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Your ERISA Watch – Court Rules that Disability Claim “Administrative Record” Does Not Include Post-Lawsuit Evidence Obtained by Insurance Company

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This week’s notable decision is an interesting district court decision on what constitutes the “Administrative Record” in a denial-of-benefits case.  In Wittmann v. Unum Life Insurance Company of America, No. CV 17-9501, 2018 WL 5631421 (E.D. La. Oct. 31, 2018), Plaintiff Anne Wittmann applied for long term disability benefits based on fibromyalgia, which Unum denied.  Plaintiff appealed and Unum denied the claim again.  Unum invited a second appeal, which Plaintiff submitted and Unum denied.  In so doing, Unum stated that no further review was available.

Before filing suit, however, Plaintiff submitted to Unum a recently obtained favorable SSDI determination.  Unum agreed to consider the SSDI award and ultimately granted Plaintiff disability benefits on the basis of a mental illness.  Disabilities caused by mental illness are payable only for a two-year period due to a limitation in the disability plan.  At the time that Unum made this decision, more than two years had already passed so only past-due benefits were payable.  Unum denied benefits after two years due to its finding that Plaintiff did not have a physical disability.  Unum advised Plaintiff to file an administrative appeal.  Instead, Plaintiff filed the instant lawsuit.

After she filed the lawsuit, Plaintiff submitted a request to appeal within the requisite 180-day appeal period, which Unum considered and ultimately denied.  The appeal denial was based, in part, on a peer review report of a rheumatologist who discounted the Plaintiff’s symptoms based upon fibromyalgia.  Plaintiff moved to strike from the administrative record all documents generated after the date on which she filed suit, while Unum sought partial summary judgment that the documents generated as a result of the post-litigation administrative appeal are part of the administrative record, or in the alternative, summary judgment dismissing the suit for failure to exhaust administrative remedies.

The court explained that to determine the proper scope of the administrative record, the court must determine whether Plaintiff exhausted her administrative remedies prior to filing suit.  According to the appeal procedures in the Plan, Plaintiff exhausted her administrative remedies as of the date of the second appeal denial.  The court granted Plaintiff’s motion because it found that Plaintiff’s right to challenge the initial denial of benefits vested when Unum denied her second appeal.

Following Vega v. Nat’l Life Ins. Servs., 188 F.3d 287 (5th Cir. 1999) (en banc) and its progeny, the administrative record closed when Plaintiff filed her lawsuit.  “Moreover, Unum points to no case law to support the proposition that a plan administrator can reset the administrative procedural clock after administrative remedies have been exhausted or require a claimant to exhaust additional rounds of administrative appeals prior to filing suit. And the Court is unable to locate such case literature either.”  On the merits of the claims decision, the court will not consider documents dated or generated after the date the lawsuit was filed, including the adverse peer review report.

The rationale for excluding post-lawsuit evidence generated by an administrator makes sense.  As explained in Roig v. Ltd. Long Term Disability Program, No. CIV.A.99-2460, 2000 WL 1146522, at *8 (E.D. La. Aug. 4, 2000), aff’d in part, 275 F.3d 45 (5th Cir. 2001), to hold otherwise would permit “ERISA plan administrators to drag their feet until they are sued and then allow them to belatedly bolster the administrative record in their favor.”  The filing of a lawsuit substantively changes the relationship of the parties.  Neathery v. Chevron Texaco Corp. Grp. Acc. Policy No. Ok-826458 & Acc. Policy No. SLG-000784, 303 F. Appx 485, 487 (9th Cir. 2008), citing to Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978, 985 (9th Cir.2005).  However, this rule generally applies only if a plaintiff has fully exhausted administrative remedies before filing suit.  The filing of a lawsuit, pre-exhaustion, will not automatically close the record.  On a separate but related note, there may be some situations that warrant the court’s consideration of extra-record evidence generated or obtained by either party after the record has officially closed.

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

Breach of Fiduciary Duty

Second Circuit

Alexander Acosta v. Bratcher, et al., No. 6:18-CV-06015 EAW, __F.Supp.3d__, 2018 WL 5668575 (W.D.N.Y. Oct. 31, 2018) (Judge Elizabeth A. Wolford). The Secretary of Labor alleged that Defendants failed to forward contributions withheld from employee wages to the Plan and sought relief for breaches of fiduciary duty under ERISA Section 409. The court accepted the proposed Consent Judgment, finding that it is fair and reasonable and comports with the public interest.

Third Circuit

First American Bank v. SJP Group, Inc. Employee Stock Ownership Trust, No. CV173778MASDEA, 2018 WL 5722252 (D.N.J. Oct. 31, 2018) (Judge Michael A. Shipp).  First American Bank claims it is legally entitled to all or part of the DOL recovery from First Bankers, which the DOL had allegedly breached their fiduciary duties with respect to the Employee Stock Ownership Trust.  Prior to the settlement, First American Bank and SJP entered into a “Voluntary Collateral Surrender and Foreclosure Agreement, wherein First American Bank released its interest in SJP’s contract rights.  The court determined that the Voluntary Surrender and Foreclosure Agreement released from all claims the Plan, and its participants, and shareholders of SJP.  Since all potential claims were released against Defendant, summary judgment is appropriate in favor of the Plan and the DOL.  Additionally, “giving every possible inference to First American Bank—even if Plaintiff had not released its claims against the Plan, and assuming the Collateral Assignment is valid, and if the Delaware state law allowing the Bank to take a security interest in the Recovery is not preempted by ERISA—the Bank’s security interest in the collateral would still not extend to the Recovery by the DOL.”

Northrop Grumman Corporation v. Axis Reinsurance Company, No. 1:17-CV-01738, 2018 WL 5314918 (D. Del. Oct. 26, 2018) (Judge Matthew W. Brann).  In this dispute over fiduciary liability insurance coverage, the court determined that Northrop Grumman’s claim for coverage of the Marshall action should be considered made at the time Northrop Grumman made its claim for coverage of the Grabek action.  Both actions allege that the company’s Investment Committee and Administrative Committee “violated their ERISA fiduciary duties by allowing the plans to pay excess administrative fees to Northrop Grumman and a third-party service provider, and by allowing the plans to pay excessive investment management fees on the plans’ Emerging Markets Fund.”  The court concluded that “Northrop Grumman’s claim for coverage of the Marshall action should, pursuant to the 2006-2007 policies’ Relation Back Provision and the 2016-2017 policies’ Prior Notice Exclusion, be considered made at the time Northrop Grumman made its claim for coverage of the Grabek action— i.e., during the 2006-2007 policy year.”

Eighth Circuit

In re: EpiPen ERISA Litig., No. CV 17-1884 (PAM/HB), 2018 WL 5314944 (D. Minn. Oct. 26, 2018) (Judge Paul A. Magnuson).  Plaintiff alleges that Defendants, pharmacy benefit managers, breached their fiduciary duties to health plan participants by negotiating with Mylan to raise the price of EpiPens while pocketing millions of dollars in rebates and other payments.  The court denied Defendants’ motion to dismiss.  It held that Plaintiffs sufficiently alleged injury traceable to Defendants’ conduct.  In addition, with respect to EpiPen payments, Plaintiffs have plausibly alleged that Defendants are plan fiduciaries and that they breached their fiduciary duties under section 404(b) by negotiating such large “rebates” and other payments from Mylan that it caused Plaintiffs’ out-of-pocket expenses for EpiPens to increase exponentially.  However, Plaintiffs have not plausibly pled their fiduciary duty claim under section 406 since the alleged conduct does not involve plan assets or transactions for purposes of ERISA’s self-dealing prohibitions.

Class Actions

Seventh Circuit

Craft, et al. v. Health Care Service Corporation, No. 14 C 5853, 2018 WL 5315204 (N.D. Ill. Oct. 26, 2018) (Judge Virginia M. Kendall).  This case involves a class action settlement of claims alleging that Defendant HCSC unlawfully restricted Plaintiffs’ insurance coverage for treatment of mental illness in residential treatment centers in violation of ERISA and the Parity Act.  The court granted Plaintiffs’ Motion to Modify Administration of Settlement by Extending Distribution Deadline so that the class action administrator can complete the distribution of 26 deliverable but uncashed checks.  The court explained, among other reasons, “that these individuals are inherently part of a vulnerable population and may continue to struggle with serious mental health issues that could have contributed to their failure to receive or cash the check.”  After 45 days, the administrator shall resume the schedule and procedures under the Plan of Allocation to distribute the Residual Settlement Fund.

Disability Benefit Claims

Fourth Circuit

Damiano v. Inst. for In Vitro Scis., Inc., No. CV PX-16-0920, 2018 WL 5392728 (D. Md. Oct. 29, 2018) (Judge Paula Xinis).  The court denied reconsideration of its grant of summary judgment to Defendant on Plaintiff’s breach of fiduciary duty claim.  Plaintiff alleged that the company told her she was not entitled to disability benefit coverage.  However, she applied for disability benefits anyway.  The claims administrator requested additional information from her doctors and employer to complete the application but Plaintiff never responded or completed the application for benefits.  The court determined that the company’s misstatements as to coverage did not cause the denial of benefits.

Fifth Circuit

Wittmann v. Unum Life Insurance Company of America, No. CV 17-9501, 2018 WL 5631421 (E.D. La. Oct. 31, 2018) (Judge Martin L.C. Feldman).  See Notable Decision summary.

ERISA Preemption

Eighth Circuit

Lee v. The Lincoln National Life Insurance Company, No. 18-CV-2063-CJW, 2018 WL 5660553 (N.D. Iowa Oct. 31, 2018) (Judge C.J. Williams).  In this dispute over accidental death benefits provided under an ERISA plan, the court found that Plaintiff’s breach of contract claim is preempted under ERISA’s express preemption provision and that it is also completely preempted by ERISA Section 502(a) since it duplicates the remedies available under ERISA’s civil enforcement provision, Section 502(a), and therefore plaintiff’s claim is completely preempted.

Ninth Circuit

Estate of Larry Lee Covello v. Nordstrom, Inc., No. C18-1025-MJP, 2018 WL 5619051 (W.D. Wash. Oct. 30, 2018) (Judge Marsha J. Pechman).  Estate of deceased 401(k) plan participant challenged company’s distribution of his account to the designated beneficiary.  The court determined that Estate’s “claim is preempted by ERISA, because Plaintiff failed to exhaust administrative remedies prior to bringing suit, and because Plaintiff failed to identify any violation of ERISA, the Court finds that Plaintiff has failed to state a claim upon which relief may be granted.”

Medical Benefit Claims

Sixth Circuit

Mahan v. America Anesthesia Associates, LLC v. Farmers Insurance Exchange, No. 17-13311, 2018 WL 5620869 (E.D. Mich. Oct. 30, 2018) (Judge Avern Cohn).  In this dispute seeking payment of medical expenses incurred in an automobile accident, where Plaintiff has no-fault auto insurance with Farmers and is a participant of the UAW Retiree Medical Benefits Trust administered by BCBS, the court determined that the BCBS plan clearly provides that Plaintiff “first seeks coverage from her insurance company, Farmers. Where it is undisputed that BCBS’s coverage obligation is secondary, it is entitled to summary judgment.”

Pension Benefit Claims

Third Circuit

Jumblat v. Ali Baba Restaurant, et al., No. CV 18-949, 2018 WL 5617922 (W.D. Pa. Oct. 30, 2018) (Judge Cathy Bissoon).  The court granted the Moving Defendants’ motion to dismiss on the basis that they cannot be held liable for wrongful denial of benefits under ERISA because Plaintiff fails to allege that either of them controlled the administration of benefits.

Plan Status

Eighth Circuit

Sanzone, et al. v. Mercy Health, et al., No. 4:16 CV 923 CDP, 2018 WL 5394968 (E.D. Mo. Oct. 29, 2018) (Judge Catherine D. Perry).  The court denied Plaintiffs’ motion for reconsideration and determined that its earlier decision finding that the Mercy Plan was not an ERISA plan was not clearly erroneous.  The court had to determine whether or not an ERISA plan was at issue in order to determine whether or not it had subject-matter jurisdiction over Plaintiffs’ ERISA claims, which it does not.

Provider Claims

Third Circuit

Atlantic Plastic & Hand Surgery, PA, et al. v. Anthem Blue Cross Life And Health Insurance Company, et al., No. CV 17-4599-BRM-LHG, 2018 WL 5630030 (D.N.J. Oct. 31, 2018) (Judge Brian R. Martinotti).  The court granted Anthem’s Motion to Dismiss Atlantic and Dr. Risin for lack of subject matter jurisdiction because the Providers are neither participants nor beneficiaries and the Plan includes an unambiguous, and therefore enforceable, anti-assignment clause.  Though the participant does have Article III standing to bring an ERISA claim, Plaintiffs fail to allege a claim for benefits because the complaint does not reference any provision governing benefit payments under the Plan itself.  There is also no breach of fiduciary duty claim because Section 502(a)(1)(B) does not create a private cause of action for breach of fiduciary duty.

Retaliation Claims

Seventh Circuit

Norrell v. Jeff Foster Trucking, Inc., No. 18-CV-443-JDP, 2018 WL 5619200 (W.D. Wis. Oct. 30, 2018) (Judge James D. Peterson).  The court denied dismissal of Plaintiff’s ERISA interference claim where “Norrell alleges that Foster made multiple comments about how much time and money Norrell’s treatment was costing JFT in the months leading up to his termination. Although defendants characterize Foster’s alleged statements as ambiguous rather than suggestive of any intent to interfere with Norrell’s benefit rights, Norrell’s allegations are more than sufficient to raise an inference that Foster acted with the requisite specific intent.”


Third Circuit

Gonce v. The Prudential Insurance Company of America, No. 218CV08662KSHCLW, 2018 WL 5631170 (D.N.J. Oct. 31, 2018) (Magistrate Judge Cathy L. Waldor).  In this dispute over long term disability benefits, the court granted Prudential’s motion to transfer to the Eastern District of Tennessee, where “Plaintiff is a Tennessee resident, worked for the Plan Sponsor in Tennessee, became disabled while in Tennessee, and would have received benefits there. Furthermore, Plaintiff’s medical providers are in Tennessee. The factual ties to this District are weaker. Although Defendant is headquartered in New Jersey, Plaintiff’s claim was processed in Pennsylvania, and the majority of Prudential employees involved in Plaintiff’s claim work outside of New Jersey. Thus, this factor supports transfer.” (internal citations omitted).

Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner


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