District Court Denies Plaintiff Ongoing ERISA Disability Benefits for Failure to Provide Proof of Loss

In Card v. Principal Life Insurance Company, No. CV 5:15-139-KKC, 2023 WL 5706202 (E.D. Ky. Sept. 5, 2023), Kentucky Eastern District Judge Karen Caldwell granted judgment in part to Plaintiff under the arbitrary and capricious standard of review and remanded the matter for a further review by Principal. Judge Caldwell also denied Principal’s motion to alter or amend the award of attorneys’ fees to Plaintiff in connection with a prior appeal.

The instant ERISA disability benefits action was filed in May 2015 and has a lengthy history. The district court initially granted judgment in favor of Principal under the arbitrary and capricious standard of review, concluding that its denial of disability benefits was supported by substantial evidence. On first appeal, the Sixth Circuit affirmed the standard of review but found that Principal’s denial was arbitrary and capricious on numerous points, vacated the judgment and remanded the case to Principal for further proceedings.

Following remand, in December 2019, Principal approved Plaintiff’s short-term disability benefits, and then made several requests for medical information to evaluate Plaintiff’s long-term disability claim. Plaintiff’s counsel reiterated that Principal was already in possession of the information necessary to render a determination but nonetheless Plaintiff executed an authorization for the release of medical documentation. Counsel did not provide the materials requested. With no decision having been made, on February 26, 2020, Plaintiff filed a motion in district court to reopen her case. Thereafter on May 7, 2020, Principal formally denied the LTD claim. In addition to the motion to reopen her case, Plaintiff also filed a motion for attorneys’ fees and costs incurred in achieving a remand in the first appeal. The district court denied both motions concluding that it lacked jurisdiction to consider them because the Sixth Circuit had instead remanded the matter directly to Principal.

On the second appeal, the Sixth Circuit clarified its prior decision: “we interpret our prior decision as remanding to the district for it to retain jurisdiction while [Principal] engaged in the new benefits determination. The district court thus had jurisdiction to consider [Plaintiff’s] motions to reopen and for attorney’s fees” and thus remanded the matter for the district court to do so. After the Sixth Circuit’s decision on the second appeal, the district court granted Plaintiff’s motion for attorney’s fees and motion to reopen. The district court concluded that Plaintiff achieved “some degree of success on the merits” in connection with the first remand of her case. In calculating the amount of fees owed, the Court relied on a reasonable hourly rate of $525/hour because Principal failed to submit any evidence disputing that this was the prevailing market rate. The district court also deemed Plaintiff to have exhausted her administrative remedies for her claims because Principal did not issue a determination of her claims within the Department of Labor’s 45-day deadline for ERISA claims, and the court reopened her case.

In this latest round of motions, the district court denied Principal’s motion to alter or amend the attorneys’ fees award. The court was not convinced by Principal’s arguments that the matter had never been remanded back to Principal after the appeal and that it had been waiting for directive and remand from the district court before beginning its review. The court found this argument disingenuous and belied by the record given that while the motion to reopen the case was still pending Principal issued its decision letter. Similarly, the court found Principal’s arguments concerning the attorney fee rate were too late as they had not been raised during the motion.

With regard to Plaintiff’s motion for judgment, the district court stated that while the Sixth Circuit has previously noted “there is undeniable logic in the view that a plan administrator should forfeit deferential review by failing to exercise its discretion in a timely manner,” it has yet to overturn Daniel v. Eaton Corp., 839 F.2d 263 (6th Cir. 1988) (holding the proper standard of review in instances where an administrator fails to timely issue a decision on a claim is arbitrary and capricious review, rather than de novo review). Accordingly, it again reviewed Principal’s claims decision under the arbitrary and capricious standard and found that Principal failed to remedy many of the deficiencies that the Sixth Circuit had already found were arbitrary and capricious in the first appeal. It found that Principal relied on the exact same reports from the same medical reviewers who had failed to critically assess Plaintiff’s specific health issues against the actual demands of her job and the profession. Principal failed to explain why it disregarded the opinions of Plaintiff’s treating physicians, and it failed to consider the impact of Plaintiff’s diagnosis of chronic lymphocytic leukemia on her ability to perform her job duties. The court granted judgment in favor of Plaintiff as to her disability claims through January 1, 2015. However, beyond January 1, 2015, the court found that Principal’s decision to deny benefits was not arbitrary and capricious because Plaintiff had failed to comply with the written “Proof of Loss” requirements of the policy. The decision for that time period was the result of a deliberate, principled reasoning process, which the district court upheld.

If Principal or your disability insurer has denied or terminated your disability insurance claim, contact us for assistance.