In 2013, the 6th Circuit made waves in the ERISA world when it held that LINA could be ordered to disgorge almost $3 million in profits it allegedly made on benefits it had improperly withheld, on top of payment of the benefits themselves. A few months later, the court granted LINA’s petition for en banc review, and vacated the 2013 decision .

Last week a divided 6th Circuit vacated the disgorgement of profits in a ruling that restores sanity to ERISA benefits litigation.
Continue Reading Rochow Part 3: En Banc Panel Vacates Disgorgement Award

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

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

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

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

Providing for “coordination of benefits” means including a provision in an insurance policy that address what should happen if more than one insurer covers the same claim. Virtually every primary insurance policy will say that, if other insurance exists, the other policy will pay first. Of course, when there are two policies providing coverage, each one typically says the other pays first. Coordination-of-benefits disputes involving deciding whether the provisions conflict, and, if so, how to resolve the conflict. Ordinarily, when policies have conflicting coordination-of-benefits provisions, courts rule that the provisions cancel each other out, and both policies share liability pro rata.
Continue Reading Fifth and Sixth Circuits Consider Coordination-of-Benefits Remedies For ERISA Plans

The Sixth Circuit has just taken an “unprecedented and extraordinary step to expand the scope of ERISA coverage” (in the words of the dissent) by affirming a judgment directing a disability insurer to pay about $900,000 in improperly denied benefits plus disgorge an additional $3,800,000, representing profits it allegedly made on the benefits. I agree with the dissent; this represents a significant expansion of potential liability for ERISA fiduciaries in the Sixth Circuit.
Continue Reading Disgorgement of $3,800,000 ordered for failure to pay $900,000 in disability benefits

Every so often a bit of legal synchronicity seems to occur. Sometimes its personal, like when you have several cases with the same uncommon issue, or multiple cases in the same rarely visited court. In 2013, there appears to be a larger force at work that has caused three circuits to address the question whether a plan that requires proof to be satisfactory to the insurer confers discretion.

It has long been clear that a plan document must give discretionary authority to an insurer in order to require courts to conduct an arbitrary and capricious review. It is also well-established that no “magic words” are required to give discretion. However, the vast majority of plans intending to grant discretion use the magic words anyway, and say that the insurer has “discretionary authority to determine claims and construe the plan” or some variant.

But what happens when a plan does not use the magic words?  
Continue Reading Effect of Requiring “Satisfactory” Proof Is A Popular Issue in the Circuits This Year

In 2011, the Supreme Court clearly held that a summary plan description cannot trump the terms of an ERISA plan, overturning the rule in many circuits. Instead, the Amara rule provides that the plan itself governs over a summary of the plan when the two conflict.

This does not mean that an SPD is meaningless. The continued importance of preparing and distributing SPDs is nicely illustrated by Liss v. Fidelity Employer Servs. Co. LLC, 2013 WL 677280 (6th Cir. Feb. 26, 2013).

Continue Reading Sixth Circuit Explains Why SPD is Still Important After Amara

Disputes over what equitable remedies are “appropriate” under ERISA continue to percolate up to the Supreme Court. In its most-recent decision on the issue, US Airways, Inc. v. McCutchen (April 16, 2013), the Court held that an equitable doctrine cannot supersede the terms of an ERISA plan.

The dispute involved a relatively routine claim over a relatively small amount of money. McCutchen was injured in a car accident with a drunk driver. US Airways, through its self-funded health plan, paid McCutchen $66,866 in medical expenses related to that accident. McCutchen hired a lawyer to pursue claims arising out of the accident; though his total alleged damages exceeded $1 million, he settled for $110,000. His attorneys took a 40% contingency fee, leaving McCutchen with $66,000. US Airways sought recovery of the $66,866 it had paid, pursuant to a provision in the health plan requiring McCutchen to reimburse US Airways “for amounts paid for claims out of any moneys recovered from [a] third party.” McCutchen refused the indemnification demand, but his attorneys put $41,500 of hiss money in escrow pending resolution of the dispute. That sum represented US Airways’ full claim less a proportionate share of the attorneys’ fees.

US Airways filed suit under ERISA, seeking “appropriate equitable relief” to enforce the plan’s reimbursement provision.

In the Supreme Court, McCutchen agreed that US Airways had an equitable lien by agreement over his recovery, but the question was whether the lien was subject to one or more equitable defenses that might reduce, or eliminate, its recovery.

Continue Reading US Airways v. McCutchen: Supreme Court Revisits, Again, the Scope of Equitable Remedies