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ERISA Watch – Seventh Circuit Affirms Denial of Long Term Disability Benefits Because the Claimant Could Eventually Make Enough in Earnings

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This week’s notably terrible decision is Geiger v. Aetna Life Insurance Company, No. 16-2790, __F.3d__, 2017 WL 65386 (7th Cir. Jan. 6, 2017).  In this lawsuit involving a denial of long-term disability benefits, the Seventh Circuit affirmed the district court’s grant of summary judgment in favor of Aetna.  The nonsensical part of the decision involves the Court’s vocational analysis.  Plaintiff worked as an account executive for Sprint from 2001 to 2009 and earned an annual salary of approximately $96,000.  She became disabled from her own occupation due to bilateral avascular necrosis in her ankles, which caused her severe pain.  She received long-term disability benefits, as well as Social Security benefits.  After the end of the 24-month own occupation period Aetna terminated her claim finding that she did not meet the “any reasonable occupation” definition of disability in the Plan.  The Plan defines “reasonable occupation” as “any gainful occupation for which you are, or may reasonably become, fitted by: education; training; or experience; and which results in; or can be expected to result in; an income of more than 60% of your adjusted predisability earnings.”  A Transferable Skills Assessment (“TSA”) found two “fair” matches of occupations which matched Plaintiff’s capabilities, skills, and reasonable wage.  Plaintiff argued that she had no prior experience in the identified occupations – Job Development Specialist and Commission Agent – and she would likely earn less than the median income identified for those jobs.  Notwithstanding, the Court found that the plan’s language – “can be expected to result in” – appears to contemplate that an employee’s income would increase as he or she gains experience.

The Court suggests that even though Plaintiff may not now be able to get a job at the median income identified in the vocational report, the possibility that she could make more money after she gains experience is enough to find that she does not meet the definition of disability.  However, in my view, the Plan cannot and should not be read to assume a hypothetical scenario with a condition precedent that has not yet occurred.  Unless the claimant is working in an occupation that pays her 60% of adjusted earnings or could reasonably qualify for a job that would pay the required level of earnings, then the claimant should receive benefits.  That she could conceivably work for a few years, gain experience, and then make the required level of earnings in the future is not a reasonable interpretation of “can be expected to result in.”

The attorneys of Kantor & Kantor LLP understand how complicated medical/vocational issues can be when you’re trying to get a disability benefit claim paid.  Our knowledge and experience with these kinds of issues work in your favor when we represent you in your insurance benefit claim.  We fight for our clients everyday in establishing their entitlement to disability benefits.

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

Attorneys’ Fees

Ninth Circuit

Resilient Floor Covering Pension Trust Fund Bd. of Trustees v. Michael’s Floor Covering, Inc., No. 11-CV-05200-JSC, 2017 WL 24747 (N.D. Cal. Jan. 3, 2017).  In this matter which raised an issue of first impression regarding whether a successor employer can be subject to withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980, and where the court found in favor of Defendant, the court found that the Hummell factors weigh against an award of attorneys’ fees.  The court denied Defendant’s motion seeking $323,480 in fees and $8,267.96 in costs.

Breach of Fiduciary Duty

Eighth Circuit

In re Harris, No. 16-6024, __B.R.__, 2017 WL 65392 (B.A.P. 8th Cir. Jan. 6, 2017).  In this matter, the DOL sought to have a pre-bankruptcy judgment debt declared nondischargeable as a debt for defalcation while acting in a fiduciary capacity under 11 U.S.C. § 523(a)(4).  The court affirmed the district court’s grant of summary judgment in favor of the DOL on its nondischargeability action since the Debtor committed defalcation, while acting in a fiduciary capacity, within the meaning of § 523(a)(4) of the Bankruptcy Code.  The court concluded that: (1) that the health insurance premiums withheld from employee wages were held in trust by the employer until they were paid into the health plan (in other words, that there was a trust res); (2) that the Debtor himself was a fiduciary of that trust within the meaning of § 523(a)(4); and (3) that the Debtor’s decision not to remit withheld wages to the health plan constituted defalcation within the meaning of that statute

D.C. Circuit

Coburn v. Evercore Trust Company, N.A., No. 16-7029, __F.3d__, 2016 WL 7480257 (D.C. Cir. Dec. 30, 2016) (Before: HENDERSON and ROGERS, Circuit Judges, and EDWARDS, Senior Circuit Judge).  The court affirmed the district court’s grant of Evercore’s motion to dismiss the complaint for failure to state a claim, where Plaintiff alleged that Evercore should have recognized from publicly available information alone that continued investment in J.C. Penney common stock was “imprudent.”  The district court also rejected Plaintiff’s alternative argument that pursuant to Tibble v. Edison International, __ U.S. __, 135 S. Ct. 1823 (2015), Evercore violated its fiduciary “duty to monitor” investments and remove imprudent ones.  The Court of Appeals explained that Fifth Third Bancorp v. Dudenhoeffer,__ U.S. __, 134 S. Ct. 2459 (2014) disposed of the “risk-based” claims through its broad rule that allegations that a fiduciary should have recognized from publicly available information alone that the market was over- or undervaluing stock are implausible as a general rule.

Class Actions

Sixth Circuit

Wilson v. Anthem Health Plans of Kentucky, Inc., No. 3:14-CV-743-TBR, 2017 WL 56064 (W.D. Ky. Jan. 4, 2017).  Plaintiff moved for class certification in this matter where she alleges that Anthem places limits on its coverage of ABA treatment for Autism Spectrum Disorder and that such limitations violate the Mental Health Parity and Addiction Equity Act, which prohibits insurance companies from providing less favorable coverage for mental health benefits than it does for medical or surgical benefits.  The court granted class certification under Rule 23(b)(3) and certified the following class:  All persons who are or have been insureds, participants in, or beneficiaries of a health insurance policy issued or administered by Anthem Health Plans of Kentucky, Inc., which contains dollar or hour limits on the provision of treatment for Autism Spectrum Disorders and who have made a claim for, and have been denied coverage or reimbursement for Applied Behavior Analysis treatment for Autism Spectrum Disorders on the grounds that the policy’s dollar or hour limits had been exceeded.

Disability Benefit Claims

Fourth Circuit

Wilkinson v. Sun Life And Health Insurance Company, et al., No. 15-2105, __F.App’x__, 2017 WL 56721 (4th Cir. Jan. 5, 2017).  The court affirmed the district court’s decision holding that Sun Life abused its discretion when it terminated Plaintiff’s long-term disability benefits. Sun Life abused its discretion because Plaintiff provided sufficient evidence to support his eligibility for coverage and because Sun Life’s decision to terminate benefits was not the result of a principled reasoning process and not supported by substantial evidence.  The court declined to reach the issue of whether a document titled “Statement of ERISA Rights” (which contained discretionary language) is considered part of the plan since even under the more favorable abuse of discretion standard of review, the district court properly granted judgment in Plaintiff’s favor.  The district court did not err by considering an FMLA Form that was outside of the record since the form is necessary to adequately assess the Booth factors and the evidence was known to Sun Life.  “The point is not that Sun Life failed to be an archeologist digging up evidence underneath a rock; quite the contrary here, Sun Life shut its eyes to evidence in plain sight.”

Seventh Circuit

Geiger v. Aetna Life Insurance Company, No. 16-2790, __F.3d__, 2017 WL 65386 (7th Cir. Jan. 6, 2017).  The court affirmed the district court’s grant of summary judgment in favor of Aetna on Plaintiff’s long term disability insurance claim.  The Plan defines “reasonable occupation” as “any gainful occupation for which you are, or may reasonably become, fitted by: education; training; or experience; and which results in; or can be expected to result in; an income of more than 60% of your adjusted predisability earnings.”  In this case a Transferrable Skills Assessment (“TSA”) found two “fair” matches of occupations which matched Plaintiff’s capabilities, skills, and reasonable wage.  Although Plaintiff argued that since she had no prior experience in the identified occupations she would likely earn less than the median income identified for those jobs, the court found that the plan’s language – “can be expected to result in” – appears to contemplate that an employee’s income would increase as he or she gains experience.  Thus, the TSA had rational support in the record.

Tenth Circuit

Stone v. Unum Life Ins. Co. of Am., No. 15-CV-0630-CVE-PJC, 2017 WL 57831 (N.D. Okla. Jan. 5, 2017).  The court found that Unum did not abuse its discretion by terminating plaintiff’s LTD benefits.  Although evidence supported Plaintiff’s disability, there was also substantial evidence supporting Unum’s decision.  For example, surveillance videos show Plaintiff leaving her home with one of her dogs on a walk, returning an hour later, then leaving with the other two dogs, returning a half an hour later, and then going to work for almost nine hours.  The court found that Plaintiff’s movement on the videos contradicted the Functional Capacity Evaluation findings.  The court also found that the videos contradicted Plaintiff’s assertions during the FCE that she worked half-a-day or less and could walk with her dogs for only about a block.  Although the surveillance videos are not conclusive in and of themselves, the court found that they are an important piece of information supporting Unum’s decision.

Discovery

Fourth Circuit

Coffey v. Hartford Life & Accident Ins. Co., No. 5:16CV00003, 2017 WL 53619 (W.D. Va. Jan. 4, 2017).  In this denial of long term disability benefits case, Plaintiff brought a second breach of fiduciary duty claim against Hartford under ERISA’s catch all equitable relief provision, 29 U.S.C. § 1132(a)(3).  The claim arises from failed settlement discussions between the parties during which Hartford insisted that Plaintiff sign a release giving up any right to seek or claim disability insurance coverage or benefits on any future policy issued by Hartford.  Plaintiff sought discovery related to this claim.  The court found that some discovery proportional to the needs of the case is warranted.  The court permitted discovery focused on Hartford’s fiduciary status, the use of the release in this case, and Hartford’s reasons for using the release.

Seventh Circuit

Geiger v. Aetna Life Insurance Company, No. 16-2790, __F.3d__, 2017 WL 65386 (7th Cir. Jan. 6, 2017).  On the issue of discovery, Plaintiff argued that the district court abused its discretion in denying Plaintiff’s request for discovery to depose Dr. Gutierrez (a board certified neurosurgeon who conducted an independent physician peer review of Plaintiff’s claim) and vocational consultant, Janet Clifton.  The court agreed with the district court that Aetna minimized any conflict of interest by implementing multiple safeguards:  Aetna obtained numerous independent physician peer reviews, they reached out to Plaintiff’s own physicians and addressed their concerns, Aetna sent the surveillance video to Plaintiff’s physicians to ensure the video was assessed objectively, and Aetna previously reversed its own decision and reinstated her benefits.  Because Aetna’s procedures were reasonable, the court affirmed the denial of discovery.

Discretionary Clause Bans

Ninth Circuit

Gallegos v. Prudential Ins. Co. of Am., No. 16-CV-01268-BLF, 2017 WL 35517 (N.D. Cal. Jan. 3, 2017).  The court granted Plaintiff’s motion for partial summary judgment on the standard of review.  The court found that Prudential failed to show that the plan provides it discretionary authority, where the discretionary language is contained only in the SPD.  The court found CIGNA Corp. v. Amara, 563 U.S. 421 (2011) persuasive in that language in the SPD cannot form an enforceable provision of an ERISA plan.  The court also found that California Insurance Code section 10110.6 applies to the plan here and voids any grant of discretionary authority.

Tenth Circuit

Stone v. Unum Life Ins. Co. of Am., No. 15-CV-0630-CVE-PJC, 2017 WL 57831 (N.D. Okla. Jan. 5, 2017).  In December 2010, Texas adopted a law banning discretionary clauses in insurance forms, Tex. Admin. Code § 3.1203.  Here, the long-term disability policy was last amended in 2002 and terminated in 2007.  The court found that the discretionary clause ban does not apply to a contract terminated four years before the law went into effect.

ERISA Preemption

Fifth Circuit

Shanker v. United of Omaha Life Ins. Co., No. 4:16-CV-02481, 2017 WL 25907 (S.D. Tex. Jan. 3, 2017).  The court granted Defendant’s motion to dismiss Plaintiff’s state law claims and jury demand related to his claim for long-term disability benefits through an employer-provided benefit plan.  The court found that although declaratory relief may be permitted in an ERISA action via the federal Declaratory Judgment Act, ERISA preempts the additional remedies unique to the Texas Uniform Declaratory Judgment Act, a state law.

Severance Benefit Claims

Eleventh Circuit

Boysen v. Illinois Tool Works Inc. Separation Pay Plan, No. 1:15-CV-1900-TWT, 2017 WL 57179 (N.D. Ga. Jan. 4, 2017).  The court granted summary judgment in favor of Defendant on Plaintiff’s claim that he was wrongfully denied severance pay under the plan.  The court found that the decision of the Administrator to deny the claim was not “wrong” since the documentary record is absolutely clear that Plaintiff was fired for poor performance and there is no evidence that this was a pretext for eliminating his position.  Further, the Administrator was given discretion in reviewing claims under the Plan and it had reasonable grounds to support the initial denial of benefits and the subsequent denial of the appeal.  The court found that just because Plaintiff did not receive all of the documents that he requested, it does not mean that the decision of the Administrator was unreasonable.

Subrogation/Reimbursement Claims

Third Circuit

National Elevator Industry Health Benefit Plan Board of Trustees v. Mclaughlin, No. 16-1352, __F.App’x__, 2017 WL 66585 (3d Cir. Jan. 6, 2017).  The court affirmed the district court’s order against Defendant in the amount of $45,347.89 in an action brought by a health plan pursuant to its right to first reimbursement out of any third party recovery.  The court explained that while it would seem that such a money judgment would originally be deemed a legal judgment prohibited by ERISA, the district court was acting pursuant to Funk v. Cigna, 648 F.3d 182 (3d Cir. 2011), which permitted it to enforce a lien-by-agreement against property other than the res to which the lien attached.  The district court needed to indicate the amount of the lien in order to do so. That, together with the underlying equitable relief requested by the Plan, makes the judgment at issue here as one that merely monetizes the lien and does not run afoul of ERISA.

* Please note that these are only case summaries of decisions 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.  If you have questions about how the developing law impacts your ERISA benefit claim, contact a knowledgeable ERISA attorney.  Case summaries authored by Michelle Roberts, Partner, Kantor & Kantor LLP, 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel:  510-992-6130. 

 

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