This is a letter sent by the California Dept. of Insurance to an insurance company, concerning its denial of long term disability benefits for chronic fatigue syndrome. It chillingly outlines the insurer's tactics, and quotes the code sections violated.

It may be useful to other patients who have experienced arbitrary denials of benefits. Thanks to John Metz for providing it.

All Identifying information has been deleted.

Legal Division, Insurer Compliance Bureau

July 12, 2000

To: CCC Life Insurance Company

As you know, I have been reviewing PPP's complaint against CCC Life Insurance Company regarding his claim for long term disability benefits. As we discussed during last week's telephone conversation, this Department has serious concerns about CCC's handling of the claim. Our concerns include, but are not limited to the following:

1. Mr. PPP filed his claim in January of 1999 (the company's January 21, 1999 letter to Mr. PPP acknowledging its receipt of claim) yet CCC took until June of 1999 to deny the claim. Although, on February 2, 1999, the company requested additional information from claimant's primary care physician, Dr. PCP, it did not follow up with the doctor until March 25, 1999. From my review of the claim file, it appears that the company's unreasonably slow investigation delayed the processing of the claim, in violation of Section 790.03(h)(3) of the Insurance Code. Although the company has limited control over how quickly a doctor responds to requests for information, the company should have made a folow up request to Dr. PCP sooner.

2. Although Dr. PCP's April 19, 1999 response to the company's March 25, 1999 request for Physician's Report may have been cursory, his April 21, 1999 clarification letter clearly state that Mr. PPP is disabled. As Dr. PCP states on page 2 of his letter:

"Regardless of the exact etiology, he...certainly is suffering from stress reaction, anxiety, and depression, all of which are exacerbated by his work, making it impossible for him to return to his work. He is therefore disabled as far as his current job is concerned."

In reviewing the policy's definition of "Total Disability or Totally Disabled", it is clear that Dr. PCP's diagnosis satisfies this definition. As we discussed on the phone, there is nothing in the policy that requires that every single symptom of chronic fatigue syndrome or any other illness be displayed by a claimant or documented by a physician before the claimant qualifies for benefits. The fact is that the medical records and Dr. PCP's detailed letter clearly show that Mr. PPP is disabled, that is, unable to perform each of the main duties of the employee's occupation. Although Mr. PPP provided "proof of claim" as provided under the policy, within 90 days after the end of the elimination period (which ran from August 28, 1998 through November 27, 1998), benefits were not forthcoming. Instead the company denied the claim on June 24, 1999 per its letter to claimant's attorney, Mr. AAA.

3. If Dr. PCP's office and treatment records pointed to a mental illness (as stated in the company's June 24, 1999 letter to AAA, why did the company wait so long to exercise its right to examination under the policy? The claim file reflects that the company, acting upon the recommendation of its Appeals Council, waited until February 10, 2000 to bring up the subject of an "independent psychiatric evaluation" (see the company's February 10, 2000 letter from ??? to ???) CCC's lagging investigation continued to cause delays in the processing of the claim. Regardless of whether claimant's disability was due to a physical or mental illness or some combination of the two (which, again, the company could have explored by way of an independent medical exam) the company has an obligation to begin paying benefits upon receiving proof of claim.

4. On May 11, 1999, the company informs AAA that Mr. PPP's claim has not been denied and that his file has been referred to an outside medical consultant for review. This "review" by Drs. OPD (psychiatrist) and OOM (occupational medicine) both with MMM Services out of ???, consisted of a paper review of medical records and tests performed. Neither of these non-California licensed physicians examined Mr. PPP. Rather, their opinions and conclusions are based upon physician records that were prepared for treatment purposes, not for the purpose of proving a claim. The Department has serious concerns about the company's use of and reliance upon these paper reviews.

5. On June 24, 1999, the company informs AAA that his client's claim has been denied. On June 30, 1999, Mr. PPP requests copies of the company's appeals process as well as other documents (the claim file notes that this letter was received by the company on July 6, 1999.) In a July 23, 1999 letter, Mr. PPP has to repeat his request for information. The company's failure to provide a complete response to a claimant immediately but in no event more than 15 days after receipt of that communication violates Section 2695.5(b) of the Fair Claims Settlement Practices regulations.

The company responds to Mr. PPP's letters on August (, 1999, informing him that "[a]s of this date, we have not received a formal appeal..." However, in a July 12, 1999 unsigned letter to Mr. PPP, the company states: "This is to acknowledge receipt of your appeal for Long Term Disability Benefits." Please explain this apparent discrepancy in the file.

As part of his Appeal, Mr. PPP is examined by Dr. APD, a psychiatrist, and Dr. CFS, a chronic fatigue syndrome expert (Dr.??? first saw Mr. PPP in late April of 1999). Their findings are summarized in Dr.???'s July 21, 1999 letter to ???, and in Dr.???'s October 26, 1999 letter. Dr. CFS notes that he has cared for and has experience with over twelve hundred patients with chronic fatigue syndrome. His letter states:

"Despite the provision of the attending physician's statement completed by Dr. PCP, and CCC Life Insurance Company's review of other medical records as reported in August 9, 1999, I am unable to determine or understand why the evaluation specialist denied his claim for disability monthly benefits... Perhaps there is some confusion regarding the differential diagnoses rendered by Dr. APD, a psychiatrist, and Dr. ???, but it needs to be made clear that just because certain individuals may manifest ... psychiatric symptoms such as generalized anxiety with panic attacks perhaps brought on by the work at the auto dealership, this does [not] therefore exclude the concurrent and on-going diagnosis of Chronic Fatigue Syndrome, which in my professional opinion is the singular cause of his total disability."

On November 24, 1999, the company informs Mr. PPP that, even after reviewing the information from Drs. APD and CFS, "we have determined that we are unable to approve benefits. In its letter the company states:

"This information indicates Mr. PPP is claiming disability as of August 29, 1998. The information further indicates that Mr. PPP worked on a part-time basis from October 15, 1998, to December 22, 1998. The Elimination Period is a specified amount of time that must be satisfied before benefits can be considered. The applicable Elimination Period for his claim is August 29, 1998, to November 27,1998."

"We have thoroughly reviewed all the information contained in Mr. PPP's claim file, and we have determined that the information provided does not substantiate that hewas Totally or Partially Disabled under the terms of the policy throughout and beyond the 90-day Elimination Period. With your recent letter, you included information from Dr. APD and Dr. CFS. However the information from Dr.??? indicates he first treated Mr. PPP in late April of 1999, and Dr. ??? indicate he first treated Mr. PPP on August 23, 1999. Therefore the records from these physicians do not provide us with medical documentation to establish Mr. PPP's disability status during the 90-day Elimination Period."

"...To reconsider our decision, we must be provided with medical documentation to establish that Mr. PPP was unable to perform each of the main duties of his occupation as a general manager. ...the information must substantiate that he was Totally Disabled as of August 29, 1998 and remained disabled throughout and beyond the 90-day elimination period."

I have a number of questions and/or concerns in response to the above. Firstly, where in the claim file does it indicate that Mr. PPP went back to work part-time during the Elimination Period? Although it appears that he made some attempts to return to work during the August 29 through November 27, 1998 period, he was unable to do so. Even if he had returned to work on certain days on a full-time basis, the policy makes it clear that "[d]ays on which the Insured Employee returns to work on a full-time basis will not count towards the Elimination Period." It is my understanding that any days that Mr. PPP worked full-time (which, again, does not appear to be any) may have extended the Elimination Period but does not support denial of the claim. It is the Department's position that the company's unfounded reliance upon the Elimination Period violates Sections 790.03(h)(3), (4) and (5) of the Insurance Code.

In its August 9, 1999 letter to AAA, the company suggests that claimant may want to provide additional medical documentation which "must substantiate that he was Totally Disabled during and beyond the Elimination Period." Given that August 9, 1999 is months after the August 29 through November 27, 1998 Elimination Period dates, it would be impossible for claimant to provide additional, that is, new medical information that covers a period of time that has already past. In other words, if the company refuses to consider the July 21, 1999 and October 26, 1999 letters from Drs. OPD and CFS on the grounds that they saw him after the elimination period was past, why did the company even suggest that additional medical information be provided by claimant? Again, the company appears to be delaying in the payment of a claim where liability has become more than reasonably clear, in violation of Insurance Code Section 790.03(h).

Upon concluding its review of the file, it is the Department's position that the company should have begun paying benefits immediately after the conclusion of the 90-day elimination period (November 27, 1998). Alternatively, the company could have pointed to any days that Mr. PPP worked full-time and adjusted the elimination period accordingly. In the Department's opinion, detailed documentation submitted by claimant satisfied the policy's Proof of Claim requirement. In addition to the medical records and other documents provided by Claimant's treating physician, Dr. PCP, (which records and documents the Department believes provided adequate proof of claim), claimant provided follow-up documentation from Drs. APD and CFS. If the company had a concern that claimant's disability might have been subject to the 24-month mental illness limitation, it should have examined claimant at that point in time. We also believe that company's numerous requests for or suggestions to submit additional medical information is in violation of Section 2695.7(d) of the Fair Claims Settlement Practices regulations.

As we discussed on the phone, the Department plans to commence formal disciplinary action against the company in the form of an Order to Show Cause (see Insurance Code Section 790.03(h)). Pursuant to Section 2695.5(a) of the claims regulations, please provide a complete response to this letter immediately but in no more than 21 days from its receipt by the company. Please indicate whether the company intends to pay Mr. PPP's long term disability benefits that the Department believes are owed him under the policy and the law.

Very truly yours,


Senior Staff Counsel