Welcome Back Cadets…
LTC
Brian Landry
Claims Bureau
Robert Russ
Prudential
Karen Smyth
Prudential
Nolan Tully
Drinker Biddle & Reath LLP
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Welcome to Training
Roll Call
• Your Instructors (LTC Police Officers)
• Goals for training
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Examine real life case studies
3 perspectives: claims, SIU/Investigation, legal
Identify red flags, surveillance tactics, and legal hazards
associated with LTC claims
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First Case Study . . .
Background
• Female 73 year old former mechanical engineer residing in
Los Angeles, CA area
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Cash Indemnity Policy (not expense reimbursement)
$120 Daily Maximum Benefit with a Lifetime Maximum of 3 years
Claimant called to initiate her own claim; requested her own
physician perform the Face to Face Assessment
Claimant's physician is well-known to us
Face to Face Assessment performed: conditions include
fibromyalgia, diabetes, neuropathy, retinopathy,
osteoarthritis and bilateral rotator cuff tears
Cognitive problems alleged based on prior incidents
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First Case Study . . .
Background (cont.)
• Rx includes Aricept and Namenda
• Living with her son and his wife
• Certified as a Chronically Ill Individual; benefits
initiated
• Obtain medical records from a different physician;
records reveal she had been driving as recently as 3
months prior
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A Home Away From Home
Investigation
• Conducted activities check - Claimant does not reside
with son; living 2 miles away in an apartment and she
continues to drive
• Attempted unannounced visit - Claimant's son got
involved; visit and interview conducted at his home; he
answered all questions; Claimant appears incapacitated
• Attempted second unannounced visit and surveillance
at claimant's "real" residence. She answered the
door. Surveillance showed claimant attempting to use a
cane
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A Home Away From Home
Investigation (cont.)
• Third visit initiated; sent investigators to both
properties simultaneously
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Son stated claimant is sleeping; requested we return later
Daughter-in-law leaves residence and drives to claimant's apartment;
picks up claimant and returns with her to the house
Investigator returns to son's house; claimant is inside
dressed in nightgown with a walker
Administered Activities Questionnaire; son refused to
sign after reading fraud warning
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Legal Considerations
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If you were the attorney, what would your
recommendation be?
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Need more information
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Independent Assessment – what does that reveal?
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Maybe IME
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Does additional information corroborate investigation?
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Legal Considerations
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Independent medical evaluations corroborate
investigation.
What is your recommendation now?
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Deny claim and seek to rescind the policy
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File declaratory judgment action
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Refer case to state authorities for consideration
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Case Study #2
Background
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Male in his 60s, retired VP of a bank
 Claim for benefits based on a brain injury as a result of a MVA 9 months
prior to claim submission
 Insured claimed the need for hands on assistance 24 hours per day;
seven days per week due to inability to perform ADLs
 Approved for benefits after in-home assessment was conducted; insured
presented as lethargic and incoherent
 Claims handler found the insured and his wife were associated with a
ranch and Alpacas through an online review
 No SIU in place within carrier; case was referred for investigation
directly from the claims department to the outside vendor
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Best in Show, Worst in Fraud
Investigation
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Prior to utilizing surveillance, alternative methods of
investigation were used in order to gather information
that would lead to constructing a productive game plan
for surveillance
Background investigation results:
 Insured
and his wife were in the process of moving from their home to a
new 20 acre ranch in WA
 Insured and his wife obtained a business license for their ranch and are
involved in local associations
 Social media indicated the insured loved the outdoors, hiking, skiing, sailing,
camping, starting an adventure raising Alpacas and building greenhouses
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Best in Show, Worst in Fraud
Investigation (cont.)
• Structuring a productive surveillance
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Conducted a day of surveillance prior to the show and
the two days of the show
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Additional surveillance conducted around an assessment
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Conclusion of investigation
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Best in Show, Worst in Fraud
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Legal Considerations
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Based on the facts learned in its investigation, the
company has denied the claim
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Shortly after denying claim, company receives strongly
worded letter from claimant’s attorney
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Letter seeks to appeal decision to deny the claim
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Letter threatens litigation against company
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Legal Considerations
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You are the Attorney, what is your Recommendation?
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Company should strongly consider resuming payment because insured
has retained counsel and has threatened litigation
Company should engage in discussions with insured’s attorney and should
render decision on appeal based on all information available.
Company should file declaratory judgment action seeking declaration as
to eligibility for benefits
Company should deny appeal outright because of overwhelming evidence
of fraud
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Legal Considerations
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You are the Attorney, what is your Recommendation?
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Company should strongly consider resuming payment because insured
has retained counsel and threatened litigation
(Probably not)
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Company should engage in discussions with insured’s attorney and should
render decision on appeal based on all information available.
(Probably)
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Company should file declaratory judgment action seeking declaration as
to eligibility for benefits
(Possibly – conservative approach)
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Company should deny appeal outright because of overwhelming evidence
of fraud?
(Possibly – aggressive approach)
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Case Study #3
Background
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Female 64 year old former dentist residing in Los
Angeles, CA
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Claimant initiated claim because of carpal tunnel
syndrome and diabetic neuropathy
Face to Face Assessment performed
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Cash Indemnity Policy (not expense reimbursement)
$145 Daily Maximum Benefit with an Unlimited Lifetime Maximum
Symptoms alleged to be so severe that she was unable to write a sentence
as required by cognitive portion of the assessment
Claimant's physician is well-known to us
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Case Study #3
Background (cont.)
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Certified as a Chronically Ill Individual; benefits
initiated
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Diagnoses seemed inconsistent with Plan of Care
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Opened an investigation with SIU
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Power Washers and Claims
Investigations
Investigation
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Sent Daily Activities Questionnaire
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Conducted Activities Check
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Claimant indicated she needs assistance because of severe back, neck,
shoulder and arm pain, but continues to drive
May have some care in place
Personally visited Claimant
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She was in front of her home operating a power washer
Upon identification, she became "dizzy" and went indoors
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Power Washers and Claims
Investigations
Investigation (cont.)
• Interviewed claimant alone
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Interviewed husband alone
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She reported she has two caregivers in addition to her husband
Needs help bathing and dressing. Can sometimes go out on her own.
He said one of the "caregivers" was a housekeeper
He never heard of the other caregiver.
At a later date, attempted to conduct surveillance;
results unsuccessful/inconclusive
Claimant has moved into a large high-rise
apartment/condo building
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Power Washers and Claims
Investigations
Investigation (cont.)
• High rise condo building inaccessible.
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Do we have enough information to make a
determination on the claim now?
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Need more information – but how do we get it?
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Legal Considerations
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You are the Attorney, what is your Recommendation?
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Deny claim and either seek to rescind policy or seek declaratory judgment
Continue to pay claim based on evidence that insured is still benefit
eligible; continue to gather information at periodic intervals and monitor
recovery
Continue to pay claim under Reservation of Rights while diligently
seeking additional information
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Legal Considerations
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You are the Attorney, what is your Recommendation?
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Deny claim and either seek to rescind policy or seek declaratory judgment
(Probably not)
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Continue to pay claim based on evidence that insured is still benefit
eligible; continue to gather information at periodic intervals and monitor
recovery
(Possibly – More conservative approach)
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Continue to pay claim under Reservation of Rights while diligently
seeking additional information
(Possibly – Less conservative approach)
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Legal Considerations
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Difficult situation to evaluate
Maintain objectivity
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Ok to protect the company’s rights/interests, but do so
thoughtfully
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No arbitrary decisions
No inaccurate or misleading communications
What would a jury do?
“When all else fails, read the directions”
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Not every “suspicious” case is a fraud
Legal focus shifts from considering fraud, to making correct and defensible
decision under the policy
What does the policy say?
What do your SOPs say?
Pitfall: Seeing all claims in black and white
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Case Study #4
Background
• Male 71 year old former used car salesman residing in Iowa
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Claimant initiated claim stating he needed help with bathing
and dressing because of a tremor in his head and arm
Face to Face Assessment performed
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Cash Indemnity Policy (not expense reimbursement)
$100 Daily Maximum Benefit with and Unlimited Lifetime Maximum
Symptoms alleged to be so severe that he has lost the entire use of his left arm
Physician certifications we obtained confirmed he needed
ADL assistance due to tremors
Certified as a Chronically Ill Individual; benefits initiated
Upon reassessment, we learned he is still driving and that
he owned a used car lot
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Never Trust a Used Car Salesmen
Investigation
• Conducted Activities Check
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Found to be actively working at the used car lot as the sole employee
Observed rolling a tire into his garage with one hand
Surveillance Initiated
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Retrieved garbage cans from the street, drove to used car lot, worked at
car lot -- including bending, stooping, squatting, donning/doffing
clothing and spray-painting with the arm he claimed to have no use of
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Never Trust a Used Car Salesmen
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We have some footage of the claimant:
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Never Trust a Used Car Salesmen
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We still need more information
Scheduled IME
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Examined the insured and watched our surveillance video
Abilities exhibited during the video were completely
inconsistent with how the insured presented at the office
Determination made that claimant is not Chronically Ill
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Legal Considerations
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What should the company do now?
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Do you have enough evidence to terminate benefits?
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Let’s assume that the company terminates benefits –
what next?
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Legal Considerations
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Should the company:
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Seek to rescind the policy?
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File civil suit for fraud to recover benefits paid?
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Refer case to state authorities for consideration?
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Legal Considerations
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Rescission
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Contestable period
Policy language
State law
Voluntary rescission
Return of premium
No apparent problem with “contract formation”
Pitfall: Attempts to “unilaterally” unwind Policy
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Legal Considerations
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File suit for fraud to recover benefits paid
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State law
“it’s not what we know, it’s what you can prove”
Amount in controversy
Damages unrecoverable
Send message to the marketplace
Open door for counterclaims?
Possible media exposure/industry perception
Potential Pitfall: Expense
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Legal Considerations
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Refer case to state authorities for consideration
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State law – mandatory fraud reporting requirement?
What does the evidence show
Send message to marketplace
Restitution order possible (but probably unlikely)
Industry/marketplace perception
Utilize in-house/outside counsel
Possible pitfall: privilege considerations; possibility that
authorities do nothing.
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