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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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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Third-Party ERISA Administrator Abused Discretion by Denying Medical Coverage: A Tale of What Not to Do

Posted in: Abuse of Discretion, Administrative Record, Conflict of Interest, ERISA, Fiduciary Duty, Health Insurance, Standard of Review September 16, 2014

Sometimes an administrator so unashamedly abuses its discretion in handling an insurance claim that its actions constitute a textbook example of “what not to do” for other administrators and the ensuing decision provides a clear illustration of how courts apply an abuse of discretion standard of review under the Employee Retirement Income Security Act (“ERISA”).  Indeed, a recent case clarified that plan administrators and third-party claims administrators alike are held to comparable standards when issuing claims decisions.  In Pacific Shores Hospital v. United Behavioral Health, 2014 WL 4086784; 2014 U.S. App. LEXIS 16062 (9th Cir. Cal. Aug. 20, 2014) (“Pacific Shores”) the Ninth Circuit Court of Appeal reversed the district court, finding the third-party administrator acted improperly by denying the insured’s claim based on clear factual errors.  Pacific Shores provides a clear example of how courts review a decision for an abuse of discretion, and shows that even third-party administrators, who purportedly have no conflict of interest with the insured, are still held to have the same duties in handling claims and must follow appropriate procedures.

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Rochow v. LINA: A Game-Changer in ERISA Disability Benefits Litigation

Posted in: Case Updates, Disability Insurance, Disability Insurance News, Equitable Relief, ERISA, Fiduciary Duty, Insurance Blog December 13, 2013

While this blog often discusses disability, life and health insurance/employee benefit decisions under the Employee Retirement Income Security Act of 1974 (“ERISA “), we rarely discuss federal circuit court of appeal decisions from outside the Ninth Circuit Court of Appeals (which governs California).  We are making an exception here, as a recent case from the Sixth Circuit Court of Appeals really caught our attention.  The case is Rochow v. Life Insurance Company of North America, __ F.3d ___ (6th Cir. December 6, 2013).  It is a “game-changer” in the world of ERISA disability, life and health insurance/employee benefit litigation, and could fundamentally change the way in which ERISA remedies are discussed and how these cases are litigated.  To say this is a “plaintiff friendly” case is probably to understate it.

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California Court Limits the Enforceability of Contractual Limitation Periods Because the Insurer Failed to Properly Provide ERISA Plan Documents

Posted in: Case Updates, Disability Insurance, Disability Insurance News, ERISA, Fiduciary Duty, Insurance Blog June 14, 2013

In an interesting opinion concerning a dispute over long-term disability (“LTD”) insurance benefits due under an ERISA plan, a District Court held that an ERISA administrator cannot rely on a contractual limitation period to defeat an insured’s claim where it failed to provide the insured with sufficient documentation and/or notice of the existence of the limitation period.  The decision in Barnett v. California Edison Co. LTD Plan, U.S. Dist. LEXIS 71345 (E.D. Cal. May 20, 2013) emphasizes that administrators of ERISA-governed policies must first discharge their fiduciary duty to fully inform the insured of existing contractual limitation periods before attempting to enforce provisions to defeat a lawsuit initiated by a plan participant. 

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ERISA Authorizes Breach of Fiduciary Duty Action for Misconduct When it Impairs Plan Assets in Participant's Individual Account

Posted in: Case Updates, ERISA, Fiduciary Duty, News, Standing January 14, 2010

Can a plan participant sue for breach of fiduciary duty when his individual account is diminished by a failure of the administrator to follow his investment instructions? The U.S. Supreme Court answered this important question in the affirmative in James LaRue  v. DeWolff, Boberg & Associates Inc., 128 S. Ct. 1020 (2008).  LaRue filed an action under ERISA alleging that his employer (also the plan administrator) breached its fiduciary duty with regards to an ERISA-regulated 401(k) retirement savings plan by failing to follow his investment instructions.  Relying on the Supreme Court’s ruling in Massachusetts Mutual Life Insurance Co. v. Russell that a participant could not bring a suit to recover consequential damages resulting from the processing of a claim under a plan that paid a fixed level of benefits, the Fourth Circuit Court of Appeals affirmed the district court’s grant of summary judgment in favor of the plan on the grounds that section 502(a)(2) did not provide a remedy for LaRue’s “individual injury.”  The Supreme Court disagreed. 

In an opinion written by Justice Stevens, the Court held that “although § 502(a)(2)  does not provide a remedy for individual injuries distinct from plan injuries, that provision does authorize recovery for fiduciary breaches that impair the value of the plan assets in a participant’s individual account.”  The Court reasoned that in the context of defined contribution plans, the misconduct did not need to threaten the solvency of the entire plan in order for section 409 (which provides remedies for breach of fiduciary duty) to apply.  Rather, the legislative history and plain language of the statute authorizes a participant to enforce fiduciary obligations under ERISA, and the administrator’s failure to follow the LaRue’sinvestment instructions could qualify as a breach of those duties.

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