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Your ERISA Watch – In Long Term Disability Matter Subject to De Novo Review, Court Orders Production of Reviewing Physician’s Compensation

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This week’s notable decision is a discovery opinion in a long term disability matter, Weinberg v. Unum Life Insurance Company of America, No. 17CIV8976RAHBP, 2018 WL 5801056 (S.D.N.Y. Nov. 6, 2018).  What’s notable about this decision is that the district court will review Unum’s claim denial de novo, yet the Magistrate Judge presiding over the parties’ discovery dispute found a basis to grant Weinberg’s request for information concerning the physicians employed by Unum to review her medical records (“Reviewing Physicians”).

The court found several of the discovery disputes moot based on Unum’s counsel’s statements at oral argument.  Specifically, Unum’s counsel represented that the Reviewing Physicians do not receive any type of bonus, they are not given instructions concerning how to evaluate a claimant’s medical records, and they are not given commendations by Unum. Because of these representations, the court found that there is nothing to produce regarding these areas.  The court did order Unum to produce to Weinberg’s counsel a statement of each Reviewing Physician’s income from Unum for the year in which each reviewed Weinberg’s medical records and the preceding year, and their curriculum vitae.

The court explained that, “[d]iscovery that will assist the Judge in making this determination will be helpful. The District Judge’s task is similar to the function a jury performs in any trial in which a party’s physical condition is in issue and medical evidence is offered. To aid jurors in this task, Rule 26(a)(2)(B) requires that certain disclosures concerning medical (and other) experts be made, including a statement of his or her qualifications and the compensation he or she is receiving. Although there is no litmus test for assessing a physician’s opinion, his or her experience, specialties and board certifications are all relevant to the assessment. Similarly, in the unlikely event that Unum pays the Reviewing Physicians exorbitant salaries, that fact would also be relevant to an assessment of their opinions.”

Not all courts that have considered whether this type of discovery is appropriate in a de novo review case have come to the same conclusion.  See e.g., Nguyen v. Sun Life Assurance Co. of Canada, No. 314CV05295JSTLB, 2015 WL 6459689 (N.D. Cal. Oct. 27, 2015)But, if you’re looking for other cases finding at least some discovery appropriate in the de novo review context, check out the following:

  • Rustad-Link v. Providence Health & Servs., 306 F. Supp. 3d 1224 (D. Mont. 2018), judgment entered, No. CV 16-136-M-DWM, 2018 WL 1336146 (D. Mont. Mar. 15, 2018)
  • Harding v. Hartford Life & Accident Ins. Co., 2017 WL 1316264 (N.D. Ill. Apr. 10, 2017)
  • Liyan He v. Cigna Life Ins. Co. of New York, 304 F.R.D. 186 (S.D.N.Y 2015)
  • Moran v. Life Ins. Co. of N. Am. Misericordia Univ., 2014 WL 4251604 (M.D. Pa. Aug. 27, 2014)
  • Healy v. Fortis Benefits Ins. Co., 2014 WL 5768537 (N.D. Cal. Nov. 5, 2014)
  • Gonda v. Permanente Med. Grp., Inc., 300 F.R.D. 609 (N.D. Cal. 2014)
  • Waggener v. UNUM Life Ins. Co. of Am., 238 F. Supp. 2d 1179 (S.D. Cal. 2002)

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

Attorneys’ Fees

Ninth Circuit

Estate of David Maurice, Jr. et al. v. Life Insurance Company of North America et al., No. 516CV02610CASSPX, 2018 WL 5793284 (C.D. Cal. Nov. 2, 2018) (Judge Christina A. Snyder).  Following a decision in favor of Plaintiff on claims for denied accidental death and dismemberment benefits, the court granted Plaintiff’s motion for attorneys’ fees and awarded a total amount of $227,635, and costs in the amount of $3,865.66.  The “reasonable rates” applied for the two experienced lead attorneys was $650/hour for work through April 2018 and $700/hour for work done after that time.   The court applied the hourly rate of $400 for an attorney who has been in private practice since 2005.

Breach of Fiduciary Duty

Eighth Circuit

Vigeant v. Meek, et al., No. 18-CV-577 (JNE/TNL), 2018 WL 5839792 (D. Minn. Nov. 7, 2018) (Judge Joan N. Ericksen).  In this putative class action alleging hundreds of millions of dollars lost due to breaches of fiduciary duties by Defendants who were directly responsible for managing the ESOP, the court granted Defendants’ motion to dismiss.  Applying the heightened pleading standard in Rule 9(b) to Plaintiffs’ claims of fraudulent data manipulation, the court found that Plaintiffs fail to plead with particularity that the Trustees fraudulently inflated Lifetouch’s stock value.  The court also found that Plaintiffs fail to state a claim that Defendants overvalued Lifetouch stock in 2015 and 2016 and fail to state an imprudent investment claim.

Tenth Circuit

Gernandt, et al. v. Sandridge Energy, Inc., et al., No. CIV-15-1001-D, 2018 WL 5851519 (W.D. Okla. Nov. 8, 2018) (Judge Timothy D. Degiusti).  The court granted Reliance’s renewed motion to dismiss because the amended complaint fails to state a claim for breach of fiduciary duties or co-fiduciary liability, and there is no right to a jury trial in ERISA cases.

Gernandt, et al. v. Sandridge Energy, Inc., et al., No. CIV-15-1001-D, 2018 WL 5848986 (W.D. Okla. Nov. 8, 2018) (Judge Timothy D. Degiusti).  The court granted Defendants’ motion to dismiss the amended complaint on the grounds that Plaintiffs fail to state a duty of prudence claim, a duty of loyalty claim, or a duty to monitor claim.

Class Actions

Sixth Circuit

In re Regions Morgan Keegan Securities, Derivative & ERISA Litigation, No. 09-2009, 2018 WL 5777503 (W.D. Tenn. Nov. 2, 2018) (Judge Samuel H. Mays, Jr.)  The court determined that Claimants’ opt-out notices were sufficient to exclude them from the Class. “Because they opted out, Claimants are not subject to the Court’s Final Approval Order prohibiting Class Members from pursuing Released Claims against Morgan Keegan in other forums.”  The court denied Morgan Keegan’s motion and emergency motion.

Ninth Circuit

Cleary v. Retirement Plan for Employees of Northern Montana Hospital, et al., No. CV-16-61-GF-BMM-JCL, 2018 WL 5826866 (D. Mont. Nov. 7, 2018) (Judge Brian Morris).  The court granted final approval of the class action settlement.

Disability Benefit Claims

D.C. Circuit

Loucka v. Lincoln Nat’l Life Ins. Co., No. 1:17-CV-01375 (TNM), 2018 WL 5840662 (D.D.C. Nov. 8, 2018) (Judge Trevor N. McFadden).  The court took judicial notice of the CDC’s Lyme-testing criteria and procedures.  The court also considered a declaration from Thomas Vargo, Lincoln’s Director of Appeals, about Lincoln’s procedures for reducing conflicts of interest and promoting accuracy during the claim review process.  In light of the CDC’s current guidance on Lyme disease and the discretion granted to Lincoln, the court determined Lincoln did not abuse its discretion in finding that Plaintiff suffers from Chronic Fatigue Syndrome (“CFS”), not Lyme disease.  CFS is limited to 24 months of payments under the Policy, which it already paid Plaintiff.  The court granted Lincoln’s motion for summary judgment.


Second Circuit

Tyll v. Stanley Black & Decker Life Insurance Program, No. 3:17-CV-1591 (VAB), 2018 WL 5847240 (D. Conn. Nov. 8, 2018) (Judge Victor A. Bolden).  In this dispute over life insurance benefits, the court denied Plaintiff’s motion seeking to compel Aetna to “(1) perform ESI searches for documents using the search terms “Tyll”, “basic annual earnings”, and “800178”, and (2) produce a Rule 30(b)(6) witness to testify for up to three hours on (i) the policies and procedures for gathering and assembling the administrative record for ERISA welfare-benefits litigation, and (ii) the manner in which AETNA implemented the policies and procedure to produce the proposed administrative record.”

Weinberg v. Unum Life Insurance Company of America, No. 17CIV8976RAHBP, 2018 WL 5801056 (S.D.N.Y. Nov. 6, 2018) (Magistrate Judge Henry Pitman).  See Notable Decision summary above.

Ninth Circuit

Zelhofer v. Metropolitan Life Insurance Company, et al., No. 216CV0773TLNACPS, 2018 WL 5809248 (E.D. Cal. Nov. 6, 2018) (Magistrate Judge Allison Claire).  In this long term disability case subject to de novo review, the court denied Plaintiff’s motion for leave to conduct discovery to obtain audio recordings of phone conversations between Plaintiff and a MetLife agent to supplement and verify the accuracy of the administrative record.  “It is unclear how the discovery plaintiff is requesting is necessary in interpreting the terms of the plan or how the administrative record itself is inadequate to conduct a proper de novo review of the case. On the contrary, the audio recordings plaintiff is [primarily] seeking to include are in plaintiff’s possession, and as plaintiff has stated, are documented in the administrative record. Accordingly, the court will deny plaintiff’s motion.”

Meguerditchian v. Federal Express Corporation Long Term Disability Plan, et al., No. 218CV00913ODWJC, 2018 WL 5794477 (C.D. Cal. Nov. 5, 2018) (Judge Otis D. Wright, II).  Plaintiff alleges that there is a structural conflict of interest between Fedex, Aetna, and the physicians they use such that the conflict influenced Aetna’s decision-making.  Plaintiff filed a motion seeking leave of court to conduct discovery regarding the financial relationships between Defendants and the physicians they use to review disability claims.  Without deciding whether there is a structural conflict of interest, “[t]he Court only finds that pursuant to Abatie, discovery in ERISA cases may be warranted in certain circumstances and that Plaintiff may pursue discovery related to a structural conflict of interest.”  The court granted Plaintiff’s motion.

ERISA Preemption

Third Circuit

Atlantic Shore Surgical Associates v. Administrators Public Service Electric and Gas Company, No. CV1805714MASDEA, 2018 WL 5832151 (D.N.J. Nov. 7, 2018) (Judge Michael A. Shipp).  Plaintiff’s complaint alleging breach of contract, promissory estoppel, (account stated, and fraudulent inducement, arising from Defendants’ failure to pay the “usual, customary or reasonable” amount for the pre-authorized laparoscopic surgery Plaintiff performed on Defendants’ insured is not preempted by ERISA.  Plaintiff is not a participant or beneficiary under ERISA and could not bring the claim under ERISA.  Motion for remand granted.

Ninth Circuit

Estate of Kirk Anthony Foster v. American Marine SVS Group Benefit Plan, No. CV 17-165-M-DLC, 2018 WL 5810506 (D. Mont. Nov. 6, 2018) (Judge Dana L. Christensen).  The court considered whether Hawaii law that provides that where an individual is entitled to a conversion right under a group plan and does not receive notice of his or her conversion right within fifteen days of the policy’s expiration, an insurer must provide “an additional period within which to exercise the right,” is preempted by ERISA.  Hawaii Rev. Stat. Ann. § 431:10D-214.  The court determined that this statute is specifically directed toward entities engaged in insurance.  It also significantly affects the risk pooling relationship because notice is essential to an individual’s ability to exercise their rights.  For these reasons, the right-to-notice statute applies and is not preempted by ERISA.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Clemens v. Music, No. 2:18-CV-639, 2018 WL 5808777 (S.D. Ohio Nov. 6, 2018) (Judge George C. Smith).  Where ERISA plan life insurance benefits have already been paid to the Estate of the decedent, and the probate court had already begun the process, the dispute between the beneficiaries must be dismissed for lack of subject matter jurisdiction.  “Any order by this Court would interfere with the custody of those insurance proceeds and potentially conflict with a ruling by the probate court in the related action. Therefore, the probate exception is applicable to the facts of this case. The Franklin County Probate Court should be the ultimate decisionmaker regarding the distribution of the life insurance proceeds.”  There is no ERISA claim because the funds are no longer in the custody of the plan administrator.

Ninth Circuit

Estate of Kirk Anthony Foster v. American Marine SVS Group Benefit Plan, No. CV 17-165-M-DLC, 2018 WL 5810506 (D. Mont. Nov. 6, 2018) (Judge Dana L. Christensen).  The participant became disabled by cancer, received long term disability benefits, and then died four months later.  Premiums for his life insurance coverage were no longer paid by the employer prior to the participant’s death.  The court dismissed the claim for benefits because, “[a]ccording to the terms of the policy, at the time of Mr. Foster’s death he was not entitled to a premium waiver, was no longer within his ‘disability elimination period,’ and no longer held a valid insurance policy, regardless of whether United recognized him as a plan participant elsewhere in its record keeping.”  There is also no failure to provide a plan benefit in the form of a grace period because the 31-day grace period only applied to American Marine, not to the participant.  With respect to the conversion privilege, the court found that Plaintiffs have stated a claim for relief because his 31-day conversion window started ticking on June 1st and he died on June 24th.  He was within his window to convert and United failed to provide him this benefit.  Finally, “Plaintiffs have adequately alleged a breach of fiduciary duty in American Marine’s unilateral decision to stop making payments pursuant to the terms contained in the ‘disability elimination period’ in order for Mr. Foster to obtain the benefit of the premium waiver.”

Medical Benefit Claims

Sixth Circuit

Zack v. McLaren Health Advantage, Inc., No. 17-11253, 2018 WL 5801225 (E.D. Mich. Nov. 6, 2018) (Judge Terrence G. Berg).  In this dispute challenging the calculation of the reasonable and customary reimbursement amount for services rendered to Plaintiffs by an out-of-network provider, the court granted Plaintiffs’ motion for judgment.  The court found that Defendant did not substantially comply with ERISA’s notice and document production requirements because it did not disclose its method of calculating that reasonable and customary amount, including any fee schedule used, if one exists. See 29 C.F.R. § 2560.503-1(g)(1)(v)(A) and (j)(1)(5)(i).  The court also determined that “where the Plan failed to provide a definition of Reasonable and Customary and where no explanation of the meaning of this term was provided during the benefit or appeal process, the Court finds that the Plan’s denial of benefits based on its undisclosed interpretation of this term was arbitrary and capricious.”  The court remanded the case to the administrator for a full and fair review.  On the statutory penalties claim, the court found that “Plaintiffs never requested a copy of the negotiated fee schedule in the administrative record before the Court. Consequently, Plaintiffs are not entitled to statutory penalties.”

Ninth Circuit

Howard v. Blue Cross Blue Shield of Arizona, No. CV-16-03769-PHX-JJT, 2018 WL 5776420 (D. Ariz. Nov. 2, 2018) (Judge John J. Tuchi).  In this dispute over the denial of cancer treatment, the court denied Plaintiff’s motion to admit evidence outside of the administrative record because it found “no discernible conflict of interest which would allow the court ‘in its discretion, [to] consider evidence outside the administrative record to decide the nature, extent, and effect on the decision-making process of any conflict of interest.’”  Defendant does not fund the plan and had no financial incentive to deny the claim.  Even if there was a conflict of interest, the court found that the plans of other health insurers would not bear on that conflict of interest.

Brian H. v. Blue Shield of California, et al., No. 17-CV-03095-MMC, 2018 WL 5778318 (N.D. Cal. Nov. 1, 2018) (Judge Maxine M. Chesney).  The court denied Plaintiff’s motion seeking de novo rather than abuse of discretion review.  The court determined that:  (1) the Blue Shield PPO Health Plan contains language sufficient to grant Blue Shield discretionary authority to determine eligibility for and entitlement to benefits thereunder; (2) § 10110.6 of the California Insurance Code is not applicable as the Plan provides health insurance; (3) though Blue Shield’s Mental Health Administrator, to which discretionary authority arguably has not been granted, made the initial decision, the final decision was made by Blue Shield, to which discretionary authority has been granted; (4) Blue Shield’s decision does not constitute a “gross deviation from the Plan terms”; and (5) the conflict here does not warrant heightened skepticism.

Provider Claims

Ninth Circuit

Beverly Oaks Physicians Surgical Center, LLC v. Blue Cross Blue Shield of Illinois, No. CV 18-3866-RSWL-JPR, 2018 WL 5883907 (C.D. Cal. Nov. 8, 2018) (Judge Ronald S.W. Lew).  “In sum, Defendant has shown that 13 of the 14 patients’ plans contain anti-assignment provisions. Because Plaintiff fails to adequately allege waiver and estoppel, Plaintiff lacks standing to bring an ERISA claim for those 13 patients. As to the remaining patient, Plaintiff fails to allege this patient’s plan or any facts relating to its terms. This is insufficient to state claim for recovery of benefits under ERISA.”

Retaliation Claims

Sixth Circuit

Stearman v. Ferro Coals, Inc., et al., No. 17-6502, __F.App’x__, 2018 WL 5778320 (6th Cir. Nov. 2, 2018) (BEFORE: SILER, MOORE, and ROGERS, Circuit Judges).  The court agreed with the district court that Plaintiff produced no evidence that the company terminated him because it expected him to have substantial medical expenses.  Thus, his ERISA interference claim fails.

Statutory Penalties

Sixth Circuit

Morehouse v. Steak N Shake, Inc., No. 2:16-CV-789, 2018 WL 5811001 (S.D. Ohio Nov. 6, 2018) (Judge Edmund A. Sargus, Jr.).  The court determined that Plaintiff experienced a “loss in coverage” triggering Defendant’s COBRA notification obligations where Plaintiff experienced a reduction in hours that corresponded with a change in her premium contribution method (she received workers’ compensation checks and insurance payments were deducted from those payments).  If an employee’s reduction in hours was due to FMLA leave, no COBRA qualifying event occurred. 26 C.F.R. § 54.4980B-4(e).  The court determined that Plaintiff’s reduction in hours was not “due to leave that was FMLA leave” pursuant to 26 C.F.R. § 54.4980B-4(e) and that her reduction in hours constituted a COBRA qualifying event, making C.F.R. § 54.4980B-4 the applicable regulation.  The court also held that Defendant did not breach its fiduciary duty by failing to inform the Plaintiff of her premium payment obligations. Plaintiffs are entitled to their medical costs minus the COBRA premiums they would have paid. The court determined that Defendant acted in bad faith by failing to provide Plaintiff with a COBRA notification and imposed statutory damages at a rate of $50 per day from August 2, 2013 (45 days after the qualifying event) to the date on which Plaintiffs acquired new insurance coverage in January 2014.  Plaintiffs are also entitled to attorney’s fees.


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