Well-intentioned policymakers enacted the Employee Retirement Income Security Act of 1974 (“ERISA”) over forty years ago to provide for the protection of participants’ employee benefits in part by establishing a uniform set of rules to ensure efficient proceedings. One of these notable rules limits the scope of permissible evidence for actions commenced under ERISA section 502(a)(1)(B). This scope of evidence further depends on whether the reviewing federal court employs an abuse of discretion, or de novo, standard of review. Because discovery can be an expensive and time consuming process, insurers and claims administrators often take the position that discovery is irrelevant and not permitted under ERISA. As the cases below show, although limited, discovery is not forbidden in de novo review cases and ERISA claimants should actively seek discovery, taking care to clearly explain why the discovery sought is necessary to a de novo review.
An individual suffering from a disabling condition undoubtedly has many concerns. In addition to dealing with physical pain and emotional distress, there is always the thought of how to pay for medical bills and living expenses if the disability prevents the person from continuing work.
It can be stressful and time consuming for a disabled claimant to fight for long-term disability benefits (“LTD”) provided under an ERISA-governed employee benefit plan. However, a recent District Court case, Carrier v. Aetna Life Insurance Company, 2015 WL 4511620 (C.D. Cal. July 24, 2015), may help insureds by making it more difficult for insurance companies/claim administrators to summarily deny an insured’s claim without proof of specific findings and details as to how and why they reached their conclusion to deny benefits.
When a person suffers from a disability caused by an injury or sickness, the resulting restrictions and limitations, be they physical or mental, can have a devastating impact on that person’s ability to return to work. What is often overlooked, is that the side effects of the medication prescribed to treat a medical condition can themselves also impede a person’s ability to perform in the work place, thus resulting in a long-term disability. Recently, Central District of California Federal Court Judge Percy Anderson, in Hertan v. Unum Life Insurance Company of America, 2015 WL 363244 (C.D. Cal. June 9, 2015), ruled that a long-term disability insurer had to consider how the side effects of an insured’s medication impacted her cognitive abilities, and therefore, her ability to perform her job.
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.
Employees Must Follow ERISA Plan Documents in Designating Retirement Plan Beneficiaries or Risk Losing Critical RightsFebruary 09, 2015 Joe McMillen
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.
The Thursday December 1, 2010 edition of the Los Angeles Daily Journal featured the article co-written by Robert J. McKennon and M. Scott Koller, entitled “In ERISA Cases, The Standard of Review Really Does Matter,” in the Perspective column. It explains why it is important to identify and appropriately utilize the Standard of Review in ERISA cases. The article is posted below with permission of Daily Journal Corp. (2010).
Please click the image to view/print the article in Adobe
ERISA Claimant Retains Burden of Proof For Establishing Disability Under a De Novo Standard of ReviewNovember 01, 2010 Scott Koller
The question of who has the burden of proof can often decide the outcome of litigation. Given its importance, it is common to see litigants attempt to shift that burden to the opposing side in order to secure a tactical advantage. Recently, in Muniz v. Amec Construction Management Inc., __ F.3d __, 2010 WL 4227877 (Decided October 27, 2010), the Ninth Circuit Court of Appeals addressed the question of whether the burden of proof can be shifted in an ERISA disability case. In Muniz, a claimant diagnosed with HIV applied for benefits through his employer’s long-term disability plan (the “Plan”). Benefits were approved and paid for the first 24 months. However, as is common with many benefit plans, after 24 months the definition of disability changed. In order to qualify under the Plan, the claimant must be unable to perform all the essential duties of any occupation. As a result, the Plan terminated his benefits.
At trial, the parties agreed that the standard of review was de novo since the Plan did not grant discretion to the claims administrator. Accordingly, the district court placed the initial burden upon Muniz as the claimant to show that he was entitled to benefits under the terms of the plan. Muniz submitted evidence to the court from his primary physician, Dr. Towner, who concluded that Muniz was totally disabled from performing any occupation. This, argued Muniz, was sufficient to shift the burden of proof to the Plan to demonstrate that its claim decision was justified. However, the Ninth Circuit disagreed. Drawing from decisions in the Eleventh and Eighth Circuits, the Appellate Court concluded that the claimant retained the burden of proving that he was entitled to benefit even in light of the proffered evidence.
Litigation pursuant to the Employee Retirement Income Security Act (“ERISA”) is rather unique. Unlike most cases, ERISA disputes are based on a limited scope of permissible evidence. The range of that scope is ultimately dependent on which standard of review is employed by the courts. Typically, when the standard of review is abuse of discretion, the scope of admissible evidence is limited to what was before the claims administrator when the claims decision was made, i.e. the “administrative record.” The reason for this limited subset of evidence is based on the sole question before the court, namely “Did the claim administrative abuse its discretion in rendering its decision?” Obviously, evidence discovered or submitted after the claims decision was made would be irrelevant to that question, hence the narrow scope. However, when the standard of review is de novo, the question before the court changes to whether or not the claimant is entitled to benefits. In other words, it is simply whether or not the claimant is disabled. Consequently, this change in question also alters the realm of admissible evidence.
Recently, the court in Ermovick vs. Mitchell, Silberberg & Knump LLP Long Term Disability Plan, 2010 WL 3956819 (Decided October 8, 2010), addressed the question of whether evidence of procedural deficiencies should be considered in the context of a de novo review. The facts are relatively straight forward. James Ermovick worked as a word processor at the law firm of Mitchell, Silberberg & Knump. His claim for disability benefits was based on depression, anxiety and pain radiating in his back and neck due to myeloradiculopathy. Ermovick claimed to be totally disabled from any occupation while Prudential, the claims administrator, believed his disability to be temporary and therefore denied his benefits claim.