THE GREY LAWFIRMec

the claims administrator to advocate for Social Security benefits, reap the benefit of the Social
Security award by means of an offset, and then ignore the SSA's determination. Metropolitan
Life v. Glenn, 554 U.S.105 (2008). As the industry comments often acknowledged,

- requiring an explanation of the reasons for disagreeing with the Social Security decision and

other contrary evidence tracks the existing standard. Logically, it should not increase costs to
simply codify this standard.

The Deemed Exhausted Rule is Not Costly

The industry's concern about this rule seems to be that plaintiffs and their attorneys will race
into court, increasing the volume of ERISA litigation and hence the overall costs of
administering disability claims. This is incorrect. It primarily acts to enforce the regulatory
deadlines by creating a nominal consequence for a carrier that blythely blows them.

Additionally, as with most of the other final rules, this rule is simply a codification of existing
judge-made law. Claimants are already able to get into court when the claims process has
failed them in a meaningful way. See e.g. Brown v. J.B, Hunt Transp. Servs., 586 F.3d
1079, 1085-86 (8th Cir. 2009) (failure to respond to request for documents excused
claims from exhaustion requirement because there was no full and fair review). Itis not likely
that additional costs will result from this regulation. Hall y. National Gypsum Co., 1O5 F.3d
225, 231-32 (Sth Cir. 1997); LaAsmar v. Phelps Dodge Corp. Life, 605 F.3d 789 (IOth
Cir. 2010); Nichols v. Prudential Ins. Co. of Am., 406 F.3d 98 (2d Cir. 2005); Jebian
v. Hewlett-Packard Co. Employee. Benefits Org. Income Prot. Plan, 349 F.3d 1098 (9th
Cir. 2003); Dunnigan v. Metropolitan Life Ins. Co., 277 F.3d 223, 231.5 (2d Cir.
2002).

Providing the Right to Respond to New Bases for Denial During the Appeal Review is Critical
to the Appeals Process

This rule prohibits stonewalling, ambushing and post-hoc rationales which can prejudice ERISA
participants. It is fundamental to full and fair review. The Department has already
acknowledged the importance of this rule and that it is already the standard in some

The Grey Law Firm PC Rebecca Grey, Esq.
The Russ Building grey@greylow-stcom
235 Montgomery Street, Suite TOV

Son Francisca, CA 94104

P (415) 262.9926
F (415) 262.9981

worse greylavesheom


December 8, 2017
Page 4

The Department has already acknowledged that the disability claims industry has been
needlessly adversarial toward ERISA disability plan participants and has received many «
comments to that effect. The industry's argument that the final rules are bad for participants -
despite all evidence to the contrary - cannot be taken seriously. The industry is not a credible
advocate for participants.

Requiring the Plan to Discuss the Basis for Disagreement with Social Security Decisions is Not
_ Costly.

This rule merely requires disability plans to observe a fundamental due process principle that is
imbedded in ERISA—namely the principle that a claimant is entitled to a well-articulated
explanation for the adverse benefits decision so that the participant may fairly dispute it. The
2000 regulations require no less.

As the Department has already noted, it is doubtful that there are costs associated with the
requirement of discussing the reasons for disagreeing with a favorable Social Security decision.
ERISA disability benefits have always been deeply intertwined with the Social Security system
and mostly are simply supplemental to Social Security benefits. Most disability plans require
claimants to apply for the SSA benefit, and the plans usually provide representation for
claimants before the SSA. This is done so that the plan may take advantage of the plan term
that the SSDI benefit will offset the LTD benefit - put another way, so that the government
can underwrite insurance industry products. In order to decide which claimants qualify for this
representation, plan claims handlers need to know the standard that the SSA uses. Comment
#114, p.6 (ACLI). Disability claims administrators’ operational manuals devote many pages to
deciding whether the claimant is disabled enough to be referred to counsel for representation
before the Social Security Administration, and how to offset or recover the benefits once they
are successful, and how to express all of this to the claimant. | have personally seen many
findings by the SSA of disability act as a persuasive scale-tipper in ERISA determinations,

particularly since the regulations requiring the carriers consider them.

Additionally, the disability plans and insurers are required in many jurisdictions to discuss why
they are denying a disability claim when the Social Security Administration awarded benefits
under an obviously more strenuous standard. Montour v. Hartford Life & Acc.Ins Co., 588
F.3d 623, 635-637 (9th Cir. 2009); Salomaa v. Honda Long Term Disability Plan, 642
F.3d 666, 679 (9th Cir. 2011); Bennett v. Kemper Nat. Services Inc. 514 F.3d 547,
553-554 (6th Cir. 2008); Brown v. Hartford Life Ins. Co., 301 F. Appx 777,776
(1O* Cir. 2008). As a matter of Supreme Court precedent, it is arbitrary and capricious for

THE GREY LAWFIRMec


December 8, 2017
Page 6

jurisdictions. The industry complains that providing the claimant with new evidence or rationales
before making a final decision is costly. The industry's claim to cost impact is is suspect for:

ic} 'Y. Y Pp P'
several reasons.

First, several disability plans or insurers already provide for the right to review and respond.
They do so on a voluntary basis, as their comments to the proposed rules showed. Second,
courts require plans or insurers to do this in many cases. Last, whether they provide this

_ information to the claimant during the ERISA appeal process, they will have to provide it
eventually in one form or another. New reasons or evidence will need to be included in the
claim file and likely again in 26(a)(1) disclosures. Thus, the industry's portrayal of the chaos
that might ensue if they were required to supply these documents is not credible. If the issue is
the cost of mailing, such a concern should not be permitted to interfere with such basic a due
process right.

The rule permits a claimant to respond to a disability claims administrator's assertions in a way
that will make the response a part of the record if the claimant has to go to court to vindicate
his/her rights. This is because most ERISA cases are decided on a closed record. Without
this rule, the claims administrator's new evidence or rationale will be included in the record that
the court reviews, but the claimant's rebuttal will not. Perhaps what the industry is really chafing
about is the loss of its ability to strategically withhold information that would help the claimant
achieve reversal or win his/her case in court. It is not surprising the carriers would object to the
ability to stack the record and have the “last word” in the claim file.

Very truly yours,

Rebecca Grey

Ee GREYLAWFIRM pc


THE GREY LAWEFIRMec

December 8, 2017

By Mail: Office of Regulations and Interpretations,
Employee Benefits Security Administration

Room M-5655

US. Dept. of Labor

200 Constitution Avenue NW

Washington D.C. 20210

Re: — Re-Examination of Claims Procedure Regulations for Plans Providing
Disability Benefits °
RIN No.: 1210-AB39
Regulation: 29 C.F.R. §2560.503

Dear Deputy Assistant Secretary Hauser:

As an attorney who has represented ERISA policyholders for nearly 20 years, | am writing to

strongly discourage the Department from modifying the final disability claims regulations (Final

Regulation on Claims Procedure for Plans Providing Disability Benefits, 81 Fed. Reg. 92316
(Dec. 9, 2016)) that are now scheduled to go into effect on April 1, 2018.

The purported concerns raised by the industry are neither new nor persuasive. Rather, these
objections are recycled argument of the merits of the final rules which have already been
considered and rejected by the Department.

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

The Grey Law Firm PC Rebecea Grey, Exq.
The Russ Building grey@greylaw-sficom
235 Montgomery Street, Suite TO!

Son Francisco, CA 94104,

wwwagreylaw-sh.com


December 8, 2017
Page 2

Costs Will Not Increase

The insurance industry claims if the final rules go into effect there will be an increase in costs
that will, in turn, increase premiums resulting in reduced access to disability benefits. These
assertions, a classic insurance company bugaboo, are incorrect and have been rejected by the
Department previously. As the Department is well aware, an agency is not required to “conduct
a formal cost-benefit analysis in which each advantage and disadvantage is assigned a

monetary value." Michigan y. Environmental Protection Agency, 135 S. Ct. 1699, 2711
(2015).

Nonetheless, the Department has asked for data addressing whether costs increased in
response to the last set of rules applying to ERISA disability plans that became effective in
2002. In fact, the Department can rely upon information supplied by its own Bureau of
Labor Statistics. https://www.bls.gov/opub/btn/volume-4/disability-insurance-plans.htm.
The data shows that access and participation in employer-based disability insurance has
increased, not decreased, between 1999 and 2O14. This increase occurred despite that
employment in the service industry has increased, an industry in which employees are the least
likely to have access to employer-based disability coverage. This increase also occurred despite
the 2000 disability claims regulations and a series of court decisions addressing conflicted
decision-making, deemed exhaustion, the need to discuss and explain adverse benefits
decisions, and the participants right to respond to new evidence.

The Department has also asked for data about whether disability premiums increased in
response to the adoption of statutory bans on discretionary language clauses in disability
policies by some states. Notably, during the time period of the BLS study, many states enacted
discretionary clause bans. This includes but is not limited to Arkansas Admin. Code

©54.00.101-4 (2013); Cal. Ins. Code §IONO.6 (2012); Colo. Rev. Stat. §16-3-116
(2008); 50 Ill. Admin. Codes 2001.3 (2005); Md. Code ann. Ins. §12-211; Mich.
Admin. Codes. R. 50O.2201-2202 (2007); R.I. Gen. Law §§ 27-18-79; Tex. Admin.
Code §3.1202-1203; Tex. Ins. Code §1701.062, §1701.002 (2011); WAC §284-
96-012 (2009). Notwithstanding these statutory developments, access and participation in
disability plans increased according to the BLS data.

Also, during the period covered by the BLS document, two major insurers with significant
market share, UNUM and CIGNA, were examined by the states for poor claims handling and
became subject to fines and Regulatory Settlement Agreements that raised the bar for their
claims administration.

THE GREYLAWFIRM pc



THE GREY LAWFIRMec

http://www.maine.gov/plr/insurance/ publications reports/exam_rpts/2004/unum_multistat

e/unum multistate.html;

fr/insurance/ publications reports/exam_rpts/2009/pdf/ciqna_mer

https:// www insurance.ca.gov/O4OO-news/O1OO-press releases/2O13/releaseO44-

13.ckm. Nonetheless, during this period access and participation increased.

This history undermines the insurance industries false claims of increased expense and
decreased coverage. Accordingly, | urge the Department not to change the final rules in
response to the industry's strained logic that the costliness of the final rules will impact access to
disability benefits in the workplace.

The Benefits Far Outweigh the Purported Costs

ERISA disability claimants who are denied their benefits face a process that is onerous; far
below the standard for regular civil disputes. These procedural hurdles include: (1) no jury trials;
(2) there is a closed record from the claims process that can rarely be supplemented in
litigation; (3) courts often apply an unfavorable standard of review, and (A) there are no
remedies to discourage unfair and self-serving behavior on the part of plans and (5) the
statutory attorneys’ fees only accrue after suit is filed, despite the requirement that claimants
undergo a detailed and exhaustive administrative appeal process which is both time consuming
and expense. There will never be a level playing field much less one that favors plan
participants. United States v. Aegerion Pharmaceuticals, Inc., 2017 WL 5586728, at *7
(D.Mass. 11/20, 2017)("The insurance industry found it could largely immunize itself from
suit due to the Employee Retirement Income Security Act (“ERISA").) Even with the final rules
in place, plan participants will not have achieved the “higher-than-marketplace standards” that
the Supreme Court insists are required in processing ERISA claims. MetLife v. Glenn, 554
US. 105, 115 (2008). Any consideration the Department makes about the benefits of the
final rules relative to costs should take this “higher-than-marketplace” expectation into account
and acknowledge that ERISA exists to protect plan participants.

The Grey Law Firm PC Rebecca Grey, Esq.
‘The Russ Building grey@graylaw-sf.eom
235 Montgomery Street, Suite HOT

Son Francisco, CA 94IO4

P (415) 262.9926
F (415) 262.9981

wwve-greylaw-steom