This week’s notable decision results from a series of unfortunate events. It also highlights an issue plan administrators and participants should be aware of when there is a switch of group life insurance policies. In Cole v. American Heritage Life Insurance Company, No. 3:17-CV-494-PPS, 2018 WL 1875632 (N.D. Ind. Apr. 18, 2018), the district court enforced Defendant American Heritage Life Insurance Company’s group life insurance policy’s Suicide Exclusion in order to deny benefits for the life of Plaintiff’s deceased husband. The Suicide Exclusion limits benefits to the amount of premiums paid if the insured commits suicide within 2 years of the certification date. In this case, the insured committed suicide on January 2, 2016, one day after the American Heritage policy went into effect on January 1, 2016. This seems cut and dry, except for one fact: the insured was covered under the employer’s life insurance group policy offered by a different insurance company, Lincoln National, from January 1, 2014 until January 1, 2016. That policy did not contain a suicide exclusion.
The main issue in this case is the proper commencement date of the Suicide Exclusion. Plaintiff contended that her husband’s two years of coverage under the Lincoln National policy should be converted to the American Heritage policy. In other words, since the insured was covered for two years before he committed suicide, the Suicide Exclusion should not apply to the claim.
The court rejected Plaintiff’s argument upon consideration of the factors analyzed in Commonwealth Life Ins. Co. v. Jackson, 432 N.E.2d 1382 (Ind. App. 1982), which involved a conversion policy issued by the same insurance carrier. The court found that the Lincoln National and American Heritage policies are sufficiently distinct. Here, the insured had to complete an “Enrollment and Evidence of Insurability Form” for the American Heritage policy. The policy made no reference to the Lincoln National policy. The court concluded that the effective date of the American Heritage group policy was January 1, 2016 and Plaintiff’s claim for payment of life benefits was properly denied pursuant to the Suicide Exclusion. The court granted Defendant’s motion for summary judgment.
Given the timing of the insured’s suicide, I surmise that he believed that life benefits would be payable to his wife and minor children given his two years of coverage under the Lincoln National policy. This case is one example of how a switch of policies can deprive an employee’s family of valuable benefits. This also comes up in other types of policies, including disability policies. For example, many disability policies have pre-existing condition exclusions for the first 12 or 24 months of coverage. For employers considering a switch of group policies insuring their benefit plans, it’s important that the new policy credit the past coverage. Employees would also be wise to fully analyze new policies and ask their employers how the change impacts their entitlement to benefits.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Attorneys’ Fees
Second Circuit
Kindle v. Dejana, No. CV146784SJF-ARL, __F.Supp.3d__, 2018 WL 1790797 (E.D.N.Y. Apr. 12, 2018) (Judge Sandra J. Feuerstein). The court found that Plaintiff met the “some success on the merits standard,” where pursuant to the parties’ stipulated settlement terms, Plaintiff achieved a recovery of $1,080,000 for the Class (the differential between the amount Dejana paid the ESOP for its stock versus the stock’s fair market value as of the December 30, 2011 valuation date) as well as $332,136.99 in prejudgment interest for a total recovery of $1,412,136.99. The court granted Plaintiff’s motion for attorneys’ fees in part and awarded $955,944.00 in attorneys’ fees; $102,896.34 in costs and disbursements; and $10,000 as a service fee to Plaintiff Michael Brewley. The Class was represented by Feinberg, Jackson, Worthman & Wasow LLP and Siri & Glimstad LLP.
Breach of Fiduciary Duty
Fourth Circuit
Acosta v. Vinoskey, No. 6:16–CV–00062, __F.Supp.3d __, 2018 WL 1806589 (W.D. Va. Apr. 17, 2018) (Judge Norman K. Moon). In this case, the Secretary of Labor alleges that Sentry, its CEO, Vinoskey, and certain other alleged fiduciaries violated ERISA by approving an ESOP’s purchase of the employer’s stock at an allegedly inflated price. On the parties’ motions, the court partially excluded the Secretary’s expert testimony “because portions of his damages theory are novel and underdeveloped.” The court granted the defendants’ motions for summary judgment on the claims the Secretary no longer has expert testimony to support. The court found that one of the alleged fiduciaries’ is not a de facto fiduciary. Because of factual disputes, namely whether reliance on a valuation report was reasonable, the court denied the parties’ motions on the remaining claims.
Class Actions
Fourth Circuit
Clark v. Duke Univ., No. 1:16-CV-1044, 2018 WL 1801946 (M.D.N.C. Apr. 13, 2018) (Judge Catherine C. Eagles). In this ERISA action alleging breach of fiduciary duties for failing to investigate and include low-cost recordkeeping services and funds with reasonable fees and by including imprudent investment funds, the court found that Plaintiffs have established Article III standing and meet the class certification standards set forth in Rule 23(a) and Rule 23(b)(1). The class is defined as: All participants and beneficiaries of the Duke Faculty and Staff Retirement Plan from August 10, 2010 through the date of judgment, excluding Defendants. Schlichter, Bogard & Denton, LLP is appointed as class counsel.
Disability Benefit Claims
Fifth Circuit
Venable v. Schlumberger Tech. Corp., No. CV 16-01336, 2018 WL 1788640 (W.D. La. Apr. 13, 2018) (Judge Carol B. Whitehurst). The court granted MetLife’s motion to dismiss Plaintiff’s claims for short-term disability (STD) and long-term disability (LTD) benefits and attorney’s fees, costs and interest, and for statutory penalties. MetLife approved Plaintiff’s STD claim during the administrative appeals process, which was after Plaintiff filed his lawsuit. Since MetLife awarded STD and LTD benefits through the administrative process, the claims are now moot as there is no case or controversy before the Court. Attorneys’ fees are not payable for the fees and costs incurred during administrative proceedings before suit is filed. The Fifth Circuit has never adopted the de facto plan administrator theory so there is no Section 502(c) claim against MetLife for failing to provide Plaintiff with Plan documents.
Ninth Circuit
Gary v. Unum Life Insurance Company of America, No. 3:17-CV-01414-HZ, 2018 WL 1811470 (D. Or. Apr. 17, 2018) (Judge Marco A. Hernandez). Applying the “compelling reason” test in Kamakana v. City & Cty. Of Honolulu, the court granted Plaintiff’s motion to file the entire administrative record under seal since a significant amount of medical and personal information is contained in these documents. The court found that Plaintiff’s interest in keeping her personal and medical information private outweighs the right of public access and is a compelling reason to seal the record. Plaintiff represented stated that approximately 75% of the more than 2,400 pages of the administrative record contain medical information or other sensitive personal information. “It is not a useful expenditure of counsel’s time to separate and redact the approximately 1,800 pages of the administrative record that contains medical and sensitive personal information.”
Exhaustion of Administrative Remedies
Seventh Circuit
Feazel v. Ameren Long Term Disability Plan For Non-Union Employees, et al., No. 17-CV-01221-DRH-SCW, 2018 WL 1787294 (S.D. Ill. Apr. 13, 2018) (Judge Herndon). The court dismissed Plaintiff’s lawsuit because he failed to allege facts showing that he should be excused from the exhaustion requirement. Here, Plaintiff filed a lawsuit after he was notified by the Plan that an audit revealed that he received benefits beyond the Plan’s Maximum Benefit Period, that he would not have to repay those overpaid benefits, but that no benefits would be payable after September 1, 2017. Plaintiff filed a lawsuit without appealing to the Plan.
Life Insurance & AD&D Benefit Claims
Seventh Circuit
Cole v. American Heritage Life Insurance Company, No. 3:17-CV-494-PPS, 2018 WL 1875632 (N.D. Ind. Apr. 18, 2018) (Judge Philip P. Simon). See Notable Decision summary above.
Eighth Circuit
Martens v. Hogan, No. CV 17-5169 (DWF/DTS), 2018 WL 1865931 (D. Minn. Apr. 18, 2018) (Judge Donovan W. Frank). The court concluded that Anthem properly paid the life insurance benefit to the insured’s ex-wife since she was the only beneficiary under the Policy at the time of the insured’s death. With respect to the state law claims of breach of contract, conversion, and unjust enrichment against the ex-wife, the court concluded that ERISA’s anti-alienation provision does not shield the distributed funds from Plaintiff’s claims, which are based on the Divorce Decree wherein Defendant contractually waived her right to the proceeds of the Policy.
Pleading Issues & Procedure
Sixth Circuit
Tennessee Tractor, LLC v. WH Administrators, Inc., No. 117CV02829STAEGB, 2018 WL 1788065 (W.D. Tenn. Apr. 13, 2018) (Judge S. Thomas Anderson). The court denied reconsideration of its order granting in part and denying in part Defendant’s Motion to Compel Arbitration. New evidence asserted by Defendant, at best, creates a genuine dispute as to whether Plaintiffs had sufficient access to the plan documents to accept their terms. On the law, the court explained that it did not hold or otherwise find that a signed document was required under ERISA to bind parties to arbitration, but that the unsigned document at issue was insufficient. Previous write up for reference: Tennessee Tractor, LLC v. WH Administrators, Inc., No. 117CV02829STAEGB, 2018 WL 1277751 (W.D. Tenn. Mar. 12, 2018) (Judge S. Thomas Anderson). Plaintiffs are a company and its employee who brings claims against Defendant related to its management of the company’s self-funded health plan. The company brought state-law claims against Defendant and the employee brought class-action claims against Defendant under ERISA. The court determined that the employer’s claims are subject to an arbitration agreement with Defendant, but the employee’s ERISA claims are not subject to the arbitration agreement. The court ordered the company to submit its claims to arbitration.
Provider Claims
Third Circuit
Zapiach, M.D. v. Empire Blue Cross Blue Shield, No. CV 17-10179-SDW-SCM, 2018 WL 1838017 (D.N.J. Apr. 17, 2018) (Judge Susan D. Wigenton). In this lawsuit by a provider seeking payment for services provided to his patient based on an assignment of benefits, he court granted Defendant’s motion to dismiss because Plaintiff failed to exhaust the administrative remedies available under the Plan, Plaintiff lacks standing to bring the ERISA claims due to the Plan’s anti-assignment provision, and ERISA preempts Plaintiff’s state law claim.
Statute of Limitations
Fifth Circuit
Williams v. Hartford Life & Accident Ins. Co., No. 3:17-CV-927-CWR-FKB, 2018 WL 1885783 (S.D. Miss. Apr. 19, 2018) (Judge Carlton W. Reeves). Here, Plaintiff received short-term disability benefits through December 23, 2012. Hartford terminated his LTD claim on November 10, 2014, denied his appeal on May 12, 2015, and Plaintiff filed his lawsuit on October 20, 2017. The court found that his lawsuit is time-barred. The court determined that Plaintiff was required to provide proof of loss by March 24, 2013, the limitations period began on March 24, 2013, and expired on March 24, 2016. The court rejected Plaintiff’s argument that the deadline was extended to December 24, 2014 because Hartford required him to provide additional documentation. “Nowhere in the policy does it state that the deadline for proof of loss is extended if the claimant is required to give additional information.”
Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner