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Your ERISA Watch – Another Loss for Retirees: Sixth Circuit Holds No Lifetime Healthcare Coverage

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This week’s notable decision is a short unpublished decision from the Sixth Circuit, Zino, et al. v. Whirlpool Corp., et al., No. 17-3851, __F.App’x__, 2019 WL 644883 (6th Cir. Feb. 15, 2019).  The Sixth Circuit reversed the district court’s (N.D. Ohio) determination that the CBAs at issue vested the Hoover Company retirees with unalterable lifetime healthcare benefits.  The majority found that the CBA’s general durational clauses that state when the agreements end also control when healthcare benefits end.

The outcome of this case is dictated by Fletcher v. Honeywell Int’l, Inc., 892 F.3d 217 (6th Cir. 2018) since none of the CBAs contain clear, affirmative language indicating that they provide lifetime healthcare benefits.  Rather, “they state that the company will pay insurance premiums ‘in accordance with the terms and conditions of the [Welfare Benefit] Plan,’ that retirees ‘shall have the opportunity to continue’ healthcare coverage, or that coverage for retirees ‘shall be’ for ‘pre-65 coverage only.’”  Since there is no language stating that the general durational clause does not control the end date of healthcare benefits, this means the obligation to provide healthcare ended when the last CBA expired.  This ends the inquiry.

Judge Jane Stranch penned a dissenting opinion.  She explained that following the Supreme Court’s opinion in Yard-Man and its progeny, courts are supposed to interpret CBAs according to ordinary principles of contract law and to interpret contracts giving effect to the parties’ intentions.  “We are failing that test.”  Judge Stranch concluded that provisions of the 2003 CBA are reasonably susceptible to the interpretation that it vested benefits for life.  Because the CBA is ambiguous, the court looked to other evidence which more than suffices to show that the parties intended the 2003 CBA to vest benefits for life.  Judge Stranch concluded,

“This case is not an aberration. Over and over again, companies promised their retirees lifetime healthcare benefits. But now, over and over again, we find that the contracts they negotiated unambiguously state the opposite. We thereby avoid the mountains of evidence that the parties intended exactly what they promised. I think that we have moved beyond the parameters articulated by the Supreme Court when we presume the necessity of a clear statement rule. And I find that requirement sadly ironic. In these cases, the contractual language was negotiated in a legal environment in which everyone understood it to constitute an ongoing promise, the employer publicly and repeatedly reiterated that promise in word (both spoken and written) and in deed, and working men and women relied on that promise. Because we changed the rules of the game after the game was over, I respectfully dissent.”

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Fourth Circuit

Acosta v. Ameriguard Sec. Servs., Inc., No. CV JKB-1S-3484, 2019 WL 498846 (D. Md. Feb. 8, 2019) (Judge James K. Bredar).  The court awarded Defendant Ameriguard $87,823.92 in attorneys’ fees against the Secretary of Labor under the Equal Access to Justice Act (“EAJA”), 28 U.S.C. § 2412.  The court explained that the government’s claim was not substantially justified where it created an argument “out of whole cloth spun from thin air” that Congress intended ERISA’s definitions of “fiduciary” to hinge upon any language in the Taft-Hartley Act.

Breach of Fiduciary Duty

Third Circuit

Alexander Acosta v. Koresko, No. CV 09-988, 2019 WL 558235 (E.D. Pa. Feb. 11, 2019) (Judge Wendy Beetlestone). The court reconsidered its denial of a settlement of claims against Athene Annuity and Life Insurance Company (“Athene”) for payment in the amount of $355,000. The court vacated the initial opinion but still withheld approval of the settlement for different reasons.  The court cannot approve a settlement that requires a third party – the Trust for the assets of welfare benefit funds affected by the Koresko scheme – to release claims since the court is not a trustee of the Trust and releasing claims could entail prejudice to the other plans with interest in the Trust.

Disability Benefit Claims

Ninth Circuit

Gallupe v. Sedgwick Claims Mgmt. Servs. Inc., No. C17-1775MJP, __F.Supp.3d__, 2019 WL 630600 (W.D. Wash. Feb. 14, 2019) (Judge Marsha J. Pechman).  The court construed Plaintiff’s Rule 52 motion for judgment as a Rule 56 motion for summary judgment since Rule 56 is the appropriate “conduit to bring the legal question before the district court” when abuse of discretion review applies.  Plaintiff is a widow who began experiencing worsening anxiety and depression at the one-year anniversary of her husband’s death.  The court found that Sedgwick failed to credit reliable evidence including the opinions of Plaintiff’s treating doctors and objective evidence of psychiatric disability.  The court rejected Sedgwick’s reasoning that Plaintiff’s condition was not as severe as she claimed because she declined prescription medication and was not hospitalized or referred to inpatient treatment.  The court also noted that Sedgwick discounted the observations of Plaintiff’s treating doctors and deferred to a physician who never examined Plaintiff.  Though Plaintiff was no longer disabled at the time Sedgwick conducted its file review, it could have had her examined in person prior to her appeal.  “That it did not do so, yet still complaints [sic] about a lack of objective evidence, indicates an abuse of discretion.”  Lastly, the court found that Sedgwick failed to consider Plaintiff’s job description and how her depression and anxiety would prevent her from performing her job duties, including regularly interacting with and supervising other employees.  The court ordered Defendants to find Plaintiff disabled and pay her short-term disability benefits.

Tenth Circuit

Smith v. Standard Ins. Co., No. CIV-16-953-G, 2019 WL 510451 (W.D. Okla. Feb. 8, 2019) (Judge Charles B. Goodwin).  The court denied Plaintiff’s motion for reconsideration of the court’s decision affirming Standard’s termination of her long term disability benefits.  A recent district court decision from this court is not intervening change in controlling law since it is not precedential authority.  The case involved de novo review and Defendant’s failure to consider the SSDI award was one factor supporting reversal.  Here, “while a substantive discussion of Plaintiff’s SSA award might have been preferred, its absence from Defendant’s decision does not render that decision arbitrary and capricious.”

Discovery

First Circuit

Knight v. Prudential Insurance Company of America, et al., No. 2:18-CV-00407-JAW, 2019 WL 615357 (D. Me. Feb. 13, 2019) (Magistrate Judge John C. Nivison).  In this long term disability case, “Plaintiff may request in discovery (1) internal guidelines, memoranda, rules, regulations, and policies concerning Defendant’s assessment of fatigue, Cushing’s syndrome, Sjogren’s syndrome, and adrenal insufficiency; and (2) all documents that set forth, reflect, or relate to any policy or benchmarks that might exist as to Defendant’s expectations regarding the number or percentage of claims to be denied.”  The court denied discovery seeking to explore the relationship among Defendants, Reliable Review Services, and the medical reviewers.

Ninth Circuit

Culver v. NXP USA Inc. Long Term Disability Ins. Plan, No. CV-18-02205-PHX-DWL, 2019 WL 568927 (D. Ariz. Feb. 12, 2019) (Judge Dominic C. Lanza).  The court denied Plaintiff’s motion to propound discovery aimed at determining whether Aetna and Prudential were afflicted by a conflict of interest when they denied his long term disability claims.  The court found no structural conflict of interest since the Plan is self-funded and the decision-makers are third parties with no financial responsibility for paying claims.  Even if the information Plaintiff seeks is discoverable, the court exercised its discretion to deny the requests under Rule 26(b)(1) due to a lack of proportionality.

ERISA Preemption

Third Circuit

Anderson v. Verizon New Jersey Inc., No. CV 13-4777, 2019 WL 630845 (D.N.J. Feb. 14, 2019) (Judge Joseph H. Rodriguez).  The court remanded Plaintiff’s lawsuit to state court.  It found that Plaintiffs claims of disability discrimination are not preempted by the LMRA or ERISA because they do not dispute the terms, legality, or validity of Verizon’s Medical Restrictive Leave of Absence Policy Amendment or Early Separation Incentive Plan.

Fourth Circuit

Hooker v. Tunnell Government Services Inc., No. GJH-18-2352, 2019 WL 651747 (D. Md. Feb. 14, 2019) (Judge George J. Hazel).  Plaintiff alleged she was injured in a car accident and Defendant terminated her without allowing her to file a claim for long term disability benefits under Defendant’s plan.  The court treated Plaintiff’s Maryland Wage Payment and Collection Law, Md. Code § 3-507-2 Lab. & Empl. (“MWPCL”) and breach of contract claims for long term disability benefits as a federal claim under § 502 and § 510 and granted Plaintiff’s request for leave to amend her Complaint.  The court denied Plaintiff’s motion to remand.  The court also found that Defendant’s short-term disability benefits constitute fringe benefits under the MWPCL.  There is no caselaw holding that short-term disability cannot constitute an earned wage under the Act.  Where Plaintiff alleges that short-term disability benefits were promised as a term of her employment and she was terminated on the same day she asked to access those benefits, Plaintiff has sufficiently alleged a breach of contract claim.

Ninth Circuit

Heldt v. The Guardian Life Insurance Company of America, No. 16-CV-885-BAS-NLS, 2019 WL 651503 (S.D. Cal. Feb. 15, 2019) (Judge Cynthia Bashant).  Defendant disclosed Plaintiff’s medical information to Select Medical (“Select”), Ethos Investigative Services (“Ethos”), and Select Physical therapy (“SPT”) in connection with its administration of Plaintiff’s long term disability benefits.  Previously, Defendant argued ERISA preemption and the court permitted Plaintiff to file an amended complaint, which contains causes of action for violation of medical privacy, negligence, and invasion of privacy.  The court granted summary judgment to Defendant on all claims.  There is no violation of the Confidentiality of Medical Information Act because Defendant does not provide health care services and is not a health care service plan.  There is no invasion of privacy because Plaintiff could not have had a reasonable expectation of privacy in the medical information it shared with Defendant due to the insurance plan language and authorizations he signed.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Taylor v. Metro. Life Ins. Co., No. 3:18-CV-0338-D, 2019 WL 633859 (N.D. Tex. Feb. 14, 2019) (Judge Sidney A. Fitzwater).  Plaintiff’s husband was disabled at the time he left work and paid for a portable life insurance policy while his claim for waiver of premium of life insurance benefits was pending.  MetLife eventually approved the waiver of premium claim and her husband died the next month.  MetLife paid the benefits under the basic and optional life insurance policies but did not pay the value of the ported policy on the basis that it would be a “double recovery.”  The court found that the plain terms of the plan state that ported insurance will end if the claimant becomes approved for the continuation of insurance while totally disabled.  The payment of premiums on the portable policy does not entitle Plaintiff to a different outcome.  The court granted MetLife’s motion for summary judgment.

Tenth Circuit

Smith v. Standard Ins. Co., No. CIV-15-1126-D, 2019 WL 544950 (W.D. Okla. Feb. 11, 2019) (Judge Timothy D. Degiusti).  Standard denied Plaintiff’s claim for life insurance benefits under the prior ERISA plan but paid the claim after the ERISA plan was amended.  The parties dispute when interest on the benefits should be payable.  Standard contends it’s as of the date of the amendment.  Plaintiff contends it’s an earlier date under the original policy.  The court ordered supplemental briefs regarding the issue of prejudgment interest due either as a policy benefit under 29 U.S.C. § 1132(a)(1)(B) or an equitable remedy under 29 U.S.C. § 1132(a)(3).

Eleventh Circuit

Harris v. Lincoln National Life Insurance Co., No. 5:16-CV-1493-LCB, 2019 WL 498983 (N.D. Ala. Feb. 8, 2019) (Judge Liles C. Burke).  In this dispute over accidental dismemberment benefits under policies which exclude coverage where disease was a contributing cause of the loss, the court found that Lincoln’s denial was de novo correct where the evidence substantiated that Plaintiff’s injury leading to the amputation of his leg resulted from a bone disease brought on by previous radiation treatment for cancer.  On Plaintiff’s claim against Lincoln for wrongfully withholding documents, the court granted summary judgment in favor of Lincoln since it is not the Plan Administrator or a de facto plan administrator.

Medical Benefit Claims

Second Circuit

S.B. v. Oxford Health Ins., Inc., No. 3:17-CV-1485 (MPS), 2019 WL 499256 (D. Conn. Feb. 8, 2019) (Judge Michael P. Shea).  Plaintiff filed a motion to remand the case to Defendant to conduct a full and fair review of Plaintiff’s claim for health care benefits, citing to several procedural irregularities in the claims process.  “The Court concludes that remanding the case would be premature, because the Court may consider each of S.B.’s arguments in deciding the parties’ dispositive motions on the merits, and no authority requires this Court to remand before considering on dispositive motions whether the administrator’s decision was proper.”  The court denied the motion without prejudice.

Eighth Circuit

Dailey v. Blue Cross and Blue Shield of Kansas City, et al., No. 17-01036-CV-W-ODS, 2019 WL 539119 (W.D. Mo. Feb. 11, 2019) (Judge Ortrie D. Smith).  In this dispute over the payment of inpatient and residential mental illness services, the court granted Blue Cross’s motion for summary judgment.  The court rejected Plaintiff’s argument that de novo review applies because the decision to deny benefits was made by New Directions and the Plan states that BCBSKC has discretionary authority.  The court found that BCBSKC did make the initial benefit denials based on lack of prior authorization.  ERISA allows a fiduciary to delegate fiduciary duties.  Though New Directions is not designated as a plan fiduciary, the Plans give New Directions discretion to perform benefit management which requires the exercise of discretion.  It was not an abuse of discretion to deny coverage for lack of prior authorization or medical necessity.  The court granted Defendants’ motion for summary judgment on the equitable relief claim under Section 502(a)(3).  Plaintiff argued that BCBSKC should pay for a lower level of care that it believed was appropriate but the court found that Plaintiff is not entitled to payment for benefits not actually received (i.e., treatment at a lower level of care).

Tenth Circuit

Michael D. v. Anthem Health Plans of Kentucky, Inc., No. 2:17-CV-675, 2019 WL 586673 (D. Utah Feb. 13, 2019) (Judge Jill N. Parrish).  This case involves a dispute over the payment of coverage for treatment at Aspiro Wilderness Adventure Therapy (“Aspiro”) and residential treatment at Uinta Academy (“Uinta”).  The court granted the parties’ motions for summary judgment in part.  The court applied the deferential arbitrary and capricious standard of review to both claims because it found that Anthem did not fail to comply with the Plan’s procedures. The court found that the exclusion for “wilderness camps” is ambiguous and Anthem hasn’t met its burden of showing that the exclusion applies to Aspiro.  Aspiro does involve an outdoor component but just because it’s licensed in Utah as an Outdoor Youth Program does not mean it is automatically excludable as a wilderness camp.  The court found the decision to exclude Aspiro was arbitrary and capricious and it did not reach a ruling on the Parity Act issues.  Regarding the Uinta claim, though the patient’s providers recommended residential treatment to prevent regression, she did not meet all three of the initial RTC Guideline criteria for continued residential treatment benefits.  Thus, denial of Uinta benefits was not arbitrary and capricious.  The court remanded the Aspiro claim to Anthem to apply the Court’s conclusions regarding the term “Wilderness Camp.”

Pension Benefit Claims

Third Circuit

United States of America v. Bernard Sr., CR 14-710 (JLL), 2019 WL 581285 (D.N.J. Feb. 11, 2019) (Judge Jose L. Linares).  The court determined that the Newark Watershed Conservation and Development Corporation (“NWCDC”) has failed to show that circumstances allow this court to modify Bernard and Brashear’s restitution orders to allow them to waive their claims against the NWCDC defined-benefit pension plan to satisfy their restitution obligations.  The PBGC has not yet made a final decision as to whether it will award pension benefits to them and the NWCDC is still in the middle of its Chapter 11 bankruptcy proceeding.  The court did not reach the question of whether a victim can reach the ERISA-protected pension benefits of a defendant under the MVRA.

Sixth Circuit

DeClercq, v. Exelis Inc., No. 17-CV-10811, 2019 WL 535549 (E.D. Mich. Feb. 11, 2019) (Judge Judith E. Levy).  Plaintiff brought a claim under Section 502(a)(3) seeking the monetary difference in survivor benefits that she would have received if her ex-husband had elected the 80/80 Spouse’s Annuity Option before he died.  The court found the claim barred under ERISA because the claim for monetary relief is merely a “repackaged” claim that would have been adequately remedied under Section 502(a)(1)(B).  The court also found that Plaintiff has not alleged mutual mistake or fraud for plan reformation to eliminate the requirement of submitting a QDRO before applying for benefits.  It was not irrational in light of the Plan’s provisions to require the submission of a valid QDRO or election on the proper form in order to exercise plan options.

Reid v. International Painters and Allied Trades Industry Pension Plan, No. 2:12-CV-00072, 2019 WL 499836 (S.D. Ohio Feb. 8, 2019) (James L. Graham).  Plaintiff seeks credited service for the entirety of his employment history from 1965–1982.  The court found that the portion of his work history before January 1, 1975 falls outside the scope of ERISA but the court has jurisdiction over that portion under § 301 of the LMRA, 29 U.S.C. § 185(a).  With respect to the administrative record, the court did not consider evidence that was not submitted to the Board of Trustees or part of the record as of its final decision.  This included supplemental declarations and the Plaintiff’s deposition.  The court concluded that the decision to deny Plaintiff’s benefits was arbitrary and capricious.  The Board of Trustees did a selective review of the record, inconsistently applied standards, ignored credible evidence and corroborating testimony and documents, and heavily relied on the absence of pre-1974 records rather than examining the available evidence.  “IUPAT is directed to credit Mr. Reid with 10.2 years of vested service prior to his 1982 departure and pay him the pension benefits to which he is entitled, retroactive to the date of his pension application, with interest.”

Plan Status

Eighth Circuit

Mayer v. Mercy Health Servs., LLC, No. 4:18-CV-00391-JCH, 2019 WL 527964 (E.D. Mo. Feb. 11, 2019) (Judge Jean C. Hamilton).  The court previously determined that Defendants are not estopped from arguing that the LTD Plan is not a church plan because it takes the position that its pension plan is a church plan.  The court also previously determined that Defendants have not effectively opted the LTD Plan into ERISA pursuant to 26 U.S.C § 410(d).  In the present decision, the court determined that the parties did not sufficiently address the issue of whether SMHC, plan administer for the LTD plan was religiously affiliated or related to Mercy for purposes of determining whether or not the SMHC LTD Plan is subject to ERISA.  Because Defendant has failed to establish that this case is properly before this court, the case is remanded to state court.

Provider Claims

Second Circuit

Montefiore Med. Ctr. v. Local 272 Welfare Fund, No. 09-CV-3096 (RA)(SN), 2019 WL 569805 (S.D.N.Y. Feb. 12, 2019) (Judge Ronnie Abrams).  The court adopted the report and recommendation granting in part and denying in part Montefiore’s consolidated motion.  The court ordered the Fund to reimburse Montefiore the ERISA claims of patients M.S., J.B., and B-11 for emergency room treatment but not for treatment after admission to the hospital.  The court denied reimbursement of claims for three other patients.  The court awarded pre-judgment interest at the federal prime rate for the ERISA claims and interest in the amount of $475,185 from the successful breach of contract claim in the first action.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees of Ne. Carpenters Health, Pension, Annuity, Apprenticeship, & Labor Mgmt. Cooperation Funds v. Espinosa Grp., Inc., No. 17CV3257DRHGRB, 2019 WL 632280 (E.D.N.Y. Feb. 14, 2019) (Judge Denis R. Hurley).  “The Clerk of Court shall enter judgment in favor of Petitioners and against Respondent confirming the April 28, 2017 arbitration award and awarding Petitioners the outstanding amount of the arbitration award ($18,736.66), plus interest on the $900 of attorneys’ fees included in the Award at the rate of 10% from the date of the arbitration award (April 28, 2017) to the date of judgment, and attorneys’ fees and costs for the instant action in the amount of $1,945.35.”

Sixth Circuit

Trustees of Indiana State Council of Roofers Health & Welfare Fund v. Mech., No. 1:17-CV-786, 2019 WL 590870 (S.D. Ohio Feb. 13, 2019) (Judge Timothy S. Black).  The court granted Plaintiffs’ motion for default judgment on the issue of liability and ordered Defendant Gaines Mechanical to submit to a payroll audit to determine the amounts owed for the time period of January 1, 2016, through the date of the audit.

D.C. Circuit

Service Employees International Union National Industry Pension Fund, et al., v. Jersey City Healthcare Providers, LLC, No. CV 17-1657 (CKK), 2019 WL 591562 (D.D.C. Feb. 13, 2019) (Judge Colleen Kollar-Kotelly).  The Court granted Plaintiffs’ Motion for Summary Judgment. The Court concludes that Defendant was required to make increased supplemental contribution payments following the passage of the Multiemployer Pension Reform Act of 2014 (“MPRA”).

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