Erisa and Disability Benefits Law Blog

Myrtle McGee worked as a restaurant general manager.  She received short-term and long-term disability benefits under her employer’s ERISA plan.  The long-term disability portion of the plan paid benefits during the first 24 months under an “own occ” standard and afterwards under an “any occ” standard.  The plan also limited benefits to 24 months for disabilities caused or contributed to by a mental or nervous condition.

Near the end of the 24-month benefit period, the claims administrator, VPA, Inc.,  hired an outside physician to perform an evaluation of McGee.  The physician apparently concluded that McGee was able to perform sedentary work.  VPA also obtained a “Functional Capacity Evaluation” and an “Employability Assessment” that supported VPA's position that McGee was capable of performing sedentary work.

Based on these opinions, VPA terminated McGee’s benefits, stating that after the initial 24-month period she would no longer meet the plan’s definition of “totally disabled.”  VPA denied McGee’s internal appeal, and she filed suit in federal court.

Applying the arbitrary and capricious standard of review, the federal district court ruled in favor of the plan.  The court analyzed the case as follows: 

VPA obtained three separate evaluations: the IME performed by Dr. Changaris; the Functional Capacity Evaluation performed by Healthsouth, and the Employability Assessment performed by CorVel.  The IME concluded that Plaintiff was incapable of light duty, but it did not rule out occupations requiring only the sedentary physical demand level.  The Functional Capacity Evaluation concluded that Plaintiff was capable of performing occupations requiring a sedentary physical demand level, and the limitations it found were consistent with those recommended by the IME.  Finally, the Employability Assessment concluded that Plaintiff could find jobs with low physical demands.  These evaluations strongly support VPA's decision to terminate benefits under the Plan's specific guidelines.  Plaintiff does not argue that this Court should ignore or completely discount these evaluations due to any independent circumstances.

 

Plaintiff's only submission in support of her claim for continued benefits was a letter from her treating physician dated January 26, 2005 stating his belief “that the patient is totally disabled.”  However, her treating physician provided no explanation whatsoever for the opinion that she was totally disabled and his opinion is not stated to a reasonable degree of certainty within the medical profession.  Plaintiff does not make a persuasive argument that this brief letter overcomes the weight of Defendant's evidence supporting its decision to deny benefits.

The cite is McGee v. YUM!Brands, Inc., 2006 WL 2631976 (W.D. Ky. Sep. 12, 2006).

The claimant, Rose Wood, left work in 1999 due to carpal tunnel syndrome.  She began to receive short-term disability benefits under her employer's plan.  Her condition continued to worsen.  She later had surgery on her back, leading to a number of additional complications.  After exhausting her short-term benefits, she transitioned to the long-term portion of the plan. 

The long-term disability plan consisted of two phases.  Under the first phase, claimants were entitled to benefits for seven months if they were unable to perform one or more of their essential duties and continuing benefits from months seven through twenty-nine if they were unable to perform any substantial gainful work.  Then, under phase two (an optional coverage that employees could elect and that was insured by Prudential), claimants were entitled to continuing benefits beyond twenty-nine months if they were unable to perform the material and substantial duties of any job for which they were reasonably suited.

The claims administrator initially denied Wood's claim for benefits during the first phase, citing the opinion of a consulting physician.  However, the plan eventually agreed to pay benefits during that period.  Prudential then denied benefits to Wood under the second phase of the plan.  After two internal appeals, Wood sued in federal court.  The court previously ruled that the de novo standard applied to the decision to deny benefits.  The parties filed cross-motions for summary judgment on the merits.

Ruling on the cross-motions, the court held that any "reasonable trier of fact would find Wood to be disabled."  The court analyzed the evidence as follows:

There is no factual dispute that Wood was diagnosed with carpal tunnel syndrome in 1999, that she underwent spinal surgery in 2000, and that she continues to suffer pain and numbness in her hands to this day.  The reports of all of the physicians who actually examined or treated her support her disability claim, with the exception of the report of Dr. Teitel, who examined Wood at the Plan's request when she sought first phase LTD benefits.  Even Dr. Teitel did not find that Wood was malingering or exaggerating her symptoms.  He stated that the recommendations of Wood's treating physicians were 'appropriate in terms of limiting her discomfort but not an absolute limitation because it is not clear that these activities will produce damage to tendons, joints, muscle or nerve.'  The policy's definitions do not, however, exclude disability on the basis of pain and do not require that activities cause damage to tendons, joints, muscle or nerve before they qualify as limitations.

Dr. Ito, the Plan's consulting doctor who did not examine Wood, did not dispute Wood's diagnoses or the findings of pain, weakness and numbness documented by numerous doctors over time.  However, Dr. Ito apparently discounted Wood's pain limitations on the basis that they were not supported by objective testing. The policy's definitions do not require the type of direct test support that Dr. Ito apparently required to support Wood's pain complaints and other limitations.

The only vocational counselor who actually met with Wood, Sandra Richter, concluded that she is totally disabled.  Ms. Richter met with Wood during the evaluation process for first phase LTD benefits.  The two vocational reports that were generated during the evaluation process for second phase LTD benefits were prepared without meeting with Wood.  One of those reports concluded that Wood could perform her own job, while the other report concluded that she could perform other occupations.  Both reports were prepared based upon limitations that did not include limitations on use of extremities.  It appears that the decision to omit limitations on use of extremities was made by a physical therapist who reviewed Wood's file but did not actually examine Wood.  Neither of the vocational reports upon which Prudential relied contained any analysis of the “gainful employment” language in Prudential's policy, which provided that “gainful occupation” means an occupation that provides at least sixty percent of pre-disability earnings.

in addition, the court rejected Prudential's attempt to limit the claims file to the materials relating specifically to phase two benefits.  The court agreed with Wood that the plan “should have reviewed Wood's entire claim file in order to make a full and fair determination regarding her disability claim, and that the documents in question thus properly are part of the administrative record even if the plan administrator chose not to review them.  Moreover, the Court concludes that Wood's entire file, including all of her medical records, are necessary to conduct an adequate de novo review of the benefits decision.”

The cite is Wood v. Xerox Corp. Long-Term Disability Income Plan, 2006 WL 2595950 (N.D. Cal. Sep. 11, 2006).  

Carla Pippin stopped working due to a medical condition in January 2002.  She began receiving ERISA disability benefits from her employer’s plan.  The third-party claims administrator, Broadspire Services, terminated Pippin’s benefits approximately two years later under the plan’s “any occ” definition of disability. 

After Broadspire denied Pippin’s internal appeal, she filed suit seeking past-due and future benefits from the plan.  Broadspire moved to dismiss, arguing that it was not a proper defendant under ERISA because it did not shoulder any financial responsibility for paying claims under the plan.  Broadspire contended that the employer and the plan itself were the proper defendants.  Pippin asserted that Broadspire was a proper party because it had authority to accept and deny claims under the plan.

The court denied Broadspire’s motion to dismiss, holding in part as follows:

The proceedings in this case are at a very early stage.  Having accepted all well pleaded facts, made all reasonable inferences in plaintiff's favor, and made a liberal reading of the complaint, we do not find that dismissal of the lawsuit would be proper.  Indeed, we must accept Pippin's assertion that Broadspire had the authority to determine the final review of her claim for disability benefits.  As Pippin contends that Broadspire maintains discretionary authority over the plan, Broadspire is a fiduciary to the plan, and therefore was properly named as a defendant.  Accordingly, the defendant's motion to dismiss the plaintiff's complaint against the plan administrator should be denied because the defendant as movant for dismissal under Rule 12(b)(6) has not met its burden to prove that the plaintiff ‘can prove no set of facts in support of his claim which would entitle him to relief.’

The cite is Pippin v. Broadspire Services, Inc., 2006 WL 2588009 (W.D. La., Sep. 8, 2006).

In Tabatabai v. Hewlett-Packard Co. Disability Plan, 2006 WL 2547762 (N.D. Cal. Sep. 1, 2006), a federal court in California clarified the standard of review that applied to the defendant’s decision to deny ERISA benefits.  As discussed several times on this blog, the selection of the standard of review is an important, and often litigated, aspect of ERISA benefit litigation.

Here, after the plan administrator denied Tabatabal’s claims for disability benefits, she filed suit under ERISA.  By way of a motion filed by the plan, the court considered the parties arguments regarding the applicable standard of review.

Quoting the U.S. Supreme Court’s decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), the court stated that a denial of benefits is “to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.”   Tabatabai did not dispute that the plan vested discretionary authority to the administrator, but argued that the denial of her appeal was untimely, thus triggering the de novo standard. 

The court quoted the Ninth Circuit’s recent decision in Abatie v. Alta Health & Life Ins., 2006 WL 2347660 (Aug. 15, 2006), for the proposition that “a procedural irregularity does not usually justify de novo review.”  Instead, the Abatie court held that a procedural irregularity, “like a conflict of interest, is a matter to be weighed in deciding whether an administrator’s decision was an abuse of discretion.”  According to the Abatie court, only when “an administrator engages in wholesale and flagrant violations of the procedural requirements of ERISA, and thus acts in utter disregard of the underlying purpose of the plan as well,” is de novo review appropriate.

Although the administrator took more time than the plan allowed to decide the appeal, the court concluded that the administrator’s delay was not a “wholesale and flagrant” violation.  Instead, the administrator acted in good faith.  The administrator apparently had difficulty reaching Tabatabai during the appeal and suspended the appeal while seeking additional information.  In addition, Tabatabai informed the administrator that she would not be able to communicate with the administrator for several months.  In the words of the court, the administrator “was faced with a situation in which a claimant appealed and then disappeared.” 

In Richardson v. Foundation of Health, 2006 WL 2524176 (D.N.J. Aug. 30, 2006), a federal court in New Jersey upheld an ERISA plan’s termination of benefits.  The claimant, Ann Richardson, applied for long-term disability benefits after a car wreck.  Her treating physicians diagnosed her with herniated discs at the C3-C4 and C5-C6 levels, radiculopathy, post-traumatic carpal tunnel syndrome, and other problems.  The plan, in turn, obtained reports from three physicians who examined Richardson for purposes of the claim.  The plan discontinued benefits after receiving the reports from these evaluating physicians.

Richardson appealed the termination of benefits, but did not submit additional information as part of the appeal.  The plan denied her appeal, stating that the “duration of symptoms without objective evidence to support them does not support the inability to function at a sedentary level occupation.”  The plan later reopened the claim when Richardson submitted information that her vision has worsened as a result of diabetic retinopathy and macular edema.  She also submitted additional evidence regarding her spinal condition, including an MRI that showed central spinal stenosis and bilateral spondyloarthritis.  The plan continued to deny benefits, concluding that there was no objective proof of functional limitations. 

Richardson also received an award of Social Security disability benefits.  After receiving evidence of the award, the plan sent Richardson’s claim file to the Medical Review Institute, which concluded that the records did not show that Richardson was unable to perform her prior job. 

Richardson filed suit in a New Jersey state court.  The plan defendants removed the case to federal district court under ERISA.  Applying the arbitrary and capricious standard of review, the district court held as follows: 

After its review of the record, the Court is unable to conclude that Defendants' decision was unreasonable or unsupported by the record.  Defendants complied with the terms of their policy, considered each of Plaintiff's submissions appealing their decision, and gave reasons for their findings based on evidence in the record. Defendants were not bound by the opinion of Plaintiff's treating physician.  Black & Decker Disability Plan v. Nord, 538 U.S. 822, 825 (2003) (holding “that plan administrators are not obliged to accord special deference to the opinions of treating physicians”).  Nor were Defendants bound by the determination of the Social Security Administration.  Russell v. Paul Revere Life Ins. Co., 148 F.Supp.2d 392, 409 (D.Del.2001) (noting that a “plan administrator is in no way bound by the determination of the Social Security Administration”).  As a result, the Court grants summary judgment to Defendants.

The claimant, Deborah Donovan, left work in 1993 due to back pain and degenerative disc disease.  Her employer’s ERISA plan paid her long-term disability benefits for ten years.  The Social Security Administration awarded her disability benefits in 1994.  The claim administrator for the self-funded plan eventually terminated her disability benefits, stating that there was insufficient objective evidence to support her claim.  Donovan’s internal appeals were denied, and she filed suit under ERISA.

The federal district court reversed the plan’s decision to terminate benefits and ordered the plan to reinstate benefits.  On appeal, the Fourth Circuit affirmed the judgment of the district court, holding that the plan had abused its discretion in terminating benefits.  In its analysis, the Court weighed the various evidence contained in the claims file, including test results and affidavits from treating providers. 

As an example, the Court found that the plan disregarded a treating physician’s affidavit stating that Donovan’s Functional Capacity Evaluation was “not an accurate indicator of her ability to work on a consistent basis” and confirming that Donovan was totally disabled.  The Court concluded that the plan instead latched onto that same physician’s earlier statement that Donovan could perform sedentary work with limitations.  The Court reasoned that the physicians’ earlier statement was based on incomplete information and that his later affidavit was supported by other medical evidence.

The cite is Donovan v. Eaton Corp. Long Term Disability Plan, 2006 WL 2530393 (4^th Cir. Sep. 5, 2006).  Click here to read the opinion.

In McNerney v. Safeway, Inc., 2006 WL 2506399 (W.D. Wash. Aug. 28, 2006), the plaintiff asserted a number of employment-related claims against the defendants (including apparently her employer), including gender and disability discrimination, hostile work environment, and retaliation.  McNerney also alleged that the defendants were liable for breach of contract, fraud, misrepresentation, and negligence with regard to her long-term disability insurance coverage.  She claimed that the defendants stopped making premium payments on her disability coverage without giving her notice.  She argued that the defendants lied to her about the purported lack of disability coverage and that she had no choice but to accept a severance agreement based on the defendants' misrepresentations.  

After the defendants removed the case to federal court, based on their argument that ERISA preempted her disability insurance claims, McNerney filed a motion to remand the case back to state court.  The federal court agreed with McNerney, analyzing the preemption issue as follows:

ERISA preemption is based on the following provision: “[e]xcept as provided in subsection (b) of this section, the provisions of this subchapter … shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by the statute.  29 U.S.C. § 1144(a).  None of the subsection (b) exceptions are at issue here.  With regard to this “related to” provision, the Supreme Court has clarified that state laws are not preempted if they have only a “‘tenuous, remote or peripheral’ connection with covered plans.” New York State Conference of Blue Cross and Blue Shield Plans v. Travelers Insurance Co., 514 U.S. 645, 661 (1995).  ERISA preemption analysis begins with the presumption that Congress did not intend to supplant state law.  Id. at 654.  In considering whether state law claims are preempted, this Court should focus on the “objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive.” Id. at 656.

Following Travelers, the Ninth Circuit analyzed the “relates to” criterion by determining whether a state law has a “connection with” or a “reference to” employee benefit plans.  Southern California IBEW-NECA Trust Funds v. Standard Industrial Electric Co., 247 F.3d 920, 925 (9th Cir.2001).  In determining whether a connection exists, the Ninth Circuit looks to the objectives of ERISA and the “nature of the effect of the state law on ERISA plans.”  Id.  The following factors were identified as significant to the determination as to whether a state law is “connected with” an ERISA plan: (1) whether the state law regulates the types of benefits; (2) whether the state law requires the establishment of a separate employee benefit plan to comply with the law; (3) whether the state law imposes reporting, disclosure, funding, or vesting requirements for ERISA plans; and (4) whether the state law regulates certain ERISA relationships, including the relationship between the ERISA plan and the employer. Operating Engineers Health and Welfare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 678 (9th Cir.1998); quoting Aloha Airlines, Inc., v. Ahue, 12 F.3d 1498, 1504 (9th Cir.1993).

....

The state law claims of breach of contract, fraud, misrepresentation, and negligence regarding the long term disability insurance are in no way related to or connected with the terms of the benefit plan itself.  None of the four factors enumerated above is present; the state law claims here do not in any way implicate the funding, disclosure or regulation of the benefits plan. In considering the claims, the Court need not even look at the disability insurance plan itself.  Plaintiff simply claims that defendants improperly and without notice stopped deducting the payments to fund her coverage, and then lied or misrepresented the status of her coverage.  These claims have only a “tenuous, remote or peripheral' connection” with the terms of the disabilty insurance plan.  Travelers Insurance Co., 514 U.S. at 661. These are thus not within the scope of state laws which Congress intended to supplant by ERISA.  Id. at 654.  Indeed, the objective of the ERISA statute to provide coverage for employees is furthered by application of the state's tort and contract laws here. Id. at 656. These claims are thus not preempted.

For ten years, Maria Zdzienicki apparently maintained to her employer, Con Edison, that she was born in 1939.   She provided Con Edison with sworn documents, such as immigration papers, confirming this to be true.  Years later, when her pension benefits were about to begin, she reportedly told the company that she had actually been born five years earlier, in 1934.  She claimed that she was therefore entitled to a larger pension benefit.  In support of this claim, she submitted copies of her Polish birth certificate, Polish marriage license, and Polish passport.  The administrator of the Con Edison pension plan denied her request for additional benefits, reasoning that there was sufficient evidence in the record to conclude that she was born in 1939, regardless of what the Polish documents indicated.   

Zdzienicki sued in federal court under ERISA, arguing that the plan administrator’s decision was arbitrary and capricious.  The parties stipulated that the administrator did not attempt to investigate the authenticity of the Polish documents.  Both sides filed cross-motions for summary judgment.  Zdzienicki conceded that the plan granted discretionary authority to the administrator to determine eligibility for benefits, decide factual questions, and resolve issues regarding plan administration.

In ruling for the defendants, the federal court found that “the plan administrator’s decision to calculate Zdzienicki’s pension benefits was not arbitrary and capricious and therefore did not violate ERISA.”   The court explained that the administrator’s decision 

was supported by voluminous documentary evidence, including Zdzienicki’s sworn statement at the outset of her employment, her United States government issued Certificate of Naturalization, her New York State driver's abstract, her diploma from the Warsaw University of Technology, her 1990 COBRA forms, her employment authorization form and her 1993 medical laboratory reports.  Also supporting the decision was the fact that Zdzienicki did not attempt to ‘correct’ Con Edison's records of her date of birth until April 2003, when her pension payments were about to begin-this was 23 years after she first attested to the company that she was born on July 30, 1939.  It would not have been unreasonable for the plan administrator to conclude that if Zdzienicki were truly born in 1934, she would have informed the company of that fact in 1990, when it twice sent her forms showing that her pension benefits would be calculated using 1939 as her year of birth, or at least in 1999, when, had Zdzienicki been born in 1934, she would have turned 65 and thus would have been entitled to pension payments at that time.  Thus, 'a reasonable mind' could view the evidence in the administrative record 'as adequate to support the conclusion' that Zdzienicki was born on July 30, 1939.

The cite is Zdzienicki v. Consolidated Edison Co. of New York, 2006 WL 2482668 (S.D.N.Y. Aug. 29, 2006).

Litigants in ERISA cases often dispute the standard of review that the court should apply in evaluating a plan’s denial of benefits.  Under the seminal case of Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989), the U.S. Supreme Court held that the de novo standard applies “unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.”  In Ushakova v. AIG Life Ins. Co., 2006 WL 2473473 (W.D. Wash. Aug. 28, 2006), an ERISA case decided this week by a federal court in Washington State, the defendant argued that plan language requiring "due written proof of the loss" was sufficient to trigger the arbitrary and capricious standard of review.  The federal court disagreed, holding as follows:

The administrator has to show that the plan unambiguously gives it discretionary authority in order to get judicial deference to its decision.  Kearney v. Standard Insurance Co., 175 F.3d 1084, 1089 (9th Cir.1999) (en banc).

Although Defendant does not clearly identify itself as the as the plan's administrator, the letters denying Plaintiff initial claim and appeal make comments from which this is reasonably implied.  For example, Defendant's letter denying Plaintiff's appeal states that the “denial of this appeal is a final plan administration decision.”  The first step in resolving these motions, then, is to determine whether the plan confers discretion on Defendant, and thus what standard of review is appropriate.

Defendant does not point out, nor is the Court aware, of a provision in the plan conferring discretion on defendant to “determine eligibility for benefits or to construe the terms of the plan.”  Firestone at 115.  The plan's “Claims Provisions” section provides that “[b]enefits payable under this Policy for loss other than loss for which this policy provides any periodic payment will be paid immediately upon the Company's receipt of due written proof of the loss.”  The phrase “due written proof of the loss” is subject to various interpretations, and the plan does not indicate who judges whether the proof of loss is    adequate.  The phrase is therefore ambiguous, and does not grant the Defendant discretion either to “determine eligibility for benefits or to construe the terms of the plan.”  See Kearney v. Standard Insurance Company, 175 F.3d 1084, 1089 (9th Cir.1999) (finding the phrase “satisfactory written proof” in ERISA plan ambiguous and therefore did not grant administrator discretion).  Accordingly, review of Defendant's decision to deny Plaintiff's claim will be reviewed de novo.

(Docket citations omitted.)  The court went on to deny the defendant’s motion for summary judgment as to whether benefits were payable under the accidental death and dismemberment plan.  The court found that there were disputed questions of material fact as to the cause of the decedent’s death.

In Trustees of the Construction Industry and Laborers Health and Welfare Trust v. Redland Ins. Co., 2006 WL 2494038 (9^th Cir. Aug. 30, 2006), the Ninth Circuit addressed whether fees generated by non-lawyers, such as paralegals and law clerks, can be recovered by pension trustees that prevail in lawsuits to collect past-due benefit contributions under U.S.C. § 1145.  ERISA provides for the mandatory award of “reasonable attorney’s fees and costs” to pension plans who recover under § 1145.

In this case, after prevailing on the merits, the joint trustees sought to recover their “reasonable attorney's fees and costs of the action” under § 1132(g)(2)(D).  The district court granted part of the fees, but did not permit recovery for work done by non-lawyers.  The court also did not allow recovery of expenses arising from the litigation.  The joint trustees appealed these rulings. 

In reversing the district court, the Ninth Circuit quoted with approval the U.S. Supreme Court holding in Missouri v. Jenkins, 491 U.S. 274 (1989):

Clearly, a “reasonable attorney's fee” cannot have been meant to compensate only work performed personally by members of the bar.  Rather, the term must refer to a reasonable fee for the work product of an attorney.  Thus, the fee must take into account the work not only of attorneys, but also of secretaries, messengers, librarians, janitors, and others whose labor contributes to work product for which an attorney bills her client; and it must also take account of other expenses and profit.

Based on the Jenkins decision, the Ninth Circuit reasoned as follows:

If the attorney's hourly rate already incorporates the cost of work performed by non-attorneys, then courts should not compensate for these costs as an additional “reasonable attorney's fee.”  The key, wrote the [Jenkins] Court, is the billing custom in the ‘relevant market.’ [Jenkins] at 288.  Thus, fees for work performed by non-attorneys such as paralegals may be billed separately, at market rates, if this is ‘the prevailing practice in a given community.’ Id. at 287.  Indeed, even purely clerical or secretarial work is compensable if it is customary to bill such work separately, id. at 287 n. 9, though such tasks ‘should not be billed at the paralegal rate, regardless of who performs them.’ Id. at 288 n. 10.

The Ninth Circuit thus concluded as follows:

If fees for work performed by non-attorneys are customarily billed separately in the relevant market, those fees are recoverable as “reasonable attorney's fees” under 29 U.S.C. § 1132(g)(2)(D).  Similarly, if the expenses specified by the Joint Trustees in this case are customarily billed separately, they are recoverable as “reasonable attorney's fees” under the same section.  We therefore reverse the judgment of the district court and remand for further proceedings consistent with this opinion. 

This is an interesting ERISA disability case out of Wisconsin.  The plaintiff, Mark Holoubek, suffered from the effects of fibromyalgia and chronic headaches diagnosed by his physicians.  He eventually left his job as a materials manager for Johnson Controls, Inc. 

Holoubek engaged in a lengthy battle with Unum Life Insurance Company of America, the plan administrator, over his entitlement to benefits.  Unum paid Holoubek for over two years, but then terminated his disability claim.  Unum relied on opinions from its in-house physician, a clinical consultant, and a nurse.  The company obtained surveillance that it claimed showed Holoubek performing activities that were inconsistent with his reported limitations.  Holoubek submitted several internal appeals before filing suit in federal court.

The court held that Unum's termination of benefits was arbitrary and capricious.  It reasoned that the contents of the record at the time of the initial denial actually supported the continued payment of benefits.  Moreover, although surveillance showed Holoubek doing things such as operating a forklift at an apartment construction worksite, the court found that the surveillance did not provide a justification for claim termination.  During the appeals process, Holoubek described his situation as "desperate" and explained that he had worked because he feared losing his financial investment in the apartments under construction.  Statements of persons from the worksite indicated that Holoubek had doubled-up on his medication and that, while working, he would lose his place in discussions, repeat himself, and suffer muscle spasm, dizziness, and headaches.  

Quoting Hawkins v. First Union Corp. Long-Term Disability Plan, 326 F.3d 914, 918 (7th Cir. 2003), the court ruled that a desperate person might "force himself to work despite an illness that everyone agree[s] [is] totally disabling."  The court stated that "even a desperate person may not be able to maintain such a level of effort indefinitely.  Accordingly, [Unum's] four days of surveillance is of little value because it fails to demonstrate that [Holoubek] could sustain such a level of activity on a continuous basis."

The court ordered Unum to pay Holoubek’s past-due benefits and reinstate his ongoing benefits.  The court dismissed Unum's counterclaim to recover an alleged overpayment of benefits resulting from his receipt of Social Security disability benefits.  The court concluded that Unum was impermissibly seeking legal relief, rather than equitable relief, under ERISA. 

This case is worth reading in its entirety.  The cite is Holoubek v. Unum Life Ins. Co. of Amer., 2006 WL 2434991 (W.D. Wis. Aug. 22, 2006).

James O'Rear, a 63 year-old former employee of Lockheed Martin, submitted a claim for long-term disability benefits under his employer's ERISA plan.  He had physical problems due to a spinal-related condition.  The insurer paid disability benefits for approximately two years, during the "own occ" period, but then determined that O'Rear did not qualify under the “any occ” definition.  After exhausting the internal appeals process, O’Rear sued the insurer.  (The case caption identifies the defendant as "Unum Life Insurance Company of America," but the opinion refers to the defendant as "Paul Revere Life Insurance Company.")  The insurer moved for summary judgment. 

The court discussed the history of the claim: O”Rear had back surgery shortly after his “own occ” period began.  His treating doctor submitted three “Attending Physician Statements” stating that O’Rear could not work.  After the third Statement, the insurer began a vocation evaluation and determined that O’Rear could perform one of three occupations given his education, training, experience, and physical abilities.  In his appeal, O’Rear submitted a fourth statement from his doctor stating that O’Rear had constant hip pain and back pain and could not work.  In an “Estimated Functional Abilities Form,” the doctor also reported that O’Rear had increasingly worsening pain and that his condition was unlikely to get better.   

The insurer obtained an in-house medical review of the materials.  The reviewer found that no diagnostic tests or office notes existed to support the treating doctor’s conclusions.  The reviewer stated that the Estimated Functional Abilities Form showed “physical functional ability within the expected range for his [O'Rear's] clinical history.”  As a result, the insurer determined that there was inadequate evidence to reverse its decision.

Based on the contents of the claims file, the court summarily concluded that the insurer’s termination of benefits was not arbitrary and capricious.  In a footnote, the court stated that “the only evidence the court may consider are the contents of the administrative record.  [Citation omitted.]  O'Rear failed to reply to Paul Revere's Motion for Summary Judgment and thereby identify any favorable evidence contained in the record. In addition, despite several requests by Paul Revere to supply additional diagnostic and treatment information, O'Rear took no action.” 

The cite is O'Rear v. Unum Life Ins. Co. of America, 2006 WL 2457096 (W.D. La. Aug. 21, 2006).    

This case arises out of a disputed claim for life insurance benefits under an ERISA plan. 

Shortly after Michael Kehoe was diagnosed with prostate cancer, he elected to increase the amount of his life insurance benefits offered through his employer's plan.  He selected “additional life insurance 2 x the earning,” doubling the basic life insurance coverage that he already had in place.  His employer began deducting premiums each month for the supplemental coverage.

After Mr. Kehoe died a few months later, his wife made a claim for the life insurance proceeds.  Unum Life Insurance Company agreed to pay the regular benefit, but refused to pay the supplemental benefit.  Among other things, Unum Life claimed that it did not owe the additional benefit because Mr. Kehoe had not provided "evidence of insurability" as required by the plan.  

Mrs. Kehoe sued Unum Life and others to recover the supplemental benefit.  She argued that her husband’s employer knew about his prostate cancer and had received a physician's statement addressing the cancer diagnosis.  As a result, she argued that Unum Life did have evidence of insurability.  Unum Life countered that general knowledge about his cancer or the doctor's report did not equate to evidence of insurability.

The federal district court in Louisiana first considered the plan language regarding insurability.  The plan defined “evidence of insurability” as a “statement of your . . . medical history which Unum will use to determine if you . . . [are] approved for medical coverage.”  In addition, the Summary Plan Description stated that evidence of insurability is the same as “proof of good health.”  Based on this language, the court held in favor of the defendants:

Based upon the explicit language in the Plan and the Summary Description of the Plan, the Court is compelled to find that Unum did not abuse its discretion in determining that the evidence submitted by Mr. Kehoe was insufficient to qualify as “evidence of insurability.”  Essentially, evidence of insurability is evidence which suggests that Mr. Kehoe's health was sufficient to qualify him for additional coverage.  [Mr. Kehoe’s treating physician’s] report does not provide documentation of Mr. Kehoe's physical condition; rather, the report is brief and is limited to Mr. Kehoe's diagnosis with metastatic prostate cancer and his diminishing health.  The report details Mr. Kehoe's recent hospitalizations resulting from his condition, and further, notes his indefinite release from work.  This report does not reflect on Mr. Kehoe's “good health” and cannot qualify as evidence of insurability.  It is unreasonable to infer that Unum, as both insurer and claims administrator, would provide Mr. Kehoe with supplemental life insurance following his cancer diagnosis.

Similarly, Unum's alleged general awareness of Mr. Kehoe's diagnosis is insufficient to qualify as proof of good health. In effect, plaintiff's argument would shift the good health burden to Unum to prove Mr. Kehoe was not in good health. 

(Citations and footnotes omitted.)  For these and other reasons (including the finding that Unum Life also did not  approve any purported evidence of insurability as required by the plan), the court concluded that the denial of the supplemental life insurance did not constitute an abuse of discretion.  The cire is Kehoe v. Ryder Truck Rental, Inc., 2006 WL 2414197 (E.D. La. Aug. 17, 2006).

In Poniewierski v. Unum Life Assurance Company of America, 2006 WL 2385045 (E.D. Mich. Aug. 17, 2006), an ERISA disability lawsuit, the federal district court held in favor of the insurance carrier, Unum Life.  The plaintiff, Mark Poniewierski, sustained injuries at work while attempting to lift steel pieces.  Unum Life denied his claim for short-term disability benefits, finding that the short-term disability plan did not cover injuries caused by work-related injuries.

Poniewierski filed suit against Unum Life, arguing that he was entitled to long-term disability benefits and that Unum acted arbitrarily and capriciously in treating his claim as one for short-term disability benefits. 

Applying a de novo standard of review (due to the lack of any language granting discretionary authority to Unum Life), the court upheld Unum Life’s denial of benefits.  The court found that there was no evidence that Poniewierski had ever filed a claim for long-term disability benefits.  The court concluded that Unum Life’s decision to construe his application “as one for STD benefits was correct because the overwhelming weight of the evidence in the record indicates that Poniewierski filed for benefits under the STD policy” instead of the separate long-term disability plan.

Next, the court ruled that Unum Life’s denial of benefits was supported by the record.  Among other things, the court stated that the record showed that his injury was work-related and that such injuries were not covered by the short-term disability plan.

Finally, the court held that Poniewierski had failed to exhaust his administrative remedies (by failing to appeal Unum Life’s denial before filing suit) and had missed the applicable statute of limitations period.

There is sometimes confusion about the proper defendants to sue in an ERISA disability case.  Moreover, the law in the federal circuit courts is not entirely consistent on this point.  A federal district in Ohio, which is part of the Sixth Circuit, recently addressed this issue in Dirkes v. Continental Casualty Co., 2006 WL 2381444 (S.D. Ohio Aug. 16, 2006).

In Dirkes, the plaintiff, an anesthesiologist, initially filed suit against Continental Casualty Co., Charles Stedman & Co., Inc., and The Hartford Financial Services Group, Inc.  The plaintiff had worked at Anesthesia Associates of Cincinnati, Inc., before leaving his job due to a liver condition.  He sued Continental Casualty as the alleged underwriter of the plan; Charles Stedman & Co. as the administrator of the plan; and Hartford Financial Services as a fiduciary under ERISA.  He later amended his complaint to add the plan itself as a defendant.

Continental Casualty, Charles Stedman & Co., and Hartford Financial moved to dismiss the claims against them, arguing that they were not proper parties under ERISA.  The federal magistrate judge recommended granting the motion but allowing the plaintiff additional time to amend his complaint to add another entity, Hartford Life Group Insurance Company, as a defendant.

Upon review of the magistrate judge’s findings, the district court concluded that the plaintiff was apparently not objecting to the dismissal of Charles Stedman & Co. and Hartford Financial, but instead was objecting to the dismissal of Continental Casualty.  He argued, among other things, that the magistrate judge erred by “suggesting that an ERISA administrator/fiduciary (Continental Casualty Co.) has the unilateral authority to extract itself from fiduciary responsibilities and assign its fiduciary role to another entity without an explicit provision in the plan.”  The parties also disputed which plan document applied to the claim.

The court ruled that claims for ERISA benefits under 29 U.S.C. § 1132 “shall be made against the plan itself or the administrator or fiduciary.” (citing 29 U.S.C. § 1132(d)).  After identifying the applicable plan document, the court reasoned that the plan had been administered by CNA Group Life Assurance Company.  However, an endorsement to the plan stated that CNA changed its name to Hartford Life Group Insurance Company.  The court held that this name change was “not an unlawful assignment of fiduciary duties by CNA as Plaintiff suggests but, instead, is comparable to a corporate restructure.” 

As a result, the district court held that the proper defendants were the plan itself and Hartford Life Group Insurance Company.  The court dismissed the claims against the other defendants and granted 30 days for the plaintiff to amend his complaint to add Hartford Life as a defendant.

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.

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.

The claimant, Toni Dramse, worked for Delta Air Lines between 1984 and 2000.  She contacted Aetna Life Insurance Company in 2000 stating that she was suffering from the effects of her 1997 work-related injury.  The Administrative Committee of Delta Air Lines administered the Delta Family-Care Disability and Survivorship Plan.  The Committee delegated the initial disability decisions under the plan to Aetna.  Aetna initially authorized short-term disability benefits for Dramse for a few weeks.

In 2003, Dramse sought long-term disability benefits.  Aetna denied her request and provided Dramse with a 90-day appeal period.  Dramse appealed and submitted additional information.  Aetna reversed its denial in part, awarding additional short-term disability benefits but again denying long-term disability benefits.  Dramse appealed the denial of long-term disability benefits and submitted additional medical information.  Aetna reaffirmed its denial.  Dramse then appealed to the Committee, which upheld the denial of benefits.

In 2005, Dramse filed suit in federal district court under ERISA, seeking benefits, pre-judgment interest, attorneys’ fees, and a declaratory judgment.

The district court found that the plan conferred discretion on the Committee to interpret the plan, meaning that the court would review the benefits denial under an abuse of discretion standard.  After a lengthy analysis of the facts and medical evidence, the court concluded that the Committee abused its discretion in denying the claim.  The court stated: “The Committee’s factual finding that Plaintiff was not unable to work as of November 8, 2000, necessarily included a determination that Plaintiff was not physically or psychologically unable to work as of that date.  Although some record evidence supports a finding that Plaintiff was not physically unable to work as of November 8, 2000, Defendant has not cited to any record evidence that supports a finding that Plaintiff was not psychologically unable to work as of November 8, 2000, and there is significant contrary evidence.”  Therefore, as the court concluded, “Because the Committee’s conclusion that Plaintiff was not psychologically unable to work was not supported by the record evidence, the Court finds that the Committee abused its discretion.”

The court accordingly granted Dramse’s motion for summary judgment and ordered supplemental briefing regarding the proper remedy for the defendant’s abuse of discretion.  The cite is Dramse v. Delta Family-Care Disability and Survivorship Plan, 2006 WL 2371334 (N.D. Tex. Aug. 16, 2006).  Dramse was represented by Bernard A. Guerrini of Dallas, Texas.

This unusual ERISA case addressed whether the claimant could recover disability retirement benefits when his injuries occurred while he was allegedly engaged in a criminal enterprise. 

The claimant, Byron Boyd, formerly an employee of the United Transportation Union (UTU), sought the disability retirement benefits from the UTU plan due to a number of conditions, including hypertension, diabetes, high cholesterol, arrhythmia, and other stress-related problems.  The parties did not dispute his underlying disability or inability to perform his job since 2004.

In 2003, however, a grand jury indicted Boyd for crimes involving mail fraud, wire fraud, racketeering, bribery, and embezzlement.  He pleaded guilty to RICO conspiracy, which took place between 1994 and 2003 and generated illegal income.  Boyd apparently “conspired with others to dominate and control the UTU and its designated legal counsel (“DLC”) program through the commission of various crimes.”

In 2003, Boyd’s doctor noted that Boyd was considering leaving work because of his health problems and high stress levels.  Boyd did stop working and sought disability benefits from the Railroad Retirement Board, a prerequisite to receiving disability retirement benefits under the UTU plan.  The Railroad Retirement Board granted Boyd’s disability status and determined that Boyd had a right to disability retirement benefits under the UTU plan. 

The UTU Summary Plan Description contained the following provision: “You w