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Abatie v. Alta Health & Life Insurance Co.

Feinberg, Jackson, Worthman & Wasow attorney Dan Feinberg, then at Lewis, Feinberg, Lee & Jackson, represented Karla Abatie, the widow of Dr. Joseph Abatie, in a landmark case. Dr. Abatie had been a radiologist at Santa Barbara Medical Foundation Clinic for over 20 years when he got sick with non-Hodgkin’s lymphoma. He had battled the disease for nearly eight years when he died in June 2000.

His widow Karla filed a life insurance claim with Alta Health & Life Insurance Company. Alta Health denied benefits, asserting that the proper paperwork had not been filed when Dr. Abatie went on permanent disability leave. The hospital where Dr. Abatie worked found the paperwork, but Alta Health denied the claim again, citing insufficient evidence that Dr. Abatie was “totally disabled” from the time he went on medical leave until his death. Alta Health had a financial conflict of interest because it both decided benefit claims under the plan and paid claims out of its own pocket.

Ms. Abatie initially lost her lawsuit against the insurance company and lost an appeal to the U.S. Court of Appeals for the Ninth Circuit. The Ninth Circuit, however, granted a petition for rehearing en banc, meaning that fifteen judges wanted to reconsider an important legal issue. The Ninth Circuit requested additional legal briefs regarding how the insurer’s financial conflict of interest should affect judicial review of the claim denial.

Dan Feinberg represented Ms. Abatie, arguing that Alta’s review of Ms. Abatie’s claim was tainted by its financial conflict of interest and that this should have reduced any judicial deference to Alta’s claim denial.

The unanimous en banc panel ruled for Ms. Abatie. The court overturned the original judgment and set a new precedent holding that benefit claim denials by Alta Health and future ERISA defendants would be subject to more searching judicial scrutiny if the defendant had a financial conflict of interest. Ms. Abatie later settled her claim against Alta Health.

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