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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

One of the great things about writing this blog is learning something new. I sometimes fall into the trap of determining the law on a particular issue in the circuit in which I practice most (the Second), and assume that other circuits are the same. Sometimes, though, it turns out that one circuit is not in step with the others, and one case can throw a monkey wrench into my world view.

The case that drew back the curtain for me on vesting of welfare benefits (an exciting topic, I know!), is Price v. Bd. of Trustees of Indiana Laborer’s Pension Fund, — F.3d –,  2013 WL 561354 (6th Cir. Feb. 15, 2013) (“Price II”). Price II held that an ERISA fiduciary could enforce a plan amendment shortening the length of time disability benefits would be payable against a participant who was on claim at the time of the amendment.

At first read, the decision seemed bizarre, because I knew (or thought I knew) that welfare benefits like disability benefits could not be changed for a participant who was “on claim.” As the Second Circuit held: “as a matter of law[,] …absent explicit language to the contrary, a plan document providing for disability benefits promises that these benefits vest with respect to an employee no later than the time that the employee becomes disabled.” Feifer v. Prudential Ins. Co. of Am., 306 F.3d 1202, 1212 (2d Cir. 2002). This rule means that you look to the plan language when the disability allegedly began, and subsequent amendments are irrelevant.

Though on re-reading Feifer, it was clear that the court recognized that other circuits approached this issue differently, that kind of caveat was not something that stuck with me. Then along came Price II and caused me to revisit the issue.
Continue Reading Vesting of Employee Welfare Benefits – Who Knew It Was So Complicated?

The Fourth Circuit recently gave a succinct reminder about the difference between ordinary conflict preemption and complete preemption, and how those two doctrines impact federal jurisdiction. In Moon v. BWX Technologies, Inc., 2012 WL 5992209 (4th Cir. Dec. 3, 2012), the court considered whether the district court correctly denied a motion to remand a case that had been removed from state court. Briefly, the facts were that the plaintiff’s husband enrolled in a life insurance benefit plan shortly before he retired. After his post-retirement death, his wife sought the insurance benefit, and her claim was denied. She then sued the employer in state court (apparently acknowledging that the benefit plan did not cover the loss, so she did not sue the insurer), arguing that the employer’s communications with her husband had created a non-ERISA contractual obligation. The employer removed the case to federal court, and the district court denied a motion to remand before addressing the merits of the claim.
Continue Reading ERISA’s “Ordinary Conflict Preemption” Is Not a Basis for Federal Jurisdiction; “Complete Preemption” Is

Often the most common divide between a participant claiming disability benefits and the claim administrator evaluating the claim is the weight to be given the opinion of a treating physician. Time was that a claimant argued that the administrator must defer to the treating physician, like the Social Security Administration does. That argument, at least in its basest form, has been eliminated in ERISA cases. Black & Decker Disability Plan v. Nord, 538 U.S. 822, 834, 123 S.Ct. 1965, 1972, 155 L.Ed.2d 1034 (2003) (“courts have no warrant to require administrators automatically to accord special weight to the opinions of a claimant’s physician”).

Often the argument is now made in a more limited fashion, or couched in different language. It might be argued that the administrator should have conducted an independent medical examination (suggesting that the opinion of a doctor who lays hands on the patient necessarily is better). It might be argued that some claims are particularly inhospitable to “paper reviews,” such as claims based on a mental illness or pain. Even where the treating physician argument does not explicitly surface, there is often an undercurrent running through disability claims in which the treating physician is placed on a somewhat higher plane than a physician who is compensated by the claim administrator. There is often the unexpressed notion that treating physicians are unbiased reporters of medical facts, while the motivation of a reviewing physician might not be equally pure.

There are, however, rulings by several courts that allow those who represent administrators to shade some of the glow enveloping treating physicians.
Continue Reading Examining the Treating Physician

In Koehler v. Aetna Health, Inc., 683 F.3d 182 (5th Cir. 2012), the Fifth Circuit criticized a health insurer for having an SPD that mirrored the plan, and held that Cigna v. Amara did not prevent the terms of the SPD from impacting plan interpretation.

The plaintiff, a participant in an HMO, suffered from sleep apnea, for which her physicians recommended treatment by an outside specialist. Aetna denied covered for the treatment, asserting that the plan required pre-authorization for an outside referral. The parties’ dispute centered around a specific provision in the Certificate of Coverage (“COC”), which the court found was ambiguous with respect to the need for pre-authorization for outside services rendered on an ad hoc basis.

The court noted at the outset something that is common in recent-vintage plans: the plan functions as an SPD. As the court explained: “in addition to appearing in the plan, the COC’s text also constitutes the ‘summary plan description’ which ERISA requires plan administrators to provide to participants and beneficiaries. Thus, although a plan summary is a separate document from the plan itself, in this case the summary’s text is simply a verbatim copy of the underlying plan provisions.”
Continue Reading Including Ambiguous Plan Language Verbatim In the SPD Can Effectively Eliminate Discretion to Interpret It — At Least in the Fifth Circuit

An ERISA Plan Administrator’s subrogation rights are not the easiest thing in the world to determine. I’m not talking about the situation where the plan is making current payments to the beneficiary and wants to offset some prior liability or overpayment. That’s easy.

What is complicated is when the plan has made a full payment, and then seeks to recover some of that payment from the beneficiary. This usually happens when the beneficiary receives a settlement or judgment for the accident that resulted in the payment of plan benefits.

The Supreme Court has ruled, for reasons obscured by the dense mists of ancient equity, that a plan administrator can recover from a beneficiary who has “possession” of a pot of money that was obtained by reason of the injury that gave rise to the plan benefit. But a plan administrator cannot recover from a beneficiary who does not have “possession.”

This led to the recent case of ACS Recovery Services, Inc. v. Griffin, 2012 WL 1071216 (5th Cir. Apr. 2, 2012), in the plan futilely picked shell after shell, only to find no money under any of them.Continue Reading The Texas Shell Game – A Subrogation Story

It is a problem that ERISA causes family-law and estate practitioners. A person participates in an employee pension plan, and has designated her spouse as beneficiary. There is a divorce, and the spouse waives any claim to the pension as part of the property settlement, but no Qualified Domestic Relations Order (QDRO) is ever issued. To add insult to injury, the plan participant never bothers to change the beneficiary designation. Plan participant later dies, and the  retirement plan administrator pays the death benefit to the ex-spouse.Continue Reading ERISA Ends When the Money is Paid

Plan Design

Claimants or their attorneys sometimes will complain that specific plan provisions are unfair. They may argue that a plan is not generous enough because it contains offset provisions that serve to reduce the benefits paid by the plan. This type of provision is common in disability plans, for example, where Social Security disability benefits are routinely offset against plan benefits.

Or they may complain about the employer’s decision to grant discretionary authority to the administrator. Perhaps no aspect of plan design is more important in claim disputes than discretionary authority. Claim decisions by administrators with discretionary authority are given some level of deference by the courts. Plaintiffs’ attorneys will often attack the notion of this deference. They may argue that it is inappropriate for a court to have to defer to the decisions of a private entity.Continue Reading Using Congressional Policy – Part 5 – Plan Design

There are always plaintiffs’ attorneys who live to push the envelope in ERISA benefit litigation. You know who they are. When opposing one of these attorneys, you may feel that he or she is more concerned with chipping away at ERISA procedures than in achieving a quick, favorable result for the client. Such attorneys will fight for as much discovery as possible (even if it has no value in a particular case); they may routinely argue for a de novo review (even where a deferential standard clearly applies).  They may argue, repeatedly, that courts should routinely conduct trials in ERISA matters when any fact is in dispute.  They may even argue that jury trials are permissible in ERISA claims. If such lawyers can get one judge to agree, even a little, with one of their positions, they will take that decision to the next judge, and argue for another little push to the envelope.

There is no question that arguments like these have to be met head on, and on the merits. But the opposition can be made more powerful by framing it in the context of congressional policy.Continue Reading Using Congressional Policy – Part 4 – Litigation Procedures