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Your ERISA Watch – Employer Must Pay Dependent Life Insurance Benefits to Employee Due to Failure to Provide Summary Plan Description

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Today’s notable decision is a good one on equitable remedies, made possible by CIGNA Corp. v. Amara, 563 U.S. 421 (2011).  In Snitselaar v. Unum Life Insurance Company of America, 2019 WL 279995 (N.D. Iowa Jan. 22, 2019), Unum denied Snitselaar’s claim for dependent life insurance benefits on the life of her ex-husband, Gerard, who died about three months following the finalization of their divorce.  Unum found that Gerard was no longer an eligible dependent under the terms of the Plan as of the date of the divorce.  Snitselaar claimed that when she signed up for the life insurance benefits, she was informed that they could not lose the insurance for life changes after the two-year waiting period and they were never informed about divorce affecting the policy.  In addition, the life insurance premiums continued to be deducted from her paychecks after the divorce and even after Gerard’s death.  Snitselaar also claimed that neither she nor Gerard were informed of their right to convert to an individual life policy without evidence of insurability after the divorce was finalized.

Snitselaar brought a claim for benefits against Unum under ERISA § 502(a)(1)(B) and a breach of fiduciary duty claim against her employer, Mount Mercy, under ERISA § 502(a)(3).  On the claim against Unum, Snitselaar contended that Unum’s denial violated Iowa Code § 509.2(7) because the policy does not contain a provision required by the Code.  The court found that Iowa Code § 509.2(7) is preempted by ERISA because it does not alter the scope of the bargain between the insured and the insurer.  And Unum’s failure to abide by the Code is not material to Unum’s interpretation of the policy and determination of Snitselaar’s claim.  Because Gerard never exercised his conversion rights and did not obtain an individual life insurance policy, Unum did not abuse its discretion in interpreting the terms of the Plan.  The court declined to reverse Unum’s determination based on its failure to disclose information pursuant to the Code.

On the breach of fiduciary duty claim, Snitselaar argued that Mount Mercy breached its fiduciary duty to her by failing to provide her with a summary plan description and/or certificate of insurance from Unum as required by 29 U.S.C. § 1022 and Iowa Code § 509.2(7).  The court agreed.  It rejected Mount Mercy’s argument that this claim is barred because it duplicates her claim for benefits against Unum. Because there was no doubt that Mount Mercy and the Plan failed to comply with the requirements of § 1022, it breached its fiduciary duty.  Mount Mercy’s failure to provide Snitselaar with an SPD caused her harm because she had no notice that her husband would not be covered if they divorced and she had no notice regarding his conversion rights.  The court rejected Mount Mercy’s argument that it was not the cause of Snitselaar’s harm because she relied on the advice from her divorce attorney that coverage would continue after the divorce.  Instead, the court found that the conversion was not timely exercised after the divorce because Snitselaar was not provided the SPD as required by ERISA.  The court entered judgment in favor of Snitselaar against Mount Mercy for $60,000, the full amount of the dependent basic and supplemental life insurance coverages.

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

Breach of Fiduciary Duty

Eighth Circuit

Snitselaar v. Unum Life Insurance Company of America, No. 17-CV-14-LRR, 2019 WL 279995 (N.D. Iowa Jan. 22, 2019) (Judge Linda R. Reade).  See Notable Decision summary above.

Nelsen v. Principal Glob. Inv’rs Tr. Co., No. 418CV00115SMRSBJ, 2019 WL 310144 (S.D. Iowa Jan. 24, 2019) (Judge Stephanie M. Rose).  The court granted Defendants’ motion to dismiss in part.  It found that Plaintiffs’ claims that Defendants breached their fiduciary duties by selecting imprudent investments must be dismissed because Defendants were not fiduciaries in selecting Principal CITs’ underlying investments, however, they were fiduciaries in monitoring the Principal CITs’ underlying investments.  The court found the facts of this case indistinguishable from Braden v. Wal-Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009) and that Plaintiffs sufficiently alleged a breach of the duties of loyalty and prudence.  The court agreed with Defendants that Plaintiffs’ breach of fiduciary duty claim related to Defendants’ initial selection of the Principal CITs’ underlying investments is barred by the statute of limitations. The failure to monitor and remove imprudent investments claim is only barred to the extent that Defendants may have breached their duties before April 16, 2012 (six years before the date of filing).

Wildman, et al. v. American Century Services, LLC, et al., No. 4:16-CV-00737-DGK, 2019 WL 293382 (W.D. Mo. Jan. 23, 2019) (Judge Greg Kays).  Following an 11-day bench trial, the court found all three of Plaintiff’s claim fail:  “(1) breach of fiduciary duty, in violation of 29 U.S.C. § 1104(a)(1)(A)-(B), (2) failure to monitor fiduciaries, and (3) equitable disgorgement of ill-gotten profits, pursuant to 29 U.S.C. § 1132(a)(3).”  The court found that Plaintiffs did not establish Defendants’ conduct breached any fiduciary duty or duty of prudence.  Specifically, the court found that the Committee did not act imprudently by only considering American Century funds, failing to offer certain funds in the Plan, including funds used to hedge inflation, or maintaining too many options in the Plan.  The court found that the Committee did prudently monitor funds on the “Watch List,” monitored or controlled costs, and did not delay the conversion to low-cost shares or fail to gain revenue sharing rebates.  Plaintiffs also did not prove a loss to the Plan-Plaintiff’s expert’s four models of loss and damages did not prove that any breach resulted in a prima facie loss to the Plan.  The duty to monitor claim and equitable disgorgement claim fails because they require an underlying breach of fiduciary duty.

Class Actions

Second Circuit

Cunningham v. Cornell University, No. 16-CV-6525 (PKC), 2019 WL 275827 (S.D.N.Y. Jan. 22, 2019) (Judge P. Kevin Castel).  Plaintiffs allege violations of ERISA §§ 1104, 1106 against the fiduciaries of the retirement plans for not managing the plans prudently and allowing the plans to underperform and accrue excessive administrative fees.  The court granted class certification of the following class:  All participants and beneficiaries of the Cornell University Retirement Plan for the Employees of the Endowed Colleges at Ithaca and the Cornell University Tax-Deferred Annuity Plan from August 17, 2010, through August 17, 2016, excluding the Defendants and any participant who is a fiduciary to the Plans.  The court appointed the law firm of Schlichter Bogard & Denton LLP as class counsel.

Seventh Circuit

Bell v. Pension Committee of ATH Holding Company, LLC, No. 115CV02062TWPMPB, 2019 WL 314388 (S.D. Ind. Jan. 24, 2019) (Judge Tanya Walton Pratt).  The court denied Defendants’ motion to amend the order certifying the Money Market Fund Class.  The court granted Plaintiffs’ motion to modify the class certification order. The court certified the Administrative Fee and Investment Management Fee Class with the following subclasses:  Flat Fee Subclass – All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) who had an account balance greater than $1,000.00 at any time from July 22, 2013 through the date of judgment, excluding the Defendants; Revenue Sharing Subclass – All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) who had a reduction in the value of their account balance at a rate of more than $35.00 per year due to revenue sharing payments to The Vanguard Group at any time from December 29, 2009 through July 21, 2013, excluding the Defendants.

Disability Benefit Claims

Sixth Circuit

Jackson v. Blue Cross Blue Shield of Michigan Long Term Disability Program, No. 18-1542, __F.App’x__, 2019 WL 291966 (6th Cir. Jan. 22, 2019).  On the standard of review, the court found that Associated Program, which oversaw the first four medical reviews of Plaintiff’s claim, does not have an inherent conflict with Plaintiff’s employer.  Plaintiff’s claim would have been paid from the National Long Term Disability Trust funded by Plaintiff’s employer, not the Associated Program.  Broadspire’s decision to deny Plaintiff’s claim was based upon more than just file reviews.  It also considered the opinion of a doctor who evaluated Plaintiff in person, as well as “objective evidence” including two FCEs and multiple MRIs.  It was not arbitrary for Broadspire to rely on the opinions of reviewing doctors over Plaintiff’s treating doctors.

Ninth Circuit

Haddad v. SMG Long Term Disability Plan, No. 17-16729, __F.App’x__, 2019 WL 295681 (9th Cir. Jan. 22, 2019) (Before: GOULD and BERZON, Circuit Judges, and MÁRQUEZ, District Judge).  The court determined that for purposes of the disability policy’s preexisting condition exclusion, Hartford bears the burden of establishing that Plaintiff’s left-sided symptoms were substantially caused or contributed to by his right-sided herniated disk.  The court found that Hartford has not met its burden.  A statement from Plaintiff’s surgeon that Plaintiff’s surgery for his right-sided condition caused or related to the left-sided symptoms does not create “substantial” causation.  There is no evidence of whether the manner in which the surgery caused the symptoms was reasonably foreseeable or whether Plaintiff was warned about any specific risk that would cause his left-sided symptoms.  Hartford did not consult with a medical expert during the appeals process.  The court reversed the district court’s grant of judgment to Hartford.

Tenth Circuit

Mawa v. Hartford Life & Accident Insurance Company, No. 2:17-CV-01044, 2019 WL 267477 (D. Utah Jan. 18, 2019) (Judge Dale A. Kimball).  The court granted summary judgment to Hartford, finding that it reasonably concluded that Plaintiff was capable of sedentary work and not disabled from “any occupation.”  The court rejected Plaintiff’s contention that Hartford was required to run another Employability Analysis Report upon receipt of its second reviewing doctor’s report.  Hartford determined the occupations identified in the EAR continued to be valid based on the restrictions and limitations identified in the doctor’s report.

ERISA Preemption

Snitselaar v. Unum Life Insurance Company of America, No. 17-CV-14-LRR, 2019 WL 279995 (N.D. Iowa Jan. 22, 2019) (Judge Linda R. Reade).  See Notable Decision summary above.

Exhaustion of Administrative Remedies

Sixth Circuit

Miller v. Deloitte Services LP, No. 3:18-CV-00581, 2019 WL 281037 (M.D. Tenn. Jan. 22, 2019) (Judge Aleta A. Trauger).  Plaintiff did not appeal the denial of life insurance benefits within sixty days after receipt of the decision.  The court agreed with Plaintiff that appealing would have been futile.  When the claim was denied in 2013, Plaintiff had not yet discovered a copy of the Designation of Beneficiary Form (which he discovered in 2018) and had no basis for arguing that Deloitte misplaced or mishandled the original form, or that the information upon which the denial was based was incorrect.  Exhaustion would not have provided a remedy in this case so the court exercised its discretion and found that in these circumstances exhaustion was not a prerequisite to bringing suit.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

Metro. Life Ins. Co. v. Smith-Howell, No. 1:18-CV-00164-MR, 2019 WL 281312 (W.D.N.C. Jan. 22, 2019) (Judge Martin Reidinger).  The court granted MetLife’s motion for default judgment against the Defendants/Claimants in Interpleader (decedent’s fiancé and son) since they were properly served the original and amended pleadings and failed to respond.  The court awarded MetLife $9,350.82 in attorneys’ fees and costs from the deposited interpleader funds of $163,321.43.  Defendants/Claimants are restrained and enjoined from instituting any action or proceeding against Plaintiff and the insurance plan for recovery of plan benefits.

Eighth Circuit

Snitselaar v. Unum Life Insurance Company of America, No. 17-CV-14-LRR, 2019 WL 279995 (N.D. Iowa Jan. 22, 2019) (Judge Linda R. Reade).  See Notable Decision summary above.

Pension Benefit Claims

Second Circuit

Kirkendall v. Halliburton, Inc., No. 17-3487-CV, __F.App’x__, 2019 WL 325649 (2d Cir. Jan. 24, 2019) (PRESENT: HALL, LYNCH, Circuit Judges, BOLDEN, District Judge).  Under the arbitrary and capricious standard of review, the court found that Defendant’s interpretation of the Plan, which denied accrual of vesting service for employees who it deemed employed by a successor company, was reasonable.  “There are other reasonable interpretations of the Plan, including that advanced by Appellants. This panel indeed finds the interpretation of the Plan advanced by Appellants to be more reasonable. But in such cases, under the standard of review we must apply, the administrator’s interpretation will not be disturbed by the courts.”

Pleading Issues & Procedure

First Circuit

Torres v. Bella Vista Hospital, Inc., No. 16-2316, __F.3d__, 2019 WL 324985 (1st Cir. Jan. 25, 2019) (Before Howard, Chief Judge, Boudin and Barron, Circuit Judges).  Plaintiff’s contention that “Banco Popular de Puerto Rico and Bella Vista and their agents committed perjury by denying the existence of an ERISA-covered 401(k) plan and covered up the transfer of funds between the liquidated employee benefits plan and the 401(k) plan,” is not sufficient to constitute a “fraud upon the court” and the reopening of their motion on the merits.

Fifth Circuit

B and D Plumbing Company, Inc. v. Finley, et al., No. IVILNUMBER1838SDDRLB, 2019 WL 303007 (M.D. La. Jan. 23, 2019) (Judge Shelly D. Dick).  Plumbing Contractors claim that Louisiana statutory requirements for apprenticeship programs set forth at LSA R.S. 37:1377are preempted by ERISA and are detrimental to the growth of the industry.  The court found that Plumbing Contractors did not sufficiently plead an injury to meet the standards of constitutional standing under Article III.  Allegedly out-of-work apprentice plumbers are not parties to this action and allegations of anticipated detriment to the plumbing industry as a whole are speculative.

Sixth Circuit

Weir-Cove Moving & Storage Co. v. Fleet Owners Insurance Fund, No. 1:17-CV-1413, 2019 WL 266422 (N.D. Ohio Jan. 18, 2019) (Judge Sara Lioi).  The court denied consolidating the   Weir-Cove lawsuit with the McHugh lawsuit.  The court granted the Fund’s motion to dismiss the intervenor complaint in the Weir-Cove lawsuit.  The court noted the split in authority as to whether a labor union may bring an ERISA claim.  Assuming associational standing is available under ERISA, the court found that the intervenor complaint would still be dismissed because it fails to establish the third prong of the “associational standing” test.

Remedies

Eighth Circuit

RightCHOICE Managed Care, Inc., et al. v. Hospital Partners, Inc., et al., No. 5:18-CV-06037-DGK, 2019 WL 302515 (W.D. Mo. Jan. 23, 2019) (Judge Greg Kays).  In this dispute where Plaintiffs allege that Defendants contrived to bill them for lab tests through a Missouri hospital even though the tests were performed at outside labs throughout the country, the court made a number of findings in denying the individual defendants’ motions to dismiss.  With respect to the ERISA claims, the court determined that the court has subject matter and personal jurisdiction over Defendants, venue is proper in this court, ERISA does not preempt Plaintiffs’ state-law claims, and Plaintiffs seek appropriate relief under ERISA Section 502(a)(3).  Plaintiffs properly seek a constructive trust over the alleged overpayments and are not required to identify the underlying funds in their complaint.  The court noted that Plaintiffs acknowledge the requirement of tracing their money to particular funds in Defendants’ possession.  In addition, the claim focuses on disgorging the ill-gotten gains as opposed to imposing liability for Plaintiffs’ losses.

Statute of Limitations

Sixth Circuit

Miller v. Deloitte Services LP, No. 3:18-CV-00581, 2019 WL 281037 (M.D. Tenn. Jan. 22, 2019) (Judge Aleta A. Trauger).  In this dispute alleging breach of fiduciary duty over the handling of a beneficiary designation for life insurance benefits, the court denied Defendant’s motion to dismiss on the basis of the statute of limitations.  Here, MetLife denied Plaintiff’s claim for life insurance benefits in 2013.  However, Plaintiff did not discover a copy of a 2007 Designation of Beneficiary Form until 2018.  (His mother had a copy in 2007 but there are questions about her agency and competency around that time.)  The court found that Plaintiff did not have “actual knowledge” of the facts establishing a cognizable legal claim under ERISA until 2018 and the Amended Complaint was filed within the six-year statute of limitations.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Moore v. New York Concrete Corp., No. 18 CIV. 2791 (PAE), 2019 WL 316402 (S.D.N.Y. Jan. 24, 2019) (Judge Paul A. Engelmayer).  The court denied John Russo’s motion to dismiss the claim against him for allegedly using an alter ego company to fraudulently underreport contributions due under various collective bargaining agreements.  “[A]n individual may be personally liable for ERISA violations in certain unusual circumstances, as where the individual engages in fraudulent conduct.”

Trustees of The New York City District Council of Carpenters Pension Fund v. Bar-Mac Construction of NJ Inc., No. 18-CV-06284(RA), 2019 WL 294768 (S.D.N.Y. Jan. 23, 2019) (Judge Ronnie Abrams).  “[T]he petition to confirm the arbitration award is granted. The Clerk of Court is directed to enter judgment in the amount of $2,431,495.78, plus (1) pre-judgment interest calculated at a rate of 5.75% per annum from May 17, 2018, through the date of judgment in this action and (2) post-judgment interest at the statutory rate. Petitioner is also granted $1,597.50 in attorney’s fees and $75 in costs arising out of filing the Petition.”

 

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