This week’s notable decision is another claimant-unfriendly opinion out of the Fourth Circuit neck of the woods – Dawson-Murdock v. National Counseling Group, Inc., et al., No. 3:18-CV-58, 2018 WL 3744020 (E.D. Va. Aug. 7, 2018). 

In this case, Plaintiff Dawson-Murdock deceased husband, Wayne Murdock, worked full-time for Defendant National Counseling Group, Inc. (“NCG”).  As a full-time employee, he was covered by a group life insurance policy funded by Unum Life Insurance Company of America.  On March 21, 2016, Wayne switched to part-time work.  Though it’s not clear from the opinion as to why Wayne reduced his work hours, the fact that he died six months later suggests it was due to a medical condition.  After he started part-time work, Wayne continued to pay premiums for his life insurance coverage. 

When Ms. Dawson-Murdock submitted a claim for life insurance benefits, Unum denied her claim on the basis that Wayne had not converted to portable coverage.  NCG’s vice president of human resources assured Dawson-Murdock that it would pay the claim and that she no longer had to deal with Unum.  On that assurance, she did not appeal the denial to Unum, which as we all know is the death-knell to a benefit claim under Section 502(a)(1)(B).  She continued to communicate with NCG about the payment for several months before NCG just decided it was not going to pay after all.  [Cringe]

Dawson-Murdock filed suit against NCG alleging an ERISA breach of fiduciary duty to herself and her husband, as well as for negligence and detrimental reliance, and breach of contract.  Judge John Gibney, Jr. dismissed the breach of fiduciary duty claims against NCG because the court determined that the employer’s conduct of failing to notify Wayne about his eligibility for life insurance benefits after he switched to part-time work and collecting his premiums did not fall within the scope of fiduciary activity.  Even though the VP of HR misstated information to Dawson-Murdock by telling her NCG would take care of the claim and she did not need to deal with Unum, the court found this did not meet the narrow definition of fiduciary activity.  

The court also dismissed Dawson-Murdock’s common law claims against NCG due to ERISA preemption because they “relate to” Wayne’s group life insurance plan and seeks the same amount as the denied insurance claim.  The court concluded that “[t]he complaint tells an unfortunate story, but its claims do not give rise to relief.”

I must, respectfully, disagree.  If there was ever a case where there should be a remedy, this one is it.  Yet, the court enabled the employer’s wrongful conduct to be protected by the shield of ERISA preemption and to hide in the shadows of a narrow definition of an ERISA fiduciary.  Hopefully Dawson-Murdock takes this battle up to the Fourth Circuit so we can get another McCravy-esque decision.  See McCravy v. Metro. Life Ins. Co., 690 F.3d 176 (4th Cir. 2012) (finding that equitable remedy of surcharge was available and damages were not limited to any life insurance premiums wrongfully withheld).

On that hopeful note, enjoy the case recap below.  

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

Attorneys’ Fees

Ninth Circuit

Lehman v. Nelson, No. C13-1835RSM, 2018 WL 3727600 (W.D. Wash. Aug. 6, 2018) (Judge Ricardo S. Martinez).  The court granted Plaintiffs’ second motion for attorneys’ fees in part, ordering Defendants to pay Class Counsel $769,665.43 in fees and $27,465.69 in costs.  In addition, the court ordered Class Counsel “to be paid 25% of the Common Fund, or $289,276, as a reasonable attorneys’ fee, which is made up of earnings on contributions that this Court has required Defendants to transfer to the Class Members’ home pension funds.”  The court also awarded Class Representative Richard Lehman $15,000 from the Common Fund, and Class Representative Michael Puterbaugh $5,000 from the Common Fund, for their services as Class Representatives.

Espy v. Independence Blue Cross, No. 12CV952-LAB (WMC), 2018 WL 3752332 (S.D. Cal. Aug. 7, 2018) (Judge Larry Alan Burns).  The court determined that the pro se litigant is not entitled to attorney’s fees under ERISA because she is not an attorney.

Breach of Fiduciary Duty

Second Circuit

In Re: SunEdison, Inc. ERISA Litigation, No. 16-MC-2744 (PKC), 2018 WL 3733946 (S.D.N.Y. Aug. 6, 2018) (Judge P. Kevin Castel).  Participants of defined-contribution retirement savings plan alleged that members of SunEdison’s “Investment Committee breached a duty of prudence by continuing to offer SunEdison shares as an investment option under the Plan, despite public information suggesting its shares were excessively risky and unfit for retirement savings.”  The court dismissed this claim because Plaintiffs have not satisfied the pleading requirements of any prudence-based claim premised on public information as set forth in Fifth Third and Rinehart.  The court also dismissed the prudence-based claims premised on non-public information because the complaint raises conclusory and speculative allegations that Defendants “breached their duty of prudence by not disclosing material non-public information and thereafter selling or freezing the Plan’s purchase of SunEdison’s shares.”  Lastly, the court dismissed the failure to monitor claim and the breach of the duty of loyalty claim.

Disability Benefit Claims

First Circuit

Lavery v. Restoration Hardware Long Term Disability Benefits Plan, No. CV 17-10321, 2018 WL 3733936 (D. Mass. Aug. 6, 2018) (Judge Denise J. Casper).  The court permitted Aetna to submit evidence, including an affidavit of Stephen E. Simpson II regarding Aetna’s policies and procedures, on the issue of Aetna’s conflict of interest.  But, “even assuming that the evidence put forth by Aetna on the issue of the structural conflict is considered and suffices to show that the structural conflict has not morphed into an actual conflict, Lavery still prevails.”  Aetna denied benefits on the basis of a pre-existing condition based on the terms of an updated Summary of Coverage published after Plaintiff had been diagnosed with malignant melanoma with an effective date of before Plaintiff began his employment.  “Even if Lavery had received notice of the updated Summary of Coverage on June 23, 2014, he still would not have been on notice at the time of his appointment with Dr. Deignan, the dermatologist, on June 10, 2014 (or at the time of his diagnosis on June 19, 2014) that his malignant melanoma would be a pre-existing condition not subject to coverage under the LTD plan. If he had been aware of this fact, he might have altered the timing of his appointment to July 1, 2014 so as to avoid losing coverage.”  The court granted summary judgment to Plaintiff.

Fourth Circuit

Reidy v. The Unum Life Insurance Company of America, et al., No. CV PX-16-2926, 2018 WL 3756740 (D. Md. Aug. 7, 2018) (Judge Paula Xinis).  The court determined that Unum did not abuse its discretion in denying long-term disability benefits to Plaintiff who stopped working as a Director of Professional Development and Retention for a law firm due to major depression.  The court found that:  (1) the SSA’s award of benefits is of limited weight because the Plan’s total disability definition does not mirror the SSA’s definition; (2) Unum’s use of the generic occupation of “Recruitment Director” was not an abuse of discretion; (3) Unum’s reliance of paper reviewers rather than an in-person examination was reasonable; (4) Unum’s decision was based on a fair and searching process; and (5) there is no evidence that Unum’s past misdeeds affected its decision on Plaintiff’s claim.

Fifth Circuit

Hayes v. Dearborn Nat’l Life Ins. Co., No. 17-30670, __F.App’x__, 2018 WL 3737970 (5th Cir. Aug. 3, 2018) (Before WIENER, DENNIS, and SOUTHWICK, Circuit Judges).  “In sum, Dearborn National reviewed Hayes’s medical records and submissions, and it used multiple independent consultants to evaluate Hayes’s claim. It invited Hayes to submit additional evidence on multiple occasions, attempted to arrange an FCE, and conducted an additional review after learning Hayes had received Social Security benefits. Because these circumstances do not suggest a high likelihood that the conflict affected the benefits decision, we accord the conflict of interest little weight.  Hayes has not shown Dearborn National’s evaluation was so procedurally unreasonable that it warrants vacatur.” (internal citations and quotations omitted). 

Eighth Circuit

Timm v. Unum Life Ins. Co. of Am., No. 17-CV-3019-LRR, 2018 WL 3727921 (N.D. Iowa Aug. 6, 2018) (Judge Linda R. Reade).  In this dispute over whether Plaintiff’s disability was caused by a pre-existing condition excluding coverage for long-term disability benefits, the court determined that there is substantial evidence in the record to support Unum Life’s conclusion that Plaintiff, during the relevant time period, had received treatment, consultation, care or services including diagnostic measures or had taken prescribed medication for papilledema and optic disc edema in his right eye and that the papilledema and optic disc edema in Plaintiff’s right eye ultimately caused or contributed to his disabling condition of nonarteritic anterior ischemic optic neuropathy (“NAION”).  The court declined to adopt the portions of the Report and Recommendation finding that Plaintiff’s disabling condition was the loss of sight in both of his eyes, that the conditions in both eyes were related and that Plaintiff’s loss of sight in his left eye constituted a preexisting condition. 

Eleventh Circuit

Allen, M.D. v. First Unum Life Insurance Company, No. 2:18-CV-69-FTM-99MRM, 2018 WL 3757523 (M.D. Fla. Aug. 8, 2018) (Judge John E. Steele).  “In this case, the Complaint spans 77 pages and 392 paragraphs, with 95 pages of exhibits, alleging breach of contract, breach of fiduciary duty, fraud, violations of the RICO statute, and ERISA.”  The court granted Defendants’ motion to dismiss the RICO and fraud claims to the extent that the Complaint is dismissed as a shotgun pleading.

ERISA Preemption

First Circuit

Vlahos v. Alight Solutions Benefit Payment Services, LLC, et al., No. 17-CV-12505-ADB, 2018 WL 3764262 (D. Mass. Aug. 8, 2018) (Judge Allison D. Burroughs).  The court found that Plaintiff’s state law claims against Defendants, premised on the allegation that Defendants failed to protect her interests as a plan beneficiary in her husband’s 401(k) retirement account during the couple’s pending divorce, is preempted by ERISA because they relate directly to the administration of an ERISA plan.  Further, Plaintiff has not demonstrated that the automatic restraining order entered in the divorce proceeding satisfies the QDRO requirements or that the QDRO preemption exception should apply to Plaintiff’s claims.  To the extent that Plaintiff claims a non-QDRO order issued by a state probate court created a requirement that conflicts with Defendants’ obligations under ERISA, that claim is also preempted.  Plaintiff may file an amended complaint.

Third Circuit

D’Antuono v. Temple Univ. Health Sys., Inc., No. CV 18-1518, 2018 WL 3707853 (E.D. Pa. Aug. 3, 2018) (Judge Baylson).  The court dismissed Plaintiff’s breach of contract claims predicated on Defendant’s failure to provide her deceased husband with a notice of the right to convert his group life insurance policy to an individual policy.  “As in [Haymaker v. Reliance Standard Life Ins. Co., No. CV 15-06306, 2016 WL 1696851 (E.D. Pa. Apr. 27, 2016)], Plaintiff clearly alleges breach of the contractual terms of the Policy, which is an employee benefit plan governed by ERISA, and these claims are preempted by ERISA.”  In addition, the court also found Plaintiff’s claims for breach of the implied duty of good faith and fair dealing to be preempted by ERISA because they relate to the administration of an ERISA plan.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

Dawson-Murdock v. National Counseling Group, Inc., et al., No. 3:18-CV-58, 2018 WL 3744020 (E.D. Va. Aug. 7, 2018) (Judge John A. Gibney, Jr.).  See Notable Decision summary above.

Eighth Circuit

Engle v. Land O’Lakes, Inc., No. 15-05088-CV-SW-SWH, 2018 WL 3733643 (W.D. Mo. Aug. 6, 2018) (Magistrate Judge Sarah W. Hays).  Where the life insurance policy provides that in the absence of a named beneficiary, death benefits will first be paid to a spouse, followed by other family members, the court determined that Unum abused its discretion by using the Plan’s spousal enlargement language and the facilities of payment provisions, which allow for the payment of benefits to a domestic partner, to award benefits to the insured’s domestic partner.  The insured had not satisfied all of the Plan’s requirements for establishing who is a domestic partner.  “Allowing an individual to declare themselves a domestic partner of a covered employee after the death of an employee is not consistent with creating clarity in the award of benefits.”  The court remanded the matter to Unum for a reevaluation of the proper recipient of the life and accidental death and dismemberment insurance benefits.

Medical Benefit Claims

Ninth Circuit

A. Z. v. Regence Blueshield, No. C17-1292 TSZ, 2018 WL 3769810 (W.D. Wash. Aug. 9, 2018) (Judge Thomas S. Zilly).  In this putative class action challenging the denial of residential mental health programs from coverage, the court denied dismissal of Plaintiff’s benefit claim because she plausibly alleges that the “Counseling in the Absence of Illness” exclusion may not apply.  The court dismissed the breach of fiduciary duty claims under Section 502(a)(2) because she fails to plead losses to the Plan.  The court declined to dismiss the Parity Act violation claims but dismissed the ACA violation claims.

Espy v. Independence Blue Cross, No. 12CV952-LAB (WMC), 2018 WL 3752332 (S.D. Cal. Aug. 7, 2018) (Judge Larry Alan Burns).  In this dispute over the payment for sleep study and bariatric lap band surgeries, the court determined that Plaintiff lacks standing to sue for additional payment because she assigned the right to receive health plan payments to the provider who performed the surgeries.  Although the court determined that she did not have standing, it issued a ruling on the merits, finding that the Plan unambiguously provides that there is no payment for the procedures that Plaintiff underwent.  The court also found no basis for estoppel.   

Tenth Circuit

Bland v. ExxonMobil Medical Plan, No. 17-CV-3040-RM-GPG, 2018 WL 3729506 (D. Colo. Aug. 6, 2018) (Magistrate Judge Gordon P. Gallagher).  The court recommended dismissal of Plaintiff’s claim for payment of inpatient care at Quality Living because the lawsuit was filed beyond the expiration of the one-year statute of limitations period.  The court found that the claim for continuing care was not untimely filed and that Plaintiffs have exhausted their administrative remedies (and any attempt to exhaust would be futile at this juncture).  Lastly, the court determined that the Plan’s anti-assignment provision precludes Craig Hospital from asserting derivative standing for rights as an assignee of Plaintiff Bland. 

Pension Benefit Claims

Second Circuit

Levy v. Young Adult Inst., Inc., No. 17-1797, __F.App’x__, 2018 WL 3773654 (2d Cir. Aug. 9, 2018) (PRESENT: DENNIS JACOBS, REENA RAGGI, PETER W. HALL, Circuit Judges).  The court affirmed the district court’s decision that the Supplemental Pension Plan and Trust (“SERP”) and Life Insurance Plan and Trust (“LIPT”) “are enforceable and not voided or altered by the public policy defense under either the federal common law or New York state law;” “YAI materially breached the Acknowledgement and Release under the federal common law and New York state law by withholding compensation owed to Levy;” “the 1992 Insurance Policies, which were taken out in Levy’s name, belong to Levy;” “YAI failed to amend SERP in the March 2005 Board meeting;” “YAI is not required to return the withdrawn $14.9 million or $8.9 million to SERP, or to purchase a commercial annuity under Section 4(e) of the 2008 Employment Agreement;” and “Levy waived his right to uncapped SERP benefits when he signed the 2008 Employment Agreement.”

Provider Claims

Third Circuit

Lourdes Specialty Hospital of Southern New Jersey v. H.D. Supply, Inc. Health and Welfare Program, No. 117CV11527NLHKMW, 2018 WL 3814277 (D.N.J. Aug. 10, 2018) (Judge Noel L. Hillman).  The court granted Defendant’s Motion to Dismiss “based on the plan having a clear and unambiguous anti-assignment clause regarding assignment of the right to sue.” 

University Spine Center v. Cigna Health and Life Insurance Company, No. CV178036JMVCLW, 2018 WL 3814279 (D.N.J. Aug. 10, 2018) (Judge John Michael Vazquez).  The court granted Cigna’s motion to dismiss the benefit claim because the complaint does not identify the specific plan or policy which is controlling.  The court declined to decide at this stage whether or not the assignment of benefits enables the provider to bring breach of fiduciary claims or whether those claims are duplicative of a benefit claim.  “In any event, if Plaintiff is not entitled to benefits under A.A.’s plan, Plaintiff might still be entitled to other appropriate equitable relief to remedy any breaches of fiduciary duty by Defendants.”

Tenth Circuit

IHC Health Service, Inc. v. Central States, Southeast and Southwest Areas Health and Welfare Fund, No. 217CV01327JNPBCW, 2018 WL 3756959 (D. Utah Aug. 8, 2018) (Judge Jill N. Parrish).  The court determined that IHC has not met the pleading standard established by the Supreme Court because it does not cite the relevant ERISA plan provisions that serve as the basis of its claim under ERISA Section 502(a)(1)(B).  The court also determined that an exemption letter authorizing specific out-of-network coverage cannot be included in the terms of the plan because there is no allegation that the exemption was a formal amendment to the plan.  Plaintiff may file an amended complaint.

Severance Benefit Claims

Fifth Circuit

Beggins v. CBRE Capital Markets Of Texas L.P., No. CV H-17-1541, 2018 WL 3741976 (S.D. Tex. Aug. 7, 2018) (Judge Lee H. Rosenthal).  Following a bench trial, the court found that CBRE’s Severance Pay policy is an ERISA-qualified plan because it satisfies the 29 U.S.C. § 1102 requirements, and that Plaintiff was not entitled to benefits under the Severance Pay policy because he did not sign the release required to receive the benefits.

Tenth Circuit

Himsl v. CVS Pharmacy, Inc., et al., No. 2:16-CV-1142, 2018 WL 3730865 (D. Utah Aug. 6, 2018) (Judge Dee Benson).  Plaintiff filed suit seeking an order that under the CVS Health Severance Plan for Non-Store Employees, his Restricted Stock Units (RSUs) should have continued to vest for the 39 weeks following the termination of his employment.  The court denied Defendants’ motion for summary judgment because the administrator provided no rationale for the determination that the Separation Agreement, rather than the Severance Plan, governed the dispute.  The administrator also failed to consider the definition of “Severance Period” in the Plan.  Thus, there is a material question as to whether the decision was arbitrary and capricious.

Statute of Limitations

Sixth Circuit

Puckett v. The Prudential Insurance Company of America, No. 218CV02174TLPDKV, 2018 WL 3732729 (W.D. Tenn. Aug. 6, 2018) (Judge Thomas L. Parker).  In this case, Plaintiff did not submit her internal appeal to Prudential within 180 days of the notice of termination of benefits sent to her in September 2014.  Plaintiff hired an attorney three years after her benefits stopped, and her attorney submitted an appeal in early 2018 and then filed suit on March 14, 2018.  The court found that the lawsuit is time-barred under the policy’s three-year limitations period.  “Plaintiff’s proof of claim was required within 180 days or on or before April 23, 2014. Plaintiff had until April 23, 2017 to sue. She waited almost another year, until March 14, 2018. Her claim is therefore time barred.”

Subrogation/Reimbursement Claims

Sixth Circuit

Tennessee Valley Operating Engineers Health Fund v. Dennis, No. 3:17-CV-1369, 2018 WL 3741941 (M.D. Tenn. Aug. 7, 2018) (Judge Aleta A. Trauger).  The welfare plan sought to recover $8,817.07 from Defendant for payments mistakenly made to healthcare providers on Defendant’s behalf for a workplace injury, which is not covered by the plan.  “Given the small nature of the sum involved, the recency with which the payment was mistakenly made, and Dennis’s other property holdings, savings, and income streams, the undisputed facts show that repayment would not be inequitable in this case. Because there is no dispute of material fact, the plaintiffs are entitled to judgment as a matter of law.”