You already know that impairment can be assessed through a Functional Capacity Evaluation (FCE).
But what happens when the claimant refuses to perform tasks requested, or does not try hard enough during the FCE?
Can you deny the claim for “lack of cooperation”? Sometimes YES.
Here’s the case of Ortega-Candelaria v. Johnson & Johnson, __ F.3d __, 2014 WL 2696725 (1st Cir. June 16, 2014).
FACTS: In June 2003, plaintiff applied for ERISA-governed disability benefits because of back pain, anxiety and panic attacks. He failed to cooperate in a number of Functional Capacity Evaluations (FCEs) conducted by a physical therapist. Plaintiff “declined all lifting, carrying, pushing, pulling and climbing activities” and gave a “sub-maximal effort” on tasks. The Plan discontinued benefits “due to his lack of cooperation in the evaluation process.” Plaintiff sued, claiming a doctor had to conduct the FCE. The trial court granted summary judgment for the plan.
FIRST CIRCUIT HELD: AFFIRMS SUMMARY JUDGMENT.
- The results of the FCE “‘suggest[ed] very poor effort or voluntary sub maximal effort, which is not necessarily related to pain, impairment or disability.’” Op. at 10.
- “He failed 86% of the validity criteria…Video footage supports the conclusion that [plaintiff] was not cooperative.” Op. at 19.
- “The Plan terms require that [plaintiff] cooperate during evaluations of his disability status; without such cooperation the plan administrator [can reduce or terminate benefits].” Op. at 20.
- The decision to terminate benefits due to lack of cooperation was not an abuse of discretion. Op. at 20.
- An FCE evaluates a medical condition; a physician is not required for the test to be used in assessing impairment. Op. at 23.
Medical providers often have a patient/ERISA plan participant assign rights under an ERISA health care plan to allow the medical provider to seek payment for medical services provided.
But what if the patient/plan participant never was billed for the medical services? What rights are there to assign?
Is that an effective assignment? YES.
Here’s the case of Univ. of Wisconsin Hospital and Clinics, Inc. v. Aetna Life Ins. Co., __ F.Supp. 2nd __, 2014 WL 2565284(W.D. Wis. June 6, 2014) (Derivative standing allows hospital to obtain reimbursement for medical services provided).
FACTS: ADP provided a health plan to employees, including James Vana. UW Hospital performed a heart catheterization for Vana, costing $14,000. Aetna paid $1,919 of the bill, but refused to pay the rest because Vana and the hospital failed to get precertification for the procedure.
Vana assigned his rights to reimbursement to UW Hospital, and the Hospital sued for reimbursement. Aetna argued: UW Hospital lacks standing to sue because Vana never received a bill.
ISSUE: Whether the hospital lacked standing to sue because the patient/plan participant never was billed for medical services, and thus had no rights to assign?
DISTRICT COURT HELD: Assignment effective — hospital had “derivative standing.”
- UW Hospital had standing to sue. “[D]erivative standing. . .[furthers] the purposes of ERISA ‘to protect the interests of participants in employee benefit plans and their beneficiaries.’” Op. at 8-9.
- “If provider-assignees cannot sue the ERISA plan for payment, they will bill the participant or beneficiary directly for the insured medical bills, and the participant or beneficiary will be required to bring suit against the benefit plan when claims go unpaid.” Op. at 9 (citations omitted).
- “[P]roviders …are better situated and financed to pursue an action for benefits owed for their services [and] the interests of ERISA participants and beneficiaries are better served by allowing provider-assignees to sue ERISA plans.” Op. at 9 (citations omitted).
- Aetna’s denial of reimbursement was arbitrary and capricious because: (a) Vana would “plainly be entitled to benefits under the plan”; (b) Aetna failed to articulate “to UW Hospital a legitimate reason for its denial”; and (c) Aetna “interpreted its policy in an unreasonably contradictory manner.” Op. at 10.
You already know that the Defense of Marriage Act (DOMA), which prohibited recognition of same-sex marriages, was declared unconstitutional. United States v. Windsor, 133 S.Ct. 2675 (2013)
In states recognizing same-sex marriages, ERISA benefits, like life and disability benefits provided through insurance contracts, will most likely be viewed as covering a same-sex spouse.
But does the same apply to self-funded ERISA plans? Maybe not.
Here’s the case of Roe and Doe v. Empire Blue Cross Blue Shield and St. Joseph Medical Center, __ F.Supp. 2d __, (S.D.N.Y May 1, 2014).
FACTS: New York recognizes same sex marriages, and Jane Roe and Jane Doe were married. St. Joseph Medical Center’s health plan for employees is self-insured and states: “Same sex spouses and domestic partners are NOT covered under this plan.” Roe sought to add Doe to the plan, which was rejected. Plaintiffs sued claiming defendants violated Section 510 of ERISA entitled “Interference with protected rights.”
ISSUE: Whether ERISA prohibits a private employer from excluding same-sex spouses?
DISTRICT COURT HELD:
- “ERISA…is not a dictator of plan terms.” Op. at 10.
- ERISA does not contain an anti-discrimination provision “because other federal laws already proscribed such discrimination.” Op. at 10.
- An ERISA plan “may, for example, choose not to provide benefits to spouses at all.” Op. at 11.
- The clear import of United States v. Windsor [133 S.Ct. 2675 (2013)] is a shift in federal policy toward enforcing state laws that recognize same sex marriage. Op. at 13.
- The exclusion [‘Same sex spouses and domestic partners are NOT covered under this plan.’] does not violate Section 510 of ERISA as it is currently promulgated.” Op. at 14 (Emph. added).
NOTE: Look for self-funded plans, containing an exclusion against same-sex spouses, to rely on this case. Plans with that exclusion will argue that ERISA does not require employers to cover same-sex spouses under the plan.
Sometimes determining the correct beneficiary for ERISA-governed life insurance benefits can present real challenges.
Can the deceased’s will prove the deceased’s intent designating the correct beneficiary? It depends on the language of the will.
A Plan administrator, vested with discretion, can choose to excuse technical errors in beneficiary-designation forms or it can elect to enforce strictly the terms of the plan.
Here’s the case of Hall v. Metropolitan Life Insurance Company, __ F.3d__ (8th Cir. May 8, 2014)(PDF).
FACTS: Dennis Hall designated his son as sole beneficiary for ERISA-governed life insurance benefits. In November 2010, however, Mr. Hall completed and signed, but never submitted, a new beneficiary designation claim form naming his wife, Jane Hall, as sole beneficiary.
After Mr. Hall died in 2011, Ms. Hall claimed she was entitled to the life benefits. She claimed Mr. Hall lacked adequate time to submit the approved form. She presented Mr. Hall’s will as evidence that he intended for her to be the sole beneficiary. The Plan vested Met Life with discretion in determining eligibility. Met Life denied her claim. Ms. Hall brought suit.
HELD: Did MetLife abuse its discretion by refusing to recognize the deceased’s will in determining who was the beneficiary?
- “MetLife reasonably determined that the will was inadequate to effect a change in beneficiary.” The will “did not expressly address the distribution of assets that were not part of the estate.” Op. at 6.
- The November 2010 form had no effect because “the Plan expressly required Dennis to submit a written beneficiary-change request within thirty days of signature for it to be effective, and he failed to do so.” Op. at 6.
- Conflict between language in the Plan and Summary Plan Description (SPD) did not matter. The Plan contained the thirty day requirement but the SPD was silent on this requirement. “The SPD’s silence on this point does not trump the Plan’s clear requirement.” Op. at 6.
- Doctrine of Substantial Compliance. “An insured substantially complies with the change in beneficiary provisions of an ERISA life insurance policy when the insured: [a] evidences his or her intent to make the change and [b] attempts to effectuate the change by undertaking positive action which is for all practical purposes similar to the action required by the change of beneficiary provisions of the policy.” Op. at 8.
- “[Even though] a court may decide as a matter of common law to excuse technical non-compliance with the terms of an ERISA plan, [that] does not mean an administrator with discretion under an ERISA plan is forbidden to enforce strict compliance with plan requirements.” Op. at 8 (Emph. in original).
- “In exercising its discretion, an administrator might choose to excuse technical errors in beneficiary-designation forms…or it might elect to enforce strictly the terms of the plan…. MetLife reasonably exercised its discretion in rejecting [the will and the November 2010 beneficiary form].” Op. at 9.
- “[A]llowing an administrator to require technical compliance with policy provisions protects the administrator from ‘paying the wrong person and being forced to pay twice.’” Op. at 10.
You already know that plans that contain “discretionary language” should enjoy a more deferential review by the trial court.
But when the plan administrator decides and funds the benefit decision, courts view this as a “structural conflict” and impose additional expectations on the claims process.
Sometimes de novo review isn’t all bad.
Here’s the recent case Inciong v. Fort Dearborn Life Insurance Company, __ Fed. Appx. __, 2014 WL 1599513 (9th Cir. April 22, 2014)(Court affirms benefit denial, under de novo standard of review, even though there was no Independent Medical Exam).
This opinion also has some other “pearls” regarding vocational assessments and consideration of Social Security Administration decisions.
FACTS: Inciong received disability benefits under an ERISA-governed plan for fifteen (15) years. Then, Fort Dearborn obtained evidence that Inciong’s condition had improved, and terminated benefits. The trial court reviewed the termination of benefits under de novo review, and affirmed the termination because Inciong failed to “provide sufficient objective and quantifiable evidence to support his claim of total disability.” The policy did not specifically mention a requirement of “objective, quantifiable evidence of disability.” Inciong appealed.
NINTH CIRCUIT HELD:
- Fort Dearborn presented evidence that Inciong’s “level of activity ha[d] actually improved over time.” Op. at 3.
- Inciong claimed he was disabled because no one would hire him after being out of the workforce for 15 years. But the policy’s definition of disability “does not require a showing that Inciong would in fact be hired for a specific job; it only requires a showing that jobs exist that Inciong was qualified for and capable of doing.” Op. at 4.
- IME Required? When a court performs de novo review, an Independent Medical Exam is not required. (When a court reviews a decision under the arbitrary and capricious standard, and the plan has a structural conflict, then a court may question the “thoroughness and accuracy of a benefit decision” if the plan relied only on a “pure paper review.”) Op. at 5.
- Failing to explain away the Social Security decision not a problem. “Fort Dearborn terminated benefits fifteen years after initially granting them, based on evidence that Inciong’s condition had improved. There is no evidence that the Social Security Administration has conducted a recent review of its determination. Op. at 5.
Does the claim administrator waive the timeliness defense if it failed to deny the claim on that basis during administrative review? YES!
Here is a nice case that summarizes the point, and the status of waiver in the circuits. Becknell v. Severance Pay Plan of Johnson and Johnson, 2014 WL 1577723 (D. N.J. April 21, 2014).
FACTS: Plaintiff became disabled on April 16, 2008 and made a claim for short term and long term disability benefits under the self-funded ERISA plan. On October 25, 2012 Plaintiff made a written claim for severance benefits under the ERISA plan. The request was four years late. The plan denied the severance benefit, but not because it was untimely. Instead, the claim was denied because Plaintiff’s termination did not result from one of the severance events in the plan.
ISSUE: Did the ERISA plan waive the timeliness defense because it was not asserted in the administrative process?
- “Some circuits prevent a plan administrator from relying on a defense…that was not articulated in the administrative proceedings[.]” Op. at 6. (The court cites cases from the 1st, 2nd 5th, 8th 9th, 10th circuits.)
- “Other circuits have acknowledged that waiver is possible in some factual circumstances.” (The court cites cases from the 4th, 7th, 11th circuits). Op. at 7.
- “Defendants wish to preclude Plaintiff from asserting his claim based on a timeliness defense that they failed to raise during the administrative proceedings. The fact remains that ‘[t]he time to deny Plaintiff’s claim on that basis of untimeliness has come and long gone.’” Op. at 12.
Are you seeing more ERISA Plaintiffs asserting claims seeking penalties for delayed production of ERISA-related documents?
29 U.S.C. 1132(c)(1) allows the Court to impose penalties of up to $110 per day for delays in producing documents requested in writing.
But are those written requests for ERISA documents sufficiently detailed to create a risk of penalties?
Here’s the case of Cultrona v. Nationwide Life Insurance Company, __ F.3d __ (6th Cir. April 9, 2014) [PDF] (Court requires Plaintiff’s written request for ERISA documents to give plan administrator “clear notice” of the documents requested).
FACTS: After her husband died, Cultrona sought accidental death benefits from the ERISA-governed plan. The claim was denied and she appealed. On November 18, 2011, Cultrona’s counsel requested that the Plan Administrator provide “all documents that you contend prove that [the insurer] provided notice of Amendment No.1…and all documents comprising the administrative record and/or supporting Nationwide’s decision.” The Plan Administrator eventually produced the accidental death policy on June 12, 2012.
The trial court imposed an $8,910 penalty against the Plan Administrator under 29 U.S.C. 1132(c)(1) for the delay in producing the policy.
ISSUE: Whether Plaintiff’s request for documents was specific enough to alert the plan administrator to produce the insurance policy?
SIXTH CIRCUIT HELD:
- The trial court’s decision to impose penalties for delay in furnishing ERISA documents is reviewed under the abuse of discretion standard. Op. at 9.
- 29 U.S.C. 1024(b)(4) provides the list of documents a plan administrator must furnish upon written request. “If a plan administrator fails to respond … within 30 days, then the district court may in its discretion impose a penalty…of up to $110 per day.” Op. at 9.
- Whether the written request is specific enough. The Court adopts the “clear notice” standard: “[T]he key question under the clear notice standard is whether the plan administrator knew or should have known which documents were being requested.” Op. at 10.
- Plaintiff’s counsel’s “broadly phrased” request should have alerted the plan administrator that this request included the accidental death policy because that was the key document supporting its decision to deny the claim. Op. at 10.
- The court did not abuse its discretion in awarding $55 per day penalty rather than the maximum $110 per day because there was a “lack of prejudice” caused by the delay. Op. at 11.
Key Take Away:
- Consider whether the request for documents provides “clear notice” of the documents requested.
- Reduce the award from $110 per day by arguing that the delay caused no prejudice.
ERISA claims administrators sometimes are asked to “reopen” a claim, after appeal denial, to consider additional information.
How does “reopening” a claim affect the statute of limitations defense?
If the statute of limitations has already run, does the claim administrator “waive” the statute of limitations defense by agreeing to reopen a claim? NO.
Here’s last Friday’s Ninth Circuit case Gordon v. Deloitte & Touche, __ F.3d __ (April 11, 2014)(Even when MetLife “reopened” the claim in 2009, five years after claim denial, the 2004 statute of limitations defense applied, barring the 2011 lawsuit.). This also is a good case to review because it discusses how an appeal denial letter should be written, when considering the statute of limitations defense.
FACTS. Gordon was eligible under Deloitte’s long term disability (LTD) ERISA plan. The plan granted discretion to MetLife to make benefit decisions. Gordon sought disability benefits due to depression. Two appeals followed. MetLife denied the claim on November 4, 2003, indicating her benefits ended on March 2, 2003 due to the 24 month mental/nervous limitation. The letter also indicated Gordon had a 180-day appeal deadline, which meant she had to file an appeal by May 4, 2004. Then, four (4) years passed. In 2009 Gordon called to “reopen” her claim. MetLife informed her the appeal deadline had passed.
In April 2009 the California Department of Insurance asked MetLife to reevaluate the issues. MetLife agreed and allowed Gordon to submit additional evidence. On December 8, 2009, MetLife informed Gordon it was upholding the prior denial based on the Plan’s 24 month limitation for mental/nervous benefits. The letter advised Gordon she could appeal within 180 days (by May 4, 2004). The letter also stated that if the appeal was denied, she could then bring suit under Section 502(a) of ERISA. Gordon timely appealed, submitting 480 pages of exhibits. Gordon filed suit on January 31, 2011.
NINTH CIRCUIT HOLDS:
- An ERISA claim “accrues either at the time benefits are actually denied or when the insured has reason to know that the claim has been denied.” A claimant should know that the claim is denied when “there has been a ‘clear and continuing repudiation of a claimant’s rights under a plan such that the claimant could not have reasonably believed but that his benefits had been finally denied.’” Op. at 7.
- “We conclude that Gordon’s right to file an ERISA action accrued no later than May 4, 2004 (applying the California four year statute of limitations). Gordon did not file the pending complaint until January 31, 2011.” The claim is barred by the California four year statute of limitations. Op. at 8.
- “Reopening” Gordon’s claim in 2009 does not in and of itself revive the statute of limitations. Op. at 9.
- MetLife is not estopped from asserting the statute of limitations defense based on MetLife’s statement in its December, 2009 letter that Gordon could bring an ERISA action (after the matter was reopened). By the time MetLife issued this letter, “the statute had already run and so Gordon could not have relied on that statement to her detriment.” Op. at 10.
- MetLife did not waive the statute of limitations defense by stating in the December 8, 2009 letter that Gordon could bring an ERISA action after the matter was reopened. Under California law, an insurance company “cannot waive the statute of limitations after the limitations period has run.” Op. at 11 (Emph. added).
You have seen this one before: The ERISA plan pays hundreds of thousands of dollars in medical bills and secures an equitable lien. Then, the ERISA plan beneficiary settles a tort claim, but refuses to reimburse the ERISA plan.
The beneficiary and her attorney both claim the funds have “dissipated.” Does that argument trump the equitable lien?
NO. The beneficiary and her attorney “better call Saul” (see Breaking Bad TV series) because jail time might be an option.
Here’s the remarkable case of Central States SE and SE Areas Health Welfare Fund and Bunte v. Lewis and Lashgari, __ F.3d __ (7th Cir. March 12, 2014)(PDF).
FACTS: Lewis was injured in an auto accident. Her ERISA-governed health plan paid $180,000 in medical expenses. Lewis later secured a $500,000 settlement from the tort suit brought by her attorney, Lashgari. Lashgari also knew the ERISA plan had a subrogation lien against the proceeds of the settlement. But Lashgari refused to reimburse the plan claiming, among other things, that the settlement funds had dissipated. The Plan sued Lewis and Lashgari under ERISA 29 U.S.C. 1132(a)(3) to enforce the lien.
7th CIRCUIT HELD:
- The plan was not required to trace settlement proceeds. The equitable lien automatically gave rise to a constructive trust of the defendants’ assets. Op. at 3.
- The district court issued an injunction against Lewis from disposing settlement proceeds until the plan received $180,000.
- Lewis claimed she couldn’t pay $180,000 because she spent the entire share of the settlement proceeds on a new house and a car. This argument is not a complete defense unless Lewis could not pay “any part of the $180,000.” Op. at 3.
- The attorney for Lewis received 60% of the settlement–$298,000. He claimed the money he received had been spent, too.
- Lewis and her attorney willfully ignored the plan’s lien. “Even if [Lewis] spent every last cent of the settlement proceeds that she received, it does not follow that she is assetless—presumably she has the vehicle and the house.” Op. at 6.
- Lewis and her attorney “may think that a mere assertion of inability to pay…precludes a finding of contempt. Not so.” Op. at 7. (Emph. added).
- The court “direct[s] the district court to determine whether the defendants should be jailed (a standard remedy for civil contempt…) until they comply with the order to deposit the settlement proceeds in a trust account.” Op. at 9.