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ERISA Watch – May 3, 2016

Happy Tuesday! This week’s notable decision is out of the Northern District of California in the matter of Nagy v. Group Long Term Disability Plan for Employees of Oracle Am., Inc. The court held that California Insurance Code Section 10110.6 renders void a discretionary clause found in the long term disability plan itself, even though it was not contained in the policy of insurance. On de novo review of the claim denial, the court determined that the claimant is disabled by Chronic Fatigue Syndrome. In coming to this conclusion, the court considered a post-final decision declaration by the claimant’s treating doctor since Hartford failed to give the claimant notice that its consultants had unsuccessfully tried to contact the doctor. The court also considered Plaintiff’s Social Security Disability Insurance decision, which was rendered one year after Hartford’s final decision.

The Court’s determination of the standard of review follows the weight of authority that does not permit an insured disability plan from escaping a State’s ban on discretionary clauses in insurance policies by simply putting the discretionary language in the Plan document. Because there are some courts that will permit plans to reserve discretionary authority through the plan document when they cannot do so through the insurance policy, I anticipate this issue will eventually wind its way up to the Supremes. What do you think? Enjoy this week’s cases!

Your reliable source for summaries of recent ERISA decisions

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

Select Slip Copy & Not Reported Decisions

Breach of Fiduciary Duty

Fourth Circuit

•· Release signed by Plaintiff, an experienced businessman, prevents Plaintiff from pursuing prohibited transaction claim related to ESOP. Halldorson v. Wilmington Trust Retirement and Institutional Services Company, No. 115CV1494LMBIDD, __F.Supp.3d__, 2016 WL 1643862 (E.D. Va. Apr. 22, 2016) (Judge Leonie M. Brinkema).

Class Actions

Second Circuit

•· In uncontested motion, granting class certification of “all persons who were participants in the ESOP when Atrium terminated the ESOP effective July 1, 2012 and/or beneficiaries of such ESOP participants or at any time thereafter. Excluded from the Plaintiff Class are the individual Defendants and their immediate families; the officers and directors of Defendant Atrium Funding, Atrium and Dejana Affiliate Companies; and legal representatives, successors, and assigns of any such excluded persons.” Kindle v. Dejana, No. 14CV6784SJFARL, 2016 WL 1642648 (E.D.N.Y. Apr. 25, 2016) (Judge Feuerstein).

Fourth Circuit

•· An administrator may amend deferred compensation plan, including specifically by authorizing the administrator to amend the rate at which participants’ deferred income accounts are credited with future earnings. Class defined as “Participants in the Plan who retired as of December 31, 2012, had elected to receive distributions of deferred income during retirement in installments, and for whom the amount or manner of their benefit payment was altered by the 2012 Amendment; and the Beneficiaries of those Participants” does not meet Rule 23 requirements for class certification. Plotnick v. Computer Scis. Corp. Deferred Comp. Plan for Key Executives, No. 1:15-CV-01002, __F.Supp.3d___, 2016 WL 1704158 (E.D. Va. Apr. 26, 2016) (Judge T.S. Ellis, III).

Disability Benefit Claims

Third Circuit

•· Plan provision stating “[t]he Plan Administrator has appointed the Insurance Company [Cigna] as the named fiduciary for deciding claims for benefits under the Plan, and for deciding any appeals of denied claims” is insufficient to invoke an arbitrary and capricious standard of review. On de novo review, the court found overwhelming and unanimous medical evidence that Plaintiff suffered from a mental impairment that precluded her from doing her specific job as a hospital account manager with Quest Diagnostics. “Defendant relied on unreasonable inferences made from isolated and out-of-context notations in the medical record, an incomplete paper review by a psychiatrist who never examined Plaintiff, and a lack of information about Plaintiff’s job demands.” Levine v. Life Ins. Co. of N. Am., No. CV 14-7050, 2016 WL 1621918 (E.D. Pa. Apr. 21, 2016) (Judge Rufe).

Sixth Circuit

•· “[T]he TPA’s reliance on file reviews that improperly questioned plaintiff’s credibility and which did not sufficiently support the denial of benefits, its rejection of the opinions of plaintiff’s treating medical providers, its failure to adequately consider the number and nature of plaintiff’s medications, and its failure to consider the specific requirements of plaintiff’s job lead to the conclusion that the denial of plaintiff’s claim for benefits was arbitrary and capricious. Stated differently, it was the ‘cumulative effect’ of these factors, rather than any single factor, that results in a finding that the TPA’s decision was arbitrary and capricious.” Groth v. Centurylink Disability Plan, No. 2:13-CV-1238, 2016 WL 1621724 (S.D. Ohio Apr. 25, 2016) (Magistrate Judge Norah McCann King).

•· Plaintiff’s Section 1132(a)(3) claim does not allege an injury separate and distinct from the denial of benefits or that the remedy afforded by Congress under Section 1132(a)(1)(B) is otherwise inadequate. Klein v. Aetna Inc. Long Term Disability Benefits Plan Defendant, No. 3:15-CV-00742-GNS, 2016 WL 1629376 (W.D. Ky. Apr. 22, 2016) (Judge Greg N. Stivers).

Seventh Circuit

•· Standard Insurance LTD Policy was not “offered or issued” in the State of Illinois within the meaning of Section 2001.3 of Title 50 of the Illinois Administrative Code, where Genco, a Delaware corporation with its principal place of business in Pennsylvania, negotiated the Standard policies insuring the Genco Plan in Pennsylvania; all negotiations and decision-making regarding the LTD Policy occurred outside the State of Illinois; the LTD Policy and its associated Certificates of Insurance were delivered by Standard to Genco in Pennsylvania; and Genco paid all the premiums from its Pennsylvania office; abuse of discretion review applies to LTD claim. Nasalroad v. Standard Ins. Co., No. 15-CV-895-SMY-DGW, __F.Supp.3d___, 2016 WL 1667335 (S.D. Ill. Apr. 26, 2016) (Judge Yandle).

Ninth Circuit

•· No dismissal of disability claim for failure to exhaust where Defendants failed to demonstrate that any plan document expressly requires a claimant to exhaust administrative remedies. Lin v. Metro. Life Ins. Co., No. C 15-2126 SBA, 2016 WL 1611036 (N.D. Cal. Apr. 22, 2016) (Judge Saundra Brown Armstrong).

•· Cal. Ins. Section 10110.6 renders void discretionary clause found in the Plan itself, but not in the policy of insurance. On de novo review, claimant is disabled by Chronic Fatigue Syndrome. Court expanded administrative record to include a doctor’s declaration since Hartford failed to give Plaintiff notice that its consultants had unsuccessfully tried to contact the doctor. Court also considered Plaintiff’s SSDI decision, which was rendered one year after Hartford’s final decision. Nagy v. Grp. Long Term Disability Plan for Employees of Oracle Am., Inc., No. 14-CV-00038-HSG, 2016 WL 1611040 (N.D. Cal. Apr. 22, 2016) (Judge Haywood Gilliam).

Tenth Circuit

•· United of Omaha did not abuse its discretion in interpreting disability plan terms to find that Plaintiff became disabled no earlier than July 2nd when disabling injury occurred on July 1st (the be same day that Plaintiff’s salary was reduced from $83,150 to $54,995), thus entitling Plaintiff to a smaller monthly benefit amount. Greggory B. Owings v. United of Omaha Life Insurance Company, No. 15-CV-1108-EFM, 2016 WL 1660550 (D. Kan. Apr. 27, 2016) (Judge Eric F. Melgren).

Eleventh Circuit

•· Lincoln did not abuse its discretion in denying long term disability benefits to claimant with multilevel degenerative disc disease, where it relied on reviews by a registered nurse and two board-certified independent medical consultants. Till v. Lincoln Nat’l Life Ins. Co., No. 2:14-CV-721-WKW, __F.Supp.3d___, 2016 WL 1631796 (M.D. Ala. Apr. 25, 2016) (Judge W. Keith Watkins).


Second Circuit

•· In enforcement of judgment action stemming from ERISA class action litigation, Government properly withheld documents under FOIA Exemption 5, which prevents disclosure of inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency. Welby, Brady & Greenblatt, Llp v. The United States Department of Health and Human Services & Sylvia Matthews Burwell, Sec’y, , No. 15-CV-195 (NSR), 2016 WL 1718263 (S.D.N.Y. Apr. 27, 2016) (Judge Nelson S. Roman).

ERISA Preemption

Third Circuit

•· Breach of contract and fiduciary duty claims contending that Defendants failed to adhere to their contractual notice obligations, thereby causing the denial of $115,000 in life insurance benefits, is completely preempted by ERISA. No breach of fiduciary duty claim under ERISA where SPD provided to insured described conversion option. Haymaker v. Reliance Standard Life Ins. Co., No. CV 15-06306, 2016 WL 1696851 (E.D. Pa. Apr. 27, 2016) (Judge Pappert).

Sixth Circuit

•· Various state law claims brought by tribal government to recover funds Blue Cross illegally billed and retained in violation of its third-party administrator (TPA) agreements are preempted by ERISA. Band v. Blue Cross Blue Shield of Michigan, No. 15-13708, __F.Supp.3d___, 2016 WL 1665157 (E.D. Mich. Apr. 27, 2016) (Judge David M. Lawson).

•· Claim for a declaratory judgment to determine hire date for purposes of pension benefits is preempted by ERISA. And, claim dismissed because Plaintiff failed to exhaust his administrative remedies. Doran v. Joy Glob., Inc., No. 2:15-CV-243, 2016 WL 1633307 (E.D. Tenn. Apr. 22, 2016) (Judge J. Ronnie Greer).

Ninth Circuit

•· Claim seeking determination that ERISA plan is not entitled to reimbursement out of health plan participant’s settlement reached with third-party tortfeasor under Haw. Rev. Stat. § 663-10 is completely preempted under the test in Davila. Noetzel v. Hawaii Medical Service Association, No. CV 15-00310 SOM/KJM, 2016 WL 1698264 (D. Haw. Apr. 27, 2016) (Judge Susan Oki Mollway).

Life Insurance & AD&D Benefit Claims

Seventh Circuit

•· Deceased life insured breached his divorce judgment by changing the beneficiary designations from his sons to his new wife, but the court cannot determine, without further briefing, the percentage of the benefits payable to the surviving son in light of other son predeceasing insured. State Farm Life & Accident Assurance Company v. Jeffrey S. Goecks & Donna Goecks, et al., No. 14-CV-885-WMC, 2016 WL 1715205 (W.D. Wis. Apr. 28, 2016) (Judge William M. Conley).

Tenth Circuit

•· Bodily or mental infirmity, illness or disease exclusion under the AD&D Rider is triggered and precludes benefits for insured who died in her home after she attempted to quit drinking alcohol after several years of alcohol abuse, became ill during detoxification, and fell and hit her head before being found dead. Corey Wagner, Individually & As The Personal Representative of The Estate Of Nancy J. Wagner vs. Minnesota Life Insurance Company, No. CV 15-47-M-DLC, 2016 WL 1644364 (D. Mont. Apr. 22, 2016) (Judge Dana L. Christensen).

Retaliation Claims

Fifth Circuit

•· Plaintiff “failed to present any evidence from which a reasonable fact finder could conclude that CCCHC’s stated, legitimate, nondiscriminatory reasons for discharging her were not true but, were instead, pretexts for discrimination based on a specific intent to retaliate against her for having enrolled in an ERISA plan, or to prevent her from attaining ERISA benefits.” Francis v. S. Cent. Houston Action Council Inc., No. CV H-14-1277, 2016 WL 1650790 (S.D. Tex. Apr. 25, 2016) (Judge Sim Lake).

Statute of Limitations

Ninth Circuit

•· In lawsuit arising from alleged misinformation about pension benefits, denying Boeing’s motion for summary judgment on the basis of the applicable statute of limitations since there remains a genuine issue of material fact as to whether Plaintiffs were provided the necessary information to alert them to their claims and Plaintiffs are entitled to further discovery under Rule 56(d). Monper v. Boeing Co., No. C13-1569 RSM, 2016 WL 1703839 (W.D. Wash. Apr. 28, 2016) (Judge Ricardo S. Martinez).

Statutory Penalties

Ninth Circuit

•· No statutory penalties of $110 per day under 29 U.S.C. § 1132(c)(1) against the disability plan and insurer for failing to produce documents required by 29 C.F.R. § 2560.503-l(h)(2)(iii). Lin v. Metro. Life Ins. Co., No. C 15-2126 SBA, 2016 WL 1611036 (N.D. Cal. Apr. 22, 2016) (Judge Saundra Brown Armstrong).

Withdrawal Liability & Unpaid Contributions

Second Circuit

•· “This Court (1) confirms the $460,042.99 arbitration award in favor of Petitioners, along with 5.25% interest from August 7, 2015 through the date of this judgment; and (2) awards Petitioners attorneys’ fees and costs in the amount of $1,060.” Trustees of the New York City Dist. Council of Carpenters Pension Fund v. V. Power Enterprises Inc., No. 15CV6978, 2016 WL 1629345 (S.D.N.Y. Apr. 22, 2016) (Judge William H. Pauley III).

Eighth Circuit

•· Granting default judgment and awarding Plaintiffs outstanding contributions in the amount of $7,500.66, liquidated damages in the amount of $799.59, interest in the amount of $80.00, and attorneys’ fees and court costs in the amount of $1,031.16, for a total of $9,411.41. Louis-Kansas v. Edwards-Kamadulski, LLC, No. 4:16-CV-00302-NCC, 2016 WL 1624019 (E.D. Mo. Apr. 25, 2016) (Judge Henry Edward Autrey).

•· R&S has produced evidence sufficient to challenge Plaintiffs’ audit at the summary judgment stage. 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, Plaintiffs, v. R&S Heating & Air Conditioning, Inc., Defendant., No. CV 14-1357 (DWF/FLN), __F.Supp.3d__, 2016 WL 1626838 (D. Minn. Apr. 22, 2016) (Judge Donovan W. Frank).

Ninth Circuit

•· Court’s previous order is void for lack of subject matter jurisdiction because the parties are not diverse from one another and Trustees’ alter ego claim does not arise under federal law. Trustees Of The Construction Industry And Laborers Health And Welfare Trust vs. PRO-CUT LLC, Defendant., No. 212CV00205GMNVCF, 2016 WL 1688001 (D. Nev. Apr. 26, 2016) (Judge Gloria M. Navarro).

* 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, 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 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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