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ERISA Watch – Failure to Adequately Consider Social Security Award Is Evidence of Disability Insurer’s Financial Conflict of Interest

This week’s notable decision, Calhoun v. Life Insurance Company of North America, No. 15-3470, __F.App’x__, 2016 WL 7241398 (6th Cir. Dec. 15, 2016), is unfortunately, not recommended for full-text publication, but is recommended (by me) for close reading.  In Calhoun, a long term disability case, the 6th Circuit Court of Appeals determined that Life Insurance of North America (“LINA”) acted arbitrarily and capriciously in denying Calhoun long term disability benefits, reversed the district court’s judgment in LINA’s favor, and remanded the case to the district court for an order reinstating Calhoun’s benefits.

On the standard of review, the Court gave more weight to LINA’s financial conflict of interest due to its seemingly inconsistent positions that were both financially advantageous:  LINA assisted Calhoun with his receipt of Social Security Disability Insurance (“SSDI”) benefits and yet failed to address the SSDI award adequately when LINA terminated his LTD benefits claim.

On the merits of the claim, the Court also found that LINA’s treatment of the SSDI award weighs in favor of concluding that LINA acted arbitrary and capriciously.  LINA encouraged Calhoun to apply for SSDI, financially benefitted from his receipt of SSDI, and then failed to explain why it is taking a position different from the SSA on the question of disability.  The Court explained that even if LINA never assisted with Calhoun’s arguments or strategy before the SSA, it certainly encouraged Calhoun to apply for SSDI benefits through its “Social Security Assistance Program,” where LINA arranged and paid for Calhoun’s representation before the SSA.  LINA also would have penalized Calhoun by reducing his benefits if he had not pursued a SSA claim.  On LINA’s argument that it “received no net-benefit from the Social Security Award” because the plan allowed LINA to reduce Calhoun’s monthly benefits by his assumed Social Security award if he did not pursue the SSA claim, the Court explained that LINA did benefit financially by Calhoun’s pursuit and receipt of SSDI because if his claim had been denied, LINA would not have been able to reduce its monthly payments to him. Lastly, LINA’s consideration of the SSDI award was inadequate.  LINA noted that it considered the award but rejected it because it was “in receipt of more current medical information than the [SSA] had at the time of their initial determination.”  The court found that LINA failed to identify the “more current medical information” on which it relied in reaching a contrary decision and also failed to explain why this information warranted the conclusion that Calhoun was not totally disabled.  Moreover, the Court found that the evidence post-dating the SSA decision—the peer reviews, the additional video surveillance, and the second and third transferrable-skills analyses—is not substantial evidence supporting the conclusion that LINA’s decision was the result of a deliberate, principled reasoning process.

LINA obtained file reviews by Dr. David Trotter and Dr. Elena Antonelli.  The Court found that LINA’s reliance on file reviews in denying Calhoun’s claim also weighs in favor of finding that the decision arbitrary and capricious.  Dr. Trotter did not physically examine Calhoun as part of his review, but he nevertheless concluded that there is no credible evidence indicating Calhoun is unable to perform full time sedentary or light level work and he nowhere explained why he believed that the medical evidence did not support Calhoun’s claim.  The Court found Dr. Antonelli’s review similarly inadequate for a number of reasons. Dr. Antonelli noted that a March 2012 functional-capacity analysis “likely reflects the minimum abilities of [Calhoun]” but she did not justify how the evaluation’s findings –which concluded that Calhoun would require at least one break every hour for 5-10 minutes from sustained sitting and could stand for only 15-20 minutes –would justify the conclusion that Calhoun could work on a full-time basis.

The Court reasoned that “[p]articularly because LINA was subject to a conflict of interest, LINA’s decision to utilize file reviews and forego a physical examination, its reliance on the file reviews despite the inadequacies with the reviews, and its failure to explain why it was crediting the file reviewer opinions over that of a treating physician collectively weigh in favor of finding that LINA’s denial of Calhoun’s claim was arbitrary and capricious.”

On the other evidence supporting LINA’s termination of benefits –the transferrable-skills analyses, the third round of video surveillance, and doctor visit notes – the Court all of this evidence to be either discredited or inadequate to explain the termination of Calhoun’s benefits.  The transferrable-skills analyses were based solely on the Trotter and Antonelli file reviews.  The video surveillance is not inconsistent with Calhoun’s reported limitations, nor does it demonstrate that Calhoun is capable of working on a full-time basis.  In six days of surveillance, PhotoFax viewed a total of less than thirty minutes of notable activity.  Lastly, LINA cherry-picked statements in Calhoun’s doctor visit notes and ignored statements supporting his claim. And although a physical-ability assessment accompanying the functional-capacity analysis indicated that Calhoun could sit “frequently,” the Court noted that this capacity to sit does not establish that he can work on a full-time basis, especially with his demonstrated restrictions in standing and walking.  The district court found “troubling several aspects of LINA’s review of [Calhoun’s] claim,” but nevertheless found in favor of LINA because it felt “constrained by the extremely deferential arbitrary and capricious standard.”  The 6th Circuit explained that “[t]his deferential standard of review, however, does not serve as a ‘rubber stamp’ for the plan administrator’s decision.”  Because the objective medical evidence supported Calhoun’s disability, the Court remanded this case to the district court for reinstatement of Calhoun’s disability benefits from the date that they were terminated.

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

Attorneys’ Fees

Second Circuit

  • In case involving a claim for benefits by a group of plaintiffs who work or have worked for Xerox Corporation, finding that the participants are entitled to a reasonable attorneys’ fee and costs. Applying 2011 rates, the court awarded Plaintiffs $4,711,430.70 in fees and $174,174 in costs for the total amount of $4,885,604.70Frommert v. Conkright, No. 00-CV-6311L, 2016 WL 7186489 (W.D.N.Y. Dec. 12, 2016) (Judge David G. Larimer).

Breach of Fiduciary Duty

Seventh Circuit

Ninth Circuit

  • The court granted summary judgment in favor of Defendants on Plaintiff’s claim that the Plan Administrator breached a duty to provide Plaintiff with complete and accurate information regarding retirement benefits and the process for obtaining them when HR allegedly knew of the participant’s cancer diagnosis. The court found that the Plan and the Honeywell Retirement Service Center did not have a procedure, or the authority, to terminate a participant’s employment or complete a participant’s application for retirement benefits on behalf of a participant that would enable a participant to obtain retirement benefits “immediately” or that would expedite the time required for verification and approval of the retirement application. Thus, there was no process that the Plan Administrator should have disclosed.  Further, there is no make-whole monetary relief available under ERISA Section 502(a)(3) which would entitle Plaintiff to an amount equivalent to the monetary benefit she would have received under the PlanAngichiodo v. Honeywell Pension & Sav. Plan, & Salaried Employees Pension Plan of AlliedSignal, Inc., No. CV-15-00097-PHX-NVW, 2016 WL 7178666 (D. Ariz. Dec. 9, 2016) (Judge Neil V. Wake).

Disability Benefit Claims

Fifth Circuit

  • The court found that United’s decision to deny Plaintiff’s long term disability benefits based on her conditions of fibromyalgia and Chronic Fatigue Syndrome was supported by substantial evidence from Dr. Britt Daniel’s IME and by the peer reviews from Dr. Adam Raff, Dr. Jeffrey Sartin, Dr. Paul Howard, and Dr. Michael R. Villanueva. United did not need to follow SSA’s determination of Plaintiff’s disability because United examined evidence that was not available to the SSA when it found Plaintiff disabledShindoll v. United of Omaha Life Ins. Co., No. 4:15-CV-00759, 2016 WL 7188837 (E.D. Tex. Dec. 12, 2016) (Judge Amos L. Mazzant).

Sixth Circuit

  • Conflict of interest factor is entitled to greater weight due to LINA’s inconsistent position on Plaintiff’s SSDI claim and award. LINA’s termination of benefits was arbitrary and capricious where it inadequately considered Plaintiff’s SSDI award, relied on two faulty peer reviewers’ opinions not based on a physical examination, misinterpreted a functional capacity analysis, relied on a faulty transferrable skills analysis, and cherry-picked statements from a treating doctor’s visit notes.  Court found Plaintiff disabled and remanded for an order reinstating benefitsCalhoun v. Life Insurance Company of North America, No. 15-3470, __F.App’x__, 2016 WL 7241398 (6th Cir. Dec. 15, 2016) (BEFORE: DAUGHTREY, ROGERS, and WHITE, Circuit Judges).


  • The court granted Prudential’s motion for judgment on the administrative record, finding that its denial of long term disability benefits was supported by three different “independent” reviewing physicians. The court rejected Plaintiff’s argument that Prudential erred by only requesting records for the previous twelve months.  Plaintiff’s last day of work was March 26, 2012 and the records retained by Prudential comprised of time periods both before and after Plaintiff’s last day of work.  “Second, a long range review of Plaintiff’s medical records could actually result in an arbitrary and capricious review. For example, had Prudential sought medical records for the past ten years, the records would have shown that Plaintiff worked with her diagnosed conditions for almost ten years before filing her claim. Armed with this information, the Administrator could have more easily dismissed Plaintiff’s claim for benefits without a reasoned, deliberate review.”  Maher v. Prudential Ins. Co. of Am., No. 1:14CV2777, 2016 WL 7227881 (N.D. Ohio Dec. 14, 2016) (Judge Christopher A. Boyko).


Second Circuit

  • In long term disability benefit dispute, the court adopts the approach by other courts permitting conflict of interest discovery in the absence of any evidence of in the record that conflict tainted the decision making. The court declines to apply the “reasonable chance” standard to the extent that it would require Plaintiff to point to specific evidence in the administrative record that Hartford’s structural conflict affected its decision just to gain entitlement to discovery on that very issue.  The court limited discovery to document requests and a deposition of a representative of Hartford pursuant to Fed. R. Civ. P. 30(b)(6), without prejudice to Plaintiff later seeking to depose other witnesses.  Chau v. Hartford Life Ins. Co., No. 1:14-CV-8484-GHW, 2016 WL 7238956 (S.D.N.Y. Dec. 13, 2016) (Judge Gregory H. Woods).

Sixth Circuit

  • Granting Liberty Life’s motion for trade secret protection of the following documents: (a) customized claims handling policies, procedures, and exceptions;(b) bonus plan for employees, as reflected in Liberty’s Variable Incentive Plan;(c) organizational structure of its claims and appeals units;(d) contracts with third party vendors;(e) contracts, including financial compensation, with its consulting physicians; and (f) training curricula provided to specific employeesOwens v. Liberty Life Assurance Co. of Boston, No. 415CV00071JHMHBB, 2016 WL 7238816 (W.D. Ky. Dec. 14, 2016) (Magistrate Judge H. Brent Brennenstuhl).

ERISA Preemption

Sixth Circuit

  • In dispute over AD&D benefits, the court denied Plaintiff’s motion to amend the Complaint because Plaintiff’s proposed Kentucky Unfair Claims Settlement Practices Act claims are preempted by the civil enforcement mechanism in 29 U.S.C. § 1132(a) of ERISA. The court rejected Plaintiff’s argument that ERISA’s “savings clause” captures his KUCSPA claimsEverett v. Metro. Life Ins. Co., No. 3:16-CV-00074-GNS, 2016 WL 7209678 (W.D. Ky. Dec. 12, 2016) (Magistrate Judge Dave Whalin).

Exhaustion of Administrative Remedies

Ninth Circuit

  • In suit seeking payment for two back surgeries, the court concluded that Plaintiff failed to exhaust her administrative remedies, as required by the BCBS plan, and is thus barred from bringing suit in federal court. Here, Plaintiff did not appeal on her own, rather her medical providers initiated the appeal on her behalf.  The court found that Plaintiff did not by writing authorize her providers to act on her behalfKojima v. Cross, No. 14-CV-1957-JLS-DHB, 2016 WL 7178852 (S.D. Cal. Dec. 8, 2016) (Judge Janis L. Sammartino).

Life Insurance & AD&D Benefit Claims

Second Circuit

  • This matter involves a drawn out dispute over life insurance benefits on the life of Judith Thomas, sister of now deceased Raymond Thomas. The day after Mr. Thomas’s death, Life Insurance Company of North America paid Plaintiff the $208,000.00 in benefits demanded in the Second Amended Complaint.  Defendant Bank of America as Successor to Countrywide Financial Corporation (“BOA”) filed the instant motion for summary judgment, arguing, inter alia, that it is not a proper defendant under ERISA § 502(a)(1)(B), that Plaintiff’s claims pursuant to ERISA § 502(a)(3) have already been dismissed, and requesting attorney’s fees and costs, either as a sanction for refusing to dismiss BOA from the action or pursuant to ERISA § 502(g)(1).  The court granted BOA’s motion in part, finding that Plaintiff has not introduced any evidence that BOA fit within one of the categories of defendants that can be sued under § 502(a)(1)(B), and even if dismissal of the § 502(a)(3) claims was premature in January 2013, it is clearly appropriate now that Plaintiff has obtained the remedy that he sought to recover under § 502(a)(3).  Further, any damage resulting from the delay in payments was not BOA’s fault.  The court denied BOA’s motion for sanctions given the state of the developing law with respect to § 502(a)(3) claimsEstate of Raymond Thomas v. Cigna Grp. Ins., No. 09CV5029SLTRLM, 2016 WL 7235718 (E.D.N.Y. Dec. 13, 2016) (Judge Sandra L. Townes).

Pension Benefit Claims

Third Circuit

  • In this case, Plaintiff contends that a 2005 Settlement Agreement required the Fund to credit her with service time dating back to March 26, 2002, when she was first hired, rather than September 26, 2005, when her position was restored. Had the Fund recognized her pre-2005 service, she would be entitled to an immediate early retirement benefit.  The court found that because the Settlement Agreement provided Plaintiff with no back pay, she is not entitled to claim any additional hours of creditable service based on that settlement.  Additionally, the court found that Plaintiff’s claim must also be dismissed for failing to exhaust administrative remedies.  The court dismissed the lawsuit with prejudiceDooley v. US Steel Workers of Am. PIUMPF, No. 16CV0402, 2016 WL 7178778 (W.D. Pa. Dec. 9, 2016) (Judge Arthur J. Schwab).

Fourth Circuit

  • In suit challenging suspension of pension plan benefits, the court found that the Trustees did not abuse its discretion when it found that (1) Plaintiff did not “retire” under the terms of the Plan because his work as an estimator was within the “jurisdiction of the Plan” and he can only be considered retired if he has been withdrawn from work in the jurisdiction of the Plan for a period of 30 days or more; and (2) Plaintiff’s work as an Operations Manager is “work in the jurisdiction of the Plan” subject to a suspension of benefits. Maltese v. Nat’l Roofing Indus., No. 5:16CV11, 2016 WL 7191798 (N.D.W. Va. Dec. 12, 2016) (Judge Frederick P. Stamp).

Tenth Circuit

Statute of Limitations

Ninth Circuit

  • The Ninth Circuit in this case previously held that the plan beneficiaries’ claims regarding the selection of mutual funds in 1999 were time-barred under the six-year limit of 29 U.S.C. § 1113(1). The Supreme Court vacated the decision on the basis that fiduciaries have an ongoing duty to monitor investments even absent a change in circumstances.  The en banc court held that Phillips v. Alaska Hotel & Rest. Emps. Pension Fund, 944 F.2d 509 (9th Cir. 1991), which held that when a fiduciary violated a continuing duty over time, the three-year limitations period set forth in 29 U.S.C. § 1113(2) began when the plaintiff had actual knowledge of a breach in a series of discrete but related breaches, does not apply to the continuing duty claims at issue under § 1113(1).  To be considered timely, only a “breach or violation,” such as a fiduciary’s failure to conduct its regular review of plan investments, need occur within the six-year statutory period of § 1113(1); the initial investment need not be made within the statutory periodTibble v. Edison International, No. 10-56406, __F.3d__, 2016 WL 7321373 (9th Cir. Dec. 16, 2016) (Before: SIDNEY R. THOMAS, Chief Judge, and STEPHEN REINHARDT, BARRY G. SILVERMAN, M. MARGARET MCKEOWN, RICHARD A. PAEZ, RICHARD R. CLIFTON, CARLOS T. BEA, MILAN D. SMITH, JR., JACQUELINE H. NGUYEN, PAUL J. WATFORD and MICHELLE T. FRIEDLAND, Circuit Judges).

Withdrawal Liability & Unpaid Contributions

Third Circuit

Seventh Circuit

Eighth Circuit


Tenth Circuit

* Please note that these are only case summaries of decisions as they are reported 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 an experienced ERISA attorney.  Case summaries authored by Michelle L. Roberts, Partner, Roberts Disability Law, P.C., 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel:  510-230-2090. 


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*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.

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