This week’s notable decision is Fortier v. Hartford Life & Accident Ins. Co., No. 18-1752, __F.3d__, 2019 WL 697989 (1st Cir. Feb. 20, 2019), where the First Circuit dealt a blow to ERISA plan participants when it comes to exhausting administrative remedies. The bottom line: An insurer may strictly enforce the 180-day appeal deadline against a plan participant.
The facts: Fortier received long term disability benefits under a group disability plan insured by Hartford Life & Accident Insurance Company (“the Plan”). The Plan only pays 24 months of benefits for disabilities caused by mental illnesses. Hartford approved and paid Fortier’s LTD benefits before sending her notice on September 13, 2011 that her benefits would terminate in the future on November 1, 2011 due to the Plan’s Mental Illness Limitation. The letter informed Fortier of her right to appeal within 180 days of the date that she received the letter. Fortier retained an attorney who submitted a timely appeal and was able to get her benefits reinstated. Shortly after reinstating her claim, Hartford explained that since it did not give Fortier prior notice of the application of the Mental Illness Limitation, it was starting the 24-month period as of September 13, 2011 and no benefits will be payable beyond September 12, 2013.
After completing an investigation and review of Fortier’s claim, by letter dated July 17, 2013, Hartford notified Fortier’s attorney that it would stop paying benefits on September 13, 2011 because it determined that the Mental Illness Limitation applied to the claim. Hartford notified Fortier of her right to appeal within 180 days. Fortier did not appeal within 180 days but sent in a letter purporting to appeal two months after the deadline. Hartford declined to consider the appeal because it was untimely.
The court’s holding: The First Circuit rejected Plaintiff’s argument that the 180-day period should run from the date of the termination of benefits and not from the date of the notice. It held that the 180-day time limit to appeal an adverse benefit determination began to run from the date of the notice of the determination. The court also found that Hartford followed the terms of the Plan, which were consistent with ERISA’s requirements when it provided her notice of the benefit determination and her right to appeal within 180 days.
Although the doctrine of “substantial compliance” has been applied to excuse an insurer’s failure to comply with ERISA’s notice requirements, it does not apply to late appeals by claimants. The court agreed with the Seventh Circuit’s decision in Edwards v. Briggs & Stratton Ret. Plan, 639 F.3d 355 (7th Cir. 2011), which reasoned that applying the doctrine to the exhaustion requirement “would render it effectively impossible for plan administrators to fix and enforce administrative deadlines while involving courts incessantly in detailed, case-by-case determinations as to whether a given claimant’s failure to bring a timely appeal from a denial of benefits should be excused or not.” Id. at 362. The court also explained that nothing in the ERISA Regulations is undermined by insurers applying deadlines strictly against plan participants.
Lastly, like the Seventh and Ninth Circuits who have considered this issue, the court held that New Hampshire’s common law notice-prejudice rule does not apply to ERISA appeals. “The exhaustion requirement — and several of its underlying policy goals — would be undercut by an extension of a state law notice-prejudice rule to ERISA appeals.”
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Potter v. Blue Shield of California Life & Health Ins. Co., No. 17-56018, __F.App’x__, 2019 WL 719136 (9th Cir. Feb. 20, 2019) (Before: WARDLAW and BEA, Circuit Judges, and MURPHY,* District Judge). The district court did not abuse its discretion in awarding Plaintiff attorney’s fees and reducing those fees by 70% in light of Plaintiff’s limited success of obtaining payment for only one month of residential treatment out of the total seven-and-a-half months of benefits sought.
Kifafi v. Hilton Hotels Ret. Plan, No. 16-7002, __F.App’x__, 2019 WL 668260 (D.C. Cir. Feb. 15, 2019) (Before: Garland, Chief Judge, and Pillard and Wilkins, Circuit Judges). In 2011, the district court ordered a permanent injunction requiring Hilton to amend the retirement plan’s benefit-accrual formula, award back payments for increased benefits that should have been paid, commence increased benefits for all class members, and administer a claim procedure to credit employees’ union service for vesting purposes. The court held that the district court did not abuse its discretion by choosing to end its active supervision of the permanent injunction after finding Hilton was in compliance or by not ordering an equitable accounting regarding Hilton’s implementation of the injunction before terminating its jurisdiction.
Disability Benefit Claims
Fortier v. Hartford Life & Accident Ins. Co., No. 18-1752, __F.3d__, 2019 WL 697989 (1st Cir. Feb. 20, 2019) (Before Lynch, Thompson, and Barron, Circuit Judges). See Notable Decision summary above.
Ricciardi v. Metropolitan Life Insurance Company, et al., No. 16-CV-3805(CM), 2019 WL 652883 (S.D.N.Y. Feb. 15, 2019) (Judge Colleen McMahon). The court denied MetLife’s motion for summary judgment on Plaintiff’s claim challenging the calculation of his Benefits Eligible Earnings (“BEE”). Plaintiff was a financial advisor for Morgan Stanley, who reported his BEE as only $34,527.20/year. His prior year’s Form W-2 reflected income in the six figures. MetLife abused its discretion by relying entirely on Morgan Stanley for the BEE calculation and not doing its own independent calculation or confirming that Morgan Stanley’s calculation was correct in accordance with the terms of the Plan. As the court explained, “No one who works at Morgan Stanley, or any other investment bank, in a position like Plaintiff’s makes just over $34,000 a year – unless he is very bad at what he does (in which case, he would cease to be employed).” The court remanded the claim to MetLife: “It is time for MetLife to do its job – which is to provide a full and fair review of Plaintiff’s claim that his BEE is too low.”
Wittmann v. Unum Life Insurance Company of America, No. 17-9501, 2019 WL 763509 (E.D. La. Feb. 21, 2019) (Judge Martin L.C. Feldman). The court granted Unum’s motion for summary judgment on Plaintiff’s claim for denied long term disability benefits. The court made several notable findings, including that: (1) Unum did not abuse its discretion in requiring some objective evidence of functional limitations or in upholding the denial when neuropsychological test results did not corroborate Plaintiff’s reported concentration problems; (2) there was no procedural unreasonableness associated with Unum’s failure to consult with a rheumatologist during the appeal review process where Plaintiff did not demonstrate how the reviewing doctor’s lack of specialized knowledge compromised the administration of her claim and the second appeal focused on cognitive deficits so it was reasonable to have the second appeal reviewed by a psychologist; and (3) on the mental vs. physical question, Unum did not abuse its discretion in failing to recognize that depression is a symptom of fibromyalgia rather than a co-morbid condition: “while it is true that depression can result from fibromyalgia, the training materials make clear that, where the claimant’s depression affects her ability to work, recovery may be limited.”
Draper v. Aetna Life Ins. Co., No. 18 CV 1321, 2019 WL 764754 (N.D. Ohio Feb. 21, 2019) (Judge Patricia A. Gaughan). The court found that Aetna did not abuse its discretion in denying short term disability benefits to a long-time Fed Ex truck driver/courier whose MRIs showed degenerative changes, cervical disc displacement, and lumbar spondylosis. In evaluating the quantity and quality of the medical evidence, Aetna reasonably relied on two “independent” peer reviews from Drs. Twombly and Ugokwe to justify that Plaintiff did not adequately substantiate his claim with significant objective findings.
Laake v. Benefits Comm., No. 1:17CV611-WOB, 2019 WL 823575 (S.D. Ohio Feb. 21, 2019) (Judge William O. Bertelsman). Plaintiff suffers from several ailments including rheumatoid arthritis, pelvic somatic dysfunction, degenerative disc disease, and chronic pain. The Plan denies benefits after 24 months for a disability that is based on certain mental illnesses, including Chronic Pain Syndrome. The court determined that Western & Southern Financial Group (“W&S”) bears the burden of proving an exclusion applies and that it incorrectly determined that Plaintiff fit under the Chronic Pain Syndrome exception. None of her doctors used the diagnostic code for Chronic Pain Syndrome and there is no support in the record that she has Chronic Pain Syndrome as opposed to just chronic pain. The court also determined that W&S did not properly analyze whether Plaintiff fits the second definition of disability after 24 months and that it did not inform her that it was considering whether she satisfied the second LTD definition in its initial decision, depriving her of proper notice of the basis for its decision on appeal.
Barker v. Insight Global, LLC, et al., No. 16CV07186BLFVKD, 2019 WL 690285 (N.D. Cal. Feb. 19, 2019) (Magistrate Judge Virginia K. Demarchi). The court granted Insight Global’s motion to compel a Rule 30(b)(6) deposition of Beacon Hill. The court found that Insight Global is entitled to discovery of its defense against Mr. Barker’s claim for deferred compensation; specifically, discovery of Mr. Barker’s direct or indirect solicitation of Insight Global employees in violation of section 10(c)(iii) of the Second Amended and Restated Insight Global, LLC 2013 Incentive Unit Plan.
Small, M.D. v. Oxford Health Insurance, Inc., et al., No. CV 18-13120 (JLL), 2019 WL 851355 (D.N.J. Feb. 21, 2019) (Judge Jose L. Linares). The court found that the state law contract claims asserted by the out-of-network healthcare provider are not completely preempted by ERISA because he is asserting the claims on his own behalf, not on behalf of the Patient, and seeking to be reimbursed for pre-authorized medical services. There is no express preemption because Plaintiff’s claims do not “relate to” an ERISA-regulated plan because the Complaint does not seek damages pursuant to the terms of Patient’s benefit plan.
Josef K., et al. v. California Physicians’ Service, et al., No. 18-CV-06385-YGR, 2019 WL 688075 (N.D. Cal. Feb. 19, 2019) (Judge Yvonne Gonzalez Rogers). In this dispute over denied residential treatment coverage, Plaintiff brought a cause of action for intentional interference with contract against Maximus Federal Services, Inc., who allegedly performed an independent review of Blue Shield’s decision. The court found that the tortious interference claim is conflict preempted by ERISA because the existence of the ERISA plan is a critical factor in establishing liability. The court also found the claim completely preempted by ERISA because it fails both prongs of the Davila test. The court granted Plaintiffs leave to amend.
Pentland v. Metropolitan Life Insurance Company, No. 18-CV-00409-RBJ, 2019 WL 699113 (D. Colo. Feb. 20, 2019) (Judge R. Brooke Jackson). Plaintiff brought state law claims to enforce payment of life insurance benefits from an Individual Policy that was converted from an ERISA-governed group plan. MetLife rescinded the Individual Policy because it claimed that the insured was still covered by the group plan at the time of his death and the conversion to the individual policy was not necessary. MetLife refunded the premiums paid for the Individual Policy and paid Plaintiff the lower benefit amount offered under the group plan. The court determined that Plaintiff’s state law claims are preempted by ERISA. It explained that “though Ms. Pentland is only asking for payment under the Individual Policy, the core of Ms. Pentland’s dispute with MetLife turns on the consequences of the conversion of the Group Plan. Because resolution of this issue involves consideration of the terms of the Group Plan being converted, I find that Ms. Pentland’s state law claims are sufficiently related to an employee benefit plan to be preempted by ERISA.”
Life Insurance & AD&D Benefit Claims
Morgan-Lapp v. Reliance Standard Life Insurance Co., No. CV 18-1085, 2019 WL 653093 (E.D. Pa. Feb. 14, 2019) (Judge Tucker). The court granted Reliance Standard’s motion for summary judgment. In this case the insured fell ill and was hospitalized less than two weeks after he was hired. The company issued its last paycheck to the insured while was hospitalized and he died after more than a month later. Reliance articulated three reasons for the denial of benefits under the company’s life insurance plan, one of which the court found to be a reasonable basis to uphold Reliance’s decision. The court concluded that while the insured may have met the eligibility requirements under the Policy, the Policy did not take effect on the day his coverage was to begin because he was not actively at work that day or any day thereafter.
Medical Benefit Claims
Potter v. Blue Shield of California Life & Health Ins. Co., No. 17-56018, __F.App’x__, 2019 WL 719136 (9th Cir. Feb. 20, 2019) (Before: WARDLAW and BEA, Circuit Judges, and MURPHY,* District Judge). The district court did not err in denying Plaintiff’s motion to supplement the administrative record with a declaration of a treating psychiatrist, where the court determined that it could have been submitted during the administrative process and circumstances did not clearly establish that additional evidence was necessary to conduct an adequate de novo review. The court also found that the district court did not err in finding that residential mental health treatment was not medically necessary since the record showed that Plaintiff could have been safely and effectively treated on an outpatient basis rather than at a residential treatment center.
Neurosurgical Associates of NJ, P.C. v. Aetna, Inc., No. 217CV13210KSHCLW, 2019 WL 851280 (D.N.J. Feb. 22, 2019) (Judge Katharine S. Hayden). The court found that Aetna’s anti-assignment clauses validly bar beneficiaries from assigning benefits and granted Aetna’s motion to dismiss the two-count complaint brought by the medical provider.
Home-Owners Insurance Company v. Blue Cross Blue Shield of Michigan, No. 17-12973, 2019 WL 764306 (E.D. Mich. Feb. 21, 2019) (Judge Arthur J. Tarnow). Plaintiff, an auto insurance carrier, sued Blue Cross to recover the $112,552.61 that it paid for medical and residential care services provided to its insured. The court granted Blue Cross’s motion for summary judgment. The court concluded that Plaintiff may have made the payments in error but “ERISA does not provide a statutory mechanism for a no-fault insurer to seek reimbursement from an ERISA Plan for payments on claims that the ERISA plan did not have a contractual obligation to honor.”
Myers v. Blue Cross & Blue Shield of Mississippi, No. 5:18-CV-81(DCB)(MTP), 2019 WL 830964 (S.D. Miss. Feb. 21, 2019) (Judge David Bramlette). In this dispute over the payment of health benefits under an ERISA plan, the court denied Plaintiff’s motion to remand to state court. The court joined those courts which have held that the phrase, “you may file suit in a state or federal court” is a statutorily required disclosure of an employee’s ERISA rights rather than a forum selection clause.
Withdrawal Liability & Unpaid Contributions
Finkel v. Walsh Electrical Contracting, Inc., No. 17-CV-07358, 2019 WL 653138 (E.D.N.Y. Feb. 15, 2019) (Judge I. Leo Glasser). Plaintiff alleges that Defendants failed to make employer contributions to various ERISA plans. The court denied Aurora’s motion to dismiss, finding that it has subject matter jurisdiction over the Aurora Claim alleging a breach of Aurora’s guarantee to pay any unpaid wages and benefits owed by Walsh for the FedEx Project. The court also found that Plaintiff has stated a plausible claim against Aurora.
Trustees of the IBEW Local 400 Welfare, Pension, Annuity, Supplemental, & Joint Apprenticeship Training Funds for & on behalf of themselves & said Funds, & the Bd. of Trustees, et al., v. Four Directions, Inc. d/b/a J. Ford Elec., No. CV189012MASTJB, 2019 WL 687905 (D.N.J. Feb. 19, 2019) (Judge Michael A. Shipp). The court granted Plaintiff’s motion for default judgment for unpaid contributions and other expenses, including the amounts of interest and liquidated damages of $32,511.80, plus attorneys’ fees and costs of $1,669.99, for a total judgment of $34,181.79.