Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.
Court Affirms Hartford’s Denial of LTD Benefits
In Waldoch v. Medtronic, Inc., 13-2543, 2014 WL 3264187 (8th Cir. July 9, 2014), the 8th Circuit Court of Appeals affirmed summary judgment in favor of Medtronic, the defendant company that provided a self-funded self-administered long-term disability plan that covered the plaintiff. The disability plan conferred discretionary authority to the administrator, which would result in “abuse of discretion,” rather than de novo review by the court. Medtronic had entered into a Long Term Disability Benefit Administration Agreement (the Services Agreement) with Hartford-Comprehensive Employee Benefit Service Company (Hartford). In the Services Agreement, Hartford agreed to evaluate and calculate LTD benefits under the Plan. Moreover, the Services Agreement included an “Appeal Assistance” section under which Hartford agreed to assist Medtronic in a nonfiduciary capacity, with denied claims on appeal. The section specifically provided that Hartford did not make final claim determinations on appeal. Instead, Hartford would merely provide Medtronic a recommendation. The Services Agreement emphasized that Hartford only acted as a provider of services to Medtronic’s Plan and disclaimed any responsibilities to perform any of the functions required by ERISA. The plaintiff argued that Hartford, not Medtronic, reviewed and made the final decision on his claim and Hartford was not granted discretionary, decision-making authority. As such, de novo review was applicable to his claim.
The court found that Medtronic’s argument for the abuse-of-discretion standard does not depend on Hartford’s authority and Hartford did not assert it was acting as the final decision-maker. Further, the proper focus of this case is not on Hartford’s status, but whether Medtronic complied with the Plan’s review procedures and whether those procedures are sufficient under ERISA. Second, the court found that the record indicated that Medtronic sufficiently reviewed the plaintiff’s claim and rendered the final decision to deny benefits. In so doing, the court considered evidence produced by Medtronic showing that the individuals vested with discretionary authority was directly involved in the plaintiff’s claim. The court found the evidence sufficient to demonstrate that Medtronic satisfied its obligation to conduct a meaningful review and render a final decision on plaintiff’s LTD claim. The court then found that the LTD claim denial was supported by substantial evidence in the record.
Court Finds Retiree Medical Benefits Not Vested. In Windstream Corp. v. Da Gragnano, 13-1723, 2014 WL 3056820 (8th Cir. July 8, 2014), an employer brought an action seeking declaratory judgment that it could unilaterally terminate or modify its ERISA plan for retiree participants at any time, and the union intervened, asserting a breach of contract claim against employer under the Labor-Management Relations Act (LMRA). The district court granted the employer’s motion for summary judgment and dismissed union’s claim for failure to state a claim. To obtain a reversal of the district court judgment, the 8th Circuit Court of Appeals found that the plaintiff must demonstrate that the plan language, when viewed in the light of relevant extrinsic evidence, is “reasonably susceptible” to his claim that the company agreed to vest retiree benefits permanently. The court held that benefits under the plan were not vested at the levels in place when the participants retired, and thus employer could unilaterally modify the premium subsidy it paid to the participant.
Court Permits SunLife’s Offset of Veterans Benefits. In Holbrooks v. Sun Life Assur. Co. of Canada, 13-3302, 2014 WL 3032230 (10th Cir. July 7, 2014), the 10th Circuit Court of Appeals affirmed the Sun Life Assurance Company of Canada’s (“Sun Life”) decision to offset the plaintiff’s monthly disability payments from the Veteran’s Administration (“VA”) against monthly benefits owed to him under a disability policy issued by Sun Life. The court found that the VA benefits fell unambiguously within the plan’s provision which permits offsets of benefits provided by a “Compulsory Benefit Act or Law.”
Court Affirms MetLife’s Denial of Life Insurance Benefits. In McCorkle v. Metro. Life Ins. Co., 13-30745, 2014 WL 2983360 (5th Cir. July 3, 2014), the 5th Circuit Court of Appeals, in an unpublished opinion, reversed a summary judgment decision that was in favor of a plan beneficiary, concluding that MetLife did not abuse its discretion when it denied benefits on the basis of substantial evidence that the decedent committed suicide, which is an exclusion for payment of life insurance benefits under the ERISA plan at issue.
Court Affirms LINA’s Denial of Life Insurance Benefits. In Lewis v. Life Ins. Co. of N. Am., 13-1980, 2014 WL 2978547 (4th Cir. July 3, 2014), the 4th Circuit Court of Appeals, in an unpublished per curiam opinion, affirmed a district court’s order granting summary judgment to the Life Insurance Company of North America in a civil action alleging breach of fiduciary duty under ERISA based on LINA’s denial of a claim for benefits under an employer-sponsored life insurance policy. The court found that under the plain language of the policy, the plaintiff was not entitled to benefits. The court also rejected the plaintiff’s arguments that LINA was bound by an eligibility determination made by the plan sponsor and that the life insurance policy was ambiguous and should have been construed in her favor.
Breach of Settlement Agreement Claim Preempted by ERISA. In Crowley v. Liberty Life Assur. Co. of Boston, 14-CV-11280, 2014 WL 2999288 (E.D. Mich. July 3, 2014) the plaintiff, a disabled ERISA plan participant, filed a breach of contract claim against Defendant Liberty Life Assurance Company of Boston (“Liberty Life”). The plaintiff is a covered participant under a group disability insurance policy issued by Liberty Life to Plaintiff’s employer. Liberty Life removed the matter, asserting that the plaintiff’s claim for breach of contract is preempted by ERISA. The plaintiff sought remand, based on his position that the action seeks to enforce a separate contractual obligation that arose between the parties pursuant to a settlement agreement and not due to a disagreement concerning the interpretation or enforcement of his employee benefit plan under ERISA. On this basis, the plaintiff argued that his claim for breach of contract is not preempted by ERISA. Conversely, Liberty Life argued that the plaintiff’s Complaint seeks to recover additional benefits under the terms of the Plan, or to clarify his right to receive future benefits under the Plan. The court found that the plaintiff’s claim involves interpretation of the ERISA plan’s provisions and preempted by ERISA such that removal of the action to federal court was proper.
Wrongful Termination and Denial of Benefits. In Kosatka v. S. Nat. Life Ins. Co., 3:13-CV-00335-BAJ, 2014 WL 2999895 (M.D. La. July 2, 2014), the plaintiff’s complaint alleged that she was denied coverage for necessary surgery under her employer’s ERISA-governed health plan. She satisfied the administrative requirements under the plan by filing an appeal, which was denied by the claims administrator, Benefit Management Services (“BMS”). Plaintiff filed suit to compel the approval of her medical claim, and the next day she was terminated. Further, the plaintiff was a recipient of a performance award for her work in 2012 – evidence that she was qualified for her position. The plaintiff brought claims under the ADA and ERISA. The court dismissed the plaintiff’s ADA claim for failing to exhaust administrative remedies but permitted the ERISA claims to move forward. Specifically, the plaintiff brought a wrongful termination and retaliation claim under ERISA Section 510 and a denial of benefit claim under Section 502(a)(1)(B).
To bring a claim under ERISA Section 510, a plaintiff must first establish a prima facie case. This requires proof that the plaintiff employee suffered an adverse employment action in retaliation for exercising an ERISA right or to prevent attainment of benefits to which he would have become entitled under an employee benefit plan. The court explained that an essential element of a claim for retaliation under Section 510 is proof of the employer’s “specific discriminatory intent.” Close timing between an employee’s protected activity and an adverse action against her may provide the causal connection required to make out a prima facie case of retaliation. Further, a plaintiff must show that she was qualified for her position as part of a prima facie case. The court found that the plaintiff pleaded sufficient facts to infer that the defendant may have discriminated or retaliated against her because she attempted to exercise her rights under the Plan. This inference can be drawn due to the extremely close proximity of the plaintiff filing suit to her termination.
With respect to the denial of benefits claim, the court found that the plaintiff was a plan participant, in that she was an active employee who contracted through a group plan with the defendant. She was denied coverage for surgery and appealed the denial, which was accompanied by her physician’s letter explaining that the surgery was medically necessary. The claims administrator denied her appeal and she filed suit to compel approval of her claim. The court found that the plaintiff pleaded facts sufficient to enable the court to draw the reasonable inference that she may be entitled to the benefits to which she was denied.
No Bench Trial Permitted in ERISA Case. In Bigley v. CIBER, Inc. Long Term Disability Coverage, No. 13-1243, 2014 WL 2958590 (10th Cir. July 2, 2014), the 10th Circuit Court of Appeals denied the plaintiff a bench trial on the merits of her long-term disability claim so that she could present evidence. Relying on 10th Circuit precedent, the court found that in reviewing a plan administrator’s decision for abuse of discretion, the federal courts are limited to the administrative record (the materials compiled by the administrator in the course of making the benefit decision). Because it found that a district court is unable to supplement the administrative record, the court rejected the plaintiff’s argument for a bench trial.
Court Finds Employer Not An ERISA Fiduciary. In Moon v. BWX Technologies, Inc., 13-1888, 2014 WL 2958804 (4th Cir. July 2, 2014), the 4th Circuit Court of Appeals affirmed a district court’s determination that an employer’s act of accepting an employee’s premium payments and advising a participant about eligibility for benefits did not make the employer an ERISA fiduciary, and dismissing a breach of fiduciary duty claim against the employer. Relying on a Department of Labor regulation, the court found that an ERISA plan sponsor’s acceptance of premium payments, as well as its failure to notify the participant that he was no longer eligible for life insurance benefits under the MetLife Plan, was not discretionary functions with respect to the management, assets, or administration of an ERISA plan. Rather, these actions are more akin to “collection of contributions” and “advising participants of their rights and options under the plan,” which are purely administrative functions.
Court Overturns Aetna’s Denial of LTD Benefits. In Mossler v. Aetna Life Ins. Co., CV 13-01945 SJO MRWX, 2014 WL 2944085 (C.D. Cal. June 30, 2014) (Plaintiff’s attorneys: ERISA Law Group), the plaintiff suffered from the following conditions: (1) fibromyalgia; (2) peripheral neuropathy; (3) myofascial pain syndrome; (4) spinal stenosis; (5) degenerative osteoarthritis; (6) degenerative disc disease; (7) radiculopathy; (8) polyarticular gout; (9) anxiety; and (10) depression. Plaintiff also claimed that he had the following symptoms: (1) extreme chronic pain; (2) fibro fog; (3) muscle spasms; (4) fatigue; (5) memory loss; (6) muscle pain; (7) joint pain; (8) morning stiffness; (9) joint swelling; and (10) inability to sit or stand for long periods of time. The record included ample documentation that the plaintiff suffered from these diseases to varying degrees. While the physicians operating on behalf of Aetna provided conflicting evidence regarding these diagnoses, the court noted that inasmuch as any such hierarchy can be established between conflicting opinions of physicians as to a single patient, the court gives the greatest weight to the plaintiff’s treating physicians, who have spent some amount of time with plaintiff and assessed his symptoms over time. Given that Aetna’s reviewing physicians did not examine the plaintiff and merely confined their reviews to plaintiff’s file, the court found that the opinions of Aetna’s reviewing physicians should not outweigh the opinions of plaintiff’s treating physicians, all of whom had in-person contact with the plaintiff.
The court explained that the plaintiff’s primary, and most controversial, diagnosis is fibromyalgia. Fibromyalgia is a type of muscular or soft-tissue rheumatism that affects principally muscles and their attachment to bones, but which is also commonly accompanied by fatigue, sleep disturbances, lack of concentration, changes in mood or thinking, anxiety and depression. The depression and anxiety associated with fibromyalgia are believed to be symptoms of this muscular disease, rather than causes of it. Benefits cases involving fibromyalgia are thorny in that the disease’s symptoms are difficult to quantify because diagnoses necessarily involve subjective determinations as to patients’ pain level, often relying largely on the patients’ own accounts. However, the plaintiff’s diagnosis of fibromyalgia was well-documented and based on criteria created by the American College of Rheumatology. Aetna argued that the plaintiff failed to meet his burden of proving that he was totally disabled due to fibromyalgia, in part because he provided no objective evidence of fibromyalgia that would support a total disability finding. In making this finding, Aetna discounted plaintiff’s subjective reports of pain. The court agreed with the reasoning in other case law and held that an insurance company cannot demand objective evidence of fibromyalgia in the absence of any evidence to even raise a question as to the plaintiff’s credibility.
Court Finds MetLife Abused Its Discretion. In Gelfand v. Metro. Life Ins. Co., 13-CV-1290 PJS/JJK, 2014 WL 2945760 (D. Minn. June 30, 2014), the court found that MetLife abused its discretion when it concluded-based solely on an obviously flawed vocational analysis-that the plaintiff, a former morning show radio announcer, was not disabled because he could earn more than 80 percent of his predisability income. Because the record contained almost no other evidence about the plaintiff’s residual earning capacity, the court remanded this matter to MetLife for further proceedings. On remand, the court ordered that the plaintiff should be given an opportunity to respond to the vocational report and to submit evidence about his earning capacity. MetLife must then consider the submissions and decide whether he has met his burden of proving that he was disabled during the 24 months following the elimination period.
Incentive Program Not an ERISA Plan. In Farr v. Rolls-Royce Corp., 1:13-CV-01266-JMS, 2014 WL 2938490 (S.D. Ind. June 30, 2014), the issue was whether an incentive benefit to transition to a different health benefit program is an ERISA plan. The plaintiff was employed by Rolls-Royce for over sixteen years, from 1994 to 2011. During his employment, Rolls-Royce offered all “Legacy Employees,” such as plaintiff, an incentive payment to transition from the “EPO/PPO” health benefit plan to a high-deductible health benefit plan. The Incentive Program offered Legacy Employees a lump sum payment of up to $75,000.00 based on years of credited service. The payment for a particular employee depended on the number of years the employee had worked for Rolls-Royce multiplied by an amount corresponding to the year during which the employee agreed to transition to the high-deductible plan ($2,500 in 2011; $1,250 in 2012; $1,000 in 2013). The court determined that the Rolls-Royce Incentive Program is not an ERISA plan because the program at issue requires only the payment of a single sum upon the occurrence of a triggering event, and does not otherwise require discretionary decisions to administer, similar to the statute at issue in Fort Halifax, a case where the U.S. Supreme Court determined that a severance benefit involving a one-time lump-sum payment was not an ERISA plan.
* Please note that these are only case summaries of decisions as they are reported and do not constitute legal advice. These summaries are not updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The cases reported above were handled by other law firms but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Kantor & Kantor LLP may be able to advise you so please contact us.
Case summaries authored by Michelle L. Roberts, Partner, Kantor & Kantor LLP, 1050 Marina Village Parkway, Ste. 105 Alameda, CA 94501; Tel: 510-992-6130.