Sometimes there are decisions reached in non-ERISA cases that provide us with valuable procedural tools/guidelines in our specialized areas of practice. This is the case with Iqbal & Twombly which require that pleadings include more than conclusory allegations to survive a motion to dismiss. In this edition of the newsletter we highlight just such a decision out of the Fourth Circuit dealing with the timing of removal where there are multiple defendants who are served at different times. This decision finally puts to rest an unanswered question in this circuit. We then get back to the business of discussing ERISA cases which present issues of whether deference should be afforded to the treating physician's opinions, preemption of a state regulation barring discretionary language and other interesting decisions reached over the past few months. As always, feel free to contact us if you have any questions.
Barbour v. International Union, 594 F.3d 315 (4th Cir. 2010): In this non-ERISA case, the Fourth Circuit joined the Sixth, Eighth and Eleventh Circuits in adopting the "last-served defendant rule" in holding that "in cases involving multiple defendants, each defendant, once served with formal process, has thirty days to file a notice of removal pursuant to 28 U.S.C. Section 1446(b) in which earlier-served defendants may join regardless of whether they have previously filed a notice of removal."
This case is significant as it resolves a question that has long plagued practitioners where their client is served later than other defendants who failed to timely remove the case. In our ERISA practice, for example, this has been a problem where individual beneficiaries to a life insurance policy are named as co-defendants along with the Plan or plan fiduciaries and the beneficiaries, who may have been served first, did not know to remove the case under ERISA. All defendants still must consent to the removal which could be an issue if earlier-served defendants have made an affirmative decision not to remove the case.
Richards v. Hewlett-Packard Corporation, --- F.3d --- , 2010 WL 157480 (1st Cir. Jan. 19, 2010): Richards, who worked as a software engineer for Hewlett-Packard's predecessor, had been on LTD since January, 1991. He was awarded Social Security disability for his chronic fatigue immune dysfunction and fibromyalgia in 1992. In January, 2001, as part of a regular review of the file, Prudential received medical records indicating Plaintiff had not been seen by one of his treating physicians since 1999. Prudential obtained an independent review, which concluded that, while Plaintiff did have fibromyalgia, he was not physically impaired from performing sedentary work. Prudential terminated Plaintiff's benefits in June, 2001.
For three years following the termination, Plaintiff stayed in contact with Prudential, inquiring about the appeals process, threatening to go to the government or the media regarding the termination, and accusing Prudential of misconduct. In July, 2004, he finally appealed the termination, raising three arguments: 1) the independent reviewer was unqualified and made false statements in her review; 2) Prudential should have deferred to Plaintiff's treating physicians; and 3) Prudential should have deferred to the administrative law judge who awarded Plaintiff Social Security benefits. Prudential denied the appeal, and several subsequent requests for review. Plaintiff eventually filed suit. The district court granted Prudential's motion for summary judgment.
Applying a de novo review, the First Circuit found that Plaintiff's second and third arguments were essentially that his treating physicians and the Social Security determination should be given controlling deference. The Court disagreed and found that Prudential had considered both the treating physicians' reports and the Social Security determination in reaching its decision denying benefits.
Addressing Plaintiff's first argument, the Court found Plaintiff's reading of the plan "strained." Plaintiff argued that, because Prudential had the right to compel Plaintiff to undergo a physical exam, Prudential was limited to only physical exams as a mechanism to independently review his claim. The Court noted that not only was this position contrary to precedent, but all of the medical evidence in the record, save one last-minute letter from a treating physician, found that Plaintiff could perform sedentary work. While the court was sympathetic to the Plaintiff's plight, it nevertheless acknowledged that Plaintiff had the burden of showing that his medical conditions made him unable to perform any job for which he was qualified. The Court concluded that he failed to meet that burden.
This decision reaffirms the right of administrator to evaluate claims on an ongoing basis to determine if the participant is still entitled to receive benefits.
Majeski v. Metropolitan Life Ins. Co., --- F.3d ---, 2009 WL 5088720 (7th Cir. Dec. 29, 2009): Majeski, who worked for MetLife as a nurse consultant, filed a claim for LTD benefits based on a diagnosis of cervical radiculitis following complaints of pain and numbness in her shoulders, arms and hands. Based primarily on the opinions of its reviewing physician, MetLife concluded that the medical records did not objectively establish any functional impairment that would prevent her from performing her job.
Majeski argued that, under Metropolitan Life Ins. Co. v. Glenn, --- U.S. ---, 128 S.Ct. 2343 (2008), the district court should have applied a heightened standard of review in light of MetLife's conflict of interest and, in doing so, the court should have considered deposition testimony offered by Majeski to show that MetLife's consulting physician was bias and evidence of Majeski's favorable Social Security award, neither of which were provided to MetLife during its administrative review of Majeski's claim. The Seventh Circuit rejected these arguments, explaining that under Glenn, a reviewing court is required to consider an administrator's conflict of interest in one of two ways (1) by mixing it in some way with all other relevant factors or (2) focusing on the "gravity" of the conflict, i.e., the likelihood that it influenced the decision as inferred from other circumstances of the case. But, the Court unequivocally rejected the notion that Glenn requires a more searching review of a benefit determination in conflict cases, reiterating that such an expansive reading of Glenn blurs the distinction between deferential and de novo review. In addition, the Court ruled that nothing in Glenn supports the contention that a plan administrator must allow supplementation of the administrative record without limit, even if the evidence offered is that of a subsequent Social Security benefit determination or even evidence of a reviewing doctor's bias.
Interestingly, notwithstanding its rejection of Majeski's arguments regarding a heightened standard of review, the Court carefully noted that "deferential review is not a euphemism for rubber-stamp" and ultimately concluded that the plan administrator's determination was an abuse of discretion. The Court found that MetLife's reviewing physician did "not acknowledge, much less analyze, the significant evidence of functional limitations that Majeski offered," including the specific opinions and conclusions reached by Majeski's treating physicians. The Court, explained that "arbitrary-and-capricious review turns on whether the plan administrator communicated 'specific reasons' for its determination to the claimant, whether the plan administrator afforded the claimant 'an opportunity for full and fair review,' and 'whether there is an absence of reasoning to support the...determination.'" MetLife's failure to address key medical evidence, according to the Court, "constitutes an absence of reasoning." In fact, it noted that under Love, a plan administrator is required to "address any reliable, contrary evidence submitted by the claimant." Based on this reasoning, the Court remanded the case to MetLife for further findings or explanations.
This is an interesting opinion in that it involves a disability claim by one of MetLife's own nurse consultants, who likely knew the ins and outs of the claims review process. It is also significant given the Court's favorable discussion of the standard of review and what appears to be the Seventh Circuit's requirement that administrators specifically address contrary medical evidence in communicating a denial of benefits.
Preemption of State Regulation re: Discretionary Language and Burden of Proof of Accidental Death Claim
Hancock v. Metropolitan Life Ins. Co., --- F.3d ---, 2009 WL 5103121 (10th Cir. Dec. 29, 2009): Hancock, as the beneficiary of AD&D benefits under an ERISA governed plan in which her mother was a participant, argued that the district court should have applied a de novo standard of review because the plan provision giving MetLife discretion in reviewing claims did not comply with a Utah insurance regulation governing discretion-granting clauses and, alternatively, that MetLife abused its discretion when it denied her claim for accidental death benefits.
The Utah insurance regulation prohibits "reservation-of-discretion clauses in insurance-policy forms" except for employee benefit plans governed by ERISA provided, however, that the provision in an ERISA governed plan "is the same as, or substantially similar to" the safe harbor provision outlined in the regulation. Because the discretionary language in MetLife's plan did not sufficiently mirror the safe harbor provision in the regulation, Hancock argued that it was invalid and that the district court should have applied a de novo standard of review. The Court rejected this argument, reasoning that although the Utah regulation is a state law "specifically directed toward entities engaged in insurance," it does not "substantially affect the risk pooling arrangement between insurers and the insured" within the meaning of 29 U.S.C. Section 1144(b)(2)(A). The Court explained that instead of imposing a blanket prohibition on the use of discretion-granting clauses, the regulation permits discretionary clauses in ERISA plans, so long as they substantially conform to the rule's safe-harbor language. As such, it has no substantial effect on risk pooling and is not saved from ERISA preemption as a state law regulating insurance. The Court held the Utah regulation was preempted and MetLife's discretionary language was valid.
As to the merits of the benefit claim, the Court determined the MetLife's denial of benefits was not arbitrary and capricious because Plaintiff failed to supply evidence that her mother's death was accidental.
In past editions of this newsletter we have discussed other cases involving state insurance regulations like the Utah regulation in this case. As these regulations and statutes become more prevalent, insurers and plan administrators should be aware of their potential impact on the standard of review employed by reviewing courts.
Graham v. Hartford Life & Accident Ins. Co., --- F.3d ---, 2009 WL 5103162 (10th Cir. Dec. 29, 2009): Graham, a former employee of the U.S. Postal Service (USPS), was a participant in an LTD plan established and sponsored by the National Rural Letter Carriers Association (NRLCA). Although the NRLCA is recognized as the exclusive bargaining representative for rural letter carriers, the LTD plan was not the result of a collective bargaining agreement with the USPS. Rather, it was the result of a separately negotiated contract with the Hartford.
Graham, in her appeal of the district court's finding that Hartford's denial of LTD benefits was not arbitrary and capricious, argued that the LTD plan should have been exempt from ERISA. She argued that because the USPS was named as the employer in the Plan documents, made payroll deductions for employees who elected to participate in the Plan and provided information to Hartford that was necessary for enrollment in and administration of the Plan, the Plan was a "governmental plan." In rejecting this argument, the Court determined that these minor tasks, which it characterized as "almost clerical," are insufficient to support the conclusion that the USPS "maintains" the plan, and therefore, the Plan was not a "governmental plan" exempt from ERISA.
In addition, Graham argued that she was entitled to a jury trial under the Seventh Amendment in light of the Supreme Court's decision in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002), in which the Court noted that "Section 1132(a)(1)(B)'s language is 'without reference to whether the relief sought is legal or equitable.'" She argued that "'most actions for beneficiaries are really for money obligations under the terms of a contract,' and thus are 'legal in nature, rather than equitable.'" The Court rejected this argument, relying on its long-standing recognition that claims under Section 1132(a)(1)(B) are "akin to common law trust actions and thus governed by common law trust principles," making Graham's claim for benefits equitable in nature. As such, the Court reasoned that Graham did not have a right to a jury trial, even though the relief she sought was money damages - which, although the classic form of legal relief, is also available in courts of equity.
In rejecting Graham's argument that the LTD plan was a "governmental plan," the Court suggested that had the plan resulted from a collective bargaining agreement, its analysis would have been quite different.
Other Circuit Court Opinions
Gardner v. UNUM Life Ins. Co. of Am., 2010 WL 4457515 (3d Cir. Dec. 4, 2009) (unpublished): In this case the Third Circuit remanded the case to the district court to vacate its entry of summary judgment in favor of UNUM because it held that the abuse of discretion standard of review should not be employed in a summary judgment proceeding where there is disagreement about the facts at issue. Gardner had challenged the accuracy of the medical records and opinions relied upon by UNUM in making its benefits determination. As such, the Court advised that the district court should consider remanding the matter to UNUM for further review or allowing further discovery or a trial on the merits.
In Young v. American International Life Assurance Co. of NY, 2010 WL 4882581 (3d Cir. Dec. 18, 2009) (unpublished), the Third Circuit affirmed an insurer's termination of long term disability benefits under an arbitrary and capricious standard of review where Plaintiff, a managing attorney for AIG, was paid 24-months of LTD benefits for a disability related to major depression/panic disorder, but later changed his position to indicate that his disability was physical in nature after realizing that his benefits had been exhausted under the Policy's mental illness provision.
In McDonald v. Hartford Life Group Insurance Company, 2010 WL 183431 (5th Cir. Jan 19, 2010) (unpublished) the Fifth Circuit held that, even if Plaintiff were permitted to supplement the administrative record with evidence of a Social Security award, she missed her opportunity to do so because she failed to bring the award to anyone's attention prior to renewing her motion for summary judgment. In addition, the Court found no evidence that Hartford's conflict of interest played a role in its decision to deny Plaintiff's claim for benefits where (1) there was no evidence of bias by the reviewing physicians, (2) Hartford had no obligation to afford additional deference to her treating physicians or to conduct a physical examination, (3) Hartford adequately considered Plaintiff's subjective complaints, and (4) there was sufficient evidence to support Hartford's decision. The Court also noted the thoroughness of Hartford's review, and favorably noted the fact that Hartford had three independent qualified medical experts review Plaintiff's record.
Longazel v. Fort Dearborn Life Ins. Co., 2010 WL 323385 (6th Cir. Jan. 28, 2010) (unpublished): The Sixth Circuit affirmed the district court's holding that Plaintiff's lawsuit was time-barred under the provisions of the LTD plan or, alternatively, that Plaintiff had failed to exhaust administrative remedies. The plan at issue included a provision limiting the time for an insured to file a lawsuit to "3 years after the time proof of claim is required." The Court rejected Plaintiff's argument that equitable tolling should be applied because the administrator falsely asserted that it did not receive Plaintiff's claim, requested information he had already provided, and was untimely in issuing a denial of his claim. The Court held that "allegations of the Defendants' misbehavior" did not excuse Plaintiff's failure to inquire about the status of his claim or pursue a lawsuit within the limitations period set forth in the plan.
Barinova v. ING, 2010 WL 381610 (3rd Cir. Feb 4, 2010) (unpublished): The Third Circuit affirmed the district court's holding that Plaintiff's was not eligible for LTD benefits because she was not actively at work and not receiving regular and appropriate care during the applicable time periods under the plan. On May 4, 2004, Plaintiff was placed on administrative leave, where she remained until she was terminated December 31, 2004. On May 17, 2004, Plaintiff's psychiatrist completed an FMLA application asserting Plaintiff had major depressive disorder, though she received no real psychiatric treatment until October, 20, 2004. Her FMLA leave expired September 4, 2004. The Third Circuit agreed that ReliaStar, the LTD carrier, had not abused its discretion by finding Plaintiff never became eligible for benefits because: 1) while she was "actively at work" during her FMLA leave, she was not "receiving regular and appropriate care" during that leave; 2) between the expiration of her FMLA leave and October 20, 2004, she was neither "actively at work" nor "receiving regular and appropriate care"; and 3) after October 20, 2004, she was "receiving regular and appropriate care" but was not "actively at work."
In Loughray v. Hartford Group Life Ins. Co., 2010 WL 618032 (10th Cir. Feb. 23, 2010) (unpublished), the Tenth Circuit held that Hartford's termination of Plaintiff's long term disability benefits did not constitute an abuse of discretion where Hartford employed an independent medical examiner who reviewed countless medical records and opinions provided by Plaintiff during the course of the administrative review and three subsequent appeals and concluded that there was a lack of objective medical evidence establishing a disability as required by the LTD plan. The Court gave little weight to Hartford's conflict of interest in its review of the decision based, in part, on the fact that Plaintiff never presented any persuasive evidence undermining the independence of the medical examiner and Hartford's willingness to consider additional evidence offered by Plaintiff after completing the initial appeal of the benefit decision.
Richard v. Fleet Financial Group Inc. LTD Employee Benefit Plan, 2010 WL 625003 (2d Cir. Feb. 24, 2010) (unpublished): The Second Circuit upheld the administrator's decision to terminate Plaintiff's long term disability benefits after concluding, based on a tremendous amount of objective evidence, including surveillance videos and evidence that Plaintiff was running a family business, that her symptoms of CFS no longer prevented her from performing sedentary work. The Court ruled that "[a]lthough extra-record evidence might sometimes be admissible to assist procedural inquiries," Plaintiff's deposition of an independent evaluator was inadmissible to challenge the administrator's substantive determination. The Court also held that although administrators are encouraged to explain why a benefit determination may differ from that of the Social Security Administration, they are not required to do so, especially where there is substantial evidence supporting the administrator's determination.
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