Three Strikes and You’re Out: Health Plan’s Decision Was Arbitrary and Capricious Be-cause It Repeatedly Refused To Abide By Remand Orders

In Butler v. United Healthcare of Tennessee, Inc., — F.3d –, 2014 WL 4116478 (6th Cir. Aug. 22, 2014), the court addressed what appeared to be a relatively straightforward health care benefit question, complicated by what the court described as a severely recalcitrant claim administrator. Continue reading

ERISA Preempts Wisconsin FMLA

Sherfel v. Newson, — F.3d –. 2014 WL 4812275 (6th Cir. Sept. 30, 2014), concerned an STD plan covering employees in 49 States. The plan allowed its administrator to pay STD benefits only to employees who qualify as disabled under the plan. The court observed that “ERISA then federalizes that limitation, by requiring the administrator to pay benefits only as prescribed in ‘the documents and instruments governing the plan[.]’ 29 U.S.C. § 1104(a)(1)(D).” The court continued that the Wisconsin FMLA “requires the plan administrator to pay short-term disability benefits to certain beneficiaries who undisputedly are not short-term disabled as defined by the plan. As to those beneficiaries, therefore, the administrator has two choices: violate the Wisconsin Act, or violate ERISA.”  The court held that the Wisconsin FMLA, as applied to this plan, is expressly preempted by ERISA.

Court Requires Nexus Between Alleged Fiduciary Duty and Alleged Damage

In Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co. (U.S.A), — F.3d –, 2014 WL 4783665 (3d Cir. Sept. 26, 2014), the plaintiffs, who were participants in employer-sponsored 401(k) benefit plans, claimed that John Hancock, an administrator that provided investment services to plans, breached its fiduciary duty by allegedly charging the retirement plans excessive fees. Continue reading

Plan’s Equitable Lien Not Defeated By Argument That State Law Precluded Participant from Recovering Medical Expenses from Tortfeasor

In Bd. of Trustees of the Nat. Elevator Indus. Health Benefit Plan v. McLaughlin,  — F.3d –, 2014 WL 4852096 (3d Cir. Oct. 1, 2014), plaintiff argued that his medical plan could not enforce an equitable lien by agreement to recover medical expenses paid because the New Jersey Collateral Source Statute (the “NJCSS”) precluded him from collecting medical expenses from the tortfeasor who caused them.

The NJCSS provided that, in a personal injury action, any benefits the plaintiff receives from any non-tortfeasor must be “disclosed to the court and the amount thereof which duplicates any benefit contained in the award shall be deducted from any award recovered[.]” Thus, the plaintiff claimed, he could not, and did not, recover any medical expenses in his litigation.

The court first held that the Plan language allowed the Plan to recover medical expenses out of any recovery by the beneficiary, not merely an award of medical expenses. It also held that the plan language took precedence over any contrary interpretation of the NJCSS. The court went on to note, however, that medical expenses paid to an injured party subject to an equitable lien might not be a collateral source under the terms of the NJCSS. The court chided plaintiff for “assuming” that the Plan payments would have precluded recovery of medical expenses from the tortfeasor, and suggested that he should have presented the issue of the proper interpretation of the NJCSS to the court presiding over the tort action.

Second Circuit Evaluates Split in Circuits, and Rules That Order Remanding Claim to Administrator Is Generally Not Appealable

In Mead v. Reliastar Life Ins. Co., — F.3d –,  2014 WL 4548868 (2d Cir. Sept. 16, 2014), the district court determined that Reliastar’s decision on plaintiff’s disability claim was arbitrary and capricious, and remanded the matter to Reliastar to calculate the benefits owed for plaintiff’s own-occupation disability, and to determine whether she was disabled from any occupation. Reliastar appealed, and plaintiff moved to dismiss for lack of appellate jurisdiction, arguing that the remand order was not a “final decision” under 28 U.S.C. § 1291. The court noted that it had “never definitively decided whether, or under what circumstances, a district court’s remand to an ERISA plan administrator is immediately appealable.” It held now that it was not appealable. Continue reading

Remand May Be Sufficient Success on the Merits to Support Attorneys’ Fee Award

Gross v. Sun Life Assur. Co. of Canada, 763 F.3d 73 (1st Cir. 2014), a divided decision, concerned the question whether a remand by the First Circuit to the administrator qualified for an award of attorneys’ fees. In a prior decision, Gross v. Sun Life Assur. Co. of Canada, 734 F.3d 1 (1st Cir. 2013), the court had accepted plaintiff’s argument that deferential review was not triggered by plan language requiring that proof of disability be “satisfactory to” the insurer. Gross 2013 also found that the administrative record was inadequate to assess plaintiff’s entitlement to benefits, and remanded to the administrator. Plaintiff then apparently filed a motion with the First Circuit seeking attorneys’ fees for the litigation in the district court and on appeal, leading to Gross 2014. Continue reading

Ninth Circuit Discusses Limits On Make-Whole Equitable Remedies for Breach of Fiduciary Duty

In Gabriel v. Alaska Electrical Pension Fund, 755 F.3d 647 (9th Cir. 2014), a venal claimant met a not-very competent plan administrator, and the result was a helpful discussion of limits on make-whole equitable claims. Continue reading

Administrator is Entitled to Require Strict Compliance With Plan Procedures

In Hall v. Met. Life Ins. Co., 750 F/3d 995 (8th Cir. 2014), the plaintiff’s husband participated in a life insurance plan, in which he named his son as beneficiary. After he married plaintiff, he executed a change of beneficiary form, but it was not filed until after he died. Shortly before his death, he executed a will that purported to designate plaintiff as beneficiary of the life benefit. Met Life denied plaintiff’s claim, and the court upheld the determination. Continue reading

Evidence Outside of Administrative Record Is Admissible to Determine Standard of Review

In Waldoch v. Medtronic, Inc., 757 F.3d 822 (8th Cir. 2014), the plaintiff argued that the plan’s grant of discretionary authority was overridden by procedural irregularities in plan administration, compelling use of the de novo standard of review. To counter that argument, Medtronic submitted an affidavit with supplemental evidence demonstrating its claims handling process. The district court overruled plaintiff’s motion to strike that evidence, and the Eighth Circuit affirmed. The court held that, though its review is normally limited to the administrative record, that rule “is relaxed when evidence is admitted for the limited purpose of determining the proper standard of review.”

After noting that Met Life v. Glenn may well have overruled Eighth Circuit precedent to the effect that serious procedural irregularities could compel de novo review even when the plan granted discretionary authority, the court held that it did not need to resolve that question, given its conclusion that there were no serious procedural irregularities present.

Sixth Circuit Adopts “Clear-Notice” Rule Before Statutory Penalties Can Be Imposed

Cultrona v. Nationwide Life Ins. Co., 748 F.3d 698 (6th Cir. 2014), involved the denial of benefits under an accidental death policy on the ground that the plaintiff’s husband’s death was excluded due to his intoxication. The court found that determination to be reasonable.

But the court also affirmed the district court’s determination that the plan administrator had to pay plaintiff a statutory penalty for its failure to provide a copy of the original policy in a timely manner. The administrator argued that the court should adopt the “clear-notice” standard, which requires a claimant to “provide clear notice to the plan administrator of the information they desire.” The court, as an issue of first impression, adopted that standard, and stated that the key question was whether the administrator knew or should have known which documents were being requested. The claimant’s attorney’s request for “all documents comprising the administrative record and/or supporting [the administrator’s] decision” gave clear notice that the original policy was being requested. This was further evidenced by the fact that an employee of the claim administrator proposed sending a copy of the original policy in response to the request.