For ERISA Disability Insurance Appeals, A Claimant Who is a Day Late May Not Be a Dollar Short

Posted in: Case Updates, Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Insurance Questions and Concepts, Policy Interpretation June 10, 2015

Under most long-term disability insurance plans governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), a claimant must appeal the denial of any claim for benefits within 180 days of the denial letter. Unless the appeal is made within that strict 180-day period, the claimant may forfeit the right to any short-term disability benefits or long-term disability benefits available under the plan. At least, that was the law until a recent ruling by the United States Court of Appeals for the Ninth Circuit cracked open the window for a timely appeal.

In LeGras v. Aetna Life Insurance Company, __ F.3d __, 2015 WL 3406182, 2015 DJDAR 5798, (9th Cir. May 28, 2015), the Ninth Circuit ruled that when the 180-day deadline falls on a weekend or holiday, the claimant has until the next business day to appeal a denial decision.

After injuring himself while working for Federal Express Corporation, LeGras filed a claim for long-term disability insurance benefits under the employee welfare benefit plan administered by Aetna. After initially approving LeGras’ disability claim, on April 18, 2011, Aetna denied his claim for ongoing benefits, and informed him that he could “file a request to appeal this decision within 180 days of receipt of this notice.” That 180-day period ended on October 15, 2011, a Saturday. However, because LeGras mailed his appeal letter on the following Monday, Aetna denied the appeal as untimely.

LeGras sued Aetna for long-term disability benefits, but the district court judge granted Aetna’s motion for judgment on the pleadings, on the grounds that LeGras failed exhaust his administrative remedies because he mailed his appeal letter after the end of 180-day period. LeGras appealed the district court’s ruling.

In considering the appeal, the Ninth Circuit noted that:

LeGras faces the possibility of losing his long-term disability benefits because of a two-day difference in the computation of the time period to pursue an administrative appeal. Although the stricter time-computation method may be convenient for AETNA’s purposes, it would be contrary to the purposes of ERISA to adopt a method that is decidedly protective of plan administrators, not plan participants.

The Ninth Circuit noted that, in enacting ERISA, Congress empowered the courts to develop federal common law governing employee welfare benefits plans. The Court then noted that federal common law has developed to protect and further the interests of plan participants, such as LeGras.

Next, the Ninth Circuit explained that “[t]here is nothing novel about the principle” of extending a deadline to the next business day, when that deadline falls on a weekend or holiday. The Ninth Circuit also noted that not only have numerous courts, including the United States Supreme Court, enforced this concept, but this rule is codified in Rule 6 of the Federal Rule of Civil Procedure.

In light of this precedent, and to further the interests of claimants such as LeGras, the Ninth Circuit explained that:

Therefore, we hold that, where the deadline for an internal administrative appeal under an ERISA-governed insurance contract falls on a Saturday, Sunday, or legal holiday, the period continues to run until the next day that is not a Saturday, Sunday, or legal holiday.

With this ruling, ERISA claimants will no longer be denied the opportunity to appeal their claim for benefits when the deadline falls on a weekend or holiday, simply because they mailed their appeal on the next business day. This case highlights the importance of having competent and experienced ERISA counsel assisting claimants who are working on appeals. There are indeed many traps for the unwary.

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Insurers Do No Have Discretionary Authority, Absent Clear Language in Official Plan Documents

Posted in: Abuse of Discretion, Administrative Record, Case Updates, De Novo Review, Disability Insurance, Disability Insurance News, ERISA, Insurance Blog, Insurance Questions and Concepts, Policy Interpretation, Standard of Review April 30, 2015

In actions brought under the Employee Retirement Income Security Act of 1974 (“ERISA”), two roads diverge in federal court—and the court’s choice regarding the applicable standard of review can make all the difference in the scope of permissible evidence.  If the court applies the abuse of discretion standard of review, the court more typically (but not always) only considers evidence received by the insurer in time for its decision and limits its review to the “administrative record” to determine whether the insurer’s denial was an abuse of discretion.  Alternatively, the court may review a case “de novo,” and may consider documents not previously provided to the insurer to determine whether the insured is entitled to benefits. 

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Ninth Circuit Affirms MLG’s Six-Figure Judgment in a Disability Suit Filed Against Sun Life

Posted in: Abuse of Discretion, Administrative Record, Case Updates, Conflict of Interest, Disability Insurance, Disability Insurance News, ERISA, Insurance Blog April 29, 2015

On April 22, 2015, the United States Court of Appeals for the Ninth Circuit issued a decision affirming the district court’s decision to award McKennon Law Group PC’s client, an attorney (“insured”), his past-due ERISA plan benefits, as well as attorneys’ fees, costs and interest against Sun Life & Health Insurance Company in connection with his short-term and long-term disability insurance claim. 

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California Court of Appeal Emphasizes Just How Broad the Duty to Defend Is, which Includes Suits Alleging Even Rape

Posted in: Case Updates, Disability Insurance, Disability Insurance News, Duty to Defend, Excess Insurance, Homeowners Insurance, Insurance Blog April 01, 2015

A liability insurer’s duty to defend its insured against lawsuits is extremely broad, much broader than its duty to indemnify its insured for a judgment entered against it.  That has been the law in California for decades.  But just how broad is the duty to defend?  Does it extend to civil lawsuits alleging the insured raped and sexually assaulted the plaintiff?  Does it extend to lawsuits alleging intentional acts by the insured?  You bet it does if the policy contains the right language.

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Multi-Million Dollar Disgorgement Award Struck Down in Rochow - But the Disgorgement Remedy May Still Be Alive

Posted in: Case Updates, Disability Insurance, Disability Insurance News, Equitable Relief, ERISA, Fiduciary Duty, Insurance Blog March 31, 2015

In December 2013, we published an article highlighting the Sixth Circuit Court of Appeals’ bold decision to award the plaintiff disability benefits plus $2.8 million in disgorged earnings, as a potential “game-changer” in Employee Retirement Income Security Act of 1974 (“ERISA”) litigation—that is, if it survived review.  Rochow v. Life Ins. Co. of N. Am., 737 F.3d 415 (6th Cir. 2013) (“Rochow I”).  Alas, the Sixth Circuit Court of Appeals vacated the decision in February 2014 and stayed the case.  Rochow v. Life Ins. Co., 2014 U.S. App. LEXIS 3158 (6th Cir. Feb. 19, 2014) (“Rochow II”).  Finally, in March 2015, the Court of Appeals issued an en banc decision vacating the disgorgement award and remanding the case for a review of prejudgment interest.  Rochow v. Life Ins. Co. of N. Am., 2015 U.S. App. LEXIS 3532 (6th Cir. 2015) (“Rochow III”).  The Court held that because the plaintiff was adequately compensated by an award of the insurance benefits, attorneys’ fees and possible prejudgment interest, that in this case, disgorgement was not necessary to make the plaintiff whole.  Although this decision is disheartening to claimant’s attorneys eager to test the limits of ERISA remedies, a careful reading of Rochow III reveals that the Sixth Circuit does not entirely foreclose disgorgement as an appropriate remedy under ERISA.  Moreover, the concurring and dissenting opinions provide additional guidance for future ERISA claimants who suffer injuries and seek equitable remedies beyond their policy benefits.

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Employees Must Follow ERISA Plan Documents in Designating Retirement Plan Beneficiaries or Risk Losing Critical Rights

Posted in: Case Updates, De Novo Review, ERISA February 09, 2015

Have you properly designated your intended beneficiaries for your retirement plan at work?  What about for your savings plan, life insurance policy or other employee benefit plans you have through your employer?  If you have not, the impact could be dire and life-changing for your loved ones after you pass.  Make sure you follow the law so your family is properly taken care of when the inevitable happens.

The Ninth Circuit Court of Appeal recently addressed these issues in Becker v. Williams, 2015 U.S. App. LEXIS 1554 (9th Cir. Jan. 28, 2015). There, a 30 year employee of Xerox Corporation died in 2011, Asa Williams, Sr.  Because Asa, Sr. did not follow through in changing his intended beneficiary with a written form after his telephone request to his employer, his son and ex-wife were left fighting each other over his retirement proceeds.  The Court framed the issue as:

We must decide whether a decedent succeeded in his attempt to ensure that his son—and not his ex-wife—received the benefits to which his employer’s retirement plans entitled him.

Before his retirement, Asa, Sr. participated in Xerox’s retirement and savings plan (“Retirement Plans”).  The Retirement Plans were subject to the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq. (as are most employer sponsored employee benefit plans such as life insurance policies and disability insurance policies).

Asa, Sr. married Carmen Mays Williams and formally designated her as his beneficiary on his Retirement Plans.  After their divorce, Asa, Sr. changed his designated beneficiary from his ex-wife to his son, Asa, Jr., by telephoning Xerox and instructing it to make the change three different times.  Each time, following his phone conversation with Xerox, Asa, Sr. received, but did not sign and return, the beneficiary designation forms Xerox gave him to confirm the change.

After Asa, Sr. died, Carmen immediately wrote Xerox and claimed to be the beneficiary under the Retirement Plans.  Asa, Jr. asserted the same claim.  Rather than decide the family squabble, Xerox filed an interpleader action in federal district court and interpleaded the retirement proceeds.

Carmen moved for summary judgment, asserting that because Asa, Sr. failed to fill out and return the beneficiary designation forms, he did not properly designate Asa, Jr. as beneficiary in her place.  Asa, Jr. argued that his father calling Xerox on the telephone and changing the beneficiary to himself from Carmen was enough.  The district court sided with the ex-wife and granted her motion, despite that Asa, Sr. apparently intended his son to receive his retirement benefits.  It reasoned the beneficiary forms were “plan documents” under ERISA and, therefore, Asa, Sr. was required to follow their instructions to legally complete the beneficiary change (they had language requiring the employee to sign and return the forms to validate a beneficiary change).

Asa, Jr. appealed.  The Ninth Circuit Court of Appeal reversed, holding that the beneficiary designation forms were not “plan documents” under ERISA.  Relying on another case that addressed a slightly different ERISA issue, Hughes Salaried Retirees Action Comm. v. Adm’r of the Hughes Non-Bargaining Ret. Plan, 72 F.3d 686 (9th Cir. 1995), the Court of Appeal found the beneficiary designation forms were not plan documents because:

only those [documents] that provide information as to where [the participant] stands with respect to the plan, such as [a] [summary plan description] or trust agreement might, could qualify as governing documents with which a plan administrator must comply in awarding benefits under [ERISA].

The Court of Appeal reasoned because an ERISA plan administrator must distribute employee benefits in accordance with the governing “plan documents,” Xerox was not required to follow the instructions on the beneficiary designation forms when distributing Asa, Sr.’s retirement proceeds.  Instead, Xerox was required to follow the requirements of the plan documents, including the Retirement Plans’ Agreement and Summary Plan Description.  Those documents permitted an unmarried employee like Asa, Sr. to change his beneficiary over the telephone simply by calling the Xerox Benefits Center.  The plan documents did not require a written form.  The Court of Appeal thus found the district court erred in determining that Asa, Sr. was required to abide by the language in the forms – but not in the governing plan documents – to change his beneficiary designation from Carmen to Asa, Jr.

The Court next addressed the issue of whether the evidence showed Asa, Sr. actually changed his beneficiary to Asa, Jr. in accordance with the plan documents.  It held that, based on Xerox’s call logs which showed Asa, Sr. called Xerox to change his beneficiary from Carmen to Asa, Jr., a reasonable jury could find he intended to make the change and that his phone calls substantially complied with the plan documents.  The Court therefore found summary judgment in Carmen’s favor was inappropriate.  It reversed and remanded to the district court for a trial in accordance with the rules espoused in its opinion on the issue of Asa, Sr.’s intent.

The Court addressed one final matter, the proper standard of review.  The issue was whether it should defer to the Retirement Plan administrator’s decisions in the matter or, instead, should decide “de novo” if Carmen or Asa, Jr. should receive the retirement benefits.  It held that because the Retirement Plan administrator did not exercise any discretion in deciding whether Asa, Sr. telephonically designating his son was valid under the Plans, it must decide the case de novo.  Stated another way, the Court found there was no discretion exercised by the Plan administrator to which it could defer.

It looks like this case will turn out fine for now deceased Asa, Sr. and his son, albeit at great expense and aggravation to Asa Jr.  But it teaches an important lesson to employees with employer sponsored retirement plans, life insurance policies and disability policies.  Make sure you carefully follow the plan documents whenever effectuating your rights.  The consequence of being careless could cost you or your family hard earned employee benefits.

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Standing Spine(dex) Adjustment – Ninth Circuit Finds Healthcare Providers Have Article III Standing in Denial of Benefit Claims Under ERISA

Posted in: Case Updates, ERISA, Fiduciary Duty, Standing January 13, 2015

A universal part of the American medical experience is paperwork. Everyone is familiar with visiting a healthcare provider for the first time, filling out history forms and signing pages of documents that they either do not understand or do not care about. The Ninth Circuit recently grappled with a minimally explored legal issue surrounding one such document: whether a non-participant healthcare provider, as assignee of health plan beneficiaries under an assignment form, has Article III standing to bring a denial of benefits claim under ERISA.

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Ruling Limits Insurance Company’s Ability to Collect SSDI Overpayments

Posted in: Case Updates, Disability Insurance, Disability Insurance News, ERISA, Insurance Blog January 08, 2015

When and under what circumstances an insurer paying long-term disability benefits may collect retroactive benefits paid to an ERISA plan participant under the Social Security Act has been the source of conflicting opinions over the years.   The most recent pronouncement:  a long-term disability plan administrators must “specifically identify a particular fund” from which it will be reimbursed in order to seek to recover of alleged overpayment of disability benefits.  So held the Southern District of California in its recent plaintiff-friendly decision in Wong v. Aetna Life Insurance Company, 2014 U.S. Dist. LEXIS 135661 (S.D. Cal. 2014).  Through its decision in Wong, the district court reaffirmed that simply because an ERISA governed long-term disability plan’s language provides for recovery of an award of back-dated SSDI benefits does not mean that an insurance company may seek reimbursement from an insured’s general assets.  Instead, the onus is on the insurer to specifically identify specific funds, separate from a plan participant’s general assets, on which it may place an attachment.

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Ninth Circuit Expands the Availability of Equitable Remedies in ERISA Cases, Approving Surcharge as a Viable Remedy

Posted in: Case Updates, Equitable Relief, ERISA December 24, 2014

Since the Supreme Court’s decision in Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134 (1985), the courts have grappled with the issue of the extent to which equitable remedies are available under the Employee Retirement Income Security Act (“ERISA”).  One of the most interesting and beneficial for plan participants is the issue of the equitable remedy of surcharge under ERISA.  Recently, the Ninth Circuit withdrew an earlier decision regarding the availability of the equitable remedy of surcharge in ERISA, and issued a new ruling consistent with the holdings of other Circuit courts.  The new ruling, Gabriel v. Alaska Electrical Pension Fund, 2014 DJDAR 16590 (9th Cir. 2014), is much more favorable to ERISA claimants and makes clear that surcharge, a form of equitable relief, is available to ERISA claimants under 29 U.S.C. section 1132(a)(3).  Further, the Court also set forth the requirements that a claimant must meet to qualify for other forms of equitable relief, including equitable estoppel and reformation.

The specific facts of the Gabriel matter are unimportant, and ultimately the Ninth Circuit ruled that the district court was correct in holding that the plaintiff was not entitled to the payment of the pension funds that he sought because his rights to those funds never vested.  The Ninth Circuit also remanded one aspect of the case to the District Court, but virtually instructed the lower court to deny that claim as well.  However, the ruling is important because, by making the equitable remedy of surcharge available to ERISA claimants, the Ninth Circuit aligned itself with the Fourth, Fifth, Seventh and Eighth Circuits in expanding the rights of ERISA claimants.

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What’s a Policyholder to Do? California Court Permits “Conditional Judgment” Awarding Replacement Cost to Policyholders

Posted in: Breach of Contract, Case Updates, Commercial General Liability Insurance, Insurance Bad Faith, Property & Casualty Insurance December 11, 2014

When a covered property is damaged, the insured may face a quintessential Catch-22—the insured cannot afford to proceed with costly repairs or replacement without insurance money, but until the repairs or replacements are finished, the insured cannot recover under the replacement cost provision of the liability policy.  A recent court decision held a policyholder must actually repair or replace the damage in order to claim replacement cost value, but may recover a “conditional judgment” for replacement cost benefits and satisfy the condition after trial.  Stephens & Stephens XII, LLC v. Fireman’s Fund Insurance Co., 2014 Cal. App. LEXIS 1073, 2014 WL 6679263 (Cal. App. 1st Dist. Nov. 24, 2014) (“Stephens”).  Stephens fashions a pragmatic approach whereby insurers can condition payment on actual replacement, while policyholders preserve their rights to benefits after proving coverage.  

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