ERISA litigation in the past year has mainly involved developments in response to major cases from prior years. The most recent of these cases is Cigna Corp. v. Amara , 131 S. Ct. 1866 (2011) (decided shortly before last year’s materials were published) addressing remedies available under ERISA and the role of the SPD in ERISA litigation. The other case is MetLife v. Glenn , 554 U.S. 105 (2008), which addressed discovery and standards of review. This article covers cases decided from April 1, 2011 to April 30, 2012, with reference to some recent earlier cases to supplement the discussion of the more recent cases. It does not address ERISA compliance issues or multi-employer ERISA plan litigation.
These materials are intended to include a balanced selection of national and local cases regardless of whether the case is a case favorable to claimants or the plans. The practice notes and case commentaries reflect the fact that the author is a claimants’-side attorney, but he hopes the materials will be useful to both sides of the ERISA litigation forum.
I. SUPREME COURT CASES
There were no significant ERISA cases in the Supreme Court in the period covered by these materials. The Amara case, decided just before last year’s materials were submitted, and the few cases interpreting it are discussed in the next section.
A non-ERISA case, Wal-Mart Stores, Inc. v. Dukes , 131 S.Ct. 2541 (2011) may affect ERISA class actions. This case held that a Fair Pay Act case could not be maintained as a class action since individual determinations of discrimination had to be made for each plaintiff. ERISA has its own class provisions, but to the extent the case shows a disinclination to allow class actions when some individual determination has to be made, it could be significant for ERISA cases. For instance, see the Novella case, supra at 12, in which the Second Circuit mentioned that, post Dukes , individual determinations of when the claim arose might make class treatment impossible.
II. AMARA AND ITS PROGENY
A. Cigna Corp. v. Amara
Amara addressed two major issues in ERISA litigation: the effect of provisions that are in the SPD but not the plan; and the types of equitable relief available for plaintiffs under ERISA.
The SPD . In any ERISA benefit plan, the two most important documents are the plan document itself, which is the lengthy, legalese-filled document that actually governs the plan and benefits, and the summary plan description, which is intended to tell participants in plain language what benefits they are entitled to. There has always been a tension between requiring information to be included in the SPD to let participants know the most important facts about their benefits but not including so much information that it no longer serves its purpose of clearly and simply explaining the benefit plan. Any lawyer who does residential closings knows how ineffective notices are when they go on for pages and pages.
The Amara court overruled the law of some circuits that plan in the event of an inconsistency between the SPD and the plan, the SPD provisions could be enforced as part of the plan. The significance of this holding is that if the SPD provision is part of the plan, then it can be enforced under Section 502(a(1)(B), which is ERISA's breach of contract provision.
Since the Court could not use 502(a)(1)(B) to grant relief, it had to find a remedy, if any, under ERISA’s general equitable relief provision, 502(a)(3). The court was restrained in what relief it could afford however, by the decision in Mertens v. Hewitt Assocs. , 508 U.S. 248 (1993), which held that only the most traditional types of non-monetary relief could be granted under 502(a)(3). The court held that there were three traditional equitable remedies that could afford relief when an SPD was inconsistent with the plan: estoppel; reformation of the plan; and surcharge. One significant clarification of prior law was that by allowing reformation of the plan and surcharge, equitable relief could be granted absent detrimental reliance by the claimant or malfeasance by the fiduciary. Killiam v. Concert Health Plan, 2012 U.S. App. LEXIS 7880 (April 19, 2012). Below are some of the other cases that have applied the Amara case.
B. Circuit Court Cases Interpreting Amara
Skinner v. Northrop Grumman , 673 F.3d 1162 (9th Cir. 2012) addressed reformation and surcharge. The plaintiffs alleged that the SPD did not adequately disclose an “annuity offset” provision that reduced benefits in certain circumstances. The court rejected reformation. The court stated that a plan could be reformed under a “mistake theory” or a “fraud theory.” The court further analyzed the mistake theory under contract principles of mutual mistake, and trust principles of reforming a trust instrument to accord with the settlor's intent.
The court held that the plaintiff's presented no evidence of mistake, or that the original plan did not reflect the employer's intent in establishing the plan. Query whether the mere fact of an inconsistency between the SPD and the plan should be sufficient to create an issue of fact whether the SPD or the plan actually reflected the settlor's intent. The court required some evidence as to who the drafters of the plan and SPD were, and some testimony about what their intent was. The court rejected the fraud theory, holding that the plaintiffs had to show some evidence of intent to deceive the plan participants apart from the bare existence of the inconsistency between the SPD and the plan. The court stated the plaintiffs could recover under the theory of surcharge if they could show that the trustee gained a benefit through unjust enrichment or for harm caused as a result of a breach of fiduciary duty. The court held that the fact that the SPD was inaccurate, and did not satisfy the plan’s statutory duty to provide an accurate description of benefits, was not a basis in itself for an order of surcharge since the plaintiffs could not show that the inaccurate SPD caused them any damage or the plan any benefit.
Eugene S. v. Horizon Blue Cross Blue Shield of New Jersey , 663 F.23d 1124, 1132 (10th Cir. 2011). This case shows that the holding of Amara regarding SPDs may not be significant long term. Amara held that if the SPD is expressly incorporated as part of the plan, then its provisions can be enforced as part of the plan. In this case, the court held that the fact that the SPD was expressly incorporated into the plan meant that the plan could take advantage of a reservation of discretion contained in the SPD but not the plan. If plans start routinely expressly incorporating the SPD into the plan, the Amara distinction between Section 502(a)(1(B) and 502(a)(3) relief might no longer be significant.
Tomlinson v. El Paso Corp , 653 F.3d 1281, 1295 (10th Cir. 2011). After Amara , reliance did not have to be shown to obtain equitable relief, but the plaintiffs still had to show damage from the alleged faulty SPD provision. Holding, however, that failure to disclose “wear away periods” (where increased service results in a reduction of pension benefits caused when a plan converts from a defined benefit to a cash-balance plan) did not violate the plan administrator’s duty to disclose material facts to the plan participants.
U.S. Airways v. McCutchen , 663 F.3d 671 (3rd Cir. 2011). When the plan sought to enforce a plan provision requiring reimbursement of medical benefits paid to a victim of a car crash, principles of equity, as elucidated by Amara, barred the plan from recovering more from the participant than the participant received in damages after payment of attorneys' fees and costs.
Showing what some might claim to be a greater willingness of the courts to find a way to grant relief to plans, as opposed to participants, claims for restitution of overpayments, or to enforce repayment agreements regarding social security award offsets, have been found to be equitable relief and therefore available under ERISA. Funk v. CIGNA Group Ins. , 648 F.3d. 182 (3rd Cir. 2011); Wetzenkamp v. Unum Life Ins. Co. of Am. , 661 F.3d 323 (7th Cir. 2011).
C. Selected District Court Cases Discussing Amara
How Amara will work its way through district court decisions is hard to determine, as shown by two Massachusetts district court issued within a few days of each. In Tetreault v. Reliance Standard Life Ins. Co ., 2011 U.S. Dist. LEXIS 152252 (D. Mass. Nov. 28, 2011), the court enforced a limitations provision contained in the SPD but not the plan. In Merigan v. Liberty Life Assurance Co. of Boston , 2011 U.S. Dist. LEXIS 137689 (D. Mass. Nov. 30, 2011), the court did not enforce a time limitation that was in the SPD and not in the plan. The plan in the former case had expressly incorporated the SPD into the plan and discussed appeal procedures, which were both absent in the latter case, which may the basis for the different results.
Younger v. Zurich Am. Ins. Co ., 2012 U.S. Dist. LEXIS 42190 (S.D.N.Y. Mar. 26, 2012): This case provides a good guide for pleading after Amara . The plaintiff claimed that the SPD was not accurate because it did not contain a limitation for injuries resulting from commission of a felony that was in the plan. The plaintiff’s claims to reform the plan are brought under 502(a)(3). Also, since claims for reformation of the plan do not depend on estoppel, it was not necessary to allege reliance on the provisions of the SPD that were divergent from the plan documents.
Joyner v. Cont'l Cas. Co. , 2011 U.S. Dist. LEXIS 146540 (S.D.N.Y. 2011). The plaintiff argued that Amara 's holding that SPDs could not be enforced as part of the plan meant that the court should ignore the reservation of discretion contained in a certificate of insurance. The court held that since the plan incorporated the certificate of coverage as part of the “contract,” the certificate was part of the plan, and so the court could consider the reservation of discretion it contained.
Frommert v. Conkright ,825 F. Supp. 2d 433 (W.D.N.Y. 2011). This case had, and is likely to continue on, a tortuous procedural course, involving multiple appeals and remands by the Second Circuit, and remand from the Supreme Court as a result of Amara . The district court had held, and the Second Circuit had affirmed, the court's application of de novo review of the plan, rather than deferring to the administrator's interpretation of the plan, due to the plan's violations of ERISA. The Supreme Court on remand ordered that the court decide the case according deference to the administrator's interpretation of the plan, on grounds that single violation of ERISA was not grounds to change the standard of review. The court found that the SPD's disclosure that the plan would offset past benefits received in calculating any future distribution was sufficient, and the exact method used did not have to be disclosed to the plan participants. Therefore, the plan could apply a “phantom account” method, where the plan would determine what the former employee's accounts would have earned if they had remained employed and deducting that amount from the pension benefits the former employees earned after they were hired.
McGuigan v. Local 295 , 2011 U.S. Dist. LEXIS 86085, 52 E.B.C. (BNA) 1406 (August 4, 2011). When the plan complied with notice requirements under ERISA, there was no requirement to give additional notice of significant dates to participants. Particularly, the plan did not have the obligation to explicitly inform plan participants that they would lose the chance to receive early retirement benefits if they did not retire by a certain date.
III. FIDUCIARY DUTY CASES
A. Excessive Fee Cases
Many cases have been brought alleging plans allowed excessive fees to be charged to participants by the mutual funds offered to participants as investment choices. The cases have generally been disposed of on motion to dismiss in favor of the plans. Renfro v. Unisys Corp , 671 F.3d 314 (7th Cir. 2011) and Loomis v. Exelon Corp. , 658 F.3d 667 (7th Cir. 2011) are recent examples of this. Courts have generally found that so long as the plan offers a mix of plans with varying degrees of risks and fees, including some high fee funds, among the choices does not constitute a breach of fiduciary duty. Contrast a case discussed in the prior materials, George v. Kraft Foods Global, Inc. , 2011 U.S. App. LEXIS 7404 (7th Cir. Apr. 11, 2011), where summary judgment regarding a plan’s investment mix/handling of funds case was reversed when a corporate affiliate, in much the same situation, had adopted practices that were more beneficial to the participants.
B. Stock Drop Cases
ERISA fiduciaries have been regularly sued for breach of fiduciary duty when the value of employer stock held by the plan dropped, particularly during the recent financial crisis. ERISA was seen as a way to bring a case when a company’s stock declined that avoided the procedural roadblocks set up in securities fraud cases by the Private Securities Litigation Reform Act, 15 U.S.C. § 78u-4, and the Federal Rules of Civil Procedure, which do not apply to ERISA claims.
Most circuits, including the Second Circuit, have made it difficult for such cases to survive the pleading stage. These circuits have has applied a presumption of prudence, requiring that the plaintiff plead facts showing “imminent collapse” of the company, or “dire circumstances” to survive a motion to dismiss. The presumption is called “ Moench Presumption” after the Third Circuit case of Moench v. Robertson , 62 F.3d 553 (3d Cir. 1995) that first set it forth. In Gray v. Citigroup Inc. (In re Citigroup ERISA Litig.), 662 F.3d 128 (2d Cir. N.Y. 2011) and Gearren v. McGraw-Hill Cos ., 660 F.3d 605 (2d Cir. N.Y. 2011), the Second Circuit explicitly adopted the Moench presumption. Even drops of 50% or more in the value of the employer’s stock do not meet the pleading standard absent allegation of facts showing a “dire situation.” The court further held that the plan fiduciary had no obligation to disclose adverse non-public information to plan participants. Judge Staub dissented, stating that the presumption leaves employees wholly unprotected from a fiduciary’s careless decision to invest in the employer’s stock, and that the case should be allowed to proceed to allow discovery regarding the fiduciary's conduct.
The Sixth Circuit has gone its own way on this issue, holding in the case of Pfeil v. State Street Bank & Trust Co. , 671 F.3d 585 (6th Cir. 2012), that there is no presumption of prudence at the pleading stage. In a case involving General Motors stock, the plan fiduciary did not suspend purchases of GM stock until after GM stated in its quarterly Form 10-Q that its auditors had expressed substantial doubt about GM’s ability to continue in business, and did not sell the GM stock it owned until three months later, a couple of months before GM’s bankruptcy. The Sixth Circuit rejected any special pleading requirements regarding the presumption of prudence, and denied the motion to dismiss. Arguably, the facts known to the plan administrator regarding GM’s finances were compelling enough that they would have rebutted the Moench presumption even if that standard had been applied by the court.
C. Miscellaneous Fiduciary Duty Cases
Milgram v. Orthopedic Assocs. Defined Contribution Pension Plan , 662 F.3d 187 (2d Cir. N.Y. 2011). Plan erroneously transferred the entire balance of a pension plan under a QDRO rather than half, as the QDRO had provided. This resulted in the wife receiving $763,847 more than she was entitled to. The ex-husband did not notice the error for fifteen years. The Court affirmed the district court's summary judgment against the plan of the amount of the original error, plus the return the ex-husband would have earned on the money over the fifteen years.
In Metlife v. Glenn 554 U.S. 105 (2008) the Supreme Court ruled when the same entity determined benefit claim and paid benefits, there existed an inherent conflict of interest that could lead to a less deferential standard of arbitrary and capricious review. The Court further held that plaintiff could obtain discovery bearing on the existence of a conflict, and whether that conflict had expressed itself in biased handling of the claim. The degree to which Glenn explanded the scope of discovery is unclear. Some cases in the last year have further discussed this issue without really establishing a consistent standard, even within the Second Circuit.
Schrom v. Guardian Life Ins. Co. of Am . 2012 U.S. Dist. LEXIS 2514 (S.D.N.Y., 2012). While non-record discovery regarding the merits was still off limits, discovery of non-record evidence was “invited” by Glenn :
Because it is now clear that a deferential standard of review applies when a plan accords the claims administrator discretion, even when the administrator is operating with a conflict, it will be more difficult in such cases to show good cause for discovery on the merits of the claim determination itself: "absent serious procedural deficiencies, discovery into the substantive merits of a claim remains off limits." Id.; see Myers v. Prudential Insurance Co. , 581 F. Supp. 2d 904, 913 (E.D. Tenn. 2008). On the other hand, by identifying an administrator's conflict as one factor to be weighed in evaluating whether a denial of benefits is arbitrary and capricious, Glenn invited discovery relating to any such conflict, since much of the relevant information would not have been part of the record. "[T]he Court [in Glenn] made clear that not all conflicts are created equal. Their significance in any given case depends upon all of the circumstances, including those suggesting a higher or lower likelihood that the conflict affected the decision."
Hogan-Cross v. Metropolitan Life Insurance Co ., 568 F. Supp. 2d 410, 415 (S.D.N.Y. 2008)
The court did deny the plan the opportunity to depose the claimant to examine inconsistencies in her claims of disability and the medical records since no non-record discovery in the claimant’s favor was ordered.
Puri v. Hartford Life & Accident Ins. Co., 784 F. Supp. 2d 103, 105 (D. Conn. 2011). Judge Dorsey allowed the claimant to depose the individual that conducted the occupation analysis that found the claimant capable of performing her occupation to determine if she had a financial interest in recommending a denial of benefits.
Joyner v. Cont'l Cas. Co ., 2011 U.S. Dist. LEXIS 146540 (S.D.N.Y. Dec. 16, 2011). Allowing document requests and a single deposition on the issue of whether the inherent conflict affected the benefit decision. Unlike the Boison case below, the court did not require any additional indicia of bad faith before order non-record discovery.
Boison v. Insurance Services Office, Inc. , 2011 U.S. Dist. LEXIS 145408 (E.D.N.Y., 2011). Holding that the existence of a conflict of interest in itself was not sufficient to allow additional discovery, and that the plaintiff had to show some additional factor, such as lack of criteria for conducting an appeal, before conflict of interest discovery would be allowed.
Crosby v. Louisiana Health Serv. & Indem. Co ., 647 F.3d 258 (5th Cir. 2011), summary judgment for plan reversed when no non-record discovery was ordered. The court held that the claimant should have been permitted to conduct discovery on the following issues: “claimant may question the completeness of the administrative record; whether the plan administrator complied with ERISA’s procedural regulations; and the existence and extent of a conflict of interest created by a plan administrator's dual role.”
A. Significant Benefits Cases
Sullivan v. CUNA Mut. Ins. Soc'y, 649 F.3d 553 (7th Cir. . 2011). The employer's health plan had provision where retirees could apply unpaid sick leave that had accrued while they were employed to the employee-portion of retiree health benefits. In 2008, the company stopped paying any share of retiree health benefits, and canceled the provision allowing accrued sick leave to be applied against any retiree health participant contributions.
The court permitted the company to simply eliminate the plan provision, and affirmed the dismissal of the plaintiff's complaint on the basis that under ERISA, welfare benefits (non-pension benefits such as health insurance or severance) do not vest, unlike pension benefits. The fact that the plaintiffs clearly relied on the promise by not taking sick leave they were otherwise entitled to, and that the company got the benefit of employees not taking sick leave, did not overcome the fact that welfare benefits don't vest. The dissent argued that it was clearly a case of promissory estoppel or unilateral contract, which theories exist under the federal common law under ERISA. Under either theory, the benefits would have vested when the employees retired, and could no longer be changed for existing retirees.
Halo v. Yale Health Plan , 2012 U.S. Dist. LEXIS 31447 (D. Conn. Mar. 8, 2012). When the plan did not return telephone calls about alleged emergency treatment within 24 hours as required by ERISA’s regulations, sole remedy was that the claimant could bring suit without further pursuing administrative remedies. The failure did not in itself entitle the claimant to the benefit. Nor was the claimant entitled to the $110 a day penalties unefer ERISA Section 502(c) for failure to provide plan documents because the penalty did not apply to violations of the regulations as opposed to the statute itself.
Barber v. Sun Life & Health Ins. Co., 2012 U.S. Dist. LEXIS 22607 (D. Conn. Feb. 3, 2012). Most district court trials of benefit denials are a “trial on the papers,” where each side moves for judgment based on the administrative record, since that is generally the only evidence the court will consider. In this case, Judge Covello, possibly because that is how the parties presented the case to him, ruled on cross motions for summary judgment, and reserved final judgment for a trial at which claims representatives, the claimant and the treating physician would testify.
B. Denial Letters
ERISA requires that plans that deny benefits provide detailed denial letters. The letters are crucial for the appeal process, providing the blue print for what the claimant has to respond to during the appeal process and for any subsequent litigation. Plan administrators may not be able to assert grounds for the denial that are not contained in the denial letter. Accordingly, denial letters are sometimes turning into minor medical treatises, sometimes reaching 15 pages or more, requiring more and more work, and expense for claimants to respond to them.
The past year has provided some guidance what the denial letter should contain, and the consequences of not including the right information.
1. Treating Physician v. Retained Experts: No “Treating physician’s rule”
ERISA does not have the “treating physician rule” of the Social Security Administration, where the Administration has to follow the opinion of a treating physician absent compelling evidence that the opinion is not justified. ERISA plan administrators need not give special deference to the opinions of treating physicians, and are under no "discrete burden of explanation when they credit reliable evidence that conflicts with a treating physician's evaluation." Black & Decker Disability Plan v. Nord , 538 U.S. 822, 834, 123 S. Ct. 1965, 155 L. Ed. 2d 1034 (2003). However, an administrator may not "arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of treating physicians." Id.
a. Holding treaters’ opinions adequately distinguished:
Marrs v. Prudential Co. of Am. 2011 U.S. App. LEXIS 20550 (5th Cir. Oct. 7, 2011), the court stated the denial letter didn’t need to address every point raised by the claimant since the omitted points were not relevant to the claims decision.
Hughes v. CUNA Mutual Long Term Dis Ins. , 2011 U.S. Dist. LEXIS 28557 (S.D.Ind. March 14, 2011. When plan explained its basis for departing from the treating physicians’ determination of disability, there was no abuse of discretion. Insurer conducted extensive reviews of the treaters medical records. The claimant also refused to submit to a functional capacity examination, which probably would have been enough for her to lose.
Other cases in which the court found that the insurer adequately explained the basis for departing from the treating physicians’ opinions are : Frankton v. Metropolitan Life Ins. Co. 432 Fed. Appx. 210 (4th Cir. May 23, 2011); Scott v. Eaton Corp. Long Term Disability Plan , 454 Fed. Appx. 154 (4th Cir. S.C. 2011), reversing district court’s finding abuse of discretion when insurer did not ignore the treating physician’s letter but rather disregarded it due to the qualifications of the general practitioner who issued it.
b. Treater’s opinions not adequately distinguished.
Hunter v. Life Insurance Company of North America , 2011 U.S. App. LEXIS 13598 (6th Cir. June 29, 2011). Decision to credit opinions of file-reviewing physicians over the treaters was arbitrary and capricious when the file reviewing physicians rejected the treaters’ opinion largely because of surveillance videos that were only minimally inconsistent with the claimant’s claimed limitations. Also holding that the determination that the claimant was not disabled because she was capable of sedentary work was arbitrary and capricious when the job required some lifting and frequent walking and required extended shifts and overtime was an additional basis to find that the decision was arbitrary and capricious. The court addressed the job requirements in terms of what the job actually required, without discussing the issue of whether the relevant criterion was the requirements for the occupation as it existed in the economy as a whole rather than the specific requirements of this position. Occupational classifications such as the Department of Labor’s online O*Net system or the Dictionary of Occupational Classifications (which are the standard sources for occupational job requirements) rarely if ever discuss required overtime, so the court’s consideration of the jobs actual requirements rather than of the occupation in general was a substantial benefit to the claimant.
O’Callaghan v. SPX Corp. 2011 U.S. App. LEXIS 19631 (6th Cir. Sept. 26, 2011). Arbitrary and capricious when the insurer did not consider additional medical evidence submitted at the second level of appeal, including the following: MRI and EMG results that contradicted the findings of the IME conducted at the initial appeal; a statement from a treating physician interpreting these results and opining that the claimant was permanently disabled; and a report from a vocational consultant that the claimant’s concentration issues and need to lie down regularly precluded him from performing any job. The insurer had a new physician review the file after this information was submitted, but the physician submitted a two-page report that did not discuss any principled basis for rejecting the treaters’ opinions. The court also mentioned that the insurer did not address the Social Security Administration’s finding that the claimant was totally disabled, especially since the insurer required that the claimant to apply for benefits. This was one of the factors cited by the Supreme Court in the Metropolitan Life Ins. Co. v. Glenn , 554 U.S. 105 (2008) that can show that a decision is arbitrary and capricious. The court also found that due to the nature of the plan, there was no intrinsic conflict of interest. The plan was a Voluntary Employee Benefit Association, where all employees made contributions to the fund from which benefits were paid, there was no intrinsic conflict of interest, even though the company had to pay any claims that exceeded the funds in the VEBA.
Kelly v. Reliance Std. Life Ins. Co. , 2011 U.S. Dist. LEXIS 147133 (D.N.J. Dec. 21, 2011). Abuse of discretion when only a paper file review (rather than a full independent medical exam) performed, and the file reviewers ignored certain treatment records, such as the records of the physical therapist, that detailed the extent of the impairments. The court also found that file reviewer’s requirement of objective evidence to substantiate the subjective complaints of pain were not a valid basis to deny the claim:
The defendants are not free to ignore the plaintiff's chronic and severe pain under the apparent theory that MRIs or EMGs must demonstrate some structural deformity for a person to be disabled because of back pain. Unfortunately for all parties involved, back pain, even severe pain, is not so simple.
Id . at *24-25 , citing, Gellerman v. Jefferson Pilot Financial Ins. Co. , 376 F. Supp. 2d 724, 734, 736 n.9 (S.D. Tex. 2005).
Also, the court faulted the lack of any real analysis of the actual requirements of the claimants job and what his responsibilities were: “ Neither the Vocational Specialist nor Reliance determined which duties were material duties of Kelly's job, which duties could be delegated, what degree of physical exertion was required to complete the material duties and whether Kelly could, during the Elimination Period, complete those tasks.” Id . at 29.
Simon v. Prudential Ins. Co of Am. , 2011 U.S. Dist. LEXIS 78989 (D.N.J., July 20, 2011. While the pain specialist retained by the insurer did not find a disability, the insurer’s failure to follow up on his suggestion that a neuropsychological evaluation be performed made the denial of benefits arbitrary and capricious.
Zhou v. Metropolitan Life Ins. Co. , 2011 U.S. Dist. LEXIS 99281 (D. Md., Sept. 2, 2011). Failure to conduct an IME, rather than file review, in rejecting opinions of a treating physician is questionable and can contribute to a finding that a denial is arbitrary and capricious, when the disabling condition is psychiatric and the basis for the denial is the lack of objective evidence. See also, Kelly , Salomma , and Hunter , discussed in the next section.
C. Subjective Conditions
One of the constant issues with disability cases is the degree to which insurers can require claimants to submit objective evidence of conditions that can commonly only be diagnosed based on subjective complaints, such as chronic pain syndrome, or which the severity of the impairment resulting from the diagnosis can only be based on subjective complaints, like fibromyalgia. A number of cases in the last year have addressed this issue.
DuPerry v. LINA , 2011 U.S. App. LEXIS 1399 (4TH Cir., Jan 24, 2011). The claimant suffered from rheumatoid arthritis, osteoarthritis and fibromyalgia. While there was little objective evidence of impairment, she supported her claim with evidence that she relied significantly on her family to performs activities of daily living, that she sometimes used a cane or walker, and that she spent most of her time in her bedroom. The treating physician supported the disability claim. The insurer denied the claim based on a file review that found no objective evidence of the condition, that the osteoarthritis appeared controlled by medication, and that “generally, patients with fibromyalgia are able to work a sedentary occupation.” The court concluded this was an insufficient basis to disregard the treaters opinion of disability.
The court stated that when a plan does not explicitly require objective proof of a disability, and the claimant submits objective evidence of the existence of disease that could cause subjective complaints of pain, the insurer must address the complaints of pain “in a thorough, meaningful way if the administrator is to deny the claim.” Id . at *34. Compare, Pinto v. Aetna Life Ins. Co. , 2011 U.S. Dist. LEXIS 16961 (M.D. Fla. Feb. 15, 2011) (finding that requirement of proof of disability “certainly connotes some objective evidence.”)
Salomaa v. Honda Long Term Disability Plan , 642 F.3d 666 (9th Cir. 2011). Ruling on a claim based on chronic fatigue syndrome, the court stated “conditioning an award on the existence of evidence that cannot exist is arbitrary and capricious.” Since under the accepted diagnosis of CFS established by the Centers of Disease Control did not have any objective test, the insurer could not require an objective test. The court also stated that when the SSA had found a claimant disabled, the insurer should review the determination, state in the denial letter that it was considered, and explain why the determination was not accepted.
Wetzenkamp v. Unum Life Ins. Co. of Am. , 661 F.3d 323 (7th Cir. 2011). The court construed a “self-reporting symptoms” provision found in many plans that limits benefits for claims based on such symptoms to twenty-four months as applied fibromyalgia. The plan defined “self-reported symptoms” as “the manifestations of your condition which you tell your doctor that are not verifiable using tests, procedures or clinical examinations standardly accepted in the practice of medicine.” The claimant argued that this referred to the diagnosis of the disease depending on self-report, rather than the impairments resulting from the disease. The diagnosis of fibromyalgia can be objectively verified by a tender or trigger points test, while the disabilities resulting from the condition, fatigue and pain, usually cannot. The court agreed with the claimant’s interpretation, and therefore found that the self-reported symptoms limitation did not apply to fibromyalgia, so the claim was not limited to a 24-month payment period.
Baker v. Hartford Life Ins. Co , 2011 U.S. App. LEXIS 15567 (3RD Cir. 2011). Fact that the employer was willing to provide reasonable accommodations and the claimant never returned to work to try supported the insurer’s decision. The plan at issue did allow considerations of reasonable accommodation in determining whether the claimant could perform the job. If the plan did not have such a provision, whether a plan could consider the possibility of reasonable accommodation would be doubtful.
Maher v. Massachusetts General Hosp. Long Term Dis. Plan , 2011 U.S. App. LEXIS 24205 (1st Cir. 2011). Video surveillance showing the claimant driving, walking, jogging, bending over, flying a kite and lifting her child could not be the sole basis for denying the claim. The activity comprised a small amount of the 90 hours of video obtained. For the brief periods of activity, the claimant could have been having a good day or pre-medicated to allow her to do the activities observed.
VI. ATTORNEYS’ FEES
Unlike Title VII, an award of attorneys fees to the prevailing plaintiff in an ERISA case is not automatic even if the plaintiff wins. In Hardt v. Reliance Standard Life Ins. Co., , 130 S.Ct. 2149 (2010), the Supreme Court loosened the standard for an award of attorneys’ fees in a benefit denial, allowing a recovery of fees even if a party was not the “prevailing party,” but achieved some degree of success in obtaining benefits. The claimant in that case did not get a judgment in her favor, but did obtain a remand that resulted in her being awarded benefits. The Circuit Court had denied fees because she was not a prevailing party in the litigation. The Court also said the five-factor test that is applied in most circuits, including the Second, is not established in ERISA and therefore it is not mandatory for courts to follow it. Several notable fee cases have been decided in the last year.
O’Callaghan v. SPX Corp. 2011 U.S. App. LEXIS 19631 (6th Cir. Sept. 26, 2011). Upholding denial of attorney’s fees to the prevailing claimant. The court upheld the district court’s determination that ignoring the treating physicians’ disability opinions (discussed above) was not sufficiently egregious to justify an award of attorneys’ fees.
Toussaint v. KK Weiser, Inc. , 648 F3d. 108 (2nd Cir. 2011). Affirming that even after Hardt , the prior five factor test for making a fee award set forth in Chambless v. Masters, Mates & Pilots Pension Plan , 815 F.2d 869, 871 (2d Cir. 1987), which requires some bad faith or lack of reasonable justification by the plan, still applies. Even if the plaintiff does achieve “some success,” an award of fees is allowed but not mandatory.
Huss v. IBM Medical and Dental Plan , 2011 U.S. App. LEXIS 7563 (7th Cir. 2011). The Circuit Court overturned an award of attorneys’ fees, even though the lower court had found the denial arbitrary and capricious, but the decision did not reflect bad faith or intent to harass the claimant.
VII. LIMITATIONS PERIODS – ACCRUAL OF CLAIM
ERISA does not contain a statute of limitations for benefit claims. Rather, the applicable state statute applies, or any limitations period contained in the plan that is reasonable. Burke v. PriceWaterHouseCoopers LLP Long Term Disability Plan , 572 F.3d 76, 78 (2d Cir. 2009). A regular subject of litigation is when a plan-specific limitations period must be followed. The law on this issue is not clear and is diverse among the circuits, and it can be difficult to determine the date a claim accrues, so practitioners in this area have to be particularly careful with limitation periods, particularly if contained in the plan.
Some cases in the past year have addressed this issue:
Novella v. Westchester County , 661 F.3d 128 (2nd Cir. 2011). Claim for miscalculation of pension benefits accrued when notice of method of calculation was given, not when the claimant first received the benefit; the claim accrued “when there is enough information available to the pensioner to assure that he knows or reasonably should know of the miscalculation.” The court rejected both the plaintiff’s argument that the claim only accrued when the claimant contested the benefit calculation and the plan denied any relief, and the plan’s claim that the claim accrued when benefits based on the contested calculation were first received. Because of the need to determine the date the claim accrued for each potential class member, the court noted that class certification in the case could be difficult, but remanded the case to the district court for it to determine the issue.
Winthrow v. Bache Halsey Stuart , 655 F.3d. 1032 (9th Cir. 2011), the court applied the California 4-year contract statute, and held that the claim accrued when there was a clear repudiation of the claim. The claimant raised issues with the calculation of the amount of her benefits over the course of a 13-year period, and had been told by telephone that the administrator believed the benefits were properly calculated. The administrator never issued a written decision, but after an oral denial of the claim in 2003, she filed suit. The Court held that the claim accrued at the definitive oral statement that her benefits would not change in 2003, and not after earlier times she had been told that the benefits would not change.
Epstein v. Hartford Life and Accident Ins. Co. , 2011 U.S. App. LEXIS 23162 (2nd Cir. 2011). The policy had a limitation period of three years after the date proof of the claim was originally required. The suit was not filed within three years of this date, but was filed within three years of when the insurer had requested additional information regarding the claim, which requests the claimant ignored. The court found that the requests for information established a new limitation period, even though the claimant had not responded to them. IMPORTANT Epstein did not affect the holding of Burke v. PricewaterhouseCoopers LLP Long Term Disability Pla n, 572 F.3d 76 (2d Cir. N.Y. 2009), which enforced a plan limitations period that ran three years from the date that the original proof of claim was filed, and counter to other circuits (e.g. Belrose v. Hartford Life & Accident Ins. Co. , 2012 U.S. App. LEXIS 7506 (4th Cir. Va. Apr. 13, 2012), the contractual limitations period did not run from the date of the final denial. The court in Burke noted that due to the ERISA claim handling regulations issued in 2002, plans were required to decide claims within 90 days after an appeal was filed, which would leave sufficient time after the conclusion of the appeal to bring suit. And, if the plan did not comply with the deadlines, the claimant could file suit without further exhausting the administrative procedures. Practice Note : from a claimant’s perspective, this holding creates real issues. The claimant may want to complete the administrative process, even if the plan is late in issuing a decision, to see if the denial is reversed prior to the expense and trouble of filing suit. Doing so, however, risks having a plan-imposed statute bar the claim. Considering the number of unrepresented parties appealing benefit denials, this is a particularly troublesome holding.
Thompson v. Retirement Plan for Employees of S.C. Johnson & Son , 651 F.3d 600 (7th Cir. 2011). Claim regarding cash balance pension plan conversion accrued no later than the participant’s receipt of lump sum distributions, rejecting the plaintiffs’ claim that the relevant date was when they received the plan itself that allowed them to determine the validity of the method the plan used to determine benefits.
Heimeshoff v. Hartford Life & Accident Ins. Co ., 2012 U.S. Dist. LEXIS 6882 (D. Conn. Jan. 16, 2012). In accordance with the holding in Epstein , Judge Arterton enforced a three year statute that she said began to run no later than three years from the date that the insurer required all the information in support of the appeal to be submitted. The court expressed some willingness to enforce a statute based on the date the original proof of claim had to be submitted, but didn’t reach the issue since the claimant didn’t satisfy the more lenient standard.
Rhodes v. First Reliance Std. Life Ins. Co ., 2011 U.S. Dist. LEXIS 149138 (D. Conn. Dec. 29, 2011). Judge Bryant held that the insurer did not arbitrarily and capricious determine that the claimant was not physically disabled from any occupation. Judge Bryant did find the decision regarding the claimant’s mental health to be arbitrary and capricious, and affected by the insurer’s inherent conflict of interest, and remanded the claim for further consideration of the mental disability claim.
Viti v. Guardian Life Ins. Co. 2011 U.S. Dist. LEXIS 100475 (S.D.N.Y. 2011). Equitable tolling of the limitation only available “in rare and exceptional circumstances in which a party is prevented in some extraordinary way from exercising his or her rights.” The court remarked that the Second Circuit has not yet held whether equitable tolling applies to plan term limitations, or just to statutory limitations periods. Compare , Candelaria v. Orthobiologics, LLC , 661 F.3d 675 (1st Cir. 2011), finding equitable tolling of a one-year statutory limitations period when the limitations period was not disclosed in the denial letter.