Archive for the ‘ERISA’ Category

There is a recent newsworthy item that I wish to discuss, as it is pertinent to our industry.  The November 20, 2007 Wall Street Journal featured an extremely negative cover story, relating to the self-insured industry’s subrogation activities under ERISA.  These types of prominent news stories do nothing for the self-insured industry except motivate the public to change current ERISA legislation.  For those of you who do not know about this case, the story covers a woman’s collision with a semi-trailer truck seven years ago, leaving the 52-year-old Deborah Shank permanently brain-damaged and in a wheelchair. Her husband, Jim, received a $700,000 accident settlement from the trucking company involved. After legal fees and other expenses, the remaining $417,000 was put in a special trust to be used for Mrs. Shank’s care.  Read more

On September 25, 2007, a Federal District Court in New Jersey held in Mulholland v. UFCW Local 1776 Participating Employers Health and Welfare Fund, 2007 WL 2814648 (DNJ) that the purchase of stop loss insurance does not preclude self-funded ERISA status. The court went on to say that because self-funded plans can come close to becoming a fully insured plan, the question is not whether a self-funded plan has reinsurance, but rather, how high is their specific deductible. In other words, does the self-funded plan retain considerable risk of loss, or, does the Plan purchase an excessive amount of stop-loss insurance? Read more

The Texas Made-Whole Rule, adopted in Ortiz v. Great Southern Fire & Casualty Insurance Co., no longer applies to cases where the Plan disclaims the rule and requires full reimbursement in the plan document. 597 S.W.2d 342, (Tex. 1980). In the Ortiz case the insurance carrier relied upon arguments made in equity. The court held that health plans do not have an equitable right to recovery until the plan beneficiary is fully compensated. Id. Read more

In the case of Bauhaus USA, Inc. v. Lillie Regina Holmes Copeland, et. al., 2007 Miss. LEXIS 545 (September 27, 2007), a self-funded Plan coming under the purview of ERISA sought reimbursement of claims it had paid on behalf of a minor child. The court took possession of funds in order to create a trust and use the funds to protect the minor. Read more

On June 18, 2007, the United States Supreme Court granted a writ of certiorari to hear the appeal of this Fourth Circuit case.  Their ruling will once again affect the application of ERISA.  Plaintiff (employee LaRue) alleged that the administrator had failed to invest his funds as instructed, resulting in a loss.  He sought monetary rewards, and both the District Court and Court of Appeals determined that the remedy he sought fell outside the scope of “equitable relief” § 1132(a)(3) of ERISA authorized. Money damages were the classic form of legal relief, absent from the list of equitable remedies available under § 1132(a)(3). Plaintiff could not recover under an equitable restitution theory since he did not allege that funds owed to him were in defendants’ possession but instead that the funds never materialized. Read more

In Cheryl Street v. Ingalls Memorial Hospital, (2007 U.S. Dist. Lexis 18643), the Northern District Court of Illinois held on March 15, 2007 that just as a Plan must identify funds prior to seeking equitable relief in Federal Court, so too must relief sought by participants be specifically identifiable. In one case, decided by the Third Circuit Court of Appeals, a group of employee Plan Participants brought their Plan Administrator to court for handling their assets in an irresponsible manner. In Eichorn, et al. v. AT&T Corp., et al., 484 F.3d 644, (May 2, 2007), the Court held that while ERISA makes it illegal for a Plan Administrator to prevent the attainment of rights provided by the Plan, actions that lessen the value of the rights are not so prohibited. As such, in a case like this one, the only relief available was in the form of monetary awards and back pay, which is not “equitable relief” for purposes of Federal jurisdiction. Read more

In this case, an employee of a company with a self funded ERISA plan was receiving benefits due to her disabled status. The TPA hired a physician to re-examine the employee, and based on her diagnosis, terminated benefits. The physician determined that the employee could perform sedentary work, which meant she was no longer “disabled” in accordance with the terms of the plan. The TPA had, after the physician’s diagnosis was complete, obtained two more evaluations. The three tests (IME, Functional Capacity Evaluation, and Employability Assessment) were all performed by different parties, and all supported the plan’s decision. The employee, meanwhile, did not argue that the tests should be ignored, and instead presented a letter from her treating physician, diagnosing her as disabled, but lacking an explanation or evidence to support the designation. Upon review, the court found in the plan’s favor. Read more

Recently, in the state of Washington, a law was passed that prohibits workplace discrimination based upon sexual orientation. When an employee protested the denial of health care coverage to her partner by her employer’s self funded ERISA plan, she brought the matter to court. The court in turn determined that the law could not be enforced against private employers with self funded plans, as it conflicted with ERISA. Read more

An employee left her job due to carpal tunnel syndrome. She began receiving benefits under her employer’s self funded ERISA plan. The syndrome became worse, and the employee underwent surgery. She exhausted her short term benefits and applied for long term benefits under the same plan. The plan denied the benefits, and the employee sued. The court applied a de novo standard of review, meaning it examined the evidence from an entirely objective perspective seeking to determine if a reasonable trier of fact would find one way or the other. Read more

In March of 2005, Poyner was injured when an automobile struck her while she was riding her bicycle and received nearly $ 200,000.00 in medical benefits. Subsequently she recovered $ 10,000.00 from the insurer of the automobile which struck her and $100,000.00 from her own under insured motorist coverage. The Plan attempted to persuade Poyner to abide by the terms of the benefit plan, which required her to pay the Plan the $110,000.00 she collected from the two insurance policies. Poyner asserted that ERISA prohibits anything other than an equitable remedy in such a situation and the Trust’s claim was one for money, not an equitable remedy. Read more

This case arose from a Plan’s failure to add an employee’s dependents to an ERISA welfare benefit plan. As a benefit of employment, the employer offered its employees health insurance. Under the Plan, the employer was both a “participant” and the “Plan Administrator.” Employees were instructed to direct their inquiries about the Plan to their employer, which acted as the general intermediary between its employees and the Insurer. Read more

In this case, a TPA was sued by their clients (employers and those employer’s employees), for mishandling their plans’ funds. The TPA trustees in turn hoped to sue their attorney, claiming that their attorney should have notified them of the fund management issues and improper expenditures. The court found that the attorney did not have discretionary control over the assets of the plan, access to funds, or powers to administer the plans, and was therefore not a fiduciary. Even if the attorney knew of the transactions and failed to disclose them, the fund trustees would be unable to demonstrate how the attorney’s actions or lack of action proximately caused the mismanagement of the funds. Read more

In this case, an employee stopped working due to a medical condition and began receiving disability benefits from her employer’s self funded ERISA plan. After two years the case was reassessed, the TPA terminated the benefits. The insured filed suit against the TPA, seeking both payment of past claims and re-instatement of future benefits. The TPA moved to dismiss arguing that it was not a proper defendant in this case because it did not have any financial responsibility to the employee. The employer and plan, the TPA asserted, were the proper defendants. The court denied the motion to dismiss, however, stating that the TPA’s discretionary power over the payment of claims made it a fiduciary to the plan and plan members. Read more

Section 502(a)(3)(B) of ERISA permits a fiduciary to bring a civil action “to obtain equitable relief to enforce the terms of the plan”. To obtain this “equitable relief,” the basis for the fiduciary’s claim and the relief it seeks must be equitable in nature. Importantly, a fiduciary cannot seek to impose personal liability, as that would be a legal remedy. The Policy in this case required repayment of an overpayment of benefits that resulted when a claimant received benefits in the amount of $ 19,612. The Plan requested reimbursement and the beneficiary refused, stating that she no longer had any of the funds. Read more