ERISA Watch – Beware of Social Media If You’re a Long Term Disability Claimant

“Lordy, I hope there are tapes,” said no plaintiff’s attorney ever.  This week’s notable decision is an unfortunate one out of the Fifth Circuit Court of Appeals.  It highlights the perils of social media.  In Davis v. Aetna Life Insurance Company, No. 16-10895, __F.App’x__, 2017 WL 2589409 (5th Cir. June 14, 2017), Davis, a former customer support associate at Experian Information Systems, alleged disability based on symptoms related to systemic lupus erythematosus.  She went out on disability in April 2010, and received both short term and long term disability benefits.  Aetna found that Davis met the “own occupation” definition of disability based on the records and opinions of her treating physician, Dr. Don Cheatum.  However, in 2012, Aetna was informed that an ALJ found that Davis was not entitled to Social Security Disability Insurance benefits.  Four months later, it had Davis attend an IME with Dr. Charles Crane, who found that Davis could do sedentary and light type activities but only for brief periods of time.  Based on this report, Aetna approved Davis’s LTD benefits under the “any reasonable occupation” standard.  An additional medical review shortly thereafter continued to support disability.

But, about a year later, when Aetna experienced benefit payment fatigue on the claim, it referred her claim to risk management in order to have Davis surveilled over the end of year holidays.   On December 31 and January 3, Davis was observed “driving to three fast-food restaurants and a pharmacy, turning her body, bending down, leaning forward, reaching into the back seat of her car, carrying a bag over her shoulder, and walking quickly.”  Aetna also performed a social media search of her and her husband.  Davis’s LinkedIn account confirmed she was a student although Aetna never confirmed whether Davis was actually attending class.  Her husband’s Facebook account reported that Davis visited several restaurants, a movie theater, and a bowling alley during four days in July and August of 2013.  Although there are no pictures, his social media account also indicated that they visited various tourist attractions in San Antonio, Texas, during this period.  Aetna terminated Davis’s LTD claim based on this and a file review done by Joseph L. Braun, an occupational medicine specialist.

Davis appealed the denial and on review, Aetna retained another occupational medicine specialist, Dr. Siva Ayyar, who found that there is no evidence for continuous medically necessary limitations and/or restrictions.  Dr. Cheatum responded that if the “insurance carrier doctor does not realize that this patient is disabled, then that doctor needs to go back to school.”  Well, Dr. Cheatum, there’s no “school” in the Wild Wild West of ERISA, at least not in Tex-ERISA.  The district court granted summary judgment in favor of Aetna.  The Fifth Circuit Court of Appeals affirmed.

The Fifth Circuit found that there was no evidence indicating that the conflict of interest may have influenced Aetna’s benefits decision so the structural conflict of interest itself need not be accorded particularly great weight when considering whether Aetna abused its discretion.  The occupational medicine specialists who reviewed Davis’s claim had the appropriate training and experience to determine whether she was capable of working in any reasonable occupation.  Aetna reasonably based its decision to terminate long term disability benefits on its own review of the treating doctor’s medical records and opinions, the IME report, an ALJ’s determination that Davis was ineligible for SSDI, Davis’s self-reporting during the relevant time, surveillance and social media evidence, and the conclusions of the two peer reviewers.

If you’re a long term disability claimant, be aware that social media profiles and posts can be used against you.  Take the time to review privacy policies and your own privacy settings.  It is inevitable that an insurance company will scour the internet for your social media presence and film you on a “good day” out of the house.  Although most surveillance and social media activity is not determinative of full time work ability, a crafty insurance company will find a way to use it against you.  If you have a denied ERISA claim because of surveillance done on you, we may be able to help.  It is important that you contact us immediately after receiving a written claim denial or termination.

Below is Roberts Disability Law, P.C.’s summary of this past week’s notable ERISA decisions.

Breach of Fiduciary Duty

Second Circuit

In re Henneborn, No. 13-73280-LAS, 2017 WL 2590734 (Bankr. E.D.N.Y. June 14, 2017) (Bankruptcy Judge Louis A. Scarcella).  To prevail on a claim that a debt is nondischargeable under § 523(a)(4) by reason of defalcation while acting in a fiduciary capacity, a plaintiff must prove that the debt was incurred in connection with an express or technical trust, that the debtor acted in a fiduciary capacity with respect to that trust, and that the debtor engaged in fraud or a defalcation within the meaning of bankruptcy law.  Here, the court determined that the ERISA employee benefit plans before it are trusts for purposes of § 523(a)(4) and the language of the collective bargaining agreements and trust agreements supports Plaintiffs’ theory that unpaid contributions owed by All Seasons to plaintiffs constitute plan assets under ERISA, but Plaintiffs have not carried their burden as movant to show that there is no genuine dispute as to whether defendant is an ERISA fiduciary within the meaning of 29 U.S.C. Section 1002(21)(A)(i).

Fourth Circuit

Michelin Ret. Plan v. Dilworth Paxson, LLP, No. CV 6:16-3604-HMH-JDA, 2017 WL 2531845 (D.S.C. June 12, 2017) (Judge Henry M. Herlong, Jr.).  In this matter involving allegations of misappropriation of ERISA retirement investment accounts funds, the court adopted the Magistrate Judge’s report and recommendation to grant the motions to stay, deny Morton’s motion for an extension of time as moot, and deny the remaining motions, with leave to refile.

Disability Benefit Claims

Second Circuit

Kim v. The Hartford Life Insurance Company, No. 15CV2474ERKRER, 2017 WL 2589303 (E.D.N.Y. June 14, 2017) (Judge Edward R. Korman).  Where the long term disability plan explicitly defines mental illness in terms of the mental disorders listed in the DSM-IV, it was not arbitrary and capricious for Hartford to rely on the DSM-IV in finding that Plaintiff’s disability from bipolar disorder is subject to the Plan’s 24-month cap for mental disabilities.  There is no breach of fiduciary duty claim against Hartford for failing to review the Plan’s definition of mental illness to determine whether it was valid and then advise the plan sponsor accordingly.

Fifth Circuit

Davis v. Aetna Life Insurance Company, No. 16-10895, __F.App’x__, 2017 WL 2589409 (5th Cir. June 14, 2017) (Before WIENER, DENNIS, and HAYNES, Circuit Judges).  Plaintiff, who alleged disability based on symptoms related to systemic lupus erythematosus, appealed the grant of summary judgment in favor of Aetna.  The court affirmed the decision.  It found that there is no evidence that would allow a reasonable inference that Aetna’s structural conflict of interest may have influenced its benefits decision so the structural conflict of interest itself need not be accorded particularly great weight when considering whether Aetna abused its discretion.  The occupational medicine specialists who reviewed her claim had the appropriate training and experience to determine whether she was capable of working in any reasonable occupation.  Aetna reasonably based its decision to terminate long term disability benefits on its own review of the treating doctor’s medical records and opinions, the IME report, an ALJ’s determination that Davis was ineligible for SSDI, Davis’s self-reporting during the relevant time, surveillance and social media evidence, and the conclusions of the two peer reviewers.

Jackson v. NFL Disability & Neurocognitive Benefit Plan, et al., No. CV H-16-1278, 2017 WL 2573404 (S.D. Tex. June 14, 2017) (Judge Gray H. Miller).  The court granted Defendants’ motion for judgment on Plaintiff’s claim for Line of Duty benefits for injuries he suffered during his football career.  The court denied Plaintiff’s motion to supplement the administrative record since Plaintiff’s proposed supplements to the administrative record do not contain any information that the Disability Board used in making its final adverse determination nor do any of the proposed supplements assist the court’s review of the Disability Board’s decision.  The court found that the Disability Board did not abuse its discretion by denying Plaintiff’s disability benefits for not meeting the required 25% WPI threshold or by relying on a combined WPI rating without an additive or excessive pain.  The court denied Plaintiff’s motion for a remand to the plan administrator and granted Defendants leave to file a motion for attorneys’ fees.

Seventh Circuit

Kalnajs v. Lilly Extended Disability Plan, No. 16-CV-62-JDP, 2017 WL 2589445 (W.D. Wis. June 14, 2017) (Judge James D. Peterson).  The court determined it was not an abuse of discretion to terminate long term disability benefits for Plaintiff, who worked as a pharmaceuticals sales representative for Eli Lilly and Company until 2000, when she became disabled. Her benefits were terminated in 2014 after the Plan learned that she had worked for nearly a decade as an internationally acclaimed dog trainer.  “Her dog-training salary may not be equal to the income she could earn as a pharmaceutical sales representative or in some other ‘regular occupation,’ but under the Disability Plan’s terms, that simply does not matter.  Kalnajs’s dog-training activities are not isolated and infrequent.  She is engaging in an occupation for profit. And even if the court disregarded the surveillance evidence gathered by the EBC, the information that Kalnajs herself provided to the EBC confirms that she has been earning money as a dog trainer.”

Ninth Circuit

Colman v. American International Group, Inc., Grp. Benefit Plan; Hartford Life And Accident Insurance Company, No. 15-15903, __F.App’x__, 2017 WL 2533411 (9th Cir. June 12, 2017) (Before: CANBY and MURGUIA, Circuit Judges, and RUFE, District Judge).  The Ninth Circuit affirmed the grant of judgment in favor of the group benefit plan and Hartford in this matter involving a denial of long term disability benefits.  On the standard of review, the court declined to consider Plaintiff’s argument that any discretion in the plan was voided by Cal. Ins. Code section 10110.6 because she failed to raise the argument before the district court.  Several minor procedural errors did not justify de novo review.  Plaintiff is not entitled to contra proferentem on allegedly ambiguous 24-month mental illness coverage limitation since the plan expressly granted Hartford the discretion to construe any ambiguities.  The court found that Hartford’s determination that the limitation applied to claims in which mental illness is a “but-for cause” of the disability was reasonable.

Bosley v. Metro. Life Ins. Co., No. C 16-00139 WHA, 2017 WL 2543805 (N.D. Cal. June 13, 2017) (Judge William Alsup).  In this case involving a de novo review of a denied disability claim where the plaintiff alleges disability from chronic fatigue syndrome and fibromyalgia, the court found that Plaintiff is entitled to payment of long term disability benefits under the “own occupation” provision of the policy since neither of Plaintiff’s doctors opined that he would be disabled on a long-term basis outside the context of his occupation as an advise nurse.  The court concluded that the opinions of the treating physicians remain more credible and probative of the key issues in this case than the opinions of MetLife’s medical director and physician consultants.

ERISA Preemption

Third Circuit

Demase Warehouse Systems, Inc. v. Demase, No. CV 17-3074 (JLL), 2017 WL 2539400 (D.N.J. June 12, 2017) (Judge Jose L. Linares).  Plaintiffs brought claims under N J. Stat. Ann. § 14, which regulates New Jersey corporations and their securities, in this matter where they allege that Defendants removed employees from the Defined Benefit Plan, reduced accrued benefits of employees under the Plan, created a class of employees whose benefit formula was in violation of the terms of the Plan, and siphoned money from Plaintiff DeMase Warehouse to Plaintiff DeMase Trucking to fund a benefits plan for Defendant Barbara DeMase’s financial benefit.  The court granted Plaintiffs’ motion to remand to state court because N.J. Stat. Ann. § 14 is the type of state law that is exempt from ERISA preemption because it involves the regulation of a corporation and its securities.

Ninth Circuit

Kos v. Aetna Health, Inc., No. 317CV00217RCJVPC, 2017 WL 2588086 (D. Nev. June 14, 2017) (Judge Robert C. Jones).  In this suit brought by a healthcare provider against a benefit plan administrator, the court determined that Plaintiff’s claims of (1) breach of contract; (2) contractual breach of the implied covenant of good faith and fair dealing; and (3) tortious breach of the implied covenant of good faith and fair dealing are completely preempted by ERISA to the extent they assert an entitlement to benefits under the Plan, but are not preempted to the extent they assert the existence of an oral contract arising solely between Plaintiff and Aetna.  Plaintiff’s claims of intentional misrepresentation, negligent misrepresentation, and promissory estoppel are not preempted.  Since Plaintiff wishes to litigate its case in state court, the court dismissed the preempted claims with leave to amend.

Kern County Hospital Authority v. Cigna Healthcare Of California, Inc., No. 116CV00432DADJLT, 2017 WL 2532678 (E.D. Cal. June 12, 2017) (Judge Dale A. Drozd).  Removal in this matter was premised on federal question jurisdiction purportedly because the claims arise under the civil enforcement provision of ERISA.  The court recently became aware that Plaintiff’s complaint actually alleges only state law claims of breach of implied-in-fact contract and quantum meruit, and does not allege a claim arising under ERISA.  The court issued an order to show cause why the matter should not be remanded to the Kern County Superior Court.

Life Insurance & AD&D Benefit Claims

Third Circuit

Moore v. Reco Equipment Inc. Employee Welfare Benefit Plan & Reliance Standard Life Insurance Company, No. CV 16-1017, 2017 WL 2590178 (W.D. Pa. June 15, 2017).  In this case involving Reliance’s decision to deny accidental death benefits after the insured was found dead of acute alcohol intoxication, the court adopted and clarified the Magistrate Judge’s R&R concluding that an “arbitrary and capricious” standard of review applied because the policy gave Reliance discretion to determine eligibility for benefits under the policy; Reliance’s interpretation of the policy term “accidental bodily injury…caused directly and independently of all other causes by accidental means” was not arbitrary and capricious; substantial evidence in the record supported Reliance’s conclusion that the insured was an alcoholic and alcoholism was a contributing cause of his death; and recommended that summary judgment be granted in favor of Defendants.

Fifth Circuit

Keith v. Metro. Life Ins. Co., No. CV H-15-1030, 2017 WL 2537296 (S.D. Tex. June 9, 2017) (Judge Sim Lake).  In this lawsuit involving the loss of life insurance benefits for a plan participant who became disabled and stopped working due to ALS, the court found that none of the fiduciaries breached a duty owed to White concerning the status of his life insurance benefit coverage.  MetLife acted as a fiduciary by generating the internal claim for continuation of White’s life benefits and by exercising its discretion to assist White in obtaining a potential benefit.  MetLife owed White a fiduciary duty to act in his best interest and to avoid misinforming him.  However, the court found that MetLife’s letters did not misstate the circumstances regarding White’s coverage or the status of the claim and thus, it did not breach any fiduciary duty owed to White.  In addition, White did not detrimentally rely on MetLife’s letters.  With respect to the former employer, the court also found that Rogers (the HR manager) acted as a fiduciary on behalf of Central Bank when she volunteered to serve as a liaison between White and MetLife.  But, Rogers did not breach a fiduciary duty to White by failing to report to him the information she learned from MetLife regarding his eligibility to convert his policy.  The court denied an award of attorneys’ fees to Defendants but did tax costs against Plaintiff.

Medical Benefit Claims

Fourth Circuit

Hooper v. Unitedhealthcare Insurance Company, et al., No. 15-2157, __F.App’x__, 2017 WL 2557543 (4th Cir. June 13, 2017) (Before TRAXLER, DIAZ, and FLOYD, Circuit Judges).  The court affirmed the grant of summary judgment to Defendants on Plaintiff’s claim that they did not properly reimburse him for a series of steroid knee injections that an orthopedic surgeon administered to his spouse.  It was not an abuse of discretion for Michelin to decide that steroid knee injections are surgical procedures for purposes of the Plan based upon the CPT codes.  The district court did not err in refusing to consider information that Plaintiff failed to present during the administrative appeals process.

Pension Benefit Claims

United States Tax Court

Steven M. Petersen and Pauline Petersen v. Commissioner of Internal Revenue, No. 15184-14, 2017 WL 2558852 (T.C. June 13, 2017) (Judge Lauber).  The court held that “the entity holding the S stock for the benefit of the ESOP participants is a “trust” within the meaning of I.R.C. sec. 267(c). I.R.C. sec. 267(c)(1) thus deems the stock held by the trust to be owned by the trust’s beneficiaries, viz., the S employees who participated in the ESOP.”  It further held that “S and the ESOP-participating employees are deemed by I.R.C. sec. 267(e) to be related persons for purposes of I.R.C. sec. 267(b). I.R.C. sec. 267(a)(2) accordingly operates to defer S’ deductions for the accrued but unpaid payroll expenses to the year in which such pay was received by the ESOP employees and includible in their gross income.”

Sixth Circuit

Chilton v. Robert Bosch Fuel Systems, LLC, No. 1:16-CV-891, 2017 WL 2491759 (W.D. Mich. June 9, 2017) (Judge Gordon J. Quist).  The court dismissed Plaintiffs’ amended complaint alleging Defendants are equitably estopped from denying them an enhanced early retirement under the pension plan.  The court concluded that Plaintiffs fail to allege an estoppel claim based on an unambiguous pension plan.  The documents attached to the complaints were executed after Plaintiffs retired so they could not have relied on them in deciding to retire.  The court also rejected the argument that Plaintiffs relied on the continued receipt of enhanced early retirement benefits in making “life and financial decisions” since the payment of a benefit, without more, is not a representation that benefits will continue beyond the current payment being made.

Pleading Issues & Procedure

Ninth Circuit

Abrams, et al. v. Peppermill Casinos, Inc., No. 316CV0454MMDVPC, 2017 WL 2485381 (D. Nev. June 8, 2017) (Magistrate Judge Valerie P. Cooke).  In this matter involving the issue of whether the claims based on N.R.S. 608.1555 are preempted by ERISA, under FRCP 1, the court granted Defendants’ motion to stay discovery while the motion to dismiss is pending.  The court found that Defendants’ renewed motion to dismiss may well be dispositive of the entire case and neither party will suffer prejudice or hardship if discovery is stayed.

Provider Claims

Third Circuit

University Spine Center v. Horizon Blue Cross Blue Shield Of New Jersey & Carefirst Of Maryland, No. CV 16-8222 (KM)(MAH), 2017 WL 2560345 (D.N.J. June 13, 2017) (Judge Kevin McNulty).  In this lawsuit brought by an out-of-network provider against CareFirst for $364,000 in unpaid services, the court granted CareFirst’s motion to dismiss because the relevant health benefits plan contains a no-assignment clause that bars University from suing as the assignee of its patient.

Fifth Circuit

Dialysis Newco Inc.; Dba DSI Laredo Dialysis v. Community Health Systems Trust Health Plan, No. 5:15-CV-272, 2017 WL 2591806 (S.D. Tex. June 14, 2017) (Judge Marina Garcia Marmolejo).  Plaintiff DSI Newco (DSI) seeks reimbursement from Defendant Community Health Systems Trust Health Plan (CHS Plan) for dialysis treatments provided to one of the CHS Plan’s participants.  The court determined that CHS abused its discretion; the plan administrator and third party administrator are proper party defendants to this case; the CHS Plan’s anti-assignment clause does not deprive DSI of standing because DSI has derivative standing based on the direct-payment assignment, which implicitly includes the right to sue for nonpayment; Tennessee law, which governs the CHS Plan, prohibits anti-assignment clauses in insurance contracts; and the anti-assignment clause is ambiguous.  DSI exhausted its administrative remedies.

Kindred Hosps. Ltd. P’ship v. Aetna Life Ins. Co., No. 3:16-CV-3379-D, 2017 WL 2505001, (N.D. Tex. June 9, 2017) (Judge Sidney A. Fitzwater).  Operators of long-term acute care hospitals sue Aetna under state law to recover insurance payments based on Aetna’s representations that it would pay.  The court granted Plaintiffs’ motion to remand to state court and concluded that none of its claims is completely preempted under ERISA. Plaintiffs established that each of its claims – fraudulent misrepresentation, negligent misrepresentation, promissory estoppel, and Texas Insurance Code – rests on independent legal duties.

Retiree Medical

Third Circuit

Grove v. Johnson Controls, Inc., No. 16-2178, __F.App’x__, 2017 WL 2590762 (3d Cir. June 15, 2017) ( Before: JORDAN and KRAUSE, Circuit Judges, and STEARNS, District Judge).  In this lawsuit challenging Johnson Controls’ cap on health insurance benefits for all Appellants over age 65, the court affirmed summary judgment in favor of Johnson Controls.  Applying ordinary principles of contract law, the benefits in question were guaranteed only for the duration of the relevant collective bargaining agreement.  The language in the CBAs and Group Insurance Program booklets shows that the parties did not intend the health insurance benefits to vest.  The extrinsic evidence in this case does not change the conclusion that benefits had not vested.

Cup v. Ampco-Pittsburgh Corp., No. 17CV0189, 2017 WL 2559624 (W.D. Pa. June 13, 2017) (Judge Arthur J. Schwab). The court granted Plaintiffs’ motion to compel arbitration of the Union’s claim that the Company’s elimination of the retiree health benefits violates the current CBA between the parties.  It dismissed without prejudice the alternative claims alleging that the Company’s elimination of the retiree health benefits breaches the Company’s obligations under its collective bargaining agreements in violation of the LMRA, and terminates retiree healthcare benefits for the class of retired employees in violation ERISA.

Severance Benefit Claims

Ninth Circuit

Boy v. Admin. Comm. for Zimmer Biomet Holdings, Inc., No. 16-CV-197-CAB-BLM, 2017 WL 2578738 (S.D. Cal. June 13, 2017) (Judge Cathy Ann Bencivengo).  The court granted Defendants’ motion for summary judgment on Plaintiff’s claim for wrongful denial of severance plan benefits.  The issue is not whether Plaintiff actually committed willful misconduct or some other wrongdoing that warranted his termination by Zimmer Dental.  The Plan states that an employee is not eligible for benefits if his employment is terminated for willful misconduct or activity deemed actually or potentially detrimental to the interests of the Company.  The question is only whether Zimmer Dental terminated Plaintiff for willful misconduct or other actions that rendered him ineligible for severance benefits and the court found that the answer is clear from the undisputed facts.