You already know that when a Summary Plan Description conflicts with ERISA plan language, the ERISA plan language controls.
But what happens when all you have is a Summary Plan Description (SPD), and… no ERISA Plan? Can the SPD become the Plan, and authorize subrogation reimbursement? YES.
Here’s the case of Board of Trustees/National Elevator Health Plan Benefit v. Moore, _ F.3d _ (6th Cir. August 25, 2015) (PDF) (Subrogation: Language in Summary Plan Description authorized required reimbursement of medical expenses paid by Plan).
FACTS: The ERISA plan paid $34,204 in medical expenses for injuries Kyle Moore sustained in an accident. After Moore settled his tort claim for $500,000, the ERISA plan sought reimbursement. Moore claimed, however, that there was no ERISA plan language requiring reimbursement. The only document submitted in the record was the Summary Plan Description (SPD), which did provide require reimbursement.
ISSUE: Is the Summary Plan Description a Controlling Plan Document Requiring Subrogration Reimbursement?
6th CIRCUIT HELD: YES.
- “[I]f the language in a SPD conflicts with the language in an ERISA plan, a district court is required to enforce ‘the terms of the plan.’” Op. at 6.
- “Nothing in Amara prevents a document from functioning both as the ERISA plan and an SPD, if the terms of the plan so provide.” Op. at 7 (Emphasis in original).
- “[A]n SPD describing employee benefits that anticipate the existence of a Plan, but is issued long in advance of the Plan, constitutes the actual plan, as well as a summary of a plan ‘that is nowhere else in writing.’” Op. at 8.
- The 3rd Circuit and the 11th Circuit (in unpublished decisions) have also recognized that a SPD can function as the controlling ERISA plan “in the absence of a separate plan document.” Op. at 7-8.
You already know about the big trend in states to ban discretionary clauses in insurance policies that fund ERISA benefits.
Chalk up another circuit deciding to enforce the ban.
Here’s the case of Fontaine v. Met Life, __ F.3d __ (7th Circuit, September 4, 2015) (PDF).
FACTS: Fontaine, a lawyer at Mayer Brown, sought ERISA governed long-term disability benefits for a vision impairment. The “disability plan provides that MetLife’s benefit determination ‘shall be given full force and effect’ unless they are shown to be ‘arbitrary and capricious,’ thus calling for discretionary review.” Met Life denied the claim and Fontaine brought suit claiming the de novo standard of review should apply because an Illinois state regulation bans discretionary clauses.
ISSUE: Does ERISA preempt a state law banning discretionary clauses?
7th Circuit HELD: No.
- Met Life argued that the ban on discretionary clauses is preempted by ERISA because the discretionary clause here was contained in the ERISA plan, not an insurance policy. The court concluded, however: “Whether a provision for discretionary interpretation is placed in an insurance policy or in a different document…should make no legal difference.” Op. at 7.
- “We join the Ninth and Sixth Circuits in concluding that a state law prohibiting discretionary clauses squarely satisfies [the requirement of proof that the state law substantially affect risk pooling].” Op. at 9-10.
- The state law here “does not duplicate, supplement, or supplant the ERISA civil enforcement remedy. All it does is restore in Illinois ERISA’s own default rule of de novo review in court cases challenging denials of health and disability benefits.” Op. at 10.
You already know that judicial review of ERISA claims generally will be limited to the administrative record considered by the claim administrator.
But the courts will allow claimants to augment the record if ERISA claims procedure was not followed.
…And courts might conclude that failing to make an IME report (obtained and relied on during the appeal process) available to claimant for review and comment violates ERISA claims procedure.
Here’s the case of Yancy v. United of Omaha Life Insurance Co., _ F.Supp. 3d _, 2015 WL 5132086 (C.D. California August 25, 2015)(“Because the record reflects that United considered and even relied on [the IME] report in making its appellate determination to uphold the claim denial, United violated ERISA’s procedural requirement when it failed to make the report available to plaintiff for review and comment during the appeals process.”)(PDF)
FACTS: Yancy made a disability claim which was denied after medical reviews. When Yancy appealed, United obtained an independent medical exam (IME) and affirmed the claim denial. Yancy sued and moved to augment the record, seeking to add a rebuttal to the IME report.
ISSUE: When can a claimant “augment” the administrative record?
HELD: Claimant allowed to augment record.
- “‘In most cases’ only evidence that was before the plan administrator should be considered. ‘[A] district court should not take additional evidence merely because someone at a later time comes up with new evidence that was not presented to the plan administrator.’” Op. at 3 (Citations omitted).
- “‘When a plan administrator has failed to follow a procedural requirement of ERISA, the court may have to consider evidence outside the administrative record.’” Op. at 4.
- “Even when procedural irregularities are smaller…and abuse of discretion review applies, the court may take additional evidence when the irregularities have prevented full development of the administration record.” Op. at 4.
- “Because the record reflects that United considered and even relied on [the IME] report in making its appellate determination to uphold the claim denial, United violated ERISA’s procedural requirement when it failed to make the report available to plaintiff for review and comment during the appeals process.” Op. at 7.
The courts are expecting more detail in your denial letters about the limitations period.
Here’s the case of Mirza v. Insurance Administrator of America, Inc.., No. 13-3535 (3rd Cir. August 26, 2015)(“One very simple solution, which imposes a trivial burden on plan administrators, is to require them to inform claimants of deadlines for judicial review in the documents claimants are most likely to actually read—adverse benefit determinations.”)
FACTS: Dr. Neville Mirza performed back surgery and received an assignment to receive ERISA benefits for surgery expenses. Dr. Mirza submitted the $34,000 claim, which was denied because the surgery was “medically investigational.” The denial letter informed Mirza of his “right to bring a civil suit under ERISA” if he was not content with this final decision. The denial letter did not state that he had one year from the date of the final benefit denial to seek judicial review. Dr. Mirza sued 19 months after getting the denial letter.
ISSUE: Was the Claim Time Barred by the Plan’s Limitation Period?
3rd CIRCUIT HELD: NO
- ERISA “does not prescribe any limitations period for filing … an action [and we] borrow the statute of limitations from the most analogous state-law claim.” Op. at 8.
- The plan substantially narrowed [the state law statute of limitations period] of six years to one….[T]his was likely reasonable as a matter of contract law[.]” Op.at 14.
- “Mirza’s suit is facially time-barred [and his claim] is therefore doomed unless he can persuade us of a reason to toll or set aside the plan’s contractual deadline.” Op. at 9.
- The “plain language” of ERISA regulations requires that “the administrator must disclose the plan’s applicable time limits.” Op. at 11-12.
- “In addition to the regulatory text and the relevant decisions… practical considerations also support interpretation of the regulation…[P]lan administrators could easily hide the ball and obstruct access to the courts. The ERISA plan at issue here is ninety-one pages. The one-year time limit is buried on page seventy-three of the plan.” Op. at 12.
- “One very simple solution, which imposes a trivial burden on plan administrators, is to require them to inform claimants of deadlines for judicial review in the documents claimants are most likely to actually read—adverse benefit determinations.” Op. at 14.
- ERISA regulations require “that adverse benefits determinations set forth any plan-imposed time limit for seeking judicial review. Without this time limit, a notification is not in substantial compliance with ERISA.” Op. at 16
- “‘When a letter terminating or denying Plan benefits does not explain the proper steps for pursuing review of the termination or denial, the Plan’s time bar for such a review is not triggered.’” Op. at 18.
- The Third Circuit joins the Sixth Circuit and First Circuit in this approach.
You probably already know that in small, wholly owned “mom and pop” businesses, benefits covering only the owners of the business may be exempt from ERISA.
But the rule has some nuances, and ERISA may apply based on who owns the business.
Here is the case of Silverman v. Unum Group, 2015 WL 460345 (July 30, 2015) (“‘[A] plan covering only corporate shareholders was exempt from ERISA only if the company was wholly owned by one shareholder or by the shareholder and his or her spouse.’”)
FACTS: Silverman was part-owner of a company. He owned 15%, and two others owned 85% of the business. The company obtained Long Term Disability coverage only for the shareholder/owners of the company. Plaintiff sought and received disability benefits, but claimed the calculations of payments were incorrect and sued, asserting state law claims. Unum contended ERISA applied and that the state law claims were preempted.
DISTRICT COURT HELD: Owner deemed employee, and benefits governed by ERISA: state law claims preempted.
- “To qualify as an ERISA plan, the plan ‘must provide benefits to at least one employee.’” Op. at 4.
- To determine whether a plan covers at least one employee, “the Court cannot consider the owner of the corporation an ‘employee’ where the corporation is ‘wholly owned by the individual or by the individual and his or her spouse.’” Op. at 4.
- “‘Congress intended working owners to qualify as [ERISA] plan participants.’” Op. at 5.
- “‘Plans covering working owners and their non owner employees…fall entirely within ERISA’s compass.’” Op. at 5.
- “‘[A] plan covering only corporate shareholders was exempt from ERISA only if the company was wholly owned by one shareholder or by the shareholder and his or her spouse.’” Op. at 6 (Emph. in original).
- Since Silverman owned the company with two others, he “is considered an employee under ERISA and his plan is an ERISA plan. Additionally, [Silverman] also was paid a salary and hired by the corporation, further supporting his treatment as an employee for ERISA purposes.” Op. at 6.
You already know that you do not have to give special deference to the opinions of treating physicians.
But you need to explain why the treating physician’s opinions are being rejected.
Overusing the same independent medical reviewers can adversely affect the weight given to your record reviews.
And, what about independent medical exams: Are they required? “‘[T]here is nothing inherently improper with relying [solely] on a file review, even one that disagrees with the conclusions of a treating physician.’… However, the failure to conduct a physical examination, where the Plan document gave the plan administrator the right to do so, ‘raise[s] questions about the thoroughness and accuracy of the benefits determination.”
These issues are highlighted by the recent case of Shaw v. AT&T Umbrella Benefit Plan No. 1, __F.3d __, 2015 WL 4548232 (6th Cir. July 29, 2015) (PDF).
FACTS: Shaw had chronic neck pain and sought ERISA-governed long term disability benefits. MRIs confirmed a cervical 6-7 disc herniation, and he had a positive EMG. His family doctor concluded he could sit or stand only 30 minutes at a time, and would need to lie down for an hour each time to recuperate. The Plan had two independent physician advisors (neurologist and pain management specialist) perform a records reviews. Both also attempted “doc-to-doc” calls with Shaw’s treating physicians, but were unsuccessful.
They concluded Shaw could work a sedentary job. The claim was denied and Shaw sued.
TRIAL COURT: Granted Summary Judgment for the Plan.
SIXTH CIRCUIT HELD—REVERSED under the arbitrary and capricious standard of review:
- “[T]he Plan stated there were ‘no specific physical measurements of range of motion, …no specific physical examination to indicate functional impairment, …[and] no new neurological testing and motor strength testing.’ However, Shaw’s medical records provide just such information.” Op. at 12.
- “The Plan also ignored [the] residual-functional-capacity questionnaire submitted as part of Shaw’s appeal of the denial of LTD benefits.” Op. at 12.
- “‘[A] plan may not reject summarily the opinions of a treating physician, but must instead give reasons for adopting an alternative opinion.” Op. at 13.
- “Instead of offering evidence to contradict [the] residual-functional-capacity questionnaire’s conclusions, the Plan’s physician advisors simply ignored [it] and concluded Shaw could perform sedentary work.” Op. at 13.
- “An administrator acts arbitrarily and capriciously when it ‘engages in a selective review of the administrative record to justify a decision to terminate coverage.’” The doctors reviewing the medical records “engaged in selective review”. Op. at 14.
- “‘[T]here is nothing inherently improper with relying on a file review, even one that disagrees with the conclusions of a treating physician.’… However, we have held that the failure to conduct a physical examination, where the Plan document gave the plan administrator the right to do so, ‘raise[s] questions about the thoroughness and accuracy of the benefits determination.’” Op. at 15.
- “‘[P]hysicians repeatedly retained by benefits plans may have an incentive to make a finding of ‘not disabled’ in order to save their employers money and to preserve their own consulting arrangements.’” Op. at 16.
We see plaintiffs asserting an ERISA claim for statutory penalties more frequently now.
These claims seek statutory penalties (up to $110 per day), alleging the plan administrator “fail[ed] or refus[ed] to comply with a request for information” by the beneficiary. 29 U.S.C. 1332(c)(1).
How easy is it for plaintiffs to win a statutory penalty claim for failing to provide information? Not all that easy.
Here’s the case of Smiley v. Hartford Life and Accident Insurance Company, Smile Brands, Inc. et al, __ Fed. Appx. __, 2015 WL 4385673 (11th Cir. July 17, 2015) (Kudos for some nice work by my friends Elizabeth Bondurant and Russ Buhite).
FACTS: Smiley requested and received relevant ERISA Plan documents from plan administrator Smile Brands. After Smiley’s ERISA benefits were terminated, she again requested plan documents. This time, however, she made the request to claims administrator Hartford. Hartford provided Smiley with an outdated address (contained in the Plan documents) for the plan administrator. Smiley then sent a second request for plan documents to the outdated address. The letter was returned as “undeliverable.”
11th CIRCUIT HELD: Statutory Penalty Claim Properly Dismissed.
- ERISA authorizes the imposition of a daily penalty upon a plan administrator that “fails or refuses to comply with a request for information which such administrator is required…to supply to a participant or a beneficiary.” 19 U.S.C. 1332(c)(1). Op. at 2.
- A plan administrator is either “the person specifically so designated” in Plan documents, or a company acting as a plan administrator. Op. at 2-3.
- Hartford was not the plan administrator and therefore not subject to statutory penalties. Op. at 3.
- Hartford also was not a “de facto administrator[.]” “We have consistently rejected the use of de facto plan administrator doctrine ‘where a plaintiff has sought to hold a third-party administrative services provider liable, rather than the employer….’” Op. at 3.
- Statutory penalties should not be awarded here because the plan administrator, Smile Brands, “did not refuse or fail to provide Smiley with the Plan documents.” Smile Brands “had no knowledge that Smiley was attempting to obtain the same Plan documents until it was served with Smiley’s amended complaint….” Op. at 4.
- Smiley failed to show any prejudice in denying disclosure of the requested documents. “Although a plaintiff need not demonstrate [prejudice] to obtain [statutory penalties], a court may consider those factors, among others, in making its determination.” Op. at 4-5.
KEY TAKE AWAY: The circuits are not consistent in how they approach the statutory penalty claim. Surveys suggest that the $110 per day penalty is rarely if ever given, and awards (if they occur) typically range from ten to fifty dollars per day, with an average of about $33 per day.
You already know that contractual limitations provisions in ERISA plans are generally enforceable and can bar untimely claims.
But when does the court apply “equitable tolling” to extend the time by which a claimant may file suit beyond the contractual limitations provision? Rarely.
And, what happens if the claim denial letter fails to set out the date by which a claimant must file suit? The contractual limitations provision still may be enforceable.
Here’s the case of Wilson v. Standard Insurance Company, 2015 WL 3477864 (11th Cir. June 3, 2015)(Equitable tolling rejected even though claim denial letter failed to state date by which civil claim must be brought.)
The case also provides some guidance on what should go into a claim denial letter.
FACTS: Wilson filed her lawsuit seeking ERISA-governed long term disability benefits 34 months after the three year contractual limitations period expired. Wilson contended the three year period should be “equitably tolled” because the letter denying her claim “did not give her notice” that the policy imposed a three year limitations period, rather than the six year contractual limitations period under state law. The district court dismissed the claim as untimely and Wilson appealed.
ISSUE: When does “equitable tolling” trump a contractual limitations provision?
11th CIRCUIT HELD: AFFIRMED—Plaintiff’s Claim Dismissed: Equitable tolling does not trump the contractual limitations provision.
- “’[W]e must give effect to [an ERISA] Plan’s limitation provision unless we determine either that the period is unreasonably short, or that a ‘controlling statute’ prevents the limitations provision from taking effect.’ Neither of those two exceptions applies in this case.” Op. at 2.
- “Heimeshoff left open the possibility that equitable tolling ‘may apply,’ but only ‘[t]o the extent the participant has diligently pursued both internal review and judicial review but was prevented from filing suit by extraordinary circumstances.’” (Emph. added by court.) Op. at 3.
- ERISA regulations require “that a claims denial letter include notice about the administrative review procedures and the time limits for filing…as well as the fact that the claimant has a right to bring a civil action under 502(a) of ERISA. “ Op. at 5.
- “What is anything but clear, however, is whether the regulation also requires a claims denial letter to include notice about the time limits applicable to filing a civil action.” Op. at 5.
- “[F]or purposes of this opinion only we will construe the regulation in Wilson’s favor and assume the correct interpretation of it is that a claim denial letter must notify the claimant of her time limit for filing a lawsuit under ERISA….” Op. at 5-6.
- “Even with that assumption in Wilson’s favor, however, it does not follow that Standard’s failure to interpret the ambiguous regulation that way renders the contractual limitations period unenforceable.” Op. at 6.
- “Equitable tolling generally does not apply in the absence of diligence.” Op. at 7.
- “’Wilson has not explained why she waited more than four years to request a copy of the LTD policy, and she has not demonstrated that [Standard] discouraged her from seeking a copy of the policy sooner.’” Op. at 8.
- “A plaintiff is not reasonably diligent when she fails to investigate basic issues that are relevant to her claim or to proceed with it in a reasonably prompt fashion…. Her lawsuit easily could have been timely filed if she had exercised even minimal diligence in discovering the terms of the policy.” Op. at 9.
You know that under ERISA regulations a claimant has at least 180 days to appeal a benefit denial. ERISA plans set out contractual timelines for appeals.
But what happens when that 180 day period runs out on a weekend? Is an appeal filed on the following Monday timely?
Here’s the case of LeGras v. Aetna Life Insurance Company, __ F.3d __, 2015 WL 3406182 (9th Cir. May 28, 2015) (180 day appeal period ended on Saturday, and Claimant filed appeal on following Monday: 9th Circuit reverses trial court dismissal and deems appeal timely).
FACTS: LeGras received long term disability benefits under the Fed-Ex ERISA plan for 24 months. On April 18, 2011, Aetna, a plan administrator, then terminated benefits effective May 24, 2011 and informed LeGras that he could “file a request to appeal this decision within 180 days of receipt of this notice.” The 180 day appeal period ended Saturday, October 15, 2011. LeGras mailed his appeal on Monday, October 17, 2011.
ISSUE: Whether an appeal, filed after the appeal period expired on Saturday, was timely.
DISTRICT COURT HELD: Appeal was not timely and granted motion for judgment on the pleadings for failure to exhaust administrative remedies.
NINTH CIRCUIT HELD: REVERSED (with dissenting opinion).
- Under ERISA regulations, a “reasonable opportunity for a full and fair review” is “at least 180 days following receipt of a notification of an adverse benefit determination within which to appeal.” Op. at 6.
- An ERISA deadline that “falls on a weekend…extends to the following business day.” Op. at 7.
- “Although the stricter time computation method may be convenient for Aetna’s purposes, it would be contrary to the purposes of ERISA to adopt a method that is decidedly protective of plan administrators, not plan participants.” Op. at 8.
- “An ERISA plan is a contract…and the terms of this contract are not ambiguous. By the Plan’s terms, LeGras had 180 days to file his appeal with Aetna by mail.” Op. at 14-15.
- “LeGras messed up; he failed to abide by his contract and now seeks an excuse to set aside his failure….He could have mailed that appeal on any one of the 180 days after April 18, 2011. Dissent at 15.
- “To get around the plain terms of the contract, the majority is forced to create federal common law….” Dissent at 16.
You know that a court has discretion to award attorney fees under ERISA if a party shows “some degree of success on the merits.”
But how do you define “success”? A new third circuit case reminds one of that old Milton Berle line: “If opportunity doesn’t knock, build a door.”
Here’s the case of Templin et al v. Independence Blue Cross et al., __ F.3d __ (3rd Cir. May 8, 2015)(Even voluntary settlements, where no judgment was entered, can result in an award of attorney fees under the “catalyst” theory.)
FACTS: Plaintiffs sought payment for blood-clotting products under an ERISA plan. Defendants moved to dismiss for failure to exhaust administrative remedies. The Court denied the motion and Defendants eventually paid the claims, and settled the claims. Plaintiffs then sought $349,385 in attorney fees.
DISTRICT COURT HELD: Attorney fees denied because the court had never made a substantive determination on whether Plaintiffs were entitled to the recovery, and the parties settled the claim “without a judgment from the Court.”
THIRD CIRCUIT HELD: Reversed and attorney fees awarded.
- “[T]he ERISA statute does not limit fee awards to the prevailing party.” Op. at 7.
- “[T]he Supreme Court has specifically acknowledged that attorney fees are available even ‘without a formal court order.’” Op. at 8.
- At least four other circuits have adopted the “catalyst” theory to statutes that lack prevailing-party requirements. Op. at 8.
- “[U]nder the catalyst theory, a party is eligible for attorney’s fees where his or her litigation efforts resulted in a voluntary, non-trivial, and more than procedural victory….” Op. at 10.
- Plaintiffs sued for interest on unpaid amounts. The Court held plaintiffs were entitled to recovery of attorney’s fees because the parties settled for “100% of the interest sought.” [W]e find that the pressure of the lawsuit caused [Defendants] to change their position….” Op. at 11.