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ERISA Watch – Long Term Disability Plan that Pays Benefits for Schizophrenia Must Also Pay for Schizoaffective Disorder

This week’s notable decision is Duncan v. Metro. Life Ins. Co., No. 2:15-CV-626TS, 2016 WL 6651317 (D. Utah Nov. 10, 2016), a victory for disability claimants.  Duncan was diagnosed with Schizoaffective Disorder.  Her long term disability plan caps benefits due to disability caused by a mental or nervous condition at two years unless the condition is attributable to schizophrenia, dementia, or organic brain disease.  MetLife denied Duncan’s long term disability benefits based on its interpretation that the schizophrenia exclusion does not include schizoaffective disorder.  The court found that MetLife’s decision was arbitrary and capricious.  On the standard of review, the court found that MetLife’s hiring of outside doctors has little effect on MetLife’s conflict of interest since its interpretation of schizophrenia is the sole issue before the court.  MetLife allowed a medical director to interpret the scope of an undefined Plan term without documenting any rationale.  The court found that the procedural irregularities in MetLife’s interpretative process “heighten the likelihood that MetLife made its interpretation in part to avoid a substantial payment of benefits …”  As such, the court found that MetLife’s conflict of interest is a factor that weighs against affirming MetLife’s interpretation in this case.

On the merits of MetLife’s interpretation, the court found that the “schizophrenia” exclusion is ambiguous.  The Plan does not define schizophrenia.  The DSM-5, however, uses the term schizophrenia to refer both to a specific disorder and to a spectrum of disorders, including schizoaffective disorder.  Plus, the Plan’s exclusion for schizophrenia precedes an exclusion for dementia, which is a general term that includes many neurocognitive disorders.  The court found that MetLife’s interpretation is unreasonable because it is inconsistent with the DSM and with other Plan exclusions.  Additionally, the potential overlap between schizophrenia and schizoaffective disorder is so great that it is not reasonable for MetLife to rely only on the name of the diagnosis to define the scope of the exclusion.  The court also found that MetLife’s interpretation undermines public policy because it is unduly restrictive.

Although the court found that MetLife abused its discretion, it remanded the claim to MetLife to remedy its deficiencies.  But, the court did award Duncan attorney’s fees and costs and directed Duncan to submit an affidavit detailing reasonable attorney’s fees.

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

Attorneys’ Fees

Fifth Circuit

Seventh Circuit

  • Following the grant of summary judgment to Plaintiff, who sought long-term benefits for his deceased wife’s disability due to Stage IV lung cancer, and remand to the administrator for further proceedings, the court awarded Plaintiff the full amount of attorneys’ fees and costs requested totaling $82,140.84. Plaintiff’s award was based on the actual billing hourly rates of $450 and $280Kaiser v. United of Omaha Life Ins. Co., No. 14-CV-762-WMC, 2016 WL 6581355 (W.D. Wis. Nov. 4, 2016) (Judge William M. Conley).

Breach of Fiduciary Duty

Fourth Circuit

  • There is no genuine dispute that the 2013 Purchase would be a violation of § 1106(a), where Wilmington, the fiduciary, caused the ESOP, a plan, to purchase stock from a party in interest, employer Constellis. Wilmington failed to act as a reasonably prudent fiduciary to defeat summary judgment at this stage with respect to his § 1108(e) affirmative defense.  With respect to whether Wilmington violated § 1106(b), there remains a material dispute over whether the exception in § 1108(b) applies, including whether Wilmington’s fee was “necessary” to establish the ESOP, or if it could have been financed some other wayBrundle v. Wilmington Trust, N.A., No. 115CV1494LMBIDD, 2016 WL 6542718 (E.D. Va. Nov. 3, 2016) (Judge Leonie M. Brinkema).

Sixth Circuit

Eleventh Circuit

  • In suit brought by National Association for Fixed Annuities (“NAFA”) under the Administrative Procedure Act, and the Regulatory Flexibility Act, challenging three final rules promulgated by the Department of Labor on April 8, 2016 which substantially modify the regulation of conflicts of interest in the market for retirement investment advice under ERISA and the Internal Revenue Code, the court denied NAFA’s motions for a preliminary injunction summary judgment and granted the Department’s cross-motion for summary judgment. Nat’l Ass’n for Fixed Annuities v. Perez, No. CV 16-1035 (RDM), __F.Supp.3d__, 2016 WL 6573480 (D.D.C. Nov. 4, 2016) (Judge Randolph D. Moss).

Class Actions

Second Circuit

  • In suit alleging that Defendants violated ERISA by significantly underfunding the St. Francis Hospital and Medical Center Pension Plan, the court granted the motion for final approval of the class action settlement, certified the Class for settlement purposes, determined that the notice provided to the class was appropriate and sufficient, granted the motion to award $800,000 in attorney’s fees to Class Counsel, granted the motion to award $19,711.71 as reimbursement of litigation expenses to Class Counsel, and granted the motion to award Plaintiff $2,000 as a case contribution or incentive award in recognition of her efforts on behalf of the Class. Kemp-DeLisser v. Saint Francis Hosp. & Med. Ctr., No. 15-CV-1113 (VAB), 2016 WL 6542707 (D. Conn. Nov. 3, 2016) (Judge Victor A. Bolden).

Disability Benefit Claims

Third Circuit

  • For Plaintiff with severe vision problems caused by proliferative diabetic retinopathy, ReliaStar did not abuse its discretion in denying Plaintiff’s long term disability claim, where it: (1) did not require an IME, and instead largely relied on Dr. Michaelson’s independent medical record review; (2) did not adopt the opinion of Plaintiff’s treating doctor, who first opined Plaintiff could not work after ReliaStar terminated her benefits and did not respond to Dr. Michaelson’s letter setting forth his opinion that Plaintiff could return to work; and (3) ReliaStar identified numerous available occupations that Plaintiff could do even in light of Dr. Michaelson’s restrictionsMoustafa v. Reliastar Life Ins. Co., No. CV 15-2531, 2016 WL 6662685 (D.N.J. Nov. 8, 2016) (Judge John Michael Vazquez).

Sixth Circuit

  • In denying Plaintiff’s short-term disability benefits claim, the Plan abused its discretion where it failed to make a reasonable effort to speak with treating physicians, selectively reviewed and misinterpreted Dr. Friedman’s report (a reviewing physician for the Plan), made credibility determinations about Plaintiff’s continuous reports of pain without having her physically examined, and relied heavily on non-treating physician consultants, including Dr. Jamie Lee Lewis. Filthaut v. AT&T Midwest Disability Benefit Plan, No. 15-CV-12872, 2016 WL 6600038 (E.D. Mich. Nov. 8, 2016) (Judge Gershwin A. Drain).

Tenth Circuit

  • MetLife’s conflict of interest is a factor that weighs against affirming MetLife’s interpretation in this case, where it allowed a medical director to single-handedly interpret the scope of an undefined Plan term without documenting any rationale. MetLife’s interpretation of the Plan’s schizophrenia exclusion is unreasonable where it required the precise diagnosis of schizophrenia (Plaintiff was diagnosed with schizoaffective disorder), since its interpretation is inconsistent with the DSM, inconsistent with other Plan exclusions, analogous case law does not support MetLife’s interpretation, and MetLife’s interpretation undermines public policy.  Claim remanded to MetLife to decide and Plaintiff awarded attorney’s feesDuncan v. Metro. Life Ins. Co., No. 2:15-CV-626TS, 2016 WL 6651317 (D. Utah Nov. 10, 2016) (Judge Ted Stewart).


Third Circuit

  • Although the formation of a plan as a tax-qualified plan is a settlor activity and is not subject to the fiduciary exception of the attorney-client privilege, analyzing options for potential plan amendments to comply with tax-qualified requirements is a settlor function to which the attorney-client privilege applies. Documents reflecting legal advice regarding communications with beneficiaries are also subject to the fiduciary exceptionRomero v. Allstate Ins. Co., No. 01-3894, 2016 WL 6568078 (E.D. Pa. Nov. 4, 2016) (Magistrate Judge Marilyn Heffley).

ERISA Preemption

Third Circuit

  • In suit seeking to enforce promises made in an employment offer letter, including that Plaintiff would be credited for years of service at an acquired company, the court found that Plaintiff’s state law claims arise from legal duties independent from the ERISA plans and seek to recover damages in the form of severance pay or lost opportunities, not ERISA benefits per se. Since the claims will involve a cursory examination of the benefit plans and will not require the Court to interpret the plans, the claims are not preemptedLapham v. Accenture, LLP, No. 16-1394 (RMB/JS), 2016 WL 6609177 (D.N.J. Nov. 8, 2016) (Judge Renee Marie Bumb).

Sixth Circuit

  • The court affirmed the district court’s dismissal of Plaintiffs’ Michigan’s Elliott–Larsen Civil Rights Act age discrimination claim. The court held that ERISA preempts Plaintiffs’ age-discrimination claim because it is untimely under the ADEA and preemption of Michigan’s statute of limitations neither impairs nor modifies federal lawLoffredo v. Daimler AG, No. 15-1443, __F.App’x__, 2016 WL 6595962 (6th Cir. Nov. 8, 2016) (BEFORE: MOORE, SUTTON, and STRANCH, Circuit Judges).

Ninth Circuit

Exhaustion of Administrative Remedies

Sixth Circuit

  • In matter where Plaintiffs allege that Defendants did not timely release their benefits under the 401(k) Plan, the issue is contractual in nature—in particular, whether Defendants breached their contractual duty under the Plan to release the funds in a timely manner. As such, the court sees no reason to apply the exhaustion-of-remedies doctrineAlexander v. Terry Law Firm, P.C., No. 2:16-CV-91, 2016 WL 6592378 (E.D. Tenn. Nov. 7, 2016) (Judge Thomas W. Phillips).

Life Insurance & AD&D Benefit Claims

Seventh Circuit

  • Plaintiff was awarded a judgment in Illinois state court on allegations that his step-mother fraudulently received proceeds from a Lincoln National Life Insurance policy on the life of his late father. In his suit against Lincoln National for violating ERISA when it paid out the policy’s proceeds to the step-mother, and for breach of contract, the court found that his breach of contract claim is barred by res judicata, but his ERISA claim was expressly reserved by the state court order; the breach of contract claim is clearly pleaded in the alternative and is not a basis for a preemption finding; and Plaintiff’s attempt to win a judgment against Lincoln National in this court does not necessarily raise the specter of a double recoveryBlack v. Lincoln Nat’l Life Ins., No. 16 C 5614, 2016 WL 6582582 (N.D. Ill. Nov. 7, 2016) (Judge Thomas M. Durkin).

Plan Status

Second Circuit

  • Severance benefit plan is not an ERISA plan where no discretion is required under the Plan as to the amount of severance, the timing of the payouts, or the form of the severance; no reasonable employee would perceive an ongoing commitment by Defendants to provide employee benefits under the structure of the Plan; the “good reason” determination requires minimal separate analysis by the employer; and very few of the “usual earmarks” of an ERISA plan are present. Motion to remand to state court grantedHall v. Lsref4 Lighthouse Corp. Acquisitions, LLC, No. 6:16-CV-06461 EAW, 2016 WL 6651389 (W.D.N.Y. Nov. 10, 2016) (Judge Elizabeth A. Wolford).

Pleading Issues & Procedure

Eleventh Circuit

Withdrawal Liability & Unpaid Contributions

Eighth Circuit

Ninth 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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