Radmilovich v. Unum Life Ins. Co. of Am., No. SA CV 22-00181-DOC-KES, __ F. Supp. 3d __, 2023 WL 7457118 (C.D. Cal. Nov. 7, 2023) (Judge David O. Carter)
In selecting this week’s notable decision, we are admittedly engaging in some light self-promotion, as Kantor & Kantor prevailed in this published district court decision on behalf of a client seeking long-term disability benefits.
The plaintiff was David Radmilovich, an industrial engineer who suffered a cardiac arrest in 2016 at the age of 53. Paramedics who responded performed lifesaving CPR after discovering he had no pulse, no blood pressure, and was not breathing. While recovering in the hospital, his cardiologist determined he had multilevel coronary artery disease.
Unsurprisingly, this traumatic event had lasting health consequences. Mr. Radmilovich underwent coronary artery bypass surgery and could not return to work until 2017. His ability to work was compromised, as he suffered from heart palpitations, dizziness, shortness of breath, and chest pain. Mr. Radmilovich’s cardiologist referred him for a neuropsychological evaluation (NPE), which also determined he was suffering from a mild neurocognitive disorder and a somatic symptom disorder. His symptoms continued and he was eventually forced to stop working.
Mr. Radmilovich submitted a claim for benefits to the insurer of his employer’s group long-term disability employee benefit plan, defendant Unum Life Insurance Company of America. Unum paid benefits for just over a year, but terminated them in October of 2019, concluding that Mr. Radmilovich had “above average exercise capacity,” there was “no clear evidence of cognitive impairment,” and there was no behavioral impairment.
Mr. Radmilovich appealed, submitting an updated NPE and an independent cardiology evaluation, among other evidence. The NPE diagnosed Mr. Radmilovich with major neurocognitive disorder, tracing his problems to his cardiac arrest which had deprived his brain of oxygen. The cardiologist determined that Mr. Radmilovich was suffering from ongoing coronary microvascular disease. Both agreed he was disabled. Unum remained unconvinced, however, and upheld its termination. As a result, Mr. Radmilovich filed this action.
The district court found in favor of Mr. Radmilovich under de novo review. In doing so, it touched on a number of issues that commonly arise in long-term disability cases. First, the court gave the opinions of Mr. Radmilovich’s doctors more weight than those of Unum’s reviewing physicians, who had only conducted “paper reviews” and did not examine him in person. Specifically, the court credited reports from Mr. Radmilovich’s treating physicians that confirmed his symptoms and explained how they were a result of his 2016 cardiac arrest.
Second, the court criticized Unum’s use of “a generic list of occupational activities” in determining whether Mr. Radmilovich was disabled, instead of considering “the specific requirements of Mr. Radmilovich’s job.” In doing so, the court ruled that Unum did not abide by the policy’s definition of disability and Ninth Circuit case law which holds that “insurers must consider the insured’s actual job activities.” (The two cases cited by the court for this proposition were both Kantor & Kantor victories: Salz v. Standard Ins. Co., 380 F. App’x 723 (9th Cir. 2010), and Kay v. Hartford Life & Accident Ins. Co., No. 21-55463, 2022 WL 4363444 (9th Cir. Sept. 21, 2022).)
Third, the court agreed with Mr. Radmilovich that it was permitted to consider evidence that was acquired after Unum terminated his benefits, and also agreed that just because his doctors’ diagnoses had changed over time that did not make them necessarily less credible.
Fourth, the court ruled that Unum did not adequately take all of Mr. Radmilovich’s conditions into consideration. The court noted that it was not prepared to rule that Mr. Radmilovich had “met his burden to prove that he was disabled from just his cardiac condition or just his cognitive impairments,” but it was convinced that the combined conditions rendered him disabled and entitled to benefits.
As a result, the court concluded that Mr. Radmilovich was entitled to benefits during the initial two-year “own occupation” time period, and remanded to Unum to determine whether he was entitled to benefits past that period, and whether he was entitled to a waiver of premiums on his life insurance benefits due to his disability.
Mr. Radmilovich was represented by Glenn R. Kantor, Sally Mermelstein, and Rhonda Harris Buckner of Kantor & Kantor LLP.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Neumiller v. Hartford Life & Accident Ins. Co., No. C22-0610 TSZ, 2023 WL 7280906 (W.D. Wash. Nov. 3, 2023) (Judge Thomas S. Zilly). Plaintiff Julie Neumiller commenced this ERISA action against Hartford Life & Accident Insurance Company to challenge its termination of her long-term disability benefits. Ms. Neumiller’s motion for judgment on the administrative record was denied in the district court. It entered judgment instead in favor of Hartford. Ms. Neumiller subsequently appealed that adverse ruling and found success in the Ninth Circuit. The court of appeals held that Hartford had failed to correctly prorate Ms. Neumiller’s trimester bonus when calculating her current monthly earnings. Based on this finding, the Ninth Circuit vacated the lower court’s judgment and remanded for further development of the administrative record. Back in district court the Ninth Circuit’s instructions were relayed to Hartford, as the district court remanded the matter to the insurer to develop the record to include more information regarding the trimester bonuses and to revise its benefits decision consistent with this updated information and the position of the Ninth Circuit. Before Hartford decided the remand, Ms. Neumiller moved for an award of attorney’s fees and costs pursuant to ERISA’s fee statute, Section 502(g)(1). Hartford opposed the motion. It argued that Ms. Neumiller’s success was purely procedural. The court disagreed. Relying on well-developed case law, it found that remand to an insurance company to conduct further administrative proceedings is a significant degree of success on the merits to make an ERISA plaintiff eligible for an award of fees. Moreover, the court agreed with Ms. Neumiller that her success warranted a fee award, as it will serve to deter Hartford from violating its ERISA obligations going forward and may discourage it “from prioritizing its own interests over the interests of plan beneficiaries.” Further, the court wrote that by bringing this action, “Plaintiff has benefited other plan participants by clarifying how an ambiguous plan provision is to be interpreted.” Thus, the court found that the relevant factors supported an award of fees and costs to Ms. Neumiller. Ms. Neumiller moved for an award of $42,000 in attorney’s fees, based on an hourly rate of $600 per hour for her counsel. Hartford did not argue in its opposition to the fee motion that the hours expended, or the attorney’s hourly rate, were unreasonable. And the court did not view them as such. Accordingly, Ms. Neumiller was awarded her full requested fee award. She was likewise awarded $844.40 in costs. Thus, plaintiff’s motion was granted in an entirely unaltered form, and Hartford was ordered to pay a total of $42,844.40 to Ms. Neumiller.
Breach of Fiduciary Duty
The Bd. of Trs. for the Alaska Carpenters Defined Contribution Tr. Fund v. Principal Life Ins. Co., No. 22-cv-01337, 2023 WL 7280748 (W.D. Wash. Nov. 3, 2023) (Judge Jamal N. Whitehead). In this action the Board of Trustees for the Alaska Carpenters Defined Contribution Trust Fund has sued its former third-party administrator, Principal Life Insurance Company, for breaching its fiduciary duties under ERISA and breaching its contract with the Board. In essence, the trustees allege that Principal, which had control over fund assets, “used its discretion to unilaterally withdraw fees inconsistent with the ‘understanding and practice’ involving fees and representations made to the Board about the same.” Thus, alleging that Principal took more than its fair, and contractually agreed upon, share of fees, the Board maintains that its service provider was in violation of both ERISA and state contract laws. Principal moved to dismiss the complaint for failure to state a claim. The court denied its motion, finding that plaintiff plausibly alleged its ERISA and breach of contract claims. The court was satisfied that the complaint plausibly alleges that Principal was functioning in its fiduciary capacity at the time of the actions that are the subject of this lawsuit. Specifically, the court stated that under Ninth Circuit precedent on the topic, plaintiffs who allege that ERISA plan service providers are taking more from plan funds than they are entitled to “plausibly allege a fiduciary relationship.” As for the breach of contract claim, the court held that the complaint cites the service agreement as the contract creating and outlining Principal’s duties, and also cites the specific duties that the Board contends Principal breached, which caused the damages at issue. For these reasons, Principal’s motion to dismiss was denied.
Foughty v. Cleaver-Brooks, Inc., No. 1:23-CV-3074-TWT, 2023 WL 7287220 (N.D. Ga. Nov. 3, 2023) (Judge Thomas W. Thrash, Jr.). Plaintiff Pamela Foughty’s late husband, decedent William Foughty, was an employee of defendant Cleaver-Brooks, Inc. Sadly, Mr. Foughty was diagnosed with brain cancer in the spring of 2020. Following his diagnosis, the Foughtys “worked diligently to ensure his life insurance policy would remain active through the time of his death.” Nevertheless, after Mr. Foughty’s death, Ms. Foughty’s claim for benefits was denied by life insurer Reliance Standard. This action arises from that denial. After Reliance upheld its decision during the internal appeals process, Ms. Foughty sued the insurer. That case was settled for the full benefits amount plus interest. In this lawsuit, Ms. Foughty has sued Cleaver-Brooks for its role in providing false and misleading information which resulted in the loss of life insurance coverage. Ms. Foughty alleges a single claim for breach of fiduciary duty under Section 502(a)(3) of ERISA. Cleaver-Brooks moved to dismiss the complaint for failure to state a claim. It argued that it did not breach any duties owed to the family, that Ms. Foughty is improperly seeking compensatory damages, and that res judicata bars her claim. Ms. Foughty responded that defendant plausibly breached its fiduciary duties and that she is entitled to make-whole compensation under the theory of equitable surcharge. Further, Ms. Foughty maintains that her settlement with Reliance Standard carved out and preserved her claims against Cleaver-Brooks, meaning res judicata does not bar her claim. As a preliminary matter, the court identified defendant’s first argument – that it didn’t breach any fiduciary duty owed to Ms. Foughty – as a merits dispute “inappropriate for consideration at the motion to dismiss stage.” However, the court considered defendant’s arguments regarding equitable surcharge and res judicata. First, it held that Ms. Foughty does not have an adequate remedy at law under Section 502(a)(1)(B), because the plan was fully insured meaning “its recourse to recover benefits due under the plan was against Reliance Standard, not the Defendant.” As to whether to allow equitable surcharge as a remedy in this case where Ms. Foughty is bringing a claim for breach of fiduciary duty against the employer after first proceeding against the insurer, the court stated that it could find “no legal authority prohibiting such a proceeding. Absent such authority, the Court cannot conclude that the Plaintiff’s elected procedure bars her § 502(a)(3) claim against the Defendant.” With regard to res judicata, the court agreed with Ms. Foughty that privity does not exist between Cleaver-Brooks and Reliance Standard in the prior suit. Thus, the court held that res judicata does not bar the breach of fiduciary duty claim in this action. Accordingly, the court denied the motion to dismiss and allowed Ms. Foughty to proceed with her Section 502(a)(3) claim against the employer.
Kazda v. Aetna Life Ins. Co., No. 19-cv-02512-WHO, 2023 WL 7305038 (N.D. Cal. Nov. 6, 2023) (Judge William H. Orrick). In this certified class action, a group of insured participants of EIRSA-governed healthcare plans administered by defendant Aetna Life Insurance Company are challenging Aetna’s use of clinical policies to systematically deny all claims for liposuction surgery for the treatment for the disease lipedema as cosmetic. Lipedema is a rare, painful, and progressive disease involving an abnormal buildup of fat tissue. Left untreated lipedema can lead to immobility. In their action, the class is alleging that Aetna’s policies categorically considered suction lipectomy to be a cosmetic procedure and that claims for the surgery were denied on this single basis thanks to those internal clinical policies. They further maintain that Aetna’s categorization of their claims as “cosmetic” is in direct conflict with the plans’ definitions of cosmetic procedures – surgeries intended to improve appearance rather than treat serious symptoms associated with diseases. Based on this theory of the case, the class brings two claims against Aetna – a claim for denial of benefits and clarification of rights under Section 502(a)(1)(B), and a claim for breach of fiduciary duty under Section 502(a)(3). Before the court were two motions. First, Aetna moved to decertify the class based on the Ninth Circuit’s rulings in the Wit v. United Behavioral Health action. Second, plaintiff Michala Kazda moved for summary judgment. In this decision the court denied both motions. Beginning with the motion to decertify, the court held that Wit II did not mean what Aetna was arguing it meant. Rather than a categorical rejection of reprocessing as a class remedy, the court wrote that Wit II clarifies “that reprocessing may be an appropriate remedy where an administrator has applied the wrong standard, and the claimant could have been prejudiced by the application of that standard.” The court stated that it had already found the class “made a showing at least for the purposes of class certification, that application of the wrong standards (here, Aetna’s CPBs) could have prejudged them.” This, the court held, “meets the minimum requirements for reprocessing,” and is common among all of the members of the class. Furthermore, the court emphasized that plaintiffs are not required to show entitlement to a positive benefits determination under Wit II, only that remand for reprocessing would not be futile. Finally, the court allowed plaintiffs to proceed with simultaneous claims under Sections 502(a)(1)(B), and (a)(3) because it continued to hold, as it did when it certified the class, that the remedies the class is seeking under each subsection are unique, available, and appropriate. Accordingly, the court found that nothing in Wit II requires or even supports decertification of the class. The decision then switched gears to analyze plaintiff’s motion for summary judgment. That motion too was denied. The court identified several issues of disputed facts material to both the benefit claim and the fiduciary breach claim. These issues included a material factual dispute over whether Aetna categorically denied claims for lipedema surgery as cosmetic based on the policies or whether the insurer individually reviewed claims for benefits to determine medical necessity. Aetna also offered evidence that cut against the complaint’s allegations of breaches of fiduciary duties. The court therefore held that undisputed evidence did not prove the class’ theory of the case and as such determined that an award of summary judgment to the claimants was inappropriate.
Disability Benefit Claims
Patrick v. Reliance Standard Life Ins. Co., No. 21-1681, __ F. App’x __, 2023 WL 7381460 (3d Cir. Nov. 8, 2023) (Before Circuit Judges Restrepo, McKee, and Rendell). As you may have read above in our notable decision, in disability cases it is not uncommon for insurance companies to be somewhat creative with their classification of a claimant’s job title. Nevertheless, this case is quite an audacious and brazen example of a job reclassification even by the typical standards. Plaintiff Amy Patrick, M.D. is a gastroenterologist. Defendant Reliance Standard Life Insurance Company recognized as much during the ten years when it paid her long-term disability benefits. However, this changed when Reliance terminated Dr. Patrick’s benefits. “In 2019, notwithstanding Reliance’s having paid her benefits for a decade based on her inability to perform her duties as a Gastroenterologist, Reliance determined that Dr. Patrick was no longer entitled to benefits because her disability did not prevent her from performing the regular duties of an Internal Medicine Specialist.” Although the digestive system is internal, only AI would understand a GI doctor to be an internal medicine doctor. The two fields of medicine are functionally different. As a gastroenterologist Dr. Patrick was required to routinely perform GI procedures, including coloscopies and endoscopies, something she and her healthcare providers agree she is unable to safely and effectively do as she does not have full use of her right shoulder. Perhaps unsurprisingly then, the district court concluded that this behavior was an abuse of discretion and awarded benefits to Dr. Patrick. Agreeing with the lower court, the Third Circuit upheld its decision in this short unpublished order. The appeals court concurred with the district court that Reliance’s characterization of Dr. Patrick as an internal medicine specialist was not reasonable and “contrary to the plan’s plain language.” The Third Circuit agreed with the district court that “the record is replete with evidence that Dr. Patrick is a gastroenterologist: Dr. Patrick’s training, employment history, board certification, and even Reliance’s records of Dr. Patrick’s disability support the finding that the occupation she routinely performed when her Total Disability began was that of a Gastroenterologist. Indeed, at the time Reliance began paying Dr. Patrick benefits, she was not even board-certified to practice internal medicine.” Thus, the court rejected Reliance’s “ridiculous” position “that Gastroenterologist is not an occupation,” and therefore affirmed the holdings of the lower court, including its award of fees and costs.
Olah v. Unum Life Ins. Co., No. 1:19-CV-96-KAC-CHS, 2023 WL 7305033 (E.D. Tenn. Nov. 6, 2023) (Judge Katherine A. Crytzer). Plaintiff Lori Olah commenced this action in 2019 to challenge Unum Life Insurance Company’s termination of her long-term disability and life insurance without premiums benefits under ERISA. Ms. Olah began receiving disability and no-premium life insurance benefits in 2017 following a spinal surgery she underwent to correct a pinched nerve root located in her lower back. Unum approved and paid Ms. Olah’s claim for benefits for one year following the surgery, at which time it terminated the benefits, concluding that she had been given an adequate amount of time for the nerve damage to heal. Unum’s reviewing doctors determined that Ms. Olah was exhibiting consistent signs of improved health and could return to sedentary work. Ms. Olah saw things differently. She maintained that she was continuing to experience debilitating back pain, stated that she required the use of a cane to walk, and pointed out that her orthopedic surgeon had diagnosed her with “moderately severe degenerative disc disease.” The parties filed cross-motions for judgment on the administrative record. Magistrate Judge Christopher H. Steger issued a report and recommendation recommending the court enter judgment in favor of Unum. Ms. Olah objected to the report. She argued that the Magistrate Judge erroneously permitted Unum to consider evidence of medical improvement which occurred while it was still approving her benefits, that the Magistrate’s report improperly cherry-picked evidence from Unum’s reviewers rather than considering the evidence of her treating healthcare providers, and that the report failed to adequately consider the conflict of interest that Unum’s reviewing doctors and claims handlers were operating under. In this decision, the court overruled Ms. Olah’s three objections and adopted the Magistrate’s report in full. To begin, the court held that Unum was entitled to consider the entire medical record, including evidence of medical improvement during the period in which benefits were approved. The court also held that Unum’s decision to rely on its own doctor’s opinions without an in-person exam of Ms. Olah was not on its own arbitrary or capricious. As for Ms. Olah’s argument that Unum and the report cherry-picked evidence in the record unfavorable to her, the court found that it was not an abuse of discretion on Unum’s part nor an error on the part of the report to credit one piece of conflicting evidence over another. Finally, with regard to Unum’s conflict of interest, the court found that Ms. Olah’s arguments failed because she could not produce any evidence that the conflicts Unum, its claims director, and its reviewing physicians were operating under “affected the plan administrator’s decision to deny her specific claim.” For these reasons, the court stated that it could not conclude the denial of Ms. Olah’s benefit claims was “anything other than a deliberate, principled reasoning process and supported by substantial evidence.” Accordingly, Unum’s motion for judgment was granted and Ms. Olah’s motion for judgment was denied.
Pedersen v. Kinder Morgan, Inc., No. 4:21-CV-3590, 2023 WL 7284177 (S.D. Tex. Nov. 2, 2023) (Magistrate Judge Dena Hanovice Palermo). In this pension benefits action, plan participants have sued the Kinder Morgan, Inc. cash balance plan and its fiduciaries asserting six separate claims under ERISA Sections 502(a)(1)(B) and (a)(3) for miscalculating early retirement benefits, failing to follow claims procedure regulations, violating ERISA’s anti-cutback provisions, using outdated mortality tables and interest rates, and for having plan language that is ambiguous and not understood by the average participant. Defendants previously tried and failed to limit the scope of plaintiffs’ action only to claims asserted under Section 502(a)(1)(B), “keen to prevent plaintiffs from bringing claims under Section 502(a)(3)…[to] severely limit discovery.” District Judge Ellison permitted four of the six claims to proceed under Section 502(a)(3), and therefore incorporated its less restrictive discovery procedures. The court then granted each party the ability to take 10 depositions each. Now defendants have moved for a protective order preventing plaintiffs from taking three of those ten depositions. The court denied the motions in this order, finding defendants failed to establish good cause for a protective order. It held that each of the three witnesses – the counsel to the plan, Ms. Bethany Bacci, and two members of the pension benefits team (Ms. Norma Ortega and Mr. Eddie Ammons) – possess unique information relevant to plaintiffs’ claims asserted under both subsections of ERISA. The court wrote that the record demonstrates that the three individuals have information and knowledge relevant to obtain discovery on the Crosby exceptions for claims asserted under Section 502(a)(1)(B), and that they further possess knowledge relevant to the claims brought under Section 502(a)(3) “which are not subject to ERISA’s narrow discovery, but rather are governed by Rule 26.” Moreover, the court was not convinced that the depositions would be duplicative of one another. Finally, the court did not require plaintiffs to submit a list of topics before deposing the individuals nor limit the duration of the depositions, as defendants had requested. Instead, the court allowed plaintiffs to depose Ms. Bacci, Ms. Ortega, and Mr. Ammons, and ask them questions relevant to the subjects of their claims, given that these “witnesses have a considerable amount of information and knowledge about which they may be deposed.”
Pedersen v. Kinder Morgan, Inc., No. 4:21-CV-3590, 2023 WL 7428865 (S.D. Tex. Nov. 9, 2023) (Magistrate Judge Dena Hanovice Palermo). Magistrate Judge Dena Hanovice Palermo wasn’t quite done ruling on discovery disputes in the Pederson action this week. In this second decision, the court weighed in on plaintiffs’ motion to apply the fiduciary exception to the attorney-client privilege with regard to communications and documents related to the plan’s administration. After examining the withheld documents during an in-camera review and analyzing the parties’ briefing and the relevant case law, the court concluded “that these documents are protected by attorney-client and work product privileges, and therefore Plaintiffs’ motion is denied.” The court stated that while the documents at issue do mention the plan beneficiaries, it emphasized that they do not “discuss or decide the merits of their pending claims and/or appeals and [don’t] direct the fiduciary committee to act on those claims.” The court ultimately disagreed with plaintiffs that the documents contained legal advice related to plan administration making them discoverable under the fiduciary exception. Instead, the court concluded that the withheld documents were privileged because the plan was receiving legal advice about the risks of potential litigation between it and its beneficiaries. Thus, as the documents analyze legal risks of potential litigation and discuss legal arguments and strategies for the plan, the court found that they were protected under the attorney-client privilege and work-product doctrine, not subject to the fiduciary exception, and thus protected from disclosure. Plaintiffs’ motion was accordingly denied.
Schoenberger v. Securian Life Ins. Co., No. 2:23-CV-00096-LK, 2023 WL 7317199 (W.D. Wash. Nov. 2, 2023) (Judge Lauren King). Plaintiff Amelita Schoenberger brings this ERISA action seeking accidental death and dismemberment benefits that were denied by defendant Securian Life Insurance Company following the death of her husband. Ms. Schoenberger moved to conduct limited discovery regarding the disclosure of redacted claim file documents which she maintains are part of the administrative record and were improperly withheld pursuant to attorney-client and work-product privileges. Ms. Schoenberger contends that these file entries are discoverable under the fiduciary exception and that they therefore are improperly being withheld on the basis of privilege. Therefore, she moved for the court to order production of these documents and their redacted information. Securian opposed Ms. Schonberger’s motion. It argued that she did not comply with the Federal Rules of Civil Procedure because she did not serve discovery requests for production after obtaining leave to conduct discovery. In response, Ms. Schonberger stated that she was following the court’s method for resolving the discovery dispute as described in the joint status report. The court rejected this argument. “First, the Court does not entertain requests for relief in a Joint Status Report.” It stated that it had no intention of circumventing procedural requirements. Therefore, the court held that Ms. Schonberger was not exempted “from the standard discovery procedures applicable to compelling disclosure,” and her request for production of documents was accordingly determined to be procedurally improper. As a result, the court denied Ms. Schonberger’s limited discovery motion and cautioned her to comply with the Federal Rules of Civil Procedure going forward. However, the court did say, “to the extent the redacted information falls within the definition of ‘relevant’ documents, records, or information…Securian must comply with Rule 26(b)(5) by supplying Plaintiff with a privilege log.”
Cannon v. Blue Cross & Blue Shield of Mass., No. 23-cv-10950-DJC, 2023 WL 7332297 (D. Mass. Nov. 7, 2023) (Judge Denise J. Casper). Plaintiff Scott Cannon, individually and as representative of the estate of Blaise Cannon, sued Blue Cross and Blue Shield of Massachusetts, Inc. in state court alleging six state law causes of action arising from Blue Cross’s denial of coverage for a Wixela Inhub inhaler to treat Blaise’s asthma. Without this inhaler, Blaise died due to complications related to his asthma. Blue Cross removed the action to federal court. It then moved to dismiss the complaint, arguing that the state law claims are preempted by ERISA and that Mr. Cannon has failed to state a claim under ERISA. Blue Cross attached several documents and exhibits to its motion to dismiss, including what it purports is the governing healthcare policy. However, Mr. Cannon questioned the completeness and authenticity of the documents Blue Cross submitted. Because the court could not say that the submitted documents were indisputably authentic, it denied the motion to dismiss without prejudice. “Had BCBS submitted an affidavit or declaration explaining the significance of the proffered policy documents and verifying they concerned the health insurance policy through which Blaise sought coverage for the Wixela Inhub inhaler, the Court may have considered the exhibits and reached the ERISA preemption arguments raised by BCBS’s motion to dismiss. However, in light of the parties’ submissions to date, the Court is unable to do so.” Nevertheless, resolution of the ERISA preemption issue remains important. Accordingly, the court ordered the parties to conduct limited discovery on matters bearing upon the issue and then to file summary judgment motions on ERISA preemption, at which point it will address and rule on whether ERISA governs the policy at issue and if so, whether Mr. Cannon can proceed with claims under ERISA.
Medical Benefit Claims
Robert B. v. Premera Blue Cross, No. 1:20-cv-00187-DBB-CMR, 2023 WL 7282726 (D. Utah Nov. 3, 2023) (Judge David Barlow). Robert B., individually and on behalf of his son, C.B., brought this two-count ERISA action against Premera Blue Cross to challenge its denial of C.B.’s one-year long stay at a psychiatric residential treatment center. Robert B. alleges in his complaint that Premera’s denial violated ERISA by denying the family a full and fair review, incorrectly denying a benefit claim the family was entitled to under the terms of the plan, and for violating the Mental Health Parity and Addiction Equity Act by making coverage conditions for mental health residential treatment more onerous than analogs coverage for other types of medical and surgical care. The parties cross-moved for summary judgment. In this decision the court granted summary judgment in favor of plaintiff on his Section 502(a)(1)(B) benefit claim, remanded to Premera for reconsideration and a full and fair review, and granted judgment to Premera on the Parity Act violation claim. To begin, the court agreed with Robert B. that Premera entirely ignored evidence of suicidal ideation present in the medical record and that this flagrant disregard of a key qualifying symptom for residential treatment coverage under the relevant criteria was not a full and fair review of either the medical records or the claim for benefits. Moreover, the court found that Premera wholly ignored the opinions of C.B.’s treating healthcare professionals, thereby shutting its eyes to readily available and relevant medical information. The court wrote that “other than listing the letters as received or reviewed, none of the denial or review correspondence substantively addressed the treaters’ opinions. They do not discuss or reference the opinions whatsoever, leaving both the beneficiary and the court with no way of discerning whether they actually were engaged with substantively at all. The denials are simply devoid of what weight, if any, Premera accorded these opinions.” Such a lack of substantive engagement with relevant medical information was found by the court to fall short of a meaningful dialogue required under ERISA. Accordingly, the court agreed with plaintiff that Premera had acted arbitrarily and capriciously in denying the benefit claims. However, rather than award benefits, the court determined that the proper recourse was to remand to Premera for a full and fair review. It felt that this remedy was appropriate given Premera’s procedural failings and because the court could not say that the record clearly shows that plaintiff is entitled to benefits for the entire year-long stay at the facility. Moving to the Parity Act violation, the court drew a different conclusion, far less favorable to Robert B. He was alleging that the plan applied more restrictive criteria for mental health residential treatment centers than skilled nursing facilities including requiring more serious and acute psychiatric symptoms and by not factoring in the risk of decline or relapse if a patient is discharged. However, the court found that separate was not inherently unequal in these circumstances and simply pointing out differences between medical/surgical care and mental healthcare is insufficient to prevail on a Parity Act violation claim. Finding that Robert B. had not shown how the limitations for mental healthcare were more restrictive than the limitations for other types of care, the court granted summary judgment to Premera on the Parity Act claim.
The Regents of the Univ. of Cal. v. The Chefs Warehouse, Inc., No. 2:23-cv-00676-KJM-CKD, 2023 WL 7284799 (E.D. Cal. Oct. 31, 2023) (Judge Kimberly J. Mueller). Is the Affordable Care Act (“ACA”) a misnomer? This decision from the Eastern District of California suggests it may be, after a patient insured under a self-funded, self-insured group health plan is now on the hook for nearly half a million dollars’ worth of health care for an inpatient hospital stay and outpatient chemotherapy treatment at the UC Davis Medical Center. In this order the court ruled that hospital had not plausibly alleged that the plan, The Chef’s Warehouse, Inc. Employee Benefit Plan, was in violation of ERISA or the ACA despite leaving the patient with bills far exceeding the plan’s own $3,600 out-of-pocket expenses limit and the $8,550 limit on out-of-pocket expenses in the ACA. Thus, the court granted the plan’s motion to dismiss the hospital’s complaint for failure to state a claim. The court stressed that the hospital was an out-of-network provider, meaning the plan was not barred under the ACA from requiring its participants to pay “any balance bills from outside the plan’s network, and the costs of any services the plan does not cover, regardless of the $8,550 limit.” This was so even though the plan at issue does not have a single hospital in network. Although the court acknowledged the language of the ACA is faulty and problematic, creating quite the loophole to its cost-sharing rules, the end result was this: “a plan can saddle a patient with the balance of a provider’s bill if the provider is not in the plan’s network.” And although the plan did not have a single hospital in network, the court found that the complaint did not allege that the plan participant’s only choice was to seek treatment from a hospital rather than an in-network provider. Without allegations that the patient had no choice but to seek care at a hospital, that the care she needed was practically unavailable in-network, and the plan’s price limits are not accepted by any provider, the court found that plaintiff’s theory of the case failed on its merits. “Nor has the hospital shown plans must include hospitals in their networks.” Shocking as these conclusions may sound, this decision is not an outlier. Other courts have drawn similar conclusions both regarding balanced out-of-network bills and inadequate healthcare networks. These cases were cited by the court in this decision as evidence that its hands were tied regardless of the absurdity of the results which appear on their face entirely inconsistent with the goals of affordable healthcare. Whether the hospital will be able to replead its two ERISA claims to convince the court that the plan at issue is akin to the junk insurance policies banned by Congress in the ACA, and by extension that its theories of the case are plausible under the terms of the ACA, remains an open question. However, the court dismissed the case without prejudice, meaning the provider will at least have the opportunity to attempt to do so.
Pension Benefit Claims
Schmidt v. Emp. Deferred Comp. Agreement, No. CV-22-01464-PHX-ROS, 2023 WL 7413667 (D. Ariz. Nov. 9, 2023) (Judge Roslyn O. Silver). After her husband’s death, plaintiff Patricia Schmidt discovered a copy of a top hat plan in her home and subsequently sent a written demand for benefits under the plan. Her husband’s corporation, Temprite Co., adopted the position that this plan did not exist. Frustrated in her attempt to receive the monthly benefits she believed she was entitled to, Ms. Schmidt brought this ERISA lawsuit. The parties have cross-moved for summary judgment. There was no dispute that, if the plan is in place, Ms. Schmidt is entitled to benefits. The dispute instead is whether the plan was adopted and whether it remains in effect or was ever abandoned, rescinded, or replaced by a 2010 stock agreement. The court concluded in its decision here that the “record viewed in the light most favorable to Temprite establishes the top hat plan was validly adopted and never replaced.” In particular the court emphasized that the plan fiduciaries sent a letter to the Department of Labor to inform the agency of the plan’s creation and that it was in effect and intended to be a plan under ERISA. The court wrote that it was “not possible to read Brown’s letter [to the DOL] and conclude Brown wished to repudiate the top hat plan. To the extent necessary, Brown’s actions were sufficient to ratify adoption of the top hat plan.” In addition, the court held that the stock agreement in no way abandoned or replaced the top hat plan, finding “the undisputed evidence establishes the 2010 agreement was not intended to impact the top hat plan.” Based on the foregoing, the court determined that the plan was validly executed and remains enforceable today and therefore granted summary judgment in favor of Ms. Schmidt.
Steigleman v. Symetra Life Ins. Co., No. CV-19-08060-PCT-ROS, 2023 WL 7413668 (D. Ariz. Nov. 9, 2023) (Judge Roslyn O. Silver). Plaintiff Jill M. Steigleman sued Symetra Life Insurance Company under state law to reinstate terminated long-term disability benefits. She stated in her action that she does not wish to pursue any ERISA-based claims, and that she does not believe the plan at issue, established in connection with her insurance agency, the Steigleman Insurance Agency, was governed by ERISA. In this decision, the court concluded that the disability coverage was part of an employee welfare benefit plan governed by ERISA and entered judgment in favor of Symetra. The court found that Ms. Steigleman’s agency always had employees and that it offered those employees benefit packages, including healthcare and disability benefits, that required an ongoing administrative scheme and discretionary decision making. Furthermore, the agency paid 100% of its employees’ premiums for certain coverage options, meaning the plan did not qualify under ERISA’s safe harbor provision. “These facts establish the Agency was not involved in the simple purchase of insurance on behalf of its employees. Instead, the Agency had an ongoing administrative scheme that promised specific benefits to employees and required ongoing monitoring by Steigleman. The extent of the Agency’s involvement in its employees’ benefits also raised the possibility of abuse, providing an additional reason to conclude ERISA applies.” Nor would any employee reasonably review the coverage as not being endorsed by Ms. Steigleman’s agency. Thus, the court concluded that the agency established a benefits package for its employees and by doing so created an ERISA-governed employee welfare benefit plan, regardless of whether it intended to or not.
Faris v. S. Ute Indian Tribe, No. 23-cv-00245-NYW-STV, 2023 WL 7386870 (D. Colo. Nov. 8, 2023) (Judge Nina Y. Wang). Plaintiff Michelle Faris brought this ERISA Section 510 and breach of fiduciary duty action against her former employer, the Red Willow Production Company, believing the company “fabricated a for-cause termination” to avoid paying her increased distribution payments under an employee benefit plan. That plan, the Long Term Incentive Plan, was the central focus of this decision. Specifically, the decision discussed whether the plan is a bonus plan or a traditional retirement plan, and if it is a bonus program, whether it systematically defers payment to the termination of covered employment and is therefore subject to ERISA. This dispute was central to defendants’ motion to dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction. In its decision, the court concluded that the plan is excluded from ERISA coverage and ERISA therefore does not govern Ms. Faris’ claims. It agreed with defendants that the plan is properly categorized as a bonus plan as its purpose is to “reward and retain eligible employees of the Growth Fund and its business enterprises,” rather than provide retirement income. Moreover, it found that the plan does not systematically defer payments to the termination of employment, and “any post-termination distributions are the result of ‘happenstance,’ not the systematic deferral of payment to the termination of employment or beyond.” Accordingly, the court granted the motion to dismiss for lack of subject matter jurisdiction.
Pleading Issues & Procedure
Cutway v. The Hartford Life & Accident Co., No. 2:22-cv-00113-LEW, 2023 WL 7386371 (D. Me. Nov. 8, 2023) (Magistrate Judge John C. Nivison). Plaintiff Kevin Cutway commenced this ERISA action seeking a court order reinstating disability benefits that defendant Hartford Life & Accident Company suspended to offset an overpayment of benefits. The parties agree that the plan provides for an offset of disability benefits paid by the Social Security Administration. However, Mr. Cutway disagrees with Hartford that it was entitled to a setoff of all the amounts paid by the Social Security Administration and to suspend his benefits altogether. The parties filed motions for judgment on the record and oppositions to each other’s motions. As part of his opposition, Mr. Cutway “filed an affirmation in which he recounted communications he had with Defendant regarding the amount he was receiving in social security benefits.” He also filed a reply memorandum. Hartford moved to strike both Mr. Cutway’s affirmation and reply memorandum. It argued that Mr. Cutway impermissibly modified the administrative record with his affirmation and that his reply was in direct contravention of the court’s scheduling order. The court agreed with Hartford. It struck the reply memorandum, as it was not explicitly authorized by the scheduling order and because Mr. Cutway did not seek leave of the court to file it. As for the affirmation, the court stressed that it would not allow the administrative record to be altered at this time. “[I]f plaintiff were permitted to supplement the record with the affirmation, presumably Defendant would also seek to supplement the record with additional information regarding communications between the parties. Such a process would be inconsistent with the general rule that the Court’s review is limited to the record before the Plan administrator. The court discerns no reason to deviate from the general rule in this case. Accordingly, even if Plaintiff had filed an appropriate motion, he has not demonstrated sufficient grounds to supplement the record.” Based on the foregoing, the court granted Hartford’s motion to strike, and kept the administrative record unaltered from the version the parties relied upon in their motions for judgment.
Saloojas, Inc. v. United Healthcare Ins. Co., No. C 22-03536 WHA, 2023 WL 7393016 (N.D. Cal. Nov. 8, 2023) (Judge William Alsup). A healthcare provider that offered COVID-19 testing services throughout the pandemic, Saloojas, Inc., brought this putative class action against United Healthcare Insurance Company for failure to pay for its services. Saloojas has commenced several of these actions with different insurers subbed in as the defendants. In each, it alleges that the insurance provider, here United, violated the CARES Act, the Families First Coronavirus Response Act (“FFCRA”), ERISA, and RICO, as well as state law promissory estoppel and fraud. Other courts in the district have dismissed Saloojas’s actions. Here, this court joined in, granting United’s motion to dismiss for failure to state a claim. Like the other decisions, the court here concluded that the CARES Act and FFCRA do not create private rights of action for healthcare providers. These two claims were dismissed with prejudice. Saloojas’ ERISA claim was dismissed, without prejudice, as the complaint fails to allege the provider received assignments of benefits from patients insured under ERISA plans. The court stated that Saloojas may seek leave to amend its ERISA claim to allege specific language of assignment. The RICO and state law fraud claims were dismissed because the court found that the provider failed to satisfy Rule 9(b)’s heightened pleading standard. Like the ERISA claim, these causes of action were dismissed without prejudice. Finally, the court concluded that the promissory estoppel claim failed because Saloojas did not identify any clear and unambiguous promise by United to reimburse it for the COVID-19 testing.
Standard of Review
Givens v. Nextran Corp., No. 3:22-cv-733-TJC-MCR, 2023 WL 7284769 (M.D. Fla. Oct. 27, 2023) (Judge Timothy J. Corrigan). In order to rule on a benefit determination under an ERISA-governed healthcare plan, the court ordered the parties to submit supplemental briefing on whether the de novo or arbitrary and capricious standard of review applies this action. In this order it ruled that the case will proceed under a de novo standard of review. In this short decision, the court stressed that deviation from the default de novo review standard requires “a clear and explicit grant of discretion.” Here, the court held that the Nextran health plan does not expressly grant discretionary authority. Rather, the plan uses such language as “decided,” “interpretation,” “good faith,” and “best interest of the member.” These phrases, the court stated, could be viewed as indirectly implying some discretionary decision-making, but certainly do not constitute an explicit grant of discretionary authority. And although the plan allows the fiduciaries to make determinations of the claimant’s eligibility, the court ruled that the plan language does not trigger deferential review. Finally, the court declined to incorporate the language of a second ERISA plan offered by the employer to alter the standard of review for the health plan at issue. In essence, the court found the other plan’s connection to the operative group health plan to be tenuous and concluded that its language, including its express grant of discretionary authority, not applicable to this case. Accordingly, when it comes time, the court will rule on the adverse benefit determination at the center of this action under the de novo standard of review.
K.A. v. UnitedHealthcare Ins. Co., No. 2:23-cv-00315-RJS-JCB, 2023 WL 7282544 (D. Utah Nov. 3, 2023) (Judge Robert J. Shelby). Plaintiff K.A. sued UnitedHealthcare Insurance Company and United Behavioral Health in this one-count ERISA action after the insurance company denied a benefit claim for the residential mental health treatment of K.A.’s minor daughter, L.A. United moved to transfer venue. Its motion was granted here. Father and daughter are residents of Illinois. L.A.’s treatment facility was located in Missouri. United is headquartered in the business-friendly state of Connecticut. And the plan sponsor is located in Arizona. As none of the parties, operative facts, or relevant events had any connection to the state of Utah, the court afforded little weight to plaintiff’s choice of forum. The only connection to the District of Utah was the office of plaintiff’s attorney, located in Salt Lake City. This tie to the state, on its own, was seen by the court as too tenuous a connection to justify keeping the lawsuit in the district. Instead, given the lack of a meaningful connection to the District of Utah, the court agreed with United that the Northern District of Illinois, where K.A. and L.A. reside and where the alleged breach occurred, was a more appropriate and convenient venue for this action. For these reasons, the court found that it was in the interest of justice to move the case, and United’s motion to transfer the lawsuit to the Northern District of Illinois was thus granted.