Another SCOTUS subrogation decision, and another deep dive into equity treatises

There is a lot about ERISA litigation that is hard to understand, but perhaps the most opaque issue is subrogation, which is the law governing when and how plans can recover benefits from participants. It seems that the Supreme Court is constantly changing the rules (while denying that it’s changing the rules), based on its interpretation of old treatises written about procedure in courts that don’t exist anymore. Continue reading

Shoes are starting to drop in church plan litigation

The Connecticut Law Tribune reported on Friday that St. Francis Hospital & Medical Center settled a class action lawsuit alleging that its pension plan failed to comply with ERISA because it improperly contended it was exempt as a church plan.

The suit alleged that the plan was underfunded by $140 million. The parties reportedly agreed to settle for $107 million, payable over 10 years.

Certainly the settlement discussions involved consideration of Kaplan v. Saint Peter’s Healthcare Sys., 810 F.3d 175, 177 (3d Cir. 2015), and Stapleton v. Advocate Health Care Network, 817 F.3d 517 (7th Cir. Mar. 17, 2016), both of which drastically narrowed the church-plan exemption.

ERISA preempts state-required “all payer claim databases” (APCD)

About twenty states, including Vermont, have passed laws requiring all entities that provide health care services to report information to a state agency; these are called “all payer claims databases” or APCDs. Though they may have many purposes, they all generally are intended to enforce a universal and consistent (within the particular state, at least) submission of data that permits study, evaluation, manipulation and dissemination of the data, with an aim of improving health care outcomes and reducing costs. Of course, each state that establishes an APCD likely will have its own requirements, scope and format, which likely will differ in some respects from other states’ APCDs. And because a primary intent of ERISA was to avoid such patchwork, state-by-state regulation of employee benefit plans, a conflict was inevitable.

That conflict came to a head in Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (2016), and the Supreme Court held that ERISA won, by preempting Vermont’s APCD law. Continue reading

ERISA governs plans established by church-related organizations

It is well-established that ERISA contains what is commonly referred to as a “church-plan exemption” which provides that plans established by churches are not required to abide by ERISA’s many rules and regulations. For many years, a number of courts have held that this exemption also applied to plans that were established by organizations that are affiliated with churches, such as schools (think Notre Dame or Georgetown) or hospitals. In two major decisions a couple of months apart, the Third and Seventh Circuits have held that the exemption is not as broad as other courts have concluded. These cases signal a major new area of ERISA litigation. Continue reading

Failure to disclose contractual limitation in ERISA claim denial letter is per se prejudicial

In Santana-Diaz v. Metro. Life Ins. Co., 816 F.3d 172 (1st Cir. 2016), the court held “that ERISA requires a plan administrator in its denial of benefits letter to inform a claimant of not only his right to bring a civil action, but also the plan-imposed time limit for doing so. Because MetLife violated this regulatory obligation, the limitations period in this case was rendered inapplicable[.]” The First Circuit thus reversed the district court, which had held that the failure to provide notice was not dispositive because plaintiff was aware of the limitation through the group policy. Continue reading

Unpaid employer contributions cannot be plan assets; debt is dischargeable in bankruptcy

Bos v. Bd. of Trustees, 795 F.3d 1006 (9th Cir. 2015), involved the owner of a company that participated in a multi-employer pension plan. Because the owner had full control over the company finances, he was personally responsible for making the required contributions. Moreover, he signed a promissory note for some $360,000 in payments that the company had failed to make. Then he filed bankruptcy. The bankruptcy court and the district court held that the debt was not dischargeable, because it was incurred due to the debtor’s “fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny.” 11 U.S.C. § 523(a)(4). To so hold, the lower courts had concluded that the unpaid contributions were plan assets, and plaintiff’s control over those unpaid contributions made him a fiduciary, which gave rise to non-dischargeability. Continue reading

Preferred provider agreements do not support ERISA claim

In Penn. Chiro. Assoc. v. Independence Hosp. Indem. Plan, Inc., — F.3d –, 2015 WL 5853690 (7th Cir., Oct. 1, 2015), two chiropractors who had signed preferred provider agreements with an insurer claimed that the insurer violated ERISA in determining payments to them. In particular, plaintiffs claimed that the insurer had improperly recouped overpayments without holding a hearing.

As the court described the function of the agreement: “Providers bill the insurer directly and do not know (or care) whether a given patient obtained the coverage as part of an ERISA welfare-benefit plan or through some other means, such as an affinity-group policy or an insurance exchange under the Affordable Care Act.” Continue reading

SPD can be governing plan document when there is no actual plan

Bd. of Trustees v. Moore, 800 F.3d 214 (6th Cir. 2015), considered whether a summary plan description (SPD) that was the only document containing a subrogation provision was a binding plan document. The Board of Trustees of the National Elevator Industry (NEI Board) established a health benefits plan, pursuant to two relevant documents. The first was a Trust Agreement between the NEI Board and participating elevator companies, which provided for the establishment and funding of a health benefit plan. The Trust Agreement did not, however, contain any details of a health plan. The NEI Board never created a plan document, but did create an SPD, which details the terms of the plan, and contains a subrogation provision. The Plan’s director of health claims administration testified that the SPD constituted both the plan and the summary of that plan. Continue reading

Third Circuit rules that claim denial letters must disclose contractual limitation period

In Mirza v. Ins. Administrator of Amer., Inc., 800 F.3d 129 (3d Cir. 2015), the court held that the failure to disclose a contractual limitation period in a denial letter precluded enforcement of that limitation, and required application of the most analogous state limitation period.

The district court had ruled, in granting summary judgment for defendant, that a lack of notice was irrelevant, because the plaintiff had knowledge of the limitation, and therefore could not benefit from the equitable tolling that might otherwise flow from a lack of required disclosure. The Third Circuit held “we do not find equitable tolling to be an obstacle, or even relevant, to Mirza’s claim.” Continue reading

Ninth Circuit judge calls for en banc review to overturn Providence Health v. McDowell

In Oregon Teamster Employers Trust v. Hillsboro Garbage Disposal, Inc., 800 F.3d 1151 (9th Cir. 2015), the corporate defendant, Hillsboro Garbage entered into contracts with a union health plan that provided coverage for Hillsboro’s union and non-union employees. Beginning in 2003, the union received contributions for the two individual defendants, who purportedly worked for Hillsboro, but actually were employed by a different company owned by Hillsboro’s owner. The plan covered these defendants until 2011, even though a 2006 audit showed that they were not eligible for coverage. Continue reading