Articles Posted in ERISA

The Proposed Delay Of The Effective Date Of The Final Rule.  The U.S. Department of Labor (the “DOL”) has proposed a delay for ninety (90) days – through April 1, 2018 – of the applicability of the Final Rule which amends the requirements in the ERISA claims procedure regulations that apply to claims for disability benefits.  The proposal is here.

The Final Rule was published in the Federal Register on December 19, 2016.  It is currently scheduled to apply to claims for disability benefits under ERISA-covered employee benefit plans that are filed on or after January 1, 2018.

Expanded Requirements.  The expanded requirements pertaining to disability claims include:

In Salyers v. Metropolitan Life Ins. Co., No. 15-56371 (9th Cir. 2017), a panel of the Ninth Circuit Court of Appeals (the “Panel”) reversed the district court’s judgment in favor of the defendant, insurer MetLife, following a bench trial in an ERISA action concerning life insurance.

In this case, the plaintiff bought a $250,000 life insurance policy on her husband, but, when he died, MetLife paid out only $30,000 because the plaintiff had not submitted evidence of insurability with her coverage election, as required under the ERISA-governed benefits plan offering the policy. The Panel held that MetLife waived the evidence of insurability requirement because it did not ask the plaintiff for a statement of health, even as it accepted her premiums for $250,000 in coverage. The Panel further held that, under the federal common law of agency, MetLife could not claim that it did not know the pertinent facts, because the knowledge and conduct of the policyholder-employer could be attributed to MetLife. The Panel remanded the case to the district court with instructions to enter judgment in favor of the plaintiff for the amount of the $250,000 policy that remained unpaid.

In King v. Blue Cross and Blue Shield of Illinois, No. 15-55880 (9th Cir. 2017), upon reviewing the decision of the district court, a panel for the Ninth Circuit Court of Appeals (the “Panel”) held as follows.

First, the Panel reversed the district court’s grant of summary judgment in favor of the defendants in the case-an ERISA action- regarding the denial of a welfare benefit plan participant’s claim for medical benefits on the basis of the plan’s lifetime benefit maximum.  The Panel held that ERISA, as amended by the Patient Protection and Affordable Care Act, does not ban lifetime benefit maximums for certain retiree-only plans (like the plan in question).

The Panel then held that the defendants violated ERISA’s statutory and regulatory disclosure requirements by providing a faulty summary of material modifications describing changes to the lifetime benefit maximum.  The Panel concluded that the summary did not reasonably apprise the average plan participant that the lifetime benefit maximum continued to apply to the retiree plan.

In Dowling v. Pension Plan for Salaried Employees of Union Pac. Corp. & Affiliates, No. 16-1977 (3rd Cir. 2017), former Union Pacific employee, John Dowling (“Dowling”), is covered by a 277-page retirement plan composed of introductory material, 19 articles of content, and various appendices—none of which explicitly address Dowling’s precise situation.  When Dowling retired, the plan administrator interpreted the plan to provide Dowling with a lower monthly payment than he expected.  Dowling challenged the administrator’s decision as contradicting the plan’s plain language, but the district court found the plan ambiguous and the administrator’s interpretation reasonable.

Dowling appealed under ERISA 502(a)(1)(B)( seeking a declaratory judgment stating his rights and liabilities).  The dispute now centers on three issues: the text of the plan, the court’s standard of review, and whether a conflict of interest alters the outcome. Upon reviewing the case, the Third Circuit Court of Appeals (the “Court”) determined that, because the plan’s terminology, silence, and structure render it ambiguous, the plan accords the plan administrator discretion to interpret ambiguous plan terms, and the mere existence of a conflict of interest is alone insufficient to raise skepticism of the plan administrator’s decision.  Accordingly, the Court decided that it will grant deference to the plan administrator’s decision as to benefit payments amounts, and the Court affirmed the district court’s judgement.

 

In Twin City Pipe Trades Service Association, Inc. v. Wenner Quality Services, Inc., No.16-1791 (8th Cir. 2017), Twin City Pipe Trades Service Association, Inc. (the “Association”) is attempting to recover unpaid fringe-benefit contributions allegedly due under a collective bargaining agreement (the “CBA”). The district court granted summary judgment for the Association on the ground that Wenner Quality Services, Inc. (“Wenner”)  was precluded by a previous lawsuit from disputing liability for the contributions as an alter ego of a signatory of the CBA. The court then awarded damages and injunctive relief to the Association.

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) said that it agreed with the district court that the Association was entitled to judgment on liability, since all of the elements required to apply issue preclusion are present here. No additional fairness considerations are raised that would preclude application of the doctrine in this circumstance.

However, the Court concluded that the district court erred in awarding certain damages to the Association, since those damages were not authorized by ERISA and that the award should be reduced accordingly. The Court also uphold the district court’s grant of injunctive relief. Accordingly, the Court affirmed the district court’s ruling in part and reversed the ruling in part.

In Brown v. Rawlings Financial Services, LLC, Docket No. 16-3748 (2nd Circuit 2017), a participant in a healthcare benefit plan covered by ERISA requested documents pertaining to her plan but did not receive them promptly. She sought statutory damages pursuant to ERISA Section 502(c)(1), which imposes personal liability on ERISA plan administrators that fail to provide plan documents to participants within thirty days of a request. On motion, the United States District Court for the District of Connecticut dismissed the suit as untimely, applying Connecticut’s one-year statute of limitations for actions to recover civil forfeitures, and the plaintiff failing to file her claim within the one-year period.

Since ERISA does not specify a statute of limitations for Section 502(c)(1) claims, courts apply the state statute of limitations that is the nearest analogue. On appeal, Brown argued that the proper statute of limitations is either Connecticut’s six-year statute of limitations for breach of contract, or the three-year statute of limitations for violations of the Connecticut Unfair Trade Practices Act (“CUTPA”) and the Connecticut Unfair Insurance Practices Act (“CUIPA”).

Upon reviewing the case, the Second Circuit Court of Appeals (the “Court”) said that it agreed with the district court that Connecticut’s civil forfeiture statute of limitations (with its one year filing period) provides the appropriate limitations period, and because the plaintiff filed her complaint more than one year after her claim accrued, the Court affirmed the district court’s dismissal.

In Mackey v. Johnson, No.16-1886 (8th Cir. 2017), Terri Johnson (“Johnson”) brought a wrongful-death action against the Duluth Clinic (the “Clinic”), alleging that the Clinic was negligent in its treatment of the lung cancer of her brother, Tim Scherf (“Scherf”). Scherf was a participant in the Minnesota Laborers Health and Welfare Fund (the “Fund”), and the Fund paid for his medical treatment. Johnson settled her claim with the Clinic. The Fund then sued Johnson, her legal counsel Meshbesher & Spence (“Meshbesher”), and the Clinic under ERISA § 1132(a)(3). The Fund alleged that it had a right to a portion of the settlement with the Clinic attributable to medical expenses. The district court agreed, on the grounds that the Fund was entitled to the medical expenses included in the settlement proceeds under the terms of the Fund document and a subrogation agreement that Johnson and a Meshbesher attorney had signed. It granted summary judgment for the Fund in the amount of $236,700.16.

On appeal, Johnson and Meshbesher challenged the district court’s ruling. However, the Eighth Circuit Court of Appeals (the “Court”) rejected their arguments, since the settlement agreement included medical expenses and the subrogation agreement applied to “any recovery” (as opposed to expenses incurred due to the Clinic’s negligence).  Accordingly, the Court affirmed the district court’s judgment.

 

In Dakotas and Western Minnesota Electrical Industry Health & Welfare Fund v. First Agency, Inc. ,  Dockets: 16-1846, 16-3319, 16-3375 (8th Cir. 2017), Jacob Plassmeyer incurred medical expenses after injuring his knee during a collegiate baseball practice in February 2014. Jacob’s college provided its student athletes insurance covering accidental injuries under a blanket policy issued by First Agency, Inc., as appointee of Guarantee Trust Life Insurance Company (collectively referred to as “FA”). Jacob’s father is also an insured participant in the Dakotas and Western Minnesota Electrical Industry Health and Welfare Fund (“Dakotas”), an employee welfare benefit plan. Jacob is covered under this ERISA plan as a dependent of his father. Jacob timely filed claims with both insurers. Though it is undisputed his baseball injuries are covered by both policies, both insurers refused to pay. FA claimed that Dakotas must pay first because FA’s policy is “excess only.” Dakotas claimed that, under the plan’s coordination of benefits (“COB”) provision, FA’s coverage is primary. Jacob’s claim remains unpaid.

 

The trustees of  Dakotas brought this declaratory judgment action against FA under § 502(a)(3) of ERISA, seeking an order enforcing the COB provisions in the Dakotas plan by declaring that FA’s policy provides primary coverage of Jacob’s claim for medical expenses already incurred. The district court  denied FA’s motion to dismiss and granted Dakotas’ motion for summary judgment, concluding that (i) § 502(a)(3) allows ERISA plan trustees to bring a declaratory judgment action to determine the extent of the plan’s liability, and (ii) under the plan’s COB provision FA has primary responsibility for Jacob’s covered medical expenses. FA appeals those rulings. Reviewing de novo, the Eighth Circuit Court of Appeals affirmed the district courts’ rulings.

In Mull v. Motion Picture Industry Health Plan, No. 15-56246 (9th Cir. 2017), a panel of the Ninth Circuit Court of Appeals (the “Panel”) vacated the district court’s grant of summary judgement in favor of the plaintiffs in an ERISA action.

The district court had enjoined an ERISA plan and its board of directors from enforcing Summary Plan Description provisions regarding reimbursement of benefits previously paid upon a plan participant’s receipt of a third-party recovery. The district court had ruled that these reimbursement/recoupment provisions were not enforceable under ERISA because they were found only in the Summary Plan Description and not in any document that constituted the ERISA plan.

The Panel concluded that a Motion Picture Industry Plan Agreement and Declaration of Trust, along with the Summary Plan Description, together comprised the ERISA plan because only the Summary Plan Description provided the basis on which payments were made to and from the plan. Hence, since the Summary Plan Description is part of the plan,  the reimbursement provisions (often referred to as a “subrogation provisions”) in the Summary Plan Description could be enforced. The Panel distinguished CIGNA Corp. v. Amara, 563 U.S. 421 (2011), which held that summary documents do not constitute the terms of an ERISA plan when there exists both a governing plan document and a summary plan description as separate documents. The Panel vacated the district court’s grant of summary judgment and remanded for further proceedings.

In Pasternack v. Shrader, Docket Nos. 16-217 (Lead), 16-218 (Con) (2nd Cir. 2017), retired officers of Booz Allen Hamilton (“Booz Allen”) allege that they received insufficient payment in connection with Booz Allen’s sale of a division to another company. They sue Booz Allen and others in the United States District Court for the Southern District of New York, asserting liability under ERISA,  the Racketeer Influenced and Corrupt Organizations Act (“RICO”), federal securities law, and common law. Each claim was resolved adversely to plaintiffs, either by dismissal or by denial of leave to amend.

Upon review by the Second Circuit Court of Appeals (the “Court”), the Court affirmed the district court’s dismissal of the ERISA claims because the plan through which Booz Allen distributed its stock to plaintiffs is not an employee pension benefit plan within the meaning of ERISA. The plan did not provide retirement income or defer income until or termination of employment, as required for a plan to be subject to ERISA, as the dominant benefits were the ownership stake in the enterprise and the corresponding rights of management—and these rights were exercised before retirement and ended with the retirement process.