08 | 23 | 2006 Posted By John Wood

Claims Arising Out of Disputed Medical Evaluation Not Preempted by ERISA

Insurance carriers handling ERISA disability cases often require claimants to be evaluated by doctors that have been selected and paid by the carriers.  Typically, an insurance carrier will hire a doctor to examine the claimant and give opinions about the claimant’s diagnosis, limitations, and prognosis.  Carriers often use the reports from these evaluations as the basis for denying disability benefits.  There are now companies that help the insurance carriers select physicians, set-up evaluations, and process the paperwork.  In Hall v. MLS National Medical Evaluations, Inc., 2006 WL 2367139 (E.D. Ky. Aug. 15, 2006), the actions of one such company have come under fierce attack. 
 
Although the facts are hotly disputed, the court summarized them in the light most favorable to the plaintiff for purposes of MLS’s motion for summary judgment:
The plaintiff, Terry Hall, worked for Sonoco Products, Inc. from 1999 through 2001.  In 2001, he began experiencing back problems and, later that year, started receiving long-term disability benefits under the terms of his company's long-term disability plan (the “Plan”).  In 2003, to ensure that he still qualified for benefits, the Plan administrator, Wausau Benefits (“Wausau”), asked Hall to submit to an independent medical examination.  Wausau contracted with the defendants, who facilitated the examination.  In turn, the defendants contracted with Dr. James Templin, who examined Hall and prepared a written report.  Rather than have Templin send this report directly to them, the defendants requested that Templin dictate his findings via the telephone.  This dictated report was then transcribed and forward to Wausau.  However, this report differed from that prepared by Templin in several respects.  Hall claims that the defendants intentionally altered Templin's report to make it appear that Hall was no longer disabled under the terms of the Plan. Chief among these alterations was the inclusion of the statement, “Mr. Hall would be most suitable for sedentary work.”
Wausau relied on the defendants' work product and terminated Hall's benefits.  After a successful administrative appeal, Hall's benefits were reinstated.  However, this process was not without cost to Hall, who hired an attorney using a contingency-fee agreement.  Because Hall believes that his benefits would not have been suspended if not for the defendants' actions, he has brought suit alleging an array of statutory and common-law torts.  His chief item of damages is his attorney's fees-one-third of his future disability benefits-from the administrative appeal. The defendants argue that they are entitled to summary judgment on all of Hall's claims.  Specifically, they argue that Hall's claims are preempted by the Employee Retirement Income Act (“ERISA”), and that, in any case, Hall cannot establish a prima facie case as to any of his state law claims.
Ruling on MLS’s summary judgment motion, the federal district court ruled that the plaintiff’s claims are not preempted by ERISA.  The court rejected these three main arguments for ERISA preemption offered by MLS: (1) that the claim for recovery of his one-third contingency attorney’s fees improperly sought to circumvent ERISA and its fee-shifting provisions; (2) that ERISA preempts all common-law claims; and (3) that ERISA preempts the plaintiff’s statutory claims as well.  As the court held,

Nothing requires a plaintiff to pursue a remedy against any particular defendant.  It is not a defense to point the finger at another entity.  That a plaintiff might have a claim under ERISA against an ERISA entity does not preclude him from bringing state law claims against a non-ERISA entity.  Nor does a plaintiff improperly circumvent ERISA by referencing an ERISA plan.  (citations omitted.)  Additionally, the cases cited by the defendant are distinguishable in that they deal with benefits owed under the terms of an ERISA plan.  In this case, the plaintiff claims a right to damages as a result of an independent breach of a duty of care.  Similarly, Curry [v. Cincinnati Equitable Co., 834 S.W.2d 701 (Ky. App. 1992)] holds that ERISA preempts statutory claims where the plaintiff has filed suit against a traditional ERISA-plan entity.  It does not extend to cases, such as this one, where the plaintiff seeks to recover from a non-ERISA entity.  As ERISA does not preempt the plaintiff's claims, the defendants are not entitled to summary judgment for this reason.

The court went on to dismiss a number of the plaintiff’s claims, such as those for outrage, breach of fiduciary duty, negligent misrepresentation, and violations of Kentucky’s fraudulent insurance act and consumer protection act, but not because of ERISA preemption.  In the end, the court allowed the plaintiff to pursue his claims for intentional interference with contractual relations, fraudulent misrepresentation, bad faith, and punitive damages,   The court made no judgment about the merits of the available claims, but instead stated that the plaintiff could pursue them in court based upon the disputed materials facts.  I will follow this interesting case and provide updates.