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

Earlier today, the California Supreme Court issued its unanimous opinion concluding that Civil Code section 3345, which allows treble damages to be awarded to seniors when a statute provides for a fine or penalty, is not permitted under the Unfair Competition Law, Business & Professions Code section 17200 (the “UCL”). 

The decision, Clark v. Superior Court (National Western Life Insurance Company), confirms that the only monetary remedy available under the UCL is restitution, and that a claim for treble damages is not restitution, nor is the nature of restitution comparable to a penalty.

The plaintiffs in the case filed a class action lawsuit against National Western Life Insurance Company arising out of the sale of deferred annuities issued to California residents who were senior citizens. The trial court denied certification as to all claims except one under the UCL. In addition to seeking restitution in the UCL claim, the plaintiffs sought treble damages on their restitution claim under section 3345.

As reported in our earlier blog post last September when the Supreme Court accepted review, in the more than two decades since the enactment of section 3345, no case had ever permitted any sort of damages, be they compensatory, treble or punitive, under the UCL. The trial court dismissed the claim for treble damages, but the Court of Appeal reversed, finding that the plain meaning of section 3345 applied to a private action seeking restitution under the UCL.

In reversing the decision issued by the Court of Appeal, the Supreme Court focused on two issues.

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Barger & Wolen partners Martin E. Rosen and Robert E. Hess will each present at the 2010 Western Claim Conference (June 27-29, 2010 | Indian Wells, CA).

Disability Legal Update by Martin E. Rosen (Session 2 | Monday, June 28)

• Keep up to date! What topics have disability insurers and their insured’s been battling about in the courts over the past year? And with what results? Come hear an outside counsel seasoned in litigating disability bad faith disputes discuss some of the issues that judges from around the country have written about in their published legal decisions.

"Help! They want to take my deposition!" by Robert E. Hess (Session 3 | Monday, June 28)

• This presentation is designed to help personnel across the insurance industry prepare for and give a quality deposition.

We look forward to seeing you at the WCC. If you cannot attend, but would like a copy of the materials, please contact Mr. Rosen or Mr. Hess directly.

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In a decision authored by Justice Clarence Thomas, the United States Supreme Court has declared that an ERISA claimant need not be a “prevailing party” to be eligible for an attorneys’ fees award. In Hardt v. Reliance Standard Life Insurance Co., __ U.S.__ (2010), the Court ruled that under 29 U.S.C. §1132(g)(1), a party may be awarded attorneys’ fees if “some degree of success on the merits” is achieved, as opposed to the more stringent requirement imposed by some circuit courts that they be a “prevailing party.”

Bridget Hardt initiated the litigation seeking long-term disability benefits under an ERISA plan. Faced with cross motions for summary judgment, the United States District Court for the Eastern District of Virginia denied Reliance’s motion finding that “Reliance’s decision to deny benefits was based on incomplete information.” The District Court also denied Hardt’s motion for summary judgment, but in doing so, found “compelling evidence” that Hardt was totally disabled. The District Court accordingly remanded the claim to Reliance with instructions that all of the evidence in the file be adequately considered within 30 days, otherwise “judgment will be issued in favor of Ms. Hardt.” 

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by John M. LeBlanc and Jason C. Love

On April 28, 2010, the California Supreme Court declined to review the Second District Court of Appeal’s decision in Nieto v. Blue Shield of California Life & Health Insurance Company, 181 Cal. App. 4th 60 (2010) (previously discussed here). The Supreme Court also declined to depublish the Nieto decision, despite numerous requests from consumer groups and a specific request from the Los Angeles City Attorney’s office. 

The Supreme Court’s decision confirms the Nieto court’s holding that the underwriting standards addressed by the Second District in Hailey v. California Physicians’ Service, 158 Cal. App. 4th 452 (2007), have no application to health insurers in California. It also confirms the holding in Nieto that advising applicants in the application, and in the policy, that an insurance policy is issued in reliance on the application statements will satisfy the requirements of the California Insurance Code attachment statutes to “endorse” the application on the policy. 

Finally, the Nieto decision is also being widely reviewed for its holding concerning when successive motions for summary judgment can be filed.

Further discussions on the Hailey and Nieto decisions can be found here:

• Victory in Health Care Rescission Case
• California Court of Appeal Upholds Rescission of Health Insurance Policy
• Court Finds Triable Issue of Fact as to Rescission of Health Insurance, but Upholds Dismissal of Bad Faith and Punitive Damage Claims

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Following the Hailey and Nieto decisions, issues exist whether a Health Care Service Plan completed sufficient medical underwriting prior to rescission

by John M. LeBlanc and Jason C. Love

In Nazaretyan v. California Physicians’ Service, ___ Cal. Rptr. 3d ___, 2010 WL 1038685 (2010), the California Court of Appeal reversed the trial court’s grant of summary judgment in favor of California Physicians’ Service dba Blue Shield of California (“Blue Shield”), a health care service plan, following its rescission of Gevork Nazaretyan and Narine Ghazaryan’s (the “Plaintiffs”) health care coverage. In a fact-driven decision, the Court of Appeal held that Blue Shield failed to establish, as matter of law, that its investigation prior to issuing Plaintiffs’ coverage was sufficient to demonstrate that it completed medical underwriting, as required under Health & Safety Code § 1389.3, to rescind for non-willful, material misrepresentations in the application for coverage.

The Court of Appeal also concluded that, as a matter of law, it could not hold that the Plaintiffs, who are husband and wife, willfully misrepresented material information in their application to Blue Shield. However, the Court of Appeal affirmed summary adjudication in Blue Shield’s favor on the Plaintiffs’ bad faith and punitive damage claims.

In August 2004, the Plaintiffs applied for health care coverage with Blue Shield with the assistance of their long-time insurance broker Ahman Yusop. On September 10, 2004, Blue Shield sent Yusop a form requesting information that was missing from the initial application. On September 21, 2004, the missing-information form was returned to Blue Shield with the questions answered, and on October 12, 2004, the Plaintiffs resubmitted their application to Blue Shield. Based on the information in the applications, Blue Shield approved coverage at its most favorable rate on November 1, 2004.

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Concludes that Health Insurer Does Not Have to Physically Attach the Application to the Policy to Rely on Misrepresentations in Application to Support Rescission

by John M. LeBlanc and Jason C. Love

In Nieto v. Blue Shield of California Life & Health Insurance Company, ___ Cal.Rptr.3d. ___, 2010 WL 162027 (2010), the Court of Appeal considered whether Blue Shield Life – an California insurance company subject to the California Insurance Code – could rescind plaintiff Julie Nieto’s (“Nieto”) individual health insurance policy based on misrepresentations concerning her medical history contained in the application she submitted to Blue Shield Life.

The Court of Appeal affirmed the trial court’s grant of summary judgment in Blue Shield Life’s favor, concluding that Blue Shield Life had no statutory duty to physically attach Nieto’s application to the insurance policy, nor to conduct further inquiries beyond the application during the underwriting process to ascertain the truthfulness of Nieto’s representations in the application before it issued the policy.

In reaching this conclusion, the Court discussed its holding in light of the recent decisions in Ticconi v. Blue Shield of California Life & Health Ins. Co., 160 Cal.App.4th 528 (2008) and Hailey v. California Physicians' Service, 158 Cal.App.4th 452 (2007).

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Since January 1, 2006, Part D of the Medicare Act has provided Medicare beneficiaries with an elective prescription drug benefit option. Under Part D, benefits are administered to beneficiaries through private health insurance companies, known as “sponsors,” which contract with the Centers for Medicare & Medicaid Services (CMS).

In late 2005, Do Sung Uhm and Eun Sook Uhm (the “Uhms”), Medicare beneficiaries, applied for the prescription drug benefit plan offered by Humana (the “Plan”). In accordance with the Uhms’ election to receive benefits under Part D, the Social Security Administration withheld monthly premiums from their social security benefits.

Pursuant to the Plan, the Uhms’ benefits were to begin on January 1, 2006; however, as of February 6, 2006, the Uhms had not received any information from Humana regarding how to obtain their benefits. As a result, the Uhms had to pay out-of-pocket for their prescription medications.

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In a decision published October 26, 2009, a unanimous panel of the Fourth Appellate District, Division Three, affirmed the trial court’s order denying class certification in a case handled by Barger & Wolen, Kaldenbach v. Mutual of Omaha et. al. Among other things, the court of appeal held that the California Supreme Court's recent decision in In re Tobacco II Cases, 46 Cal.4th 298 (2009) (“Tobacco II”) did not mandate reversal of the trial court's decision.

Kaldenbach's case arose from his purchase of an alleged “vanishing premium” life insurance policy. He claimed that, when he purchased an “Advantage Life” universal life insurance policy from Defendant Mutual of Omaha Life Insurance Company (“Mutual”), his agent represented that he would have to pay only four annual premiums, after which he would never have to pay another premium. Kaldenbach alleged those oral representations were false, as he later was required to pay more than four premiums to keep his policy in force. Seeking to transform his individual dispute into a class action, Kaldenbach also alleged that Mutual committed “class-wide” misrepresentations and omissions in scripted presentations and standardized marketing and training materials which, among other things, supposedly violated California’s Unfair Competition Law, Business and Professions Code section 17200 et seq. (“UCL”).

In opposing class certification, Mutual showed that the class allegations involved thousands of individualized point-of-sale transactions between a policy owner and an agent — a scenario that courts consistently hold is not subject to class treatment. Mutual’s evidence demonstrated that Kaldenbach’s case, like those of the other putative class members, was based upon the unique dialogue between an agent and a policy owner, and that marketing materials, agent training and sales illustrations were not uniform. The trial court denied class certification, holding that Kaldenbach failed to meet any of the criteria required for class certification. Kaldenbach thereafter filed an appeal.

Prior to the hearing on Kaldenbach’s motion for class certification, Californians passed Proposition 64 (“Prop 64”), which limited standing under the UCL to a “person who has suffered injury in fact and has lost money or property as a result of [such] unfair competition.” See Business and Professions Code § 17204. Additionally, Prop 64 mandated that UCL representative actions satisfy class action requirements under California Code of Civil Procedure section 382. At the time the trial court decided Kaldenbach’s class certification motion, Tobacco II — which raised the issue of whether, after Prop 64, each class member was now required to show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition — was pending before the California Supreme Court.

After Kaldenbach and Mutual completed their briefing and oral argument on appeal, the Supreme Court issued its opinion in Tobacco II, holding that, to demonstrate standing to pursue a UCL claim as a class action, only the named plaintiff must show an injury in fact, consisting of lost money or property, as a result of the alleged unfair competition. Tobacco II, supra at 305-306, 324. The Supreme Court explained that the “standing requirements are applicable only to the class representatives, and not all absent class members.” Id. at 306. Significantly, the Supreme Court also concluded that “Proposition 64 was not intended to, and does not, impose section 17204’s standing requirements on absent class members in a UCL class action where class requirements have otherwise been found to exist.” ld. at 324.

In light of Tobacco II, the court of appeal in Kaldenbach requested further briefing on UCL class action issues. In one of the first appellate decisions to interpret Tobacco II, the court of appeal affirmed the trial court’s decision, rejecting Kaldenbach’s argument that class certification was appropriate because reliance need not be proven on a class-wide basis under the UCL. The court of appeal reasoned that reliance was only one of the individualized issues noted by the trial court. Moreover, unlike Tobacco II, which involved identical misrepresentations and/or nondisclosures made to the entire class, in Kaldenbach’s case, no evidence linked alleged sales materials, training or illustrations to what was actually said or demonstrated in any sales presentation. Accordingly, the appellate court held that individualized issues predominated as to whether Mutual in fact committed an unfair business practice that was “likely to mislead” the putative class. 

Ed Oster, Sandra Weishart and Misty Murray of Barger & Wolen are counsel for Mutual.
 

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The Court of Appeal recently interpreted the infertility treatment provisions of Health and Safety Code section 1374.55 in Yeager v. Blue Cross of California, __ Cal. Rptr. 3d __, 2009 WL 2033209 (July 15, 2009). Yeager sued Blue Cross, alleging that it violated its duty under section 1374.55 to offer coverage for infertility treatment in the group plan that Blue Cross provided through Yeager’s employer, Westmont College. Blue Cross moved for summary judgment, arguing that it complied with section 1374.55 by offering optional coverage of up to $2,000 a year for half the cost of each group member’s infertility treatment, which Westmont College declined to purchase for cost-related reasons. The trial court granted summary judgment, and Yeager appealed.

The Court of Appeal held that section 1374.55 – which states that “every health care service plan contract . . . shall offer coverage for the treatment of infertility . . . under those terms and conditions as may be agreed upon between the group subscriber and the plan” – merely obligated Blue Cross to offer coverage for infertility treatment, and left the amount and cost of that coverage to agreement between Blue Cross and Westmont College. Thus, the court agreed that Blue Cross complied with the statute.

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Arias v. Superior Court of San Joaquin (Angelo Dairy), 46 Cal.4th 969 (2009)

Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (First Transit, Inc.), 46 Cal.4th 993 (2009)

In a pair of cases, the California Supreme Court restricted the use of California Business & Professions Code Section 17200 et seq.   One case affirmed what many expected, that Proposition 64, a 2004 voter initiative, requires plaintiffs to follow strict class-action procedures when seeking to recover under California’s unfair competition law (Bus. & Prof. Code § 17200 et seq.) which prohibits “any unlawful, unfair or fraudulent business act or practice . . . .” 

Before 2004, any person could assert representative claims under the unfair competition law to obtain restitution or injunctive relief against unfair or unlawful business practices. Such claims were not required to be brought as a class action, and a plaintiff had standing to sue even without having personally suffered an injury. (See Former §§ 17203, 17204; Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal. 4th 553, 561 (1998)).

In 2004, however, the California electorate passed Proposition 64, amending the unfair competition law to provide that a private plaintiff may bring a representative action under this law only if the plaintiff has “suffered injury in fact and has lost money or property as a result of such unfair competition” and “complies with Section 382 of the Code of Civil Procedure . . . .” This statute provides that “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” The Court has previously interpreted Code of Civil Procedure section 382 as authorizing class actions. See Richmond v. Dart Industries, Inc., 29 Cal. 3d 462, 470 (1981).

In Arias v. Superior Court of San Joaquin (Angelo Dairy), __ Cal. 4th __ , 2009 WL 1838973 (June 29, 2009), the Court held that employees can pursue penalties for wage-and-hour violations under the Private Attorneys General Act, or (“PAGA”), without having to qualify their lawsuit as a class action.

Justice Joyce L. Kennard, writing for the majority, also analyzed the effect of Proposition 64. Plaintiff contended that because Proposition 64’s amendment of the unfair competition law required compliance only with “[s]ection 382 of the Code of Civil Procedure” and because that statute makes no mention of the words “class action,” his representative lawsuit brought under the unfair competition law need not comply with the requirements governing a class action. The Court rejected this assertion, explaining:

In light of this strong evidence of voter intent, we construe the statement in section 17203, as amended by Proposition 64, that a private party may pursue a representative action under the unfair competition law only if the party “complies with Section 382 of the Code of Civil Procedure” to mean that such an action must meet the requirements for a class action. (See Fireside Bank v. Superior Court, supra, 40 Cal.4th at p. 1092, fn. 9.)

In a concurring opinion by Justice Werdegar, she disagreed with the majority’s “nonliteral interpretation of Proposition 64 (Gen. Elec. (Nov. 2, 2004)), which forecloses a variety of representative actions the measure clearly permits. Unlike the majority, I do not believe we would frustrate the voters’ intent by enforcing the measure according to its plain language.”

Similarly, in Amalgamated Transit Union, Local 1756, AFL-CIO v. Superior Court (First Transit, Inc.), __ Cal. 4th __ , 2009 WL 1838972 (June 29, 2009), the Court ruled that the requirement that a plaintiff be one “who has suffered injury in fact,” combined with the PAGA requirement that a labor action be initiated by an “aggrieved employee,” prevents a union from bringing a UCL action based on associational standing.
 

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On May 28,  Barger & Wolen client Blue Shield of California won a complete victory in the landmark health care rescission case, Cindy Hailey and Steven Hailey v. California Physicians’ Service dba Blue Shield of California (pdf).  According to a Blue Shield representative:

Today's verdict is a complete vindication for Blue Shield of California. It means we acted properly every step of the way. It means that our underwriting procedures were fair and complete, our application was clear, and we acted in good faith. There was no post-claims underwriting. The evidence of deceit by the Haileys was overwhelming. This decision proves that Blue Shield of California had every right to rescind the Haileys' coverage.

Congratulations to Barger & Wolen partner and lead trial counsel John M. LeBlanc and his team: partner Andrew S. Williams, associates Vivian I. Orlando and Jason C. Love, legal assistant Gloria Valles, and paralegals Cathie Sorenson and Eve Torres.

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In Re Tobacco II Cases, 46 Cal.4th 298 (2009) 

Following the passage of Proposition 64 on November 2, 2004, in order to bring a representative claim under the unfair competition law (“UCL”), a plaintiff must meet the following standing requirements: (1) establish that he or she “has suffered injury in fact and has lost money or property as a result of such unfair competition” and (2) comply with the class action requirements as set forth in California Code of Civil Procedure Section 382. Bus. & Prof. Code §§ 17203, 17204 and 17535. After the passage of Prop 64, litigants continued to debate whether only the named plaintiff or all class members had to meet the more stringent standing requirements of injury in fact and loss of money or property as a result of the alleged conduct. 

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Mintz v. Blue Cross of California, __ Cal. App. 4th __, 2009 WL 1019039 (April 16, 2009).

On April 16, 2009, the Second Appellate District in Mintz v. Blue Cross of California, found Blue Cross liable in negligence when acting as claims administrator for CalPERS, when its claims denial caused physical injury to the member. Blue Cross denied the member's treatment on the grounds it was experimental. The member appealed, and though Blue Cross advised the member of his contractual appeal rights, it failed to advise him of his statutory right to Independent Medical Review.

While the court held that the administrator, as representative of the insurer, may not be held liable for interfering with its principal's contract, and the denial of health insurance benefits, without more, is not the kind of extreme outrageous conduct necessary to state a claim for intentional infliction of emotional distress, the court did hold that the administrator owes a duty to the members to exercise due care to protect them from physical injury caused by its negligence in making benefit determinations.  

Judicial Opinion Available Here

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The Mega Life and Health Insurance Company v. Superior Court (Closson), 2009 WL 989386, __ Cal. App. 4th __ (April 14, 2009)

The California Court of Appeal recently addressed the issue of whether a widower, who was not a party to the health insurance policy at issue, could sue the health insurer for fraud in his individual capacity. In The Mega Life and Health Insurance Company v. Superior Court (Closson), 2009 WL 989386, __ Cal. App. 4th __ (April 14, 2009) , the court held that although the non-contracting party spouse could properly sue as his spouse’s representative to receive all damages legally available on her behalf, he had no separate and individual tort claim based on the policy.

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The annual meeting of the Defense Research Institute took place on October 22, 2008 in New Orleans, Louisiana. Presented at the meeting was this article titled, “The Top Life, Health, Disability and ERISA Decisions of 2008.”   Written by three prominent defense attorneys, this article highlights some of the most influential decisions from 2008.

The article, available here, was authored by:

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Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal. 4th 497 (2009)

The California Supreme Court was recently faced with the issue of whether emergency care providers that do not have contracts with the health care service plan (the “plan”) can bill the patient for the difference between the bill submitted to the plan and the actual amount received from the plan—a practice known as “balance billing.” In Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal. 4th 497 (2009), the Court held that non-contracted emergency care providers may not engage in balance billing of plan members.

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Fontana v. The Guardian Life Insurance, 2009 WL 73743 (N.D. Cal. January 12, 2009)

Fontana, a software product manager, sued The Guardian Life Insurance Company for denying her claim for long-term disability benefits under an ERISA-governed plan. Guardian gave two explanations for its claim decision: (1) that a medical report based on examination conducted five months after the date the operative definition of disability changed cannot demonstrate Fontana’s disability; and (2) that Fontana’s activities as a graduate student dispute her claim. On cross motions for summary judgment on the Administrative Record, the Court ruled that both of these reasons constituted an abuse of discretion, and remanded the matter to Guardian for a new determination of Fontana’s administrative appeal.

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Hecht v. Paul Revere Life Ins. Co., 168 Cal. App. 4th 30 (2008)

Practitioners in the field of bad faith disability law are all familiar with the "grandaddy" of DI cases, Erreca v. Western States Life Ins. Co., 19 Cal. 2d 388 (1942), as well as its children, Moore v American United Life Ins. Co., 150 Cal. App. 3d 610 (1984) and Austero v. Nat. Casualty Co., 84 Cal. App. 3d 1 (1978), overruled on other grounds in Egan v. Mutual of Omaha Ins. Co., 24 Cal. 3d (1979). For years these cases have explained how the concept of "total disability" is to be interpreted in California. In citing these cases, plaintiffs lawyers -- and often the courts -- would usually only cite to the first part of the famous Erreca definition: "[T]he term 'total disability' . . . means such a disability as renders the insured unable to perform the substantial and material acts necessary to the prosecution of a business or occupation in the usual or customary way." The courts seemed reluctant to qualify the definition with the second part of Erreca's teachings: "Conversely, the insured is not totally disabled if he is physically and mentally capable of performing a substantial portion of the work connected with his employment." Now Erreca has spawned a "grandchild" that confirms that the second part of the definition is equally important.

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Standard Ins. Co. v. Morrison, 537 F. Supp. 2d 1142 (D. Mont. 2008).

A ruling by District Court Judge Donald Molloy may signal the end of discretionary authority for ERISA plans in Montana.  Standard Insurance Company brought suit against John Morrison, the Insurance Commissioner for the State of Montana.  Morrison had implemented a state-wide policy disapproving ERISA plans that contained any clauses that conferred discretionary authority to the plan/claims administrator, which would give rise to a more deferential judicial standard of review when the decision of the plan/claim administrator is challenged in the district court. 

Standard Insurance argued Morrison’s actions were pre-empted by ERISA and exceeded his authority.  However, the court found neither argument persuasive and stated that there was no law granting Standard the right to a particular standard of review.  The court reasoned that “ERISA’s Savings Clause recognized the traditional role of states in regulating insurance on behalf of state citizens and in accordance with state public policy objectives.”  This case "is the straight forward regulation of insurance, a matter ERISA expressly saves from preemption.”

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Jurinko v. The Medical Protective Company, 2008 U.S. App. Lexis 26263 (3d Cir. December 24, 2008)

The Third Circuit, in a non-precedential (but citable under FRAP 32-1) opinion, recently reduced a punitive damages award in an insurance bad faith case from a compensatory damages to punitive damages ratio of 3:1 to a 1:1 ratio. 

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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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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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Bartholomew v. Unum Life Ins. Co., 579 F.Supp.2d 1339 (W.D.Wash. 2008)

Plaintiff, who sued to recover benefits under her long-term disability (LTD) plan, sought to expand the scope of discovery under ERISA by seeking documents outside the Administrative Record. Among others, the Plaintiff requested; “Details of compensation and financial incentives,” “revenue and profitability reports for the last 10 years,” and “[a]ny document discussing the claims handling process published during the last 10 years.” Despite the recent rulings in Abatie allowing weight to be given to structural conflict of interest analysis, the District Count held that Plaintiff was not allowed to engage in a fishing expedition. Here, the discovery requests were not narrowly tailored to lead to discovery of admissible evidence. Therefore, Plaintiff’s request for discovery outside the statutory guidelines was appropriately denied.

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Bartholomew v. Unum Life Ins. Co. of America, 588 F. Supp. 2d 1262 (W.D. Wash. 2008.)

A Plan participant brought suit under ERISA challenging the claim administrator’s decision to terminate long term disability benefits. On a motion for summary judgment, the District Court held that the hearsay rule barred the court from considering documents that discussed the administrator’s past claims handling practices. In its decision, the Court acknowledged that a history of biased claim administration was a key factor in weighing the conflict of interest. Nevertheless, the court held that documents containing a recitation of the defendant’s past administrative abuses did not fall under any of the hearsay exceptions. The court also considered the Regulatory Settlement Agreement (“RSA”) with the Department of Labor and found the report admissible as an admission of a party opponent. However, while the RSA could not be offered as evidence of claims handling in this case, the RSA warranted a more “elevated level of skepticism” with regard to the structural conflict of interest.

Nevertheless, even in light of the structural conflict of interest, the court found that Unum afforded the Plaintiff an opportunity for a “full and fair review” of her claims. Therefore, the administrator’s decision was upheld because it was based on a reasonable interpretation of the plan’s terms and made in good faith.

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Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d 1016 (9th Cir. 2008).

The Plan terminated benefits because it determined that the employee was not totally disabled from any occupation. After appealing their decision and exhausting all administrative remedies, the employee sued in federal court. In light of the recent Supreme Court holding in Glenn, the court vacated the grant of summary judgment and remanded back to the district court to allow the discovery of documents outside the administrative record in order to properly evaluate the structural conflict of interest. The court came to this conclusion even though the employer had no direct financial incentive to deny claims because benefits were paid out of a trust. However, the court disagreed with the holdings in Post v. Hartford (3d Circuit) and Gilley v Monsanto (11th Circuit). Instead, the court reasoned that since the employer would ultimately need to contribute to the trust in order for it to maintain its solvency, it had an incentive to keep claims as low as possible. Therefore, a structural conflict of interest existed.

 Read Judicial Opinion Here

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Caplan v. CNA Financial Corp., 544 F.Supp.2d 984 (2008).

In what appears to be a relatively standard claim for benefits under ERISA, the District Court ruled that it was an abuse of discretion to ignore contrary evidence. When the participant in this case made a claim for disability benefits, Hartford submitted his file to an independent medical evaluation service. The IME opinion, which conflicted with the treating physician opinion, was the basis for Hartford to deny the claim.

The court noted that the participant had submitted a “wealth of evidence” to support his contention that he was disabled. Hartford claimed that their decision was based on the “totality of the medical information provided.” However, the only information that supported the decision was the IME opinion. The court factored the discrepancy in the amount of medical support for Hartford’s decision with the evidence of financial incentives for the IME and found an abuse of discretion in this case.

 Judicial Opinion Available Here

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Garrison v. Aetna Life Ins. Co., 558 F. Supp. 2d 995 (C.D. Cal. 2008)

This case addressed the issue of an employer’s accommodation of an employee’s disability, and how the claim administrator considered that factor when assessing disability. Here, a Boeing employee submitted a claim for benefits under the “own occupation” definition of disability. At the time of her disability, her position was described as “light,” requiring 12-hour shifts and a great deal of travel. In response to the onset of the employee’s disability, Boeing attempted to make accommodations by eliminating the travel requirement and reducing the number of hours worked. Based on the accommodations, the claim administrator reclassified the participant’s occupation from “light” to “sedentary,” and finding that she was capable of sedentary work, denied her claim.

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Golden Gate Restaurant Ass'n v. City and County of San Francisco, 546 F.3d 639 (9th Cir. 2008).

The city of San Francisco passed an ordinance requiring that most city-based employers make a certain level of health care expenditures on behalf of their covered employees.  (Basically, employers were required to either provide health care benefits to employees or pay the City a certain amount of money per employer hour worked to fund a city-run Health Access Plan.)  Employers argued that the ordinance was preempted by ERISA because it impermissibly created an ERISA plan, or related to employers’ existing ERISA plans.  Citing a presumption against preemption, the Court of Appeals for the Ninth Circuit found that the ordinance was not preempted by ERISA.

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Walker v. Metropolitan Life Ins. Co., 585 F. Supp. 2d 1167 (N.D. Cal. 2008.)

Plaintiff sued MetLife and Kaiser Permanente Benefits Plan for denying his claim for long-term disability benefits.  The court denied cross motions for summary judgment on the grounds that the Administrative Record did not contain sufficient information regarding MetLife’ relationship with a company, NMR, retained to conduct independent medical reviews such that the court could assess the impact of MetLife’s undisputed structural conflict of interest.  In order to obtain this information, the court ordered MetLife to provide the number of claims that were approved and denied after a review was conducted by an NMR-retained physician.

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