In Thurber v. Aetna Life Ins. Co., Docket Nos. 12-370-cv (Lead), 12-521-cv (XAP) (2nd Cir. 2013), the plaintiff, Sharon Thurber (“Thurber”) was appealing a decision of the district court granting summary judgment to the defendant, Aetna Life Insurance Company (“Aetna”), on Thurber’s claim that Aetna had improperly denied her request for long-term disability (“LTD”) benefits. Also, Aetna was appealing the district court’s denial of its counterclaim against Thurber for equitable restitution of overpaid short-term disability (“STD”) benefits.
In this case, Thurber had been covered at work by a disability benefits plan (the “Plan”), administered by Aetna. Under the Plan, Thurber was entitled to LTD benefits if a disabling condition rendered her unable to perform the material and substantial duties of her occupation. After being in two car accidents in which her legs were injured, Thurber left work and filed a claim for LTD benefits under the Plan on the grounds that she could no longer sit or walk as required by her job. Aetna denied the claim for LTD benefits, on the basis that she could still perform her job. Thurber brought this suit, seeking the LTD benefits under section 502(a)(1)(B) of ERISA. Although it had denied the claim for LTD benefits, Aetna had paid Thurber $7,213.92 in STD benefits under the Plan, when Thurber had also received this amount in no fault insurance benefits. Aetna asked the district court to order Thurber to repay the STD benefits, as equitable restitution, under section 502(a)(3) of ERISA.
In analyzing the case, the Second Circuit Court of Appeals (the “Court”) noted that Aetna’s decision to deny Thurber’s claim for LTD benefits must be reviewed under an arbitrary and capricious standard, if the Plan gives Aetna discretionary authority to determine a participant’s eligibility for benefits. Under this standard, Aetna’s decision will be overturned only if it is without reason, unsupported by substantial evidence or erroneous as a matter of law. The Court found that both the Plan and its summary plan description (the “SPD”) included language giving Aetna the discretion needed to entitle Aetna to the arbitrary and capricious review. For example, the Plan provides Aetna with “discretionary authority to: determine whether and to what extent employees and beneficiaries are entitled to benefits.” The Court said that Aetna is entitled to the arbitrary and capricious standard of review, even if Thurber had not received a copy of the Plan or the SPD. The Court then said that, under this review standard, based on the case record, Aetna’s denial of the claim for LTD benefits must be upheld. Accordingly, the Court affirmed the district court’s summary judgment to Aetna on the denial of Thurber’s claim for LTD benefits.
As to Aetna’s counterclaim, the Court noted that section 502(a)(3) of ERISA allows a fiduciary-such as Aetna-to bring suit for “appropriate equitable relief”. The Court said that, in this case, the nature of Aetna’s claim is equitable, since it seeks specific funds (i.e., overpayments resulting from Thurber’s simultaneous receipt of no-fault insurance benefits and the STD benefits) in a specific amount (the total overpayment, $7,213.92). The Plan authorizes this recovery, since the SPD provides that Aetna may reduce benefits if a beneficiary receives other income, and may require the beneficiary to return any benefits subsequently rendered overpayments. This language establishes an equitable lien by agreement. The funds constituting the STD benefit payments were entrusted to Thurber, even though these funds have been dissipated. As such, the Court concluded that Aetna presented a claim for “appropriate equitable relief” under section 502(a)(3) of ERISA, and the Court remanded the case back to the district court, with instructions to enter judgment in favor of Aetna on its counterclaim.