This week’s notable decision is White v. Life Insurance Company Of North America, No. 17-30356, __F.3d__, 2018 WL 2978641 (5th Cir. June 13, 2018), a dispute over life insurance benefits based on the application of an exclusion for death caused by intoxication or drug abuse. What’s interesting about this case is that the insurance company had discretion to decide claims and it was a close call based on the evidence. Ordinarily, when the evidence presents a close call, a court will uphold the administrator’s decision, especially under abuse of discretion review. But in this case, the Fifth Circuit was troubled that LINA withheld an expert report that it commissioned during the claims process and violated ERISA Regulations by failing to disclose the report to the beneficiary. This fact appeared to tip the scale in favor of the beneficiary. The message to insurance companies should be loud and clear: It doesn’t pay to hide the ball.
The facts: The insured was driving on the highway in the late afternoon in broad daylight. Plaintiff, the life insurance beneficiary, was riding as a passenger. For unknown reasons, the insured failed to turn when the highway curved right, crossed three lanes of traffic, and then collided head-on with an oncoming truck. The drug screen indicated that the insured tested positive for amphetamines, cocaine, opiates, benzodiazepine, and cannabinoids. None of the tests measured the level of these drugs in his system. He later died from what the coroner described as multiple trauma, cocaine abuse, and amphetamine abuse.
LINA sent the reports to Dr. Fochtman, who noted that it was impossible to estimate the level of the insured’s intoxication, and thus his level of impairment, at the time of the crash. LINA denied benefits to Plaintiff on the basis that his death was caused at least in part by intoxication or the voluntary ingestion of narcotics or drugs. The denial letter did not mention Dr. Fochtman’s report and when Plaintiff’s attorney wrote to LINA to request all of the documents it relied upon in making the decision, LINA conveniently did not provide the report.
The district court found in favor of LINA. The Fifth Circuit reversed the district court’s decision and instructed the court to enter judgment in favor of Plaintiff. The court found that four considerations supported its conclusion that “LINA abused its discretion in denying benefits: (A) LINA’s conflict of interest; (B) LINA’s failure to address Dr. Fochtman’s report in any of its denials; (C) LINA’s withholding of Dr. Fochtman’s report; and (D) the closeness of the evidence to support LINA’s determination that intoxication or drug abuse caused David’s death.”
The court found Dr. Fochtman’s report to be support for the claim that the level of drugs in the insured’s system could not be determined and the cause of death speculative. This is important “because Arkansas defines ‘intoxicated’ as being influenced by alcohol or drugs ‘to such a degree’ that the driver is ‘a clear and substantial danger’ to himself and those around him.” Thus, “the inability to determine whether David was under the influence of alcohol or drugs at the time of the accident does not afford a reasonable conclusion that his death was caused by intoxication or drug abuse.” The only evidence supporting the application of the exclusion is the fact that the insured went straight while the road curved right. The court found that this, on its own, was insufficient to support a rational conclusion that the driver was intoxicated while driving. “Thus, in accordance with the Supreme Court’s instruction in Glenn, and taking into account all facets of this case, we conclude that LINA’s conflict of interest ‘affected the benefits decision,’ and, accordingly, we may not uphold its decision.”
There were many other notable decisions this past week so don’t stop reading here. Hope everyone had a lovely Father’s Day weekend.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Breach of Fiduciary Duty
Bryant v. Community Bankshares, Inc., No. 17-15360, _F.App’x_, 2018 WL 2947926 (11th Cir. June 12, 2018) (Before WILLIAM PRYOR, MARTIN and JILL PRYOR, Circuit Judges). “Community Bankshares Inc., appeals the summary judgment in favor of and the award of prejudgment interest to Dave and Vikki Bryant on their complaint to enforce their rights to the distribution and redemption of stock in an employee stock ownership plan maintained by Bankshares. The district court ruled that the plan administrator acted arbitrarily and capriciously by disregarding ‘specific and mandatory provisions of the plan’ that required Bankshares to honor the Bryants’ elections to diversify. We affirm.”
Disability Benefit Claims
Dahlka v. Unum Life Ins. Co. of Am., No. 17-CV-245-BBC, 2018 WL 2944518 (W.D. Wis. June 12, 2018) (Judge Barbara B. Crabb). Plaintiff claimed disability due to severe pain following calcaneal and navicular coalition resection surgery of the right foot and ankle. The court held that Unum did not act arbitrarily and capriciously in denying long-term disability benefits: (1) Unum did not create a “moving target”; (2) Unum acted well within its discretion in construing the term “regular occupation” to mean a category of work rather than a job description drafted by a particular employer; and (3) “although plaintiff’s treating providers may have reached a different conclusion from that of Unum’s reviewing physician about plaintiff’s need for restrictions and his ability to work, under an arbitrary and capricious review, I do not have the authority to make a determination between competing expert opinions.”
Mrkonjic v. Delta Family-Care And Survivorship Plan, No. 16-56335, __F.App’x__, 2018 WL 2996773 (9th Cir. June 15, 2018) (Before: BERZON and BYBEE, Circuit Judges, and WOODCOCK, District Judge). Plaintiff was forced to elect early retirement solely because the Plans wrongfully denied his long-term disability benefits. Then, the Plans refused to allow Plaintiff to rescind his retirement. “In this context, because the situation was unique and caused by the Plans, the Plans should have implemented the Mrkonjic I judgment so as to leave Mrkonjic no worse off from their mistakes. Instead they accumulated offsets and collected an overage, treating him more poorly than other beneficiaries.” The court remanded to the district court to consider the appropriate remedy in light of the court’s holding that the Plans could not require reimbursement of the portion of retirement benefits that exceeded Plaintiff’s monthly LTD benefit amount. “Alternatively, the district court may wish to exercise its power of equitable relief and fashion an order to cut the Gordian knot of this long-litigated matter.”
Johnson v. General Electric Company & Metropolitan Life Insurance Company, No. 3:17-CV-05397-RBL, 2018 WL 2949448 (W.D. Wash. June 13, 2018) (Judge Ronald B. Leighton). The court granted Defendants’ motion for judgment on the issue of the proper calculation of “normal straight-time annual earnings” (“NSTAE”) under the GE Long Term Disability Plan. “The Court interprets the definition of NSTAE under the Plan to include Ms. Johnson’s salary in NSTAE and not additional payments she received for commissions, Leadership Life insurance, health facility reimbursements and retention/hiring bonuses, and finds that this is the only reasonable interpretation.”
Dowman v. Chubb Corp., No. 16CV8129PGSLHG, 2018 WL 2973381 (D.N.J. June 11, 2018) (Judge Peter G. Sheridan). In this case, Plaintiffs contend that Chubh created “sham” corporations to wrongfully exclude employees from participating in the ERISA benefits plan offered to Bellemead and Chubb employees. The court determined that Plaintiffs have failed to meet their burden of establishing that the Magistrate Judge’s decision was erroneous or contrary to law, where the Magistrate Judge denied Plaintiff’s request to conduct discovery concerning whether or not there has been a misuse of the corporate form in order to disadvantage Plaintiffs in terms of benefits received. The Magistrate Judge concluded that the various Plan terms (“employer,” “employee,” and “participating employer”) are subject to the Committee’s interpretation and discovery beyond the administrative record was not warranted.
Wittmann v. Unum Life Ins. Co. of Am., No. CV 17-9501, 2018 WL 2970873 (E.D. La. June 13, 2018) (Judge Martin L.C. Feldman). In this dispute over long-term disability benefits, the court granted Plaintiff’s motion to compel identification of communications by attorneys who are not in-house counsel and that Unum must produce responses that adequately address Plaintiff’s request for oral and written communications by any lawyer that participated in Plaintiff’s claims.
Parker v. Baker Hughes Incorporated Long Term Disability Plan, et al., No. CV 17-372 WJ/GBW, 2018 WL 2926165 (D.N.M. June 11, 2018) (Magistrate Judge Gregory B. Wormuth). In this dispute over long-term disability benefits, the court granted Plaintiff’s motion to compel with respect to the following: (1) Interrogatory Nos. 2 and 3, requesting MetLife to state the name, address, position, job title, and affiliation to MetLife of any health or vocational professional who rendered a report or opinion to MetLife, examined records for MetLife, or examined the Plaintiff for MetLife at any time and state how that person was compensated and the exact amount of the compensation related to Plaintiff’s disability claims and appeals; (2) Interrogatory No. 10 requesting that MetLife state the total amount of money that MetLife paid to Dr. Taylor from 2013 through 2016; (3) Interrogatory No. 12 requesting that MetLife describe the material terms of all contracts or agreements that MetLife entered into with Dr. Taylor from 2013 through 2016; and (4) Interrogatory No. 14 requesting that MetLife state “the earliest date on which MetLife requested a medical evaluation or opinion from [Dr. Taylor.]” The court denied all other requests.
Waters v. AIG Claims, Inc., No. 2:17-CV-133-WKW, 2018 WL 2986213 (M.D. Ala. June 14, 2018) (Judge W. Keith Watkins). In this dispute over life insurance benefits, the court granted Plaintiffs’ motions to lift the stay and seek discovery given the parties’ allegations of misconduct. “At this relatively early stage, it seems inescapable that at least one parties’ counsel will be subject to sanctions; either Defendants’ counsel for ‘causing [the decedent’s] samples to be destroyed … to prevent payment of this claim,’ among other charges, or Plaintiffs’ counsel for making such bold and salacious accusations.” The court admonished counsel for the parties to cooperate with each other and to stop “taking shots” at the other.
Life Insurance & AD&D Benefit Claims
Miller v. Metropolitan Life Ins. Co., No. 16-CV-6684-FPG, 2018 WL 2939495 (W.D.N.Y. June 11, 2018) (Judge Frank P. Geraci, Jr.). Defendant administered Plaintiff’s benefits under the Kodak’s Family Protection Plan survivor income benefit program until August 2000 when Kodak stopped funding the account. A Bankruptcy-Court approved settlement required Kodak to maintain retiree benefits until December 2012 and form a VEBA. Plaintiff received benefits from the VEBA until March 2015. Plaintiff sued Defendant for additional benefits and document penalties. The court granted MetLife’s motion to dismiss all claims because it was not the plan administrator when Plaintiff requested plan information, and because Defendant stopped paying plan benefits in 2000 and had nothing to do with the bankruptcy and implementation of the VEBA. MetLife is not equitably estopped based on an old letter stating she would receive her monthly payment for life.
White v. Life Insurance Company Of North America, No. 17-30356, __F.3d__, 2018 WL 2978641 (5th Cir. June 13, 2018) (Before JOLLY, DENNIS, and ELROD, Circuit Judges). See Notable Decision summary above.
Pension Benefit Claims
Estate of Jones v. Children’s Hosp. & Health Sys. Inc. Pension Plan, No. 17-3524, __F.3d__, 2018 WL 2946426 (7th Cir. June 13, 2018) (Before Bauer, Barrett, and St. Eve, Circuit Judges). The Plan administrator denied pension benefits to the participant’s daughter since the participant died three days before her pension was to start and only spouses are entitled to benefits under the Plan when a participant dies before the start of her pension. The Seventh Circuit affirmed the district court’s grant of summary judgment to Defendant, holding that the plan administrator’s determination that the participant’s ten-year annuity was not payable to the daughter was reasonable.
Lewis, et al. v. Pension Benefit Guaranty Corporation, No. CV 15-1328 (RBW), __F.Supp.3d__, 2018 WL 2926157 (D.D.C. June 11, 2018) (Judge Reggie B. Walton). In this dispute concerning the calculation of pension benefits, the court held that the PBGC’s benefits determinations in this matter do not constitute a non-delegable policy matter under 29 C.F.R. § 4002.1(a)(3)(v), and therefore, the court may apply the Chevron framework in this case. Further, the Chevron framework applies to the PBGC’s interpretations concerning the asset allocation process undertaken as trustee and the Appeals Board’s decision is not too informal for the Chevron framework to apply. The PBGC’s decision to re-audit the Plan’s assets and to issue new, appealable benefit determinations based on the re-audit does not render the Chevron framework inapplicable. The court found that the arbitrary and capricious standard of review applies to three of the claims and the PGBC is entitled to summary judgment on all but one of the claims.
Pleading Issues & Procedure
Reg’l Local Union No. 846 v. Gulf Coast Rebar, Inc., No. 16-35651, __F.App’x__, 2018 WL 2927638 (9th Cir. June 12, 2018) (Before: GRABER and M. SMITH, Circuit Judges, and KORMAN, District Judge). In this case where the Trusts sought to obtain fringe benefit contributions that they claimed Defendant owed and the Union sought to recover damages that it claimed Defendant owed for dues and working assessments, as required by the collective bargaining agreement, and where the district court compelled arbitration on the Union’s LMRA claims and issued a stay pertaining to the separate claims, the Ninth Circuit determined that it lacks jurisdiction because the district court’s opinion and order did not end the action.
Cape Reg’l Med. Ctr. v. Cigna Health & Life Ins. Co., No. CV 17-5284, 2018 WL 2980386 (D.N.J. June 14, 2018) (Judge Joseph H. Rodriguez). In this lawsuit brought by an out-of-network provider against Cigna for payment for services for provided to 52 individual patients, the court dismissed the complaint and found that: (1) “Count One, alleging a violation under N.J. Admin. Code § 11:4–37, is preempted by ERISA because it is a claim for benefits allegedly due under section 502(a)(1)(B) of the federal statute;” (2) even if it was not preempted by ERISA, the New Jersey law does not provide a private right of action; and (3) the ERISA benefits claim fails because Plaintiff did not identify specific plans or policies such that Defendant cannot determine whether its relevant policies contain anti-assignment clauses.
University Spine Center v. Highmark, Inc., No. 2:17-CV-11403, 2018 WL 2947859 (D.N.J. June 12, 2018) (Judge Claire C. Cecchi). The court determined that Plaintiff’s Patient’s benefits could not be assigned because “Patient’s insurance policy contained a valid and enforceable anti-assignment provision. Accordingly, Plaintiff does not have standing to bring this action and Plaintiff’s complaint must be dismissed.”
Innova Hosp. San Antonio, Ltd. P’ship v. Blue Cross & Blue Shield of Georgia, Inc., No. 14-11300, _F.3d_, 2018 WL 2943339 (5th Cir. June 12, 2018) (Before WIENER, ELROD, and SOUTHWICK, Circuit Judges). In this case brought by out-of-network medical services providers alleging underpayment or non-payment of reimbursement amounts pursuant to terms of various health benefit plans, the court affirmed in part, reversed in part, and remanded. The court held that: (1) the provider stated a claim under ERISA for plan benefits without identifying specific language of every plan provision at issue; (2) the provider stated a breach of contract claim against the insurer without identifying specific language of every health insurance plan provision at issue; (3) the briefing on appeal was inadequate as to the provider’s claims under ERISA alleging failure to provide full and fair review and violations of claims procedure, and therefore it forfeited them; (4) the provider had an adequate mechanism for redress, and therefore it could not recover on the ERISA breach of fiduciary duty claim that requested equitable relief in the form of surcharge; and (5) the provider forfeited the argument that district court abused its discretion in denying its motion for leave to amend its complaint out of time.
RMP Enterprises LLC v. Connecticut Gen. Life Ins. Co., No. 9:18-CV-80171, 2018 WL 2973389 (S.D. Fla. June 13, 2018) (Judge Robin L. Rosenberg). In this suit brought by substance abuse treatment and mental health facilities against Cigna for underpaying claims and seeking over $5 million in refund for overpayments, the court granted Defendants’ motion to dismiss “without prejudice: Count I for Defendants’ Failure to Comply with Plan Terms in Violation of ERISA; Count II for Breach of Fiduciary Duty and Co-fiduciary Liability; Count III for Promissory Estoppel; Count V for Failure to Provide Full and Fair Review; Count VI Failure to Provide Requested and Required Documentation; Count VII to Remove Plan Fiduciaries; Count VIII for Damages; Count IX for Attorney’s Fees; and Count X for Punitive/Exemplary Damages (Count X).” The court dismissed with prejudice Count IV for Wrongful Claims Determination since an amendment would be futile.
Joffe v. King & Spalding LLP, No. 17-CV-3392 (VEC), 2018 WL 2768645 (S.D.N.Y. June 8, 2018) (Judge Valerie Caproni). Plaintiff is a former litigation associate who claims that the defendant law firm fired him for reporting ethical concerns over the representation of a client. He further claims that he was wrongfully discharged under Section 510 of ERISA, 29 U.S.C. § 1140, related to the timing of his discharge relative to the vesting of the firm’s contribution to his 401k account. The court denied Defendant’s motion for summary judgment. Plaintiff was terminated two weeks before a contribution to his account was due to vest and he has adequately rebutted the firm’s purported legitimate explanation for his termination.
Statute of Limitations
Faciane v. Sun Life Assurance Co. of Canada, No. CV 17-17429, 2018 WL 2938317 (E.D. La. June 12, 2018) (Judge Lance M. Africk). Plaintiff brought suit to challenge the calculation of his long term disability benefits, which Sun Life argued was untimely under the policy’s contractual limitations provision. The court rejected “the continuing-violation theory, as numerous circuits have convincingly rejected its applicability in the context of ERISA miscalculation claims.” The court found that Plaintiff knew or should have known from the information available to him when his claim was approved in 2008 that his benefit was miscalculated. Under the policy, Plaintiff’s claim was not time-barred until early March 2010, at which point he had about to years to administratively challenge the calculation. Thus, the application of the limitations period defined in the policy is enforceable. The court also found that Plaintiff did not make an estoppel case against Sun Life.
University Spine Center v. Anthem Blue Cross And Blue Shield, No. 2:17-CV-08676, 2018 WL 2947858 (D.N.J. June 12, 2018) (Judge Claire C. Cecchi). The court determined that the Plan’s forum selection clause is valid, Ohio is the proper venue for this action to proceed and Plaintiff has not set forth any extraordinary circumstance that would permit this action to proceed in New Jersey.
Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner