Perhaps Namath was clairvoyant, confident or just plain arrogant. But, the Jets won that game, beating the Colts 16-7, and Namath's statement is considered one of the best Super Bowl quotes ever. Those of us who are litigators know better than to "guarantee" a win. And, I'm pretty sure the Colts are glad they didn't make a similar prediction last week. Regardless of whether you are happy about the Saint's win on Sunday, licking your wounds or just don't care, this issue of the e-RISA Newsletter highlights some wins and losses experienced by participants, plans and administrators over the last few months. As always, let us know if we can provide any assistance.
Johnson v. Metropolitan Life Ins. Co., 2009 WL 2973045 (W.D.N.C. Sept. 15, 2009): In this case, the Court considered cross motions for summary judgment on Johnson's claim for LTD benefits. The Magistrate Judge made certain findings of fact, and recommended summary judgment in favor of MetLife. In objecting to the Magistrate's recommendations, Johnson argued that (1) the abuse of discretion standard of review did not apply; (2) Glenn did not prevent the Court from lessening the deference given to the administrator; and (3) the decision was inherently unreasonable. The District Court rejected each argument and adopted the recommendation of the Magistrate.
* This is a well-reasoned and thorough decision. Although the case was appealed in October 2009, the appeal was dismissed in late January 2010 as a result of a joint agreement to dismiss filed by the parties.
In Swanson v. Hearst Corp. Long Term Disability Plan, 2009 WL 3582435 (5th Cir. Nov. 3, 2009), Plaintiff Swanson challenged the grant of summary judgment in favor of the plan based on the ground that Swanson failed to exhaust administrative remedies. Beginning in January 2002, Swanson was awarded long term disability benefits. Then, on April 4, 2003, Hartford Life Insurance Company, insurer and administrator of the plan, terminated her benefits. On August 25, 2003, Swanson's counsel submitted a letter to Hartford, which stated the following: "Please accept this letter as notice of Debra Swanson's intention to appeal your decision terminating her benefits under the above referenced policy. . . ."
Three and a half years later, on February 23, 2007, Swanson submitted medical records for consideration, on what Swanson claimed to be her "ongoing appeal." In response, Hartford rejected this submission as beyond the 180-day deadline to appeal. Thereafter, Swanson filed suit, which was dismissed for failure to exhaust administrative remedies. The district court held that Swanson's letter "merely expressed an intention to appeal in the future, but did not constitute an appeal." On appeal, the Fifth Circuit agreed that Swanson's letter was not an appeal because it did not include any factual or substantive arguments, and no evidence; therefore, Harford had nothing to consider on appeal.
* The Fifth Circuit strictly construed the language of the participant's letter in determining whether she had actually appealed the decision. However, the Swanson Court did not cite to any other courts in support of its conclusion. Therefore, there is no indication whether a similar argument would be successful in courts outside the Fifth Circuit.
Failure to Exhaust Administrative Remedies; Timeliness of Appeal
Brown v. J.B. Hunt Transport Servs., 2009 WL 3818374 (8th Cir. Nov. 17, 2009), involved the dismissal of an action challenging the termination of long term disability benefits for failure to exhaust administrative remedies. Prior to requesting an administrative appeal of the administrator's decision to terminate her benefits, Plaintiff Brown filed suit in district court for benefits and civil penalties alleging that her employer and the plan administrator failed to provide information upon request. The district court dismissed Brown's causes of action, reasoning that she did not exhaust her administrative remedies.
On appeal, the Eighth Circuit held that the administrator failed to comply with its duty under Section 1133(2) to provide Brown with "a reasonable opportunity . . . for a full and fair review" of the decision terminating her LTD benefits. Therefore, Brown's failure to exhaust before bringing suit was excused. The Court explained that without the documents she requested, Brown could not properly prepare her appeal.
The Court found that the proper remedy was not to award Brown benefits but to reverse and remand the case to the district court with instructions to remand to the administrator for an out-of-time appeal.
* This decision reinforces the importance of timely providing participants with requested information. If an administrator fails to comply with these rules, the participant may be granted another opportunity to appeal and the administrator will be required to spend more time and money on a matter previously decided.
Application of the Reasonable Expectations Doctrine
Scharff v. Raytheon Co. Short Term Disability Plan, 2009 WL 2871229 (9th Cir. Sept. 9, 2009) involved the challenge of a denial of long term disability benefits. Plaintiff was an employee of Raytheon and a participant in Raytheon's Short Term and Long Term Disability Plans, administered, but not insured, by Metropolitan Life Insurance Company ("MetLife"). Plaintiff filed a claim for STD benefits on April 15, 2005, which MetLife denied on July 18, 2005. Thereafter, Plaintiff submitted additional medical documentation, without formally appealing. MetLife upheld its previous decision on September 16, 2005. Then, on October 28, 2005, Plaintiff formally appealed. On January 12, 2006, MetLife, once again, issued a decision upholding its denial of benefits. On February 1, 2007, Plaintiff filed suit against the STD and LTD plans. The district court dismissed the action as untimely and Plaintiff appealed.
Both plans, as well as the Summary Plan Description provided by Raytheon, contained a one-year statute of limitations. Therefore, Plaintiff had to file suit on or before January 12, 2007, one year after the decision was last upheld. She missed this deadline by 20 days. Plaintiff argued that the Ninth Circuit should adopt the reasonable expectations doctrine to analyze whether the placement and display of the deadline was reasonable. In analyzing this issue, the Court noted that there were two opinions in the Ninth Circuit in conflict with one another-one applied the reasonable expectations doctrine to a self-funded plan and the other prohibited expansion of the doctrine beyond insured plans. Instead of resolving this conflict, the Court held that the SPD at issue met both Plaintiff's reasonable expectations and fulfilled the statutory and regulatory requirements. Therefore, the Court upheld the district court's dismissal of the action.
* Because the Court did not resolve the conflict, the issue of whether the reasonable expectations doctrine applies to self-funded plans remains in play. The Court did not provide any insight into which way it may come down on this issue.
Salisbury v. Hartford Life and Accident Insurance Company, 2009 WL 3112411 (10th Cir. Sept. 30, 2009): In this case, the Second Circuit considered the limitations period in an LTD plan. Plaintiff Salisbury became disabled under the terms of the Plan in 2000. When Salisbury applied for LTD benefits in 2002, the application was approved, and she was paid under the own occupation definition of disability from August, 2000, to August 2002. At test change, Hartford denied further LTD benefits. Plaintiff appealed in March, 2003, and Hartford upheld its decision in September, 2003.
Almost five years later, in March, 2008, Plaintiff instituted an action against Hartford seeking benefits. The district court granted Hartford's motion for summary judgment based on the three-year limitation in the Plan. That limitation period stated "[l]egal action cannot be taken against us: 1. sooner than 60 days after due Proof of Loss has been furnished; or 2. three years after the time written Proof of Loss is required to be furnished under the terms of the Policy." The Plan stated that "written Proof of Loss must be sent to us within 90 days after the start of the period for which we owe payment." Salisbury argued these definitions were ambiguous, circular, and confusing, and the three year period should not be applied.
The Court held the limitations period ran in October, 2005. It determined written proof of loss was due in October, 2002, 90 days after the "start of the period for which [Hartford] owed payment." Salisbury therefore had three years from October, 2005, in which to institute legal action, which she failed to do.
Salisbury further argued the limitation period was unenforceable because it was based on the Proof of Loss due date, rather than the date administrative remedies were exhausted. The Court noted the Circuits are divided on which event serves as the trigger for a limitation period. The Court suggested it recognized the potential problem with allowing a limitation period to expire prior to the administrative process being exhausted, and went so far as to suggest that, in such a case, it would simply allow the claimant a "reasonable period of time after exhaustion of administrative remedies or to apply equitable tolling during the pendency of the administrative review process." Such considerations were moot, however, as the Court noted Salisbury filed her action more than three years after Hartford denied her administrative appeal. The Court, therefore, affirmed the district court's grant of summary judgment to Hartford.
* Because there is no statute of limitations contained in ERISA for a claim for benefits, it is important to be aware of limitation periods contained in the Plan. While this Court acknowledged that the specific Plan provision could, in some circumstances, result in a problematic timing issue, it was willing to apply the Plan terms where the conduct of the plaintiff was such that it was clear, under any analysis, that he had not timely pursued his rights.
Additional Circuit Court opinions decided in the Fall of 2009
The Ninth Circuit in Marin General Hospital v. Modesto & Empire Traction Co., 2009 WL 2882832 (9th Cir. Sept. 10, 2009) reaffirmed recent precedent that to determine if claims are completely preempted by ERISA, both prongs of Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) must be satisfied-(1) an individual, at some point in time, could have brought the claim under ERISA Section 502(a)(1)(B), and (2) where there is no other independent legal duty that is implicated by a defendant's actions."
The Third Circuit in Lutz v. Philips Electronics N. Am. Corp., 2009 WL 3236029 (3d Cir. Oct. 8, 2009) applied prior precedent that "a successful equitable estoppel argument cannot toll the statute of limitations beyond the date of a plaintiff's actual knowledge of the injury giving rise to his claim." The Court determined that Plaintiff's claim for underpayment accrued when he began complaining about the incorrect calculation of benefits-the statute of limitation period could not be tolled beyond that date.
The Sixth Circuit in Mitzel v. Anthem Life Ins. Co., 2009 WL 3644653 (6th Cir. Nov. 4, 2009), relying on precedent from other circuits, held that in cases where the administrator's denial of benefits is reviewed under the arbitrary and capricious standard, invoking the rule of contra proferentem undermines that standard of review and should only be used in cases reviewed de novo.
The Second Circuit held, in A.M. Kawski v. Johnson and Johnson, 2009 WL 2750691 (2d Cir. Sept. 1, 2009), that Johnson and Johnson's practice of offering terminated employees payments, in exchange for releases, did not implicate ERISA. The Court noted there was no evidence Johnson and Johnson had made a commitment to its employees to offer these payments, and that the payments were based on "simple arithmetic" rather than any overarching administrative scheme.