Home > Blog > Blog > Fiduciaries > ERISA Watch – Discretionary Authority Must Be Explicitly Stated in Long Term Disability Plan

ERISA Watch – Discretionary Authority Must Be Explicitly Stated in Long Term Disability Plan

This week’s notable decision is Rodríguez-López v. Triple-S Vida, Inc., No. 15-2413, __F.3d__, 2017 WL 782293 (1st Cir. Mar. 1, 2017), where the First Circuit Court of Appeals held that the long term disability plan contained no clear delegation of authority to Triple-S, such that Triple-S’s decision was not entitled to deference.  Because the district court applied the deferential arbitrary and capricious standard, the court reversed and remanded to the district court to decide the case under the de novo standard of review.

In Rodriguez-Lopez, Jefferson-Pilot Life Insurance Company originally issued a group policy to Mova. The summary plan description (“SPD”) named Mova as the Plan sponsor and administrator.  The SPD also contained a provision granting the Plan Sponsor the discretionary authority to determine eligibility for benefits and to construe the terms of the Plan.  Under the Plan, Jefferson-Pilot processed the claim forms and decided claims and appeals.  Triple-S replaced Jefferson-Pilot and agreed to pay the benefits provided under the Plan subject to the policy’s provisions.  The Plan was not amended to reflect the change nor was a new SPD or summary of material modification furnished to plan participants notifying them of this change and naming Triple-S as claims administrator and/or insurer.

When Triple-S denied Plaintiff’s claim and appeal, she filed suit in Puerto Rico state court and Triple-S removed the action to the federal district court.  On the parties’ cross-motions for summary judgment, the district court determined that Triple-S had discretionary authority to determine benefits eligibility.  Even though Mova was the designated plan administrator, the district court found that Triple-S was plan fiduciary with administrative authority to interpret the terms of the plan and determine eligibility for benefits.  It found this sufficient to apply the arbitrary and capricious standard of review.

The First Circuit Court of Appeals disagreed.  No plan language specifically establishes that Triple-S had discretionary decisionmaking authority.  The transfer of discretionary authority from Mova to Triple-S cannot be “implied,” rather the delegation of discretionary authority to an administrator or fiduciary must be clearly stated in the plan.  So insurers take heed:  Discretion may be the better part of valor, but “the power to decide does not necessarily imply the existence of discretion.”

The attorneys at Roberts Disability Law, P.C. know how to overcome the obstacle of discretionary review of long term disability benefit claims.  We’ve helped hundreds of claimants with denied ERISA claims for benefits get the disability benefits that they deserve.

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

Attorneys’ Fees

Ninth Circuit

Mull v. Motion Picture Indus. Health Plan & Bd. of Directors of Motion Picture Indus. Health Plan, No. LA CV 12-06693-VBF, 2017 WL 748980 (C.D. Cal. Feb. 27, 2017) (Judge Valerie Baker Fairbank).  After determining that Defendants lacked valid legal justification for refusing to pay medical claims submitted by Plaintiffs or for insisting turn over of insurance settlement proceeds, the court granted Plaintiffs attorneys’ fees at the hourly rates of $575 and $400 for 464.23 hours of time.

Breach of Fiduciary Duty

Second Circuit

Kindle v. Dejana, et al., No. 14CV6784SJFARL, __F.Supp.3d__, 2017 WL 837692 (E.D.N.Y. Feb. 28, 2017) (Judge Feuerstein).  In this matter alleging that Defendants breached their fiduciary duties to Plaintiffs and other ESOP participants in connection with the valuation and sale of ESOP assets, in violation of ERISA Sections 404 and 406 of ERISA, the court denied Plaintiffs’ motion for partial summary judgment on their Section 404 breach of duty of loyalty claim against the Sipala Defendants, and it denied the Sipala Defendants’ cross motion for summary judgment on Plaintiffs’ Section 404 and 406 claims.

Fourth Circuit

Perez v. Silva, No. CV JKB-15-3484, 2017 WL 713759 (D. Md. Feb. 23, 2017) (Judge James K. Bredar).  The court granted Defendant’s motion for leave to amend to include a cross-claim.  Plaintiff opposed on the grounds that AmeriGuard’s indemnification and contribution claims are not available under ERISA, a fact that renders AmeriGuard’s motion to amend futile.  The court disagreed and found more persuasive the rationale of courts that allow a claim for contribution.  It explained that disallowance of contribution claims would frustrate ERISA’s purpose of deterring plan abuse by allowing breaching fiduciaries to escape the consequences of their actions.

Eighth Circuit

Wildman v. Am. Century Servs., LLC, No. 4:16-CV-00737-DGK, __F.Supp.3d__, 2017 WL 818787 (W.D. Mo. Feb. 27, 2017) (Judge Greg Kays).  The court determined that the waiver of claims in a severance agreement signed by Plaintiffs alleging breach of fiduciary duty and prohibited transaction claims is valid, but since the Agreements then carve out an exception for “claims that may arise after the date the Agreement is executed,” only claims arising before the execution are waived.  Because each failure to exercise the duties of loyalty and prudence is a new breach and consequently, a new claim, the court found that Plaintiffs’ claims, which arose after executing their Agreements, are not within the scope of the release.

Class Actions

Seventh Circuit

Cappello v. Franciscan All., Inc., No. 3:16-CV-290-TLS-MGG, 2017 WL 781609 (N.D. Ind. Feb. 28, 2017) (Magistrate Judge Michael G. Gotsch, Sr.).  In this putative class consolidated ERISA “church plan” action against Defendant Franciscan Alliance, Inc., the court appointed Kessler Topaz and Cohen Milstein as Co-Interim Lead Class Counsel.

Disability Benefit Claims

First Circuit

Rodríguez-López v. Triple-S Vida, Inc., No. 15-2413, __F.3d__, 2017 WL 782293 (1st Cir. Mar. 1, 2017) (Before Torruella, Thompson, and Kayatta, Circuit Judges).  The court held that the long term disability plan contained no clear delegation of authority to Triple-S, such that Triple-S’s decision was not entitled to deference.  The court reversed and remanded to the district court to decide the case under the de novo standard of review.

Second Circuit

Salisbury v. Prudential Ins. Co. of Am., No. 15-CV-9799(AJN), 2017 WL 780817 (S.D.N.Y. Feb. 28, 2017) (Judge Alison J. Nathan).  Prudential violated the Labor Department’s ERISA regulations by failing to state what “special circumstances” necessitated an extension of time to make a decision on Plaintiff’s long term disability appeal.  Prudential only explained that Plaintiff’s claim requires “physician and vocational review,” but this cannot constitute a valid special circumstance.  Because Prudential violated a Labor Department regulation governing the processing of employee claims under ERISA, the court concluded that the standard of review is de novo.  The court also denied Plaintiff’s request for plenary discovery, but notes that Salisbury may file a motion requesting specific pieces of discovery.

Fifth Circuit

Peters v. Reliance Standard Life Ins. Co., No. 3:16-CV-60, 2017 WL 713792 (S.D. Tex. Feb. 23, 2017) (Judge George C. Hanks, Jr.).  The court granted Reliance Standard’s motion to dismiss Plaintiff’s lawsuit seeking long term disability benefits since Plaintiff signed a release with his employer releasing its insurers from liability in exchange for a payment of $2,500,000.

Sixth Circuit

Buchanan v. Sun Life & Health Ins. Co., No. 3:15-CV-202-TAV-CCS, 2017 WL 818463 (E.D. Tenn. Mar. 1, 2017) (Judge Thomas A. Varlan).  Sun Life’s decision to deny long term disability benefits to Plaintiff, owner of the policy holder company, is not an abuse of discretion where the evidence shows that Plaintiff signed 100 checks per month on behalf of the business, which is a material and substantial duty of her regular occupation.  The definition of total disability under the policy requires that an individual is “unable to perform all the material and substantial duties of your Regular Occupation.”

Tenth Circuit

Anderson–Posey v. Unum Life Ins. Co. of Am., No. 16-CV-0086-CVE-FHM, 2017 WL 723898 (N.D. Okla. Feb. 23, 2017) (Judge Claire B. Eagan).  In this long term disability dispute subject to abuse of discretion review, the court determined that the financial incentive of saving approximately $160k in not paying Plaintiff own occupation benefits for at least two years is not enough to substantially reduce the level of deference to Defendant’s decision.  However, Defendant’s decision that Plaintiff could return to her job as a pharmacist while on narcotics was arbitrary and capricious because it was unreasonable and not supported by substantial evidence.  Additionally, substantial evidence did not support Unum’s contention that Plaintiff has a disabling condition requiring the use of narcotic pain medication.  The court remanded the claim to Unum for reconsideration.


Second Circuit

Benjamin v. Oxford Health Ins., Inc., No. 3:16CV00408(AWT), 2017 WL 772328 (D. Conn. Feb. 28, 2017) (Magistrate Judge Sarah L. Merriam).  The court granted discovery of information regarding defendant’s interpretation of the subject insurance plan’s preauthorization requirement.  The court found that it is unclear what information defendant relied on in denying Plaintiff’s claim for benefits and additional discovery beyond the administrative record is warranted in this instance to reveal how Defendant determined that Plaintiff’s claim should be denied for failure to seek preauthorization.  The court denied discovery on the issue of whether an in-network facility was available to treat plaintiff at the time of her admission to an out-of-network facility.

Fourth Circuit

Hugler v. Bat Masonry Co., Inc., No. 6:15-CV-28, 2017 WL 722069 (W.D. Va. Feb. 22, 2017) (Judge Robert S. Ballou).  In this case, the DOL seeks to hold Defendants liable for their purported breaches of fiduciary duties under a failed ESOP.  Defendant James Joyner moved to compel seeking the DOL’s unredacted Report of Investigation (“ROI”), and all related documents, pertaining to the ESOP investigation of BAT Masonry Company.  The DOL asserted protection under the deliberative process privilege.  The court denied Joyner’s motion and found that the DOL met its burden to show that the privilege applies.

ERISA Preemption

See Provider Claims below

Exhaustion of Administrative Remedies

Fourth Circuit

Shepherd v. Cmty. First Bank, No. CV 8:15-04337-MGL, 2017 WL 735582 (D.S.C. Feb. 24, 2017) (Judge Mary Geiger Lewis).  In this matter seeking retirement benefits under a SERP plan, the court followed Gagliano v. Reliance Standard Life Insurance Co., 547 F.3d 230 (4th Cir. 2008) and held that the proper remedy for Defendants’ failure to timely respond to Plaintiff’s claim is to remand to Defendants for a full and complete review of the claim under the Plan’s internal review procedures.  The court found that the futility exception does not apply.

Life Insurance & AD&D Benefit Claims

Third Circuit

Estate of Lutz v. Lutz, No. CV 16-01461, 2017 WL 714032 (E.D. Pa. Feb. 23, 2017) (Judge Gerald J. Pappert).  The Estate of Richard Lutz alleges that Standard breached its fiduciary duty under ERISA Section 1109 for paying his life insurance benefits to his recently divorced spouse who was the named beneficiary of the policy.  The court found that ERISA Section 1132(a)(2) provides the only means of suing for breaches of fiduciary duty arising under Section 1109, but that Plaintiffs cannot seek to recover life insurance benefits under Section 1132(a)(2) since only the plan itself is entitled to any recovery.  And, Standard would be entitled to summary judgment even if Plaintiffs asserted a proper claim for breach of fiduciary duty under § 1132(a)(2).  Lastly, Plaintiffs did not pursue administrative relief at all and the contract-law doctrine of impossibility does not apply.

Fifth Circuit

Unum Life Ins. Co. of Am., v. Mohedano, No. 3:13-CV-446, 2017 WL 713791 (S.D. Tex. Feb. 23, 2017) (Judge George C. Hanks Jr.).  Unum did not abuse its discretion in denying AD&D benefits where the evidence indicates that the insured’s death was not accidental.  It is undisputed that the insured and his wife engaged in a physical altercation while in their parked car in the driveway; that the insured was inebriated; that the wife (and beneficiary of the AD&D benefits) went inside the home and grabbed the shotgun; and that the insured continued to approach the wife despite her warning that he should stop.  Unum was reasonable to conclude that the insured’s aggressive behavior led to his death; his behavior constituted the crime of assault; and his intoxication further contributed to his behavior.

Medical Benefit Claims

Sixth Circuit

Fletcher v. Honeywell Int’l, Inc., No. 3:16-CV-302, 2017 WL 778387 (S.D. Ohio Feb. 28, 2017) (Judge Walter H. Rice).  Evidence of the bargaining history of negotiations for the 2000-2003 CBA and subsequent events satisfy Plaintiffs burden of proving that Honeywell agreed to provide lifetime healthcare benefits to its retirees.

Pension Benefit Claims

Sixth Circuit

Titus v. Operating Engineers’ Local 324 Pension Plan, No. 16-CV-10951, 2017 WL 744243 (E.D. Mich. Feb. 27, 2017) (Judge Gershwin A. Drain).  In this matter challenging the suspension of retirement benefits for working full-time in the same trade or craft, the court found that Plaintiff’s Section 502(a)(3) claim was a repackaged claim for benefits that he brought under ERISA Section 502(a)(1)(B) and is barred.  Even if it was not, the claim of equitable estoppel does not survive where Plaintiff failed to meet the heightened standard.

Plan Status

Ninth Circuit

Tom v. Hartford Life & Accident Ins. Co., No. C 16-01067 WHA, 2017 WL 778681 (N.D. Cal. Feb. 28, 2017) (Judge Williams Alsup).  The court determined that ERISA governs Plaintiff’s claim for long term disability benefits, where Plaintiff alleged that as an accounting partner/principal for non-party Grant Thornton LLP from 2007 to 2009 that she received LTD benefits under a separate plan that only covered partners/principals, and thus not governed by ERISA.  The court concluded that ERISA preempts Plaintiff’s state law claims where the evidence shows that the benefits offered to principals/partners fit into Hartford’s single comprehensive LTD policy funding benefits for both employees and principals/partners and the employer’s single comprehensive plan providing benefits for both employees and principals/partners.  A patchwork benefit program can, taken as a whole, constitute an ERISA plan even if piecemeal insurance policies within the program cover only partners/principals.

Provider Claims

Third Circuit

Progressive Spine & Orthopaedics, LLC v. Empire Blue Cross Blue Shield, ABC Inc., No. CV 16-01649, 2017 WL 751851 (D.N.J. Feb. 27, 2017) (Judge John Michael Vazquez).  The issue in this case is whether Plaintiff’s state law claims are completely preempted under ERISA Section 502(a) when Defendant allegedly preauthorized the Patients’ medical procedures and made an oral promise to pay Plaintiffs’ “usual, customary, and reasonable amount.”  Plaintiffs’ Counts Two through Five based on Defendant’s alleged verbal promise or agreement to pay the usual, customary, and reasonable rate of the procedures are not completely preempted by ERISA.  The alleged oral contract, or quasi-contract, between Plaintiff and Defendant creates an independent legal duty removing the state law claims from the scope of ERISA’s complete preemption.

Ninth Circuit

Doctors Med. Ctr. of Modesto, Inc. v. Gardner Trucking, Inc., No. 116CV01674DADSAB, 2017 WL 781498 (E.D. Cal. Feb. 28, 2017) (Judge Dale A. Drozd).  The plaintiff/provider brought state law breach-of-contract claims premised on the existence of a valid implied-in-fact contract. The court granted Plaintiff’s motion to remand to state court after finding that this case is on all fours with Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941 (9th Cir. 2009).

* Please note that these are only case summaries of decisions and do not constitute legal advice.  These summaries are not updated to note any subsequent change in status, including whether a decision is reconsidered or vacated.  If you have questions about how the developing law impacts your ERISA benefit claim, contact a knowledgeable ERISA attorney.  Case summaries authored by Michelle Roberts, Partner, Roberts Disability Law, P.C., 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel:  510-230-2090. 



facebook twitter shop

*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.

Get The Help You Need Today

Inner form image


Contact Us

We know how to get your insurance claim paid. Call today at:
(510) 230-2090

Close Popup