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ERISA: Is It Wrong to Take an Offset for Social Security Benefits Received by the Children of a Long Term Disability Claimant?

Posted in ERISA

Is it wrong to take an offset for Social Security benefits received by the children of a long term disability claimant? No, says a new decision.

Andjust because you reinstate benefits does not mean you have to provide Pannebecker payments…

Here’s the case of Jones v. Life Insurance of North America, 2016 WL 3257781 (N.D. Cal. June 14, 2016)(PDF).

FACTS: Jones worked for Merck and sought ERISA-governed long term disability benefits in 2001. The benefits were terminated in 2007 and Jones sued. Reinstatement was offered, but an offset was taken for dependent Social Security benefits (SSDI) received for her children.


  1. Under the plan terms, “any benefit payable under the Plan” is reduced by “Social Security benefits, effective at the time the Participant becomes entitled to benefits.” Op. at 3.
  2. Plaintiff argued that no offset should occur for SSDI benefits her children received because they were not yet born when Jones started getting benefits in 2001. “Plaintiff’s interpretation is nonsensical….’[A]s a practical matter, a participant continues to be eligible and entitled to benefits for each subsequent monthly or partial monthly period for which s/he is Totally Disabled.”  Op. at 13.
  3. Plaintiff also argued that her children are “entitled” to their dependent SSDI benefits. But the court noted: “[t]he plan defines Social Security benefits as including family benefits” and the dependent benefits are awarded here because of plaintiff’s disability. Also, the SSDI “family award notices” expressly designate Jones as the payee and authorize her to use the funds. Op. at 14.
  4. Mere reinstatement, without more evidence of erroneous claims handling, does not trigger Pannebecker. (The Ninth Circuit decision in Pannebecker requires payment of claims from the improper termination of benefits.) “While MetLife’s subsequent reinstatement of plaintiff’s LTD benefits implies the initial termination was a mistake, the court has no basis for a finding that MetLife was arbitrary or capricious in terminating plaintiff’s LTD benefits.”  Op. at 16. (Emph. added).

For ERISA Section 502(c) Penalties — Must Plaintiff Prove “Actual Injury”? A Recent U.S. Supreme Court Decision Creates the Argument

Posted in ERISA

These Section 502(c) penalty claims seem to be added to most every ERISA lawsuit…

Does a claimant have to prove “actual injury” to win ERISA Section 502(c) penalty claims? MAYBE.  Here’s why:

As you know, if a plan administrator fails to provide plan-related documents within 30 days of a written request, then ERISA section 502(c) gives the district court discretion to impose up to $110 per day per failure.

Tom Cristina at Ogletree makes a good point that the recent Supreme Court decision in Spokeo, Inc. v. Robins, No. 13–1339 (May 16, 2016) may create a basis to assert that Plaintiffs have to prove “actual injury” to recover Section 502(c) penalty claims. Spokeo was a Fair Credit Reporting Act (FCRA) case. But the FCRA has a statutory penalties provision much like ERISA section 502(c).

Cristina writes: “[I]n a passage that has implications for the defense of certain ERISA actions, the Court held that there is a constitutional limitation on Congress’s ability to identify actionable intangible injuries:

Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation. For that reason, Robins could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.

(Emphasis added.) …

“Thus, the Spokeo opinion at least raises the question whether, despite the language of ERISA section 502(a)(1)(A) authorizing such a lawsuit, a plaintiff might lack standing to seek the penalty under ERISA section 502(c) if the plaintiff fails to allege and prove a “concrete” injury-in-fact other than and in addition to nonreceipt of the requested documents.”

Key Take Away:  Preserve the argument, citing Spokeo, that Plaintiff lacks standing to assert the 502(c) penalty claim when Plaintiff has failed to show “actual injury.”

ERISA: Court’s Short Checklist to Reduce Plaintiff/Claimant Attorney Fees

Posted in ERISA

Attorney fees in ERISA cases continue to be a challenge.

What happens when both sides can claim wins during a case?

What is a reasonable hourly rate for Plaintiff’s attorneys?

Here’s the case of Barboza v. California Association of Professional Firefighters, 2016 WL 3125996, (E.D. Ca. June 3, 2016).(This case involved years of litigation and two prior appeals to the Ninth Circuit.)

The case also highlights additional considerations when addressing the attorney fee issue.

FACTS:  The Plan granted Barboza ERISA-governed disability benefits. However, Barboza failed to disclose he operated an alpaca ranch and also settled a worker comp claim for $18,000. The Plan brought an amended counterclaim for offset and an equitable lien on undisclosed earnings. The Ninth Circuit concluded, among other things, that the Plan had not abused its discretion in offsetting undisclosed worker comp settlement amounts. Barboza did overturn a trial court summary judgment and a ruling regarding prejudgment interest.

Both sides sought attorney fees.

ISSUE: Who should be awarded attorney fees, and how much?

DISTRICT COURT HELD: Plaintiff was the “partially prevailing” party, entitled to fees, but fees and hourly rates were reduced.

  1. Although parties achieving “trivial” successes and “purely procedural” victories may not be awarded fees, “partially prevailing parties—parties achieving some success, even if not a major success” may be enough. Op. at 3 (emphasis in original).
  2. Barboza argued he had some success when the Ninth Circuit held he had exhausted administrative remedies. BUT the parties already negotiated a fee award, so that could not be used as a basis for the current attorney fee motion. Op. at 3.
  3. Barboza did overturn a trial court summary judgment and prejudgment interest and therefore had “some degree of success.” Op. at 4.
  4. “The fee applicant bears the burden to document these hours and …the requested hourly rate are reasonable.” Op. at 7.
  5. Plaintiff sought hourly rates of $650, $625 and $600 per hour. Defendant argued the local Sacramento rates are much lower—$300-$400 per hour. The Court concluded that an ERISA practice is more a state-wide practice, and reduced the rates to $500-$550 per hour. Op. at 8.
  6. The Court eliminated hours claimed for the administrative appeal and early stages of the litigation. Op. at 9.
  7. Plaintiff was not entitled to hours for the appeal because he failed to file a timely request for fees with the circuit court. The district court is not authorized to rule on a post-remand request for attorney fees incurred on appeal. Op. at 9.
  8. Plaintiff failed to detail how 21 hours was spent drafting a declaration, and reduced it by 15 hours. Op. at 10.

ERISA — 9th Circuit: Plaintiffs Can Now Simultaneously Bring Benefit Payment and Equitable Claims

Posted in ERISA

Lane Powell attorney Mike Baylous writes an excellent summary here on big changes to ERISA in the 9th Circuit.

Remember that old argument that equitable claims should be dismissed because they are duplicative?

Not so anymore in the 9th Circuit (or the 8th Circuit for that matter).

Here is the case of Moyle v. Liberty Mut. Ret. Benefits Plan 05-20-16 Moyle v Liberty Mutual, ___ F.3d ___, 2016 WL 2946271 (9th Cir May 20, 2016).

FACTS:  Former employees eligible for ERISA governed retirement benefits claimed they were wrongfully denied past service credit for time worked. In this class action Plaintiffs asserted a variety of claims, including (1) claims for benefit payments for past service credit under Section 1132(a)(1)(B); and (2) equitable remedies under Section 1132(a)(3).

ISSUE: Whether Plaintiffs’ claims for payment under Section 1132(a)(1(B) and equitable claims under Section 1132(a)(3) were duplicative?

9th CIRCUIT HELD:  Claims for payment under Section 1132(a)(1(B) and equitable claims under Section 1132(a)(3) are “alternative” claims and not “duplicative” claims.

  1. Plaintiffs can present § 1132(a)(1)(B) and § 1132(a)(3) as alternative – rather than duplicative – theories of liability. P. 20.
  2. The Ninth Circuit agreed with the Eighth Circuit’s application, in Silva v. Metro. Life Ins. Co., 762 F.3d 711 (8th Cir. 2014), of CIGNA Corp. v. Amara, 563 U.S. 421 (2011). P. 23.
  3. “Some of our pre-Amara cases held that litigants may not seek equitable remedies under § 1132(a)(3) if § 1132(a)(1)(B) provides adequate relief. However, those cases are now “clearly irreconcilable” with Amara and are no longer binding.” (Citations omitted). P. 25.
  4. “This approach not only comports with Amara and Varity, it also adheres to the Federal Rules of Civil Procedure, which requires that “[a] pleading that states a claim for relief must contain … a demand for the relief sought, which may include relief in the alternative or different types of relief.” Fed.R.Civ.P. 8(a)(3) (emphasis added).  P. 26.
  5. “Finally, allowing plaintiffs to seek relief under both § 1132(a)(1)(B) and § 1132(a)(3) is consistent with ERISA’s intended purpose of protecting participants’ and beneficiaries’ interests. See, e.g., 29 U.S.C. § 1001; see also Varity, 516 U.S. at 513 (“ERISA’s basic purposes favor a reading … that provides the plaintiffs with a remedy.”).” P. 26.

ERISA: Reviewing What Needs to Be Proved to Establish the Suicide Exclusion

Posted in ERISA

For many reasons, some of the toughest cases to litigate involve the application of the suicide exclusion.

There is a growing body of evidence challenging suicide exclusion determinations.

Here is the recent case of Collins v. Unum Life Insurance Co., 2016 WL 2753862, __ F.Supp.3d __ (May 6, 2016). This case walks you through arguments to win the validity of suicide exclusions under state law, and summarizes the facts needed to establish “sanity” at the time of death. (Kudos to my friend David Constine and his law firm for some scholarly work in this area.)

FACTS: Collins, a former Navy Seal for 17 years, took his own life.  At the time of his death Collins had ERISA-governed life benefits, which included a suicide exclusion. Plaintiff argued the suicide exclusion was invalid under Virginia law. That law states that a suicide exclusion shall be valid if liability is limited to an insured “who, whether sane or insane, dies by his own act.” Plaintiff contended the suicide exclusion was invalid because it failed to include the “sane or insane” language.

HELD: Unum’s Motion for Summary judgment GRANTED.

  1. “ERISA has no bearing on this question of validity as suicide exclusions fall under the so-called ‘insurance exception’ to ERISA preemption…and state law applies.”  Op. at 19.
  2. “Because the ERISA policy at issue gives the insurer discretionary authority, …it is the duty of the insurer in the first instance to construe the policy language. This Court merely determines if the insurer’s interpretation was reasonable.”  Op. at 23.
  3. The Fourth Circuit “[does] not require suicide exclusions to contain any ‘magic’ words in order to be valid.”  Op. at 19-20.
  4. “‘[Generally] as long as the policy provided sufficient notice of exclusion—and the exclusion was limited to two years—it was valid under the statute.” Op. at 21.
  5. The punctuation in the Virginia statute “suggests that the phrase ‘whether sane or insane’ is non-essential to the meaning of the term suicide and need not be ‘express’ within the exclusion.”  Op. at 21-22.
  6. Recent decisions “in ERISA cases…have upheld as reasonable plan administrators’ determinations that the term ‘suicide’ meant any non-accidental, self-inflicted death even though the suicide exclusions at issue did not include some variant of the phrase “whether sane or insane.”  Op. at 26.
  7. What is evidence of “sane at death”?  Collins “knew the consequences of his actions: He knew that he was taking his own life. Additionally, in both the text to his wife and email to Mr. Mansfield, Mr. Collins expressed regret for his actions.”  Op. at 31.

ERISA (6th Circuit): Mental Nervous Limitations and Dealing with Arguments of “Organic Cause”

Posted in ERISA

You know that most ERISA disability plans contain a 24-month limitation related to mental/nervous disabilities.

But what happens when the claimant alleges the mental illness is “organically caused”?  Is that enough to justify benefits beyond the 24-month period?

Not in this case…

Here’s the case of McAlister v. Liberty Life Assur. Co. of Boston, __ Fed. Appx. __ (6th Cir. May 4, 2016)(Applying abuse of discretion standard of review: “[W]hile it is clear that plan administrators owe fiduciary duties to beneficiaries,…whether that duty encompasses a duty to reasonably investigate remains unclear.”)

FACTS: McAlister was suicidal and depressed, and applied for ERISA-governed long term disability benefits in August 2010. Liberty Life granted the benefit and later informed McAlister that her long term disability benefits would end when the 24 month maximum benefit for mental nervous disabilities had been paid. McAlister then sought benefits beyond 24 months, claiming she had “cognitive problems” related to diabetes, hypertension and other physical problems.

DISTRICT COURT HELD:  Liberty properly exercised discretion in determining McAlister suffered from mental illness that had a psychiatric (not organic) cause.

SIXTH CIRCUIT HELD: AFFIRMED– Dismissal of Claim based on 24 month mental/nervous limitation.

  1. Even if the court took out of the analysis the independent medical assessment, notes from three of Plaintiff’s medical providers constitute “‘relevant evidence… a reasonable mind might accept as adequate to support [the] conclusion that McAlister suffers from a Mental Illness.’”  Op. at 13.
  2. The Court rejected the “duty to investigate” argument. McAlister alleged she had put Liberty on notice that her mental condition had an organic cause, and that Liberty had failed to investigate it. Op. at 17.
  3. “[W]hile it is clear that plan administrators owe fiduciary duties to beneficiaries,…whether that duty encompasses a duty to reasonably investigate remains unclear.”  Op. at17.
  4. If there is a duty to investigate, “the parameters of such a duty are altogether undetermined.”  Op. at 18.
  5. “‘There is no justifiable basis for placing the burden solely on the administrator to generate evidence relevant to deciding the claim, which may or may not be available to it, or which may be more readily available to claimant.’”  Op. at 18.
  6. It was unnecessary for the plan administrator in this case to conduct its own neuropsychological evaluation. Op. at 19.

What Constitutes “Reasonable Efforts” to Inform Plan Participants of Plan Amendments, Which Include a Forum Selection Clause?

Posted in ERISA

You know that many Plans have forum selection clauses.  Are they enforceable?  YES

When a Plan participant claims they “did not know of a plan amendment,” how do you prove the Participant received notice of the amendment? A new case explains.

Here’s the case of Malagoli v. AXA Equitable Life Insurance Company, __ F.Supp. 3d __ (S.D.N.Y. March 24, 2016)( “‘[A] valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases.’” )

FACTS: Malagoli retired from AXA/Equitable in 2004. In 2011, AXA added a forum selection clause requiring all ERISA actions be filed in New Jersey.  In 2015, Malagoli sued AXA Equitable Life Insurance in New York, alleging AXA had breached an agreement to allow him to collect commissions while receiving retirement benefits. AXA move to transfer venue to New Jersey because the ERISA-governed retirement plan required suits be filed in New Jersey.

Malagoli argued:

(1) the forum selection clause contradicted ERISA special venue provisions. ERISA provides that ERISA actions may be brought: “in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found”;

(2) the 2011 forum selection clause should not apply to him, since he “vested” when he retired in 2004.


  1. “‘A contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought…’”  Op. at 2.
  2. But the vast majority of courts have concluded that forum selection clauses are not per se invalid.  Op. at 2.
  3. “‘[A] valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases.’” Op. at 2.
  4. “‘Congress provided that an [ERISA] action may be brought in several venues. Congress did not provide that private parties cannot narrow the options to one of these venues.’”  Op. at 3. (Italics in original).
  5. “A benefit under an employee benefit plan only “becomes ‘vested’ if the employer has promised not to amend or terminate [the plan].’” Op. at 4.
  6. AXA made no such promise: AXA expressly  “reserve[d] the right in its discretion to make from time to time any amendment or amendments to the Plan.” Op. at 4.
  7. For the 2011 amendment to be enforceable, the ERISA administrator must “make reasonable efforts” to ensure each plan participant receives plan documents.
  8. AXA used “reasonable efforts” to notify Malagoli of the amendment that included a forum selection clause because: (a) they presented the Court with an Excel spreadsheet listing all Participants used to mail notices, and Malagoli’s address was on this list; (b) Malagoli concedes his address in this list was accurate; (c) AXA merged the list of 29,125 Participants with the letter announcing the amendment, and assembled them in printed envelopes; (d) a bulk mailing certificate confirms that 29,125 letters were mailed first class on December 27, 2011.

ERISA (9th Circuit): Denial Letters — Sometimes Forgotten Arguments to Enforce Contractual Limitations Provisions

Posted in ERISA

Must denial letters inform the claimant, seeking ERISA-governed benefits, about the contractual limitations provision?

A recent court trend, like with the First, Third and Sixth Circuits, requires denial letters to inform the claimant of the Plan’s contractual limitations provision. See, e.g.,  Santana- Díaz v. Metropolitan Life Insurance Co., No. 15-1273, 1st Cir. (March 14, 2016) (“Based on the plain language of the regulation, we hold that the correct interpretation of section 2560.503-1(g)(1)(iv) is that a denial of benefits letter must include notice of the plan-imposed time limit.”)

Other courts have rejected arguments that ERISA regulations impose an affirmative duty to include the length of the limitation period for filing suit in claim denial letters. Scharff v. Raytheon Co. Short Term Disability Plan, 581 F.3d 899 (9th Cir. 2009); Wilson v. The Standard Ins. Co., No. 11- 2703, 2014 U.S. Dist. LEXIS 12111 (N.D. Al., Jan. 31, 2014); (holding that a claim-denial letter complied with the regulation despite omitting the civil action limitations period); Koblentz v. UPS Flexible Emp. Benefits Plan, No. 12-CV-0107-LAB, 2013 WL 4525432, at *4 & n.5 (S.D. Cal. Aug. 23, 2013) (same).

The evolving “best practice”: add information regarding the contractual limitations period in the denial letter.

And…here is some good news: sometimes you can use the contractual limitations defense even if the contractual limitations period was not disclosed in the denial letter.

Here’s the case of Upadhyay v. Aetna Life Insurance Company, __Fed. Appx. __ (9th Cir. March 23, 2016).

FACTS: Upadhyay sought ERISA-governed disability benefits.  The Plan stated: “No legal action can be brought to recover any benefit after 3 years from the deadline for filing claims.” Upadhyay was required to file her claim for benefits by July 1, 2007, making the date by which to file a lawsuit at July 1, 2010.  But she did not file her lawsuit until March 4, 2013.

Aetna denied the claim, but the denial letter failed to inform Upadhyay of the Plan’s contractual limitations period for filing suit.

9th Circuit Court of Appeals HELD: Summary Judgment for Aetna Affirmed.

  1. “[P]arties may ‘agree[] by contract to commence the limitations period at a particular time.’” Op. at 3.
  2. Aetna did not waive its contractual limitations defense despite failing to inform Upadhyay, in its denial letters, of the Plan’s contractual limitations period for filing a lawsuit under ERISA.”  Op. at 2.
  3. “Under California law, an insurance company cannot waive a contractual limitations provision defense when the limitations period has already run.” Op. at 2-3 (Emph. added).
  4. “Even if Aetna could waive the contractual limitations period, Upadhyay [failed to show] ‘an element of detrimental reliance or some misconduct’ on the part of Aetna.”  Op. at 2-3.
  5. Aetna’s contractual limitations defense was not “an impermissible attempt to circumvent California’s notice-prejudice rule.”  Op. at 4.

ERISA: Sixth Circuit — No Conflict of Interest with Multi-Employer Benefit Plan, Saving Abuse of Discretion Standard of Review

Posted in ERISA

You already know that evidence of a “conflict of interest” can change the standard of review the court applies in ERISA claims.

But proper structuring of multi-employer benefit plans can avoid an inherent conflict of interest.

Here’s the case of Foltz v. Barnhart Crane and Rigging, Inc., __ Fed. Appx. __ (6th Cir. February 29, 2016)(This case also shows that the Worker Compensation exclusion can trump ERISA disability benefits.) [PDF]

FACTS.  Foltz worked at an oil refinery and was exposed to toxic vapor, which caused chemical pneumonia. He required three months of hospitalization. Foltz submitted a disability claim under the ERISA plan. The plan excludes disability benefits if “benefits are payable under any Worker’s Compensation Act….”  The Plan concluded his illness was work-related and denied his disability claim.

TRIAL COURT: The Plan properly exercised its discretion in denying Foltz’s ERISA disability claim because of the Worker Compensation exclusion.


  1. “When an ERISA plan relies on an exclusion to deny benefits,…the plan (not the employee) has the burden of proving the exclusion applies.”  Op. at 5.
  2. “[T]he evidence in the administrative record clearly shows that the Fund carried its burden to establish that Foltz’s illness was, in fact, work-related.”  Op. at 5.
  3. As a multi-employer benefit plan, “individual trustees on the Board receive no personal financial benefit from approving or denying claims.  This structure does not create an inherent conflict of interest….”  Op. at 6.

BIG NEWS: ERISA Preempts Hodgepodge of State Insurance Reporting Regulations

Posted in ERISA

You know there has been a court trend toward narrowing ERISA preemption.

But…that trend was brushed back today by the U.S. Supreme Court.

Here’s today’s case: Gobeille v. Liberty Mutual Insurance Com., __ U.S. __ (March 1, 2016) (State regulations that impinge upon ERISA’s core functions, like reporting, are preempted by ERISA) [PDF].

FACTS:  Vermont subpoenaed claims data from Liberty Mutual’s third-party administrator. Liberty Mutual then sued, seeking a declaration that ERISA preempted Vermont’s law and regulation requiring health insurers, including self-funded plans, to file reports with the state, like claims data and other information for a health care database. Liberty Mutual contended that having to submit data to fifty (50) states would be expensive, especially given the lack of uniformity.  This, Liberty Mutual argued, runs contrary to ERISA. Vermont said the information was already available and the state had the right to use it to ensure the safety and health of its residents.

United States Supreme Court Held: (6-2 decision)

  1. “ERISA’s reporting, disclosure, and recordkeeping requirements for welfare plans are extensive. “ Op. at 7.
  2. “Vermont’s reporting regime, which compels plans to report detailed information about claims and plan members, both intrudes upon ‘a central matter of plan administration’ and ‘interferes with nationally uniform plan administration.’”  Op. at 9-10.
  3. “Vermont orders health insurers, including ERISA plans, to report detailed information….This is a direct regulation of a fundamental ERISA function.” Op. 11.
  4. ERISA’s pre-existing reporting, disclosure, and recordkeeping provisions…maintain their pre-emptive force whether or not the new [Affordable Care Act] reporting obligations also pre-empt state law.” Op. at 13.

This decision presents very good news to ERISA plans administrators, including self-funded plans. State regulatory frameworks that impinge upon core ERISA functions are preempted.