Archive for the ‘Federal Circuits’ Category

With the U.S. Supreme Court decision in Sereboff v. Mid Atlantic Medical Services, Inc., it became clear that ERISA plans can enforce their subrogation and/or reimbursement provisions by asserting a claim for a constructive trust or equitable lien against clearly identifiable tort settlement or judgment proceeds. In most instances, those proceeds end up either in the plan participant’s attorney’s escrow or trust accounts or are held by a court if the third party’s casualty insurer deposits the funds there. Read more

ERISA did not preempt a Louisiana Department of Insurance directive that limits insurer’s subrogation and reimbursement rights to cases where covered individuals have been “made whole”, the 5^th U.S. Circuit court of Appeals ruled in Benefit Recovery Inc. v. Donelon, 2008 WL 642972 (5^th Cir. March 11,2008). Read more

By Ron E. Peck, Esq.

If you have read the postings below (addressing the ongoing Supreme Court case of MetLife v. Glenn) you will note that the matter of what standard of review a Court applies when reviewing an administrator’s decision, is a major topic of conversation.  The issue literally dominates how much power administrators will have to interpret the terms of their plan documents.  In general, having discretion to interpret terms, and enjoying the Court deference that comes with it, is extremely important to administrators.  Discretion and deference, however, do not always guarantee Court acceptance of an administrator’s interpretation of plan terms. Read more

By Ron E. Peck, Esq.

On April 30th, we posted a discussion of the ongoing Supreme Court case, MetLife (Metropolitan Life Insurance Company), et al. v. Wanda Glenn, 128 S.Ct. 1117.  To review, in that case the Court is questioning whether a deferential standard of review - the standard ordinarily applied by Courts reviewing ERISA administrator decisions when the Plan reserves discretionary authority - should be replaced by a more searching analysis when the administrator financially benefits from denials. Read more

Although Lumbermens Mutual Casualty Company’s Summary Plan Description (”SPD”) clearly states that its Plan Administrator, Kemper Ins., has the discretionary authority to determine eligibility for disability benefits and to interpret the terms of the plan, both the District Court and Ninth Circuit Court of Appeals applied a de novo standard of review, instead of a deferential standard of review in this case, since Lumbermens violated ERISA regulations by failing to properly distribute the SPD to its plan participant, Linda Gertjejansen, (Gertjejansen v. Kemper Ins. Companies, Inc., Slip Copy, 2008 WL 1787484 (C.A.9 (Cal.)). Read more

By Ron E. Peck, Esq.

All eyes in the insurance industry should be turned towards the ongoing case of MetLife (Metropolitan Life Insurance Company), et al. v. Wanda Glenn, 128 S.Ct. 1117.  The United States Supreme Court granted cert in this matter on January 18, 2008, and oral arguments were heard on April 23, 2008.  This case comes before the Supreme Court on appeal from the Sixth Circuit decision in Glenn v. MetLife (Metro. Life Ins. Co.), 461 F.3d 660 (6th Cir. 2006). Read more

If the summary plan description (SPD) omits important provisions, such as subrogation and reimbursement, that are included in another document, the plan may not be able to compel beneficiaries to follow those provisions. In one such case, a federal judge shot down a plan’s denial after a participant refused to sign a subrogation agreement. The plan tried to impel him to sign the agreement before he had been treated for his injuries, but the SPD was silent on the issue of executing the agreement before submitting a claim. The plan document had the requirement that members must “execute and deliver such instruments and take such actions as the Plan may require to protect the Plan’s rights.” The court rejected plan arguments that inclusion of such language in the plan document complied with ERISA. Read more

Federal courts are permitting ERISA plans to recover the benefits they paid on account of injuries arising through the fault of some third party from tort settlement or judgment proceeds that are set up in special needs trusts. Those are usually designed to provide resources to pay for ongoing care when an individual’s injuries are so severe that he or she will need professional care either for the remainder of his or her life or for an indefinite period.

In the absence of such a resource, in most cases, individuals will be cared for through state programs such as Medicaid. When a tort settlement or judgment is substantial, the special needs trust can provide some (or perhaps even all of the required care. Or, trusts might be used to provide some amenities (such as TV or other entertainment or respites) for the injured party. Read more

The fact that an individual had medical treatment for a condition before an accident and subsequently suffered an injury that required additional treatment should not defeat a plan’s right to reimbursement for benefits paid on account of the treatment resulting from the accident. A U.S. District Court reached that conclusion in Schaffer v. Mancini, 2007 WL 2725569 (N.D. N.Y., Sept. 13, 2007). Read more

This 4^th Circuit case is another addition to the growing list of cases holding that contractual disputes between plan sponsors and claims administrators are subject to state law.

The defendant in this case, Information Systems and Networks Corp. (”ISN”) established a self-funded health benefit plan governed by ERISA.  ISN purchased insurance from the plaintiff in this case, Great-West Life and Annuity Insurance Company (”Great-West”) to cover some benefits under the Plan.  ISN also contracted separately with Great-West to provide stop-loss coverage. Read more

Benefit Recovery, Inc. sued Louisiana Commisioner of Insurance and lost its case.  See entire 5th Circuit Court of appeals decision.

A Louisiana State Law requiring that insureds be made whole before an insurance carrier could seek reimbursement was upheld by the 5th Circuit, Benefit Recovery, Inc. v. Donelon, 2008 WL 642972 (March 11, 2008).  Note that the decision only applies to plans that are not self-funded, but will apply to plans that are fully insured, and governmental plans, even if ERISA otherwise applies.

Supreme Court Justice Anthony M. Kennedy declined an application for a continuance of the San Francisco ordinance that sets minimum levels of spending by employers on health care. SEE COURT ORDER

The Supreme Court held in LaRue v. DeWolff, Boberg & Associates that ERISA §502(a)(2) authorizes recovery for fiduciary breaches that impair the value of plan assets in a participant’s individual account.

Stevens, J., delivered the opinion of the Court, in which Souter, Ginsburg, Breyer, and Alito joined. Roberts filed an opinion concurring in part and concurring in the judgment, in which Kennedy joined. Thomas filed an opinion concurring in the judgment, in which Scalia joined. Read more

The Supreme Court will be granting certiorari to MetLife, et al., v. Wanda Glenn.  While MetLife v. Glenn reinforces a third party administrator’s (”TPA”) right to make administrative decisions and interpret the terms of benefit plans when it is not the party funding the plan, this case asks whether a Plan Administrator faces a conflict of interest if it not only determines whether a claim is payable, but also pays the claim with its own funds. Read more