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ERISA Watch – State Law Action Against Doctors Reviewing Disability Plan Claim Is Preempted by ERISA

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I will apply dietetic measures for the benefit of the sick according to my ability and judgment; I will keep them from harm and injustice.

Translation from the Greek by Ludwig Edelstein. From The Hippocratic Oath: Text, Translation, and Interpretation, by Ludwig Edelstein. Baltimore: The Johns Hopkins Press, 1943.

This week’s notable decision is from the land of ERISA preemption:  Hackney v. Allmed Healthcare Management Inc., No. 16-5651, __F.App’x__, 2017 WL 656752 (6th Cir. Feb. 17, 2017).  This case involves a dispute over long-term disability insurance benefits under an ERISA-governed benefit plan insured and administered by Lincoln National Life Insurance Company.  At issue is whether Hackney, the aggrieved claimant who was denied benefits, may bring state law claims against AllMed, an Oregon-based third-party record reviewer that Lincoln National hired to evaluate Hackney’s medical documents and provide an opinion on whether the medical evidence supported Hackney’s claim of complete disability.  As expected, AllMed, by its agents Robert J. Cooper and Skip Freedman, opined that Hackney was able to work.  Neither AllMed nor its agents were licensed to practice medicine in Kentucky at the time they reviewed Hackney’s records and wrote the opinion.  Lincoln National relied on AllMed’s assessment to deny his claim, although Hackney’s disability claims were approved through a separate private insurance plan and the Social Security Administration.

The court determined that Hackney’s lawsuit against AllMed is completely preempted by ERISA.  In Aetna Health Inc. v. Davila, 542 U.S. 200 (2004), the U.S. Supreme Court held that a claim is completely preempted when it satisfies both prongs of the following test:  (1) the plaintiff complains about the denial of benefits to which he is entitled only because of the terms of an ERISA-regulated employee benefit plan; and (2) the plaintiff does not allege the violation of any legal duty (state or federal) independent of ERISA or the plan terms.  Since AllMed’s conduct was part of the ERISA claims process and the lawsuit arises from the ultimate denial of disability benefits, the first prong of the Davila test for complete preemption is satisfied.  Second, there is no independent legal duty here since reviewing medical records does not by itself constitute the practice of medicine.  The court also found that AllMed was not a proper defendant for an ERISA claim and the appropriate avenue for Hackney’s potential relief on these matters is in the previously filed case against Lincoln National.

So, the Sixth Circuit determined that it is all good for AllMed.  AllMed can essentially provide negligent medical reviews for ERISA disability claims with impunity.  Good thing there are other safeguards against bad faith reliance on faulty medical reviews, like punitive damages….Oh, wait.

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

Attorneys’ Fees

Fifth Circuit

Hamsher v. N. Cypress Med. Ctr., No. CV H-13-1401, 2017 WL 544592 (S.D. Tex. Feb. 9, 2017) (Judge Lynn N. Hughes).  After ruling in favor of the beneficiary in a medical benefit coverage dispute, the court awarded attorneys’ fees of $50,000.00, approximately 33% of the recovery of unpaid treatment bills.

Disability Benefit Claims

Fifth Circuit

Currier v. Entergy Corporation Employee Benefits Committee et al., No. CV 16-2793, 2017 WL 590292 (E.D. La. Feb. 14, 2017) (Judge Lance M. Africk).  The Entergy Benefits Committee terminated Plaintiff’s disability benefits pursuant to the two provisions of the Pilots Plan, namely that her coverage under the Primary Plan had ceased (when Unum terminated her benefits) and that she had failed to complete the cognitive rehabilitation program of neuropsychologist Dr. Bracy and had therefore failed to remain under the regular care and treatment of a qualified physician.  The court granted Defendants’ motion for partial summary judgment and found that the Plan’s termination of benefits was consistent with the plain meaning of the plan language and was legally correct.

Sixth Circuit

Chamness v. Liberty Life Assurance Co. of Boston, No. 1:13-CV-301, 2017 WL 631601 (W.D. Mich. Feb. 16, 2017).  On de novo review, the court found that Plaintiff, a board-certified pediatrician, is disabled as a result of mental disability, although Plaintiff claimed physical disability due to coronary artery disease and sleep apnea.  The court concluded the record supports a claim for mental disability, not physical disability, which is limited to 24 months.  Since Liberty Life has not reviewed the claim for “any occupation” benefits, the court has no occasion to review that claim.

Schofield v. Nationwide Ins. Companies, No. 2:16-CV-371, 2017 WL 588995 (S.D. Ohio Feb. 14, 2017) (Judge James L. Graham).  The Plan did not abuse its discretion by denying Plaintiff’s long term disability benefit claim, where it was reviewed by three independent experts in occupational or rehabilitative medicine and Nationwide arranged for an independent medical examination.  The independent experts acknowledged the treating providers’ opinions, but reasonably concluded that the diagnoses of a disabling condition and CRPS/RSD were not supported by clinical or objective evidence.

Ninth Circuit

Gallego v. Wells Fargo & Company Long Term Disability Plan; Metropolitan Life Insurance Company, No. 15-15294, __F.App’x__, 2017 WL 631690 (9th Cir. Feb. 16, 2017) (Before: SILER,***TASHIMA, and HURWITZ, Circuit Judges).  The court affirmed the district court’s decision finding that MetLife could offset permanent partial disability workers’ compensation benefits against Plaintiff’s long-term disability benefits, where the Plan permits workers’ compensation offsets for “[p]eriodic benefits and substitutes and exchanges for periodic benefits.”

Sliwa v. Lincoln Nat’l Life Ins. Co., No. 213CV01433APGVCF, 2017 WL 536827 (D. Nev. Feb. 8, 2017) (Judge Andrew P. Gordon).  Plaintiff argued that although the long term disability policy’s pre-existing condition exclusion applies to her, Lincoln National cannot enforce it against her because she never received a copy of the policy.  The court explained that the “reasonable expectations” doctrine requires that claims administrators ensure policyholders receive a copy of the policy or are otherwise on notice of its provisions before it can apply an exclusion.  The court found that Lincoln National did not abuse its discretion in concluding Sliwa received a copy of the plan or that she was otherwise on actual notice of the policy.

Discovery

Seventh Circuit

George v. CNH Health & Welfare Benefit Plan, No. 16-CV-1678-JPS, 2017 WL 627452 (E.D. Wis. Feb. 15, 2017) (Judge J.P. Stadtmueller).  In this case involving payment of benefits under ERISA-governed employee benefit plans, the court granted the parties’ joint request for a protective order with slight modification.  Some documents should be redacted instead of sealed where they contain only small amounts of confidential information.  Also, the court will allow members of the public to challenge the confidentiality of documents filed in this case.  The court found that there is good cause to issue the order due to the exchange of sensitive employee and business information.  However, the court warned the parties that any decision will not be entered under seal.

ERISA Preemption

Sixth Circuit

Hackney v. Allmed Healthcare Management Inc., No. 16-5651, __F.App’x__, 2017 WL 656752 (6th Cir. Feb. 17, 2017) (BEFORE: McKEAGUE, KETHLEDGE, and STRANCH, Circuit Judges).  The court affirmed the district court’s judgment finding that the state-law claim against a third-party reviewer hired by a long-term disability insurance carrier is completely preempted by ERISA. “The claim is in essence about the denial of benefits under an ERISA plan and the defendant does not owe an independent duty to the plaintiff under the Kentucky medical licensing statute.”

Ninth Circuit

Abrams v. Peppermill Casinos, Inc., No. 316CV00454MMDVPC, 2017 WL 627209 (D. Nev. Feb. 15, 2017) (Judge Miranda M. Du).  Plaintiffs’ claim that under state law NRS § 608.1555 Defendant failed to provide the same benefits and pay health care providers in the same manner as a policy of insurance pursuant to NRS Chapters 689A and 689B is completely preempted by § 514 of ERISA.

Durham v. Prudential Ins. Co. of Am., No. 216CV08202ODWKSX, 2017 WL 555971 (C.D. Cal. Feb. 10, 2017) (Judge Otis D. Wright, II).  The long term disability plan established by Loyola Marymount University (“LMU”) is not a church plan because LMU is not a church.  Thus, Plaintiff’s state law claims are completely preempted by ERISA.

In re: Premera Blue Cross Customer Data Sec. Breach Litig., No. 3:15-MD-2633-SI, 2017 WL 539578 (D. Or. Feb. 9, 2017) (Judge Michael H. Simon).  The court declined to follow the conclusion in In re Anthem, Inc. Data Breach Litig., 2016 WL 3029783 (N.D. Cal. May 27, 2016) that all three types of claims under Section 502(a) require ERISA benefits to be at issue. Complete ERISA preemption could apply even if data security protection is not a “benefit” under ERISA.  Although there is some relationship between data security and the administration of Plaintiffs’ ERISA plans, it is not enough to overcome the presumption against preemption of state law.  The court concluded that Plaintiffs have sufficiently alleged an independent legal duty separate from the ERISA plan that has been implicated by Premera’s alleged actions.  Complete ERISA preemption does not apply.

Eleventh Circuit

Attilus v. Emblemhealth Administrators, Inc., No. 16-61133-CIV, 2017 WL 548955 (S.D. Fla. Feb. 9, 2017) (Judge Jose E. Martinez).  The court granted Plaintiff’s motion to remand after finding that the substance of Plaintiff’s claims in the active complaint is wrongful termination based on race and/or disability.  Plaintiff states specifically that she “is not seeking to recover in this suit for the wrongful denial of any sort of insurance benefit or interference with any insurance benefit.”  Plaintiff’s first complaint, which she voluntarily dismissed, had alleged claims for damages due to intentional interference with her right to health insurance.  The court considered that complaint but found that it was not dispositive of the new complaint.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Miles v. Fed. Ins. Co., No. 5:16-CV-15-KKC, 2017 WL 559582 (E.D. Ky. Feb. 10, 2017) (Judge Karen K. Caldwell).  In this dispute involving accidental death benefits for a death caused by asphyxiation-inducing activities to derive pleasure, the court granted Defendant’s motion to dismiss since the complaint does not contain allegations sufficient to plausibly suggest that Defendant improperly denied Plaintiff benefits under the Policy.  Plaintiff alleged that Defendant denied benefits based on a mistaken belief that his son committed suicide, but the documents upon which the complaint relies show that Defendant did not deny benefits on that basis.  Defendant denied benefits on the policy exclusion for loss resulting from Intentional Injury and it found that the insured voluntarily placed the cord around his neck.

Medical Benefit Claims

Third Circuit

C.E. v. Excellus Blue Cross Blue Shield, No. CV146950FLWDEA, 2017 WL 593492 (D.N.J. Feb. 14, 2017) (Judge Freda L. Wolfson).  The Court found that Excellus’ failure to adequately explain the grounds for denying the administrative appeals in this matter violated 29 U.S.C. § 1133 and its accompanying regulations, 29 C.F.R. § 2560.503-1(j).  The court further found that the appropriate remedy “is to remand to the plan administrator so the claimant gets the benefit of a full and fair review.”

Fifth Circuit

Hamsher v. N. Cypress Med. Ctr., No. CV H-13-1401, 2017 WL 544592 (S.D. Tex. Feb. 9, 2017) (Judge Lynn N. Hughes).  The plan must pay for Plaintiff’s treatment at Timberline Knolls Residential Treatment Center for bulimia nervosa, depression, post-traumatic stress disorder, suicidal ideation, binge eating, and other destructive behavior.  The Center is not a “hospital” as defined in the Plan and Plaintiff was not required to get both pre-certification and prior authorization.

Sixth Circuit

Turner v. Alcoa, Inc., No. 3:15-CV-270-TAV-HBG, 2017 WL 627447 (E.D. Tenn. Feb. 15, 2017) (Judge Thomas A. Varlan).  The court overruled Plaintiff’s objections to the magistrate judge’s recommendation finding that Defendants did not abuse their discretion in denying proton beam therapy to treat prostate cancer because it constituted experimental treatment.  The court did not find the conclusion undermined by the fact that many insurance providers, including Medicare, provide coverage for proton beam therapy when used to treat prostate cancer.

Seventh Circuit

W.P. v. Anthem Ins. Companies Inc., No. 115CV00562TWPTAB, 2017 WL 605079 (S.D. Ind. Feb. 15, 2017) (Judge Tanya Walton Pratt).  In this suit alleging that Anthem violated the law by limiting the hours of ABA therapy that it covers for children with autism ages seven or older, the court granted Anthem’s Motion for Partial Judgment on the Pleadings.  The court dismissed Plaintiffs’ violation of state law claim for wrongful denial of benefits under Count I, as well as Plaintiffs’ equitable relief claim under Count II regarding Anthem’s practice of limiting the amount of hours covered for ABA therapy.  The claims remaining for trial are Plaintiffs’ claim that they are entitled to recover benefits because Anthem limited coverage for ABA therapy in violation of federal law and the claim to enjoin Anthem from offering providers “take-it-or-leave-it” deals in exchange for participants giving up their right to appeal coverage denials.

Pension Benefit Claims

Eighth Circuit

Anheuser–Busch Companies Pension Plan v. Laenen, No. 4:15 CV 1005 CDP, 2017 WL 633824 (E.D. Mo. Feb. 16, 2017) (Judge Catherine D. Perry).  A March 2015 Order entered in Missouri state court does not qualify as a QDRO under ERISA because it does not clearly specify either the amount or percentage of benefits to be paid to the former spouse, or the number of payments to be made.

Provider Claims

Fifth Circuit

Connecticut Gen. Life Ins. Co. v. Elite Ctr. for Minimally Invasive Surgery LLC, No. 4:16-CV-00571, 2017 WL 607130 (S.D. Tex. Feb. 15, 2017) (Judge Keith P. Ellison).  In suit by Cigna against out-of-network medical provider for its “fee forgiving” practices, the court granted in part and denied in part Defendant’s motion to dismiss.  Specifically, Cigna may proceed on its claims under ERISA, for fraud, negligent misrepresentation and civil conspiracy.  The court dismissed Cigna’s claims for unjust enrichment, money had and received, promissory estoppel, and claims for tortious interference with contract for plans governed by ERISA (but not for ERISA–exempt plans).

Severance Benefit Claims

Ninth Circuit

Hoffman v. American Society For Techion-Israel Institute Of Technology, Inc., No. 15-55756, __F.App’x__, 2017 WL 655783 (9th Cir. Feb. 17, 2017) (Before: SCHROEDER, PREGERSON, and MURGUIA, Circuit Judges).  The district court erred in holding that an employee who left work due to her terminal illness had voluntarily resigned for purposes of the employer’s severance benefit plan.  A person of average intelligence would understand “voluntary” to mean as “proceeding from the will or from one’s own choice or consent.”  Being forced to leave a job due to a disabling illness does not proceed from one’s own choice or consent.

Statute of Limitations

Third Circuit

Lanegan v. Unum Life Insurance Company Of America, 2017 WL 569524 (E.D. Pa. Feb. 13, 2017) (Judge Jeffrey L. Schmehl).  In this suit disputing the proper beneficiary of a life insurance policy, the court found that Plaintiff’s Complaint is time-barred by the statute of limitations and the Policies’ contractual limitation of action provisions.  There was a clear repudiation of Plaintiff’s claim on two possible occasions:  when he first received a letter from Unum telling him that one of his sons was a beneficiary or when he received confirmation that the claim had been processed and paid.  Under either scenario, Plaintiff filed his claim too late.

Ninth Circuit

Hart v. Unum Life Ins. Co. of Am., No. 15-CV-5392-TEH, 2017 WL 565026 (N.D. Cal. Feb. 13, 2017) (Judge Thelton E. Henderson).  In this case, Unum paid long term disability benefits to Plaintiff for nearly eight years before terminating her claim on June 7, 2012.  After exhausting administrative remedies, Plaintiff filed her lawsuit on November 24, 2015.  The court granted Plaintiff’s motion seeking a determination that the policy’s contractual limitations term does not apply to her claim.  The court determined that the LTD Plan policy fails to clearly demonstrate that there is no distinction between “proof of claim” and “proof of continuing disability” such that the claim termination letter did not trigger the three-year contractual limitation to file a legal claim.  Further, Unum provided two different dates in the termination letter which created an ambiguity as to the date that triggers the three-year contractual limitation period.

Venue

Tenth Circuit

Gail v. QualCare, Inc., No. 1:15-CV-00130-DN, 2017 WL 589112 (D. Utah Feb. 14, 2017) (Judge David Nuffer).  The court denied motion to dismiss or to transfer venue.  At issue is whether residential treatment services provided in Utah should be covered.  Only the service provider is located in Utah.  The court found that venue is not proper on the basis of where the plan is administered or where the breach took place, but that under Section 1132(e)(2) Defendant resides in Utah since personal jurisdiction is proper.  The court found that Defendants have not met their burden to show a “constitutionally significant inconvenience.”

* 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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