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Your ERISA Watch – First Circuit Rules in Favor of Harvard Pilgrim Health Care in Dispute Over Denied Residential Treatment Benefits

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This week’s notable decision demonstrates the difficulty of overcoming a district court’s de novo review on appeal in an ERISA case. Like many courts deciding mental health benefits under ERISA, the First Circuit concluded: “This case is not an easy one.” Doe v. Harvard Pilgrim Health Care, Inc., No. 19-1879, __F.3d__, 2020 WL 5405367 (1st Cir. Sept. 9, 2020).

The case previously reached the First Circuit in Doe v. Harvard Pilgrim Health Care, Inc., 904 F.3d 1 (1st Cir. 2018) (Doe I) which reversed the district court’s denial of Doe’s motion to expand the administrative record, vacated an order of summary judgment for Harvard Pilgrim, and remanded to the district court.

Following remand, and under a de novo standard of review, the district court agreed with Harvard Pilgrim’s determination that continued residential treatment was not medically necessary. Doe appealed.

Doe was admitted to residential treatment in January 2013, and Harvard Pilgrim approved one month of benefits for residential treatment before claiming further residential treatment was not medically necessary. Doe remained in residential treatment. On June 18, 2013, Doe was admitted to a higher level of care, inpatient treatment, which Harvard Pilgrim approved, as well as Doe’s second residential treatment from June to August 2013.

In Doe I, the Court determined clear error is the proper standard of appellate review of a district court in an ERISA case. Under such standard, the First Circuit found that there was no clear error in the district court’s order of summary judgment in favor of Harvard Pilgrim. The First Circuit addressed three arguments raised by Doe on appeal.

First, the Court found Doe’s “overarching argument on appeal” is that the expert reports by Harvard Pilgrim used an incorrect standard of care, namely requiring that Doe need 24-hour nursing care. The Court found it was not clear error for the district court to rely on the expert reports despite the expert’s references to “24-hour care,” noting that one report found that Doe did not need “24 hour supervision or nursing care.” The Court found the district court’s opinion can be read to explain that Doe did not require 24-hour “structure” either. The Court summarily dismissed Doe’s additional arguments such as Doe’s “difficult but perhaps supportive relationship with her family.” The Court found no clear error in the fact that the district court implicitly agreed more with Harvard Pilgrim’s experts than Doe’s.

Second, Doe argued the district court should have held a bench trial with live testimony. The Court found the district court did not err in its proceedings on remand and a bench trial with testimony would not differ from the district court’s process of holding oral argument and issuing a decision. The Court also dismissed Doe’s request for testimony as “long ago rejected” by the First Circuit.

Third, Doe sought attorney’s fees and costs resulting from litigation of the case up to the decision in Doe I which resulted in remand. The Court found it need not decide whether Doe’s win in Doe I makes her eligible for attorney’s fees under ERISA because there was no legal or clear factual error in the district court’s discretion.

This week’s notable decision summary was prepared by Kantor & Kantor, LLP Partner, Elizabeth Green. Elizabeth is passionate about helping patients obtain health benefits for a range of health conditions and particularly for mental health disorders such as eating disorders, and bipolar disorder. Elizabeth was lead counsel in the matter of Jamie F. v. United Healthcare Ins. Co., No. 19-CV-1111-YGR, __F.Supp.3d__, 2020 WL 4249200 (N.D. Cal. July 23, 2020).

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

Breach of Fiduciary Duty

Ninth Circuit

Amy F., v. California Physicians’ Service DBA Blue Shield of California, et al., No. 19-CV-6078 YGR, 2020 WL 5500370 (N.D. Cal. Sept. 11, 2020) (Judge Yvonne Gonzalez Rogers). In this class action over health insurance benefits, Defendant filed a motion to dismiss Plaintiff’s Second Amended Complaint, arguing Plaintiff did not have standing for forward-looking injunctive relief under 29 U.S.C. § 1132(a)(3). The court dismissed Defendant’s motion, finding that Plaintiff does have standing because “she is a current Plan participant and seeks equitable relief to ensure fair treatment in future claims for health benefits.”

Disability Benefit Claims

Second Circuit

Beardsley v. Hartford Fire Ins. Co., No. 3:18CV2056 (MPS), 2020 WL 5441322 (D. Conn. Sept. 10, 2020) (Judge Michael P. Shea). Plaintiff, an employee of Hartford, brought this action contending that Hartford wrongly denied her claim for life insurance waiver of premium benefits under an ERISA-governed employee benefit plan. On cross-motions for summary judgment, the court granted Hartford’s motion and denied Plaintiff’s motion. Because the life insurance plan contained a grant of discretionary authority, the court reviewed Hartford’s decision under the deferential “arbitrary and capricious” standard of review. The court acknowledged that Hartford had approved Plaintiff’s separately administered long-term disability claim, and that she was receiving disability benefits from the Social Security Administration. However, the court found that that the life insurance definition of disability was different from the disability plan definition, and that the life insurance plan administrators had more current information than either the SSA or the disability plan administrators. The court also found that Hartford had no obligation to conduct a medical examination of Plaintiff, and that one of Plaintiff’s doctors had opined that she could return to sedentary work. As a result, Hartford’s decision was supported by “substantial evidence.”

Fifth Circuit

Newsom v. Reliance Standard Life Ins. Co., No. 3:19-CV-1446-N, 2020 WL 5411702 (N.D. Tex. Sept. 9, 2020) (Judge David C. Godbey). On de novo review of Reliance’s decision to deny Plaintiff long-term disability benefits, the court found that Plaintiff was eligible for benefits. Plaintiff initially worked reduced hours (32 hours per week), and thereafter part-time until he became completely unable to work. The LTD Policy makes each active full-time employee eligible for LTD benefits. “Full-time” means working for a minimum of 30 hours during a person’s regular work week. The term “regular work week” is not defined. Reliance argued that the word “working” means the hours the person actually worked. Plaintiff, on the other hand, argued that the phrase “regular work week,” with the modifier “regular,” indicates something other than actual hours worked. On balance, the court found Plaintiff’s argument more persuasive. The most pertinent definition of “regular” from the Oxford English Dictionary is: “Having the usual, typical, or expected attributes, qualities, parts, etc.; normal, ordinary, standard. Now chiefly U.S.” The most pertinent definition of “regular” from the Merriam-Webster Dictionary is: “normal, standard.” The court held that “regular work week” as used in the LTD Policy means “normal, ordinary, standard workweek,” or the scheduled workweek. If Plaintiff was scheduled to work 30 hours a week, he was “full-time,” even if he worked less than 30 hours.

Ninth Circuit

Entz v. Standard Ins. Co., No. EDCV19402JGBSHKX, 2020 WL 5496072 (C.D. Cal. Sept. 11, 2020) (Judge Jesus G. Bernal). Plaintiff went out on disability from her job as a teacher due to a variety of complaints, including weakness, numbness, fatigue and chronic pain.  Her doctor diagnosed chronic Lyme disease. Standard took the position that Plaintiff’s complaints were “somatic,” and that chronic Lyme disease was not a recognized diagnosis. The court agreed to consider her award of disability retirement benefits, which was not in the record, as well as information outside the record related to Plaintiff’s salary. The court concluded that Standard’s review of the claim focused on its determination that the doctor who diagnosed Plaintiff with chronic Lyme disease was a “quack,” and generally casting doubt on the diagnosis of chronic Lyme disease. The court was unimpressed with Standard’s failure to consider the severity of Plaintiff’s symptoms in the context of her medical history. Standard’s reviewing physician also dismissed “extensive somatic complaints” due to the lack of “objective identifiable disease process.” The court chose to give greater weight to Plaintiff’s numerous treating physicians, all of whom supported her disability. The court noted that “[d]isability should have been measured by Plaintiff’s functional capacity, given her symptoms, compared to her duties as a teacher.” The court held that Standard’s reliance on a number of negative tests for various illnesses served only to rule out diagnoses and had no bearing on the symptoms themselves. The court found that Plaintiff was disabled from her usual occupation as required under the policy and awarded the two years of past-due benefits owed.

Wilstead v. United Heritage life Ins. Co., No. 1:19-CV-00276 WBS, 2020 WL 5441911 (D. Idaho Sept. 9, 2020) (District Judge William Shubb). Plaintiff filed suit when his claim for long-term disability benefits was terminated. The court first held that Idaho’s prohibition on discretionary clauses is limited to health insurance plans and does not apply to disability plans. Under the abuse of discretion standard, the court held that Defendant’s decision to terminate benefits was reasonable, despite Plaintiff’s insistence that his opioid addiction prohibited him from securing any gainful employment. The court noted that it need not give deference to Plaintiff’s treating physicians, nor was it unreasonable to assess Plaintiff’s psychiatric limitations without examining him in-person.

ERISA Preemption

Fifth Circuit

Holick v. Aetna Life Ins. Co., No. 4:19-CV-02976, 2020 WL 5412635 (S.D. Tex. Sept. 8, 2020) (Judge Charles Eskridge). Plaintiff claims that Aetna wrongfully denied her treatment and failed to timely reverse its denial of coverage to obtain an MRI. Plaintiff initially filed her complaint in state court, which Defendant removed based on diversity and federal question jurisdiction. Plaintiff added several state-law claims in her amended complaint. Defendant then moved to dismiss. Plaintiff’s state law claims for breach of the insurance contract, breach of the duty of good faith and fair dealing, violations of the Texas Insurance Code, and violations of the Texas Deceptive Trade Practices Act are based on Aetna’s alleged delay in making a coverage determination under her ERISA plan. Supreme Court and Fifth Circuit precedent is clear that state law claims such as these are preempted because they arise out of a claim for benefits under an ERISA plan. Therefore, the court dismissed Plaintiff’s state law claims with prejudice, but allowed her to seek leave to amend her complaint to plead a claim under ERISA only.

Ninth Circuit

Summit Estate Inc. v. United Healthcare Insurance Company, Case No. 4:19-cv-06724 YGR, 2020 WL 5436655 (N.D. Cal. Sept. 10, 2020) (Judge Yvonne Gonzalez Rogers). Plaintiff Summit Estate, Inc., brought this action against defendant United Healthcare Insurance Company (“United”) for claims arising out of United’s alleged failure to pay for substance-abuse-treatment services at the usual, customary, and reasonable rate (“UCR”). Summit Estate provided these services to patients with health insurance policies administered by United. In the complaint, Summit Estate asserts claims for breach of contract, intentional misrepresentation, negligent misrepresentation, fraudulent concealment, negligent non-disclosure, promissory estoppel, prohibitory injunctive relief, quantum meruit, a claim under California’s Unfair Competition Law and a claim under ERISA. United filed a motion for judgment on several grounds including that Summit’s state law claims were preempted by ERISA. (The other grounds raised by United’s motion for judgment will not be discussed herein.) The court analyzed whether Summit Estate’s claims “relate to” an ERISA plan and noted that “the Supreme Court has recently admonished that the term is to be read practically, with an eye toward the action’s actual relationship to the subject plan.” The court noted that Summit Estate’s state-law claims are based in tort or equitable concepts and do not necessarily depend on the existence or terms of an ERISA plan. Summit Estate alleged that United confirmed that the services at issue were covered by the patients’ policies and, separately, that United represented that it would pay for such services at the UCR. The court reasoned that United’s alleged representations were independent of any statements that United allegedly made with respect to the insurance policies of Summit Estate’s patients. Accordingly, the court held, at this stage, that Summit Estate’s claims are not preempted under ERISA Section 514(a).

Life Insurance & AD&D Benefit Claims

Eighth Circuit

Verschelden v. Hartford Life & Accident Ins. Co., No. 4:19-CV-00167-DGK, 2020 WL 5350294 (W.D. Mo. Sept. 4, 2020) (Judge Greg Kays). Hartford denied life insurance benefits on the assertion the policy had lapsed. The insured had been a partner at a law firm for over 30 years. He left work due to brain cancer and Hartford approved his life insurance waiver of premium (“LWOP”) claim under an “any occupation” definition of disability. After medical records indicated improvement, Hartford terminated the LWOP claim asserting part-time work capacity. Both the LWOP provision and the policy were silent as to whether “any occupation” included part-time work. The court recognized this created an ambiguity as to whether part-time or full-time work capacity was required. Applying an abuse of discretion standard of review, it decided the issue in Hartford’s favor on two grounds. First, because Hartford had discretion to interpret the term, and its interpretation was part-time capacity was sufficient. Second, because “the use of ‘any occupation’ suggests a broad interpretation.” Thus, interpreting the phrase to utterly preclude part-time occupations would be contrary to the use of “any” in the definition. The court made one other finding of note: it took no issue with Hartford totally ignoring medical records from after the termination date (which showed a relapse of the cancer followed by the insured’s death) because “medical records after the termination date are irrelevant given that no benefits were payable for any new or worsening conditions because [claimant] was not continuously disabled.” The court upheld Hartford’s denial of benefits because no premiums were paid after the termination of LWOP benefits and the insured did not convert.

Medical Benefit Claims

First Circuit

Doe v. Harvard Pilgrim Health Care, Inc., No. 19-1879, __F.3d__, 2020 WL 5405367 (1st Cir. Sept. 9, 2020) (Before Torruella, Selya, and Kayatta, Circuit Judges). See Notable Decision summary above.

Ninth Circuit

Community Hospital of The Monterey Peninsula, v. Aetna Life Insurance Company, No. 19-CV-00328-BLF, 2020 WL 5500367 (N.D. Cal. Sept. 11, 2020) (Judge Beth Labson Freeman). Plaintiff is a hospital that previously entered into a settlement agreement with defendant Aetna. Per the terms of the settlement agreement, claims with dates of service between September 25, 2015 and February 1, 2016 would be processed according to the terms of the Hospital Services Agreement between the parties, which went into effect February 1, 2016. Patient P.R. was treated in December 2015. She was about to be discharged on January 7, 2016, but the discharge was put on hold due to her medical condition. At the same time, the home health agency refused to treat her at home because “her home environment was unsafe for her condition,” as she “live[d] in a shack behind a home that [wa]s not insulated and d[id] not have heat.” P.R. was an end-stage COPD patient with oxygen and steroid dependency and had poor social support in the outpatient setting. Plaintiff continued to search for an appropriate placement for her so she could be discharged. On January 14, 2016, Plaintiff identified six skilled nursing facilities under contract with Aetna. Three of the six did inform Plaintiff on January 15, 2020 that they either did not have beds or otherwise declined. One of the three remaining facilities was found to be out of network with Aetna, and a call was placed to Aetna to inquire. On January 19, 2016, Aetna refused to pay for any services provided to P.R. after January 14, 2016, opining that the services could have been completed at a less intense level of care or setting. Plaintiff discharged P.R. to a skilled nursing facility on January 23, 2016 after finding an appropriate placement for her. Aetna continued to deny coverage for her care between January 15-23, 2016.  The court held that, under the language of the plan, Aetna did not abuse its discretion in denying coverage for the January 15-23, 2016 care, where the plan required that Aetna cover only those services found to be “medically necessary” and P.R.’s home condition was not a medical issue, and did not create an “emergency condition” under the plan.

Tenth Circuit

Theo M. v. Beacon Health Options, Case No. 2:19-cv-364-JNP, 2020 WL 5500529, (D. Utah Sept. 11, 2020) (Judge Jill N. Parish). In this dispute over the payment of residential treatment for a minor due to alleged lack of medical necessity, the court considered a partial motion to dismiss Plaintiffs’ Parity Act Claim for failure to state a claim and Plaintiff, Christa R., for lack of standing. The court explained that there is no clear law in the Tenth Circuit on what is required to state a claim under the Parity Act. The court identified the prevailing pleading standard for Parity Act claims but did not apply this standard because the parties did not argue that it should apply. Instead, the parties asserted that Plaintiffs must allege “that the mental health or substance abuse services at issue meet the criteria imposed by [the] insurance plan and that the insurer imposed some additional criteria to deny coverage of the services at issue.” The court held that Plaintiffs met this pleading standard. Defendants also argued that Plaintiffs’ Parity Act claim brought under Section 502(a)(3) is duplicative of their first claim under Section 502(a)(1)(B). The court first noted that there is no absolute prohibition on bringing simultaneous claims under Sections 502(a)(1)(B) and 502(a)(3). The court also noted that Plaintiffs’ Parity Act claim under Section 502(a)(3) represents an alternative theory of liability, rather than a repackaged Section 502(a)(1)(B) claim. Plaintiffs seek enforcement of the Parity Act, a substantive provision of ERISA not included in the Plan. Also, because the Parity Act is a substantive provision of ERISA, rather than a part of the Plan, Plaintiffs are authorized to seek remedies for violations of the Parity Act through Section 502(a)(3). Finally, the court stated that it would be premature to decide that Plaintiffs’ claims are duplicative of each other at this stage. Thus, the court denied Defendants’ motion to dismiss Plaintiffs’ Parity Act Claim. The court granted Defendants’ motion to dismiss as to Christa R. on the grounds that she was not a participant, beneficiary, or fiduciary of the Plan.

Plan Status

Third Circuit

Caggiano v. Teva Pharmaceuticals, No. CV 19-3074, 2020 WL 5407855 (E.D. Pa. Sept. 9, 2020) (Judge J. Schmehl). Plaintiffs sued Teva, their former employer, to enforce the terms of the Teva’s Severance Benefit Plan (“SBP”). Teva claimed the SBP was an ERISA plan and removed the case to federal court based on federal question jurisdiction and ERISA preemption. Teva acknowledged that the SBP plan document alone would not meet the criteria for an ERISA plan, but argued that the SBP along with other documents about benefit arrangements were one ERISA plan. The court was not convinced, stating that the documents did not incorporate one another and contained numerous inconsistencies. The court determined the SBP did not meet the criteria for an ERISA plan and remanded the case back to state court.

Pleading Issues & Procedure

Second Circuit

Campanelli v. Flagstar Bancorp, Inc., No. 19 Civ. 7299 (PAE), 2020 WL 5350245 (S.D.N.Y. Sept. 4, 2020) (J. Paul A. Engelmayer). Plaintiff, the former president and CEO of defendant Flagstar’s bank subsidiary, brought this action alleging that Flagstar had failed to uphold its end of two compensation agreements, including one under a Supplemental Executive Retirement Plan. Plaintiff alleged that these failed payments violated ERISA and constituted a breach of contract and breach of the implied covenant of good faith and fair dealing. Flagstar filed a motion to dismiss, which the court granted in part and denied in part. Flagstar contended that Plaintiff had no claim for relief under ERISA because it was barred from making payments to him by government regulators. (Flagstar was a “troubled” bank and thus required governmental approval for some of its actions.) However, the court noted that regulators had never definitively told Flagstar it could not make the payments, and that Flagstar had never formally sought approval for the payments. In any event, the issue of whether the payments required regulatory approval was not one that could be decided on a motion to dismiss because it involved a “quintessential factual question.” For the same reasons, the court denied Flagstar’s motion to dismiss plaintiff’s breach of contract claim. However, the court granted Flagstar’s motion as to plaintiff’s bad faith claim, ruling that it was duplicative of his other claims.

Provider Claims

Third Circuit

Ross Cooperman, M.D., LLC ex rel. Patient LPH v. Horizon Blue Cross Blue Shield, et al., Case No. 19-cv-19225 (D.N.J. Sep. 10, 2020) (Judge William J. Martini). In 2018, Patient LPH (the “Patient”), who suffered from bilateral ductal carcinoma, underwent a bilateral mastectomy with tissue expander at St. Barnabas Medical Center in Livingston, New Jersey. Dr. Ross Cooperman performed a two-stage, post-mastectomy breast reconstruction on the Patient in July and November 2018. At the time of the surgeries, Patient was covered under an ERISA-governed health plan through the Patient’s employer Defendant Fidelis Companies LLC, a recruiting and consulting company based in Plano, Texas. Patient’s surgeries with Dr. Cooperman were covered under a BCBS Texas-insured health plan (Home Plan) and Horizon served as the Host Plan for purposes of the submission and adjudication of the surgery claims. Through the Blue Cross Blue Shield Association’s BlueCard Program, a patient enrolled in a Home Plan who resides in or travels to another state (i.e., the “Host Plan’s” state) may receive covered services from a provider who participates in the Host Plan’s network, and the Home Plan will treat those services as “in-network” services as though the patient had received them from a “Home Plan” participating provider. Here, Plaintiff’s prior authorized surgery claims were processed by BCBS Texas for an in-network rate of $5,485.66, leaving a discrepancy of over $423,000 between what Patient owed to Dr. Cooperman and what Horizon/BCBS Texas paid. Applying Third Circuit law which enforces anti-assignment provisions in ERISA-governed plans, the Court found that Patient’s BCBS Texas plan had a valid anti-assignment provision and therefore granted Defendants’ motion to dismiss Dr. Cooperman’s ERISA benefits claim on the grounds that he had no standing to pursue the under-reimbursement for the surgery claims.

Sixth Circuit

Atrium Med. Ctr. v. UnitedHealthcare Ins. Co., Case No. 19-cv-680 (S.D. Ohio Sep. 10, 2020) (Magistrate Judge Karen L. Litkovitz). Atrium is a hospital that provided emergency medical services to United’s insured, Khron Powell, between June 12, 2017 through June 18, 2017. Atrium was not an “in-network provider” or a “contracted provider” with United during this period. Upon Powell’s discharge from Atrium, a corresponding claim for $197,628.26 was billed to United. United unilaterally paid $51,371.53 of the claim and directed Atrium to seek the amounts of $4,462.85 and $1,242.32 directly from Powell. United then denied the $140,551.56 claim balance without reason or explanation despite Atrium’s repeated inquiries. After filing the original complaint in Ohio state court and United successfully removing the action to federal court, Atrium filed an amended federal complaint containing three counts, and only the first pertained to United. It did not invoke ERISA or any specific cause of action but generally alleged that United improperly denied $140,551.56 of Atrium’s claim, that United became indebted to Atrium for the unpaid services rendered to Powell, and that United had failed to pay this debt notwithstanding repeated appeals to United and requests for explanation regarding its calculations. Here, the court granted United’s motion to dismiss the amended complaint with prejudice for lack of standing finding that estoppel and waiver could not confer standing where a valid anti-assignment provision was contained in the operative plan.

Venue

Sixth Circuit

Henken v. Iron Workers Dist. Council of S. Ohio & Vicinity Pension Tr., No. 3:20-CV-235-CRS, 2020 WL 5301161 (W.D. Ky. Sept. 4, 2020) (Judge Charles R. Simpson III). Defendant filed a motion to transfer venue from the Western District of Kentucky to the Southern District of Ohio. The motion was premised on forum selection clauses contained in the plan documents. Plaintiff neither objected nor responded to the motion. Because the transfer was to a venue where the plan at issue was administered, and the forum selection clause was valid. The case was transferred.

Withdrawal Liability & Unpaid Contributions

Fourth Circuit

Bd. of Trustees, Sheet Metal Workers’ Nat’l Pension Fund v. Four-C-Aire, Inc., No. 1:16-CV-1613, 2020 WL 5468620 (E.D. Va. Sept. 10, 2020) (Judge Liam O’Grady). The court determined that “pursuant to the Fund’s governing documents, Four-C-Aire is liable for an exit contribution.” The exit contribution survives expiration of the CBA and the Fund complies with the relevant statutes.

Seventh Circuit

Central States, Southeast and Southwest Areas Pension Fund, et al., v. Dworkin, Inc., et al., No. 19 C 06716, 2020 WL 5365968 (N.D. Ill. Sept. 8, 2020) (Judge Edmond E. Chang). “[T]he Defendants’ motion to dismiss or in the alternative to stay is denied. What’s more, because the Defendants were instructed to address why judgment should not be entered if they lost the motion, and they offered nothing, judgment is entered in favor of the Pension Fund and against the Defendants in the amount of $7,722,361.20 in withdrawal liability. Post-judgment interest shall apply.”

Eighth Circuit

St. Louis Glass & Allied, Indus. Health & Welfare Ins. Fund v. St. Charles Glass & Glazing, Inc., No. 4:20-CV-00279 SEP, 2020 WL 5366298 (E.D. Mo. Sept. 8, 2020) (Judge Sarah E. Pitlyk). “[T]he Court finds that Plaintiffs have provided sufficient evidence to support their motion. Adding together all the amounts due, Defendant owes Plaintiffs a total of $604,410.64.”

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian Brehm, Sarah DemersElizabeth GreenAndrew Kantor, Anna Martin, Michelle RobertsTim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.

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