This week’s notable decision is Littleton v. Liberty Life Assurance Company of Boston, 2016 WL 3093887 (E.D. Ky. June 1, 2016), another case where a court has permitted a disability plan to work around a state’s ban on discretionary clauses in insurance policies. In Littleton, Liberty Life administered the long term disability claim in dispute. The Plan documents issued by Plaintiff’s employer delegated discretionary authority to Liberty Life for administration of the claims made under the Plan. The insurance policy documents do not confer discretion and the parties agreed that any such provision would be prohibited by Texas Insurance Code Section 1701.062. The court found that the Texas law did not ban discretionary clauses in Plan documents, only documents issued or delivered by an insurer. Since the Plan documents were issued and delivered by Plaintiff’s employer, they do not fall within the scope of the Texas law. As such, the court found that abuse of discretion review applies to Liberty Life’s claim decision.
The court explained that, “[f]f the Texas Legislature sought to indirectly limit the terms a benefit plan might include in its plan documents, they could have limited insurers’ ability to enter into any contract that would permit them to exercise discretion in administering a policy they underwrote.” If this is the roadmap to a bullet-proof ban on discretion, I urge you to contact your state’s insurance commissioner, who can be found via this link: http://www.naic.org/state_web_map.htm.
Why are insurance companies so afraid of de novo review? To answer my own question, check out another notable decision from this past week, Wonsowski v. United of Omaha Life Ins. Co., 2016 WL 3088141 (N.D. Ill. June 2, 2016). In this de novo review case, the court found for the disability claimant after a bench trial where the court heard Plaintiff’s live testimony and deposition testimony from her treating doctor and the insurance company’s reviewing doctor. If you handle LTD claims, this is a fun decision to read. But hey, I think they’re all fun to read! Enjoy this week’s case summaries!
Your reliable source for summaries of recent ERISA decisions
Below is Roberts Disability Law summary of this past week’s notable ERISA decisions.
Breach of Fiduciary Duty
•· In action where Plaintiffs seek disgorgement of fees paid to a law firm for representing Lawrence Koresko in ERISA litigation, granting law firm’s motion to dismiss for failure to state a claim under ERISA § 502(a)(3) since Plaintiffs have failed to allege that law firm had actual or constructive knowledge that funds rightfully belonging to an ERISA plan were wrongfully transferred to them. Kalan v. Farmers & Merchants Trust Co. of Chambersburg, No. CV 15-1435, 2016 WL 3087360 (E.D. Pa. June 2, 2016) (Judge Wendy Beetlestone).
•· In matter challenging the status of Defendants’ wealth accumulation plan (“WAP”) as a valid top hat plan and alleging claims for breach of fiduciary duty under section 1132(a)(2) and a claim for equitable relief under section 1132(a)(3), finding that (1) a class may not be certified under Rule 23 for failing to meet the commonality, typicality, and adequacy prongs; (2) Plaintiffs’ claims and requested relief are statute-based, not plan-based, and need not be exhausted administratively; and (3) “to the extent this case is governed by section 1113(1)(A) applicable to affirmative fiduciary breaches, and to the extent Plaintiffs are claiming that the forfeitures constituted breaches of a fiduciary duty, the unlawful forfeiture claims stemming from the WAP’s non-top hat status would appear brought well within any six-year limitations period.” Tolbert v. RBC Capital Markets Corp., No. CV H-11-0107, 2016 WL 3034497 (S.D. Tex. May 26, 2016) (Judge Keith P. Ellison).
Disability Benefit Claims
•· Denying cross-motions for summary judgment on long term disability claim and remanding the claim to Aetna to determine whether Plaintiff’s use of oxycodone would have prevented her from performing her duties in the national economy. “Avoidance of even unrealized risks is fundamental to many job duties. A truck driver who developed a condition-or required a medication-that carried a risk of narcolepsy or seizures might reasonably be barred from doing his job even if he presently showed no signs of suffering those symptoms, and there would be little question that his medical issue was keeping him from performing his material duties.” Fultz v. RR Donnelley & Sons Co. Long Term Disability Plan, No. CV 15-0319, 2016 WL 3078192 (E.D. Pa. June 1, 2016) (Judge Jeffrey L. Schmehl).
•· On de novo review following a bench trial where Plaintiff testified in person and the parties submitted the deposition testimony of Plaintiff’s primary internal medicine physician, and Dr. Manoj Mehta, a consulting physician for United of Omaha, the court found that Plaintiff is entitled to long term disability benefits for being unable to perform the material duties of “Mechanical-Design Engineer, Products.” The court rejected Defendant’s argument that Plaintiff’s ability to use her computer six to eight hours a day, at home on a reclining sofa, is evidence of ability to perform the intellectual demands of a highly skilled professional occupation on a full-time basis. Wonsowski v. United of Omaha Life Ins. Co., No. 15 C 3795, 2016 WL 3088141 (N.D. Ill. June 2, 2016) (Magistrate Judge Geraldine Soat Brown).
•· On Defendants’ Rule 12 Motion to Dismiss, (1) dismissing breach of fiduciary duty claim against Defendants based on their “failure to monitor” the claims process since there is no alleged underlying breach of fiduciary duty; (2) finding that per Cyr and Spinedex, Plaintiff’s employer and the plan administrator and the plan sponsor are proper defendants; (3) finding that the amended complaint “relates back” to the original action since the new Defendants knew or should have known they were proper defendants in the case. Dahmen v. Liberty Mut. Grp., Inc., No. 2:15-CV-76-SAB, 2016 WL 3072256 (E.D. Wash. May 31, 2016) (Judge Stanley A. Bastian).
•· In matter where Defendants’ removed Plaintiff’s state court action alleging disability discrimination and wrongful discharge in violation of the West Virginia Human Rights Act and public policy, granting Plaintiff’s motion to remand where Defendants merely cited to Section 502 and stated that Plaintiff’s action appears to relate to ERISA because it alleges a loss of income and benefits. Moreland v. Bali Surgical Practice, PLLC, No. 2:16-CV-03666, 2016 WL 3024162 (S.D.W. Va. May 25, 2016) (Judge Joseph R. Goodwin).
•· In putative class action against Defendants related to Anthem data breach, denying Defendants’ motion to dismiss some claims brought by certain Plaintiffs on the basis of ERISA preemption, and finding that “(1) Defendants are precluded from asserting an ERISA preemption defense as to Plaintiffs’ UCL claims, (2) the presumption against preemption applies, (3) Defendants’ privacy obligations are not ‘benefits’ for purposes of ERISA express or complete preemption, and (4) even if Defendants’ privacy obligations were considered ‘benefits,’ there is a genuine dispute concerning whether Plaintiffs’ ERISA employee benefit plan incorporated these obligations.” In re Anthem, Inc. Data Breach Litig., No. 15-MD-02617-LHK, 2016 WL 3029783 (N.D. Cal. May 27, 2016) (Judge Lucy H. Koh).
Life Insurance & AD&D Benefit Claims
•· In interpleader action where marriage settlement agreement required decedent to name his ex-wife as life insurance beneficiary but he later changed the beneficiary to his new wife, finding that as a matter of law the Oklahoma dissolution of marriage decree and settlement agreement is a final judgment, the terms of those documents state that the life insurance policy could not be modified absent the agreement of both parties, the ex-wife never consented to the change in beneficiary, and the Oklahoma judgment must be upheld. Berry v. Bannerr Life Ins. Co., No. SA-16-CV-52-XR, 2016 WL 3081037 (W.D. Tex. May 31, 2016) (Judge Xavier Rodriguez).
•· The Benefits Plan of the Presbyterian Church is an ERISA-exempt church plan governed by Pennsylvania trust law. MacNeill v. Benefits Plan of the Presbyterian Church (U.S.A.), No. C16-189RSL, 2016 WL 3017711 (W.D. Wash. May 26, 2016) (Judge Robert S. Lasnik).
Pleading Issues & Procedure
•· In action seeking to recover medical benefits under the Liebovich Bros. Inc, Plan, dismissing defendant Northern Illinois Health Plan (“NIHP”) for failing to be a proper defendant. Plaintiff alleged that NIHP is the Claims Administrator “having the authority to apply the terms of the Plan in order to make an initial determination of eligibility for benefits and to administer the Plan in accordance with its terms.” The court found that NIHP does not have an obligation to pay Plaintiff any benefits and it does not have discretion to decide whether Plaintiff is entitled to benefits. Kunz v. Liebovich Bros., No. 15 C 50279, 2016 WL 3093045 (N.D. Ill. May 31, 2016) (Judge Frederick J. Kapala).
•· In consolidated actions brought by Bethesda Surgery against United for denying coverage or underpaying for services for insureds with out-of-network benefits, granting motion to remand and finding that motion was timely since it was filed within 30 days of Plaintiff’s provision of information necessary to identify the policies that applied to each patient. The court rejected Plaintiff’s contention that pre-litigation communications put Defendant on notice of the basis of removal. The statutory language of 29 U.S.C. § 1446(b)(3) makes plain that the meaning of the term “other paper” in that provision refers to documents exchanged after the case has been initiated. Bethesda Chevy Chase Surgery Ctr., LLC v. Unitedhealthcare Ins. Co., No. GJH-15-3496, 2016 WL 3042957 (D. Md. May 27, 2016) (Judge George J. Hazel).
State Bans on Discretionary Clauses
•· Despite the Texas Insurance Code’s prohibition on discretionary clauses contained in insurance policies, a long term disability plan document’s discretionary language adequately confers discretion necessary to justify an arbitrary and capricious review standard. Littleton v. Liberty Life Assurance Company of Boston, No. CV 6:15-187-KKC, 2016 WL 3093887 (E.D. Ky. June 1, 2016) (Judge Karen K. Caldwell).
Statute of Limitations
•· In matter alleging breach of fiduciary duty to procure and deliver the funds in Plaintiff’s pension accounts that he requested back in 1988, finding that Plaintiff had actual knowledge of the essential facts needed to assert his claim for breach of fiduciary duty in 1989, and the three-year statute of limitations provided by ERISA expired in 1992. Even if Plaintiff asserts a claim for denial of benefits, the 10-year statute of limitations began accruing in 1988 when Plaintiff first elected to take a lump sum payment, and it expired in 1998 (nearly seventeen years prior to Plaintiff filing his Complaint). Utley v. Prairie Power, Inc., No. 15-CV-03324, 2016 WL 3030222 (C.D. Ill. May 26, 2016) (Judge Sue E. Myerscough).
•· In matter seeking to recover optional life insurance benefits and an accidental death insurance benefit, granting summary judgment in favor of Liberty Life, finding that lawsuit is barred by policy’s contractual limitations period requiring that any legal action be filed no more than one year after the time Proof of claim is required and satisfactory proof of loss must be given to Liberty Life no later than 30 days after the date of loss. Here, the insured died on December 27, 2013 and Plaintiff was required to file suit by January 27, 2015 but did not file suit until June 12, 2015. Webb v. Liberty Life Assurance Co. of Boston, No. 1:15-CV-2508-TWT, 2016 WL 3087455 (N.D. Ga. June 1, 2016) (Judge Thomas W. Thrash, Jr.).
Withdrawal Liability & Unpaid Contributions
•· Granting Petitioners’ motion to confirm the arbitration award in the amount of $34,689.79 and awarding petitioners $372.50 in attorneys’ fees and $467.50 in costs. Trustees of Empire State Carpenters Annuity, Apprenticeship, Labor-Mgmt. Cooperation v. Dipizio Constr., Inc., No. 15CV2592JFBAYS, 2016 WL 3033722 (E.D.N.Y. May 25, 2016) (Judge Joseph F. Bianco).
•· Granting Plaintiffs’ motion for entry of judgment and finding the total amount due and owing the Control Board from Fore Mechanical for delinquent contributions, liquidated damages, and attorneys’ fees and costs for the Audit Period is $69,852.18. James Bigham, John Quarnstrom, Robert Vranicar, Jim Bowman, Mike McCauley, & Matt Fairbanks as Trustees of the Sheet Metal Local #10 Control Bd. Trust Fund, & the Sheet Metal Local #10 Control Bd. Trust Fund vs. Fore Mech. Inc., No. 14CV03076MJDSER, 2016 WL 3034157 (D. Minn. May 27, 2016) (Judge Michael J. Davis).
•· Denying Defendant’s motion to dismiss in its entirety with respect to GCIU’s claim for delinquent contributions, but granting Defendant’s Motion to Stay GCIU’s § 1399(a) claim. GCIU-EMployer Ret. Fund v. Quad/Graphics, Inc., No. 216CV00100ODWAFMX, 2016 WL 3027336 (C.D. Cal. May 26, 2016) (Judge Otis D. Wright, II).
•· Entering default judgment against Defendant and in favor of Plaintiffs and awarding $63,777.20 in total damages: $14,560.53 for delinquent contributions; $17,238.89 in interest; $17,238.89 in liquidated damages; $10,305.00 for Audit fees; $3,973.73 in attorney’s fees; and $460.16 in litigation costs. Bd. of Directors of The Motion Picture Indus. Pension Plan v. Oil Factory, Inc., No. 15-9841-RSWL-AGRX, 2016 WL 3027337 (C.D. Cal. May 25, 2016) (Judge Ronald S.W. Lew).
* 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. The cases reported above were 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 may be able to advise you so please contact us. Case summaries authored by Michelle L. Roberts, Partner, Roberts Disability Law, 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel: 510-230-2090.
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