ERISA Watch – May 22, 2014

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

Breach of Fiduciary Duty

In Echague v. Metro. Life Ins. Co., 12-CV-00640-WHO, 2014 WL 2089331 (N.D. Cal. May 19, 2014) (Plaintiff’s attorney: Rebecca Grey), after being diagnosed with cancer and going on medical leave, Carol Echague sent defendant TriNet Group, Inc. a specific inquiry about her insurance coverage, stating that she did not want any of it to lapse. TriNet responded by referring her to confusing form letters it had already provided that did not specifically address the policies that were in danger of lapsing. She died four months later, and her husband then learned that her insurance policies had lapsed. Among several issues, the court had to determine whether TriNet breached its fiduciary duty to the Echagues and whether it or any other defendant is liable as a result. The court found that TriNet’s insufficient response to Ms. Echague’s inquiries violated its fiduciary duties under ERISA.

Trial on Conflict of Interest

The matter of Couvillion v. Reddy Ice Corp., 12-CV-204, 2014 WL 1922769 (M.D. La. May 14, 2014) involved Metlife’s denial of life insurance benefits to a widow who was the designated beneficiary of her late husband’s group life insurance policy. The plaintiff and MetLife both filed motions for summary judgment, which the district court denied because it determined that genuine issues of fact exist as to the date that the participant’s employment ended and whether the employer continued to pay premiums on his behalf. Because the Plan reserved discretion to MetLife to make claim decisions (entitling it to some degree of deference), the court determined that a trial is necessary to determine whether a conflict of interest exists in this case and subsequently what standard of review the Court should utilize under that determination. Additionally, the court reasoned that the factual issues set forth must also be resolved to the court’s satisfaction before the Court can determine whether MetLife made a legally correct interpretation of the Plan or abused discretion in denying Plaintiff’s claim.

Vesting Status of LTD Benefits. In Iannone v. Metro. Life Ins. Co., 14 CIV. 0341 AKH, 2014 WL 1918238 (S.D.N.Y. May 12, 2014), the court considered the issue of whether long term disability (“LTD”) benefits vest for a participant who was already receiving disability benefits at the time that MetLife amended the LTD Plan to terminate employment, and continued health and life insurance coverage, after 24 months of leave. Iannone worked for MetLife as a registered nurse for fifteen years before becoming permanently disabled in June 2004. She received benefits under MetLife’s LTD Plan from December 15, 2004 through March 14, 2005, when MetLife terminated her claim for benefits. After she filed a lawsuit, the parties agreed to a settlement retroactively restoring her status in MetLife’s LTD Plan to that of March 14, 2005, and paying her the salary and health and life insurance benefits owed to her. In October 2012, MetLife, acting pursuant to the LTD Plan, gave notice that it was amending the LTD Plan. Pursuant to the amendment, the employment status of all employees on disability for more than 24 consecutive months was terminated. As a result, the terminated employees no longer would be eligible for certain provisions LTD Plan benefits. MetLife advised Iannone that she would continue to receive her salary but that her health and life insurance coverage would be discontinued. After appealing to MetLife, Iannone then filed this lawsuit, alleging that the curtailment of her health and life insurance violated the LTD Plan and breached her Settlement Agreement and seeking reinstatement of her benefits denied since June 30, 2013.

The Summary Plan Description contains the section titled “Plan Amendment or Termination” which provides, in relevant part, as follows,

Although the Company expects to continue the MetLife Options Plus Program and other benefit Plans, it reserves the right to amend, modify, or discontinue all or any part of the program or any Plan at any time for any and all Employees including Active, Retired or Disabled employees. No oral or written communication will be effective in amending the Plan unless it is by way of a formal amendment.

The Plan also provided that MetLife retains “full power and discretion to resolve all issues concerning eligibility, status, entitlements to benefits, any other interpretations under each of the benefit Plans described in this book. Such interpretations or rulings shall be binding on all parties.”

Iannone claims that, pursuant to 29 U.S.C. § 1132(a)(1)(B), MetLife could not discontinue her medical and life insurance benefits because her right to participate in these portions of the LTD Plan vested when she became disabled. The Court determined that MetLife’s determination that Iannone was no longer eligible for continued participation in its medical and life insurance plans as of June 30, 2013 was permissible under ERISA because it was based on the express and unambiguous terms of the Plan and an employer can modify or amend plan benefits as long as these benefits have not vested. The Court granted MetLife’s motion to dismiss and denied Iannone’s motion for summary judgment.

ERISA Document Penalties. In Curran v. Aetna Life Ins. Co., 13-CV-00289 NSR, 2014 WL 1918711 (S.D.N.Y. May 12, 2014), the court ruled on the plaintiffs’ motion to amend the Complaint to add a claim for sanctions under ERISA § 502(c) against TriNet for failing to furnish the latest copy of the Summary Plan Description upon written request. The court found that the Plaintiffs adequately alleged that it requested a copy of the SPD to the plan administrator and was not provided with a copy. In so doing, the court found that Plaintiffs’ claim for statutory penalties under based § 502(c) on a failure to provide a copy of a document that the plan administrator was required to produce under ERISA 104(b)(4) is not futile. Although Plaintiffs were in possession of the SPD, ERISA § 104(b)(4) allows a participant or beneficiary to request a copy of the SPD at any time. The same section of ERISA provides that the plan administrator must provide each plan participant and beneficiary a copy of the SPD within a certain amount of time that he or she becomes a participant or beneficiary. 29 U.S.C. § 1024(b) (1). Therefore, the sections would be contradictory if a plan administrator was not required, upon request, to provide a copy of the SPD to a participant or beneficiary who may already possess the SPD because theoretically, every participant or beneficiary should be in possession of the SPD by virtue of § 104(b)(1). The failure to provide a copy of the SPD after a written request is made constitutes a violation of § 104(b)(4), whether or not the requestor was previously provided a copy of the SPD.

Failure to Exhaust Administrative Remedies. In Taylor v. AK Steel Corp., CIV.A. 13-130-HRW, 2014 WL 1892591 (E.D. Ky. May 12, 2014), the district court found that the participant failed to comply with ERISA’s administrative scheme, thus forfeiting the right to appeal the denial of pension benefits where the administrative remedy available was to commence arbitration proceedings and was explicitly set forth in the pension plan. The court found that despite “this clear path,” and the assistance of counsel, the participant did nothing to pursue his claim for pension benefits until filing this lawsuit. As such, the court dismissed the lawsuit.

Similarly, in Orr v. Assurant Employee Benefits, 13 C 5535, 2014 WL 2069349 (N.D. Ill. May 19, 2014), the Court found that a letter titled “NOTICE OF INTENTION TO OPPOSE DENIAL OF POLICY PROCEEDS” and stating that “[t]his letter is intended to qualify as a First Review of the denial of benefits as set out [sic] instructions” and that “[t]his letter is claimant’s effort to be in compliance with the policy term requirement of Notice within 60 days of a Rejection of a Claim for Benefits to Request Review Proceedings,” but did not identify any particular basis for further review (only requesting certain documents and advising that the Orrs intended to submit additional written materials) did not constitute an appeal for purposes of exhausting administrative remedies.

* 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 attorney at Roberts Disability Law, P.C. may be able to advise you so please contact us.

Case summaries authored by Michelle L. Roberts, Partner, Roberts Disability Law, P.C., 1050 Marina Village Parkway, Ste. 105 Alameda, CA 94501; Tel: 510-230-2090.