Life, Health and Disability Insurance Law Blog : Life, Health and Disability Insurance Law Blog : California Disability Lawyer & Attorney : Barger & Wolen Law Firm : CA Life Insurance & ERISA Law, Life Health Disability

James LaRue  v. DeWolff, Boberg & Associates Inc., 128 S. Ct. 1020 (2008).

LaRuefiled an action under ERISA alleging that his employer (also the plan administrator) breached its fiduciary duty with regards to an ERISA-regulated 401(k) retirement savings plan by failing to follow his investment instructions.  Relying on the Supreme Court’s ruling in Massachusetts Mutual Life Insurance Co. v. Russell that a participant could not bring a suit to recover consequential damages resulting from the processing of a claim under a plan that paid a fixed level of benefits, the Fourth Circuit Court of Appeals affirmed the district court’s grant of summary judgment in favor of the plan on the grounds that § 502(a)(2) did not provide a remedy for LaRue’s “individual injury.”  The Supreme Court disagreed. 

In an opinion written by Justice Stevens, the Court held that “although § 502(a)(2)  does not provide a remedy for individual injuries distinct from plan injuries, that provision does authorize recovery for fiduciary breaches that impair the value of the plan assets in a participant’s individual account.”  The Court reasoned that in the context of defined contribution plans, the misconduct did not need to threaten the solvency of the entire plan in order for § 409 (which provides remedies for breach of fiduciary duty) to apply.  Rather, the legislative history and plain language of the statute authorizes a participant to enforce fiduciary obligations under ERISA, and the administrator’s failure to follow the LaRue’sinvestment instructions could qualify as a breach of those duties. 

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Hoskins v. Metropolitan Life Ins. Co., 551 F. Supp. 2d 942 (D. Ariz. 2008)

An employee submitted a claim for benefits through his employer's ERISA governed disability plan. After approving the payment of both short-term and long-term disability benefits, MetLife requested that the participant apply for Social Security benefits. Through her attorney, the participant requested that MetLife provide all information relating to plaintiff's claim, including a copy of the Plan, policy, summary plan description and copies of all internal notes concerning MetLife’s consideration of plaintiff's claim. Travelers Insurance, the plaintiff’s employers and plan administrator, took the position that the plan documents were not to be disclosed absent a subpoena and directed MetLife to not comply. Upon instructions by Travelers, MetLife subsequently terminated benefits for failure to apply for Social Security benefits and for failure to provide proof of continuing disability.

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Keller v. Albertsons, Inc. Employees' Disability Benefits Plan, 589 F. Supp. 2d 1205 (C.D. Cal. 2008)

Initially approving plaintiff’s claim for LTD benefits under the “own occupation” definition of disability, after two years, plaintiff’s claim was reviewed under the “any occupation” standard, and his claim for benefits was terminated. In a letter sent to the plaintiff, the Plan stated “the final assessment indicates you are capable of performing sedentary work, therefore you no longer meet the Plan's definition of ‘Total Disability.’” Although this letter informed plaintiff that he had the right to bring a civil action, the letter failed to mention his right to an administrative appeal. After plaintiff filed a civil suit under ERISA, the Plan sought to bar recovery on the grounds that the he did not exhaust his administrative remedies. The Court rejected this argument, finding that an ERISA claim is not barred by the doctrine of exhaustion if the reason the claimant failed to exhaust was that he reasonably believed, based on communications from the Plan, that he was not required to exhaust his administrative remedies before filing a lawsuit.

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Pannebecker v. Liberty Life Assur. Co. of Boston, 542 F.3d 1213 (9th Cir. 2008).

A participant in an ERISA plan became disabled and filed a claim for LTD benefits. After paying benefits for 18 months under the “own occupation” definition of disability, the Plan reviewed the participant’s claim under the “any occupation” standard. The “any occupation” definition required an examination as to whether the participant could perform any job for which she was “qualified by training, education, or experience.” After determining that the participant could work in any number of sedentary occupations, the administrator terminated her claim for further LTD benefits.

The participant asserted that administrator’s claim determination was an abuse of discretion because the “any occupation” language included an implicit requirement that the administrator consider her salary or station in life when making a disability determination. The court ruled that there was no such requirement and upheld the administrator’s claim determination.

Read Judicial Opinion Here

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Sgro v. Danone Waters of North America, Inc., 532 F.3d 940 (9th Cir. 2008).

A participant in an ERISA plan sued his employer (as plan administrator) and MetLife seeking unpaid disability benefits, reimbursement of copying costs and statutory penalties for failure to respond to a document request.

The claim for copying costs was based on California state law, which requires that an insurer reimburse claimants for costs associated with duplicating medical records. While ERISA preempts most state laws, some laws that “regulate insurance” are saved from preemption. Here, the Ninth Circuit ruled that, although the regulation requiring reimbursement by insurers is undoubtedly aimed at insurance companies, it does not “significantly affect the risk-pooling arrangement between the insurer and insured,” and therefore cannot be said to regulate insurance. Accordingly, the state law was preempted by ERISA.

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Torres v. Reliance Standard Life Ins. Co., 551 F. Supp. 2d 1221 (D. Or. 2008)

Both the Plan Administrator and Participant moved for summary judgment on a cause of action challenging the denial of long-term disability benefits under ERISA.  Noting that the Plan contained discretionary language and citing Abatie, the District Court rejected the Participant’s contention that the claim decision should be reviewed de novo.  However, the court stated that a “moderate level” of scrutiny of the Defendants’ claim decision was justified due to the structural conflict of interest and because, during the claim review process, the Plan Administrator failed to disclose information regarding the Participant’s activities it obtained from the Internet.  Additionally, the Court ruled that because of the administrator’s failure to disclose the information, the Participant was denied the opportunity to present counter evidence that might further support her claim for benefits, and, thus, the Court allowed Torres to submit information responding to the new “internet information”

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Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620 (9th Cir. 2008).

On appeal from the District Court of Arizona, the Ninth Circuit considered whether the claimant in an ERISA case exhausted his administrative remedies when the claim administrator rejected, as deficient, his first attempt to appeal the claim decision.  The Court also examined whether a claimant can raise new legal theories supporting his claim during litigation.

Initially, the district court granted summary judgment for the Plan, holding that, despite a detailed appeal letter written by Vaught’s attorney, he did not effectively appeal the initial claim decision because he failed to meet the requirement that he “clearly explain…the reason why you think the Claim Administrator should reconsider your claim.”  However, the Ninth Circuit disagreed with both the claim administrator’s initial decision and the district court’s factual determination, and found that the appeal letter’s “seven procedural reasons” listing why the initial claim decision should be overturned satisfied the Plan’s appeal requirements.  Thus, in response to the argument that Vaught failed to exhaust his administrative remedies, the Ninth Circuit ruled that, while he did not utilize the Plan’s two-step appeal process, that was only because the Plan improperly rejected his first attempt to appeal the claim decision, and because it the administrator’s fault that Vaught did not complete the appeal process, the claim was ripe for litigation.

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