Merritt Personal Lines Manual: Overuse of Treatments
Another tactic used by insurance companies to try to get out of paying a claim is the overuse of treatments defense.
The case Andrews-Clarke v. Travelers Insurance Co. presents a particularly wretched example of this problem. Richard Clarke, the plaintiff's deceased husband, was a severe alcoholic and was admitted to the hospital for inpatient detoxification treatment.
Although the Travelers policy authorized up to 30 days of inpatient alcohol-related treatment annually, the third-party administrator (TPA) retained by Travelers authorized only a five-day stay. Clarke was discharged but remained alcohol-free only briefly. He admitted himself to another hospital, but the TPA authorized only eight days of treatment. Almost immediately after discharge, Clarke resumed drinking, took cocaine and an overdose of prescription drugs and attempted suicide.
After he was revived, a state court ordered him committed for 30 days. The "Court Clinic" sought approval from the TPA to admit Clarke to a private hospital. The TPA refused to approve any treatment. Clarke was therefore committed for treatment to a state prison, where he was raped and beaten,” but not treated for his addiction.
After his incarceration, Clarke tried to return home but only resumed drinking. After a long binge Clarke was placed in police custody and, shortly after his release, committed suicide.
Clarke's widow and children sued Travelers and the TPA in state court for violations of state law. Travelers and the TPA promptly removed the case and moved to dismiss for failure to state a claim on the grounds that ERISA preempted the state law claims. After a long analysis and argument for a change in the law, the court dismissed the state law claims.
The district court noted that all the state law claims arose from the allegation that the claims for benefits under the Travelers policy were improperly handled. Because there is no recovery under ERISA for wrongful death, personal injury or other damages caused by the improper refusal to authorize treatment, the court also noted that a decision that the state law claims were preempted would "immunize Travelers and [the TPA] from any potential liability for the consequences of their denial of benefits."
Because the state law claims were intimately related to plan administration and would have created an alternative set of rights against the plan, the court believed it had no other choice. The interest of the plans in preventing overuse of treatment trumped the interest of the people counting on benefits.
