because that doctor is a treating doctor. Moreover, the Social Security Medical-Vocational Rules

that take into consideration a claimant’s age, education, and work experience have been recognized

as “well-developed, relatively efficient and by no means overly generous to claimants—by which

a plan may show adequate consideration of a claimant's vocational characteristics. Demirovic v.

Bldg. Serv. 32 B-J Pension Fund, 467 F.3d 208, 216 (2d Cir. 2006). Hence, requiring disability

plans to meaningfully explain a differing outcome from the Social Security Determination would

enhance the claim process and its fairness.

Fourth, the Regulations promote the use ofimpartial consultants. Especially in view of a litigation

regime that effectively precludes discovery, the rule promotes the use of practitioners who bring

more objectivity and fairness into the evaluation of claims instead of using doctors and other

consultants who appear to earn the bulk, if not all oftheir income, reviewing disability claims and

thus are influenced by the notion ofregulatory capture into being biased to favor benefit denials.

Fifth, the requirement of disclosure of the time limit for filing suits is simply a tool to prevent

confusion and unnecessary premature adjudication of claims. Likewise, the disclosure ofinternal

guidelines utilized by plans insures consistent treatment ofsimilarly situated claimants.

In summary, the regulations have already gone through an extended comment period and the

comments presented were all taken into consideration before the final rules were issued in

December 2016. There is no reason whatsoever to delay the implementation ofthe rules, especially

since insurers and benefit plan administrators have already been given more than adequate time to

institute procedures and measures to comply with the rules.

Very Truly Yours,

:GRK/nc

GLENN R. KANTOR

KANTOR & KANTOR, LLP