Arbitrary and Capricious Standard Continues to Favor Plan Administrators
The First Circuit, in O’Shea v. UPS decided September 15, 2016, upheld a denial of monthly payments under an annuity plan to a deceased UPS worker’s family because the worker died prior to the annuity start date. The decedent, who was terminally ill, delayed his retirement start date in order to accrue the maximum paid vacation and personal time he had for the remainder of his employment. He was not advised on his benefits application or by Human Resources that there was a survival requirement beyond the annuity date in order to receive the benefits. The application merely stated that the benefits would be “subject to the terms of the plan”. The retirement plan provided for a Preretirement Survivor Annuity for active employees spouses in the event they died prior to their annuity start date. The plan does not explicitly state that this is the sole provision available in those circumstances. After the decedent’s family was denied the annuity benefits, the plan justified that denial by interpreting the Preretirement Survivor Annuity provision as the sole benefit in light of the absence of another benefit for those circumstances.
The Court reviewed this interpretation under the arbitrary and capricious standard, which does not seek to find the best reading of the plan but rather if the administrator’s interpretation was reasonable. UPS’s interpretation was upheld as reasonable since there was no other term in the plan that applied to the decedent’s circumstances. Despite the fact that the decedent did not choose the Preretirement Survivor Annuity benefit, rather the annuity that paid a Single Life Annuity payable over 120 months, did not persuade the court that UPS’s interpretation failed under the standard of arbitrary and capricious. The Court’s application of this standard often favors the plan administrator and not the beneficiary. Particularly in this case the Court considered the argument that the single life annuity did not expressly state there could be no payment of the benefit if the employee died prior to the annuity start date, but agreed with UPS’s interpretation that the other annuity is the sole benefit since there was yet again an absence of language in the plan that guaranteed or provided another benefit under these circumstances. The Court’s willingness to allow an administrator to hinge its interpretation on the absence of express language for eligibility perquisites as well as additional remedies in the event of a plan participant’s early death, demonstrates just how favorable the arbitrary and capricious standard is for plan administrators.
Reliance Standard’s Denial Found Arbitrary and Capricious
The Sixth Circuit recently reversed a twelve month mental disorder limitation against Reliance Standard adopting the “but-for” approach for Mental and Nervous Disorder Limitations of the Fifth, Ninth, and Third circuits. Okuno v. Reliance Standard Life Ins.Co. Ms. Okuno was approved solely for mental disorder benefits for her auto-immune disease and narcolepsy due to the fact that she exhibited a psychiatric component that “contributed to” her physically disabling conditions. The Sixth Circuit found that a “reasoned and deliberate” review for these circumstances is to assess the physical disability separate from the mental or nervous disorder and concluded denying benefits on the basis a mental disorder contributes to a physical condition is inappropriate.
The court went further in disparaging Reliance’s denial for Ms. Okuno’s physical disabilities because it its inherent conflict of interest is readily apparent based on their file. The court noted that file reviews by paid employees of the insurance company, without physical examinations “raises questions about the accuracy of the benefits determination.” Shaw v. AT&T Umbrella Ben. Plan No. 1, 795 F.3d 538, 550 (6th Cir.). Ms. Okuno did not even claim a mental disorder in her application; however Reliance denied her claim based on a mental disorder, which the court found “necessitated further review” beyond exclusively relying on file reviews. Reliance also acted arbitrarily in denying benefits without consulting a mental health expert. Prior decisions of this court suggest that failure to consult with a specialist on the condition the entire denial was based on is improper. Also, Reliance improperly denied Ms. Okuno by failing to consult the insured’s treating physicians. The Court held although no special deference is required to be given to treating physicians, there cannot be a total refusal to consider those opinions. Finally, the differing rationales from each of Ms. Okuno’s denials showed direct evidence that Reliance’s denial was arbitrary and capricious.
Supreme Court Issues ERISA subrogation Opinion
In a surprising bit of good news for plaintiffs, on January 20, 2016, the Supreme Court issued Montanile v. Board of Trustees of National Elevator, 577 U.S. (2016). In this action, the plaintiff was seriously injured by a drunk driver, which required payments from his ERISA plan of more than $120,000 for his medical expenses. The plaintiff recovered a $500,000 settlement from the tortfeasor and the ERISA plan sought reimbursement of the funds it had paid from the settlement. Most ERISA plans now contain specific language allowing the ERISA plan to seek reimbursement under a subrogation clause. The Court explained, however, that the ability of an ERISA fiduciary to recover sums paid from a third-party tortfeasor to a plaintiff under Section 502(a)(3) of ERISA is grounded in equity. And whether the relief requested “is legal or equitable depends on the basis for [the plaintiff’s] claim and the nature of the underlying remedies sought.”
Prior precedent of the Supreme Court explained that the enforcement of a lien created by an agreement to convey a particular fund to another party—is equitable. Moreover, other precedent of the Court established that the nature of the ERISA plan’s underlying remedy, i.e., the enforcement of a lien against “specifically identifiable funds that were within [plan participant’s] possession and control” did not apply to the facts at hand. Here, because there was no specific funds capable of identifying, the ERISA plan “fiduciary cannot bring a suit to attach the [plan] participant’s general assets under §502(a)(3) because the suit is not one for ‘appropriate equitable relief’.”
If you or a loved one is in need of legal help and counsel, contact the long term disability attorneys at Burke Harvey, LLC for a free legal consultation.
Sixth Circuit Allows Lawsuit to Continue Despite ERISA Requirment
On October 2, 2015, in Waskiewicz v. UniCare Life & Health Ins. Co., the Sixth Circuit reversed a district court’s granting of summary judgment in favor of Ford’s ERISA Plan because the insured, who suffered from major depression and gender identity disorder, failed to provide notice of her disability to the Plan after she suffered a debilitating breakdown. According to the terms of the Plan, an employee was required to provide notice within a five-day period if the employee is absent for more than five (5) consecutive workdays. The insured failed to provide such notice and was terminated. The Plan administrator then denied the claim for benefits and the insured sued under ERISA. The Sixth Circuit reversed with instructions that the insured should be allowed the opportunity to show the failure to comply with the notice requirements, resulted from the very disability for which the insured sought benefits, i.e., her debilitating breakdown.
Court Imposes Penalty against ERISA Fiduciary for Failure to Provide Plan Documents
A few months ago, we wrote about the case of McDonough v. Aetna, 783 F.3d 374 (1st Cir. 2015) wherein the First Circuit upheld a penalty award against Aetna for failing to provide plan documents to an ERISA participant. This week, in the case of Harris-Frye v. United of Omaha, (E.D. Tenn. 2015), the plaintiff sought a penalty under ERISA for the Plan Fiduciary’s failure to provide documents relating to an ERISA life insurance policy. The Court upheld a Magistrate Judge’s recommendation to impose a penalty of $12,760 for failure to provide the life insurance policy; importantly, the Court further an additional sanction of $61,380.oo for the Plan’s failure to provide the “plan document.”
Sixth Circuit Continues to Give Meaning to “Equitable Relief”
On June 18, 2015, the Sixth Circuit in Pearce v. Chrysler Group LLC Pension Plan, 2015 WL 3797385, found that a retirement plan participant could state an equitable claim under ERISA for supplemental pension benefits until he became eligible for Social Security benefits, notwithstanding the fact he was terminated prior to receiving the benefits and the Plan document provided that terminated employees were not eligible for those type benefits.
The Sixth Circuit cited to the Supreme Court’s decision in Cigna Corp. v. Amara, 131 S. Ct 1886 (2011), and found that the district court had abused its discretion in denying, on futility grounds, Pearce’s motion to amend his complaint to add equitable claims of reformation, estoppel and surcharge under 1132(a)(3), because “a material conflict between the SPD and the Pension Plan can give rise to a claim for equitable relief.” These equitable claims of (1) reformation; (2) estoppel; and (3) surcharge potentially provide equitable relief when an ERISA participant is precluded from direct relief under that statute for a claim of money benefits.
Eleventh Circuit Vacates Prior Decision on ERISA Fiduciary
The Eleventh Circuit revisited its holding in Pruitt v. SunTrust Banks, Inc., No. 14-13207 (11th Cir. June 30, 2015), a putative ERISA class action brought against ERISA fiduciaries by plan participants, concerning certain investments in the plan. The district court had dismissed the case based on ERISA’s borrowed six-year statute of limitations. In related proceedings, another panel of the Court had affirmed that conclusion in Fuller v. SunTrust Banks, Inc., 744 F.3d 685 (11th Cir. 2014). Recently, the Supreme Court decided Tibble v. Edison International, 135 S. Ct. 1823 (2015) which held under trust law, which controls the contours of an ERISA fiduciary’s duties, “a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones.” 135 S. Ct. at 1828-29. Accordingly, the Supreme Court held that a plaintiff can effectively allege that a defendant breached its duty of prudence under ERISA “by failing to properly monitor investments and remove imprudent ones[,] . . . [and] so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely.” Id. at 1829. In light of this holding, the Eleventh Circuit panel vacated the district court’s summary judgment to defendant and remanded for reconsideration in light of Tibble v. Edison International.
The Burke Harvey, LLC national ERISA lawyers fully understand the ERISA guidelines and how they apply to each individual, specific case they handle. Our expertise of the LTD claims process and federal ERISA guidelines gives us the ability to offer each client the customized advice needed to understand your legal rights and options to help you successfully pursue and obtain the benefits you are entitled to under your long term disability policy. Contact our Burke Harvey, LLC long term disability lawyers for a free legal consultation.
Seventh Circuit Reaffirms Requirement to Exhaust Administrative Remedies
In Orr v. Assurant Employee Benefits (7th Cir. May 19, 2015) the district court dismissed a lawsuit for life insurance benefits because the plaintiffs did not first exhaust their administrative remedies. On appeal, the Seventh Circuit affirmed noting that the denial letter plaintiffs received informed them of their right to seek review and included a copy of USIC’s Life Claims Denial Review Procedure. That document stated in boldfaced, all-caps print, that a request for review must be submitted in writing within 60 days and warned: “If … you do not complete both the first and second review before filing a lawsuit, a court can dismiss your lawsuit.” The exhaustion of administrative remedies is a requirement of most ERISA plans and courts will enforce its requirements by dismissing lawsuits that do not comply with this requirement.
Supreme Court Clarifies Statute of Limitations for Trustees Fiduciary Duty Claim under ERISA
In Tribble v. Edison Int’l, the United States Supreme Court found that ERISA beneficiaries claims were not time barred under a six year statute of limitation, from the date of the original purchase of investments, because ERISA fiduciaries have an ongoing duty derived from trust law that requires them to continue to monitor, and remove imprudent, trust investments. As long as a plaintiff’s claim alleging breach of the continuing duty of prudence occurred within six years of suit, the claim is timely. Justice Breyer, writing for the Court, explained:
In determining the contours of an ERISA fiduciary’s duty, courts often must look to the law of trusts. We are aware of no reason why the Ninth Circuit should not do so here. Under trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones. This continuing duty exists separate and apart from the trustee’s duty to exercise prudence in selecting investments at the outset. The Bogert treatise states that “[t]he trustee cannot assume that if investments are legal and proper for retention at the beginning of the trust, or when purchased, they will remain so indefinitely.” A. Hess, G. Bogert, & G. Bogert, Law of Trusts and Trustees 684, pp.145–146 (3d ed. 2009) (Bogert 3d). Rather, the trustee must “systematic[ally] conside[r] all the investments of the trust at regular intervals” to ensure that they are appropriate. Bogert 3d §684, at 147–148;
Second Circuit Finds That New York’s Anti-Subrogation Statute Is Not Preempted By ERISA
Recently, the Second Circuit held in Wurtz v. The Rawlings Company, — F.3d—, 2014 WL 3746801, that New York’s anti-subrogation, Section 5-335, is “saved” by ERISA’s “saving clause” and applies to health insurers providing coverage through ERISA plans. This will provide some significant relief to New York ERISA participants and beneficiaries.
Plaintiffs filed a class action in state court alleging violations of New York law relating to efforts to secure reimbursement of medical benefits from plaintiffs’ tort settlements. The defendants removed the case to federal court and the federal trial judge dismissed it on the basis of ERISA preemption.
On appeal, The Second Circuit reversed finding that ERISA did not provide “complete preemption” or “conflict preemption,” because the New York state claims survived under ERISA’s savings clause. This opinion is at odds with rulings from other circuits which mean the issue may eventually find its way to the Supreme Court.
If you or someone you love is in need of experienced and successful legal representation for any type of disability and or long term disability case, contact the Burke Harvey LLC long term disability national attorneys. These lawyers offer free legal consultations and or case evaluations to anyone in need.