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ERISA Watch – Long Term Disability Plan Administrator’s Failure to Issue a Timely Decision Results in “Deemed Exhaustion”

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This week’s notable decision was a fun read out of the Middle District of Alabama, Stevens v. Sun Life & Health Ins. Co. (U.S.), No. 3:16-CV-76-WKW, 2017 WL 900005 (M.D. Ala. Mar. 7, 2017).  In this dispute over short and long term disability benefits, the court agreed with the Magistrate Judge’s conclusion that Sun Life’s motion for summary judgment should be denied.  The question was whether Stevens exhausted administrative remedies based on the following facts:

  • November 9, 2015, Stevens appeals the denial of her long term disability claim and termination of her short term disability claim.
  • On November 16, 2015, Sun Life wrote to Stevens indicated its inability to access contents of a DVD submitted with the appeal and also requesting Plaintiff’s SSDI file.
  • On December 8, 2015, Stevens’ attorney provided a replacement DVD and a transcript of the DVD.
  • On December 15, 2015, Sun Life acknowledged receipt of the DVD and again requested the SSDI file.
  • On December 30, 2015, NMR notified Stevens’ attorney that an IME was scheduled for January 7, 2016.
  • On December 31, 2015, Stevens’ attorney informed Sun Life that an IME was improper on appeal but Stevens would consider it if the doctor were truly neutral and if the IME is videotaped by a witness accompanying Stevens at the exam.
  • On January 5, 2016, Sun Life wrote to Stevens’ attorney insisting that the IME proceed but the exam would not be videotaped.
  • On January 7, 2016, Plaintiff showed up to the examination but the doctor refused to allow videotaping in his office, and the examination was cancelled.
  • On January 13, 2016, NMR notified Stevens’ attorney that it had scheduled another IME for February 5, 2016 with a doctor who would permit videotaping.
  • On January 14, 2016, Sun Life wrote to Stevens’ attorney claiming that the appeal remains “tolled” for its receipt of the IME and it would inform him in writing if the second 45-day review period is necessary.
  • On January 19, 2016, Stevens’ attorney wrote to Sun Life objecting to the IME because the second doctor was biased.
  • On February 5, 2016, Stevens filed suit.

Sun Life argued that Plaintiff failed to exhaust her administrative remedies for her LTD claim because she failed to attend the IME and because she filed suit before Sun Life issued its letter denying her appeal.  The court disagreed.  It explained that Sun Life had 45 days to decide the appeal starting from the day that Stevens submitted her appeal.  Neither the regulations nor the plan documents provide for intermittent tolling of the initial 45-day period every time Sun Life requested necessary or other information or documents from Stevens (such as the DVD or SSDI file), or for completion of the IME.  Sun Life was required to provide Stevens with written notice of the extension prior to December 26, 2015, the date of termination of the initial 45-day period.  It was also required to inform Stevens of the special circumstances requiring an extension and the date by which the plan expects to render the determination on review.  Stevens was not required to attend the IME with the second doctor because it was scheduled outside the initial 45-day review period and because the second 45-day period had been neither invoked nor tolled.  Because Sun Life failed to issue a decision or provide notice of an extension within the time limit for the appeal, Stevens is deemed to have exhausted her administrative remedies.

This decision is refreshing for those of us who represent claimants in long term disability disputes and often see claims administrators fail to make a decision within the 45-day deadline.  In many of the cases, there are no “special circumstances” justifying an extension.  Administrators should not wait until the 11th hour to request an IME, assuming one is even appropriate while an appeal is pending.  This opinion is also a good example of quality lawyering by the plaintiff’s attorney.  Take note.

And, enjoy the rest of this week’s cases!

Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.

Attorneys’ Fees

Second Circuit

Standish v. Fed. Express Corp. Long Term Disability Plan, No. 6:15-CV-6226(MAT), 2017 WL 874689 (W.D.N.Y. Mar. 6, 2017) (Judge Michael A. Telesca).  Following the court’s decision to remand Plaintiff’s long term disability claim to Aetna, the court granted Plaintiff’s motion for attorneys’ fees because even though the court did not opine positively on the merits of her claim to the degree that the district court did in Hardt, Plaintiff nevertheless achieved some success on the merits by convincing the court to remand her claim, and is therefore entitled to attorneys’ fees.  The court allowed a recovery of 113.8 hours by the lead attorney at $300 per hour ($34,140), and 0.7 hour by the paralegal at $90 per hour ($63), for a total fee award of $34,203.

Eleventh Circuit

Lee v. Equity Properties Asset Mgmt., Inc., No. 8:13-CV-2239-T-30AAS, 2017 WL 897394 (M.D. Fla. Mar. 7, 2017).  In dispute between an attorney and his former client, where the attorney imposed a “charging lien” on settlement proceeds obtained shortly after the end of his representation, the court determined that the attorney could impose a charging lien based on the parties’ agreement but that the attorney cannot impose a charging lien on the $230,000 in pension funds due to ERISA’s anti-alienation provision.  “However, the Court in no way means to imply that Mitchell is not entitled to fees, or that he cannot attempt to collect those fees through other means.”

Griffin v. Publix Super Markets, Inc., No. 816CV01243T27AEP, 2017 WL 833043 (M.D. Fla. Mar. 2, 2017) (Judge James D. Whittemore).  The court granted Defendant’s request for an award of fees against Plaintiff in the amount of $6,800.50.  Plaintiff, a medical provider, “shows some degree of bad faith because she continued to pursue this lawsuit after Defendant filed its motion to dismiss attaching the plan documents containing an unambiguous anti-assignment provision.”  The court found that she has the ability to pay as she has spent upwards of $20,000 in filing fees in this series of cases.  The court noted an award of attorneys’ fees would be a deterrent to filing identical claims in the future.

Breach of Fiduciary Duty

Second Circuit

Malone v. Teachers Ins. & Annuity Ass’n of Am., No. 15-CV-08038 (PKC), 2017 WL 913699 (S.D.N.Y. Mar. 7, 2017) (Judge P. Kevin Castel).  In this putative class action on behalf of retirement plans alleging that TIAA breached its fiduciary duty to the Plans under ERISA Section 404(a) and engaged in prohibited transactions in violation of ERISA Section 406, the court granted Defendant’s motion to dismiss the Amended Complaint after concluding that TIAA is not a fiduciary of the Plans with respect to its role as recordkeeper.  Because TIAA is not a fiduciary with respect to the recordkeeping services it provides, the Plans cannot recovery compensatory damages under a surcharge theory.  Further, Plaintiffs are not entitled to recovery under Section 502(a)(3) because their claims seek legal, rather than equitable, relief.

Fifth Circuit

In re BP P.L.C. Sec. Litig., No. 4:10-CV-4214, 2017 WL 914995 (S.D. Tex. Mar. 8, 2017) (Judge Keith P. Ellison).  The court dismissed Plaintiffs’ motion for leave to file an amended complaint in this nearly seven-year-old “stock drop” case.  The Amended Complaint included two expert reports to support the allegations expressly weighing the “harm” and “good” of each proposed alternative.  But, the court determined that is undisputed that such a public disclosure of negative information would likely have led to at least some negative effect on the price of BP ADS. Thus, Plaintiffs have not plausibly alleged that no prudent fiduciary could have concluded that this negative effect would do more harm than any alleged benefit would do good.

Eighth Circuit

Tussey, et al. v. ABB, Inc.; et al., No. 15-2792, __F.3d__, 2017 WL 929202 (8th Cir. Mar. 9, 2017) (Before RILEY, Chief Judge, MURPHY and SMITH, Circuit Judges).  In this matter, a class of employees who participated in ABB, Inc.’s 401(k) defined contribution savings plans alleges that ABB and its agents mismanaged the plans for their own benefit.  The district court found that Defendants did breach their duties but entered judgment in favor of Defendants because the participants failed to prove any losses.  The court awarded the participants two-thirds of the attorneys’ fees that they requested.  The court vacated the decision and remanded the case for further consideration regarding whether the participants can prove losses to the plans.  The court also vacated and remanded the award of attorneys’ fees.

Disability Benefit Claims

Fourth Circuit

Sutherland v. Sun Life Assurance Co., No. 316CV00182FDWDSC, 2017 WL 833061 (W.D.N.C. Mar. 2, 2017) (Judge Frank D. Whitney).  Defendant did not abuse its discretion for terminating Plaintiff’s benefits when his post-disability earnings exceeded 80% for four successive months—deeming Plaintiff no longer partially disabled under the terms of the plan.  Here, Sun Life applied a lump sum bonus that Plaintiff was paid at the end of each quarter equally across the preceding quarter when calculating his monthly partial disability benefits.  The court found this calculation to be reasonable.

Discovery

Sixth Circuit

Monterroza v. Belletech Corp., No. 2:16-CV-1113, 2017 WL 874733 (S.D. Ohio Mar. 6, 2017) (Magistrate Judge Kimberly A. Jolson).  The court denied Plaintiff’s motion to permit discovery regarding her short term disability claim denial because Plaintiff makes no allegations of bias or procedural defect, the discovery Plaintiff seeks would not illuminate whether an inherent administrator/payor conflict impacted the decision in this case, and there was not room for bias to come into play in evaluating Plaintiff’s claim for benefits.

ERISA Preemption

Fifth Circuit

  1. El Paso Physicians’ Med. Ctr., LLC v. Aetna Health Inc., No. EP-16-CV-44-KC, 2017 WL 876313 (W.D. Tex. Mar. 2, 2017) (Judge Kathleen Cardone). In dispute between medical facility and insurer, the court held that ERISA does not preempt the arbitration provision of the Hospital Services Agreement (“HAS”) nor does it render unenforceable the arbitration provision in the HSA. The court ordered that all claims in this case are submitted to arbitration for an arbitrability determination.

Exhaustion of Administrative Remedies

Third Circuit

Roche, v. Aetna, Inc., et al., No. 16-1712, __F.App’x__, 2017 WL 942649 (3d Cir. Mar. 9, 2017) (Before: SMITH, Chief Judge, HARDIMAN, and KRAUSE, Circuit Judges).  In this matter where Aetna claimed that Roche had to reimburse it for medical expenses it paid on behalf of Roche under the relevant benefits plan, Roche reimbursed Aetna but then filed this action, the court affirmed the judgment of the district court dismissing the matter without prejudice for failure to exhaust administrative remedies as unambiguously required by the Plan.

Eleventh Circuit

Stevens v. Sun Life & Health Ins. Co. (U.S.), No. 3:16-CV-76-WKW, 2017 WL 900005 (M.D. Ala. Mar. 7, 2017) (Judge W. Keith Watkins).  Where Sun Life failed to invoke the second 45-day period or toll the running of the second 45-day prior to the expiration of that agreed extension, Sun Life failed to timely decide the appeal and Plaintiff is deemed to have exhausted her administrative remedies.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

Dean v. Zurich Am. Ins. Co., No. CV 15-11379, 2017 WL 870409 (S.D.W. Va. Mar. 3, 2017) (Judge John T. Copenhaver, Jr.).  Where the insured died as a result of a combined overdose of prescribed drugs and overingestion of alcohol, the court granted summary judgment to Zurich on Plaintiff’s claim for accidental death benefits, and found that its decision to apply a policy exclusion for losses caused by non-prescribed drug use was reasonable.

Sixth Circuit

Collins v. Unum Life Insurance Company Of America, No. 16-3918, __F.App’x__, 2017 WL 937562 (6th Cir. Mar. 9, 2017) (BEFORE: COLE, Chief Judge; STRANCH and DONALD, Circuit Judges).  Following a fall, fracture, and foot amputation, the court affirmed the district court’s decision to uphold the benefits denial where substantial evidence supports Unum’s finding that Collins’ amputation was caused, at least in part, by his diabetes, and the policy precludes losses caused in any way by a disease or illness.

Minnesota Life Ins. Co. v. Rings, No. 2:16-CV-149, 2017 WL 896989 (S.D. Ohio Mar. 7, 2017) (Magistrate Judge Terence P. Kemp).  Following a murder-suicide, where the insured killed his wife, the sole beneficiary of his life insurance policy, and then shot himself, the court determined that proceeds go to the insured’s mother, based on a policy provision which specifies when a named beneficiary who dies at roughly the same time as the policyholder is still entitled to the proceeds or if someone else—for example, the policyholder’s parent—is to receive the money instead.

Ninth Circuit

Metro. Life Ins. Co. v. Fisher, No. 215CV01546APGVCF, 2017 WL 843171 (D. Nev. Mar. 2, 2017) (Judge Andrew P. Gordon).  MetLife brought this interpleader action to determine beneficiary of $86,000 of life insurance proceeds on decedent Maria Lopez.  Cornilles was the primary beneficiary for the 2014 plan year, but Lopez changed the beneficiary to Fisher in October 2014.  The change did not take effect until January 1, 2015 but Lopez denied in December 2014.  The court denied Cornilles’ motion for summary judgment, finding that there remains genuine issues of material fact as to whether Lopez intended the beneficiary change to take effect immediately.

Medical Benefit Claims

Sixth Circuit

Roll v. Med. Mut. of Ohio, No. 1:16 CV 2487, 2017 WL 879637 (N.D. Ohio Mar. 6, 2017) (Judge Patricia A. Gaughan).  In dispute over coverage of a surgery to be performed at an out-of-network facility, the court granted Defendant’s motion to dismiss Plaintiff’s claim for injunctive relief for Defendant to produce various documents and for damages in an amount equal to the costs incurred by Plaintiffs because of Defendant’s denial.  The court found that the several categories of documents requested by Plaintiff were not relevant to the claim for benefits.

Pension Benefit Claims

Seventh Circuit

Teufel v. N. Trust Co., No. 14-CV-7214, 2017 WL 896562 (N.D. Ill. Mar. 6, 2017) (Judge John W. Darrah).  Plaintiff alleged that a plan amendment illegally decreased his accrued benefit by “(1) locking the average compensation as of March 21, 2012, and increasing the average compensation by 1.5 percent per year instead of basing the average compensation on the highest annual average in any five-consecutive-year period; and (2) by freezing increases in Final Offset Compensation at 1.5 percent for the time period after the adoption of the 2012 Plan Amendment.”  The court granted Defendants’ motion to dismiss these claims because Plaintiff was dependent on future employment and raises to become eligible for the potentially higher Accrued Benefit and the language of the Plan did not entitle Plaintiff to have his Accrued Benefit based on uncompleted years of service that may or may not have included raises.

Statute of Limitations

Fourth Circuit

Sutherland v. Sun Life Assurance Co., No. 316CV00182FDWDSC, 2017 WL 833061 (W.D.N.C. Mar. 2, 2017) (Judge Frank D. Whitney).  Plaintiff’s partial disability benefits were terminated February 5, 2016 based on a benefit calculation formula Sun Life began applying in July 2012 (which Plaintiff did not dispute); Plaintiff appealed the denial February 17, 2016; Defendant affirmed its decision February 25, 2016; and Plaintiff filed his Complaint April 21, 2016.  The court held that Plaintiff’s cause of action accrued February 25, 2016, the date Defendant formally denied Plaintiff’s benefit termination and his lawsuit is not time-barred.

 

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