You know that most ERISA plans, and most supporting insurance policies, have provisions that allow for an offset of Social Security disability benefits.

Can the court invalidate these offset provisions because of “unconscionable” conduct? It depends.

Here’s the case of Hart v. Unum Life Insurance Co. of America Catholic Healthcare West LTD Disability Plan, 2017 WL 4418680 (October 4, 2017)(Court denied Plaintiff’s request to invalidate offset provision).

FACTS: The court previously determined Plaintiff Hart was entitled to ERISA-governed disability benefits. Plaintiff then asked the court to invalidate the Social Security benefit offset provision in the ERISA plan, claiming that Unum’s (wrongful) denial of benefits was unconscionable and forced Hart to “lose her house and her car,” and forced her to prematurely apply for Social Security retirement benefits.

ISSUE: Whether the right to offset Social Security benefit payments should be denied because Unum wrongfully denied disability benefits?


  1. Plaintiff “offers no analysis to show that the law in our circuit would permit application of unconscionability principles…to deny effect to an ERISA provision.” Op. at 3.
  2. “Allowing Unum the offset it seeks would still compensate Hart for Unum’s wrongful termination of benefits through the age of 65 but not for the reduction of her social security retirement benefits thereafter.” Op. at 4.
  3. The Court awarded prejudgment interest, which is an “element of compensation, not a penalty.” Op. at 4. “The balance of the equities herein warrants an award of prejudgment interest [at 10%].” Op. at 6.


-There is some authority allowing a court to exercise “equitable power” to deny offsets, but those cases are distinguishable. See, e.g., Godfrey v. BellSouth Telecommunications, Inc., 89 F.3d 755, 757-9 (11th Cir. 1996)(Offset provision invalid because employer denied disability benefits and then threatened to fire employee unless she returned to work).

You already know that most ERISA plans require an assessment, say after 24 months, whether the claimant can perform “any occupation.”

This review usually involves a Vocational Assessment examining what “other occupations” and earnings are available given the claimant’s education, skills and experience.

HOT TIP: Courts are placing higher burdens on vocational experts when establishing what “other occupations” the claimant can assume.

For example, using median wage data may not be sufficient in certain circumstances.

Here’s the case of Flaaen v. Principal Life Insurance Co., 2017 WL 4286358 (W.D. WA, September 27, 2017)(attached)(“[T]he term ‘gainful occupation’ requires an evaluation of the insured’s actual employment prospects and wages based on his current experience and qualifications.”)

FACTS: Flaaen, a truck driver, received ERISA-governed disability benefits for years. While disabled, Flaaen earned a university bachelor’s degree in “Art/Media Culture”. After paying disability benefits for seven years, Principal Life sought to determine whether Flaaen could perform the “substantial and material duties of any Gainful Occupation” at an amount of $47,124. A vocational assessment determined he could perform jobs in the public relations and graphic design field, earning in excess of $50,000. Consequently, Principal discontinued benefits. Flaaen sued after an unsuccessful appeal. The Court applied de novo review.

ISSUE: Whether the Vocational Assessment supported the conclusion that Flaaen could perform “any Gainful Occupation”?

DISTRICT COURT HELD: NO—Flaaen was entitled to reinstatement of benefits.

  1. The Court rejected Principal’s argument that “an occupation is gainful even if the claimant would not be able to earn median/mean wage upon starting.” Op. at 12.
  2. “[C]hoosing the median wage of every professional is an arbitrary heuristic because it in no way relates to the experience or qualifications of the specific insured.” Op. at 14 (Emp. added).
  3. The record did not support the vocational assessment that Flaaen was qualified for either job suggested by the report. Principal also failed to show that the report was used by “experienced job experts”. Op. at 16.
  4. Principal’s vocational assessment failed to offer an opinion on Flaaen’s earning capacity. Op. at 18.
  5. Flaaen presented persuasive evidence he would earn only in the 25% percentile of certain occupations due to his inexperience. Principal’s mere reliance on Flaaen’s social media profiles and listed job titles was insufficient to support a conclusion that Flaaen had relevant job experience. Op. at 18-19.

KEY TAKE AWAY: This is another example of how the standard of review will affect the outcome. Come up with a plan to make your vocational assessments more defensible.

You know that failing to follow Department of Labor (DOL) claims regulations can result in the court using the de novo review standard, rather than the abuse of discretion standard in reviewing claim decisions.

But the court still may apply the abuse of discretion standard: if the plan can establish:

(1) it has procedures in full conformity with DOL regulations, and

(2) its failure to follow regulations was inadvertent and harmless.

So, what is the plan’s BURDEN OF PROOF to establish that it has procedures in conformity with DOL regulations?

And…does Plaintiff get to conduct discovery into claims procedures, and the way you handled the specific claim?

Here’s the recent case of Capretta v. Prudential Ins. Co., 2017 WL 4012058 (S.D.N.Y. August 28, 2017) “[A plan’s] burden to prove compliance with DOL regulations arises, if it ever arises, only after a plaintiff makes a reasonable showing that the defendant violated DOL rules.”)

FACTS: Capretta worked for four years following lung cancer treatment, and sought ERISA-governed long term disability benefits, which were denied. Plaintiff pursued discovery regarding Prudential’s claim procedures and its conduct in handling the specific claim.

ISSUE: Whether Prudential maintained “administrative processes designed to ensure that similarly-situated claimants are treated consistently and in accordance with plan documents?”


                 PLAN’S BURDEN OF PROOF.

  1. “District courts have disagreed whether the plan’s burden of proof requires it to demonstrate compliance with the regulation in general, or simply to show that any noncompliance was inadvertent and harmless.” Op. at
  2. “[A plan’s] burden to prove compliance with DOL regulations arises, if it ever arises, only after a plaintiff makes a reasonable showing that the defendant violated DOL rules.” Op. at  (Emph. added)
  3. It would be wrong to require “a plan to prove affirmatively compliance based on the mere allegation that it might have violated the regulations.” (Emph. in original.) Op. at


  1. “[T]o take discovery outside of the administrative record, a plaintiff challenging a claims decision must show that there is ‘a reasonable chance that the requested discovery will satisfy the good cause requirement.’” Op. at
  2. Plaintiff “must do more than merely claim that [discovery] is needed to determine whether she received a full and fair review.” Op. at
  3. “[E]ven where a plaintiff has sufficiently alleged good cause, discovery requests may not be overly broad or redundant of what is already in the administrative record.” Op. at
  4. Plaintiff fails to show that [Prudential] did not maintain reasonable claims procedures, or explain how [Prudential’s] application of the procedures may have been irregular or noncompliant in this case.” Op. at

Pre-existing condition exclusions can be difficult to apply, especially when addressing whether a new disabling condition relates back to a pre-existing condition.

But this new case shows how a new disabling condition resulting from a “bad surgery” may still be excluded under the pre-existing condition exclusion. Haddad v. SMG LTD and Hartford Life and Accident Ins. Company, 2017 WL 3620143 (E. D. Cal. August 22, 2017).

FACTS: Haddad had a pre-existing condition cervical disk that caused pain/tingling in his right arm. He had surgery to replace the disk. The surgery caused a new, non-pre-existing disabling condition to his left arm. Hartford contended the pre-existing condition exclusion applied to the new, post-surgery left arm condition because it was “caused or contributed to by” his pre-existing right-sided disk condition.

ISSUE: Whether a new disabling condition (caused by surgery to treat a pre-existing condition) is excluded as a pre-existing condition?

DISTRICT COURT HELD: YES. (Applying de novo standard of review.)

  1. The policy provided up to six weeks of disability benefits “for any Disability that results from, or is caused or contributed to by, a Pre-existing Condition….” Op. at 2.
  2. The [new] disabling left side pain, parenthesis and neck pain were “caused or contributed to” by Haddad’s pre-existing condition—the diseased C5-6 disk. Op. at 9.
  3. “This conclusion is consistent with district court cases that have addressed this issue on similar facts under similar policy language.” Op. at 9.
  4. “[The decisions from these other district courts] did not necessarily turn on the deferential standard applied. They relied on what a reasonable interpretation of ‘caused or contributed to’ is, as applied to the conditions that have worsened due to treatment or progression of a disease.” Op. at 11.
  5. The “caused or contributed to” language is broader than “related to or resulting from” language seen in some other pre-existing condition exclusions. Op. at 13-14.

You already know that ERISA imposes on employers the duty to provide a written plan document, and a Summary Plan Description (SPD) which states key plan terms.

And… Supreme Court precedent is clear that Summary Plan Descriptions “do not themselves constitute the terms of the plan for purposes of [ERISA].” CIGNA Corp. v Amara, 663 U.S. 421, 438 (2011)(Emph. in original).

Many employers with group life, health and disability plans assume materials provided by an insurer satisfy ERISA requirements.

BUT materials provided by insurers or third party administrators may not satisfy ERISA requirements. The Plan can be at a big disadvantage without a written plan or SPD when participants/beneficiaries sue seeking benefits.

Now a new Ninth Circuit case explains how “wrap documents” can establish plan terms required by ERISA, using the Summary Plan Description. Here’s the case of Mull vs. Bd. of Dir. Motion Picture Hlth Pln No. 1, __ F.3d __ (9th Cir. August 1, 2017).

FACTS. After a serious auto accident, Mull sought ERISA-governed health benefits from a self-funded plan. The plan paid over $147,000 in medical benefits and sought reimbursement after Mull secured a $100,000 tort settlement. Mull sued seeking to enjoin the plan from seeking reimbursement. The Plan counterclaimed for reimbursement.

ISSUE: Whether a wrap document, indicating that a trust agreement and Summary Plan Description should be read together, established the ERISA plan?

DISTRICT COURT HELD: NO. Reimbursement provisions contained only in the Summary Plan Description are NOT part of the ERISA plan and are not enforceable.

NINTH CIRCUIT REVERSES. The plan’s trust agreement, when read together with the Summary Plan Description, constituted an ERISA plan document.

  1. “Neither the Trust Agreement nor the SPD meets ERISA’s requirements for constituting a plan. But by clear design reflected in provisions of both documents, the two documents together constitute a plan.” Op. at 7. (Bold in original).
  2. “[Amara] did not address the situation…that a plan administrator seeks to enforce the SPD as the one and only formal plan document.” Op. at 8.
  3. The Plan “clearly intended” by statements in the wrap document that “‘the plan’ is comprised of two documents: the Trust Agreement and the SPD.” Op. at 6.
  4. “‘[A]n SPD may constitute a formal plan document, consistent with Amara, so long as the SPD neither adds to nor contradicts the terms of existing Plan documents.” Op. at 7.
  5. Since “there is no conflict between the SPD and the Trust Agreement[,] the SPD is part of the plan itself.” Op. at 8.


  1. The DOL explains what should be in your plan document: The named fiduciary who has authority and responsibility to administer the plan; procedures for amending and terminating the plan; the source of plan contributions; and the allocation of responsibilities for the operation of the plan between the employer and the insurance carrier or third-party administrator. Here is the Department of Labor’s Reporting and Disclosure Guide for Employee Benefit Plans.
  2. For what needs to be in the Summary Plan Description, see Department of Labor regulation (29 CFR 2520.102-3).
  3. A “wrap document” can help establish the ERISA Plan. The wrap document should expressly state that “the referenced documents are intended to constitute both the Plan document and the Summary Plan Description for the plan.”

You already know that ERISA gives plan beneficiaries a choice on where to bring suit seeking ERISA benefits. Section 1132(e)(2) allows plan beneficiaries to bring suit “in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found….”

But what happens when the plan has a forum-selection clause? Are forum selection clauses enforceable? YES.

Here’s the case of In re Mathias, __ F.3d __ (7th Cir. August 10, 2017).

FACTS: Plaintiff sued the Caterpillar ERISA Plan in federal court in Pennsylvania, where he had worked for years. But the ERISA plan included a form selection provision requiring suits to be filed in the federal court for the Central District of Illinois. Plaintiff argued, however, that the plan’s forum selection clause should not be enforceable because of ERISA’s broad beneficiary-protection purpose, which allows plan beneficiaries to choose a number of potential venues.

ISSUE: Was the ERISA plan forum-section provision enforceable? YES.


  1. The ERISA venue statute, Section 1132(e)(2), provides that a lawsuit “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….” Op. at 9.
  2. Only one circuit has addressed whether an ERISA plan’s forum selection clause is enforceable. The Sixth Circuit has held that an ERISA plan’s forum-selection clause “is enforceable even if it overrides the beneficiary’s choice of venue permitted by Section 1132(e)(2).” Op. at 2. (Emph. added).
  3. Generally the forum selection clause in an ERISA “plan is controlling unless ERISA invalidates it.” Op. at 9.
  4. “The forum selection clause in the Caterpillar plan chooses from among the venue options listed in Section 1132(e)(2), and nothing in the statute makes the choice invalid.” Op. at 13.

Have a good week…

What happens in Washington when your employee fails to take a meal break?

Is the employer “strictly liable” for a statutory wage/hour violation?  NO.

This new Washington Supreme Court gives helpful guidance on avoiding wage/hour liability for missed meal breaks. Brady v. Autozone Stores, Inc., _ Wn. 2d _ (June 29, 2017).

FACTS: This class action in federal court sought unpaid wages (under Washington law) for meal breaks allegedly “withheld from employees.” The Washington Court accepted review of certified questions.

Washington Supreme Court HELD/RATIONALE:

  1. Is an employer automatically liable if an employee misses a meal break? NO.
  • “Employees shall be allowed a meal period of at least thirty minutes which commences no less than two hours nor more than five hours from the beginning of the shift….No employee shall be required to work more than five consecutive hours without a meal period.” Op. at 3-4. (WAC 296-126-092).
  • “[E]mployees may choose to waive the meal period requirements….The Department ‘recommends,’ but does not require, obtaining a ‘written request’ from an employee who chooses to waive the meal period.” Op. at 4.
  • But “[e]mployees may not waive their right to a rest period.” Op. at 4 (Emphasis in original). (Admin Policy ES.C.6, Section 9).
  1. Does an employer have an affirmative duty to ensure employees take their meal breaks? YES.
  • Washington law “imposes a mandatory obligation on the employer…to provide meal periods and rest breaks and to ensure the breaks comply with [Washington law].” Op. at 5.
  • The Court rejected California’s more employer-friendly standard (of a similar provision) that an employer merely has to provide a  reasonable opportunity to take the meal break, without impeding or discouraging the employee from doing so. Op at 7.
  • Instead, under Washington law, an employee establishes a prima facie case of a meal break violation if the employee “did not receive a timely meal break.” Op. at 7.
  • Then, the employer has the burden to prove that “no violation occurred or a valid waiver exists.” Op. at 7.

KEY TAKE AWAY: Washington is tougher than California on meal breaks. Employers should continue to ensure that employees take required meal breaks. If an employee elects to waive that right, then the best practice is to obtain a written waiver signed by the employee.

Plaintiffs in ERISA employee benefit cases are frequently asserting breach of fiduciary duty claims, and then seeking broader discovery.

So, consider early motions to dismiss the breach of fiduciary duty claims.

One argument to use in seeking early dismissal of breach of fiduciary duty claims is the ministerial defense: That is because “[a] person who performs purely ministerial functions…for an employee benefit plan within a framework of policies, interpretations rules, practices and procedures made by other persons is not a fiduciary….” 29 C.F.R. Section 2509.75-8(D-2).

The recent case that highlights the point is Turner v. Volkswagen Group of America, Inc., 2017 WL 3037803 (S.D. West Virginia July 18, 2017)(“ERISA fiduciary status is conferred by the function performed—not the position of the entity performing the duty.”)

FACTS: Keith Turner sought ERISA-governed long term disability benefits, and after his death Karen Turner sued seeking ERISA-governed life and survivor benefits, and asserting a breach of fiduciary duty claim. Defendants moved to dismiss a number of claims, including the breach of fiduciary duty claim.

ISSUE: Whether the Court should GRANT Defendants’ Rule 12(c) motion to dismiss the breach of fiduciary duty claim.

HELD: Breach of Fiduciary Duty Claim Dismissed. (The Court ruled on other issues, including the fiduciary duty claim).

  1. “A person who performs purely ministerial functions…for an employee benefit plan within a framework of policies, interpretations rules, practices and procedures made by other persons is not a fiduciary because such person does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of the assets of the plan, and does not render investment advice with respect to any money or other property of the plan and has no authority or responsibility to do so.” (Emph. added). Op. at 16-17.
  2. “Plaintiff alleges that the defendants breached fiduciary duties by failing to advise her of her rights under the benefits plan, failing to advise Mr. Turner of his rights under the plan while he was alive, and sending the plaintiff and Mr. Turner erroneous statements that he continued to have life insurance under the plan. None of the conduct alleged by the plaintiff constitutes management or administration of the plan.” Op. at 17 (Emph. added).
  3. “[F]ailing to notify a claimant that he was no longer eligible for life insurance was a ministerial function.” Op. at 17.
  4. “Although the plaintiff argues that Volkswagen’s conduct constitutes a breach of fiduciary duty because it is both the payor and adjudicator of claims, ERISA fiduciary status is conferred by the function performed—not the position of the entity performing the duty.” Op. at 17-18 (Emph. added).
  5. “Here, the functions on which the plaintiff bases her breach of fiduciary duty claim are ministerial [and the breach of fiduciary duty claim is dismissed.]” Op. at 18.

You know that in typical ERISA disability benefit claims, the claim administrator first determines whether claimant’s disability prevents the claimant from performing claimant’s current, “own occupation.”

Then, after a period of time (52 weeks for example), the claims administrator assesses whether the claimant can perform “any occupation.” If the claimant can perform “any occupation,” then the disability benefits end.

So, what happens when a claimant’s physical restrictions render the claimant able to perform only part-time work?

Does the ability to perform only part-time work mean the claimant can perform “any occupation,” making the claimant ineligible for disability benefits? YES.

Here’s the case of Kott v. Agilent Technologies, Inc., 2017 WL 2903174 (N.D. Cal. July 7, 2017).

FACTS: Kott sought and was granted ERISA-governed disability benefits due to back and foot pain. Under the plan, after 270 days receiving disability benefits an assessment was made whether Kott could perform “any occupation.” An independent medical evaluation determined Kott could perform part-time work, up to 20 hours per week without accommodation, and could return to full-time work within six months with a work-station which accommodated her need to sit and stand.

ISSUE: Whether Kott’s ability to perform part-time work precludes entitlement to “any occupation” benefits.


  1. “[A] claimant capable of working 20 hours per week is not unable to work in ‘any occupation’ and thus not entitled to disability benefits beyond the ‘own occupation’ benefit.” Op. at 14 (Emph. Added).
  2. “While the Ninth Circuit has not finally decided the issue, most if not all other circuits are in accord.” Op. at 14.
  3. “[T]he Court need not reach the part-time work issue in this case because there is evidence in the record showing that Kott could return to full-time work as early as February 2016.” Op. at 15.

NOTE: Pay close attention to the definition of “disability” because many plans and policies include an income factor.

You already know that most ERISA plans allow the Plan to reduce or offset long term disability payments by amounts the disabled worker receives from workers compensation or Social Security.

But it is trickier when you try to offset payments received from lump sum personal injury settlements. Some ERISA Plans have “presumed allocation for offset” provisions that help determine how much of a lump sum settlement can be offset.

But some state statutes “conclusively establish” how to allocate lump sum personal injury settlements, which complicates things.

Here’s the case of Arnone v. Aetna Life Insurance Company, 2017 WL 2675293 (2nd Cir. June 22, 2017)(New York state statute, governing lump sum personal injury settlements, prohibited offset of ERISA-governed long term disability benefits.)

FACTS. Arnone, an account executive for Konica, obtained ERISA-governed disability benefits after slipping and falling in a puddle. Aetna then properly reduced benefit payments by worker compensation and Social Security benefits received, lowering his monthly payment to $114 per month.

But then Arnone received an $850,000 lump sum personal injury settlement. The ERISA plan contains a “50% provision,” which states that when a lump sum personal injury settlement is not apportioned between pain and suffering, medical expenses or lost income, then “50% will be deemed to be for disability.”

Aetna determined this provision reduced its obligation by $275,550. Arnone argued however, that New York Statute 5-535 (which presumes that personal injury settlements do NOT include loss of earnings) precluded Aetna from offsetting 50% of the settlement amount. When suit was filed, Aetna also brought a $40,000 counterclaim for overpayment.

DISTRICT COURT HELD: Summary Judgment for Aetna. The New York statute did not apply; Connecticut law governed.

SECOND CIRCUIT HELD: REVERSED: New York Statute Determined Allocation of Lump Sum Settlement; Offset Prohibited

  1. New York Statute 5-535 establishes a “conclusive presumption” that personal injury settlements “do not include…loss of earnings…” Op. at 13. (Emphasis added.)
  2. Section 5-335 is saved from express ERISA preemption. Op. at 15.
  3. The Plan’s Choice-of-law provision, which states that the Plan will be “construed” in accordance with Connecticut law, “does not encompass the matter at issue in this case…. Section 5-335 is not a statute of contract construction or of contract interpretation….and does not modify how benefit plans are ‘construed.’ It provides a rule to which all contracts between an insurer and an insured must adhere.” Op. at 16.
  4. The Court concluded “Aetna erroneously overlooked the law’s provisions when it acted on its conclusion that 50 percent of the net proceeds from Arnone’s personal injury settlement were “for disability” such that Aetna was permitted to reduce Arnone’s disability benefits in offset.” Op. at 21.