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ERISA Watch – The ACA Does Not Prohibit Lifetime Benefit Maximum for Certain Retiree-only Health Plans

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This week’s notable decision, King v. Blue Cross & Blue Shield of Illinois, No. 15-55880, __F.3d__, 2017 WL 3928339 (9th Cir. Sept. 8, 2017), involves a claim for unpaid medical benefits on the basis that the claim exceeds the welfare plan’s $500,000 lifetime benefit maximum.  The district court granted summary judgment to the defendants and Plaintiff appealed.  The panel reversed the district court’s order.  First, the court held that ERISA, as amended by the Affordable Care Act, does not ban lifetime benefit maximums for certain retiree-only plans.  Plaintiff argued, but the court rejected, that the exception in 29 U.S.C. § 1191a(a) has been impliedly repealed by the ACA’s amendments to the Public Health Service Act which introduced a ban on lifetime benefit limits, but also eliminated a similar exception for certain retiree-only plans.  The court did not see that the lifetime benefit limits in the PHSA and the exception for certain retiree-only plans in ERISA are in irreconcilable conflict.

With respect to ERISA’s disclosure requirements, the court agreed that the SPD, as amended by the 2010 Summary of Modifications, violates ERISA’s statutory and regulatory disclosure requirements because it does not reasonably apprise the average plan participant that the lifetime benefit maximum continues to apply to the Retiree Plan.  Because notice of the amendment to the lifetime benefit maximum violates ERISA, the court did not address whether UPS abused its discretion by interpreting the Retiree Plan to include the lifetime benefit maximum or whether enforcing the maximum would defeat the participant’s reasonable expectations of coverage.

Lastly, with respect to the breach of fiduciary duty claims, the court reversed the district court’s order granting summary judgment to UPS and the Retiree Plan since the 2010 Summary of Modifications failed to alert retirees that despite the announcement that the lifetime cap would no longer apply to the Employee Plan, Defendants intended the lifetime maximum to still apply to the Retiree Plan.  With respect to the claims administrator, Blue Cross, the court found that the district court erred by ruling that Blue Cross is not an ERISA fiduciary because it has the authority to grant, deny, and review denied claims.  The court also concluded that there is a genuine dispute of material fact about whether Blue Cross misled the participant because a reasonable juror could conclude that Blue Cross made misrepresentations to her about the lifetime benefit maximum.

On remand, the district court is to determine the appropriate remedy after Plaintiff specifies whether he still seeks relief under ERISA section 502(a)(1)(B), what type of equitable remedy he seeks under section 502(a)(3), and why.

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

Breach of Fiduciary Duty

Seventh Circuit

Trujillo v. American Bar Association & John Krsul, Jr., No. 16-3612, __F.App’x__, 2017 WL 3867821 (7th Cir. Sept. 5, 2017) (Before DIANE P. WOOD, Chief Judge WILLIAM J. BAUER, Circuit Judge FRANK H. EASTERBROOK, Circuit Judge).  The court affirmed the district court’s dismissal of Plaintiff’s section 1132(a)(3) claim, which he brought on the basis that his termination, following his repeated warnings to the ABA pension plan’s administration committee about mismanagement of the plan, was a violation of Section 1140.  The court did not decide if 29 U.S.C. § 1132(a)(3) authorizes a former fiduciary to seek redress for violations of other ERISA provisions since Plaintiff did not bring this lawsuit in a fiduciary capacity—current or former.  In addition, as a pro se litigant, he can only represent himself and not sue on behalf of plan participants or beneficiaries.

Class Actions

Second Circuit

Moreno, et al. v. Deutsche Bank Americas Holding Corp., et al., No. 15 CIV. 9936 (LGS), 2017 WL 3868803 (S.D.N.Y. Sept. 5, 2017) (Judge Lorna G. Schofield).  In this case alleging mismanagement of the Deutsche Bank Matched Savings Plan, the court certified the following class under Rule 23(b)(1)(B):  “All participants and beneficiaries of the Deutsche Bank Matched Savings Plan at any time on or after December 21, 2009, excluding Defendants, any of their directors, and any officers or employees of Defendants with responsibility for the Plan’s investment or administrative function.”  Nichols Kaster, PLLP is appointed as Class Counsel.

Disability Benefit Claims

First Circuit

Davis v. Sun Life Assurance Company of Canada, No. CV 15-12773-RGS, 2017 WL 3841630 (D. Mass. Sept. 1, 2017) (Judge Richard G. Stearns).  The court adopted the report and recommendation of the magistrate judge that Plaintiff failed to meet her burden of proving that she was disabled within the meaning of the policy; that she remained able to perform sedentary work; and that Sun Life “fully and fairly” processed her benefits application and appeal.  The court believed that Sun Life made out a credible case that Plaintiff did not satisfy the “Actively at Work” requirement for coverage under the policy, but it deferred to the Magistrate Judge’s reasoned determination that Sun Life was wrong to deny benefits on this ground.

Ninth Circuit

Gordon v. Metropolitan Life Insurance Company, No. 5:10-CV-05399-EJD, 2017 WL 3917336 (N.D. Cal. Sept. 7, 2017) (Judge Edward J. Davila).  MetLife did not abuse its discretion in denying long term disability benefits to Plaintiff in reliance upon the opinions of medical reviewers who never examined Plaintiff.  The court questioned whether an in-person exam of Plaintiff would have been helpful because there was more than a seven year lapse between the claimed date of disability and the date the claim was filed.

Cruz-Baca v. Edison Int’l Long Term Disability Plan, No. 15-56921, __F.App’x__, 2017 WL 3888005 (9th Cir. Sept. 6, 2017) (Before: REINHARDT and KOZINSKI, Circuit Judges, and BERG, District Judge).  The court reversed and remanded this long-term disability dispute to the district court.  It held that that the Plan abused its discretion when it offered no principled reason for its failure to review Plaintiff’s SSDI award, which is reliable evidence of her disability; disregarded her subjective complaints of continuing and pervasive pain; and disregarded its own IME which offered reliable evidence that Plaintiff cannot perform sedentary work.

Houghton v. The Hartford Life and Accident Insurance Company, No. C16-1186RAJ, 2017 WL 3839577 (W.D. Wash. Aug. 31, 2017) (Judge Richard A. Jones).  On de novo review, the court found that Plaintiff has demonstrated she was disabled throughout the 180-day Elimination Period that began on her initial date of disability.  Plaintiff’s receipt of unemployment insurance benefits and certification that she was “able and available for work,” does not render her ineligible for long term disability benefits, which has a different standard for disability.  The court did not accept the incomplete Social Security file into the record as proof of Plaintiff’s disability since Plaintiff failed to submit the record upon which the SSA made its determination.

ERISA Preemption

Eighth Circuit

Erickson et al. v. Born, et al., No. CV 17-1176(DSD/DTS), 2017 WL 3822728 (D. Minn. Aug. 31, 2017) (Judge David S. Doty).  Where the issue is whether SuperValu acted consistent with the Trust Agreement in removing and appointing Employer Trustees, and thus, met its fiduciary obligations, the court found this matter is preempted by ERISA and that remand is inappropriate.  The management of trustees does not involve one of the enumerated settlor functions.

Life Insurance & AD&D Benefit Claims

Third Circuit

Hocknell v. Metropolitan Life Insurance Company, No. 116CV09093NLHAMD, 2017 WL 3895550 (D.N.J. Sept. 6, 2017) (Judge Noel L. Hillman).  In this dispute over life benefits, where the insured’s niece with a power of attorney changed the beneficiary to herself, the court held “that MetLife properly interpreted New Jersey law in determining that Saul’s durable power of attorney failed to meet a statutory obligation to expressly and specifically grant his attorney-in-fact the power to transfer or gift property to herself regardless of the type of property involved. Consequently, MetLife did not act arbitrarily or capriciously in its denial of Plaintiff’s claim.”

Seventh Circuit

Colander v. Metropolitan Life Insurance Company, No. 17 C 2601, 2017 WL 3816100 (N.D. Ill. Aug. 31, 2017) (Magistrate Judge Sidney I. Schenkier).  In this dispute over ported life insurance coverage, the court determined that the terms of the Deloitte and Portable Plans make clear that Plaintiff’s claim for $324,000 in coverage is not plausible, even though MetLife offered and accepted premiums for this coverage.  The Portable Plan limits eligibility to individuals whose coverage terminated under their former plan, but here, the insured continued to have coverage under his Deloitte Plan because he applied for, and was granted, a continuation of that coverage under a disability waiver of premium.  The application for life insurance under the Portable Plan was for $324,000 but the insured did not have that amount of coverage in his Deloitte Plan because he had already been paid $252,800 in accelerated benefits, leaving only $63,200 remaining in his Deloitte Plan.

Tenth Circuit

Oomrigar v. Unum Life Insurance Company Of America, No. 2:16-CV-940 TS, 2017 WL 3913277 (D. Utah Sept. 6, 2017) (Judge Ted Stewart).  Unum did not abuse its discretion in denying AD&D benefits based on the policy’s crime exclusion, finding that the insured’s reckless driving and evading a police officer are both chargeable as a misdemeanor or felony, respectively, in Utah.  The record supports that the insured was engaged in this behavior just prior to his accident.

Eleventh Circuit

Davis v. Davis, et al., No. 3:15-CV-3-WKW, 2017 WL 3820962 (M.D. Ala. Aug. 31, 2017) (Judge W. Keith Watkins).  Applying Alabama substantive law to this dispute challenging the validity of a change of beneficiary form two days before the insured’s death, the court found that Plaintiff did not prove that Defendant, through undue influence or fraud, caused the insured to execute a beneficiary designation form naming Defendant as the beneficiary of his life insurance policy.

Medical Benefit Claims

Sixth Circuit

Egbers v. Senior Lifestyle Corporation, No. 1:16CV732, 2017 WL 3923319 (S.D. Ohio Sept. 7, 2017) (Judge Michael R. Barrett).  In this matter, Plaintiffs allege that the TPA failed to remit Employee Contributions to fund the Plan and Defendant did not pay covered medical expenses.  The court determined that because an award of benefits will not change the fact that Defendant is allegedly failing to remit Employee and Employer Contributions in violation of the terms of the Plan, and this is not simply a one-time claim for denial of individual benefits as Defendant argues, Plaintiffs have stated a claim under § 502(a)(3).

Ninth Circuit

King v. Blue Cross & Blue Shield of Illinois, No. 15-55880, __F.3d__, 2017 WL 3928339 (9th Cir. Sept. 8, 2017) (Before: Richard A. Paez, Marsha S. Berzon, and Morgan Christen, Circuit Judges).  The court reversed the district court’s order granting summary judgment to Defendants and held “(1) that ERISA, as amended by the Affordable Care Act, does not ban lifetime benefit maximums for certain retiree-only plans; (2) that the defendants violated ERISA’s statutory and regulatory disclosure requirements by providing a faulty summary of material modifications describing changes to the lifetime benefit maximum in September 2010; and (3) that genuine disputes of material fact preclude summary judgment on the breach of fiduciary duty claims.”

Pension Benefit Claims

Second Circuit

United States v. Feldman, No. 14-CR-6092-FPG, 2017 WL 3866024 (W.D.N.Y. Sept. 5, 2017) (Judge Frank P. Geraci, Jr.).  The court reaffirmed its previous decision and found that ERISA’s alienation restrictions do not shield the Sentinel Account from the government’s collection efforts.  The government may step into Defendant’s shoes and garnish the joint and 50% survivor annuity payments that Defendant would be entitled to.  The court denied Defendant’s motion for reconsideration and to motion to vacate the government’s writ of execution.

Ninth Circuit

Koeplin v. Klotz, et al., No. 17-CV-01530-DMR, 2017 WL 3894983 (N.D. Cal. Sept. 5, 2017) (Magistrate Judge Donna M. Ryu).  The court dismissed Defendants’ amended counterclaim against Plaintiff brought under 29 U.S.C. § 1132(a)(3) since they do not have standing to sue under this ERISA provision.  The court agrees with the reasoning of Goldstein v. Johnson & Johnson, 251 F.3d 433 (3d Cir. 2001), and declined to interpret ERISA as allowing a top hat plan administrator to avoid fiduciary status as a defendant, while at the same time permitting the administrator to claim fiduciary status in order to sue a plan participant.

Vyas v. Vyas, et al., No. CV1502152RSWLDFMX, 2017 WL 3841809 (C.D. Cal. Sept. 1, 2017) (Judge Ronald S.W. Lew).  Former spouse sues former spouse and others over retirement benefits not disclosed during divorce proceedings.  The court granted Defendant’s motion for summary judgment, finding that Plaintiff does not qualify as an ERISA beneficiary with standing to sue for breach of fiduciary duty because (1) Defendant Vyas did not designate her as his beneficiary in the Lockheed Plan; (2) she does not fall within the definition of a beneficiary in the Lockheed Plan documents; nor (3) does she qualify as an “alternate payee” under a valid QDRO.

Pleading Issues & Procedure

Third Circuit

Romero, et al. v. Allstate Insurance Company, et al., No. 01-6764 (ROMERO II), 2017 WL 3881215 (E.D. Pa. Sept. 5, 2017) (Judge Kearney).  The court denied Allstate’s motion for summary judgment seeking to dismiss the eight agents’ claims for breach of contract and breach of fiduciary duty because the agents have shown genuine issues of material fact concerning their ability or need to tender-back.

Provider Claims

Second Circuit

Prof’l Orthopaedic Assocs. v. 1199SEIU Nat’l Benefit Fund, No. 16-4220-CV, __F.App’x__, 2017 WL 3887988 (2d Cir. Sept. 6, 2017) (Present: POOLER, LYNCH, Circuit Judges. BRIAN M. COGAN, District Judge).  District court is affirmed.  The court held that the “less-than-partial assignment is fatal to Cohen and POA’s standing to sue for benefits due Patient AM under the plan, even assuming arguendo that patients may assign their claims under Section 502(c), as opposed to Section 502(a).”  Patient AM’s has not plausibly stated a claim for relief under ERISA §§ 502(a)(1)(B) where the complaint alleges that the Fund is required to pay the “usual, customary and reasonable rates” for services rendered by the out-of-network providers, but it fails to identify any provision in the plan documents requiring the Fund to pay such rates.

Retaliation Claims

Third Circuit

Romero, et al. v. Allstate Insurance Company, et al., No. 01-6764 (ROMERO II), 2017 WL 3881219 (E.D. Pa. Sept. 5, 2017) (Judge Kearney).  The court granted Allstate’s “motion for summary judgment as to Mr. Millison’s ADEA and ERISA retaliation claims based on Allstate’s allegedly retaliatory state law counterclaims because Mr. Millison does not satisfy his burden of showing Allstate’s withdrawn counterclaims are objectively baseless.”

Statute of Limitations

Seventh Circuit

Cinecoe v. The Boeing Company, et al., No. 16 CV 8443, 2017 WL 3872459 (N.D. Ill. Sept. 5, 2017) (Judge Manish S. Shah).  The court concluded that Plaintiff’s federal claims are time-barred and are dismissed with prejudice since the earliest date on which he had actual knowledge of any breach was November 2014, and that the last act or omission in this case occurred more than fifteen years ago.  “Six years from the date of the last act or omission (approximately 2005 or 2006) would be earlier than three years after Cinecoe had knowledge of the breach (approximately 2017), and no action may be commenced after the earlier date.” The limitations period expired over ten years ago and a breach that has not been cured does not make the violation a continuing one.

Ninth Circuit

Guenther v. Lockheed Martin Corporation, et al., No. 5:11-CV-00380-EJD, 2017 WL 3838437 (N.D. Cal. Sept. 1, 2017) (Judge Edward J. Davila).  Following a remand from the Ninth Circuit, the court found that Plaintiff’s ERISA breach of fiduciary duty claim, based on Defendant’s failure to make accurate representations concerning Plaintiff’s ability to “bridge” prior employment service credit with future service credit, is barred by ERISA’s three year statute of limitations.  The court found that the record supports Lockheed’s contention that “(1) the alleged breach of fiduciary duty occurred no later than July, 2006, when Lockheed did not disclose in its letter to Plaintiff the 2005 plan changes and its effect on Plaintiff’s pension rights upon re-hire, and (2) Plaintiff had actual knowledge of the breach in November, 2006, when he received the second letter from Lockheed.”

Statutory Penalties & Notice Violations

Second Circuit

Prof’l Orthopaedic Assocs. v. 1199SEIU Nat’l Benefit Fund, No. 16-4220-CV, __F.App’x__, 2017 WL 3887988 (2d Cir. Sept. 6, 2017) (Present: POOLER, LYNCH, Circuit Judges. BRIAN M. COGAN, District Judge).  Patient AM’s Section 502(c)(1)(B) claim, to the extent that Plaintiffs seek penalties under that provision for the Fund’s failure to provide information required to be furnished under ERISA § 503 and 29 C.F.R. § 2560.503-1, does not give rise to civil penalties under ERISA.  Plaintiffs never requested documents under ERISA § 104(b)(4), which does give rise to penalties under Section 502(c)(1)(B).

Sixth Circuit

Greer v. Operating Engineers Local 324 Pension Fund, et al., No. 17-11832, 2017 WL 3891785 (E.D. Mich. Sept. 6, 2017) (Judge Avern Cohn).  Here, Plaintiff contends that 29 C.F.R. § 2560.503–1(h)(2)(iii) and (m)(8) establishes a duty under § 1132(c) for the Fund to provide all of the documents relevant to his claim. The court agreed with the Fund that Count I fails to state a claim because the Fund’s regulatory obligation to produce claim documents “relevant to” a claimant’s claim established under 29 C.F.R.2560.503-1(h)(2)(iii) does not confer a claim under ERISA.

Ninth Circuit

Regents of the University of California v. Stidham Trucking Inc. et al., No. 16-CV-02835-MCE-CKD, 2017 WL 3840259 (E.D. Cal. Sept. 1, 2017) (Judge Morrison C. England, Jr.).  Plaintiff’s ERISA claim alleges that Defendants denied Franklin the statutory benefits of COBRA by failing to adequately provide him with an opportunity to elect for continued coverage, premised on the concept of equitable tolling since Franklin was incapacitated for the last 10 days of the 60-day election period and did not elect continued coverage before the deadline.  Assuming, without deciding, that equitable tolling of COBRA’s 60-day election period is available due to Franklin’s incapacity, the court found that equitable tolling provides no support for Plaintiff’s claims, where he attempted to elect continued coverage almost two years after he received his COBRA notice.  The court granted CobraHelp’s Rule 11 motion for sanctions against Plaintiff’s counsel for making factual allegations he knew to be false.



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