6 WEDNESDAY, AUGUST 11, 2010
Los Angeles
The Waiver Doctrine, Alive
And Well in ERISA Cases
By Robert J. McKennon
C
alifornia courts have long applied the waiver doctrine in
insurance cases, usually against insurers to afford cover-
age to insureds. But whether the waiver doctrine applies
to group insurance claims under the Employee Retirement
Income Security Act (ERISA) was resolved just last week
by the 9th U.S. Circuit Court of Appeals in Mitchell v. CB Richard Ellis
Long Term Disability Plan, 2010 DJDAR 11532 (9th Cir. July 26). It
was not a stretch to believe that the 9th Circuit, typically one of the
most pro-insured circuits when deciding ERISA cases, would apply
the waiver doctrine to afford coverage to plan participants. After all,
most circuit courts that have considered the issue have adopted
waiver in ERISA cases. See Lauder v. First Unum Life Ins. Co., 284
F.3d 375, 382 (2d Cir. 2002) (holding insurer waived its right to rely
on lack of disability as a defense when, upon becoming aware of the
individual’s disability, it failed to investigate or challenge it); Rhorer
v. Raytheon Eng’rs & Constructors Inc., 181 F.3d 634, 645 (5th Cir.
1999) (finding waiver available where insurer knew individual did not
meet the eligibility requirements but nonetheless enrolled, accepted,
and retained premiums from the individual); see also Gaines v. Sar-
gent Fletcher Inc. Group Life Ins. Plan, 329 F. Supp. 2d 1198, 1222
(C.D. Cal. 2004) (holding insurer waived the right to require submis-
sion of a personal health statement when it enrolled and accepted
premiums from plaintiff without giving any indication that plaintiff
failed to comply with the precondition to obtaining coverage).
Robert J. McKennon, a partner of
McKennon|Schindler in Newport Beach,
represents clients in business and insurance
litigation matters, with a particular emphasis
on life, health and disability insurance,
insurance bad faith, ERISA and unfair
business practices litigation. He can be
reached at rm@mslawllp.com. His firm’s
California Insurance Litigation Blog is at
www.californiainsurancelitigation.com.
Moreover, the 9th Circuit has recognized the similar equitable principle
of estoppel in ERISA cases. See Alaska Trowel Trades Pension Fund v.
Lopshire, 103 F.3d 881, 884 (9th Cir. 1996) (holding equitable estoppel
available in ERISA action to recover trust fund contributions); Pisciotta
v. Teledyne Indus. Inc., 91 F.3d 1326, 1331 (9th Cir. 1996) (recognizing
the availability of equitable estoppel in the context of ERISA, but finding
estoppel unavailable because the terms of the plan were unambiguous).
It has been a long-standing requirement in ERISA that a long-term
disability benefits insurer must disclose all of the reasons for the denial
of a claim in writing at the administrative review level. The question
became: Would the doctrine of waiver apply to prevent an insurer from
relying on the new reason for the denial when it first asserted this basis
Law 2020 and Beyond: Perspective Is Everything
By Sanford Jossen
T
he budget crisis in California has forced the judiciary,
the Administrative Office of the Courts and the California
Judicial Council to become more efficient and work with
less while servicing more people. Even with the option of
alternative dispute resolution, courts cannot keep up with
the number of cases and jury trials. So, how will California create
and provide a justice system for the future?
On July 22 through July 24, Fortune hosted the Fortune Brain-
storm Tech Conference in Aspen, Colo. (fortuneconferences.com/
brainstormtech), where approximately 150 luminaries, visionaries, archi-
tects, captains, “big brains” and puppet masters of the digital, media,
telecommunications and Internet world convened to attend seminars
and discuss the future of these industries. Attendees included Barry
Diller, CEO of IAC/InterActiveCorp, Walter Issacson, president of The
Aspen Institute, Steven Bratt, CEO of the World Wide Web Foundation,
Ursula Burns, chairwoman of Xerox and Lisa Jackson, Administrator for
the U.S. Environmental Protection Agency, as well as executives from
companies such as Twitter, Time-Warner, AOL, Mozilla, Linkedin, Hewlett-
Packard, Microsoft, Johnson and Johnson, AT&T, Nielsen, Myspace, IBM,
ABC, Google, and Yahoo. Seminars addressed areas such as “Rede-
signing Security in the Digital Age,” “Smart Biology — Where Computer
Science Meets Health Care” and “Media Goes Global — A Financial
Perspective” as well as presentations by Irving Azoff, chairman of Live
Nation and Charles Phillips, president of Oracle, among others. Not open
to the public, this was the elite of the media world in a conference for
Charles T. Munger Gerald L. Salzman
Chairman of the Board Publisher / Editor-in-Chief
J.P. Guerin Robert E. Work
Vice Chairman of the Board Publisher (1950-1986)
David Houston
Editor
Alexia Garamfalvi Sharon Liang
San Francisco Editor Legal Editor
Liz Enochs Pia Sarkar Michael Gottlieb Evelyn Larrubia
Associate Editor Associate Editor Associate Editor Associate Editor
San Francisco San Francisco Los Angeles Los Angeles
Aris Davoudian, Designer
Los Angeles Staff Writers
Pat Alston, Gabe Friedman, Emma Gallegos, Evan George,
Kari Hamanaka, Sandra Hernandez, Catherine Ho, Ciaran McEvoy,
Susan McRae, Jean-Luc Renault, Anna Scott
San Francisco Staff Writers
Rebecca Beyer, Laura Ernde, Sara Randazzo,
Jill Redhage, John Roemer, Fiona Smith, Amy Yarbrough
Bureau Staff Writers
Craig Anderson, San Jose, Jason W. Armstrong, Riverside,
Don J. DeBenedictis, Santa Ana, Pat Broderick, Mandy Jackson, San Diego,
Lawrence Hurley, Washington D.C.
Robert Levins, S. Todd Rogers, Photographers
Lisa Kestenbaum, Carla Pineda Editorial Assistants
Rulings Service
Seena Nikravan, Rulings Editor
Meryl Chambers, Verdicts and Settlements Editor
Edward Chang, Genevieve Knoll Legal Writers
Advertising
Audrey L. Miller, Corporate Display Advertising Director
Monica Smith, Los Angeles Account Manager
Joel Hale, Michelle Kenyon, San Francisco Account Managers
Kari Santos, Display Advertising Coordinator
Nikki Delucchi, San Francisco Administrative Coordinator
Art Department
Kathy Cullen, Art Director
The Daily Journal is a member of the Newspaper Association of America,
California Newspaper Publishers Association, National Newspaper Association and Associated Press
for denial in litigation and did not inform the insured of it in the claims
and appeal process? The 9th Circuit answered this question in the af-
firmative in Mitchell.
Michael Mitchell had been a successful commercial real estate broker
since 1983. Mitchell’s employer, CB Richard Ellis, provided long-term
disability benefits to its employees. From Jan. 1, 2000 until Dec. 31,
2003, Unum Life Insurance Co. of America provided long-term disability
benefits to the plan’s participants. MetLife replaced Unum as the insurer
and claims administrator as of Jan. 1, 2004. In February 2001, Mitchell
was diagnosed with restless leg syndrome. In October 2003, Mitchell
was also diagnosed with major depression, chronic fatigue syndrome,
sleep apnea, and hemochromatosis. Mitchell continued to work and his
job performance was successful. In 2001, the year he was first diag-
nosed, his income was approximately $180,000. In 2002, his income
rose to $250,000. But, by March 2004, Mitchell’s disability interfered
with his ability to earn income, which was solely based upon commis-
sion and bonuses. In 2003, his income dropped below $30,000, and in
2004 it fell to under $13,000.
Mitchell subsequently applied for long term disability benefits on
April 15, 2004, only a few months after MetLife took over as benefits
administrator and insurer of Ellis’ employees. In the MetLife application
for long term disability benefits, Mitchell provided the date of his first
treatment as October 2003. He also stated that he was still working and
that his disability began October 2003. MetLife denied Mitchell’s claim
based upon the definition of “disability” or “disabled” as defined in the
certificate of insurance, since Mitchell was still able to work based on
the doctor’s reports and in fact, was still working.
In December 2004, Mitchell filed an appeal and submitted sup-
porting letters from examining physicians, and additional medical
records. On Jan. 18, 2005, MetLife upheld the original denial,
although this time it based the denial on the ground that Mitchell did
not meet the definition of disability as defined in the summary plan
description. Under this definition, a plan participant must be “unable
to perform the material and substantial duties of his/her regular
occupation.” During the initial claim and the administrative review
processes, MetLife never specified, as a reason for denial, that it
was not the provider of long term disability benefits at the claimed
onset of Mitchell’s disability in October 2003.
M
itchell filed suit against MetLife on Feb. 2, 2005,
seeking long term disability benefits. MetLife then
asserted for the first time it was not the provider
of these benefits and Mitchell should have filed his
benefit claim with Unum because the claimed disability
predated its policy date. Mitchell filed with Unum in October 2005,
but was denied. Mitchell requested a review of this decision on Nov.
13, 2006, and on Jan. 11, 2007, Unum denied his appeal because
Mitchell continued to work. Mitchell then amended his complaint on
Jan. 5, 2007, naming Unum as an additional defendant. Unum then
filed a cross-complaint for indemnification against MetLife.
The District Court concluded MetLife had conflicting definitions of
accomplished “members” only.
The attendees of this conference live in the future. The media and
technology we now use and purchase — they developed years ago. That
“cutting-edge” cell phone or iPad you just bought — they created years
ago. Our technology today is their yesterday. This is an industry that
is and must be forward thinking at all times. They cannot afford to be
otherwise. Survival of the fittest and most capable of adaptation and
innovation is the law of their land.
Compare that with the perspective of our profession. We stand on
“stare decisis.” We look
backward first. We echo prec-
edent in the rule of law. We
live in the past. Intellectual
debate continues to reflect
the tension between the
origins of our Constitution
and the realities of modern
life. While there is a value to
legal precedent in the law,
administrators of justice
must be forward thinking.
Jurists must see the current
environment and embrace
the new media to create a
more efficient system.
While it is said that
“change comes slowly,” can
the legal profession, the
judiciary and society afford
to languish? This is not a
plaintiff’s versus defense
or jurist versus administra-
tion issue. These issues
and their consequences
involve everyone. More ef-
ficient use of time by judges
as afforded by technology
means more time for hear-
ing cases, deciding issues
and providing better service
to the public. I remember
arguing with judges not that
long ago about their refusal
to recognize CourtCall. I wrote briefs addressing its mandatory adop-
tion. I mentioned the reduction of pollution and traffic. It had no effect.
Personal appearance was required. I had to drive hours for a five minute
appearance, which was sometimes handled by a clerk. What a waste
of time, gas, and traffic! Think of how much time we would save if case
management conferences were conducted online. A judge could review
the statement of both parties, and propose trial and other dates based
on the status of the case, the status of discovery and the complexity of
the case — and parties can pick dates subject to court approval, like
making hotel reservations online. This online dialog process is used in
Central Civil West Courthouse in Los Angeles. And it works! Compare
this with your last experience in court. Doesn’t this seem more efficient
and a better use of time?
T
he court and the administrators of our justice system have
to get ahead of the power curve-or at least in synch. While
we may be bound to legal precedent as a basis for legal
analysis, we must recognize the sea in which we swim when
it comes to the administration of justice. Cell phones have
integrated two way video. Let’s use this in court. How about using
cameras to digitally record witnesses at trial? Testimony can be
replayed if the jury wants a readback. Also, studies have found that
more communication is non-verbal than verbal and a transcribed
record does not permit a jury to revisit demeanor or tone of voice
— subjects that are particularly telling. Court reporters may not like
it but the bottom line is, if technology is embraced, more time can
disability and abused its discretion when it applied the more limiting
definition of disability to deny long term disability benefits. The District
Court also applied the waiver doctrine and found that MetLife could “not
disavow that it was the administrator and insurer for Mitchell’s claim
when it never raised that reason during the administrative review.”
The 9th Circuit affirmed. The court concluded MetLife abused its dis-
cretion by relying on an “unwritten and unexplained objective evidence
requirement,” and by failing to meet its own requirements for providing
full disclosure when it denied benefits since it did not inform Mitchell of
its claimed date of onset coverage defense. The court first stated that
it need not address the waiver issue because Met Life was the “respon-
sible insurer at the time Mitchell submitted his claim under the plain
language of its policy.” However, the court then explained in footnote 2:
“[W]e are not persuaded that the district court erred in concluding
that MetLife waived its date of onset coverage defense. The purpose
of ERISA’s requirement that plan administrators provide claimants with
the specific reasons for denial is undermined ‘where plan administra-
tors have available sufficient information to assert a basis for denial of
benefits, but choose to hold that basis in reserve rather than commu-
nicate it to the beneficiary.’ These provisions ‘afford the beneficiary an
explanation of the denial of benefits that is adequate to ensure mean-
ingful review of that denial.’ Requiring that plan administrators provide
a participant with specific reasons for denial ‘enable[s] the claimant
to prepare adequately for any further administrative review, as well as
appeal to the federal courts.’ ‘[A] contrary rule would allow claimants,
who are entitled to sue once a claim had been ‘deemed denied,’ to be
‘sandbagged’ by a rationale the plan administrator adduces only after
the suit has commenced.’”
Even though one can argue that the 9th Circuit’s discussion of the
waiver issue in Mitchell is dicta, ERISA plan participants will rely on this
decision to argue for application of the waiver doctrine where it could
afford them benefits under an ERISA welfare benefit plan. Whether, and
to what extent, this doctrine will apply in other contexts remains to be
seen. However, it is a safe bet that the 9th Circuit is likely to expand its
use of waiver in the future to grant benefits to ERISA plan participants.
be used for trials and not administration.
In Los Angeles, Superior Court Presiding Judge Charles McCoy has
done an amazing job establishing an interactive center for unrepre-
sented litigants to file documents in small claims. Part of this process
can be defined as “disintermediation,” a term that refers to the process
of enabling participants to have direct transactions with the court by
a mechanism that does not always require direct interface with court
personnel. An example is the jury summons system where a recipient
can contact the court and arrange dates for jury service without having
to speak to anyone. Another
example is e-filing, making
it no longer necessary to
stand in line to file with a
clerk. Imagine a paperless
courthouse where pleadings
are available online after
electronic filing. No longer
would it be necessary for a
staff member to accept and
log payment of a filing fee
or tomanually retrieve the
file for future purposes. For
responses, counsel can, cut,
paste and edit the pleadings
as needed, which can then
be emailed to the court.
This would also save time at
the appellate and Supreme
Court level.
The attendees of Fu-
tureTech would be amazed
that the court system contin-
ues to function in prehistoric
digital time, using snail mail
and personal appearances.
I wonder how some of them,
given the opportunity, would
revamp and adapt our court
system so that it embraces
new media and technology.
What would our court system
look like then? While the
evolution of the law will continue to be based on precedent by nature
and design, the administration of justice must be focused on the future
if it is to continue serving the public. As difficult as it may be for some
in our profession, lawyers, judges and administrators must consciously
untether themselves from looking [only] backward. Our perspective must
change! The legal profession needs to distinguish between the origin
of the law and the manner in which justice is administered. We have no
choice to do otherwise. We have to do it now.
An administration of justice “Future Tech” dialog should be com-
menced with a solicitation of ideas and creation of an organization to re-
view them towards implementation. The attendees of Future Tech would
never wait. The competition is just too fierce and those who do would
fail. Unless we change our perspective, the system for the administra-
tion of justice and the public it serves will be left behind.
Sanford Jossen has extensive experience as
a civil litigator and is also an arbitrator and
mediator for the Los Angeles County Superior
Court.