Court Decisions
Introduction
A surprising number of LTD-related court cases have been reported in the past four years. This section reviews this hemorrhaging litigation in capsule format and classifies such by topic; this format will give the reader an idea, with case references, of the scope of the many disputes reviewed by the courts. The purpose of this exercise is not to delve into the law or the logic of the judges but only to help the reader comprehend what the opinions tell us about how LTD should be sold and administered. That is, this exercise is a compilation of decisions and not any rigorous analysis thereof. The cases are fairly complete within the chosen time period which was from 1999 to date.
The cases are offered by topic, subtopic and date reported. The topics are as follows:
Administrative and Procedural Issues
Benefit Recovery-Coverage Rescission
Compensation-Earnings Definition
Conflicted Interest
Consulting Physician
Defendant or Venue Issues
Definition of Disability
Discretionary Authority Language
Extra-Contractual Awards
Mental Disorders
Offsets to Benefits
Plan Eligibility Issue
Preemption
Preexisting Conditions
SPD-Related Issues
Surveillance-Related
Treating Physician Issue
Winners and Losers
Administration
and Procedural Errors
Numerous lawsuits have resulted from the alleged failure to abide by ERISA-required claims filing and procedural issues:
Such failure to exhaust the remedies was sufficient reason for the insurer to deny the claim.
Guerrero v. Lumberman’s Mutual Casualty Co.,
174 F.Supp.2d 1218 (D.C. Kans. 2001).
Failing to properly and timely apply for plan benefits is the same as failing to exhaust administrative remedies. Participant sought state law relief which was denied because of ERISA preemption.
Ayola v. Johnson & Johnson, Inc.,
208 F.Supp.2d 195 (D.P.R. 2002).
Where the participant brought litigation instead of following the plan’s claims procedures, the court held that the insurer’s denial was proper.
Chupina v. Hartford Life and Accident Ins. Co.,
28 EBC 2822 (E.D.La. 2002).
The plan administrator wanted the participant’s legal complaint summarily dismissed because the plan’s administrative remedies were not met. The court said that they were met when participant requested a claim form and plan administrator refused to send one.
Young v. UNUM Provident Corp., 29
EBC
1669 (D. Minn. 2002).
The Appeals Court was not pleased that the health care plan administrator failed to render a up/down decision. This left the court with nothing to review so the matter had to be returned to the plan administrator for a decision. Where there is any reason to question the plan administrator’s procedures, the court will renew de novo.
Seman v. FMC Corp. Retirement Plan,
___F.3d___ (8th Cir. 2003).
In a denied LTD benefit dispute, the insurer argued that the participant had to seek an administrative remedy before seeking legal relief. Court said the insurer failed to meet its own self-imposed deadline in its processing and therefore the claim should be deemed denied.
Sidou v. UNUM Provident Corp., 30 EBC
1919 (D. Maine 2003).
ERISA requires that the denial letter must state the reasons for the denial but does not require an explanation of the logic used to arrive at such reasons.
Adkins v. Holland, 216 F.Supp.2d 576
(S.D.W.Va. 2002).
Sixty-Day Filing Period
Faulty Denial Letter
While the participant failed to meet the 60-day response requirement, it was excused because insurer’s denial letter failed to state the reasons for the denial in order that the claim might have been perfected.
White v. Aetna Life Ins. Co., 210 F.3d 412
(D.C. Cir. 2000).
Failure to Exhaust Administrative Remedies
Participant failed to respond within 60-days of insurer’s denial claiming such response would have been futile. Instead, participant filed a lawsuit. The participant alleged action of insurer in not giving a denial letter within 90 days justified his non-response to the denial when it did arrive. The court held for the insurer.
Ravencraft v. UNUM Life Ins. Co.,
212 F.3d 341 (6th Cir. 2000).
Not Following Administrative Review Procedures
When participant sued, and did not appeal during the 60-day period, the insurer was correct in later denying such participant the right to appeal the denial.
Palmer v. Prudential Ins. Co. of
America,
215 F.3d 1320 (4th Cir. 2000).
Exhaustion of Administrative Remedies
Two claims processing errors occurred:
· Participant did not appeal within the 60-day time frame.
· Plan supervisor misprocessed the claims.
The court resolved the issue by holding that participant’s administrative glitch could be excused because it did not have all the facts.
Combe v. La Madelaine, Inc.,
29 EBC 2325 (E.D.La 2002).
When the 60-day appeals time arrived, participant saw her lawyer in lieu of making an appeal. Months later, the lawyer filed the appeal. The plan rejected the appeal as untimely. The court held for the plan because the SPD was poorly drafted and used the verb may and not must in the appeals clause.
Watts v. Bellsouth Telecoms, Inc., ___F.3d___
(11th Cir. 2003).
When Provident denied Moses’ ongoing LTD claim, it put Moses on notice that it had 60-days to appeal. Attorney for Moses dropped the ball and failed to timely appeal. When Provident refused to recognize the late appeal by Moses’ attorney, Moses’ sued. The court held that Provident was not liable; also, that Moses had the responsibility to appeal, not his attorney. If there were to be a dispute, it would be between Moses and his attorney. The court used the substantial evidence test and held on a summary judgement for Provident.
Moses v. Provident Life and Accident Ins. Co. 30 EBC 1409
(M.D.N.C. 2003).
Request for Additional Information
Participant and Failure to Meet Administrative Rules
Plaintiffs’s case came apart because (a) state law actions are not permitted with ERISA plans and (b) participant neglected to respond to plan administrator’s request for information.
UNUM Life Ins. Co. v. Schaffer, 29 EBC 1927
(D.N.H. 2002).
Perfecting the Claim
Perfecting the claim does not mean that the plan administrator has to obtain additional medical information to support the participant’s claim for benefits.
Wallace v. Reliance Standard Life Ins. Co.,
213 F.3d 723 (7th Cir. 2003).
Broad Definition of “Other Instruments of Plan”
In an ERISA claim dispute, aggrieved
participant wanted to see the (a) claim file and (b) reference manuals and (c)
guidelines of claims administrator. The
participant wanted to find fault with the decision by combing these records and
claimed authority to do so under the ERISA-provided right to see plan document
and other instruments. The court
held for the claims administrator holding that other instruments meant
“formal legal documents used to underpin the plan”. Thus, the requested items failed to be other instruments.
Glista v. UNUM Life Ins. Co. of America,
31 EBC 2049 (D. Mass. 2003)
Harassing Request by Insurer
The denial letter requested that “a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary”. The court held that this was too broad and therefore violated the ERISA claims denial rules.
Cheng v. UNUM Life Ins. Co.,
____F.Supp.2d____ (N.D. Ill 2003).
Claims Rules/Practices Had to Be Disclosed
Court agreed that the insurer should disclose its rules and practices followed in determining mental-related disability.
Cannon v. UNUM Life Ins. Co. of America,
F.Supp.2d (D. Me. 2004).
Meaning of Relevant Documents in Claim Denial
Claim denial tailed to tell participant that he had the right to “review pertinent documents” as part of the ERISA “full and fair review” procedure. The court held this to be an abuse of discretion by the plan administrator. Note: the infraction occurred when the ERISA claim regulations did not require that the plan participant specifically request such pertinent documents.”
Soron v. Liberty Life Assurance Co. of Boston,
F.Supp.2d (M.D. N.Y. 2004).
Request for Claim Information Must be Specific and
Not Blanket
A blanket request for information does meet the standards of ERISA as regards the perfecting of the claim. There must be a degree of specificity with the request for additional information.
Cheng v. UNUM Life Ins. Co. of America,
31 EBC 2239 (N.D. Ill. 2004).
Timely Filing of a Lawsuit
LTD and ADA
The LTD plan capped mental conditions at two years. The court held that this did not conflict with the ADA. The reason was that there is no subterfuge to evade ADA purposes.
EEOC v. Aramack Corp., 208 F.3d 266
(D.C. Cir. 2000).
Time Filing Period and Administrative Remedies
The court held that a participant may not have the time filing period truncated because of the requirement to meet the plan administrative remedy requirements.
Wolfe v. 3M Disability Plan, 26 EBC
2493 (D.Minn. 2001).
Three-Years Time Limitation
The insurer wanted the three-year time limitation to apply to the participant’s lawsuit. The participant said it was unreasonably short and the state’s contractual time limit of six years should apply. The court held for the plan administrator.
Alcorn v. Raytheon Co.,
175 F.Supp.2d 117 (D. Mass. 2001).
Legal Action Provision – Tolling Rule
The plan had a three-year legal actions provision measured from the date proof of claim was requested. UNUM denied the ongoing LTD benefits because the participant failed to meet the definition of continued disability. UNUM notified Mogck of its decision after considerable correspondence, etc., on September 29, 1995. Mogck’s legal action was begun February 2, 1999 beyond the three-year period by several months. The court held for Mogck because (a) the tolling was to be from the date proof was requested and UNUM failed to request proof of claim and (b) the California legal action period of four years should be followed (which law is applicable to written contracts). That (a) proof of loss refers to the establishment of a claim and not the termination thereof and (b) ERISA preempts the California contractual legal action statute were both ignored by the Court. That is, the Court found contractual ambiguities and accordingly held for the participant. Decision is silent on the standard of review but clearly it gave UNUM the least possible deference. UNUM’s plan was ambiguous which gave the court the opportunity to hold for Mogck.
Mogck v. UNUM Life Ins. Co. of America,
292 F.3d 1025 (9th Cir. 2002)
Time Rules Waived if Insurer is Dilatory
If the insurer is dilatory in adjudicating the claim, the participant is free to file a lawsuit without violating the administrative review rules.
Nichols v. Prudential Ins Co. of America,
306 F.Supp.2d 418 (S.D.N.Y. 2004).
Overruling of Plan’s Time
Limit Not Permitted
Participant attempted unsuccessfully to have the state's commercial law rule of ten years for filing legal action replace the insurance contract's three year rule.
Furleigh v. Allied Group Inc,
281 F.Supp.2d 952 (N.D. Ia. 2004).
Late Filing and Proper Claim Denial
LTD claim was properly denied because of late filing where delay was three years and not the 180 days required by the plan.
Hungelmann v. Metropolitan Life Ins. Co.,
F.Supp (D. Minn. 2004).
Clear Denial of Claim Not Timely Filed
Filing a claim six
years after occurrence resulted in a denial which the court upheld. Kilpatrick v. Intertrade Holdings, Inc.
31 EBC 1984 (E.D. Tenn. 2004)
Faulty Claims Submission
LTD Time Filing Period
Participant claimed that she filed for an LTD claim in 1992 and never received any response. She filed again in 1995 and was denied. She filed a law suit in 1998. The court held the plan’s time filing period precluded any consideration and held against her.
Clark v. NBD Bank N.A., 248 F.3d
1147 (6th Cir. 2001).
Tolling of Time Limitations
Participant, facing a termination of a long ongoing LTD benefits (eight years in length), argued that the plan precluded such termination because of the two-year limitation period. The court refused to honor this absurd argument.
Skipper v. Claims Service International,
213 F.Supp.2d 4 (D.Mass. 2002).
Claim Denial
Mere denial of a claim by an ERISA plan is no grounds for a breach of fiduciary duties lawsuit by an aggrieved plan beneficiary.
Post v. Hartford Life and Accident Ins. Co., 29 EBC 29
EBC 2931 (E.D.Pa. 2002).
Tolling of Time Limit to Contest
When her two-year mental illness limit ran out, the insurer notified the participant of benefit cessation. The insurer wrote the participant of her rights to appeal but did not describe her proof of claim rights as regards litigation. Insurer believed the three-year tolling period for proof of loss began with this letter; the participant believed otherwise. The court held for the plan administrator.
McLaughlin v. UNUM Life Ins. Co. of America,
224 F.Supp.2d 283 (D.Me. 2003)
Preemption
Participant, after recovering LTD benefits, as an ERISA matter, proceeded in legal action against the employer as a non-ERISA matter. The court held for the employer.
Skrevedt v. E.I. DuPont de
Nemours and Co.,
29 EBC 2427 (D.Del. 2003)
Miscellaneous
Date of Injury
The date of injury causing an ongoing disability is of no moment when filing an LTD claim.
McCarthy v. American International Group. Inc.,
283 F.3d 121 (2d. Cir. 2002).
Privacy Violation (Non-ERISA)
In the course of an LTD claim, the plan administrator wrongfully disseminated private medical information. For this infraction of state law, the employer was sued and suffered losses.
Darcangelo v. Verizon Communications, Inc.,
292 F.3d 181 (4th Cir. 2002).
Proper Form of Claim Denial
Insurer made an LTD denial based upon the
following:
·
Participant's medical
records
·
Reports of
physician-consultants
· Detail finding of insurer.
On appeal, by de novo standard of review, the participant wanted additional evidence introduced. The court denied the request stating that the original denial was fairly made based upon sufficient information.
Wheatley v. American United Life Ins. Co.
31 EBC 1263 (Ind. Ct. App. 2003).
Court
discerned certain claims processing errors by the LTD insurer:
·
Failure of insurer to
respond timely to the claim request (ERISA 90-180 Day
rule).
·
Failure to give
written notice of the reason for the claim denial.
As
a result, court made insurer reconsider its denial.
Wertheim
v. Hartford Life Ins. Co.,
31
EBC 1491 (E.D. Va. 2003).
Court held for the participant because insurer failed to follow the claims filing requirement; that is, poor insurer claims procedural practices were held against it.
Schmir v. Prudential Ins. Co. of
America,
31 EBC 2915 (D. Me. 2004).
Court
denied the claim benefits because the plan's claims appeals procedures were not
followed.
Byars v. Coca Cola Co. F.Supp.2d (N.D. Ga 2004).
Benefit Recovery – Coverage Rescission
Recovery of past LTD payments, made in error, is a troublesome one and has been dealt with by the courts from time to time. The position of the courts has been mixed. Similar logic would apply to coverage rescission.
Recoupment of Past Overpayments
Insurer overpaid participant for a five year period. Upon discovering its error, it sought recoupment. Court held against the insurer for these reasons:
· It took insurer too long to discover its error.
· Such recoupment is not a remedy under ERISA
· The relative culpability of the parties favored the participant.
· Societal considerations were taken into account by the court.
Dandervand v. UNUM Life Ins. Co., of America,
150 F.Supp.2d 178 (D.Me. 2001).
Recovery of LTD Benefits by Insurer
Because the participant falsely completed his LTD benefit application, the court said that (a) policy could be rescinded and (b) mispaid benefits recovered by the insurer. The court believed that (a) unjustment enrichment was repayment to ERISA and (b) any actions to safeguard plan assets would be blessed by ERISA.
Provident Life and Accident v. Cohen,
28 EBC 1058 (D.Md. 2002).
Recovery of Mispaid LTD Benefits
Plan awoke to the fact that they had mispaid LTD benefits and sought recovery. The court held that by the Great-West v. Knudson logic such recovery was legal in nature and therefore impermissible under ERISA. Had the payments been escrowed in a special account the recovery would have been permissible because it would have been equitable in nature.
Leipzig v. AIG Life Ins. Co., 30
EBC 1873
(N.D. Ill. 2003).
Pre-Coverage Cocaine Use – LTD Claim Denial
Participant admitted to along-standing cocaine habit but was successful in proving she had not abused the substance in the past five years as the policy required. The court denied the insurer’s request for the rescission of participant’s coverage. Court did, however, deny the claim because (a) taking self-prescribed herbal medication and (b) being under the regular care of a physician were not the same.
Adzick v. UNUM Life Insurance Co. of America,
26 EBC 2914 (D.Minn. 2001).
Compensation – Earnings Definition
Overview
Issues involving compensation and earnings which have been examined by the courts include the following:
· Bonuses and commissions
· Rehabilitative pay
· Professional or consulting income
· Part-time earnings
· Investment-type earnings.
Employer – Insurer Record Keeping Error
When employer failed to notify the insurer of the pay increase of the participant, the participant received benefits which were too low.
The participant correctly said the employer was guilty a breach of employment contract matter.
Spann v. Chicago Physicians II, P.C.,
24 E BC 1878 (N.D. Ill. 2000).
Base Pay Include Bonuses and Commissions
Since Court found the plan language clear enough, it held that bonuses and commissions should be excluded from base wages when determining benefits.
Shlapack v. UNUM Life Ins. Co. of America,
218 F.Supp.2d 735 (D.Md. 2001).
Professional and Consulting Income
Actuary was denied ongoing LTD because of his huge consulting income. The litigation which ensued held for the insurer and the correctness of its denial.
O’Reilly v. Hartford Life & Accident Ins. Co.,
272 F.3d 955 (7th Cir. 2001)
Abuse of Part-Time Earnings Provision
A 20% reduction was applied to the participant’s pay just prior to disability. Difficulty arose when a disability was paid during years 2000-2001, e.g. The disability recurred for the time period 2003, e.g. For the second period of disability, does the 20% apply to the 2000 pay or the 2003 pay? The court said that it was based upon the 2003 pay.
Dandervand v. UNUM Life Ins. Co.
of America,
284 F.3d 331 (1st Cir. 2002).
Benefit Determination-Rehabilitative Pay
Plan’s language caused confusion in that the LTD benefits after 24 months had these possibly conflicting conditions:
1. Benefits could be terminated if participant is capable of earning 60% of his basic monthly earnings.
2. Benefits will be reduced by 50% of rehabilitative employment.
The court heard the contest between the insurer alleging option (1) are the participant alleging option (2). The court found the insurer’s denial to be offensive and held for the participant.
Lavoire v. Betz Laboratories, Inc., LTD Benefits Plan,
29 EBC 1178 (D.N.H. 2003).
Definition of Monthly Income
The court denied the participant’s claim that investment income (rental property) constituted income for the purpose of determining total disability benefits.
Gingold v. UNUM Life Ins. Co. of America,
29 EBC 2153 (N.D. Ill. 2002).
Is After-Tax Bonus Compensation or Property?
A single, large, after-tax pay check is not income
but is rather property.
Weiss
McFadden, 30 EBC 2439
(Ark. Sup. Ct. 2003).
Rental Income and LTD Benefit
Claims administrator was correct in excluding rental income
from LTD benefits even though it based its premiums on earnings including
rental income. Reason - applicant misrepresented (by overstatement) his
earnings thereby taking unfair advantage of insurer.
Gingold
v. UNUM Life Ins. Co.,
31 EBC 2070 (7th Cir. 2003).
Conflicted
Interest
Overview
When applying review standards to LTD litigations, the courts will almost without exception look for conflicted interest. If such is found, the one with such conflict(s) will be held to a higher standard of review. Such conflicts are generally found in fully insured; arrangements; less often in ASO arrangements; even less often with self-funded plans which are TPA-administered; and rarely found with plans sponsored by a trust (e.g., VEBAs or MEWAs). In reviewing conflicted-interest litigation, four plan funding arrangements will be considered:
· Fully Insured
· ASO Administered
· Employer as Claims Fiduciary
· VEBA or MEWA.
Fully Insured
Insurer’s Conflicted Interest Issue
A Doctor of Osteopathy diagnosed the ailment of Ellis to be neurological in nature due to somatic dysfunction. She had a predisposition to fibromyalgia; exercise was recommended. No evidence of a disease or neurological disorder was found. When MetLife denied the claim, Ellis sued. MetLife declared itself to be a plan fiduciary. The Court held for MetLife noting the following:
· MetLife made every effort to be fair and thorough and maintained close relationship with the physician of Ellis.
· The MetLife used a claims committee with adequate professional representation.
· MetLife had substantially complied with all ERISA claims-related regulations.
· The assertion of Ellis that MetLife had a conflicted interest was acknowledged by the court but was deemed of no consequence because of the fairness of MetLife.
The court reviewed by the abuse of discretion standard since the right to interpret was vested with the claims administrator. The possibility of the conflicted interest of MetLife was noted but not made a factor due to the exemplary fairness of MetLife.
Ellis v. Metropolitan Life Ins.
Co.,
126 F.3d 228 (4th Cir. 1997).
Insurer’s Egregious Conduct (Conflicted Interest)
Insurer, in a fully insured arrangement, failed to use proper judgement in its denial (by arbitrary and caprious standard). The court cited the insurer’s conflicted interest and therefore applied a sliding scale of deference. The insurer lost.
Woo v. Deluxe Corp., 144 F.3d 1157
(8th Cir. 1998).
Fully Insured Arrangement and Sliding Scale of
Review
Recognizing the conflicted interest of the insurer, the court applied a heightened standard of review to the claim denial. The court followed the dictum of Firestone v. Bruch which meant that the insurer lost.
Pinto v. Reliance Life Ins. Co., 214 F.3d 377
(3d Cir. 2000).
Conflicted Interest of the Insurer (Real or
Imagined)
Participant wanted his LTD denial reviewed under the simple test of reasonableness. Plan document, with clear Firestone v. Bruch language wanted the review to be arbitrary and capricious, the most favorable standard to such insurer. The participant argued that a less deferential standard was needed because of the insurer’s obvious conflicted interest. The court held for the insurer noticing the absence of any evident conflicted interest.
Pari-Fasano v. LTT Hartford Life and Accident Ins. Co.,
230 F.3d 415 (1st Cir. 2000).
Conflicted Interest
Because the insurer was both claims-adjudicator and risk-assumer, its conflicted interest was obvious to the court. As a consequence, the court applied a heightened arbitrary and capricious standard. As a consequence, the insurer’s plea for summary judgement dismissal was denied.
Cohen v. Liberty Life Ins. Co., 25 EBC 1200
(E.D.Pa. 2000).
Conflict of Interest of the Insurer (Real or
Imagined)
The court applied the arbitrary and capricious standard of review to an LTD claim denial with great deference to the insurer even through the plaintiff had alleged conflicted-interest. The logic of the court was that even through there was the potential for insurer abuse of discretion, none was evident by the facts. The denial was for chromic fatigue syndrome.
Schatz v. Mutual of Omaha Ins. Co.,
220 F.3d 944 (8th Cir. 2000).
Conflicted Interest of Insurer
The court refused to apply a heightened standard of review where the participant failed to show that the insurer’s conflicted interest was a factor in the claim denial.
Cochran v. Frams-General Life
Ins. Co.
26 EBC 1010 (6th Cir.). cert. denied.
___US___ (2001).
Standard of Review
The court refused to follow the more lenient abuse of discretion rules and instead invoked the harsher de novo standards. Reason was that the plan was ASO-administered (with stop-loss provided by the insurer). Court believed the conflict of interest was so serious as to warrant this decision. Insurer also made procedural errors.
Laser
v. Provident Life & Accident Ins. Co.,
211 F.Supp.2d 645 (D.Md. 2002)
Insurer as Plan Fiduciary in Fact
Since the insurer made all of the decisions and did all of the work needed to operate the plan, it was named the plan fiduciary even through not formally named as such in the plan documents. The sliding scale of discretion was applied because of the insurer’s conflicted interest. The court held for the participant for these reasons:
· Excessive reliance on the opinion of the reviewing consulting physician who never examined the participant.
· Denial was made on medical condition which preceded open heart surgery.
· Lack of reasonable and objective approach to claim adjudication.
Vartanian v. Metropolitan Life Ins. Co.,
27 EBC 2912 (N.D. Ill. 2002).
Conflicted-Interest of Insurer
Because insurer both administered and insured the LTD program, a disputed claim was reviewed with the least deference to the insurer. The court made a particular issue of the insurer’s conflict of interest.
Laser v. Provident Life & Accident Ins. Co.,
211 F.Supp. 645 (D. Md. 2002).
Conflicting Interest
Insurer, with a clear conflict of interest, had a bias in selecting outside medical consultants who would endorse a claim denial. The treating physician said the participant was totally disabled and there was no credible evidence to support plan administrator’s findings. Court held for the participant.
Dorland v. Fortis Benefits Ins. Co.,
317 F.3d 516 (6th Cir. 2003).
Conflicting Interest
Where it is established that plan administrator (insurer) has a conflict of interest, the participant is a liberty to act for and receive these types of documentation and information:
· Insurer’s general policies and procedures relative LTD claims
· Insurer’s policies and procedures relative participant’s claim
· Incentive and/or other types of compensation of any/all persons connected with the subject claim
· Training and education of any/all persons connected with the subject claim.
The point of such information is the pursuit of any conflict of interest.
Pulliam v. Continental Casualty
Co.,
29 EBC 2704 (D.D.C. 2003).
Conflicted Interest
The group LTD policy was issued to an attorney firm where the partners failed the ERISA employee test. The group plan was therefore not an ERISA plan. Since disability definitions used his only language, House’s condition rendered him unable to perform his occupation, which was that of a trial lawyer. The court held that House was entitled to his disability because he could not perform as a trial lawyer. Because the fully insured policy language conferred on the insurer the right to interpret and adjudicate, the de novo standard was not used. However, because of the conflicted interest of the insurer, the court gave the least deference to the position of the insurer.
House v. American United Life Ins. Co.,
30 EBC 1433 (E.D. La 2003)
Because of insurer's bad actions the court "threw the book at it" by involving the heightened standard of arbitrary and capricious. The bad actions were these:
· Lack of attention to processes
· Selective and self-serving analyses.
Also, the court noted the insurer's obvious conflicted interest.
McGuigan v. Reliance Standard Life Ins. Co.
F.Supp.2d (E.D. Pa. 2004).
ASO Administered
Standards of Review
Often the court will apply the de novo standard of review where the plan is ASO-administered and the stop-loss is also provided by the insurer. In this instance, the court applied the arbitrary and capricious standard (much less strict on the insurer) because the plan participant did not come to the court with clean hands.
Alford v. DCH Foundation Group
Long-Term Disability Plan,
311 F.3d 955 (9th Cir. 2002).
Conflicted Interest and Insurer-Owned TPA
The court noted the conflicted interest of the insurer in being both plan administrator (albeit with its subsidiary TPA) and assumer-of-the risk. As such, it reviewed the denial with the least deference to the insurer. This is called a heightened abuse of discretion standard. The parentage of the insurer could not be used to masquerade the reality of the conflict. The court found three reasons to hold for the participant:
· Opinion of treating physician was not properly considered.
· Consulting physician did not do a hands-on examination.
· No authority was shown that pain fails to be a valid reason for disability.
Davidson v. Kemper National Services, Inc.
231 F.Supp.2d 446 (W.D. Va. 2002).
Because of the
conflicted interest of the insurer being both at risk as well as being the
claims adjudicator, the court held the insurer to the highest review standard;
i.e., de novo.
Torres v. Pittston Co., 31 EBC 1759 (11th Cir. 2003).
ASO-Conflicted Interest
In a continuation of many conflicted interest decisions involving ASO arrangements; the court held for the participant in an LTD claims denial dispute.
Byrne v. Avon, ____F.3d____ (7th Cir. 2003).
ASO-Administered Glitch
Employer's LTD plan was self-funded, with an insurer as TPA; employer had the authority to administer and adjudicate claims. In its claims denial process, TPA followed the plan's rules governing timely claims tiling. Of interest in this litigation is this: The TPA may ignore the regulatory-imposed claims time rules but only at its own peril. Even if the slip up or oversight is entirely innocent, the act may give the court justification to hold the miscreant party to a higher standard of deference. A single administrative glitch may cost the employer a bit of money if the court reviews the matter.
Gilbertson v. Allied Signal, Inc.
328 F.3d 625 (10th Cir. 2003).
ASO-Administered Benefits (Conflicted Interests)
The
Court found significant anomalies in the denial by Aetna as ASO claims
administrator and that Aetna clearly ignored evidence that participant was
unable to perform the duties of his occupation.
Chmielowiec v. H.B. Fuller Co.
Long Term Disability Plan,
31 EBC 1896 (E.D. Pa. 2004).
ASO-Administered Conflict – Severance Agreement
As part of a severance package, employee/participant agreed to not sue employer for any LTD benefits. This agreement was silent on a suit against plan’s fiduciary (in this case the ASO-administrator). Court held a suit against insurer was permitted.
UNUM Life Ins. Co. v. Capello,
278 F.Supp.2d
228 (D.R.I. 2004).
Employer as Claims Fiduciary
Self-Funded Plan and Alleged Conflicted Interest
Review standard of this LTD claim denial was arbitrary and capricious (not de novo) because the plan administrator (employer) had the discretionary authority as required by Firestone v. Bruch. The alleged employer’s conflicted interest was raised by the plaintiff in that the money saved by the employer went into its pocket. The participant’s contention was that a heightened standard should be used by the court. Also, the participant contended that the facts of the denial involved plan ambiguities which should be construed against the drafters. The court ruled as follows:
· Since the review is arbitrary and capricious and not de novo, it does not matter who wrote the plan or how it was written.
· The potential conflicted-interest of the plan sponsor is admittedly a factor, but only one of many in the arbitrary and capricious review.
Pagan v. NYNEX Pension Plan,
52 F.3d 438 (2d Cir. 1995).
Conflict of Interest – Is it Ignorable
In an LTD claim denial dispute, both the plaintiff and insurer stipulated that the abuse of discretion review standard should be. Such stipulation was honored by the District Court. The Appeals Court declined to be bound by such stipulation because it failed to consider the employer’s conflicted interest.
Delta-Family Care Disability and
Survivorworship
Plan v. Marshall, 258 F.3d 834 (8th Cir. 2001)
Arbitrary and Capricious Claim Denial (Conflicted
Interest)
The participant suffered from disabling work-related anxiety and depression. The denial was without reason and unsupported by any substantial evidence The actions of the plan administrator were arbitrary and capricious. The participant’s allegation that it was structurally wrong and involved a conflicted-interest for the company physician to both approve the disability and later deny its continuance.
Skretvedt v. E.I. Du Pont de
Nemours and
Co. 268 F.3d 167 (3d Cir. 2001).
Conflicted Interest
Even through the court noted the conflicted interest of the insurer, it declined to review de novo for these countervailing reasons:
· Participant failed to provide material showing probative evidence that conflicted interest was a factor in the LTD claims denial.
· Participant was dilatory in the timely filing of claims information.
Alford v. DCLT Foundation Long Term Disability Plan,
311 F.3d 955 (9th Cir. 2002).
Conflicted Interest with Self-Funded Plans
The LTD plan was self-funded with CIGNA being the paid claims administrator but the employer retained the final adjudication authority. This arrangement was discerned by the court to be conflicted and, as a result a modified abuse of discretion standard was applied. In its review, the court found as follows:
· Participant had been awarded Social Security benefits.
· Participant’s treating physician said that the participant was disabled due to back and psychiatric problems.
· Consulting physician said that participant was not disabled
· There was no objective evidence to support findings of disability.
Therefore, court held for the employer.
Tickle v. Long Term Disability
Plan of Marathon Ashland
Petroleum, 28 EBC 2063 (4th Cir. 2002).
Standard of Review
Participant’s allegation that the arbitrary and capricious standard should be heightened because benefit committee was biased was not accepted by the court. Reason – no credible proof of any bias was shown by participant.
Nelson v. Nielson Media Research,
Inc.,
30 EBC 1103 (S.D.N.Y. 2002).
No Conflicted Interest with TPA Administration
Employer had the final authority to adjudicate but delegated the actual claims processing to a TPA. Aggrieved participant alleged that this was conflicted interest which should lead the court to a heightened standard of review. The court held otherwise as there was no evidence that the alleged conflicted interest was a factor in the claims determination.
Keogan v. Towers Perrin Forster
Crosby, Inc.,
30 EBC 2643 (D. Minn. 2003).
VEBA or MEWA
LTD Claim Denial by a VEBA
The court made note of the total absence of any conflicted-interest with the claims adjudication and as a consequence reviewed it with the maximum deference.
The basis of denial was favorable to the participant in that disability occurred if (a) any of the participant’s duties could not be performed and not if (b) none of such duties could be performed.
Grossman v. Media General, Inc. 26 EBC
1507 (4th Cir. 2001).
MEWA and LTD Claim Denial
When her LTD claim was unpaid, participant sued the insurer (Hartford). The LTD was provided to her employer (IMI Systems), which was a participant in the Hartford Sponsored MEWA. Hartford defended itself by arguing that the complaint should be dismissed because the complaint should have been against IMI and not Hartford. This argument will fail with a MEWA where the legal identify of the plan is not easily discerned. Hartford's plea for dismissal at summary judgment was denied.
Penrose v. Hartford Life and Accident Ins. Co., 31 EBC 2065 (N.D, 111. 2003)
Consulting Physician
Overview
In appraising the opinions of the consulting physician, these factors should be considered:
· Checkered past is a requisite due diligence factor.
· Professionally-qualified (board certified, psychologist v. psychiatrist, e.g.) is a consideration.
· Range of opinions is usually preferred.
· Hands-on physician contact is preferred but not necessary.
Role of Consulting Physicians
In this LTD claim denial, which was reviewed under arbitrary and capricious standards, the plan administrator relied on two consulting physicians who both said participant failed to provide any response. As a result, the court held for the plan administrator.
Abnathya v. Hoffman – La Roche,
Inc.,
2 F.3d 40 (3d Cir. 1993).
Reliance on Consulting Opinion
While the consulting physician did not personally examine the participant, his expertise was such that he could form an accurate appraisal from the provided medical records. SPD and other documents were in places inconsistent but the court ignored such inconsistencies because the participant placed no reliance thereon. Also, any dispute which the participant had with the SPD should have been with the employer (plan administrator) and not the insurer. The case was not reviewed de novo.
Hightshue v. AIG Life Ins. Co.,
135 F.3d 1144 (7th Cir. 1998).
Lyme Disease and LTD Claim Denial
Insurer, fuzzy plan language to the contrary, did retain discretionary authority. Therefore, the review was not de novo but rather was by the arbitrary and capricious standard. A consulting physician testified that participant was not suffering from Lyme disease as was alleged. Therefore the court held for the Insurer.
Dunn v. Standard Insurance Co.,
156 F.Supp.2d 227 (D. Conn. 2001).
Multiple Opinions from Physicians
The plan administrator attempted to make the best of a plethora of contradictory opinions from the physicians. Since the fiduciary acted rationally, the court held for the plan.
Wages v. Sandler O’Neill &
Partners, LP.
27 EBC 2814 (9th Cir. 2002)
Opinion of Consulting Physician Under a Cloud
The problem was that the LTD claim denial used the opinion of a physician whose license was under a cloud. This glitch caused the litigation be sent back to a lower court for a retrial.
Hutchins v. A.O. Smith Retirement
Plan,
28 EBC 2133 (7th Cir. 2002).
Defendant or Venue Issues
Overview
These LTD questions are often determined by the court:
· Which venue is proper – state or federal court?
· Is the proper defendant the employer, the insurer or the TPA?
· Does the litigation involve the plan or a party thereto?
State or Federal Court. The ERISA status of the plan is usually, but not always, the determinant issue.
Proper Defendant. Almost always, the party with the de facto fiduciary authority is the proper defendant. Such will almost always be the employer, insurer or TPA.
Plan v. Party-Thereto as Defendant. The plan should be sued where the issue is an up-or-down claim decision with no issue of fault or breach by any of the parties thereto. Otherwise the alleged miscreant party is the proper defendant.
State or Federal Court
Disability Policies as ERISA plans
Where physician was the only person covered and he was the soleowner, his disability policy was not governed by ERISA. Also, the business overhead expense policy was not an ERISA plan because it defined the company and not the participant as the beneficiary.
Agrawal v. Paul Revere Life Ins.
Co.,
205 F.3d 297 (6th Cir. 2000).
Venue for LTD Claim Dispute
Plan said that claim could be pursued in either state for federal court. Participant filed in state and not in federal court. When insurer sought to remove dispute to a federal court, Participant objected citing this plan wording. Court said the insurer had a right to argue for a different venue.
Satterfield v. Fortis Benefits Ins. Co., 225 F.Supp.2d
1319 (M.D.Ala. 2002).
Plan Administrator
With a fully insured plan, the insurer is not the ERISA plan administrator and therefore is not responsible for ERISA filings.
Coffey v. UNUM Life Ins. Co., 302 F.3d 576 (6th Cir. 2002); Coyle v. D.M.R. International, Inc., 29 EBC 1945 (S.D.Ohio 2002).
Employer-Not Insurer-Has Ultimate ERISA Responsibility
Participant
sued insurer for benefits and named such insurer as the one guilty of an ERISA
non-compliance infraction. The court held for the insurer noting that the
employer, as plan administrator, had such responsibility.
Addison v.
Hartford Life and Accident Insurance,
32 EBC 1640, (E.D. Tenn. 2004).
TPA is Not Proper to Serve in a Claims Denial
Contest
Because
the aggrieved participant sued the TPA, and not the plan administrator, the
court dismissed the lawsuit.
Hobson v.
Kemper National Services Integrated Disability
Management, 33 EBC 1221 (S.D. Ind. 2004).
ERISA Status of LTD Plan
When the LTD benefit of an insurance agent was denied, the agent wanted the denial to be heard as a state law (not ERISA) matter because of these reasons:
· Agent was an independent contractor and not a common law employee.
· Plan failed to be a welfare plan.
The court held as follows:
· The plan was an ERISA plan because (a) the insurer was named plan sponsor, (b) eligibility was determined by the sponsor, (c) coverage was obtained through the insurer, (d) all premiums were paid by the insurer (albeit on an employee-pay-all basis) and (e) insurer and not agent was to be notified of premium increases.
· Whether an agent was legally an independent contractor or a common law employee, he was named as an eligible employer in the plan document.
Thus, the agent did not gain state law advantages,
Turnoy v. Liberty Life Ass. Co., ___F.Supp.2d___
(N.D. Ill. 2003).
Owner-Arranged LTD
The two owners arranged for themselves an LTD plan which benefited only them. When the insurer denied an LTD claim, the owner sued and the insurer claimed an ERISA defence. The owner sued as a state-law matter. The court held the arrangement was not an ERISA plan.
Ritter v. Massachusetts Casualty Ins. Co.,
30 EBC 1797 (Mass. Sup. Jud. Ct. 2003).
Proper Defendant
Correct Party to Be Sued
The fully insured plan used an insurer as plan administrator to adjudicate and pay claims. Yet, the employer’s rules required all LTD claims to be filed through the employer’s personnel department. This administration procedure put the employer in a decision-making position as regards the claims. As such, the court ruled that the employer (de facto administrator) could be sued.
Hamilton v. Allen – Bradley Co.,
217 F.3d 1321 (11th Cir. 2000).
Final Authority to Adjudicate Claims
Employer delegated all matters of eligibility and claims adjudication to an insurer by contract. Any litigation relative the LTD benefits should have been between the participant and the insurer; the employer should not have been involved.
Cunningham v. Associated Benefits Corp.,
27 EBC 1242 (S.D. Ia. 2001)
Claim Review Authority Confusion
Participant submitted claim request to insurer which denied the claim. In the litigation which ensued, the court had the participant resubmit the claim to the employer which had the sole authority to make the final claims decisions.
Spanos v. TJX Companies, Inc. 22 F.Supp.2d
67 (D. Mass. 2002).
Service of Process – Insurer or Plan Administrator
The plaintiff incorrectly served the legal papers on the insurer (who was a perfunctory claims processor) and not the plan administrator (employer) who was named as the fiduciary and decision-maker.
Garcia-Pardini v. Genentech, Inc.
Long Term
Disability Plan, 29 EBC 1637 (Calif. Ct. App. 2002).
Self-Funder’s Delegation of LTD Claims
Administration
The employer’s LTD plan was administered by an insurer which had the right to make the claim determinations. Since employer has no obligations to make any additional reviews, it is the insurer which is the plan administrator.
Lane v. Gannett Company Director
of Employee
Benefits, 28 EBC 2769 (D. Mass 2002).
Insurer Not Proper Defendant in LTD Claim Denial
Insurer was removed as a defendant when the legal complaint disclosed that the plan administrator was the employer and that insurer did only perfunctory claims processing and recordkeeping.
Hackner v. Long Term Disability
Plan for Employees
of the Havi Group, LP, 28 EBC 2689 (N.D. Ill. 2002).
Insurer or Employer as Defendant
The insurer showed that it was only the claims payer in an ASO arrangement; the plan’s fiduciary was the employer. The court, as a consequence, removed the employer as the defendant in a summary hearing.
Kennard v. UNUM Life Ins. Co.,
27 EBC 2803 (D. Me. 2002).
Proper Defendant – Insurer or its Holding Company
The non-insurance holding company was improperly named by participant as the defendant. The holding company had nothing to do with the dispute and the insurer (subsidiary) was the proper defendant. This slip-up cost the participant his case.
Adkins v. UNUM Provident Corp.,
191 F.Supp.2d 956 (E.D. Tenn. 2002).
LTD Claim Denial Complaint – No Stated Damages
The court permitted the complaint to be filed absent money damages because (a) it was clear that there was abuse of discretion by the plan administrator and (b) the monetary relief had to be determined at trial.
Jakubiac v. Inland Material
Handling, Inc. Employee
Benefit Plan, 28 EBC 2556 (N.D. Ill. 2002).
ERISA Thwarted Aims of Participant
Because the participant failed to bring any evidence of permanent total disability, plan administrator was fully justified on denying him LTD benefits. Participant’s claim for the employer’s breach was denied; since no money damages were available, participant had no cause of action.
Wilkins v. Baptist Healthcare
Systems, Inc.,
150 F.3d 609 (6th Cir. 1998).
Plan or Party as Defendant
Suit for Benefits and Breach under ERISA
The court held that it was redundant for the participant to seek relief both for the payment of an ERISA plan benefit and for an ERISA fiduciary breach.
King v. UNUM Life Ins. Co. of
America,
221 F.Supp.2d 1 (D. Me. 2002).
Suing Plan or Suing Plan Administrator
In an attempt to get a benefit paid, the plan should be sued; to challenge the action of the
plan fiduciary, such fiduciary should be sued.
Chapman v. Choice Care Long Island Term Disability Plan,
288 F.3d 506 (2d Cir. 2002).
ERISA Fiduciary May Not Be Sued for Doing Its Job
The participant sued the plan administrator (insurer) not because such insurer made a breach but simply because the participant wished the benefit paid. The court held that ERISA provided relief for such participant by suing the plan directly without involving the plan fiduciary.
Guiles v. Metropolitan Life Ins. Co., 27 EBC
2131 (E.D. Pa. 2002).
Long Term Disability
Participant, in pursuing his ERISA rights, believed that he could sue for both (a) wrongful denial and (b) breach of fiduciary duty. The court said that relief could be sought under (a) or (b) but not both.
Emil v. UNUM Life Ins. Co. of America,
30 EBC 1557 (M.D. Pa 2003).
Class Action Status Denied
Court allowed the participant reinstated disability benefits but declined to award such issue class action status.
Parlee v. First Reliance Standard Life
Insurance Co.
F.3d (8th Cir. 2004).
Definition of Disability
Overview
There are many disputes which the courts have been asked to settle dealing with the meaning of total disability. The few cited litigations compiled in this section illustrate the number and range of recent disputes. The issues with the meaning of total disability almost seem endless:
· What is total disability to one is not so to another.
· Is pain a disability? What of ill-defined symptoms?
· What is an impairment to one is merely a nuisance to another.
· Is disability the loss of capacity to work or the actual loss of income?
· Multiple impairment-related challenges come about as result of changing technologies (latex gloves and allergies therefrom, e.g.).
· Multiple sources of disability determinations create changes (social security, state plans, e.g.).
Work Reasonably Suited to Education/Training
Due to disability, participant who was a chemist, lab engineer and supervisor was assigned to duties as a gate attendant with surveillance systems monitoring and information duties. Participant sued. Court held that plan’s decision was not arbitrary and capricious.
Orvosh v. Wolkswagen of America,
Inc. Group Insurance
Program for Salaried Employees, 222 F.3d 123 (3d. Cir. 2000).
Definition of Disability
Total disability measures loss of capacity to work and not loss of income. A dentist claimed benefits because he went from 90% chair work and 10% administration to the reverse. Was he disabled? Insurer said no; the court said yes.
Shapiro v. Berkshire Life Ins.
Co.,
212 F.3d 121 (2d Cir. 2000).
Hearing-Impaired Attorney
The court upheld insurer’s denial for a hearing-impaired attorney. While he could not do court room work he could easily do other duties related to the practice of law.
Kutner v. UNUM Life Ins. Co. of America,
24EBC 2145 (E.D. Pa. 2000)
Pain as a Factor in Determining Disability
When the court reviewed an LTD denial for back problems (cervical strain/pain, cervical radiculiopathy, sciatic neuritis, knee intrasubstance degeneration and a herniated disk), it discounted the pain factor as being subjective. The lower court was held by the Appeals Court to have been in error because the common law of the Second Circuit is that pain, even though subjective, was an important factor in determining disability.
Connors v. Connecticut General Life Ins. Co.
272 F.3d 127 (2d Cir. 2001).
Vague and Ill-Defined Symptoms
The
court upheld the denial of LTD benefits for chronic fatigue syndrome and
fibromyalgia because of (a) significant evidence of manipulative and dishonest
behavior and (b) the inherent difficulty in getting an objective medical
determination of the disease.
Robyns v. Reliance Standard Insurance Co.
31 EBC 1903 (S.D. Ind. 2003).
Disability with Vague Symptoms Disallowed
This
LTD claim was correctly denied for these reasons:
Robyns v.
Reliance Life Ins. Co.,
31 EBC 1903 (S.D. Ind. 2004).
Casual Denial with Self-Reported Symptoms
The denial was because the participant's self-reported
symptoms were not supported by clinical testing. The court said the denial was
too casual and needed more work to develop the claim.
Collins v.
Continental Casualty Co.,
F.3d (8th Cir. 2004).
Claim for “Mystery Illness” Not Payable
Court on appeal held that a mystery illness could be disabling. The case was sent back
to the lower court for more deliberation.
Krizek v.
CIGNA Group Insurance,
345 F.3d 91 (2d Cir. 2004).
Claims Denial for Subjective Illness Upheld
As
has been the majority opinion of the courts, chronic fatigue syndrome has not
been deemed to be a valid cause of disability due to its subjectivity.
Nichols v.
Veriaon Communications Inc.,
31 EBC 2447 (3d Cir. 2004).
Partial Disability of Orthopedic Surgeon
Orthopedic
surgeon claimed total disability because he was unable to do on-call or
emergency surgery. The court said such inability was not dispositive of total
disability.
Lasser v. Reliance Standard Life Ins. Co.,
F.2d
(3d. Cir. 2004).
Social Security Total Disability Definition
The Social Security standards are different from the typical LTD plan and need not be followed:
Social
Security
Inability to work in any occupation which exists in significant numbers in the national economy.
Typical
LTD Plan
Inability to work in any occupation.
These two definitions are quite different.
Gillen v. life Ins. Co. of North America,
199 F.Supp.2d 900 (W.D. Wisc. 2001).
Definition of Total Disability
While in active practice, physician was addicted to painkillers and advised by medical
board to seek drug-addiction treatment. He refused and continued to practice for 11 months at which time he quit his practice and filed for a disability claim. The insurer denied the claim saying that his claim for disability was not supportable. Court agreed with the insurer.
Zenk v. Paul Revere Life Ins.
Co.,
171 F.Supp 929 (D. Minn. 2001).
Latex Allergy and Health Care Worker
The courts held in this, and other disputes also, that a latex glove allergy is not a cause of total disability.
Smith v. UNUM Life Ins. Co.,
305 F.3d 789 (8th Cir. 2002).
RN Disability from Latex Glove Reaction
The nurse’s treating physician failed to specify why her condition prevented her from working as an X-Ray technician. The nurse claimed she was allergic to the latex gloves. Two independent physicians, using two different testing protocols reached different conclusions as to whether the latex allergy was disabling. The plan administrator’s denial was upheld by the court.
Proctor v. UNUM Life Ins. Co. of America,
27 EBC 1683 (8th Cir. 2002).
His v. Any Occupation Dispute
The court found that the plan administrator was in error when it made the his v. any occupation determination on these bases:
· Administrative law judges opinion in workers’ compensation hearing
· Social Security findings and conclusions
· Physician who only attended to initial care
· Faulty denial letter.
In essence, the plan administration failed to match the claim decision with the clear wording of the plan document.
Caldwell v. Life Ins. Co. of America,
287 F.3d 1276 (10th Cir. 2002).
Discretionary Authority Language
Overview
In Firestone Tire & Rubber Co. v. Bruch, the Supreme court held that if the claims determination was made by a plan fiduciary (employer or insurer) that had such clear discretionary authority so provided by the plan document it would have such determination reviewed by the arbitrary and capricious standard (albeit a sliding scale standard). Otherwise, the court’s review standard would be the de novo standard. Where the plans Language is murky on such discretionary authority, the court will usually look to other evidence for the intention of the plan document. Litigation where such plan intention was sought is provided in the following section under these headings.
· Ineffective Plan language
· Effective Plan language
· SPD-related Issues
· Effective Date of Firestone v. Bruch Amendment
Ineffective Plan Language
Lack of Discretionary Language
Since plan lacked the unambiguous language of Firestone v. Bruch, the review was de novo. The plan complied with ERISA’s language by saying that administrator “would make all decisions on claims.” This language does not equate to having the unambiguous right to adjudicate. To avoid de novo, the plan must state unambiguously that the administrator has the ultimate power to adjudicate.
Ingram v. Martin Marietta Long Term Disability Plan for Salaried Employees, 244 F.3d 1109 (9th Cir. 2002).
What is Discretionary Authority
Plan required these two actions:
· Participant was to provide satisfactory proof of total disability.
· Insurer was to make a full and fair review.
Court did not believe that this language gave the insurer (claims administrator) discretionary authority as contemplated by Firestone. v. Bruch. Making benefit payments for which it must give reasons is not the same as having unambiguous discretionary authority. Thus, the court of appeals upset the lower court’s decision and applied the de novo standard of review. As a consequence, the insurer lost.
Sandy v. Reliance Standard Life Ins. Co.,
222 F.3d 1202 (9th Cir. 2000).
Discretionary Authority
Group plan gave insurer the right to ask for written proof of disability. This language failed to give the insurer discretionary authority. Such requisite authority was absent both explicitly or implicitly. Hence, the court reviewed the decision de novo which meant that the insurer lost.
Feder v. Paul Revere Life Ins.
Co.,
228 F.3d 518 (4th Cir. 2000).
Discretionary Authority Language
Insurer’s plan document gave it the right to pay when satisfactory proof of loss was submitted. This did not give insurer the deferential power required by Firestone v. Bruch. As a result, the claim denial was reviewed de novo.
Hertzberger v. Standard Ins. Co.,
205 F.3d
327 (7th Cir. 2000).
Discretionary Authority – Absence of
Plan administrator’s denial of an LTD claim has due to its treating a bi-polar disorder as a mental, not a physical disorder. The court would have reviewed it with deference had the requisite Firestone v. Bruch language been in the plan document. Since it was not, the Appeals Court renewed it de novo. In effect, the plan lost.
Fitts v. Federal National Mortgage Association,
236 F.3d 1 (D.C. Cir. 2001).
Plan Language and Discretionary Authority Language
Insurer’s group LTD policy gave it authority to pay claims after receiving satisfactory proof of loss. This did not meet the discretionary authority language requirement of Firestone v. Bruch. As a consequence, the court had to review the facts de novo.
O’Sullivan v. Prudential Ins. Co. of America,
26 EBC 2023 (S.D.N.Y. 2001).
Faulty Discretionary Authority Language
The insurer believed that its group policy, which gave it the right to pay claims from written proof of loss failed to meet the Firestone v. Bruch discretionary authority language. As a result, the insurer’s denial was reviewed de novo. As a result, since (a) her physicians said she was disabled, (b) she was under the regular care of a physician and (c) she was not gainfully employed in any occupation for which she was qualified by education, training or experience, the court said her LTD Denial was improper.
Williams v. Continental Casualty Co.
130 F.Supp.2d 998 (M.D.Tenn. 2001).
Insurer Lacked Discretionary Authority
The group LTD contact gave insurer the right to adjudicate where the participant “submits satisfactory proof of total disability to us.” Did this give the insurer the discretionary authority required by Firestone v. Bruch? The court said that it did not, which meant that claims review was by the de novo standard.
Walker v. Group Long Term Disability Insurance,
256 F.3d 835 (8th Cir. 2001).
Ineffective Discretionary Language
Absent the requisite discretionary language, the court found the insurer abused its discretion in several ways and accordingly held for the participant:
· Trial lawyer’s physician opined that the long hours exacerbated the participant’s blood pressure. The insurer responded by stating that these were normal working conditions where normal was an undefined plan term.
· Plan application did not clearly put participant on notice that insurer would claim the right to determine benefits.
Rosential v.
Epstein, Becker & Green P.C.
Disability Plan, 24 EBC 1371 (C.D. Calif. 2001).
Discretionary Authority Language
Plan said that total disability existed when certain conditions were met. The court said that this was not equivalent to the plan administrator (insurer) having discretionary authority as required by Firestone v. Bruch. LTD denial as a consequence was reviewed de novo.
Deal v. Prudential Ins. Co. of America,
222 F.Supp.2d 1067 (N.D. Ill. 2002).
Discretionary Authority Language
Plan gave the insurer the right to adjudicate based upon evidence “satisfactory to the administrator”; this was more specific than “submission of satisfactory evidence.” That is, the language, imperfect though it was, did meet the Firestone v. Bruch standard. As a consequence, the abuse of discretion test was applied. The claim denial was upheld because the participant failed to show that his depression existed when he terminated employment. Medical evidence showed that his depression (disabling condition) began after his termination.
Nance v. Sun Life Ins. Co. of Canada,
294 F.3d 1263 (10th Cir. 2002).
Discretionary Language Ineffective
The plan’s words “due written proof of loss” do not meet the Firestone v. Bruch standards.
· Does the language set forth requirements for timely claim filing? Yes.
· Does the language give the plan administrator explicit discretion to make benefit determinations? No.
Ransdell v. Continental Casualty Co.
29 EBC 2025 (D. Kans. 2002).
De Novo Review Used (Faulty Discretionary Language)
Plan administrator (insurer) was to be given written proofs of loss and could require a physical examination of the participant. The court held that these were not sufficient to meet the Firestone v. Bruch test of discretionary authority. Therefore, it reviewed the facts de novo and found the following:
· LTD benefits were wrongfully denied.
· Participant’s treating physician said the participant was disabled and had been so for five years.
· Insurer was not able to provide any objective evidence that participant was not disabled.
Because of the lopsidedness of the dispute, the court awarded the participant her attorney fees.
Hoover v. Provident Life and Accident and Ins. Co.,
290 F.3d 801 (6th Cir. 2003).
Discretionary Authority Language
The court found that the plan language which said the insurer would determine claims based on satisfactory proof failed to meet the Firestone v. Bruch discretionary language requirements. The court proceeded to review de novo. In so doing, it did find that the participant’s pay should exclude not only bonuses but profits from his business which are the same as bonuses.
Perugini-Christian v. Homestead Mortgage Co.
287 F.3d 624 (7th Cir. 2002).
De Novo v. Arbitrary and Capricious (Discretionary Authority)
Appeals court said the district court should have used the de novo and not the arbitrary and capricious standard of review because plan document’s language failed to clearly give plan administrator discretionary authority.
Carrigan v. Reliance Standard Life Ins. Co.,
29 EBC 2710 (4th Cir. 2003).
Discretionary Language Ineffective
The plan gave the insurer the right to adjudicate using words “satisfactory proof of total disability to us.” The court said this did not meet the Firestone v. Bruch standard. LTD denial was therefore reviewed de novo Even so, the court held for the plan administrator because the participant failed to submit objectively satisfactory proof of disability which showed that participant was claimant incapable of performing each and every duty of his job as required to receive benefits.
Gallagher v. Reliance Standard life Ins. Co.
305 F.3d 264 (4th Cir. 2004).
Questionable Discretionary Authority Language
This LTD denial was held to be proper by the district court; but the appellate court found fault with the manner of review and sent it back to the district court to be retried.
Muller v. First UNUM Life Ins.
Co.,
30 EBC 2419 (11th Cir. 2004).
Faulty Firestone v. Bruch Language
Plan language did not meet the Firestone v. Bruch standards and as a consequence the de novo standard of review was used by the court. This tipped the scales in favor of the participant.
Shaw v. Connecticut General Life Ins. Co.,
31
EBC 2419 (11th Cir. 2004).
Poor Discretion any language
The court applied de novo review standard because (a) plan was vague as to
discretionary authority and (b) insurer clearly had a conflicted interest.
Sanders v. CAN Group Life Assurance Co.,
33 EBC 1311 (D. Ore. 2004).
Processing Errors Reviewed De Novo
Where claims processing
irregularities are discerned, the court will typically review de novo.
Jebian v. Hewlett-Packard Co.
Employee Benefits Organization Income Protection Plan, 349 F.3d 1098 (9th Cir. 2004).
Effective Plan Language
Discretionary Authority
Yeager was declared by the insurer to not be totally disabled because (a) vague symptoms (fatigue and joint pain), (b) absence of authoritative diagnosis and (c) no evidence of anatomical or physical disorder. Yeager claimed to be suffering from fibromyalgia but was not able to support her claim with medical evidence. The court found Yeager unable to produce any satisfactory proof that she could not perform the material duties of her regulation occupation. The issue arose as to whether the words “satisfactory proof of evidence to us” conferred on the insurer the “right to interpret and adjudicate” as required by Firestone v. Bruch. The court said it did not and consequently reviewed de novo. Fiduciary was given a high degree of deference, however.
Yeager v. Reliance Standard Life
Ins. Co.,
88 F.3d 376 (6th Cir. 1996).
Discretionary Authority by Implication
When Marx reached the end of her two year period of her occupation and had to meet the more rigid standard of any occupation, the claims administrator denied her claim. Her claim was that back pain caused depression making her unable to work. Of concern to Marx was that the plan would deny the claim while Social Security would pay. The court noted that giving MetLife the adjudication authority was synonomous to giving it total discretionary authority. As such, the decision of MetLife to deny the claim at the end of the two-year period was upheld. The fact that Social Security might pay and the plan not pay was plausible and did not concern the Court. Also, the physician of Marx was not particularly helpful to the arguments of Marx. Marx lost. The Firestone v. Bruch text was met in that the plan administrator (or its assigns) had the authority to adjudicate. Therefore, the standard of review was not de novo but arbitrary and capricious. Since the MetLife was not at risk, the issue of any conflicted interest with MetLife did not arise; had such been the case, the lenient-harsh standard of review continuum would possibly have been an issue. Clearly, having an arbitrary and capricious standard of review, which is typically available with a self-funded plan, was helpful.
Marx v. Meridian Bancorp, Inc. Long Term Disability Plan,
28 EBC 1055 (10th Cir.), cert. denied, ___U.S.___ (2002).
Discretionary Authority Language
Plan gave plan administrator the right to adjudicate upon “evidence satisfactory to us”. The court held that this met the Firestone v. Bruch Test. The court then held that the denial decision was not arbitrary and capricious because of these three reasons:
· Participant could do sedentary work.
· Treating physician concurred in decision.
· Decision of plan administrator was based upon substantial evidence.
Bringham v. Sun Life of Canada,
317 F.3d 72 (1st Cir. 2003).
Subcontracting
Claims to TPA May Still Leave Employer as Final Adjudicator
Employer avoided the de novo review Standard because such employer retained the ultimate claim review authority even through the employer subcontracted such claims processing to a TPA.
Williams
v. BellSouth Telecommunications, Inc.
33
EBC 1195 (11th Cir. 2004).
ASO-Administration and Discretionary Authority
Employer escaped any LTD claim liability by showing the court that only the insurer, in an ASO-administered LTD arrangement, had any discretionary authority.
Dunn v.
Key Bank of Alaska,
Supp.2d (D. Alaska 2004).
SPD-Related Issues
Discretionary Authority Language Not In SPD
The discretionary authority language which is required by Firestone v. Bruch was in the plan document but not in the SPD. The participant, in an LTD dispute, argued that the dispute should be reviewed de novo. The court held for the plan administrator arguing that the SPD error was moot since participant had no reliance thereon.
Davis v. First Union Corp. Long Term Disability Plan,
213 F.Supp.2d 29 (D. Mass 2002).
Effective Date of Firestone v. Bruch
Amendment
Discretionary Authority – When Effective – How
Applied
The disability plan was amended putting in the Firestone v. Bruch language which gave the insurer (claims administrator) the full, final, conclusive and binding power to construe and interpret relevant plan terms. When an LTD claim was contested, the insurer sought the arbitrary and capricious standard according to the amended language; the participant sought the de novo standard according to the original plan language. The court would have held for the insurer except that it discerned an insurer glitch; i.e., the employer failed to request and approve the amendments as required by Firestone v. Bruch. Because the employer did not request that the discretionary language be inserted, the amendment was held to be null and void. As a result, the Appeals Court reviewed de novo which meant that the Insurer lost.
Grosz-Solomon v. Paul Revere Life
Ins. Co.
237 F.3d 1154 (9th Cir. 2001).
Adding the Discretionary Language to LTD Plan
So long as the plan amendment adding the Firestone v. Bruch language was adopted before the date on which the plan administrator actually made the claim determination, it will be applicable.
Peltzer v. Life Ins. Co. of North America,
28 EBC 2765 (N.D. Ill 2002).
Discretionary Amendment and Ongoing Disability Claim
When participant began his LTD benefits, the plan did not have the so-called discretionary clause; when such clause was added by amendment, he was still drawing benefits; later his benefits were denied because his total disability was not clinically supported. In its review, what standard should the court apply? The Appeal’s Court said it should order the arbitrary and capricious standard. The courts’ logic was that since the LTD benefits were non-vested the amendment was effective and valid when added.
Hackett v. Xerox Corp. LTD Income Plan,
___F.3d___ (7th Cir. 2003).
Discretionary Authority Amendment-When Effective
The discretionary authority amendment may apply to an ongoing LTD claim (even though it was not in effect when the claim was originally approved). The facts were these:
· Participant for 10 years had been found by various physicians to be totally disabled for psychiatric reasons.
· A new physician made an evaluation, and concluded without explanation, that the participant was suffering from a personality disorder.
· Using this logic the plan administrator denied the ongoing LTD claim. The court ordered the claim reinstated with the payment of accrued benefits.
Hackett v. Xerox
Corp. Long-Term Disability Income Plan,
315 F.3d 771 (7th Cir. 2003).
Extra-Contractual Awards
Overview
While punitive or exemplary damages are only rarely found with ERISA plans because of preemption, the issue of (a) monetary interest and court-awarded benefits and (b) attorney fees is fairly common. If the court believes that equity is furthered, it will often make such extra-contractual awards to the aggrieved participant. The primary factor suggestive of such court-awards is the egregious action of the plan administrator. The courts will find justification in making such extra-contractual awards for these reasons:
· Equity and fairness (full-value of promised benefits and make-whole remedy) should apply.
· Shield to protect small participant from big plan administrator is needed.
· Legal v. equity arguments of Great-West v. Knudson do not apply.
Attorney Fees
Where insurer’s actions were so egregious, the court made the insurer pay the participant’s legal fees. The attorney’s fees were based on the state of New York attorney fees (where they were located) and not Connecticut where the litigation occurred. The insurer’s error was to improperly withhold plan benefits.
Dobson v. Hartford Financial Services Group, Inc.
28 EBC 2658 (D. Conn. 2002).
Interest Allowed on Wrongful Denial
Because the court found that the insurer acted improperly in denying the LTD claim and, on de novo review, awarded interest as well as benefits to the participant. Attorney fees were not awarded, however.
Britton v. Lovelace Institutes
Long Term Disability
Insurance Plan, 217 F.Supp.2d 1207 (D.N.M. 2002).
Late Payment Penalties
Participant having won on a benefit payability dispute sought an additional award (beyond interest adjustment). The court said no to the request.
Marziale v. Hartford Life and Accident Ins. Co.
29 EBC 1580 (E.D.La. 2002).
Interest Allowed in LTD Claims Settlement
Where the insurer was egregious in delaying the payment of the LTD benefits, the court awarded interest to the aggrieved participant. Some of the logic of the court dealt with (a) full value of what was promised, (b) unjust enrichment and (c) equitable make-whole remedy.
Dunnigan v. Metropolitan Life Ins. Co.,
277 F.3d 223 (2d Cir. 2002).
Attorney Fees
Because the participant acted in bad faith and attempted to have a claim paid which had no merit, the court awarded the legal fees to the plan administrator. The participant protested asserting that the awarding of attorney fees was a shield to protect the participant from the insurer and not a sword to deter the participants from filing a claim.
The court disagreed and held for the plan administrator.
Seitzman v. Sun Life Assurance Co. of Canada,
311 F.3d 477 (2d Cir. 2002).
Wrongful Benefit Termination – Interest and Legal Fees
After much investigation, insurer suspended LTD benefits (i.e., did not deny them as a plan claim matter). Aggrieved participant asked that the benefits be restored but with interest. The insurer argued that the interest payments would be a legal, not an equitable, relief and contrary to Knudson v. Great-West. Court found insurer’s actions offensive by suspending benefits without going through the plan’s claim denial procedure. As for the award of interest, the court found such interest payment to be equitable in nature because the participant had a rightful claim to such interest as its money. In a subsequent court decision, the participant was also awarded legal fees.
Park v. First Reliance Life Ins. Co.,
29 EBC 2719 (D.C. Minn. 2003).
Attorney Fees Awarded
Where there was
demonstratable unjust enrichment on the part of the insurer and uncompensated
expenses for the aggrieved participant to gain his victory, the court allowed
attorney fees to the participant.
Connors v.
Connecticut General Life Ins. Co.,
30 EBC 2658 (S.D. N.Y 2003).
Claim Adjustment for Interest
The
court held that remedies outside of ERISA (interest adjustments, e.g.) were not
available to ERISA beneficiaries. This is the case even if the plan fiduciary was
egregious and the disgorgement of ill-gotten gains by the employer would appear
to be appropriate.
Flint v.
ABB, Inc. 30 EBC 2417
(11th Cir. 2003).
Lawyer Fees-Appropriate Amount
The
court awarded legal fees to the plaintiff which were large due to the employerdefendant's
uncooperativeness. The fees were $235 x 765 hours. The court wished to make a
statement to litigants to be helpful in dispute resolution.
Skretveldt
v. E.I. DuPont de Nemours,
30
EBC 2455 (D. Md. 2003).
Mental Disorders
Overview
It is general practice for the cutback in benefits due to a mental condition to not be deemed an ADA violation because it is not an attempt to subterfuge the meaning and intent of the law. Similar logic also applies to state discrimination laws. A particularly difficult and ongoing problem is the fairly common situation where there is both a physical and a mental condition and two conditions exacerbate each other. Attempts to treat certain mental conditions (bipolar, e.g.) as physical in that they have a provable physical etiology but a mental ICD – 9 classification have been unsuccessful. For LTD purposes, substance abuse (or reliance thereon) will generally be deemed a mental disorder.
Mental v. Physical Issue
The LTD plan excluded mental and nervous conditions. Tolson was clearly disabled from depression but claimed it to be physiological and attributable to the medication and treatment (primarily the Interferon – Alpha treatments for his hepatitis type C).
The plan asserted that depression is a mental disorder regardless of its origin. The court held for the plan and went so far as to call Tolson’s logic borderline frivolous. The court heard the arguments de novo because the hearing was for a summary judgement.
Tolson v. Avondale Industries,
Inc.
141 F.3d 604 (5th Cir. 1998).
LTD Mental Limitation and the ADA
The participant challenged the 24 – month mental disability limitation as being contrary to ADA in that Congress opposed any special coverage limitations for mental disabilities. The court held for the plan. The court also dealt with the fact that many of the so-called mental disorders have a physical etiology; the court acknowledged such possibility but held that they were mental disabilities anyway because this is how they are treated by medical tradition and disease classification.
Pelletier v. Fleet Financial
Group, Inc.,
25 EBC 1401 (D.N.H. 2000).
Applying Mental Disability Limitation
The plan treated the participant’s 1993 physical disability and his 1994 mental disability as a single period of disability. The mental disorder was clinical depression. The participant argued that during his second period of disability, he experienced physical pain. But no medical evidence supported his contention. The court believed that there was no abuse of discretion when the plan denied the claim.
Aboul-Fetough v. Employee Benefits Committee,
245 F.3d 465 (5th Cir. 2001).
Mental Health Parity and LTD Plan
LTD plan paid a lower benefit for mental disorders than for physical disorders. Participant alleged that this was an ADA violation. Court said that Congress did not impose mental health parity with the ADA.
El-Hajj v. Fortis Benefits Ins. Co.,
156 F.Supp.2d 27 (D. Me. 2001).
Depression and Rx Dependence Problem
Insurer wanted to deny the disability claim because the cause was temporary (i.e., depression and Rx dependency). The court held to the contrary and found the condition to be chronic. That is, the participant won.
Royal Maccabees Life Ins. Co. v. Parker,
26 EBC 2568 (N.D.Ill. 2001).
ADA Discrimination-Mental v. Physical Differences
Such distinction in LTD plans is not a discrimination issue by the Minnesota Human Rights Act (similar to ADA) considering (a) long tradition of distinction, (b) federal courts holdings that the distinction does not violate ADA and (c) no legislative expression that there would be any discrimination.
Kalton v. Anoka County, 645 N.W. 2d
403 (Minn. Sup. Ct. 2002).
Bipolar as Physical Illness
The court, using the arbitrary and capricious standard of review, found that the bipolar mental disease was physical, and not mental thereby making the LTD claim payable. The court’s logic was murky plan language.
Fitts v. Federal National Mortgage Association,
191 F.Supp.2d 67 (D.D.C. 2002).
Differing Opinions of Total Disability
Condition was depression where opinions of two psychologists were in evidence.
One (Treating Physician)
Participant was not totally disabled but the treating physician failed to consider duties of participant and whether each could be performed.
Two (Consulting Physician)
Participant was totally disabled but the consulting physician carefully considered duties of participant and whether each could be performed. The court said that the claim was payable.
McOster v. Paul Revere Life Ins.
Co.,
279 F.3d 586 (8th Cir. 2002).
Mental v. Physical Disability
Participant left employment in a disabled state (depression, anxiety, etc.) and drew total disability benefits for two years without any mention of a physical disorder in any of the physician reports (treating and consulting physicians). When her two-year period was to end, her treating physician alleged she was suffering from physical disorders. The plan administrator denied the claim when her two-year mental limitation expired. The court upheld the plan administrators denied administrator’s denial.
Tumblestone v. A.O. Smith Corp.,
27 EBC
1673 (4th Cir. 2003).
Bi-Polar
Held to be Mental, Not Physical, Disease
The participant alleged
that bi-polar was physiological in nature and therefore the LTD mental disease
limitation should not apply. The court held that since the American Psychiatric
Association classifies bi-polar as a mental disease, so should the court, 1ogic
of etiology notwithstanding.
Fuller v.
JP. Morgan Chase & Co. Benefits Appeal Committee,
31 EBC 1827 (E.D. NY. 2003).
Depression is Mental Even if it Exacerbates Physical
The LTD beneficiary argued
unsuccessfully that this depression was connected with his hypothyroidism and
therefore physiological in nature.
Hildebrand
v. Fortis Benefits Ins. Co.
30 EBC 2987 (6th Cir.
2003).
Mental
Illness May Cause Physical Illness
The mental disorder limitation was
held to apply. The claims administrator
had ruled that the cause of disability was both mental and physical. In this
case, depression and obstructive sleep apnea syndrome were involved. That
mental disorders can result in physical disorders was the crux of the courts
decision.
Varney v. Consol, Inc.
31 EBC 2652 ((W.D. Va. 2004).
Depression Not a Physical Illness
Participant
argued unsuccessfully that his mental disorder (depression) was physical in
nature (frontal lobe syndrome).
Vega-Muniz
v. Metropolitan Life Ins. Co.; 287
F.Supp.2d 146 (D.P.R. 2004).
Depression Could Be Caused by an Accident
The
participant was successful in showing that a minor accident (for which he was
claiming social security disability) was the proximate cause of his depression
which qualified him for the plan's disability benefits.
Buzzard v. Holland, 33 EBC 1446 4th Cir. 2004).
Physical and Mental Conditions Combined
This is one many of the
decisions where the two-year limit of mental disease ran out but same
contributing physical condition continued. In this case, the ongoing physical
condition was issue related (rheumatism, i.e.). The difficulty was that the
medical condition was not supported by solid clinical findings. The court found
fault with the insurer’s denial (lack of specificity of the denial reason and
failure to perfect the claim). The insurer as a consequence lost at summary
judgment meaning the full facts had to be heard at trial. That is, the insurer
lost.
Scott
v. Hartford Life & Accident Ins. Co., F.Supp.2d (E.D. Pa. 2004).
Offsets to Benefits
Overview
The deduction from LTD benefits for worker’s compensation, Social Security, state statutory or railroad retirement benefits is well-known. The plan document should (a) enumerate all of the offsets and (b) state how the plan should recover offsets not known when gross benefits are paid. It appears that recovery of offsets not deducted when paid by subrogation might be troublesome at least for fully insured plans but quite possible for self-funded plans.
LTD and Subrogation
Participant was paid LTD benefits for full amount because the social security offset provision did not apply in that participant was not eligible when LTD benefits were paid. Social Security benefits were, however, paid retroactively and insurer sought recovery of such as a subrogation matter. Virginia’s anti-subrogation law was drafted to be non-applicable to “hospital-medical-surgical and related/similar” benefits. This exclusion did not include disability. The court held that the insured plan could not recover such social security disability benefits by subrogation; had the plan been self-funded, such recovery could have been possible.
Whitlinger v. Continental
Casualty Ins. Co.,
129 F.Supp.2d 924 (E.D. Va. 2001).
LTD Subrogation and Social Security Benefits
Such subrogation opportunities with LTD arise where insurer pays full benefits and Social Security disability benefits are awarded retroactively. In such instance, the insurer believed its ERISA plan can proceed as an ERISA matter against the participant and recovery its overpaid LTD benefits. In this instance the court said no; to do so would subject the Social Security benefits to execution, levy, attachment of garnishment or other legal process which is prohibited by federal law.
Provident Life and Casualty Co. v. Crean,
26 EBC 2011 (Ala, Ct. Cir. App. 2001).
Social Security Offset
That the participant failed to comprehend the meaning of the Social Security offset was unfortunate but the participant had to reimburse the plan for the retroactive adjustment just the same.
Garst v. Wal-Mart Stores, Inc.,
27 EBC 2283 (6th Cir. 2002).
Benefits from Railroad Retirement Act
Plan allowed an offset from “state disability benefits or similar benefits”. Did this language cover benefits from the Railroad Retirement Act? The court said yes.
McElroy v.
SmithKline Beecham Health & Welfare Benefits Trust
Plan for U.S. Employees, 29 EBC 1217 (E.D. Pa. 2002).
Offsets for Same Disability
The plan said that offsets would be taken for same disability. Participant was paid a disability benefit by workers’ compensation and Social Security for condition X; the plan awarded him benefits for condition Y. In such instance, should the offset apply? The court said it should not apply.
Gruber v. UNUM Life Ins. Co. America,
195 F.Supp.2d 711 (D.Md. 2002).
Participant on Workers’Compensation Disability
Participant, having been on long term workers’ compensation disability for six years, the participant had a diabetic setback rendering her totally disabled. After this setback she attempted to gain LTD benefits from the plan. The plan administrator denied her request because LTD benefits, by the plan document, were only available to active full-time employees.
Perry v. New England Business
Service, Inc. Long Term
Disability Plan, 29 EBC 2344 (D. Mass. 2002).
LTD and WC Offset
As typical of LTD plans, the benefits are to be reduced by workers’ compensation income payments. The beneficiary with monthly income of, say, $500/month accepted a WC lump sum payment of, say, $6,000, such beneficiary believed only a single $500 payment should be reduced. The insurer believed the $6,000 should be annuitized. The court held for the insurer.
Davidson v. Avon Products, Inc.,
30 EBC
1807 (D. Minn. 2003).
Benefits May Be Offset by Railroad Retirement Benefits
The plan language defined
offsets to include state disability benefits. The court held these words to
include railroad retirement benefits.
McElroy v. Smithkine Beecham
Health & Welfare Trust
Plan for U.S. Employees, 30 EBC 2677 (3d Cir. 2003).
Benefit Reduction – Other Income
Insurer had the clear contractual right to reduce
the claimant's disability income benefits by his other earnings.
House v.
American United Life Ins. Co.,
30 EBC 3033 (E.D. La.
2003).
Relevance
of Social Security Approval of Disability
A District Court held that the determination of
disability by Social Security was relevant to its review of an LTD claim
denial. The Appeals court cited Black & Decker Disability Plan v. Nord and reversed the ruling of District Court by
holding that the adjudications were separate. In effect the court held for the
employer.
Smith v. Continental Casualty Co., F.3d (4th Cir 2004).
Workers’ Compensation Offset
When it became evident
that participant had collected both his LTD and also his workers' compensation
benefits, the plan requested a pay back of the workers' compensation benefits. The court referred the matter back
to the plan administrator for an equitable solution.
Cherere v.
First American Financial Corp. Long Term
Disability
Plan, F.Supp.2d (N.D. Cal. 2004).
Workers’ Compensation Offset
LTD benefits were reduced by workers' compensation benefits. When the participant accepted a large settlement for such workers' compensation benefits, he believed that such LTD should be increased to their full amount. The court held otherwise. The decision rested on the reduction being for benefits for which the participant was illegible to rested.
Lane v. UNUM Life Ins. Co. of America, 293 F.Supp.2d
477 (M.D. Pa. 2004).
Pension Benefits and LTD
LTD plan was to pay benefits reduced by any pension plan benefits. Did this recovery violate the ERISA nonforfeitability provision applicable to pension benefits? The court said such ERISA provision did not apply.
Fuller v.
Liberty Life Assurance of Boston, F.Supp.2d
(W.D. N.C. 2004)
Plan Eligibility Issues
Overview
Such eligibility issues are (a) independent contractor, (b) sick leave/full-time employment and (c) actively-at-work; there issues are the same for LTD benefits as for medical benefits. There is a special problem, unique to LTD, where increased benefits are due with increased compensation.
Any Occupation Issue
A surgeon had an LTD rider which permitted him to draw full benefits even though he was able to work in an emergency center. The original policy would have denied benefits after two years if he was able to perform any other work other than his regular occupation. The rider, however, had a termination date of the physicians 65th birthday. After the physician reached 65, the insurer terminated benefits because the benefit’s reverted to their usual form. The court held for the insurer.
McMurtny v. Paul Revere Life Ins.
Co.,
225 F.3d 659 (6th Cir. 2000).
LTD Claim Denial and FMLA
Participant failed to return to work following a family medical leave and was terminated. She did, however, offer an impressive array of evidence that she was totally disabled. Two disputes were heard and decided by the court.
1. The employer’s decision to terminate the participant was proper.
2. The participant was eligible for total disability benefits, however.
Carter v. General Electric Co., 26 EBC 1166
(N.D. Ill. 2001)
LTD Benefits and Denial of Severance Benefits
Participant was specifically informed that the acceptance of LTD, would make him ineligible for the employer’s severance benefit. He took LTD with this knowledge and later sued for a severance benefit. The court held for the employer.
Jorgensen v. Massachusetts Mutual Ins. Co.
27 EBC 1407 (D. Mass. 2001)
Disability Occurring During Paid Leave of Absence
Court held that such is covered by the clear wording of the plan document.
Pearce v. Paul Revere Life Ins. Co.,
29 EBC 1357 (D. Minn. 2002)
Eligibility and Participant Contribution Issue
When participant earned a salary increase, he became eligible for increased LTD benefits but a participant contribution was also required. Below the salary breakpoint, such LTD was employer-pay-all. By not making an affirmation of benefits and not paying his contribution, he, in effect, declined coverage. The denial of benefits became a non-eligibility of coverage issue. Court held for the plan.
Thompson v. J.C. Penny Co. VEBA Long Term Disability Plan,
26 EBC 2228 (6th Cir. 2001).
Eligibility for LTD Plan
When the employer’s LTD plan was put in place, the participant was on sick leave and never returned to full-time work status. The court held that such participant was not eligible for the LTD plan.
Sokolski v. MetLife Ins. Co., 27 EBC 2110
(4th Cir. 2002)
Claims v. Eligibility Denial Glitch
Plan administrator (insurer) denied the LTD claim because of non-coverage (i.e., lack of eligibility). When it was later established that the participant was eligible (accident being on last day worked), the insurer then wanted to assert additional defenses. The court held that the late assertions should not be allowed.
Lauder v. First UNUM Life Ins. Co.,
284 F.3d 375 (2d Cir. 2002).
Independent Contractor Issue
Ruttenberg wanted to contest the denial of his LTD benefit as a state law matter.
Basic contest was this:
· Ruttenberg said the plan was non-ERISA and was offered to him as a contractual right since he was an independent contractor.
· Plan sponsor believed the opposite.
Court held for plans sponsor.
Ruttenberg v. U.S. Life Ins. Co. of N.Y.,
30 EBC 1793 (N.D. Ill. 2003).
Leased Employee Litigation
Because of high benefit costs. Mobil
began in the 1980's to hire some of its employees through a third-party payroll
company (so-called leased employee firm). Other than not being on Mobil's
payroll, they were indistinguishable from other Mobil employees. The court held
for Mobil and dismissed the complaint by summary judgement.
Maclachlan v. ExxonMobil Corp.,
31 EBC 1993 (5th Cir. 2003).
Defendant is Controlled Group (Not Individual
Corporation)
The
defendants were the plan and Ameritech Corp. Since numerous corporations were
participating employers, it was not correct to single out Ameritech (even
though Ameritech was named the Plan Administrator).
Dehn v. Ameritech Corp. 30 EBC 2749 (E.D. Wise. 2003).
Stockholders Were Employees for LTD Purposes
Stockholders, as LTD plan participants, wanted to sue as a state law matter claiming that ERISA did not apply to them because they were not employees. The court said that they were employees for plan and ERISA purposes relying on the Supreme Court Yates v. Herndon which held that stockholders were ERISA participants.
Provident Life & Accident Insurance Co. v. Sharpless,
F.3d (5th Cir. 2004).
Plan’s Recurrent Disability Clause Tested
Participant with a recurrent health problem changed jobs. When a disability recurred, he believed that the old employer had an obligation to resume his disability under the old plans recurrency rules. The court held otherwise.
Loria v. Children’s Hospital, 31 EBC 2171
(E.D. La. 2004).
Actively-at-Work Eligibility Issue
Participant suffered total
and permanent disability after leaving active service but prior to the date of
official resignation. Court held that claim for LTD benefits was not valid.
Keiser v. CDC Investment Management Group,
32 EBC 2953 (S.D. N.Y. 2004).
Preemption
Overview
The primary topics with LTD benefits where ERISA preemption has been a factor in litigation are as follows:
· Was policy a individual policy or a group certificate?
· Was the arrangement funded as an ERISA plan?
· Where there is diversity (i.e., both state and federal issues), it must be determined prior to and not after litigation?
· How is the sole-owner participant to be treated?
· What state law relief is available with a claim denial? (Examples include: state’s whistleblower law, bad faith law, prorating of disability offsets law, breach of contract law; tortious invasion of privacy law, e.g.
Preemption
When the insurer, as dependent showed that the LTD plan was employer-financed, it became an ERISA plan. Participant’s state law relief was consequently denied.
Stuart v. UNUM Life Ins. Co.,
217 F.3d 1145 (9th Cir. 2000).
ERISA Preemption and LTD Benefit Denial
Participant sought relief from insurer’s denial action as a state law matter; i.e., bad faith claim for tortious breach of insurance contracts. The court found such state law was preempted by ERISA.
Chamblin v. Reliance Standard Life Ins. Co.
168 F.Supp.2d 1168 (N.D. Calif. 2001).
Physician Status in a Clinic – Employee or Not?
The physician wanted to be denied status as an employee in a small clinic of which he was a major partner. This was in order that he could avoid the ERISA rules and seek state law relief review. The court held for the clinic; physician was an employee and participant in an ERISA-governed plan.
Santino v. Provident Life and Accident Ins. Co.,
276 F.3d 772 (6th Cir. 2001).
Preemption and LTD Claim Denial
Participant sued the insurer for tortious invasion of privacy (a state law offense) when the insurer used detectives and surveillance to investigate his disability claim. The court found that such state law was not preempted by ERISA.
Dishman v. UNUM Life Ins. Co. of America,
250 F.3d 1272 (9th Cir. 2001).
Preemption of State Law Governing Offsets
Many states have laws which require that offsets with multiple LTD policies be prorated. Court held that such laws were preempted by ERISA LTD plans.
Tuohey v. Lincoln National Life Ins. Co.,
273 F.3d 817 (9th Cir. 2001).
Preemption
Participant sought relief from an LTD claim denial as a state law violation. The law was Pennsylvania’s bad faith statute. The court said that such law was preempted by ERISA.
Bell v. UNUM Provident Corp., 28 EBC
2850 (E.D. Pa. 2002).
Preemption
Participant wished stated law relief from the claims denial of his LTD benefit. The court held that such relief was denied by ERISA because of preemption.
Talbert v. Reliance Standard Life Ins. Co.,
27 EBC 2202 (D. Me. 2002).
Business Owner as LTD Beneficiary
The business owner was an ERISA beneficiary under the firm’s group LTD policy. As such, any disputes which the owner had with the insurer (plan administrator) were ERISA-governed. Owner wanted his LTD claims dispute to be under state law which the court denied.
Goodson v. American United Life Ins. Co.,
28 EBC 1423 (S.D. Ind. 2002).
Is LTD Plan an Employee Benefit Plan?
In this instance an individual policy, employer paid, was involved. The employer had no control, discretion over the policy, it merely paid the premiums. In a dispute the court held that ERISA was not involved.
Collazo v. Life Ins. Co. of North America,
217 F.Supp.2d 189 (D. P. R. 2002).
Group v. Individual LTD Policy
Clinic of physicians had a fully insured group LTD plan clearly governed by ERISA. When the clinic disbanded, the physicians were able to keep their policies. Were such policies to be treated as individual or group? The court said the dissolution could not change the spots on the policies so that they remained ERISA-governed. State law relief was therefore not available to them.
Brown v. Paul Revere Life Ins. Co., 28 EBC
1427 E. D. Pa. 2002)
Preemption and LTD Plan Benefits Denial
When his LTD benefits were denied, participant sought state law relief. Such was denied by the court as an ERISA preemption issue.
Moffett v. Halliburton Emergy Services, Inc.
291 F.3d 1227 (10th Cir. 2002).
Preemption – New Age Decision
Notwithstanding ten years of court decisions to be contrary, the court held that an ERISA plan’s LTD claim denial could be challenged as a state bad faith law matter. The court believed the national trend in such matters was that a state bad faith law was industry-specific and not benefit plan-specific.
Rosenbaum v. UNUM Life Ins. Co.,
28 EBC 2023 (E.D. Pa 2002).
Preemption
ERISA LTD group plan permitted participant to covert to a private plan (which was paid and endorsed by employer). In a claim dispute involving such individual plan, the participant wanted state law relief (breach of contract, bad faith, misrepresentation, intentional infliction of emotional distress etc.). The court said such were all preempted by ERISA.
Selkridge v. United of Omaha Life Ins. Co.,
27 EBC 230 of (D.Virg. Is. 2002).
Preemption
Adams argued that his disability claim was denied by the bad faith of UNUM and sought a state court venue. UNUM, relying on Dedeaux v. Pilot, argued that the LTD plan was an ERISA plan, albeit fully insured. The court, without addressing the issue of the claim, was asked to rule on the preemption issue. The court held the plan to be an ERISA plan eliminating the need to be heard in a state court. That is, Adams lost.
Adams v. UNUM Life Ins. Co. of
America
200 F.Supp.2d 796 (N.D. Ohio 2002)
Preemption
Participant may sue for benefits but for nothing else with her LTD ERISA plan. She sought relief as a state law matter for these alleged offenses by the insurer:
· Breach of contract
· Promissory estoppel
· Unjust enrichment
· Negligence
· Breach of good faith and fair dealing.
All of these complaints were denied by the court.
Hartman v. Wilkes-Barre General
Hospital,
237 F.Supp.2d 552 (M.D. Pa. 2002).
Preemption
In the denial of LTD benefits, participant wished to proceed against employer as a state law bad claim denial matter. The court held for the plan administrator.
Walker v. Southern Company
Services, Inc.,
279 F.3d 1289 (11th Cir. 2002)
Preemption
Participant had no logic to seek non-ERISA state law action where plan and its administrator clearly indicated that it was an ERISA-governed plan.
Sanfilippo v. Provident Life and
Casualty Co.,
178 F.Supp.2d 450 (S.D.N.Y. 2002).
Was LTD Plan Governed by ERISA (Preemption)
The participant argued that the LTD plan was not an ERISA plan (thereby opening up state law relief options) because the ERISA compliance requirements were not met. The court held that the compliance matters were of no moment and held for the insurer.
Greenblatt v. ITT Hartford Life Ins. Co.,
29 EBC 1091 (D.N.J. 2002).
ERISA and Non-ERISA Plans in One Group Contract
Because the benefits were markedly different for the owners and the employees, the court said there could be both and ERISA and a non-ERISA plan under a single group LTD contract.
Tierney v. UNUM Life Ins. Co., 97 S.W.3d
842 (Tex. Ct. App. 2002).
Preemption
Insurer’s medical advisor was a whistleblower to the practices of the insurer on LTD claims; for this the advisor was fired. The advisor filed a complaint under the state’s whistleblower law claiming it to be a non-ERISA matter. The insurer argued that the advisor had the authority to deny ERISA claims and was therefore an ERISA fiduciary. The advisor’s state law complaint was denied.
McSharry v UNUM Provident Corp.
237 F.Supp.2d 875 (E.D. Tenn. 2002).
LTD Claim and Punitive Damages
The Rhode Island bad faith insurance law was invoked in an LTD claims dispute. The court decided that the law in question was ERISA-preempt.
Morris v. Highmark Life Ins. Co., 30 EBC
1965 (D.R.I. 2003).
Preemption
LTD plan denied claim; irate participant wanted relief as a state law matter (i.e., bad faith denial). Using the recent Supreme Court decision in Kentucky Association of Health Plans, Inc. v. Miller, the court asked two questions as regards the state’s bad faith law:
1. Was the state law specifically directed towards entities engaged in insurance?
2. Did the state law substantially affect the risk pool arrangement between the insurer and the insured?
The answers for the state’s bad faith law are yes and no. The no answer means that it is not saved from preemption. That is, the law is preempt which meant that bad faith penalties would not be invoked by a state court.
McGuigan v. Reliance Standard Life Ins. Co.,
30 EBC 1525 (E.D. Pa 2003).
Individual Supplemental Disability
Clinic provided group STD with insurer X and payroll deduction and supplemental LTD through InsurerY. While clearly the STD was a welfare plan, such question with the LTD was moot. The court made the five-element test:
· Plan, fund or program?
· Plan established or maintained?
· Was employer dominant?
· Was purpose to provide benefits?
· Were benefits for participants or beneficiaries?
The court held that all of the five elements were met and that the plan was a welfare plan. The plaintiff won which is one more financial set back to fully insured LTD coverage.
Halperin v. Equitable Life
Assurance
Society of the United States,
___F.Supp.2d___ (D. Colo. 2003).
LTD Plan for Agents of Insurer
Since insurer publicized the plan, collected premiums therefore and affirmatively established the plan, it was an ERISA plan. That participants were, in all particulars, independent contractors did not mean that plan was not an ERISA-governed plan.
Turnoy v. Liberty Life assurance Co.;
29 EBC 2609 (N.D. Ill. 2003).
State Punitive Damages Law Not Preempted
The two issues involved in the LTD claim denial were adjudicated by the court as follows:
and therefore would apply to insurer's action of prorating downward the LTD benefits based upon earning of the company. The LTD participants were all shareholders and their earnings would have been reduced had salaries been equated to employer profits. For trying to renege on benefits, the employer was held accountable as a state law matter.
Stone v. Disability
Management Services, Inc., 31 EBC 1741 (M.D. Pa. 2003).
UNUM Bad Faith Denial
The court held contrary to Kidneigh v. UNUM in a recently reported District Court case.
Rosenbazcm v. UNUM Life Ins. Co.,
31 EBC 1 541 (E.D. Pa. 2003).
ERISA Preemption-Single Employee Plan (Owner)
Small employer purchased
an LTD policy for himself and one employee. When his claim was denied, he sued
as a state law matter. Insurer defended as an ERISA matter. The court held for
the employer.
Dimaria v. First UINUM Life Insurance Co., 31 EBC 1215 (S.D. N. Y. 2003).
Preemption – Safe Harbor Rule
The aggrieved participant
sought state court relief for an LTD claim denial. The court applied the
four-prong safe harbor test and found that only one of the four was met whereas
all four had to be met to gain state law relief. In this instance, ERISA
preempted the state law.
Sutherland v. U.S. Life Ins. Co.,
30 EBC 2467 (E.D. La. 2003).
Workplace – Sited Individual Policies
This
is another dispute involving an employee pay-all but employer-sponsored LTD
plan. The participant wished the venue to be a state court but the court held that the employer's stamp of authority was such as to make it an ERISA plan. Thus the
participant had to have his complaint heard in a federal court.
Stern v.
Provident Life& Accident Ins.
F.Supp. (M.D. Fla. 2004).
Preemption – Court Held Plan to Be an ERISA Plan
The
participant, with a claim denial compliant, attempted unsuccessfully to have
the dispute tried in a state court as a state insurance law matter. The court
said it was clearly an ERISA matter.
Lippard
v. UNUM Provident Corp.
30
EBC 2561 (M.D. NC 2003).
Workplace – Based Individual Disability Policies
The
plan was an employer-promoted employee-pay-all LTD plan. After a claim denial,
the participant sought relief as a state insurance law infraction. The court
held that the employer’s mark was on the plan to such an extent that it was an ER1SA plan which defeated
participant's plans to receive damages beyond the payment of the claim.
Anderson
v. UNUM Provident Corp.
369 F.3d 1257 (11 th Cir. 2004).
Workplace – Based Individual Disability Policies
Employee-pay-all LTD had these employer marks on the plan’s’ administration:
· Chose insurer.
· Indicated that it established the plan.
· Was agent for legal service of process.
· Was plan administrator.
· Did numerous administrative functions.
For these reasons, court held the plan was an ERISA plan and that participant's state law claim was not appropriate.
Anderson
v. UNUM Provident Corp. 369 F.3d
1257 (11th Cir. 2004).
State Bad Faith Relief Denied-ERISA Preemption
Participant asserted that
Kentucky unfair claim settlement practices law should apply to his LTD benefits
denial. Court held such state law was preempted by ERISA.
Bonnell
v. Bank of America
284 F.Supp.2d 1284 (D. Kans. 2004).
Court Held Denial Not Bad Faith
Aggrieved plan participant wished the state’s bad faith law to be invoked against the insurer. The court said no. ERISA said it should not be invoked and the plan was clearly an ERISA plan.
Keenan v. UNUM Provident Corp.,
2585 (E.D. Pa. 2003).
State Law Relief Denied – Preemption of ERISA
Being a stock-trader, participant wanted state law relief with an LTD claim denial. Court held for the plan because the clear of intention of such plan was to treat a trader as an employee.
Dwyer v UNUM Life Ins. Co. of America, F.Supp.2d (N.D.III. 2004).
Insurer Not Held Liable for Employer’s Error
Participant sued insurer for claim denial the reason for such was tardy claim tiling. The reason for the untimely filing was employer error. Court held for the insurer and also ruled that it was not the obligation of the insurer to investigate the reasons for the untimely claims filing.
Walley v. Wal-Mart, Inc. ___F.Supp.2d___ D. Mass. 2002).
State’s Bad Faith Law Pree?????
The
participant sued the plan for unpaid self-funded LTD benefits occasioned by her
rheumatoid arthritis medical condition claim both an ERISA §502(a) breach and
also a violation under the Pennsylvania bad faith statute (42 Pa. Cons. Stat.
Ann. §8371). The court said yes to
the ERISA violation but no to
the state bad faith violation for these reasons:
1. The
state’s bad faith law gives the participant an additional cause of action and
remedy but does not involve the spreading or transferring of risks as required
by Kentucky Association v. Miller.
2. Notwithstanding the logic in (1) above the state's bad faith law would not apply because it provides remedies in addition to those provided by ERISA.
Dulce v. Hercules, Inc. Insurance Plan. F.Supp.2d (E.D. Pa. 2004).
Relief Sought was Payroll and Not an ERISA Plan
Issue
In an employment-related dispute, the employer caused the participant to receive reduced LTD benefits. Participant sued but employer claimed defense as an ERISA matter. Since participant sought cash damages from the employer, and not the plan, the court held for the participant; i.e., it was not an ERISA contest.
Denniston v. Taylor, 32 EBC 1805 (S.D. N.Y. 2004).
State Relief Not Allowed – ERISA Preemption
When
LTD benefits were terminated, the participant sought relief as a state law
matter. The court held the fully insured plan was an ERISA plan and that state
law relief would not apply.
Rothhaupt
v. UNUM Provident Corp.
31
EBC 1987 (N.D. N.Y. 2004).
Preexisting Conditions
Overview
Preexisting conditions apply to group LTD the same as group medical. Post-HIPAA, the importance of preexisting conditions has fallen off dramatically. Group LTD and group medical read about the same as regards preexisting.
Preexisting Condition and LTD Denial
The participant visited her physician during the period just prior to being covered; medical reasons were urinary frequency and urgency. After she was covered and all of her tests were completed, she was diagnosed as having interstitial cystitis which rendered her disabled. The insurer was unable establish a clear and credible link between the symptoms and the ultimate diagnosis. The court held that the insurer abused its discretion by denying the claim and held for the participant.
Cecchanecchio v. Continental Casualty Co.,
27 EBC 1056 (E.D. Pa. 2001).
Preexisting Condition
During the exclusionary period, the participant had medical care for chest pains and shortness of breath and was treated for pneumonia. At this early time, the physician suspected lung cancer but did not so communicate this suspicion to the participant. When the disability commenced, the plan administrator (insurer) denied the LTD claim for preexisting condition reasons. The court held for the participant.
Hall v. Continental Casualty Co.,
27 EBC 2553 (W.D. Wisc. 2002).
Preexisting and LTD Claim
Claim was denied due to preexisting. The cause of disability was a back problem. Participant had previous medical visits for such back problem and the court found that the insurer correctly denied the claim.
Kennard v. UNUM Life Ins. Co., 211 F.Supp.2d
206 (D.Ma. 2002).
Preexisting and LTD Claim
Participant was treated for the symptoms of fibromyaligia (pre-coverage period) even though such was not finally diagnosed as such until a later date (post-coverage period). The court held that the claim was properly denied because of the preexisting condition exclusion.
Julyan v. Fortis Benefits Ins.
Co.,
29 EBC 2321 (D. Minn. 2002).
Preexisting Condition Error by Plan Administrator
The pre-coverage condition for which medical care or treatment was sought was hypercholesterolemia; the post-coverage disabling condition was chronic obstructive pulmonary disease. The early condition may relate to the later condition but it did not result directly or indirectly from the latter condition. The court found that the plan administrator abused its discretion in denying the claim; i.e., The court held for the participant.
Thompson v. Life Ins. Co. of
North America,
27 EBC 1874 (4th Cir. 2002).
LTD Plan Dropped and Participant not Told
Employer’s LTD plan was dropped and after a time reinstated with a preexisting provision; the plan was employer-pay-all. The issue was not one of claims but of eligibility for coverage. Employer failed to inform participants of coverage changes. Participant sued seeking monetary damages for an ERISA fiduciary breach. The court denied this request.
Sampson v. Rubin, 29 EBC 1293
(D.Mass. 2002).
Preexisting Held for Insurer
The issue was whether the participant received care
and treatment for primary lateral sclerosis (albeit undiagnosed at the time)
during the look back period. Since the diagnosis was not made until
after the coverage had attached, the participant argued that it was not a preexisting
condition. The court held for the insurer.
Glista v. UNUNI Life Ins. Co. of America,
F.Supp.2d (D. Mass 2003).
Preexisting-Mental or Ill-Defined Symptoms
Participant had taken Prozac during preexisting exclusionary period; he later filed an LTD claim for the following conditions:
· Stress reactions
· Anxiety disorder
· Clinical depression.
Participant alleged the Prozac was for fatigue and stress and was unrelated to the post-Rx conditions. Court held for plan.
Connell v. Hartford Life and Accident Ins. Co.,
F.Supp.2d- (D. Minn. 2004).
Preexisting with Insurer Conflicted Interest
During exclusionary period, physician treated the
symptoms of multiple sclerosis (diagnosed after the exclusionary period) as
though such symptoms were heart, back problems, etc. The appeals court said the
preexisting provision should not be used to deny benefits. Because of the
conflicted interest of the insurer, the court applied a heightened standard of
renew.
McLeod
v. Hartford Life and Accident Ins. Co., F.3d (3d Cir. 2004).
Preexisting and Conflicted Interest
The
court, citing severe conflicted interest of the insurer-administrator, held for
the participant. The disabling condition was a severe staph infection which
resulted in for elective heart surgery. The court believed that the nexus
between the preexisting condition and the disabling condition was too remote.
Fought v. UNUM Life Ins. Co. of America, F.2d (10th Cir. 2004).
Preexisting – Conflicting Interest of Physician
Chronic cough during preexisting period developed
into lung cancer which lead the insurer to deny an LTD claim. The court held
for the plan. That consulting physician had a conflicted interest was
discounted by the court when such physician effectively testified that there
was no conflicted interest such as to refute the clear facts.
Futumana v.
UNUM Life Ins. Co., F.Supp.2d (W.D. Wash. 2004).
SPD-Related Issues
Overview
Plan sponsors of and all parties thereto have found that LTD, as with medical, may bring sobering experiences from SPD language glitches. While the SPD should have the Firestone v. Bruch language, it often does not. As with medical, SPD-document variations will not go against the plan drafter if such differences were not a factor in the claim denial. Courts expect the paperwork to be done correctly and will quickly side with the participant when it is not.
Troublesome SPD Phrase
The SPD said that the plan administrator “should expect in most cases that the claimant should be entitled to benefits.” Participant wanted to turn that phrase against the plan administrator so as to get his claim paid. The court said that such phrase did not mean that payment should be automatically assumed payable.
Butler v. Shoemaker, 26 EBC
2089 (D. Ore. 2001).
Standard of Review
Plan document clearly gave administrator discretion to adjudicate claims. SPD was silent thereon. Even so, the court allowed the arbitrary and discretionary standard because (a) the participant did not rely on the SPD and (b) the plan and SPD were not in conflict. Davis v. First Union Corp. Long Term Disability Plan, 213 F.Supp.2d 29 (D.C. Mass. 2002).
Faulty SPD and Nonexistent Plan Document
Several plan participants became totally disabled under a new LTD plan at the time when (a) plan document was not in place and (b) SPD was in error by not citing the Social Security or workers’ compensation offset. Participant claimed a benefit under the incorrect SPD language even though it was corrected shortly thereafter. Court held for the participant.
Feifer v. Prudential Ins. Co. of America,
306 F.3d 1202 (2d Cir. 2002).
SPD Glitch – No Clear Plan Administrator
There
existed a Hartford Life Insurance Co. Multiple Employer Trust which trust was the applicant-owner-payer-beneficiary of a fully insured group
policy. When a claim was denied, the Hartford Life was sued as the group
insurer. The Hartford argued that it could not be sued as an ERISA matter but
the Trust had to be sued. The court refused to honor the request at Hartford
because the ERISA could not be identified. The critical SPD to designate an
agent for service of process as required by ERISA. This designation would have permitted the participant to sue the
proper party.
Penrose v. Hartford Life and Accident Ins. Co.,
____F.Supp.2d____(N.D. Ill. 2002).
Faulty Plan Language – SPD
The LTD SPD failed to
disclose that participant had to be actively at work when disability commenced.
The employer, for this plan language oversight, had to pay an LTD claim when
participant was, in fact not actively at work when LTD began.
Horn v. Cedant Operations, Inc.,
31
EBC 1371 (10th Cir. 2003).
SPD – Plan Document Conflict
The SPD was poorly written
and conflicts existed between the SPD and the plan document. Employer’s letter
approving the plan benefits for the participant was not deemed to be
significant by the court. The court said that because of the conflict, the SPD
should prevail.
Ready v.
Dawn Food Products Inc., F.Supp.2d
(W.D. Ky. 2004).
SPD Language or Venue Vague
Participant
wished the words in the SPD “Legal action may be brought in either state or
federal court” to mean that it could file at its option in either venue. The
court held that such words were a mere recitation of ERISA included to make the
SPD compliant with DOL guidelines. The words did not give the participant a
choice of venue.
Cruthus v. metropolitan Life Ins. Co., F.3d (7th Cir. 2004).
Occasional v Daily Use of Cocaine
Misrepresentation issue
revolved around meaning of regular use of narcotics. Participant/applicant
argued that since she had not used cocaine daily her denial as being regular
user was not correct. The court said that misrepresentation occurred and held
for the insurer.
Adzick
v. UNUM Life Ins. Co. of America, F.3d (8th Cir. 2004).
Surveillance – Related
Overview
Video and other forms of surveillance of suspected LTD malingers has become big business so it not surprising that such activities are appearing in litigation. Courts have tended in the vast majorities of instances to have accepted and/or honored video surveillance.
LTD Claims Denial and Forcing Participant to Do Some
Work
Participant alleged that insurer made original denial realizing full well that such denial would force him to do some work to keep his family from going hungry. Having caught the participant at work (by surveillance) the insurer, a good case for denial. Were the insurer’s actions contrary to public policy? The court did not believe the insurer’s actions to be contrary to public policy.
Galman v. The Prudential Ins. Co. of America,
254 F.2d 768 (8th Cir. 2001).
Working at Another Job
Participant, on surveillance, was shown to be working at her boyfriend’s store (albeit for no pay); also the insurer’s consulting physician and her treating physician had an opposing opinion. The court upheld the insurer’s denial.
Heinze v. Life Ins. Co. of North America,
28 EBC 1982 (N.D. Ill. 2002).
Surveillance Company a Fiduciary
Such surveillance company is not a fiduciary and cannot be held liable for any breach. The surveillance company did offer opinions as to benefits payability but not as a fiduciary.
Smith v. Champion International
Corp.,
28 EBC 2847 (D.Conn. 2002).
Working at Another Job
Participant claimed total disability from her employer and worked at least part-time at a retirement home which she co-owned. For this the insurer terminated her benefits. The Court held for the insurer.
Hersee v. Allmerica Financial
Life Ins. Co.,
28 EBC 1623 (D.Mass 2002).
Surveillance v. Treating Physician Opinion
Surveillance videos showed clearly that participant’s mobility and investigator’s interview indicated something was amiss. Yet the treating and consulting physicians all concurred that participant was disabled. Since the insurer lacked concrete evidence of malingering, the court held for the participant.
Marziale
v. Hartford Life & Accident Ins. Co.
28 EBC 2367 (E.D. La. 2002)
Surveillance-Based LTD Denial
The condition was chronic fatigue syndrome and the LTD claim was denied because the video surveillance clearly showed that participant was not disabled. Court held for the plan.
Carugati v. Long Term Disability
Plan for Salaried
Employees, 27 EBC 2998 (N.D. Ill. 2002).
Surveillance Evidence v. Treating Physician’s
Opinion
The plan administrator denied the LTD claim using evidence developed by independent professionals. This evidence conflicted with views of participant’s treating physician. Court held for the plan administrator.
Webster v. Black & Decker
(US), Inc.,
27 EBC 2677 (4th Cir. 2002),
Russell
v. Paul Revere Life Ins. Co.
288 F.3d 78 (3d Cir. 2002).
Surveillance Tape Crucial to Claims Denial
As so often happens, the video of the participant's activities lead to a proper and successful claims denial.
Osbun
v. Auburn Foundry, Inc., F.Supp.2d (N.D Ill. 2004)
Treating Physician Issues
Overview
The plan administrator should always consider the opinion of the treating physician (if there is one) and give it a higher deference than the opinions of a consulting physician. However the opinion of the treating physician is a contributing but not a dispositive factor.
Social Security and Treating Physician Issue
The issue involved arthroscopic surgery of the knee where the plan administrator had discretionary authority as required by Firestone v. Bruch. The physicians (both the treating and consulting) agreed that the disability was total but temporary where plan definition was total and permanent. Also, the participant had a Social Security disability award. The court opined that the plan administrator’s denial was proper reasoning as follows:
· Committee’s actions were not arbitrary or capricious.
· Award of Social Security disability is not germane to the dispute.
· Committee honored the opinion of the treating physician.
· Committee accepted participant’s assertion that no list of other jobs had been given to him. This was not the task of the Committee, however.
Extensive discuss of the standard of review was provided by the court. References were made to the distinction between abuse of discretion and arbitrary and capricious, which was the basis of the review. No issue of conflicted interest arose. The highest deference was awarded the decision of the plan administrator.
Block v. Pitney-Bowes, Inc., 952 F.2d
1450 (D.C. Cir. 1992).
Treating Physician Rule
The court held that the treating physician rule of Social Security was an appropriate standard to apply when discerning whether or not the plan administrator abused its discretion. The court believed the rule to be consistent with ERISA principles; i.e.; the rule may be used but it does not have to be used.
Regula v. Delta Family Care
Disability
Survivorship Plan, 266 F.3d 1130 (9th Cir. 2001).
Treating Physician Rule
The court held that the Social Security “treating physician rule” (by which such physician’s opinion is given great weight) does not have to apply to ERISA benefit determinations. In this case, the court noted inconsistencies in the opinion of the treating physician.
Needham v. CIGNA Group Insurance,
26 EBC 2026 (W.D. Mich. 2001).
Treating Physician Rule
Court held that with an ERISA plan, the need to give deference to the opinion of the treating physician over the opinion of a paid consulting physician does not exist.
Jackson v. Metropolitan Life Ins. Co.,
27 EBC 1185 (6th Cir. 2001).
Treating Physician Opinion
At plan administrator’s direction, participant visited several physicians and an independent medical examiner who recommended that an independent psychiatric evaluation be made. Instead, all of the records were reviewed by the plan’s psychiatric consultant who opined that there was no total disability based solely on the submitted documents. Since the plan administrator failed to get an independent opinion and failed to get a hands-on opinion, the court held for the participant.
Henderson v. Ameritech Corp.,
27 EBC 1515 (6th Cir. 2001).
Treating Physician and Benefit Review
Court found these facts with an LTD claim denial:
1. Treating physician said participant was totally disabled.
2. Two independent physicians said he was not totally disabled and could do some work.
3. Plan administrator did not research Item 2.
Court said Item 1 did not deserve greater weight thank Item 2; that research for Item 3 was not required. Court held for the plan administrator.
Douglas v. General Dynamics Long Term Disability Plan,
29 EBC 1471 (6th Cir. 2002).
Applicability of Treating Physician Rule
The court held that the contested LTD claim should be paid because the treating physician opined as to the disability of the participant. This deference to the treating physicians opinion is becoming commonplace in LTD. To counterbalance this deference, the plan administrator may have the plan’s physician review the report of the treating physician and address, with specificity, why such report is questionable.
Darland v. Fortis Benefits Ins. Co.,
___F.3d___ (6th Cir. 2003).
Standard of Review
There is a claims processing rule followed by CMS (both for Medicare and Social Security disability) which requires the opinion of the treating physician to be given deference. The Supreme Court held that this rule would not apply to ERISA plans.
Black & Decker Disability Plan v. Nord,
___U.S.___ (2003).
Treating Physician Issue
Based upon evidence submitted, insurer denied the LTD claim; both the treating physician and the consulting physician reports were reviewed. The insurer invited the participant to submit clarifying evidence which such participant failed to do so. The court held that the action of the insurer (plan administrator) was not arbitrary and capricious.
Sandoval v. Aetna Life and Casualty Ins. Co.
967 F.2d 377 (10th Cir. 1992).
Aggrieved participant with an LTD denial wanted to establish conflicted-interests of insurer’s hired vocational consultant. To do so, the participant wanted extensive background and experience items of such consultant. The court said such request was excessive.
Abromitis v. Continental Casualty Co.,
30 EBC 2928 (W.D. N.C. 2003).
“Sloppy” Physician Opinions Crucial to Outcome
Attending physician held for total disability; consulting physician held against disability. Consulting physician flinched and modified its position on the sole basis of a phone conversation. Insurer proceeded with denial. Court held for participant.
McDonald v. Western-Southern Life Ins. Co.
F.3d (6th Cir. 2004).
Winners and Losers
Overview
This section offers a review of LTD litigations which usually involve multiple issues and which are reviewed under two headings:
· Participant was the winner.
· Participant was the loser.
The litigations are complex and do not lend themselves to being easily assorted by a single issue. The reader is left to review each case so as to get the feel of how courts are deciding the many and widely varying factual situations. Most of the insight will be gained by seeing how the courts use the (a) de novo v. arbitrary and capricious standards and (b) sliding scale of deference with the arbitrary and caprious standard and (c) role of conflicted – interests in the court’s decision.
Participant was the Winner
Poor Claims Processing by Blue Cross
Quinn believed that the benefits which she received under her Blue Cross short term disability plan should continue under her Blue Cross LTD Plan. Her medical condition was chronic interstitial cystitis. Blue Cross believed otherwise. The lower court had awarded retrospective benefits and attorney fees to Quinn. The court agreed that Blue Cross mishandled the claim and told the plan’s Review Committee to reevaluate their decision that Quinn was totally disable as defined by the plan. Quinn lost in that she did not receive her retroactive benefits and had to pay her attorney’s fees. Because the claim decision was made by a plan fiduciary (with clear contractual authority to do so), the court’s review was not de novo (i.e., it was reviewed arbitrary and capricious). Because no issue of conflicted interest could be discerned, the plan fiduciary was afforded the highest deference. The actual claim funder was the Illinois Blue Cross plan; the plan fiduciary represented the Blue Cross Blue Shield National Association.
Quinn v. BlueCross and Blue Shield Association,
161 F.3d 472 (7th Cir. 1998).
Self-Funder gets a De Novo Review
The employer self-administered its LTD plan and acted in such an egregious manner that the court reviewed the appeal de novo. Here is what distressed the court:
· Employer, while administering its own self-funded plan had an obvious conflict of interest.
· Employer did not abide by its own claim procedures.
· Employer failed to provide an adequate ERISA denial letter.
· The presence of the disabling effects of chronic disease syndrome was proven by both (a) treating physician’s statements and (b) consulting physician’s statements that disability was physical with secondary psychiatric disorders.
· Depression and reliance on narcotics as a treatment was not the primary cause of disability which was a chronic fatigue syndrome; such syndrome was physiological in nature.
· Medical tests were standard or protocol for chronic disease syndrome albeit not such for any other disease.
Court held for the participant.
Frederick v. Intel Corp.,
181 F.3d 1105 (9th Cir. 1999).
Proper Claim Denial
When participant failed to provide medical evidence of continuing total disability, the plan administrator properly denied the claim. Participant’s complaints reflected employer’s poor claim handling (trying to restrain or reassign, e.g.) were irrelevant according to the court.
Randazzo v. Federal Express Corp.
Long Term Disability Plan
24 EBC 2018 (S.D. N.Y 2000).
LTD Claim Denial – Arbitrary and Capricious
Disabled city employee ran for mayor. The plan administrator held that such participant’s campaigning activities were not compatible with being disabled. The court applied the preferential arbitrary and capricious standard and held for the plan.
Piscottano v. Metropolitan Life
Ins. Co.,
118 F.Supp.2d (D. Conn. 2000).
Remand to Plan Administrator Not required
When the Appeals Court determined that the plan administrator had acted in an arbitrary and capricious manner, the question arose as to whether the issue should have been remanded to the plan administrator for proper adjudication. The court held that such was not needed; it merely ordered the LTD claim to be paid.
Levinson v. Reliance Standard Life Ins. Co.
245 F.3d 1321 (11th Cir. 2000).
Claim Denial and Discoverable Evidence
Participant wanted to see the notes, e-mails memos, telephone logs, etc. between the insurer and other personal dated prior to the litigation at which time the client-attorney privacy rules would apply. The insurers protested; the court held for the participant.
Coffman v. Metropolitan Life Ins. Co.,
204 FRD 296 (S.D.W. Va. 2001).
Egregious Reading Error by Claims Examiner
The insurer’s claims examiner failed to read the clear language of the plan’s definition of compensation and, in so failing, mispaid benefits. Since the litigation could have been avoided by a more dutiful perusal, the court made the insurer pay the participant’s legal fees.
Hess v. Hartford & Accident Ins. Co., 274 F.3d
456 (7th Cir. 2001).
Poor Claim Handling by Insurer in LTD Denial
The insurer was found guilty of the following:
· Misreading medical records
· Taking evidence out of context
· Straining to reach a self-serving conclusion.
The court believed this to be an abuse of discretion and held for the participant.
Myers v. Hercules, 253 F.3d 761 (4th Cir. 2001).
Plan Administrator’s Arbitrary and Capricious Action
The participant provided the plan participant with proof from his attending physician that he was totally disabled. Plan administrator claimed this evidence was not objective and summarily denied the claim without requiring participant to submit to an examination that would be objective. The plan administrator had not a shred of evidence that would refuse the participant’s proof but denied the claim anyway. For this arbitrary and capricious act, the court held for the participant.
House v. Paul Revere Life Ins.
Co.,
241 F.3d 1045 (8th Cir. 2001).
LTD Claim Denial Overturned
The court, in a de novo review, was distressed that the insurer would cherry pick excerpts from the report of the participant’s physician; also that the participant was disabled by Social Security standards was compelling evidence of disability.
La Barge v. Life Ins. Co. of North American,
26 EBC 1245 (N.D. Ill. 2001)
Court Improperly Adjudicated Claim
The appeals court held that the district court was in error to have, in effect, decided the claim before the plan administrator had completed its deliberations. There was nothing for the District Court to rule on until there was a decided issue, which there was not.
Peterson v. Continental Casualty
Ins. Co.,
228 F.3d 112 (2d Cir. 2002).
Unsupportable LTD Denial
Plan administrator abused its discretion by denying the participant’s LTD ongoing claim because of the other occupation provision. The action of the plan administrator which the court found objectionable was to deny without the support of creditable evidence.
Norris v. Citibank N.A. Disability Plan,
308 F.2d 880 (8th Cir. 2002).
Imperfect Claim Denial Letter
The initial denial letter of the plan administrator was poorly written because it failed to specify what information was needed to perfect the claim. Because of this egregious error, the court reviewed de novo. The courts will look to the initial claim denial letter as being precise, and unambiguous with clearly articulated reasons for denial, either medical or procedural.
Olive v. American Express Long
Term Disability
Benefit Plan, 183 F.Supp.2d 1191 (C.D. Calif. 2002).
LTD Claim Denial and Miscellaneous Issues
The participant’s disability claim for lupus was denied for preexisting condition reasons and contested. The significant decisions of the courts are as follows:
· Being an ERISA plan, any state law relief is denied.
· Court gave no relief to consequential damages from the denial (loss of job, other employee benefits).
· Penalties for not meeting ERISA compliance standards are on the with employer and not on the insurer.
· It was appropriate that awarded disability benefits be adjusted for interest.
Coffey v. UNUM
Life Ins. Co.,
302 F.3d 576 (6th Cir. 2002).
Unfair Claim Review
Participant, a long sufferer with post-polio syndrome, was increasingly unable to carry on his occupational duties which required extensive travel. He basically toughed it through until he was totally disabled. The court was critical of insurer for presuming participant’s act of toughing it through was equivalent to not being under the regular care of a physician. However, the denial was allowed to stand when the court realized that participant was dilatory in not providing proof of disability.
Winters v. UNUM Life Ins. Co. of America,
28 EBC 2891 (W.D. Wisc. 2002
Improper Claim Denial
Plan administrator made several claims errors:
· Did not consider participant’s particular all ailment.
· Ignored or discounted attending physician’s statement.
· Vocational consultant interviewed but did not test the claim out.
· Consulting physical opined from records but did not examine such records.
For these reasons, the court held for the participant.
Austin v. Continental Casualty
Co.,
216 F.Supp.2d 550 (W.D. N.C. 2002).
Abuse of Discretion by Plan Administrator
The employer’s personnel department instructed the plan’s claims fiduciary (claims committee) to terminate the participant’s LTD claim without investigation. One of the reasons was that the participant was seen working at his wife’s restaurant. This was an egregious action by the employer for which the court decided that the claim was payable.
Shelton v. ContiGroup Companies,
Inc.,
285 F.3d 640 (8th Cir. 2002).
Insurer’s Gross Misinterpretation of Policy Wording
The insurer denied the LTD claim because it confused “unable to perform all material duties.” with ”unable to perform a single material duty.” For this lapse, the court held that the insurer was guilty of abuse of discretion.
Lain v. UNUM Life Ins. Co., 279 F.3d
337 (5th Cir. 2002).
Egregious Claims Processing
Insurer (plan administrator) negligently made the claims denial using the medical records of the wrong individual. The reason for this error was that insurer was looking for a reason to deny the claim. The court believed the insurer’s actions to be almost outright fraud and most certainly a gross abuse of discretion.
Watson v. UNUM Provident Corp.,
185 F.Supp.2d 579 (D. Md. 2002).
Self-Funded Plan’s Inappropriate LTD Denial
The court found that the employer (plan administrator) acted inappropriately in these ways:
· Two consulting physicians said participant was not totally disabled but they were given the wrong job description. Plan administrator refused to supply correct information.
· Plan administrator’s analysis was not consistent with participant’s medical records.
· Plan administrator failed to abide by ERISA claim time-filing requirements.
Browning v. A.T.
Coal Co. Employees Comprehensive
Benefit Plan, 28 EBC 1533 (S.D. W. Va. 2002).
Faulty Claim Denial
These actions of the plan administrator were held by the court to have been an abuse of discretion:
· Alleged participant could work for 30-minute intervals which was contrary to the most recent medical records provided to it.
· Ignored those parts of the medical records which indicated a deteriorating medical condition.
· Chose to ignore good and sufficient evidence of total disability.
Wilkes v. UNUM Life Ins. Co. of America,
27 EBC 2079 (W.D. Wisc. 2002).
De Novo Review – Abuse of Discretion
The appeals court used a de novo review and found several areas of possible abuse of discretion by plan administrator:
· Denial was made after the 120 day time limit set forth in DOL Claims Regulations.
· Lack of deference was given to the statement of the attending physician.
· Medical evidence existed which showed total disability.
Jebian v.
Hewlett-Packard Co. Employee Benefits
Protection Plan, 310 F.3d 1173 (9th Cir. 2003).
Participant was the Loser
Lack of Physician A Hesitation of Disability
The TPA denied the claim because the participant failed to produce any credible evidence of disability (her attending physician failed to attest to her being totally disabled). Moreover she was, by all evidence, not disabled. The court held for the employer. Since the court proceeding was for a summary judgment, it was reviewed de novo.
Tolle v. Carroll Touch, Inc.
73 F.3d 174 (7th Cir. 1998).
De Novo Review Irregularity
The court erred in admitting outside evidence in a de novo review without good cause. The rule followed by appeals courts was this:
Type of Review Rules Regarding New Evidence
Deferential Never admitted
De Novo Initiator of appeal must show good cause for
such admission
The participant (initiator) as a result lost his appeal.
Brown v. Seitz Fords, Inc.
Disability
Benefit-Plan, 1140 F.3d 1198 (8th Cir. 1998).
Wrongful Benefit Denial and Alleged Procedural
Errors
Plan administrator was insurer under an ASO arrangement. It denied the participant’s LTD benefits based upon treating physician’s opinion who said that the participant could do his job with a motorized cart. Participant believed otherwise and sued; court held for the insurer citing these errors of the participant:
· Since plan administrator was the insurer, it was not appropriate to name employer as a defendant; only the insurer was the real-defendant.
· Correspondence between employer and insurer did not constitute serious procedural errors.
Layes v. Mead Corp., et al., 132 F.3d
1246 (8th Cir. 1998).
Improper Claim Denial
Employer, realizing the participant could not do his job as a high paid Supervisor which involved extensive travel, removed such participant to a desk job (at reduced pay). When participant failed to report for work and filed a claim for LTD, employer denied using his desk job as an occupational criteria. The court overruled employer saying the proper test was using the supervisor’s duties and not the desk duties.
Peterson v. Continental Casualty Co.,
420 (S.D. N.Y. 1999).
Full Blown v. Reasonable Vocational Evaluation
The plan, by court order, conducted a vocational evaluation. The plan performed such evaluation by reasonable criteria. In so doing, much of the participant-submitted vocational data was factored in by the plan. The aggrieved participant sued citing a breach by the plan. The court, applying the arbitrary and capricious standard, held for the plan. The court order did not require a full-blown vocational evaluation, nor was plan administrators obligated to do so.
Quinn v. Non-Contributory
National Long Term
Disability Programs, 113 F.Supp.2d 1216 (N.D. Ill. 2000).
Implication of Insurer of Insurer wanting to Buy
Back LTD Policy
In the dispute in district court over the LTD claim denial which went against the participant, the matter went to appeal, at which time the participant brought in as evidence that the insurer had attempted to buy back the policy. The participant wanted to show that the insurer was guilty per se. The court held the buy back attempt to be innocent and understandable and not suggestive of guilt. This was because when the buy back offer was made, the insurer had a legitimate dispute with the participant.
Pappa v. UNUM Life Ins. Co., 261 F.3d 492
(3d. Cir. 2001).
Proper LTD Denial on Appropriate Evidence
The court held the plan administrator’s denial to be proper because it was based on this evidence:
· Independent physician’s report
· Independent medical examination
· Independent vocational assessment
· Two-day video surveillance.
Vlass v. Ratheon Employees Disability Trust,
244 F.3d 27 (1st Cir. 2001).
Abuse of Discretion Standard of Review
Appeals court believed that the denial of the LTD claim by the plan administrator was proper in that there was a reasonable explanation for it. That the court might have come to another conclusion was no reasons to change the plan administrator’s denial. The appeals court refused to upset the denial even though it found some logic to do so.
Fletcher-Merritt v. Nor Am Energy Corp.,
250 F.3d 1174 (8th Cir. 2001).
Sliding Scale of Defense
Because the court believed the LTD claim denial contest was not evenly matched the court afforded the aggrieved participant increased deference. The participant was totally inept as to his rights and failed to be able to match wits with the insurance crowd. Even so, the court held for the plan administrator because the participant failed to properly or timely respond to the request of the plan administrator.
Friess v. Reliance Standard Life Ins. Co.,
163 F.Supp.2d 518 (E.D. Pa. 2001).
How Thoroughly Should Insurer Investigate?
Insurer had concrete evidence in its file that LTD claim was deniable. Participant alleged that insurer was derelict in not thoroughly investigating its claim. Court noted insurer’s conflicted interest by which it was not under any obligation to reasonably investigate the participant’s claim. In its review, the court needed to apply a sliding scale of reasonable and customary which it did and found that insurer was proper in its claim denial.
Gooden v. Provident Life & Accident Ins. Co.
250 F.3d 329 (5th Cir. 2001).
Being Able to Perform Other Duties
The participant suffered from a host of ailments:
· Nephritic syndrome
· Collagen vascular disease
· Mild peripheral neuropathy
· Lupus
· Congestive heart failure
· Cardiomyopathy
· Auto immune disease
· Fibromayaligia.
Notwithstanding, the participant was demonstratably not disabled from each and every occupation for which such participant was reasonable qualified by education, training or experience. Court held for insurer.
Clapp v. Citibank N.A. Disability Plan,
262 F.3d 820 (8th Cir. 2001).
Claim Denial Not Arbitrary and Caprious
Participant, disabled for Social Security and Workers’ Compensation for a twelve year period filed for total disability from his employer’s pension plan. Claim was denied and court upheld the denial. The court discounted the Social Security and workers’ compensation awards as being entirely different from ERISA plan awards (different parties, evidential standards and bodies of governing laws).
Wagner-Harding v. Farmland Industries, Inc.
Employee Retirement Plan, 27 EBC 1634 (10th Cir. 2001).
Chronic Fatigue Syndrome – Not Disability
The court found ample evidence in the file that the participant failed to bring any objective evidence of total disability from the alleged condition. Where employer was the plan administrator and the insurer was merely the claims processor, the role of the insurer as defendant was non-existent. The furnishing of plan documents was the responsibility of the employer and not the insurer.
Nichols v. Verizon Communications, Inc.,
29 EBC 1204 (D.N.J. 2002).
Proper Claim Denial
The condition of fibromyalgia and chronic fatigue syndrome afflicted a personnel director. The LTD claim was denied because while the disease was clearly recognized by her physician, its impact on her ability to perform her job was not clearly recognized.
O’Sullivan v. Prudential Ins. Co. of America,
27 EBC 2817 (S.D.N.Y. 2001).
De Novo Renew – Outside Evidence Allowed
The well-known rule is that new evidence is never introduced into an arbitrary and capricious review and only rarely into a de novo. This is one of those rare cases because it meets the following commonly-used criteria:
1. Medical issues are complex.
2. Administrative review procedures are very limited.
3. Particular or specialized evidence in plan language interpretation is needed; more so than mere historical facts.
4. Conflicted interest is involved.
5. Claims which would have been insurance contract claims pre-ERISA.
6. Obvious impossibility of such claims having been presented earlier.
By the de novo review, with new evidence, court held for the insurer.
Hall v. UNUM Provident Life and Accident Ins. Co.
America, 300 F.3d 1197 (10th Cir. 2002).
Standard of Review in LTD Denial
Participant wanted court to apply the least deferential review standard because of serious procedural irregularities, lack of good judgement by plan administrator, as well as its failure to explain the rationale of its denial. The plan administrator, however, demonstrated how it struggled to get relevant data from the participant as well as its ample explanation of the denial. The court sided with the plan administrator.
Ferrani v. Teachers Insurance and
Annuity
Association, 278 F.3d 801) 8th Cir. 2002).
De Novo v. Arbitrary and Capricious Standard
The participant filed proof that she was totally disabled because of her allergic reaction to chemicals. The employer denied and the dispute was reviewed by the District Court using arbitrary and capricious standards. The Appeals Court overruled and said that the review should have been made de novo. The court held for the insurer.
Ray v. UNUM Life Ins. Co. of America,
314 F.3d 482 (1st Cir. 2002).
Proper Claim Denial
The court held that the plan administrator’s claim denial was appropriate given these facts:
· Seeing a physicians six times in four years is not under the care of a physician.
· Referring physician-prescribed treatment is not under the care of a physician.
·
A chiropractor who failed to treat his disabling
condition is not under the care of a physician.
· Participant’s acceptance of the condition as incurable is no excuse to not see a physician.
Rosenberg v. Guardian Life Ins. Co.,
29 EBC 2517 (S.D.N.Y. 2002).
Proper Claims Determination
The court was favorably impressed with these actions of the plan administrator in adjudicating the claim.
· Reviewed over 900 pages of medical rewards.
· Spent over one year in research.
The court held that plan administrator was not bound by the position of the Social Security Administration as regards disability.
Thomas v. Liberty Life Assurance Co. of Boston,
226 F.Supp.2d 735 (D. Md. 2002).
Proper LTD Claim Denial
These are the things the plan administrator did properly:
· Used video surveillance to show activity.
· Opinions of several consulting physicians said participant was not totally disabled.
· Participant did not produce requested opinion of his treating physician supporting the claim.
As a result the court held the claim deniable.
Conti v. Equitable Life Assurance Society of the U.S.,
227 F.Supp.2d 282 (D.N.J. 2002).
Proper LTD Claims Denial
Using the abuse of discretion rules, the court found that the plan administrator obtained evidence consisting of (a) functional capacity assessments and (b) opinion of a consulting physician. Both (a) and (b) were consistent with finding of participant’s treating physician.
Gerdes v. UNUM Provident Corp.,
28 EBC 2373 (8th Cir. 2002).
Proper LTD Denial
The court held that the plan administrator (insurer) did not abuse its discretion when it denied an LTD claim.
· Denial decision was supported by convincing medical evidence.
· Decision of Social Security was not binding on the insurer.
· Careful review of independent medical examiner established that participant was not disabled.
Coker v.
Metropolitan Life Ins. Co.,
28 F.3d 793 (8th Cir. 2002).
Denial Heed to Be Reasonable
Participant claimed total disability because his insulin dependency made it illegal for him to have a commercial driver’s license. Yet his commercial license was not revoked. For this the plan administrator denied LTD. The court found the decision to be fairly debatable or at least reasonable.
Cowan v. Paul Revere Life Ins.
Co.,
27 EBC 1994 (6th Cir. 2002).
Appropriate LTD Claim Denial
The court found the insurer to be correct in its claim denial because of these reasons:
· One year after heart attack there were no chest pains, no arrhythmias, and no hypertensive response to exercise.
· In-house physician, consulting physician and occupation consultant collectively that the participant could do stressful work in his home town (but not New York).
When it was discovered by employer that participant had been working, it sued to receive back benefits. This request was denied by the plan.
Rosenthal v. First UNUM Life Ins.
Co.,
28 EBC 1985 (S.D.N.Y. 2002).
Proper LTD Claim Denial
The insurer denied the LTD claim where both the treating physician and the report of the physical therapy clinics agreed that participant was not totally disabled. The court held for the plan administrator.
Jackson v. Metropolitan Life Ins.
Co.,
303 F.3d 884 (8th Cir. 2002).
Proper Claim Review – Status of Plan for ERISA
Purposes
Since employer’s representative (agent) helped employer decide on terms of the plan, plan should be deemed an ERISA plan. Plan administrator based its denial on the opinion of three independent physicians. Court said a hands on examination was not mandatory.
Nicholas v. Standard Ins. Co.,
29 EBC 1570 (6th Cir. 2002).
MRI Reports – Ordered or Not?
The issue of MRI reports was significant to the court for these reasons:
· If they were ordered and ignored, such fact is significant.
· If they were not ordered, they should be and then made part of the evidence.
Court ordered a rehearing after such facts were established.
Houston v. Provident Life and
Accident
Ins. Co., 27 EBC 2222 (N.D. Ill. 2002).
LTD Claim Denial
White collar worker denied LTD where the cause of disability was fibromyalgia which precluding him from his computer-programming activities. Reasons for the denial were
these:
· Evidence was at hand indicating that he was more active than he or his attending physician disclosed.
· Even with the condition, he free-lanced as a web site designer.
· Medical consultant of insurer deposed that worker was not totally disabled.
Court noting workers’ heroic efforts to overcome pain, relied on his attending physician’s opinion, discarded the opinion of the consultant as self-serving and held the claim to be payable.
Hawkins v. First Union Corp. Long Term Disability Plan,
___F.3d___ (7th Cir. 2003).
Standard of Review – LTD
LTD was denied to participant with depression by three-person plan committee of the employer. The plan was self-funded. Because the plan delegated claims decisions to a committee (fiduciary) as required by Firestone v. Bruch the court did not review de novo.
In reviewing by the more lenient arbitrary and capricious standard, it was at the less lenient end of the standard continuum. That is, the court found imperfections in the insurer’s claims handling:
· Selective reliance on medical opinions
· Failing to state reasons for denial with specificity
· Omitting the key factor of participant’s salary in its denial deliberations.
In brief, the court held for the participant.
Doyle v. Nationwide Insurance Co.
Employee Health
Care Plan, 30 EBC 1576 (E.D. Penn. 2003).
Denial of LTD Claim
Plan had the opinion of an independent medical examiner supporting the continuation of the LTD benefit. There was no evidence to contest the denial. The court ruled that the denial was properly made.
Gonzalez – Rivera v. Citibank,
N.A,
30 EBC 2011 (D. P. R. 2003).