In Milby v. MCMC LLC, 844 F.3d 605 (6th Cir. 2016), the plaintiff had her claim for disability benefits terminated following a peer review by a doctor engaged through MCMC. The plaintiff lived in Kentucky, and the peer reviewer was not licensed there. Accordingly, the plaintiff sued MCMC for negligence per se for practicing medicine in Kentucky without a license. The district court granted defendants’ motion to dismiss, and the Sixth Circuit affirmed. Continue Reading
In Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576 (6th Cir. 2016), an employer, its CEO, and an hourly employee (for themselves and as representatives of a putative class of similarly situated employees) sued the defendant for violating ERISA and PPACA (Obamacare) by maintaining per-participant and per-beneficiary caps on benefits. Plaintiff employer bought supplemental health insurance to eliminate those caps. The Plan asserted that it was a grandfathered plan and therefore not required to eliminate the caps.
The district court dismissed plaintiffs’ claims for lack of standing, and the Sixth Circuit affirmed, providing another example of the tightening of federal standing after Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016). Spokeo is discussed in more detail in a previous post. Continue Reading
In Prince v. Sears Holdings Corp., 848 F.3d 173 (4th Cir. 2017), plaintiff applied for life insurance for his spouse through Sears, his employer, in 2010. Sears sent an acknowledgment to plaintiff, and Sears’ online benefits summary confirmed in 2012 that his wife had life insurance. Plaintiff’s wife died in 2014, and the insurer denied benefits, asserting that no evidence of insurability questionnaire had been submitted for her. The insurer asserted that it had sent a notice to that effect in 2011, but plaintiff denied receiving it. Plaintiff sued Sears, alleging constructive fraud, negligent misrepresentation, and intentional infliction of emotional distress. After Sears removed, the district court dismissed the action.
The Fourth Circuit affirmed, ruling that ERISA preempted plaintiff’s claim.
Plaintiff argued that his claims relied only on Sears’ actions before the denial of benefits, such as deducting premiums and reporting that his wife was covered. The court held that the claims nonetheless “challenge the administration of the ERISA plan – a core § 502(a) claim.” The court noted that plaintiff was entitled to life insurance benefits “only if the ERISA plan provided them.” Because plaintiff’s entitlement to coverage would exist only because of the plan, and because Sears had no independent duty to him, ERISA preempted his claims.
The court also found that resolution of plaintiff’s claims would require interpretation of the ERISA plan, including assessment of Sears’ duty as plan administrator.
The Second Circuit Court of Appeals recently held that claim fiduciaries must strictly comply with ERISA claim regulations or lose the deferential standard of review, as we have discussed in previous posts: Second Circuit rejects “substantial compliance” rule, Insurer’s Failure to Establish “Special Circumstances” for Extension of Time to Decide LTD Appeal Warrants De Novo Review, and District of Connecticut Rules that Violations of Claims Procedure Regulations Result in Loss of Discretion.
While other courts have not applied the same strict level of scrutiny to the claims regulations as Halo and its progeny, the Ninth Circuit recently held that a procedural violation in the claims-handling process may warrant de novo review if it resulted in substantive harm to the claimant. In Smith v. Reliance Standard Life Ins. Co., Dkt. # No. 16-15319 (9th Cir., March 16, 2017), the Ninth Circuit Court of Appeals vacated a district court’s order in favor of the insurer on a plan participant’s claims for short- and long-term disability benefits, remanding the case back to the district court for further consideration. Continue Reading
As ordered by President Trump in a presidential memorandum (the “Memorandum”) on February 3, 2017, the U.S. Department of Labor (DOL) proposed a 60-day delay to the “fiduciary rule,” which revised the definition of “fiduciary” for retirement investment advice purposes. The rule was originally set to become effective on April 10, 2017; however, after receiving more than 1,000 comments from the financial services industry, the DOL issued a final rule on April 4, 2017 to extend the effective date of the fiduciary rule to June 9, 2017. It is likely that a series of delays will follow, as the DOL must also consider the comments it will continue to receive until April 16, 2017 on the Memorandum. As the President’s administration continues to assess the rule, it is possible they could leave the rule in place, make minimal changes, revise it, or completely rescind the rule, with a total revision likely proving to be the most difficult.
Following the 2016 decision of the Second Circuit Court of Appeals in Halo v. Yale Health Plan, 819 F.3d 42 (2d Cir. 2016), in which the Second Circuit rejected the doctrine of “substantial compliance” with ERISA claim regulations in favor of a much stricter interpretation, courts within the Second Circuit have increasingly held insurers and other claims fiduciaries to a high standard of compliance with the claim regulations, regardless of the type of benefit at issue.
Under Halo, a plan’s failure to comply with the claims-procedure regulations will result in that claim being reviewed de novo, unless the plan has otherwise “established procedures in full conformity” with the regulations and can show that its failure to comply with the regulations was both inadvertent and harmless. We have previously written about this here and here.
Most recently, in Schuman v. Aetna Life Ins. Co., 2017 U.S. Dist. LEXIS 39388 (D. Conn. Mar. 20, 2017), the U.S. District Court for the District of Connecticut ruled that Halo compelled de novo review of a denial of long-term disability benefits, despite the grant of discretion in the plan. The plaintiff (plan participant) alleged several violations of the claims-procedure regulations, including: failure to adequately consider a vocational assessment submitted by the plaintiff; improper deference to the initial decision on appeal; failure to provide copies of internal policy guidelines upon request; and lack of adequate safeguards to ensure that claims decisions were made in accordance with the applicable plan document. Continue Reading
In Prime Healthcare Servs. – Landmark LLC v. United Nurses & Allied Prof’ls, Local 5067, 848 F.3d 41 (1st Cir. 2017), the First Circuit ruled that an arbitration agreement required the arbitrator to determine whether ERISA preempted the claims at issue.
Plaintiff purchased a financially troubled hospital that had a pension plan, and a collective bargaining agreement (CBA) with defendant. The CBA contained a broad arbitration provision. After the acquisition, the pension plan was terminated by the Pension Benefit Guaranty Corp. (PBGC), and the defendant union sought arbitration of its grievance that the termination violated the CBA. Ultimately, the district court ruled that the union’s claims were preempted by ERISA.
The Court noted that courts will determine questions of arbitrability only when there is a dispute of “substantive arbitrability” – whether the parties are bound by an arbitration clause, or whether the particular clause governs a particular type of controversy. “Procedural arbitrability” questions, in contrast, are presumptively determined by the arbitrator; these questions include things like defenses of waiver, delay, or any other procedural rule that grows out of the dispute and bears on its final disposition. Continue Reading
Those of us who finished law school more than five or ten years ago learned about personal jurisdiction through the lens of International Shoe Co. v. Washington, 326 U.S. 310 (1945), and its focus on “minimum contacts” analysis. We learned that a company can be sued in any state with which it has significant, ongoing contacts, such as an office, employees or bank accounts.
That was then. Recently, the Supreme Court has begun to tell us we were all wrong for thinking that way. Daimler AG v. Bauman, 134 S. Ct. 746 (2014). Though the Daimler majority would have us think they are simply reinforcing what International Shoe really held, Justice Sotomayor described it as “a new rule of constitutional law that is unmoored from decades of precedent.” Daimler, 134 S. Ct. at 773. Our world has changed, and anyone suing or defending corporations must understand the new rules. Continue Reading
As ordered by President Trump in last month’s presidential memorandum (the “Memorandum”), the U.S. Department of Labor (DOL) proposed a 60-day delay to its conflict of interest rule (commonly referred to as the “fiduciary rule”). The effective date of the fiduciary rule, which revised the definition of a “fiduciary” for retirement investment advice purposes, is currently April 10, 2017. In addition to a general 15-day comment period, the DOL is also accepting comments until April 16, 2017 on the Memorandum itself and on issues applicable to whether or not the fiduciary rule should be revised, revoked, or further delayed. Continue Reading
In a recent decision from the Southern District of New York in a case concerning a dispute over the denial of long-term disability (LTD) benefits, a District Court judge held that the LTD insurer had failed to establish special circumstances warranting an extension of the time frame for deciding the claimant’s appeal during the administrative review process. The Court determined that this constituted a violation of the claims processing regulations under ERISA, thereby warranting a de novo review of the insurer’s decision rather than the arbitrary and capricious standard of review that otherwise would apply.
The case, Salisbury v. Prudential Insurance Co. (Dkt. 15-cv-9799, S.D.N.Y.), involves a claim by an employee for LTD benefits under an employer-sponsored ERISA benefit plan. LTD benefits were provided through a group insurance policy issued by Prudential, who served as the claims administrator. After Prudential initially denied the employee’s claim for LTD benefits, the employee appealed the decision with Prudential, as claimants generally must exhaust their administrative remedies prior to initiating litigation. Under the existing U.S. Department of Labor (DOL) claim regulations, Prudential had 45 days to issue a decision on the appeal. Continue Reading