In Gross v. Sun Life Assur. Co. of Can., No. 09-11678-RWZ, 2018 U.S. Dist. LEXIS 107918 (D. Mass. June 28, 2018), a District Court decided the appropriate prejudgment interest rate for a Kentucky resident was the Massachusetts prejudgment rate (12 percent) rather than the federal rate at the time (.37 percent). The District Court awarded attorney’s fees in the amount of $625 per hour for Plaintiff’s Boston lawyer but refused to increase the rate for Plaintiff’s Kentucky lawyer in accordance with the Boston market rate. The Court also refused to compensate the Kentucky lawyer for work performed during the phases of litigation “infected” by misconduct. Continue Reading
On July 3, 2018, a District Court in Alabama upheld, on reconsideration, its initial decision to dismiss a plaintiff’s breach of fiduciary duty claim under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), finding that ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), provided the plaintiff with an adequate remedy. This decision adds to the growing amount of case law regarding whether—and when—a breach of fiduciary duty claim should be dismissed in benefit claim litigation. Continue Reading
The Colorado Supreme Court’s decisions upholding the dismissal of claims against two separate disability plans under ERISA may be under review by the Supreme Court, following submission of the joint petition for a writ of certiorari filed in Olivar v. Public Serv. Employee Credit Union Long Term Disability Plan and Burton v. Colorado Access a/k/a Colorado Access Long Term Disability Plan, No. 17-1543.
Both petitioners claimed that they were improperly denied disability benefits under insured plans. Each filed a complaint against their respective ERISA benefit plan and served the complaint on the Secretary of the U.S. Department of Labor under the belief that the plans had not effectively designated an agent for service of process. The Secretary of Labor did not forward these complaints to the plans. When neither plan responded, each petitioner obtained a default judgment. Ultimately, the trial courts held the default judgments to be void because service of process through the Secretary of Labor was improper. The plans were then granted summary judgment on the grounds that they were not proper parties. Both the Colorado Court of Appeals and the Colorado Supreme Court upheld the grants of summary judgment. Olivar v. Public Serv. Employee Credit Union Long Term Disability Plan, No. 14CA1734, 2016 Colo. App. LEXIS 54 (Colo. Ct. App. Jan. 21, 2016), aff’d by 410 P.3d 1255 (Colo. 2018); Burton v. Colorado Access, No. 14CA0728, 2015 Colo. App. LEXIS 1210 (Colo. Ct. App. Aug. 13, 2015), aff’d by 410 P.3d 1255 (Colo. 2018). Continue Reading
The Department of Labor’s (“DOL”) conflict of interest rule, informally coined the “fiduciary rule,” sparked much debate when the regulations were proposed in 2015, and finalized in 2016, to expand the definition of fiduciary under the Employee Retirement Income Security Act of 1974 (“ERISA”). However, the fiduciary rule was continuously challenged in the courts, and appears to have met its final fate at the hands of the Fifth Circuit nearly 2 years later.
Following several delays, the fiduciary rule took partial effect on June 9, 2017, with certain other provisions set to take effect July 1, 2019. However, in March 2018 we saw two nearly back-to-back decisions involving the fiduciary rule. Perhaps most notable, in Chamber of Commerce of the United States of America v. U.S. Department of Labor, the Fifth Circuit vacated the fiduciary rule in its entirety, with the three judge panel ruling 2-1. Following this decision, the DOL issued Field Assistance Bulletin (FAB) 2018-02, which extended its temporary enforcement policy until further notice.
Many key players in the financial industry waited as the April 30 deadline to petition the Fifth Circuit for a rehearing, and the June 13 deadline to petition the United States Supreme Court to hear the case came and went, with no action from the DOL. Consequently, the Fifth Circuit issued its mandate vacating the fiduciary rule on June 21, 2018 in a two-page cover memo and final judgment which contained two key elements: (i) it stated that the case was argued by counsel on appeal and the judgment of the District Court was reversed, vacating the fiduciary rule in toto, and (ii) it ordered the DOL to “pay to appellants the costs on appeal”.
After expending a large number of resources to attempt to come into compliance with the fiduciary rule, many practitioners are left wondering whether the old “5-part test” from 1975 will be resurrected, and what that means for those who have already been operating under the new rule for nearly one year. It is possible that the DOL may update FAB 2018-02; however, until then it is recommended practitioners seek the advice of counsel and other professionals as needed when navigating through issues affected by the demise of the fiduciary rule.
In Eden Surgical Ctr. v. Cognizant Tech. Sols. Corp., No. 16-56422, 2018 U.S. App. LEXIS 10597 (9th Cir., Apr. 26, 2018), the U.S. Court of Appeals for the Ninth Circuit upheld the District Court’s Order dismissing the Complaint of an out-of-network healthcare provider attempting to pursue its patient’s rights under an ERISA plan based on an assignment of benefits. The defendant health plan’s claim administrator, Aetna, determined that benefits were not payable under the plan because the patient had not satisfied the plan’s deductible. Plaintiff brought this action on behalf of its patient challenging that benefit determination. The Ninth Circuit found that the plaintiff’s Complaint was properly dismissed by the district court because the patient’s health benefit plan did not permit assignments. Continue Reading
In Dowdy v. Metro. Life Ins. Co., 16-15824, 2018 U.S. App. Lexis 12648 (9th Cir. May 16, 2018), the Ninth Circuit ruled that an accident plan that covers “accidental injury that is the Direct and Sole Cause of a Covered Loss” really covers many losses that have causes other than the accidental injury. And the court held that an illness does not “contribute to” a loss unless it is a “substantial cause” of the loss. In so holding, the Court: relied on some Congressional policies underlying ERISA while ignoring others; and read language into a Plan that was not there. Continue Reading
In May 2017, the Internal Revenue Service (“IRS”) issued Revenue Procedure 2017-37, which set the 2018 limit at $6,900 for annual contributions made to a health savings account (“HSA”) by those with eligible family health insurance coverage. In March 2018, the IRS issued Internal Revenue Bulletin No. 2018-10, which lowered the 2018 limit by $50, to $6,850, as a result of a change in the inflation-adjustment calculations under the Tax Cuts and Jobs Act. This resulted in many plan sponsors needing to communicate the changes to employees participating in an HSA, to make changes to contributions as necessary, and to alter their payroll systems to account for the new limit.
Now, in Revenue Procedure 2018-27, the IRS rolled back its March 2018 guidance and reinstated the $6,900 limit, as a result of “numerous unanticipated administrative and financial burdens.” Those participating in an HSA are permitted to adjust their contributions in accordance with the again-revised limit. To the extent an individual with an HSA had already contributed the full $6,900 and as a result of the March 2018 guidance had to withdraw the $50 difference, with earnings, that individual can put that money back into the HSA provided it is permitted by the HSA custodian, and should check with the custodian.
In Ariana M. v. Humana Health Plan of Tex., 2018 U.S. App. LEXIS 5227, *5, 2018 WL 1096980 (March 1, 2018) (“Ariana M. II”), a majority of judges of the U.S. Court of Appeals for the Fifth Circuit, in an en banc decision, recently overturned its quarter century old holding in Pierre v. Connecticut General Life Insurance Company, 932 F.2d 1552 (5th Cir. 1991), which held that the factual determinations of ERISA benefit plan claim administrators are entitled to deference, regardless of whether the plan includes a grant of discretionary authority. Under Pierre, the Fifth Circuit has long held that such factual determinations can only be overturned if they are found to be arbitrary and capricious. In overturning its holding in Pierre, the Fifth Circuit joined nine sister circuits in ruling that all aspects of ERISA benefit denials will be reviewed de novo unless the governing plan delegates discretionary authority to the claim administrator. Continue Reading
Significant changes to the Department of Labor’s (“DOL”) rules regulating disability claims procedures are now in force. These new rules apply to claims filed on or after April 1, 2018.
ERISA directs the Secretary of Labor to establish and maintain rules which ensure that plan fiduciaries and insurance providers fully and fairly review claims for ERISA-governed benefits. The DOL’s rules regulating claims procedures are set forth at 29 C.F.R. § 2560.503-1, which contains detailed direction as to the claims handling process for both group health plans and disability plans. Historically, 29 C.F.R. § 2560.503-1 imposed similar obligations on group health plans and disability plans. That changed in 2010, however, with the implementation of the Affordable Care Act, under which claims procedures for group health plans were significantly modified, while procedures for disability plans remained untouched. Continue Reading
On May 22, 2017, Department of Labor (DOL) Secretary Alexander Acosta announced in an op-ed in the Wall Street Journal that the DOL would not issue another delay of the “fiduciary rule,” and that it was set to generally become effective on June 9, 2017. As we now know, certain provisions of the fiduciary rule went into effect on that date, with others being delayed until July 1, 2019. However, the fiduciary rule remains under attack in the courts. Two notable appellate court decisions were issued within days of one another, and both were decided by three judge panels. One case upheld narrow provisions of the fiduciary rule, and the other effectively completely invalidated the rule. Shortly after the second decision, the Department of Labor announced that it would not enforce the fiduciary rule “pending further review.” Continue Reading