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

On June 28, 2010, the United States Supreme Court announced that it would not hear a challenge to San Francisco’s universal health care program filed by the Golden Gate Restaurant Association.  The announcement effectively put an end to a four-year legal battle.

One provision of program, titled “Healthy San Francisco,” requires that businesses with at least 20 workers either provide health care coverage to their employees or pay a certain amount of money per employee hour worked to fund the health care program.  Business groups sued to halt the program, asserting that it is preempted by ERISA because it impermissibly creates an ERISA plan, or alternatively is related to employers’ existing ERISA plans.  In 2008, the Ninth Circuit ruled that the program was not preempted by ERISA.  In refusing to hear the business-led challenge to the health care program, the Supreme Court effectively sustained the Ninth Circuit’s ruling.

The Supreme Court’s decision was consistent with the Obama administration’s recommendation that the Court turn down the case, in part because the recently enacted national health reform law makes similar city- or state-level programs unlikely.

See a summary of the Ninth Circuit’s ruling here.

See previous Golden Gate news posts here and here.

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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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The California Assembly’s Insurance Committee is scheduled to conduct its first hearing today on AB 1868, a bill outlawing clauses in insurance policies and other related documents that purport to vest the insurer with discretionary power to determine eligibility for benefits or to interpret the terms of the policy.

Under the proposed legislation introduced by Assemblyman Dave Jones (D-Sacramento), any provision in an insurance policy, contract, certificate or agreement providing or funding life insurance or disability insurance coverage that purports to reserve discretionary authority with the insurer would be void and unenforceable. The bill would also require that the Insurance Commissioner disapprove of any disability policy containing such a provision.

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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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On Monday October 19, 2009, Lisa Girion of the Los Angeles Times reported on the healthcare reform bills being debated in Congress and their potential impact on claim denials by insurers. Girion states that, “Despite growing frustration with the way health insurers deny medical treatments, major healthcare bills pending in Congress would give patients little new power to challenge those sometimes life-and-death decisions.” She further explains that “a patient's ability to fight insurers' coverage decisions could be more important than ever because Congress, in promoting cost containment and price competition, may actually add to the pressure on insurers to deny requests for treatment.”

The article discusses the wrongful death lawsuit filed by Hilda and Grigor Sarkisyan, whose daughter Nataline died in 2007 after Cigna decided not to cover a liver transplant. The lawsuit against Cigna over the transplant denial was dismissed this year by a federal judge, who ruled that the Employee Retirement Income Security Act (“ERISA”) preempts suits with state law claims for damages over such health benefit decisions. The Sarkisyans traveled to Washington this year to try to persuade members of Congress to pass legislation which would remove ERISA’s bar of certain types of damages that are now available under state law.

Rep. Adam B. Schiff (D-Burbank), who met with the Sarkisyans in Washington, said that there are not enough votes in Congress to pass such legislation.  Insurers and employers strongly support ERISA’s limitations on damages. They say any increase in litigation would drive up costs and could force some employers to drop health benefits.

The healthcare reform bill pending in the House would extend the right to sue under state law for damages to anyone who buys coverage through one of the health insurance exchanges it envisions. That could include small businesses. However, the pending legislation does not remove ERISA’s barrier to such suits by employees who procure coverage in the employment-based insurance market.

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In Marin General Hospital v. Modesto & Empire Traction Co., 581 F.3d 941 (2009), the Ninth Circuit Court of Appeals considered whether section 502(a)(1)(B) of ERISA completely preempted state-law causes of actions for breach of contract, negligent misrepresentation, quantum meruit and estoppel brought by a hospital against a patient’s employer and its claims administrator based on an alleged oral agreement between the hospital and claims administrator to pay for services provided by the hospital. Because the claims could not be pursued under section 502(a)(1)(B), but rather relied on legal duties that were independent from duties required by the ERISA plan, the Ninth Circuit concluded that the state-law claims were not preempted, depriving the court of subject matter jurisdiction. Accordingly, removal from state court was improper and the case was remanded to the district court with instructions to remand the matter to state court.

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In Scharff v. Raytheon Company Short Term Disability Plan, et al., ___ F.3d. ___, 2009 WL 2871229 (9th Cir. September 9, 2009), the Ninth Circuit Court of Appeals affirmed the district court’s dismissal of a lawsuit filed a mere twenty days after expiration of the ERISA plan provision requiring an action to be filed within one year following the denial of the appeal from an initial disability-claim denial, holding that the summary plan description’s placement and display of a that contractual limitations period met statutory and regulatory requirements. The court specifically rejected Donna Scharff’s arguments that the doctrine of reasonable expectations should be adopted in analyzing Raytheon’s SPD and that the placement and display violated her reasonable expectations: “We hold that even if the doctrine of ‘reasonable expectations’ applied here, the one-year statute of limitations met its requirements and also met the statutory and regulatory standards for disclosure.” The court also declined Scharff’s call for the importation into federal common law a California regulation requiring insurers to expressly inform claimants of statutes of limitations that may bar their claims. Noting that other circuits had expressly rejected a rule requiring plan administrators to inform participants of provisions already contained in the SPD, the court explained that Scharff’s position “would place the Ninth Circuit out of line with current federal common law and would inject a lack of uniformity into ERISA law.” In that latter regard, a lack of uniformity among the circuits would be detrimental, particularly to large multi-state employers who issue the same welfare benefit plan to cover all employees, regardless of their location.

Circuit Judge Susan P. Graber authored the majority opinion, joined by Judge Kim McLane Wardlaw. Judge Harry Pregerson dissented.

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The Ninth Circuit Court of Appeals in Montour v. Hartford Life & Accident, 582 F.3d 933 (9th Cir. 2009), adopted a new standard of reviewing ERISA abuse of discretion cases where the insurer has a conflict of interest. The court held that a “modicum of evidence in the record supporting the administrator’s decision will not alone suffice in the face of such a conflict, since this more traditional application of the abuse of discretion standard allowed no room for weighing the extent to which the administrator’s decision may have been motivated by improper considerations.”

Robert Montour was a telecommunications manager for Conexant Systems, Inc. His employer provided him with a group long-term disability plan governed by ERISA. Hartford was both the insurer and claims administrator of the plan. The plan granted Hartford discretionary authority to interpret plan terms and to determine eligibility for benefits.

Montour applied for and received disability benefits, initially for an acute stress disorder, in 2003. In 2004, Montour consulted an orthopedic surgeon, Dr. Kenneth Kengla, about knee and back pain and subsequently underwent surgery. Dr. Kengla diagnosed Montour with degenerative changes in both areas and notified Hartford that Montour was suffering from physical disability which prevented him from returning to the labor force. Dr. Kengla listed numerous restrictions on Montour’s physical activities.

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In Dupree v. Holman Prof'l. Counseling Ctrs., ___ F.3d ___, 2009 WL 2245219 (9th Cir. July 29, 2009), the Ninth Circuit Court of Appeals held that an ERISA-governed health plan, which repeatedly asserted that non-contracted services were generally not covered, unambiguously excluded coverage of non-emergency treatment at a non-contracted residential treatment center. In doing so, the Ninth Circuit employed the well-established canon of contract interpretation, applicable in ERISA cases, that a contract should be read as a whole, giving effect to every part. The court rejected Plaintiff’s attempt to pick out policy provisions and read them out of context to find ambiguity where none exists.

Plaintiff’s employer contracted with Holman Professional Counseling Centers (“Holman”) for behavioral health insurance coverage. Holman agreed to provide behavioral health services “through Providers pursuant to the Schedule of Benefits” and that if enrollees chose to use non-contracted providers, they would do so at their own expense “except as otherwise provided in this Group Plan Contract.”

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In Sznewajs v. U.S. Bancorp Amended and Restated Supplemental Benefits Plan, ___ F.3d ___, 2009 WL 2004452 (9th Cir. July 13, 2009), the Ninth Circuit Court of Appeals addressed, for the first time, whether the standard of review analysis for “top hat” ERISA plans is the same as for other ERISA plans.

Franciene Sznewajs, the ex-wife of co-defendant Robert Sznewajs, challenged the Plan’s decision to treat Robert Sznewajs’ second wife, Virginia Sznewajs, as his surviving beneficiary. The Plan Administrator denied Franciene’s claim for benefits because it interpreted Robert’s “retirement” to have occurred when Robert started collecting benefits. Franciene argued that “retirement” meant the date of Robert’s termination of employment. The issues on appeal were the appropriate standard of review and the definition of retirement under the Plan.

The employee benefit plan in this case is known as a “top hat” plan. ERISA “defines a top hat plan as one which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.” Sznewajs at *4. Because of the specialized nature of “top hat” plans, Congress exempts such plans from certain ERISA regulations. Gilliam v. Nevada Power Co., 488 F.3d 1189, 1192-93 (9th Cir. 2007).

In most ERISA cases, the administrator’s claim decision is reviewed under the de novo standard of review unless the plan documents grant the administrator discretionary authority. Here, Franciene argued that, despite the discretion granted to the plan administrator, the district court should utilize the de novo standard of review because payments made to beneficiaries come directly from the company’s pockets and those payment decisions are made by the company’s executive committee. Franciene’s argument was consistent with holdings in the Third and Eighth Circuits, both of which have ruled that “top hat” plans are subject to a de novo standard of review despite the existence of a grant of discretionary authority for the very same reasons. However, the Ninth Circuit disagreed, explaining that applying a de novo standard of review to “top hat” plans “would create unnecessary confusion.” Therefore, in the Ninth Circuit, “top hat” plans are subject to the same standard of review analysis as other ERISA plans.

Finally, in making this ruling, the court found that the Plan did not abuse its discretion in its interpretation of the term “retirement.”

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Recently, in Harris v. Amgen, Inc., ___ F.3d ___, 2009 WL 202758 (9th Cir. July 14, 2009), the Ninth Circuit Court of Appeals held that a former employee who withdrew his assets from an ERISA-governed retirement contribution plan still had standing to assert a breach of fiduciary claim against the plan fiduciaries, on the grounds that his retirement account might have been worth more at the time of the withdrawal had there been no breach of fiduciary duty.

Initially, Steve Harris, a former employee of Amgen, who withdrew his assets from his retirement account in July 2007, and Dennis Ramos, another former Amgen employee who still maintained assets in his retirement account, sued Amgen and several officers and directors for breach of fiduciary duty, alleging that the fiduciaries improperly allowed the plan to purchase and hold Amgen stock despite knowledge that the stock price was artificially inflated because of improper off-label drug marketing and sales. The district court dismissed Harris’ claims, finding that because he had withdrawn his assets from the Plan, he did not have standing to sue the Plan. The district court dismissed Ramos’ claims because he failed to identify the proper defendants. Both Harris and Ramos were denied leave to amend the complaint.

In order to bring a suit under ERISA, a plaintiff must have standing as a plan participant, defined as “an employee or former employee of an employer … who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer.” 29 U.S.C. § 1002(7). In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117 (1989), the United States Supreme Court expanded the definition of plan participant to include “former employees who have … a colorable claim to vested benefits.” In reversing the dismissal of Harris’ claims, the Ninth Circuit found that even though he previously cashed out his plan account, he still had standing to assert a claim under ERISA Section 502(a)(2). Specifically, the Ninth Circuit observed that “when employees withdraw their funds from a benefit plan, but claim that they would have had more to withdraw absent breach of fiduciary duty by those managing the plan, it is not difficult to see a common sense loss of benefits in their plan caused by the alleged breach of fiduciary duty.” Accordingly, “former” plan participants still have standing to recover losses caused by an alleged breach of fiduciary duty. The Ninth Circuit further explained that it agreed with the First and Third Circuits “in holding that an ERISA plan participant who no longer has assets in the plan has statutory standing to assert a fiduciary claims under Section 502(a)(2), even when relief is available under Section 502(a)(1)(B).”

Finally, the Ninth Circuit ruled that both Harris and Ramos were improperly denied the right to amend their pleadings, as courts “should normally permit at least one amendment of a complex ERISA complaint that has failed to state a claim where, as here, the Plaintiffs might be expected to have less than complete information about the defendants’ organization and ERISA responsibilities, where there is no meaningful evidence of bad faith on the part of the plaintiffs, and where there is not significant prejudice to defendants.”
 

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The City of San Francisco’s attempt to require that all employers in the city make mandatory contributions towards employee health costs may end up being decided by the United States Supreme Court. As expected, the Golden Gate Restaurant Association filed a petition for writ of certiorari asking the Supreme Court to overturn the Ninth Circuit’s holding that the city ordinance was not preempted by ERISA. There is some dispute as to whether the Ninth Circuit’s ruling created a split with the Fourth Circuit, as the dissenting judges to the petition for en banc review stated that the original opinion conflicts with a the holding in Retail Industry Leaders Association v. Fielder, 475 F.3d 180 (4th Cir. 2007). In that case, a Maryland law requiring employers to play a penalty if it did not spend a certain percentage of their payroll on health coverage was struck down on the grounds that it was preempted by ERISA. The City and County of San Francisco’s response brief is due August 24th.

See also Golden Gate Restaurant Ass’n case summary.

See also Golden Gate news post.
 

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Coast Plaza Doctors Hospital v. Blue Cross of Calif., 2009 WL 1272631 (Cal. App. 2nd Dist. May 11, 2009)

The California Court of Appeal has held that a claim against a health care insurer that is violated California Health and Safety Code Section 1371.4 (“Section 1371.4”) is not preempted by ERISA. In Coast Plaza Doctors Hospital v. Blue Cross of Calif., 2009 WL 1272631 (Cal. App. 2nd Dist. May 11, 2009), Coast Plaza Doctors Hospital (“Coast Plaza”) provided emergency care to a patient who was enrolled in a group health plan insured by Blue Cross of California (“Blue Cross”).  Coast Plaza was an “out-of-network” provider because it did not contract with Blue Cross to provide services to Blue Cross plan participants or beneficiaries. Coast Plaza billed Blue Cross over $580,000 in costs incurred to provide emergency care to the patient. Blue Cross refused to pay the bill, contending that Coast Plaza did not submit sufficient information to demonstrate that the services were rendered in connection with a medical emergency. 

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The Defense Research Institute’s For the Defense has published an article by Jerel C. Dawson entitled “The Conundrum of Self-Reported Symptoms.”  This article addresses some of the issues surrounding self-reported symptoms in ERISA disability cases.  Mr. Dawson’s expert discussion talks about objective medical evidence of fibromyalgia, chronic fatigue syndrome and judicial acceptance of subjective complaints.  “The Conundrum of Self-Reported Symptoms” provides an excellent overview of the relevant issues for ERISA attorneys facing claims of self-reported symptoms.  

Republished with Permission Here

About the Author:

Jerel C. Dawson is a Partner at Shutts & Bowen LLP
1500 Miami Center, 201 South Biscayne Boulevard | Miami, FL 33131
Phone: 305-358-6300

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On March 9, 2009, the Ninth Circuit denied a petition for en banc review of Golden Gate Restaurant Ass’n v. City and County of San Francisco, 546 F.3d 639 (9th Cir. 2008) wherein the Court of Appeals found that a San Francisco city ordinance requiring that all employers in the city make mandatory contributions towards employee health costs was not preempted by ERISA. Eight (generally conservative) judges joined a dissent authored by Judge Milan Smith, Jr. criticizing the decision not to rehear the case en banc, and noted that there is now a split with the Fourth Circuit; specifically, Retail Industry Leaders Ass’n v. Fielder, 475 F.3d 180 (4th Cir. 2007). In light of this split, many believe that the United States Supreme Court will accept an expected petition for certiorari.

See also Golden Gate Restaurant Ass’n case summary.

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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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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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Salomaa v. Honda Long Term Disability Plan, 542 F. Supp. 2d 1068 (C.D. Cal. 2008).

An insurer denied the ERISA plan participant’s disability claim, in part, because he failed to support his claimed disability from CFS with “objective test results.”  During the participant’s initial appeal of his LTD benefits, his attorney asked the insurer if there were any tests the participant should undergo in order to help establish his disability.  The participant’s attorney did not receive a response and yet the insurer, citing a lack of medical documentation that Plaintiff was afflicted by CFS or that he was unable to perform the duties of his occupation, denied his claim. 

After explaining that a factor tending to show a potential conflict of interest is the failure to engage in meaningful dialogue during the review process, the court found that decision to deny benefits due to the absence of objective test data while opting not the request a SPECT scan was an indication of “evasiveness during the review process, and a conflict of interest.”  Nevertheless, noting the distinction between a medical condition and the effect of that condition on an employee's ability to perform occupational duties is well established, the court “affirm[ed] a plan administrator's right to require objective evidence that employees are totally disabled by the medical condition which afflicts them, regardless the condition at issue.”

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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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Jenny H. Wang is a partner in Barger & Wolen's Newport Beach office. Ms. Wang’s practice primarily involves complex business and tort litigation. She has represented national corporations in state, federal and appellate courts. Her expertise includes defense of first-party breach of contract and bad faith claims, and ERISA-governed benefits claims in the areas of life, health and disability.Ms. Wang is a member of the Defense Research Institute and the Orange County Bar Association. Jenny can be reached by email at jwang@bargerwolen.com.

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Scott E. Calvert is a litigation associate in the firm’s Newport Beach office. He has worked on a wide range of litigation matters, including first-party insurance lawsuits involving individual disability insurance and ERISA-governed employee welfare benefit plans.

Mr. Calvert has experience handling interpleader actions and litigation involving bankruptcy and real estate disputes. He has also represented institutional clients in securities-related arbitrations before FINRA (formerly called NASD). Scott can be reached by email at scalvert@bargerwolen.com.

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For those interested in reading a decidedly anti-insurer ERISA article published in the Utah Law Journal last September, take a look at “ERISA: License to Cheat, Lie, and Steal for the Disability Insurance Industry,” authored by Loren M. Lambert. In it, Lambert argues that ERISA “has created a brutal, arbitrary, and inefficient administrative process controlled by the insurance industry.” According to Kantor & Kantor, Lambert is finishing the final editing on a 25-minute documentary that follows one of his clients through the process of attempting to obtain her disability benefits. It will not be hard imagine what conclusions he will reach in this documentary.

The article is at:

http://webster.utahbar.org/barjournal/2008/09/erisa_license_to_cheat_lie_and.html

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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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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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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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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.

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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.

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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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Simon v. Hartford Life, Inc., 546 F.3d 661 (9th Cir. 2008).

Acting pro se, a plan participant filed suit on behalf of the group long-term disability plan, claiming breach of fiduciary duty under 29 U.S.C. Section 1109. The plan administrator filed a motion to dismiss on the ground that the participant must be represented by a licensed attorney in order to proceed with this claim. The district court granted the motion and dismissed the action without prejudice so that the participant could obtain counsel. The district court reasoned that because the plan is a separate entity, the participant was not entitled to bring a suit on the plan’s behalf. The participant appealed.

In upholding the district court’s order granting the motion to dismiss, the Court of Appeals ruled that, under ERISA and 29 U.S.C. Section 1132(a)(2), a participant is not authorized to pursue a claim in a representative capacity on behalf the plan without counsel. The Ninth Circuit explained that any judgment would have significant impact on the plan and the other beneficiaries, and those entities are entitled to representation by a licensed attorney. While, 28 U.S.C. Section 1654, states that “parties may plead and conduct their own cases personally or by counsel.” the court noted that the participant was not representing his own rights, but rather the rights and interests of the employee benefit plan. By proceeding pro se, the participant was improperly attempting to represent a party other than himself. Therefore, absent specific Congressional authorization, only one licensed to practice law may conduct proceedings in court for anyone other than themselves.
 

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