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ERISA Watch – Sixth Circuit Adopts “But-For” Interpretation of Mental Illness Limitation In Long-Term Disability Plan

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It’s always a joy when the notable decision is a win for disability claimants.  In Okuno v. Reliance Standard Life Ins. Co., No. 15-4043, __F.3d__, 2016 WL 4655741 (6th Cir. Sept. 7, 2016), Reliance Standard terminated Okuno’s long-term disability benefits on the basis that depression and anxiety “contributed to” Okuno’s disabling conditions. The district court found in favor of Reliance on cross motions for judgment on the administrative record, but the Sixth Circuit reversed and remanded the case for further proceedings.  The Sixth Circuit noted that every federal circuit to consider the meaning of the phrase “caused by or contributed to by,” in the Mental or Nervous Disorders Limitation has read it to exclude coverage only when the claimant’s physical disability was insufficient to render him totally disabled.  The Sixth Circuit agreed with Okuno that because her physical ailments, including Crohn’s disease, narcolepsy, and Sjogren’s syndrome, are disabling when considered apart from any mental component, she is entitled to recover long-term disability benefits.

The court determined that Reliance acted arbitrarily and capriciously in determining that Okuno’s physical conditions were not disabling.  Reliance’s decision was not based on substantial evidence where it relied solely on file reviews for a claim involving a mental illness component, failed to consult with a medical professional with relevant expertise, arbitrarily refused to consider the opinions of treating physicians, and offered shifting rationales in support of its denial over the course of the appeals process.

After having represented hundreds of participants suffering from disabling physical conditions, I can say that it’s very common for people to develop depression and anxiety as a result of constant pain or fatigue, being unable to work, and losing many social connections.  If the mere presence of a psychiatric impairment limited receipt of disability benefits, most people would be denied benefits beyond the limitation’s maximum pay period (which is typically only two years).  Disability claimants are often fearful to have their depression or other mental condition treated lest the insurance company attempt to claim that their disability is subject to a limited pay period.  This is the last thing people should be worrying about when they are physically unable to work.  Thanks to the Circuit Courts for making this battle easier.

Another notable mention from this past week is a decision from our firm’s case handled by Michelle Roberts, McKeown v. Sun Life Assurance Co. of Canada, No. 16 C 748, 2016 WL 4720048 (N.D. Ill. Sept. 9, 2016), where the court denied Sun Life’s motion for judgment on the pleadings on the basis that McKeown allegedly failed to cooperate during the claim review process by not providing Sun Life with the SSA claim file and the raw data from a neuropsychological examination.  The court found that material issues of fact exist as to whether McKeown has presented sufficient proof of her claim to warrant a favorable appeal determination.

Enjoy the rest of this past week’s decisions!

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

Breach of Fiduciary Duty

Second Circuit

  • Affirming the district court’s conclusion that the Complaint failed to plausibly allege that a prudent fiduciary could not conclude that freezing purchases or disclosing the alleged securities fraud would cause the Fund “more harm than good,” as is required to be alleged by Fifth Third Bancorp, 134 S. Ct. at 2473, and Amgen Inc. v. Harris, 136 S. Ct. 758 (2016) (per curiam). Loeza et al. v. JPMorgan Chase & Co., et al., No. 16-222-CV, __F.A’ppx__, 2016 WL 4703505 (2d Cir. Sept. 8, 2016) (PRESENT: RALPH K. WINTER, DENNY CHIN, CHRISTOPHER F. DRONEY, Circuit Judges).

 

  • In suit where Plaintiffs allege that once Defendants learned that IBM’s stock price was artificially inflated, Defendants should have either disclosed the truth about Microelectronics’ value or issued new investment guidelines temporarily freezing further investments by the Fund in IBM stock, granting Defendants’ motion to dismiss the Amended Complaint for failure to state a claim: (1) Plaintiffs have plausibly pled that IBM’s Microelectronics unit was impaired and that the Plan fiduciaries were aware of its impairment; (2) Plaintiffs do not sufficiently plead that IBM was a de facto fiduciary; (3) although Plaintiffs’ proposed alternative actions would not necessarily conflict with the securities laws, the Amended Complaint fails to satisfy the second prong of Dudenhoeffer’s alternative-action test, that a prudent fiduciary in the same position could not have concluded that the alternative action would do more harm than goodJander v. Int’l Bus. Machines Corp., No. 15CV3781, 2016 WL 4688864 (S.D.N.Y. Sept. 7, 2016) (Judge William H. Pauley, III).

Disability Benefit Claims

Fourth Circuit

  • Determining that Unum did not abuse its discretion in deciding that Plaintiff could do full-time sedentary, where it had a total of four consulting physicians review her medical records and considered the treating opinions of her doctors. “While Unum made some mistakes with its denial of Allen’s second appeal—namely, the Facebook profile mix-up—these mistakes do not negate the full and fair review Allen received before the second appeal … and, in any event, are harmless.”   Allen v. UNUM Life Insurance Company of America, No. 3:15-CV-219-JAG, 2016 WL 4571451 (E.D. Va. Sept. 1, 2016) (Judge John A. Gibney, Jr.).

Fifth Circuit

  • In suit involving a disability plan issued to Plaintiff out of Chicago, Illinois, and governed under Illinois law, but where Plaintiff worked out of the policyholder’s Houston, Texas location, finding that the grant of discretionary authority found in the Plan’s Appointment of Claim Fiduciary form is rendered void by 50 Ill. Adm. Code § 2001, which is not preempted by ERISA. Brasseur v. Life Ins. Co. of N. Am., No. 4:15-CV-03570, 2016 WL 4702587 (S.D. Tex. Sept. 8, 2016) (Judge Kenneth M. Hoyt).

Sixth Circuit

  • Reliance bears the burden to show that the Mental and Nervous Disorder Limitation applies to the claim. For the Mental and Nervous Disorder Limitation to apply, the mental disability must be a “but-for” cause of the total disability.  In other words, the limitation will not apply if physical disabilities independently render the claimant totally disabled.  Claim denial was not based on substantial evidence where Reliance:  (1) relied solely on file reviews for a claim involving a mental illness component; (2) failed to consult with a medical professional with relevant expertise; (3) arbitrarily refused to consider the opinions of treating physicians; and (4) offered shifting rationales in support of its denial over the course of the appeals process.  Matter remanded for determination of whether physical disabilities entitle Plaintiff to benefitsOkuno v. Reliance Standard Life Ins. Co., No. 15-4043, __F.3d__, 2016 WL 4655741 (6th Cir. Sept. 7, 2016) (Before: DAUGHTREY, CLAY, and STRANCH, Circuit Judges).

 

  • Granting United of Omaha’s motion for summary judgment where the court determined there are inconsistencies in Plaintiff’s medical records that suggest he is downplaying his capabilities, including that during a Functional Capacity Evaluation, Plaintiff claimed that as a result of his back pain he needed help dressing, putting on socks, and undergarments, yet, at a another Independent Medical Examination, Plaintiff was able to dress and undress without difficulty, and walk across the examination room without difficulty. Gayer v. United of Omaha Life Ins. Co., No. 15-11202, 2016 WL 4608174 (E.D. Mich. Sept. 6, 2016) (Judge Denise Page Hood).

Seventh Circuit

  • Denying Sun Life’s motion for judgment on the pleadings on the basis that McKeown had failed to cooperate during the claim review process by not providing Sun Life with the SSA claim file and the raw data from a neuropsychological examination, finding that material issues of fact exist as to whether McKeown has presented sufficient proof of her claim to warrant a favorable appeal determination. McKeown v. Sun Life Assurance Co. of Canada, No. 16 C 748, 2016 WL 4720048 (N.D. Ill. Sept. 9, 2016) (Judge John Z. Lee).

 

  • Summary judgment granted in favor of Plaintiff, and finding that: (1) Plaintiff’s treating physicians believed that her symptoms precluded her from working, and Aetna asserted no plausible ground for suspecting that their conclusions were the product of faulty assessment methods; (2) the opinions of Plaintiff’s treating physicians were based in part on her reported pain, but they also had support in objective medical evidence such as Plaintiff’s diminished grip strength in her right hand; Owestry Neck Index, MRI, and Spurling test results; and conspicuously decreased cervical and bilateral lateral flexion; (3) Aetna’s reliance on a flawed medical review by a doctor who was doing an increasing amount of medical reviews for Aetna and MES is a factor to be weighed in the abuse-of-discretion analysis; (4) Aetna’s termination of benefits when Plaintiff was awaiting another surgery and its failure to consider postponing the termination of benefits is troublingAlvarado v. Aetna Life Ins. Co., No. 14 CV 4717, 2016 WL 4678305 (N.D. Ill. Sept. 6, 2016) (Judge Rebecca R. Pallmeyer).

ERISA Preemption

Fourth Circuit

  • Plaintiffs’ claims, which allege that Defendants breached the terms of the National Bituminous Coal Wage Agreements by improperly siphoning assets from Mystic, LLC, leaving the company unable to satisfy its obligation to provide retirement healthcare benefits, “relate” to an employee benefit plan within the meaning of Section 514. But even if they did not, the claims nonetheless conflict with the exclusive remedies available under ERISA, as set forth in Section 502(a)(1)(B).  Int’l Union v. Mystic, LLC, No. 5:16-CV-02030, 2016 WL 4596353 (S.D.W. Va. Sept. 2, 2016) (Judge Irene C. Berger).

Tenth Circuit

  • Plaintiff’s state court action seeking a declaratory judgment that she is not obligated to pay EagleMed the full amount of the helicopter transportation bill, and also requesting a declaratory judgment as to the “reasonable value of the services rendered” by EagleMed, is preempted by ERISA; Plaintiff could have brought this case as a claim against her insurer and the court will necessarily need to consider the terms of the health plan to determine the amount of Plaintiff’s outstanding obligation to EagleMed. Garrett v. Eaglemed, LLC, No. 16-CV-0377-CVE-FHM, 2016 WL 4718017 (N.D. Okla. Sept. 8, 2016) (Judge Claire V. Eagan).

Medical Benefit Claims

Fifth Circuit

Ninth Circuit

  • Affirming district court’s determination that Providence had abused its discretion in denying preauthorization for additional trauma-related dental services following a seizure-induced fall which fractured Yox’s jaw, since Providence did not follow important procedural requirements, did not adequately assess the substance of her claim (calling it dental rather than medical), and appeared by be affected by its structural conflict of interest; further finding that Yox’s agreement to have her denial reviewed by an Independent Review Organization (IRO) did not constitute an agreement to arbitrate; district court properly held that Yox’s claim does not include the expanded services she requested after starting her internal appeal. Yox v. Providence Health Plan, No. 14-35127, __F.App’x__, 2016 WL 4709872 (9th Cir. Sept. 9, 2016) (Before: PREGERSON, BEA, and OWENS, Circuit Judges).

Pension Benefit Claims

Third Circuit

  • Defendant abused its discretion in determining that Plaintiff became eligible for disability retirement benefits as of the date his SSDI benefits became payable, rather than as of his date of disability, where the court found that Defendant’s interpretation of the Plan completely disregards and renders superfluous a provision of the Plan which governs the “commencement” of benefits upon retirement. Marino v. Joint Bd. of Admin. Trustees, No. CV 15-6933 (JLL), 2016 WL 4620371 (D.N.J. Sept. 6, 2016) (Judge Jose L. Linares).

Fifth Circuit

  • The Western & Southern Agency Group Long Term Incentive and Retirement Plan is a “top-hat” plan and Defendants were not required to provide a summary plan description to Plaintiffs; the plan administrator’s finding that becoming licensed to sell insurance for another company constitutes engaging in competing business is a reasonable interpretation of the Plan and it did not abuse its discretion in denying Plaintiffs’ claims for benefits. Owens v. The W. & S. Life Ins. Co., No. CV 13-4782, 2016 WL 4718185 (E.D. La. Sept. 8, 2016) (Judge Mary Ann Vial Lemmon).

Sixth Circuit

  • In matter where Salary Continuation Agreement (“SCA”) provided that all rights under the agreement terminate if employment ends for reasons other than total disability or the sale of the company to a third party, finding that a 1999 change of ownership and Plaintiff’s termination in 2014 are not causally linked under the circumstances presented, and as a matter of law, Plaintiff is not entitled to benefits under the SCA. Smith v. Integral Structures, Inc., No. 3:14-CV-00419-GNS-DW, 2016 WL 4581414 (W.D. Ky. Sept. 1, 2016) (Judge Greg N. Stivers).

Ninth Circuit

Provider Claims

Second Circuit

Retaliation Claims

Seventh Circuit

Statute of Limitations

Fifth Circuit

Subrogation/Reimbursement Claims

Fifth Circuit

  • In matter where health plan is seeking to recoup medical expenses it paid on behalf of Defendant from a third-party settlement, denying summary judgment to both parties on the basis that neither party established as a matter of law that either Humana Health Plan or Humana Insurance Company are, or are not, plan fiduciaries with respect to the reimbursement claim at issue. Humana Health Plan, Inc. v. Nguyen, No. CV H-13-1793, 2016 WL 4718194 (S.D. Tex. Sept. 8, 2016) (Judge Sim Lake).

Withdrawal Liability & Unpaid Contributions

Second Circuit

 

Third Circuit

Fourth Circuit

Eighth Circuit

* 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.  If you have questions about how the developing law impacts your ERISA benefit claim, contact an experienced ERISA attorney.  Case summaries authored by Michelle L. Roberts, Partner, Kantor & Kantor LLP, 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel:  510-992-6130. 

 

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