This week’s notable decision, Horneland v. United Of Omaha Insurance Company, No. 16-16935, __F.App’x__, 2017 WL 5508496 (11th Cir. Nov. 17, 2017), is an unpublished decision from the Eleventh Circuit Court of Appeals involving a denial of long-term disability benefits based on a pre-existing condition exclusion. The Eleventh Circuit reversed the district court’s grant of summary judgment to United of Omaha after determining that Plaintiff Horneland’s back pain and muscle spasms could not be classified as pre-existing conditions disqualifying him for long-term disability benefits.
Roughly fourteen years prior to Horneland’s employment as a real estate manager for Thornton’s, where he became covered by a long-term disability policy insured by United of Omaha, he hurt his back in a slip and fall accident that fractured his thoracic spine. Pain management and rehabilitation enabled him to live a relatively pain free life. However, a few months into being a real estate agent, which involved about 15 to 20 hours a week driving, Horneland began experiencing back pain and spasms and took prescribed pain medications for them. A few months later, the look-back period of his long-term disability policy began. During this time, he experienced a sudden onset of sharp, stabbing pain over his mid back and went to the doctor to obtain prescription refills of pain medication. As his symptoms progressed, Horneland claimed disability about five months after the end of the look-back period as a result of severe back pain and muscle spasms.
United of Omaha concluded that Horneland was not disabled, and even if he was disabled, his claim would be barred by the Pre-existing Conditions Exclusion. “A Pre-existing Condition means any Injury or Sickness for which You received medical treatment, advice or consultation, care or services including diagnostic measures, or had drugs or medicines prescribed or taken in the 3 months prior to the day You become insured under this Policy.” Horneland appealed the decision and submitted evidence which suggested that his disability was not caused by his thoracic spine issues, but due to his extensive lumbar spine issues.
United of Omaha denied Horneland’s appeal. It took the position that his lumbar condition was a recent development and not part of his disability, that he was not actually disabled, and that, even if disabled, the disability is excluded as a pre-existing condition because during the look-pack period he received treatment for back pain and muscle spasms. Horneland filed suit and the district court entered judgment in favor of United of Omaha on the basis that the Pre-existing Conditions Exclusion applied.
On the standard of review, the Eleventh Circuit determined that the burden is on United of Omaha to show that the exclusion prevents coverage. By interpreting the plain text of the Pre-existing Conditions Exclusion, the question is whether Horneland had a Pre-existing Condition that caused, contributed to, or resulted in his disability. Based on the Plan’s definitions of Pre-existing Condition, Injury, and Sickness, the court determined that a Pre-existing Condition must be an accidental bodily injury, a disease, a disorder, or a condition. Back pain and muscle spasms are not any of these labels. Instead, back pain and muscle spasms are just symptoms for which an accidental bodily injury, a disease, a disorder, or a condition might be the cause. This is further supported by the Plan’s definition of “Self-Reported Symptoms,” which includes pain. Thus, Horneland’s back pain is a symptom, not a condition. The same logic also dictates that muscle spasms are not a condition, but rather, a symptom of some underlying injury, disease, disorder, or condition.
Due to the genuine issues of material fact, summary judgment is an inappropriate mechanism to determine what Horneland’s disability is and whether the Pre-Existing Conditions Exclusion applies. The court remanded for further proceedings. To prevail, Horneland must be able to demonstrate “(1) that he was disabled by a lumbar condition (2) that arose before his insurance policy ended and (3) that was not caused by an earlier thoracic injury that manifested itself during the look-back period.”
Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.
Wolf v. Causley Trucking, Inc., et al, No. 15-CV-12530, 2017 WL 5291488 (E.D. Mich. Nov. 13, 2017) (Judge Thomas L. Ludington). In this suit where Plaintiff unsuccessfully pursued various claims against Defendants for death benefits, the court denied Defendants’ motion seeking $130,623 in attorney fees and $2,386.53 in costs based on its consideration of the Sec’y of Dep’t of Labor v. King, 775 F.2d 666 (6th Cir. 1985) factors, the claims and defenses asserted, the disposition of the case, and Plaintiff’s conduct.
Breach of Fiduciary Duty
Senior Lifestyle Corp. v. Key Benefit Administrators, Inc., No. 117CV02457JMSMJD, 2017 WL 5483161 (S.D. Ind. Nov. 15, 2017) (Judge Jane Magnus-Stinson). Plaintiff brought suit alleging breach of fiduciary duty under ERISA, among other claims, against the administrator of its employee benefits plan for failing to make payments on stop-loss coverage which resulted in its coverage being canceled. The court denied Defendant’s motion to dismiss part of Plaintiff’s Complaint for failure to establish that Defendant had a fiduciary duty under ERISA since it involves a factual analysis not appropriate at the motion to dismiss stage. The Administrative Services Agreement alone is not dispositive as to whether a fiduciary relationship existed.
Hawaii Masons’ Pension Trust Fund et al v. Global Stone Hawaii, Inc., et al, No. CV 17-00289 SOM-RLP, 2017 WL 5331828 (D. Haw. Nov. 13, 2017) (Judge Susan Oki Mollway). The Court dismissed the fiduciary claims against the officers of the company that allegedly failed to pay the full contribution amounts to the trust funds. It held that unpaid contributions are not “plan assets” from which fiduciary obligations flow and even if there were the Cline v. Industrial Maintenance Engineering & Contracting Co., 200 F.3d 1223 (9th Cir. 2000) exception advanced by Plaintiffs, it would not salvage the fiduciary claims.
Ihde v. United of Omaha Life Insurance Company, No. 17-CV-00847-RM-NYW, 2017 WL 5444551 (D. Colo. Nov. 14, 2017) (Magistrate Judge Nina Y. Wang). The Magistrate Judge recommended that United’s motion to dismiss Plaintiff’s claim alleging violations of §§ 1132(a)(2) and 1109(a) be granted because the denial of long-term disability benefits cannot form the basis of a breach of fiduciary duty claim under these sections and Plaintiff fails to adequately allege Plan-wide harm and relief. Notwithstanding, the court found that drafting and disseminating a SPD that does not comply with the statutory requirements may give rise to a cognizable breach of fiduciary duty.
Spires, et al. v. David R. Sch., et al., No. CV 2:16-616-RMG, 2017 WL 5514515 (D.S.C. Nov. 17, 2017) (Judge Richard Mark Gergel). In this matter involving an ERISA Section 502(a) claim brought on behalf of approximately 5,000 ESOP participants, the court denied Plaintiff’s contested motion for leave to proceed without class certification, as a derivative action on behalf of the Plan under Rule 23.1 of the Federal Rules of Civil Procedure, and to be excused from compliance with the derivative-action pleading requirements of Rule 23.1(b). The court noted that recasting this putative class action as a derivative action would require amendment of the complaint asserting a new legal theory. The case was filed 18 months ago and the court declined to return it to the pleading stage absent extraordinary circumstances.
Comer v. Gerdau Ameristeel US Inc., No. 8:14-CV-607-T-23AAS, 2017 WL 5256871 (M.D. Fla. Nov. 13, 2017) (Judge Steven D. Merryday). The court granted final approval of the class action settlement reached in this matter where Plaintiffs alleged that Defendant breached an agreement to provide union members with health insurance at a fixed cost when it demanded that the members contribute more money to the health-insurance premium. The settlement provides for contributions to class members’ HRA accounts, some monetary reimbursement for additional amounts the class members paid, and other benefits. The court approved Class Counsel’s motion for attorneys’ fees and costs in the amount of $725,000.
Disability Benefit Claims
Davies v. First Reliance Standard Life Insurance Company, No. 17-1782, __F.App’x__, 2017 WL 5256857 (3d Cir. Nov. 13, 2017) (Before: JORDAN, HARDIMAN, and SCIRICA, Circuit Judges). It was not an abuse of discretion for First Reliance to determine that Plaintiff is not totally disabled from any occupation. It was not arbitrary and capricious for First Reliance to determine that Plaintiff’s physical conditions alone did not render her totally disabled from performing any occupation.
O’Conner v. The PNC Fin. Servs. Grp., Inc. & Affiliates Long-term Disability Plan, No. CV 15-5051, 2017 WL 5352721 (E.D. Pa. Nov. 13, 2017) (Judge Michael M. Baylson). Liberty Life’s determination that Plaintiff was not disabled from her own occupation through the elimination period since her Crohn’s Disease was not active during the elimination period, among other reasons, was not arbitrary and capricious.
Cline v. Aetna Life Insurance Company, No. 515CV00096RLVDSC, 2017 WL 5490853 (W.D.N.C. Nov. 15, 2017) (Judge Richard L. Voorhees). The court concluded that Defendant’s decision-making process was not reasoned and principled and relied on materials inadequate to constitute substantial evidence in support of its decision. “In support of Plaintiff’s claim for LTD benefits, he submitted numerous reports and letters from his treating physicians, who point out that while objective testing hasn’t pinpointed a measurable cause of Plaintiff’s right leg collapsing, it is not a feigned symptom.” Defendant did not properly take into consideration Plaintiff’s job as a pilot. Defendant also had a significant conflict of interest. The proper remedy is an award of benefits and attorneys’ fees and costs.
Watson v. Reliance Standard Life Insurance Company, No. 14 C 4990, 2017 WL 5418768 (N.D. Ill. Nov. 14, 2017) (Judge Sara L. Ellis). On de novo review, the court found that the preponderance of the evidence demonstrates that Watson remains totally disabled due to her physical limitations and thus entitled to continued long-term disability benefits beyond the Plan’s 24-month limitation for disabilities caused by mental illnesses. The court found that Plaintiff’s evidence goes beyond mere self-reported complaints of pain and fatigue; her doctors diagnosed her with chronic fatigue syndrome and fibromyalgia, for which the crucial symptoms of pain and fatigue won’t appear on laboratory tests. Nothing in the record suggests that her symptoms are exaggerated. With respect to how much her pain and fatigue limits her functional capabilities, and in the absence of a functional capacity evaluation, the court relied on Plaintiff’s self-reports of her ability to work, her doctors’ opinions, the IME and INE, and the Social Security ALJ’s decision.
Jones v. Life Insurance Company Of North America; et al., No. 16-16172, __F.App’x__, 2017 WL 5507668 (9th Cir. Nov. 17, 2017) (Before: GOULD and MURGUIA, Circuit Judges, and GRITZNER, District Judge). The district court properly upheld the claim administrator’s decision that Jones’ LTD benefits were offset by the dependent social security benefits she began receiving in 2009. Merck’s offset provision is not barred by California Insurance Code § 10127.15 since ERISA preempts that provision. Plaintiff is not entitled to penalties under 29 U.S.C. § 1132 for Defendant’s alleged failure to provide her with the complete administrative record. The district court did not abuse its discretion by denying Plaintiff’s motion to add MetLife as a defendant since LINA replaced MetLife as the claims administrator.
Horneland v. United Of Omaha Insurance Company, No. 16-16935, __F.App’x__, 2017 WL 5508496 (11th Cir. Nov. 17, 2017) (Before MARCUS, WILSON, and JULIE CARNES, Circuit Judges). The court reversed the district court’s grant of summary judgment in favor of United of Omaha on the question as to whether Plaintiff’s disability was caused by a pre-existing condition where Plaintiff received treatment for back pain and muscle spasms during the look-back period. The court determined that back pain and muscle spasms are not pre-existing conditions under the Plan’s exclusion since they are not by themselves an accidental bodily injury, a disease, a disorder, or a condition. The plain text of the plan defines pain as being a “symptom” not a “condition.” Due to the genuine issues of material fact, summary judgment to either party is not appropriate. The court remanded for further proceedings.
Life Insurance & AD&D Benefit Claims
Union Sec. Ins. Co. v. Hockensmith, No. CV 5: 17-228-DCR, 2017 WL 5473891 (E.D. Ky. Nov. 14, 2017) (Judge Danny C. Reeves). The court denied the motion to dismiss the interpleader action because Union Security cannot determine whether the insured’s initial designation remains valid, whether she effected a change prior to her death, or whether her failure to respond to its August 2015 letter asking her to complete a beneficiary designation voided any prior designation. In light of the complexities of this case, the court declined to adopt Defendants’ argument that since Union Security did not have a beneficiary designation on file, the proceeds must go to the decedent’s only living child.
Pension Benefit Claims
Smith v. Pension Benefit Guaranty Corporation, No. CV 16-2194 (ABJ), __F.Supp.3d__, 2017 WL 5508343 (D.D.C. Nov. 15, 2017) (Judge Amy Berman Jackson). The court granted the PBGC’s motion for summary judgment. The court found that based on the weight of available evidence at the time of the decision, the agency rationally concluded Plaintiff was paid in full prior to PBGC becoming the trustee of the Plan.
University Spine Center v. Blue Shield of California, No. CV 17-8673 (JLL), 2017 WL 5513688 (D.N.J. Nov. 16, 2017) (Judge Jose L. Linares). The court granted Defendant’s motion to dismiss Plaintiff’s Complaint seeking reimbursement for medical services it provided. The court concluded that the anti-assignment clause is valid and enforceable against Plaintiff. Thus Plaintiff does not have standing to bring this case.
LB Surgery Ctr., LLC v. United Parcel Serv. of Am., Inc., No. 17 C 3073, 2017 WL 5462180 (N.D. Ill. Nov. 14, 2017) The court granted United’s motion to dismiss the claims against it by Plaintiff, a surgical center outside of BCBS’s provider network. The court found that the FAC fails to identify any provision of either plan that specifically provides for the claims benefits. ERISA does not authorize participants or beneficiaries to assign away their rights to statutory penalties under § 502(c)(1).
Statute of Limitations
Wilson v. Life Techs. Corp., No. CV RDB-17-2344, 2017 WL 5466825 (D. Md. Nov. 14, 2017) (Judge Richard D. Bennett). The court determined that the pro se plaintiff’s state law negligence claim fails to state a plausible cause of action for several reasons. The statute of limitations for civil actions in Maryland is three years from when the action accrues and Plaintiff’s claim accrued at the end of 2011 when she was informed by a representative of Defendant Life Technologies that the company never put her back on her husband’s healthcare plan. She filed her lawsuit outside of the SOL.
Tarasovsky v. Guardian Life Ins. Co. of Am., No. C 17-03464 WHA, 2017 WL 5495822 (N.D. Cal. Nov. 16, 2017) (Judge William Alsup). In this matter where Plaintiff seeks interest on payment of long-term disability benefits and consequential damages for breach of trust and breach of fiduciary duties, the court granted Defendant’s motion to transfer venue to the District of New Jersey pursuant to Section 1404(a). The court explained that all of the events occurred outside this district since at all times during the “any occupation” benefit period, Plaintiff lived outside of California. Since this action involves a federal law, neither forum is more familiar than the other with the governing law. Deference should be given to Plaintiff’s choice of forum but a transfer will ultimately result in a more convenient forum. Neither party has much contact with this forum. There are no contacts relating to Plaintiff’s claim in this forum.