Williams v. Unum Life Ins. Co. of Am., No. 20-1694, __ F.4th __, 2021 WL 3729660 (8th Cir. Aug. 24, 2021) (Before Circuit Judges Smith, Arnold, and Stras).
Ever since the Supreme Court’s 1989 decision in Firestone Tire & Rubber v. Bruch, ERISA-governed benefit plans and their insurers have sought to grant themselves discretionary authority in order to ensure a favorable standard of review in court.
As time passed, however, many legislatures and regulators increasingly became persuaded that the abuse of discretion standard of review tipped the scales too far in favor of insurers and claim administrators. As a result, many states have enacted anti-discretion laws, which prohibit insurers of ERISA plans from including grants of discretionary authority in their policies. (These prohibitions do not run afoul of federal ERISA preemption because they are laws that regulate insurance, which are expressly exempted from preemption by ERISA.)
As a result, ERISA beneficiaries and insurers have a new war to wage – what do these new anti-discretion laws mean and to whom do they apply? The latest skirmish in this battle is this published case from the Eighth Circuit, which addressed Maine’s anti-discretion law.
The plaintiff, Gary Williams, submitted a claim for accidental death benefits to Unum Life Insurance Company of America after his wife Kathy fell down the stairs in their home. Unum denied Gary’s claim because Kathy’s blood-alcohol content was .337, four times the legal driving limit in Missouri, and thus Unum asserted that the claim was barred by a plan provision which excluded coverage of losses “caused by, contributed to by, or result[ed] from … being intoxicated.”
At trial, Gary contended that the discretionary clause in the insuring policy was invalid under Maine law, which governed the plan and has an anti-discretion statute. The district court rejected this argument, and further ruled that Unum did not abuse its discretion in finding that the intoxication clause prevented Gary from recovering.
Gary appealed to the Eighth Circuit. The court examined Maine’s anti-discretion law, which forbids “health plan[s]” from conferring “absolute discretion” on plan administrators, and determined that the accidental death plan at issue in the case was not a “health plan.” The plan did not “provide[ ] for the financing or delivery of health care services,” which is how Maine defines health plans, and the plan was not subject to the requirements of the Affordable Care Act, which lists “coverage only for accidents” as an “excepted benefit.” Because the plan was not a “health plan,” Maine’s anti-discretion ban did not apply to Gary’s claim, and “the discretionary clause kicks in.”
Under abuse of discretion review, the rest of the decision was a foregone conclusion. According to the court, “From a blood-alcohol level of 0.337 to the opinions of multiple medical experts that a level so high could have led to incoordination and an inability to stand or walk safely, substantial evidence supported Unum’s conclusion that intoxication ‘contributed to’ her fall.” Even if other factors might have “played a role” in Kathy’s death, it was not unreasonable for Unum to conclude that Kathy’s “extreme intoxication” “contributed to” her death. The court therefore affirmed the judgment in Unum’s favor.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Chandhok v. Companion Life Ins. Co., No. CV 19-00362 JB/JFR, 2021 WL 3772136 (D.N.M. Aug. 25, 2021) (Judge James O. Browning). The court had previously determined that Companion’s denial of plaintiff’s claim for ERISA-governed disability benefits was arbitrary and capricious. The court remanded the case to Companion and denied its subsequent motion to reconsider judgment. In response to the present motion for attorney’s fees, the court concluded that awarding fees was appropriate because plaintiff had convinced the court that his claim should be remanded and had achieved “some degree of success on the merits.” The Tenth Circuit’s five factors to guide court discretion in awarding fees in ERISA actions also weighed in favor of awarding fees. The court determined a reasonable hourly fee rate; however, the court declined to grant fees for all hours that plaintiff requested because plaintiff was not permitted to recover fees for work done before the start of litigation. Plaintiff’s motion for attorney’s fees was granted in part and denied in part.
Breach of Fiduciary Duty
Osborne v. Employee Benefits Admin. Bd. of Kraft Heinz, No. 20-CV-2256, 2021 WL 3725613 (N.D. Ill. Aug. 23, 2021) (Judge Robert M. Dow, Jr.). The court dismissed the first amended complaint of a proposed class action stock drop case against Kraft Heinz. The case alleged Kraft Heinz breached its fiduciary duty of prudence by recording inaccurate amounts of goodwill and intangible assets that artificially inflated the company’s stock price, and that other fiduciary defendants failed to monitor the benefits administration board. The court found the complaint was too fuzzy to meet the Supreme Court’s Dudenhoeffer standard, which requires plaintiffs to plead that a prudent fiduciary could not conclude that public disclosure would do more harm than good. Plaintiffs were granted leave to file a second amended complaint.
Disability Benefit Claims
McIntyre v. Reliance Standard Life Ins. Co., No. 17-5134 (JRT/DTS), 2021 WL 3711034 (D. Minn. Aug. 20, 2021) (Judge John R. Tunheim). Previously the Eighth Circuit remanded this disability case for evaluation under the abuse of discretion standard of review. Plaintiff claimed to be disabled by symptoms of Charcot Marie Tooth Syndrome—an incurable progressive neurological condition that affects peripheral nerves and can result in the increasing loss of sensation and atrophy of muscles in the feet, legs, and hands. The district court considered four issues: (1) the timeliness of Reliance’s determination on administrative appeal, (2) the quality and quantity of evidence Reliance relied upon, (3) Reliance’s consideration of the Social Security Administration’s finding of disability, and (4) Reliance’s conflict of interest. First, the court noted Reliance’s appeal decision was made 204 days after plaintiff appealed. Reliance’s delay in processing plaintiff’s appeal and its use of that delay to procure the only piece of medical evidence that supported its adverse determination contributed to the court’s determination that Reliance’s denial was unreasonable. Second, because the IME report Reliance obtained on appeal did not constitute substantial evidence when weighed against the remainder of the record, the court found that Reliance abused its discretion regarding its almost exclusive reliance on its conflicting opinion. Third, the court noted Reliance was not bound by the contrary SSA determination. While it was seemingly inconsistent for Reliance to promote plaintiff’s claim for SSA disability benefits and then terminate her ERISA claim, the court found this factor did not weigh heavily in favor of either party. Fourth, the court observed that Reliance had a documented history of arbitrary claims denials. The court found that Reliance’s conflict of interest should be given greater weight when viewed in the context of its egregious procedural irregularities and dependance on insubstantial evidence in rendering its final determination against plaintiff. The conflict of interest, therefore, supported the court’s conclusion that Reliance’s denial was an abuse of discretion.
Easter v. Hartford Life & Acc. Ins. Co., Case No. 2:19-cv-612, 2021 WL 3709933 (D. Utah Aug. 20, 2021) (Judge Howard C. Nielson, Jr.). Plaintiff filed an ERISA action against Hartford after Hartford denied her claim for long-term disability benefits. The parties filed cross-motions for summary judgment. Plaintiff argued that Hartford improperly disregarded mental impairments she suffered as a result of her chronic fatigue syndrome and sleep disorders. Even though she admitted she suffered from pre-existing mental impairments, plaintiff argued that her chronic fatigue syndrome and sleep disorders independently caused mental impairments. Hartford, however, determined that plaintiff’s mental impairments were pre-existing conditions under the plan, and that plaintiff was thus ineligible for long-term benefits for any disability resulting from these impairments. In her appeal letter, plaintiff acknowledged that her mental impairments were pre-existing conditions and did not appeal Hartford’s application of the pre-existing condition limitation. The court found plaintiff had not argued that the alleged disability for which she sought benefits resulted from mental impairments; she instead pointed to “debilitating fatigue,” “severe sleep disturbances,” “trouble with memory, focus, and concentration,” and “malaise” as the symptoms of her chronic fatigue syndrome and other sleep disorders that caused the alleged disability. Under these circumstances, the court concluded that it was not arbitrary and capricious for Hartford to disregard plaintiff’s alleged mental impairments—both because she failed to appeal the determination that they were preexisting conditions, and also because she did not claim these conditions played a causal role in her alleged disability. The court further found that there was sufficient evidence that independent physicians both reviewed plaintiff’s chronic fatigue syndrome and performed a separate neuropsychological evaluation. Accordingly, the court found that Hartford’s decision was not arbitrary and capricious and granted Hartford’s motion for summary judgment.
Hyla v. Bezou, No. CV 21-1199, 2021 WL 3721708 (E.D. La. Aug. 23, 2021) (Judge Donna Phillips Currault). Hyla filed this action in state court asserting numerous contract and tort causes of action arising out of a failed law partnership agreement with defendants. Part of the dispute involved Hyla’s alleged entitlement to medical benefits under the firm’s group health insurance plan. Defendants removed the case to federal court based on ERISA preemption, after which Hyla moved to remand. The court granted Hyla’s motion, finding that Hyla was not seeking benefits under the plan and could not assert claims against defendants under the plan. Instead, “plaintiff’s claims hinge on whether defendants complied with their obligations under a partnership agreement…the lack of health insurance was a ‘mere consequence’ of her termination – not a motivating factor thereof.” Thus, plaintiff’s claims were not preempted by ERISA and the court remanded the case back to state court.
Shih v. Blue Cross & Blue Shield of Texas, Inc., No. 4:21-CV-1530, 2021 WL 3711192 (S.D. Tex. Aug. 20, 2021) (Judge Keith P. Ellison). The case concerns a medical billing dispute between the plaintiff physician and Blue Cross. Plaintiff alleged he provided out-of-network medical services to over 200 patients covered by Blue Cross plans and Blue Cross underpaid him by nearly $4 million. After Blue Cross removed the case to federal court, plaintiff filed a motion to remand. The court found the claims were subject to complete ERISA preemption based on Aetna Health Inc. v. Davila, 542 U.S. 200 (2004). The court found that plaintiff could have brought 13 claims under ERISA for patients who executed assignments. The court also found that plaintiff could not point to any independent legal duty and the claims necessarily implicated the ERISA-governed plan.
Gomez v. Bradford, No. 2:20-CV-00506-TLN-DB, 2021 WL 3733119 (E.D. Cal. Aug. 24, 2021) (Judge Troy L. Nunley). In this case involving an alleged failure to fund an annuity as part of an employee benefit plan, defendants filed a notice more than 30 days after receiving the complaint to remove the action to federal court based on ERISA preemption. Plaintiff argued that defendants’ removal to federal court was untimely because the fact that the employee benefit plan at issue raised ERISA implications could be determined from the face of the complaint. The court agreed and granted plaintiff’s motion to remand.
Life Insurance & AD&D Benefit Claims
Metropolitan Life Ins. Co. v. Fowler, No. 20-CV-05535-SB-KKx, 2021 WL 3771794 (C.D. Cal. Aug. 24, 2021) (Judge Stanley Blumenfeld, Jr.). This action involves a dispute over the proper beneficiary of life insurance benefits after the death of Felix Fowler, Jr. Felix married Carolyn Fowler (“Fowler”) and eventually made their daughter, Dallas, as a beneficiary. Fowler and decedent never formally divorced. Felix thereafter married Carolyn Washington and changed his life insurance beneficiary to her. In 2017, Felix’s health began to fail, and he had brain surgery. Dallas contacted MetLife to obtain information about her father’s policy, and the representative advised Dallas that a beneficiary may be changed over the phone so long as decedent spoke himself. Felix was largely incoherent during that conversation and had assistance from someone in the background, but eventually changed the beneficiary back to Fowler. Fowler and Washington each claimed they were entitled to the benefits. The court found that Felix’s marriage to Washington was bigamous, but she maintained that she was still entitled to benefits as a putative spouse, because she had a good faith belief that their marriage was valid. The court found that Washington was not entitled to the pension benefits as a putative spouse because those benefits are not quasi-community property. Under California law, property acquired by either husband or wife during a marriage generally constitutes community property. This principle has been extended to putative marriages. Here, however, Felix had stopped working for GM and contributing to the plan in 2003—years before he married Washington in 2007. Thus, even though Washington may have had a good faith belief that her marriage was valid, she had no claim to property acquired solely during Felix’s marriage to Fowler. However, the court also found that the change of beneficiary was a product of undue influence by Dallas. For 11 years, Washington was the designated beneficiary until Dallas initiated a call that changed things back to the way they were 34 years earlier. The court was not convinced that this reversion was the product of decedent’s free will. Therefore, the court concluded that Washington was entitled to the life insurance benefits, and Fowler was entitled to pension benefits.
The Prudential Ins. Co. of America v. Tubbs, No. 20-CV-233-JFH, 2021 WL 3733126 (E.D. Okla. Aug. 23, 2021) (Judge John F. Heil, III). Prudential brought this interpleader action arising from the death of Catrina Pope, who had ERISA-governed group life insurance coverage with Prudential through her employment by Wal-Mart. Pope was married to defendant Tubbs, who was the primary beneficiary of her coverage. However, Tubbs had been criminally charged with Pope’s death, and Prudential was concerned that Oklahoma’s “slayer statute” legally barred him from receiving the insurance proceeds, so it filed this action. Tubbs failed to answer the complaint, and Prudential moved for default judgment. The court found that it had subject matter jurisdiction under ERISA, and personal jurisdiction over Tubbs because he was an Oklahoma citizen. It further found that Tubbs had forfeited his right to the benefits by failing to make an appearance in the action, and ordered that the benefits be paid to the guardians of Pope’s daughter, who was the secondary beneficiary.
Medical Benefit Claims
Callery v. Exxonmobil Corp., No. CV H-21-1086, 2021 WL 3711180 (S.D. Tex. Aug. 20, 2021) (Judge Lee H. Rosenthal). Plaintiffs in this case are retiree participants in the Exxonmobil Retiree Medical Plan. Exxon informed all participants in writing that they needed to have a physical United States street address and be enrolled in Medicare to continue to be eligible for benefits. Plaintiffs live in Thailand. They were removed from the plan when they were unable to provide a U.S. address. Plaintiffs sued Exxon for ERISA retaliation, breach of fiduciary duty, and benefits due under an ERISA plan. The court dismissed plaintiffs’ retaliation claim because there were no allegations that Exxon was retaliating against plaintiffs for pursuing their rights under ERISA. Plaintiffs’ benefits claim and breach of fiduciary duty claim was also dismissed as they did not point to any plan term that conferred a perpetual right to health care benefits regardless of residence.
Swearingen v. Westlake Health Care Plan, No. 2:20-CV-02052-MCS-JEM, 2021 WL 3733242 (C.D. Cal. Aug. 24, 2021) (Judge Mark C. Scarsi). The court considered plaintiff’s request for health benefits for proton beam radiation therapy for treatment of prostate cancer. The court found the standard of review to be abuse of discretion because the summary plan description’s terms did not conflict with the terms of the benefit plan. The parties disputed the medical evidence regarding the medical necessity of the treatment and Anthem’s guidelines. The court found it was not the court’s role to determine which medical opinion should prevail. Instead, it was “bound by” Howard v. Blue Cross Blue Shield of Arizona, 822 F. App’x 628 (9th Cir. 2020), and therefore Anthem’s decision was not an abuse of discretion.
Pension Benefit Claims
Russo v. Valmet, Inc., No. 19-cv-00324-DBH, 2021 WL 3824670 (D. Me. Aug. 26, 2021) (Mag. J. John C. Nivison). Plaintiff Russo was hired by Valmet in 2002. He claimed that at the time of his hire, he was told he would have a defined benefit plan. Upon receiving his first benefit statements, Russo learned he was not included in the defined benefit plan, but rather a defined contribution plan. He contacted human resources and learned that his location did not offer the defined benefit plan, and if he had been told otherwise when he was hired, it was an error. Russo stated at the time that he would deal with the error when he retired. He retired in 2018 and made a claim under the defined benefit plan. Russo’s claim was denied on the ground that he was not eligible for benefits under that plan, and he brought suit. The claim was reviewed under the abuse of discretion standard. The magistrate judge recommended that the court deny Russo’s claim, as he was not able to demonstrate any failure on behalf of Valmet in following the plan in place at the time of his hire. Russo argued that Valmet should be equitably estopped from denying benefits based on the representations made at the time of his hire. However, the court found that the six-year statute of limitations barred that claim as well.
Pleading Issues & Procedure
Greer v. Unum Life Ins. Co. of Am., No. 17-CV-615-CWR-LGI, 2021 WL 3782137 (N.D. Miss. Aug. 25, 2021) (Judge Carlton W. Reeves). In this action for ERISA-governed long-term disability benefits, defendant Unum moved to strike plaintiff’s “chronology” – a summary of events in the administrative record – arguing that it was “not evidence.” The court disagreed, finding that plaintiff’s chronology squarely met the requirements of Federal Rule of Evidence 1006. Unum’s second motion to strike pertained to documents attached to plaintiff’s supplemental motion for judgment. The Court cited Crosby v. Louisiana Health Serv. & Indem. Co., 647 F.3d 258 (5th Cir. 2011), which generally prohibits evidence from outside the administrative record in ERISA cases, but agreed with plaintiff that the records in question fell within exceptions to Crosby. The court ruled that it was appropriate to consider the filings in connection with the pending motions for summary judgment and the related non-coverage issues of conflict of interest, bias, and the appropriate standard of review. The court stated that the exhibits would be considered only to the extent they were relevant to these issues.
Gotham City Orthopedics, LLC v. Cigna Health & Life Ins. Co., No. CV-21-1703-SDW-LDW, 2021 WL 3726053 (D.N.J. Aug. 23, 2021) (Judge Susan D. Wigenton). Gotham, a medical provider, alleged that Cigna under-reimbursed it for services it provided to its patients, who were covered under ERISA-governed benefit plans administered by Cigna. Cigna filed a motion to dismiss, which the court granted. The court found that Gotham’s ERISA claims were deficient: “Plaintiff’s pleading fails to include the terms of the Plans under which Plaintiff seeks payment, terms which are central to all of Plaintiff’s claims and necessary for any meaningful review of their sufficiency. Without this information, the Complaint contains little more than an assertion that Plaintiff is owed more than it was paid for the services it provided. This is insufficient under [Federal] Rule [of Civil Procedure] 8.” The court declined to exercise supplemental jurisdiction over Gotham’s remaining state law claims, dismissed the complaint, and gave Gotham leave to amend.
Adkins v. CSX Transp., Inc., No. CV 3:18-0321, 2021 WL 3731828 (S.D.W. Va. Aug. 23, 2021) (Judge Robert C. Chambers). In this case where the facts “have been restated ad nauseam,” the plaintiffs brought various federal and state law challenges to their termination by their employer, defendant CSX. CSX fired plaintiffs on the ground that they fraudulently represented that they could not work due to injury. The parties filed cross-motions for summary judgment. Regarding plaintiffs’ claim for retaliation under ERISA, the court found that plaintiffs “have failed to produce any evidence to suggest that Defendants terminated the Plaintiffs for any purpose other than the Defendants’ stated legitimate reason. Therefore, Plaintiffs are unable to carry their burden of showing they were terminated for pre-textual reasons.” The court thus granted summary judgment to defendants on plaintiffs’ claim for retaliation under ERISA.
Withdrawal Liability & Unpaid Contributions
Steelworkers Pension Trust v. The Renco Group, Inc., Nos. 19-3499, 19-3504, 19-3507, __ Fed. App’x __, 2021 WL 3788945 (3rd Cir. Aug. 26, 2021) (Before Circuit Judges Ambro, Porter, and Roth). Plaintiff Renco appealed two summary judgment orders and related preceding interlocutory orders in ERISA actions as they related to Renco’s withdrawal from Steelworkers’ multiemployer pension plan. Steelworkers cross-appealed one summary judgment order. The Third Circuit affirmed the district court’s orders in their entirety. The Third Circuit found that 29 U.S.C. § 1339 governs interim payments during withdrawal liability disputes, and requires plan sponsors to provide notice and demand of withdrawal liability to employers. It also requires employers to make interim payments beginning 60 days post-notice, notwithstanding any pending withdrawal liability challenged. The court found that Renco had not shown any basis for absolving its obligation to make payments and that the parties’ dispute did not toll Renco’s payments obligation, which began 60 days after Steelworkers’ demand. The court also affirmed the district court’s application of the default rate coverage actions for delinquent plan contributions under 29 U.S.C. § 1132(g)(2) and 26 U.S.C. § 6621. The Third Circuit found that courts are split on the issue of whether § 1132(g)(2) or § 1399(c)(6) should apply to interim payments in a withdrawal liability dispute. It found those cases applying § 1132(g)(2) more persuasive: Section 1132(g)(2) specifically covers actions to compel disputed withdrawal liability payments, as in the case at hand, while § 1399(c)(6) appeared to apply to the collection of overdue withdrawal payments when liability was not disputed. Therefore, the Third Circuit ruled the default underpayment rate applied where the plan specified no withdrawal liability payment rate. Accordingly, the Third Circuit affirmed all the district court’s orders and judgments.
Teamsters Local Union No. 727 Pension Fund v. Capital Parking, No. 19-CV-00837, 2021 WL 3709190 (N.D. Ill. Aug. 20, 2021) (Judge Franklin U. Valderrama). Plaintiffs – multiemployer benefit plans and their trustees – brought this action under various statutes, including ERISA, alleging that Capital Parking, a participating employer in the plans, failed to adequately contribute to the plans under a collective bargaining agreement. In their complaint, plaintiffs sought to pierce the corporate veil of Capital Parking to hold defendant James Weiss personally liable for the contributions. Several months later, the federal government indicted Weiss as part of a corruption and bribery scandal involving an Illinois state representative and another one of Weiss’ businesses. Defendants moved to stay the ERISA action pending the adjudication of the criminal indictment. The court found that (1) the criminal and civil matters did not overlap, (2) the parties were not the same, (3) the posture of the criminal proceeding did not affect the civil action, (4) proceeding in the civil action was in the public interest, (5) plaintiffs had an interest in an expeditious resolution of the civil action, and (6) proceeding with the civil action would not significantly prejudice Weiss in the criminal case. As a result, the court denied defendants’ motion to stay.