This week’s notable decision is Tran v. Minnesota Life Ins. Co., No. 17-CV-450, 2018 WL 1156326 (N.D. Ill. Mar. 5, 2018), a case involving a denial of accidental death & dismemberment (AD&D) benefits on the basis of policy exclusions for intentional injuries.  Here, the insured’s death was caused by “Asphyxia due to hanging, autoerotic in nature.”  Following his death, the insured’s wife submitted a claim for AD&D benefits under the insured’s group policies.  As you might have guessed, Defendant Minnesota Life denied the claim.  Its rationale was that the insured intentionally put a rope around his neck to cut off the air flow to the lungs and blood flow to the brain, resulting in lost consciousness and death.  Since the death resulted from a self-inflicted injury, the policies’ exclusions for death caused by self-inflicted injuries apply.  

In appealing the claim denial to Minnesota Life, Plaintiff submitted evidence showing that her husband’s death was accidental in nature and that he did not intend or attempt to self-inflict injury to himself.  She explained, “[a]lthough perhaps more unusual, autoerotic asphyxiation is no different than sky-diving, motorcycle riding, or sailing, in that they are activities people take part in for enjoyment, but which may conceivably lead to their death in the event of accident.”  Defendant obtained a report from a doctor who explained that the risk of death from autoerotic asphyxia is high because the practitioner is alone and unconscious.  Defendant upheld its claim denial and Plaintiff filed suit.

The court noted that the only dispute is whether the exclusions for death that results from, or is caused directly by, self-inflected injuries applies to Plaintiff’s claim for AD&D coverage.  Defendant claimed that the injury, which resulted in death, was not an accidental injury which is unexpected and unforeseen.  

The court surveyed the caselaw involving similar deaths and concluded that reasonable minds could disagree about whether the insured’s intentional induction of cerebral hypoxia is, in and of itself, a self-inflicted injury under the facts of this case.  There is no evidence that the insured intended to injure himself.  For example, he employed measures to protect himself from strangulation, including a towel, a foot resting on a step stool, and a possible release mechanism with the rope.  There is also evidence that he had engaged in this activity before and survived.  The court could not say that the insured’s loss of consciousness and strangulation were substantially certain to result from his conduct.  It explained that though the practice of autoerotic asphyxiation is risky, Plaintiff and many others engage in that practice without losing consciousness, strangling themselves, or dying.  As such, Defendant should not have denied coverage based on the exclusions for intentional injuries.  The court granted Plaintiff’s motion for summary judgment.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Second Circuit

Verdier v. Thalle Constr. Co., Inc., No. 14CV04436NSRLMS, 2018 WL 1136615 (S.D.N.Y. Mar. 1, 2018) (Judge Nelson S. Roman).  In this matter over Deferred Compensation Plan benefits, Defendants admitted to liability but the parties disputed the amount owed to Plaintiff.  The court ultimately determined that Plaintiff was entitled to the lower amount calculated by Defendant.  Following that determination, the court decided that Plaintiff is due an award of attorney’s fees of $24,890.55 and costs in the amount of $868.89.  The court applied a 20% reduction across the board due to Plaintiff’s limited success in not recovering the full amount he originally claimed he was due.

Fifth Circuit

Thomason v. Metro. Life Ins. Co., No. 3:14-CV-86-K, 2018 WL 1174086 (N.D. Tex. Mar. 5, 2018) (Judge Ed Kinkeade).  Following the Fifth Circuit’s affirmation of the district court’s determination that MetLife incorrectly interpreted the meaning of “elected to receive” pension benefits to apply to Plaintiff’s direct rollover to move his benefits to his IRA, the court granted Plaintiff’s renewed motion for attorneys’ fees.  After reducing the total by 10% for block billing, the court awarded a total of $243,650.18 in attorney’s fees.

Ninth Circuit

B.R. & W.R. v. Beacon Health Options, et al., No. 16-CV-04576-MEJ, 2018 WL 1184763 (N.D. Cal. Mar. 7, 2018) (Magistrate Maria-Elena James).  In this case, Plaintiffs filed suit to obtain reimbursement of residential treatment facility expenses for the Plaintiff’s (a child) out-of-network treatment.  The court granted Defendant’s motion for attorneys’ fees in part after they prevailed on three motions to dismiss.  “[T]he record here is devoid of material supporting the inference that Plaintiffs had a reasonable basis for filing their successive complaints, which continued to assert allegations the Court had rejected as conclusory, insufficient to state a claim, and/or based on a fundamental misreading of the SPD. This factor weighs in favor of awarding fees.”  Defendant is only entitled to fees and costs incurred after the court dismissed the Second Amended Complaint.

Breach of Fiduciary Duty

Second Circuit

United States of America v. Hoey, Jr., No. 16-2738-CR, __F.App’x__, 2018 WL 1211826 (2d Cir. Mar. 8, 2018) (PRESENT: GUIDO CALABRESI, DENNY CHIN, SUSAN L. CARNEY, Circuit Judges).  Defendant-appellant Thomas Hoey, Jr., appealed from a judgment of conviction and an order of restitution after he was convicted by a jury of embezzlement from an employee benefit plan, interstate transport of stolen money, wire fraud, and money laundering.  The court determined that the district court did not err by allowing evidence of Defendant’s lavish spending habits while barring evidence of his spending on illegal activities (e.g., drugs and prostitutes).  The court affirmed Defendant’s conviction and order of restitution but vacated and remanded his sentencing in light of the absence of a state conviction.

Eleventh Circuit

Birmingham Plumbers and Steamfitters Local Union No. 91 Health And Welfare Trust Fund v. Blue Cross Blue Shield of Alabama, No. 2:17-CV-00443-JHE, 2018 WL 1210930 (N.D. Ala. Mar. 8, 2018) (Magistrate Judge John H. England).  “The provisions of the ASA unambiguously provide that BCBS’s fiduciary duty with respect to administering claims is limited by the eligibility information the Employer provides. If the Employer had performed its duty to provide BCBS with the participant’s Medicare eligibility information, BCBS could have administered the claim accordingly. However, there is no allegation the Employer provided such information regarding the participant at issue. Accordingly, there can be no claim that BCBS failed to act in accordance with the Plan documents or that BCBS breached its fiduciary duty, when BCBS ‘rel[ied] on eligibility information submitted by the Employer.’”

Class Actions

Ninth Circuit

Moyle v. Liberty Mut. Ret. Benefit Plan, No. 10CV2179-GPC(MDD), 2018 WL 1141499 (S.D. Cal. Mar. 2, 2018) (Judge Gonzalo P. Curiel).  The court granted final approval of the class action settlement covering employees of Liberty Mutual who were former employees of Golden Eagle Insurance Company, and who were or will be denied credit for all years of service with Golden Eagle for purposes of calculating benefits under the Liberty Mutual Retirement Benefit Plan.  The settlement provides them with 50% of the retirement benefit they would have received if they prevailed at trial.  In addition, Liberty will pay $7.5 million in attorneys’ fees to Class Counsel, reimburse $250,000 in out-of-pocket expenses, and pay $25,000 in total incentive awards to class representatives. 

Disability Benefit Claims

Second Circuit

Sigal v. Metropolitan Life Insurance Company, No. 16-CV-3397 (JPO), 2018 WL 1229845 (S.D.N.Y. Mar. 5, 2018).  The court found that the language of the Plan is unclear as to whether discretionary authority was intended to be conferred via incorporation of the “Additional Information” sections.  MetLife failed to carry its burden to demonstrate that the Plan document clearly bestowed discretionary authority upon it, so the court reviews its benefits decision de novo.  As to the merits, the court noted that the evidence in the record reveals a conflict between competing physician opinions.  The court found that these opinions preclude summary judgment for either party.

Third Circuit

Vetter v. Am. Airlines, Inc. Pilot Long-Term Disability Plan, No. PWG-16-2833, 2018 WL 1169182 (D. Md. Mar. 6, 2018) (Judge Paul W. Grimm).  The court determined that the Plan’s decision not to award benefits before May 3, 2012 or after July 23, 2012 was not supported by substantial evidence, but also that the onset and duration of Plaintiff’s disability are not clear on the record. The court denied the parties’ cross-motions for summary judgment and remanded the case to the plan administrator to determine the date when Plaintiff’s insomnia and fatigue rendered her disabled under the Plan, as well as the date on which that disability ceased to exist, and to identify the evidence upon which it relies to support its determinations.

Sixth Circuit

Ritter, Jr. v. Liberty Life Assurance Company of Boston, No. 3:17-CV-00445-JHM, 2018 WL 1189413 (W.D. Ky. Mar. 7, 2018) (Judge Joseph H. McKinley, Jr.).  The court determined that Kentucky law does not prohibit the use and enforcement of discretionary clauses in insurance contracts, the discretionary clause in the Liberty Life policy is enforceable, and abuse of discretion review will apply to the court’s review. 

Moore v. Metropolitan Life Insurance Company, et al., No. CV 5: 17-105-DCR, 2018 WL 1187770 (E.D. Ky. Mar. 7, 2018) (Judge Danny C. Reeves).  On Plaintiff’s Section 502(a)(1)(B) claim for a certain amount of long-term disability benefits, the court determined that he may not obtain benefits based on an obsolete version of his plan.  The proper vehicle to bring an invalid amendment claim is under Section 502(a)(3).  Even if MetLife’s response to Plaintiff’s claim for additional benefits was not in substantial compliance with Section 503, the court found that MetLife’s violation has been cured and that remanding the case would be a useless formality.  The employer provided evidence sufficient to establish that it satisfied its obligation to furnish the 2011 SPD by means reasonably calculated to ensure actual receipt.  It was not a breach of fiduciary duty by the employer in providing Plaintiff with the wrong certificate in response to his attorney’s request.  

Eighth Circuit

Cassidy v. Union Security Insurance Company, No. CV 16-4087 (JRT/FLN), 2018 WL 1169135 (D. Minn. Mar. 6, 2018) (Judge John R. Tunheim).  The court determined that the following Plan language explicitly grants the relevant discretion to Union Security:  “The policyholder delegates to us and agrees that we have the authority to determine eligibility for participation or benefits and to interpret the terms of the policy. However, this provision will not restrict any right you may have to pursue an appeal or file a lawsuit if your claim for benefits is denied.”  The court denied Plaintiff’s motion for de novo review.

Ninth Circuit

Abrams v. Life Insurance Company of North America, No. 16-55858, __F.App’x__, 2018 WL 1189181 (9th Cir. Mar. 7, 2018) (Before: BERZON and BYBEE, Circuit Judges, and WOODCOCK, District Judge).  Defendants did not violate the Plan by offsetting Plaintiff’s monthly LTD benefit by 50% of his monthly wages pursuant to the “Work Incentive Benefit.”  The court determined that the Work Incentive Benefit contained in the SPD did not violate ERISA’s disclosure requirements or the reasonable expectations doctrine.  Plaintiff’s declaratory relief claim under ERISA Section 502(a)(1)(B), and claims for injunctive and equitable relief under ERISA Section 502(a)(3), were properly dismissed.

ERISA Preemption

Fourth Circuit

Purvis v. Lutheran Homes of S.C., Inc., No. 3:15-CV-02238-JMC, 2018 WL 1156428 (D.S.C. Mar. 5, 2018) (Judge J. Michelle Childs).  The court determined that Plaintiff’s state law claims for breach of contract, breach of contract/detrimental reliance and bad faith failure to pay insurance exist only with reference to an ERISA benefit plan.  Thus, these claims are preempted by ERISA § 514 and must be dismissed. 

Eighth Circuit

Owayawa v. Am. United Life Ins. Co., No. CV 17-5018-JLV, 2018 WL 1175106 (D.S.D. Mar. 5, 2018) (Judge Jeffrey L. Viken).  Plaintiff, an educational facility chartered by the Oglala Sioux Tribe, sued the company that sponsored and designed its 401(k) plan for fraud, negligent misrepresentation and negligence.  Plaintiff seeks damages based on its corrective contribution, the fee related to the IRS Voluntary Correction Program, attorneys’ fees and punitive damages.  The court granted Defendant’s motion to dismiss finding that Plaintiff’s claims are preempted by ERISA because the claims relate to and have a connection with an ERISA plan.  The court reached the same conclusion in a related matter:  Little Wound Sch. v. Am. United Life Ins. Co., No. CV 17-5017-JLV, 2018 WL 1175102 (D.S.D. Mar. 5, 2018).

Exhaustion of Administrative Remedies

Ninth Circuit

Adan v. Kaiser Found. Health Plan, Inc., No. 17-CV-01076-HSG, 2018 WL 1174559 (N.D. Cal. Mar. 6, 2018) (Judge Haywood S. Gilliam, Jr.).  The court determined that Plaintiff’s failure to exhaust her administrative remedies is clear from the face of the complaint and precludes her ERISA Section 502(a)(1)(B) claim for coverage of her excess skin surgery.  The court denied the parties’ request for judicial notice of materials that are more properly considered on a motion for summary judgment.  It determined that Plaintiff was required to exhaust administrative remedies set forth in the EOC and that she did not do so.  The court rejected Plaintiff’s argument that her claim should be deemed exhausted because she never submitted a “claim” as defined in the relevant regulation.  She also does not plead facts sufficient to show that engaging in the administrative process would have been futile.

Life Insurance & AD&D Benefit Claims

Seventh Circuit

Tran v. Minnesota Life Ins. Co., No. 17-CV-450, 2018 WL 1156326 (N.D. Ill. Mar. 5, 2018) (Judge Robert M. Dow, Jr.).  See Notable decision summary above.

Medical Benefit Claims

Sixth Circuit

Cooper v. Honeywell Int’l, Inc., No. 17-1042, 2018 WL 1190385 (6th Cir. Mar. 8, 2018) (Before: SUTTON, McKEAGUE, THAPAR, Circuit Judges). The Sixth Circuit reversed the district court’s grant of a preliminary injunction barring the employer from terminating the retirees’ healthcare benefits.  It held that the retirees were unlikely to succeed on the merits of the claim that healthcare coverage vested irregardless of the expiration of the CBA.

Pension Benefit Claims

Sixth Circuit

Baker v. Ohio Operating Engineers Pension Fund, No. 2:17-CV-316, 2018 WL 1138412 (S.D. Ohio Mar. 2, 2018) (Judge Algenon L. Marbley).  In this dispute over the proper payment of remaining pension benefits following the death of the plan participant, the court granted Defendant’s motion to dismiss Plaintiff’s equitable relief claims seeking reformation and restitution.  The court found that the ultimate remedy sought is the same as the claim for benefits under Section 502(a)(1)(B).  “Under her Complaint, reformation and restitution are solely equitable means to a monetary end. In light of this unambiguous precedent, the Court cannot accept Plaintiff’s attempt to cancatervate [meaning to heap into a pile] equitable claims upon statutory ones.”

Plan Status

Eighth Circuit

Miller v. Starkey Labs., Inc., No. CV 17-3996 (JRT/LIB), __F.Supp.3d__, 2018 WL 1141377 (D. Minn. Mar. 2, 2018) (Judge John R. Tunheim).  The court determined that a “loyalty benefit” in Plaintiff’s employment agreement does not constitute an ERISA plan because the benefit does not require an ongoing administrative scheme.  The court extended the Eighth Circuit’s logic in Dakota, Minnesota & E. R.R. Corp. v. Schieffer, 648 F.3d 935 (8th Cir. 2011) to pension plans and found that a single contract is not a pension plan.  But, the existence of the same agreement with two other executives collectively established a deferred-compensation program.  Because there is no ERISA plan, the court granted Plaintiff’s motion to remand the case to state court but denied costs and fees.  

Eleventh Circuit

Whedbee v. United of Omaha Life Ins. Co., No. 617CV1695ORL37DCI, 2018 WL 1181596 (M.D. Fla. Mar. 7, 2018) (Judge Roy B. Dalton, Jr.).  In this lawsuit over denied long term disability benefits, the court overruled Defendant’s objection to the Magistrate Judge’s application of Rose v. Long Island R.R. Pension Plan, 828 F.2d 910 (2d Cir. 1987) in determining that the employee benefit plan administered by Halifax Staffing, Inc. is exempt from ERISA as a governmental plan.  Staffing is an agency or instrumentality of the government.

Pleading Issues & Procedure

Ninth Circuit

Puget Sound Surgical Ctr., P.S. v. Aetna Life Ins. Co., No. C17-1190JLR, 2018 WL 1172992 (W.D. Wash. Mar. 6, 2018) (Judge James L. Robart).  Where Defendant Anchorage School District Active Employee Open Choice PPO Medical Plan does not conduct any operations in Washington State, does not pay taxes in Washington State and is not licensed to do business there, and does not have any employees, offices, real estate, bank accounts, or other property in Washington State, the court determined that it lacks personal jurisdiction over the Plan and granted the Plan’s motion to dismiss on that basis.

Provider Claims

Second Circuit

Goldberg v. Aetna Insurance Company, No. 17 CV 9621 (VB), 2018 WL 1226025 (S.D.N.Y. Mar. 8, 2018) (Judge Vincent L. Briccetti).  The court granted the provider’s motion to remand his state law claims for breach of contract, promissory estoppel, account stated, and fraudulent inducement.  The court found that Plaintiff did not have standing to bring a claim under Section 502(a)(1)(B) because of the Plan’s anti-assignment provision, so his claims do not fall within the scope of Section 502(a)(1)(B).  The court rejected Defendant’s offer to waive the anti-assignment provision, stating that this was an attempt to circumvent the Court’s lack of subject matter jurisdiction.

Third Circuit

East Coast Advanced Plastic Surgery v. Amerihealth, No. CV 17-8409-SDW-LDW, 2018 WL 1226104 (D.N.J. Mar. 9, 2018) (Judge Susan D. Wigenton).  The court granted the provider’s motion to remand its claims for claims for breach of contract, promissory estoppel, account stated, and fraudulent inducement.  The court determined that Plaintiff is neither a participant nor a beneficiary as defined by ERISA. Because Plaintiff is a third-party provider and does not attempt to assert the rights of XF, Plaintiff does not have standing to bring suit under ERISA Section 502(a).  Defendant argued that Plaintiff’s claims are expressly preempted by Section 514 but the court explained that express preemption under this provision does not serve as an independent basis for subject matter jurisdiction.

Univ. Spine Ctr. v. Horizon Blue Cross Blue Shield of New Jersey, No. 16-CV-8021(SDW)(LDW), 2018 WL 1169126 (D.N.J. Mar. 6, 2018) (Judge Susan D. Wigenton).  The court determined that the Plan is clear that Plaintiff has no right to expect to be reimbursed more than the Medicare rates allow. Plaintiff’s patient was informed on two separate occasions prior to his surgery that he may be required to pay more for services rendered by out-of-network providers.  Plaintiff’s claim for breach of fiduciary duty against Defendant for wrongfully withholding funds owed to Plaintiff, for which Plaintiff seeks $187,610.53 as payment, is a legal rather than equitable relief claim that is not authorized under the statute.

Retaliation Claims

Sixth Circuit

Feldmeyer v. BarryStaff, Inc., No. 1:16CV954, 2018 WL 1151776 (S.D. Ohio Mar. 5, 2018) (Judge Michael R. Barrett).  “For purposes of summary judgment, the Court finds there is sufficient evidence to support a causal link between Plaintiff’s enrollment in Defendant’s health insurance plan and his termination. Plaintiff enrolled in January 2015. Less than four months later, Plaintiff was terminated, according to Plaintiff, in an effort to cut costs. While there is conflicting testimony related to whether Plaintiff was indeed terminated to cut costs, this is a credibility issue that cannot be decided at the summary judgment stage. Defendant is therefore not entitled to summary judgment.”

Statutory Penalties

Sixth Circuit

Moore v. Metropolitan Life Insurance Company, et al., No. CV 5: 17-105-DCR, 2018 WL 1187770 (E.D. Ky. Mar. 7, 2018) (Judge Danny C. Reeves).  The court determined that American Water’s failure to provide Plaintiff with the applicable certificate governing his benefits claim within 30 days of his request constitutes a violation of 29 U.S.C. § 1024(b)(4), and it awarded a $15/day penalty for 441 days, resulting in a total penalty of $6,615.00.  Although American Water’s conduct was not in bad faith, its violation created confusion regarding Plaintiff’s benefits, leading to litigation.  American Water could have, but did not, timely cure its mistake after it was notified by MetLife.

Venue

Fifth Circuit

Gilmour III, et al. v. Blue Cross And Blue Shield of Alabama, et al., No. 5-17-CV-00518-FB-RBF, 2018 WL 1189880 (W.D. Tex. Mar. 6, 2018) (Magistrate Judge Richard B. Farrer).  Noting that the Fifth Circuit does not appear to have addressed the circumstances under which a defendant “may be found” in a judicial district for purposes of § 1132(e)(2), the court followed the Seventh and Ninth Circuits in finding that a defendant “may be found” for purposes of § 1132(e)(2) in a judicial district where it has minimum contacts.  But, the parties have neglected to consider that venue is district-specific.  The court recommended that the “Victory Plaintiffs” be permitted to file an amended complaint to address the venue issues.

Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner