Archive for the ‘Plan Language’ Category

Davis v. AK Steel Corp., 2009 WL 3853608 (W.D. Pa. 2009)

The trial court in this case found that an employer’s SPD hand-delivery process satisfied DOL regulations, which require that the process be reasonably calculated to ensure that recipients receive SPDs and likely to result in full distribution. The employer had denied an employee’s claim for LTD benefits on the grounds that the employee failed to apply within the plan’s required timeframe. The employee sued claiming, among other things, that he never received the plan’s SPD that would have informed him of the application deadline. Read more

By TIM HULL

(CN) – An insurance company must award benefits to an Ohio man who lost his leg in a drunken motorcycle crash, the 6th Circuit ruled, because the incident falls within the broad definition of an “accident.” Read more

From the August 13, 2009 EBIA Weekly
Wiley v. Cendant Corp. Short Term Disability Plan, 2009 WL 1940780 (N.D. Cal. 2009)

The employee in this case was denied disability benefits and sued his employer’s plan. In this decision affecting only the standard of review to be applied in later proceedings, the employee asked the court for the less deferential “de novo” standard, claiming that the plan documents did not unambiguously confer discretionary authority on the claims administrator because the SPD and contract (which was presumably the plan document) were in conflict. (A more deferential “abuse of discretion” or “arbitrary and capricious” standard of review applies if the plan document gives the plan decisionmaker discretionary authority to make benefit decisions.) The plan’s SPD gave only limited discretion to the claims administrator, but broad discretionary authority to the employer’s benefits committee. In contrast, the contract between the claims administrator and the employer gave the claims administrator complete authority to review all benefit denials, including discretionary authority to determine whether employees were entitled to benefits and to construe plan terms. The employee also argued that the disclaimer language in the plan’s SPD, which provided that the plan documents would control over the SPD if there was a conflict between the two, should not be enforced. Read more

In Wenner v. Sun Life Assurance Co. of Canada, 482 F.3d 878 (6th Cir. 2007), the Sixth Circuit found that Sun Life’s failure to give plaintiff an opportunity to appeal the new grounds for its termination of his benefits violated ERISA’s notice requirements. The insurer initially terminated plaintiff’s benefits because he failed to provide requested medical information; on appeal, it upheld its decision on entirely different grounds. The court held that Sun Life failed to provide a full and fair review of the decision denying the claim, as required by ERISA, when it refused to allow plaintiff a second appeal. In considering the appropriate remedy, the court reasoned that because Sun Life previously determined plaintiff was entitled to benefits, he should not be denied those benefits until his insurer complied with ERISA. Accordingly, the court affirmed the reinstatement of plaintiff’s benefits.

In Administrative Committee of the Wal-Mart Stores, Inc. v. Gamboa, 479 F.3d 538 (8th Cir. 2007), an ERISA plan administrator brought suit seeking equitable reimbursement from a plan participant who had received a settlement from a tortfeasor. Although the reimbursement provision was contained in an SPD for a health plan, the employer had no formal written health plan. Reversing summary judgment for the participant, the Eighth Circuit held that the plan administrator reasonably construed the SPD to be on the plan document for purposes of a group health plan in the absence of any formal plan and that the reimbursement provision in the SPD was therefore enforceable. Read more

In Daic v. Metropolitan Life Insurance Co., 458 F. Supp. 2d 1167 (D. Haw. 2006) the district court rejected each of plaintiff’s arguments challenging the validity of the plan’s reservation of discretionary authority. The court concluded that the plan’s discretionary language was clear and found it inconsequential that such language was in the certificate was delivered to the insured. The court also held that the insurer did not have to delegate its fiduciary responsibilities to a third party to preserve its discretionary authority and found that the insurer’s inherent conflict of interest was merely a factor to be considered in applying the abuse of discretion standard of review. Finally, the court held that the state insurance commissioner’s memorandum, although purporting to state that a discretionary clause was “deceptive” and “was not to be used in health insurance contracts or plans,” had no legal effect as it did not purport to retroactively invalidate such clauses and provided for no private right of action.

In MacLeod v. Proctor & Gamble Disability Benefit Plan, 460 F. Supp. 2d 340 (D. Conn. 2006) the administrator denied the participant’s application for benefits on the grounds that the claimed disability resulted from the participant’s prior military service and therefore was excluded from coverage. At oral argument, the administrator admitted that its decision was based on the “categorical military exclusion” and did not entail an individualized consideration of the particular facts of the application. The plan at issue, however, specifically provided that in the event of an “illness, accident or injury occurs while the Participant is working for pay for some person or organization other than the Company, payment of benefits under the Plan shall be made only at the discretion of the [administrator] after their review of the facts of the case.” Although the court did not find that the administrator’s conclusion that the participant’s disability occurred during his time in the military was arbitrary and capricious, it concluded that the manner in which the administrator evaluated the claim was an unreasonable interpretation of the plan language and remanded the matter.

In Thomas v. Reliance Standard Life Insurance Co., 487. F. Supp. 2d 697 (D.S.C. 2007), the court examined whether death by asphyxia from vomitus resulting from drug self-administration was an accident within the terms of an ERISA-governed policy. Reliance Standard denied benefits pursuant to the policy’s exception for losses caused by suicide or intentionally self-inflicted injuries because the insured had expressed a desire to commit suicide in the exact place he was later found dead. Reliance Standard further argued that the insured’s intentional use of prescription drugs contributed to his inability to maintain a clear airway. The court sided with the insurer, citing evidence that the insured “intended to commit suicide, ingested dangerous narcotic medication, and died as a result.” Accordingly, the court concluded that the insurer “reasonably found that [the insured] intended the ultimate result, although he may not have anticipated the exact means.”

In Bond v. Ecolab, Inc., 2007 WL 551595 (E.D. Mich. Feb. 21, 2007, an ERISA plan participant died while engaging in autoerotic asphyxiation. The police and medical examiners concluded that the participant’s death was accidental. The plan’s claims administrator, MetLife, denied the beneficiary’s claim for benefits based on the plan’s exclusion for self-inflicted injuries. In entering judgment in favor of defendants, the district court rejected plaintiff’s argument that the death certificate’s identification of the manner of death as accidental was controlling and held that MetLife’s decision to deny benefits was not arbitrary and capricious because MetLife’s determination that the participant’s intentional disruption of oxygen to his brain was a self-inflicted injury and was not unreasonable in light of the plan’s language.

In Eckelberry v. Reliastar Life Insurance Co., 469 F.3d 340, the Fourth Circuit affirmed the insurer’s determination that the decedent’s fatal automobile collision did not qualify as an “accident” as defined under the subject ERISA plan. The insured died after he lost control of his car and collided headlong into the rear of a tractor trailer parked on the side of the road. At the time of the collision, the insured was not wearing his seat belt, and his blood alcohol level was 50 percent higher than the state’s legal limit. For purposes of establishing coverage, the plan defined accident as an “unexpected and sudden event in which the insured does not foresee.” The court determined that absent evidence of an insured’s subjective intent, an “objective analysis” governs whether death was “unexpected” when that term is undefined in accidental death policy. The court found that the circumstances of the insured’s accident were “perfectly consistent with his inebriated state” and noted that “all drivers know, or should know, the dire consequences of drunk driving.” In reaching its decision in favor of the insurer, the court joined what it characterized as “near universal accord that alcohol-related injuries and deaths are not ‘accidental’ under insurance contracts governed by ERISA.”

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Diamond Crystal Brands, Inc. v. Wallace, 531 F.Supp.2d 1366 (N.D. Ga.2008)

After the negligent medical care and consequential death of Deborah Hayes, the Estate and her daughter Tamara Hayes pursued a wrongful death claim against the hospital.  In Georgia State Court plaintiffs settled for $900,000, of which $837,000 went to Tamara Hayes and $63,000 to the Estate of Deborah Hayes.

Prior to Deborah Hayes’s death, her employer, Diamond Crystal provided $261,863.58 in medical benefits related to the medical malpractice.  After the settlement, Diamond Crystal sought reimbursement of claims paid. Read more

Cooper v. Premera Blue Cross, Slip Copy, 2008 WL 2180148 (W.D.Wash.) (May 23, 2008) addresses a risk often overlooked by plan participants when debating over their benefit plan’s right of reimbursement from other liable insurance carriers.

Cooper suffered multiple injuries while he was a passenger involved in an ATV accident and applied for benefits through his own auto carrier, Allied Insurance, because the driver’s vehicle was uninsured.  Cooper received $64,200 for medical expenses and lost wages through his PIP and UM coverage. Read more

The United States District Court for the Eastern District of Texas recently presided over a case involving a plan’s denial of claims due to a lack of signed subrogation agreement. Don Burgett, Et. Al. v. MEBA Medical and Benefits Plan, 2007 U.S. Dist. LEXIS 70934, (September 25, 2007). The Plan in this case lost, and the court determined the Plan’s conditioning payment of claims on the signing of a subrogation agreement was not supported by the summary plan document (”SPD”). The court held that the language of the SPD controls and additional agreements cannot create new rights for the Plan. 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 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