ERISA and Life Insurance News

NOVEMBER

2016

2

ERISA

& LIFE INSURANCE NEWS

Covering ERISA and Life, Health and Disability Insurance Litigation

Healthcare Providers’ Right to Sue Under ERISA is Derivative, Limited in Scope, and Narrowly Construed 4 Penalty for Failure to Provide Plan Documents Cannot Be Claimed for First Time in Summary Judgment Brief 5 Claim for Life Insurance Benefit Barred by Failure to Exhaust Administrative Remedies 6 Statute Barring Defense Based on Application Does Not Prevent Insurer from Relying on Policy Exclusion 6 Court Denies Dismissal of Complaint Against Potential Plan Administrator 7 ERISA Denial of Benefits Affirmed, Despite Award of SSDI Benefits 7 “Right of Payment” versus “Rate of Payment” Distinction Irrelevant for Out-of-Network Case 8 One-Year Contractual Limitation Provision Bars Claim for Death Benefits under ERISA Plan 9 ERISA Preempts State Community Property Law in Interpleader Action 9 Insured Who Is Already Totally Disabled by Sickness Cannot Recover Lifetime Benefits Based on Injury 10 Loss Due to Intoxication Cannot Be Established by Elevated Blood Alcohol and its Common Effects

Healthcare Providers’ Right to Sue Under ERISA is Derivative, Limited in Scope, and Narrowly Construed Under ERISA’s civil enforcement provision, 29 U.S.C. §

healthcare providers are plan beneficiaries and continue to

1132(a)(1), only two categories of persons may sue directly

do so, thereby precluding such providers from bringing direct

to recover benefits due them under the terms of an ERISA-

actions to recover benefits under ERISA. Hobbs v. Blue Cross

governed plan, or to enforce their rights under the plan, or to

Blue Shield of Ala., 276 F.3d 1236, 1241 (11th Cir. 2001).

clarify their rights to future benefits under the plan. Those persons are plan participants and plan beneficiaries.

Healthcare providers are “not ‘beneficiaries’ of an ERISA welfare plan by virtue of their in-network status,” or their

Healthcare providers seeking to recover benefits under

provider agreements. Rojas v. Cigna Health and Life Ins. Co.,

an ERISA-governed plan generally do not claim to be plan

793 F.3d 253, 259 (2d Cir. 2015); Penn. Chiropractic Ass’n,

participants. See, e.g., Penn. Chiropractic Ass’n v. Indep.

802 F.3d at 929.

Hosp. Indem. Plan, Inc., 802 F.3d 926, 928 (7th Cir. 2015) (chiropractors conceded they are not “participants”). Rather, they claim to be plan beneficiaries. Id.

“The fact that [a healthcare provider] may be entitled to payment from [an insurer] as a result of her clients’ participation in an employee plan does not make her a beneficiary for the

A “beneficiary,” as defined in ERISA, is “a person designated

purpose of ERISA standing.” Brown v. BlueCross BlueShield of

by a participant, or by the terms of an employee benefit plan,

Tenn., Inc., 827 F.3d 543, 545-46 (6th Cir. 2016), citing Rojas,

who is or may become entitled to a benefit thereunder.” 29

793 F.3d at 257 (plan provision entitling healthcare providers

U.S.C. § 1002(8).

to receive payments directly from the insurer “does not a beneficiary make”); Grasso Enter., LLC v. Express Scripts, Inc.,

The circuit courts have long rejected the argument that

2

ERISA & LIFE INSURANCE NEWS

809 F.3d 1033, 1040 (8th Cir. 2016) (citing Rojas, but stating

“[t]he issue … is not whether [the health care providers] have

If a valid and enforceable assignment of a claim for payment

standing but whether their claim comes within the zone of

of benefits has been made, the court will assess the scope of

interests regulated by [ERISA]”).

the assignment by applying rules of contract construction.

“

Nonetheless, “a healthcare provider may acquire derivative standing ERISA

to by

sue

under

obtaining

a

written assignment from a ‘participant’ or ‘beneficiary’ of his right to payment of medical benefits.” Conn. State Dental Ass’n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1347 (11th Cir. 2009); New

See, e.g., Griffin v. Suntrust Bank, Inc., 2016 WL 1657973, at *4 (11th Cir. Apr. 27, 2016) (“Nothing in an assignment of benefits transfers the

A healthcare provider-assignee ‘stands in the shoes of the beneficiary,’ and can only assert claims that could have been brought by the patients themselves.

patient’s right to bring a cause of action for breach

”

of fiduciary duty, to seek statutory failure

to

documents,

penalties provide or

to

for plan seek

equitable relief to redress

Jersey Brain and Spine Ctr. v. Aetna, Inc., 801 F.3d 369, 373

a practice that violates ERISA or the terms of the Plan.”);

(3d Cir. 2015); Spinedex Physical Therapy, USA, Inc. v. United

Rojas, 793 F.3d at 258-59 (“By expressly assigning only their

Healthcare of Ariz., Inc., 770 F.3d 1282, 1289 (9th Cir. 2014),

right to payment, [the] patients did not also assign any other

cert. denied, 136 S. Ct. 317 (2015).

claims they have under ERISA,” including an ERISA antiretaliation claim); Montefiore Med. Ctr. v. Local 272 Welfare

“A healthcare provider-assignee ‘stands in the shoes of

Fund, 2015 WL 7970026, at *3 (S.D.N.Y. Oct. 19, 2015)

the beneficiary,’ and can only assert claims that could have

(assignment of patients’ rights to “monies and/or benefits

been brought by the patients themselves.” Brown, 2016 WL 3606686, at *4; see also City of Hope Nat’l Med. Ctr. v.

HealthPlus, 156 F.3d 223, 227-28 (1st Cir. 1998). Claims that implicate coverage and the right to recover benefits under a plan, often characterized as “right to payment” claims, are

... to cover the costs of care and treatment” did not include patients’ rights to seek injunctive or other equitable relief under ERISA), order adopting report and recommendation of magistrate, 2015 WL 8073909 (S.D.N.Y. Dec. 4, 2015).

properly assignable to a healthcare provider. Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 325 (2d Cir. 2011); see, e.g., CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165 (3d Cir. 2014).

But plan participants and beneficiaries cannot assign “amount of payment” claims. For example, “claims regarding the computation of contract payments or the correct execution of such payments” cannot be assigned to a healthcare provider because those “are typically construed as independent contractual obligations between the provider and ... the benefit plan.” Montefiore, 642 F.3d at 331. See, e.g., Brown, 543 F.3d at 548; Merrick v. United Health Group Inc., 127 F. Supp. 3d 138, 150 (S.D.N.Y. 2015) (same). Such claims are properly the subject of a breach of contract action, not an ERISA action. CardioNet, 751 F.3d at 177-78 Anti-assignment clauses in ERISA plans are valid and enforceable. Physicians Multispecialty Group v. Health Care Plan of Horton Homes, Inc., 371 F.3d 1291, 1295 (11th Cir.), cert. denied, 543 U.S. 1002 (2004).

ERISA & LIFE INSURANCE NEWS

3

Penalty for Failure to Provide Plan Documents Cannot Be Claimed for First Time in Summary Judgment Brief Juan v. Minnesota Life Ins. Co. | 2016 WL 1169576 (N.D. Ga. Mar. 25, 2016)

Ms. Juan’s husband, a native of Guatemala, was employed in Georgia.

He participated in an ERISA plan sponsored by his employer, Shaw Industries, a company associated with Berkshire Hathaway. The plan provided a basic life insurance benefit of $30,000 and a basic accidental death insurance benefit of $30,000 under a group insurance policy issued

by Minnesota Life. The policy was delivered to Berkshire Hathaway, as group policyholder, in Nebraska.

Ms. Juan’s husband was murdered in Guatemala while visiting his wife, who was a resident and citizen of Guatemala. Although her husband had not designated a beneficiary, Ms. Juan was the default beneficiary under the terms of the group policy.

Shaw Industries reported the death to Minnesota Life, which began an extended effort to obtain a certified death certificate and other documents. Minnesota Life repeatedly asked Ms. Juan’s attorney to provide a completed Form W-8BEN, an

4

ERISA & LIFE INSURANCE NEWS

Internal Revenue Form needed for the payment of benefits to a foreign national. Instead of providing the form, the attorney sued Minnesota Life, alleging breach of contract. In an amended complaint, Ms. Juan sought to recover a daily penalty from Shaw Industries under 29 U.S.C. § 1132(c) (1), alleging that the employer had failed to provide plan documents upon request.

“

[T]he proper procedure for plaintiff to assert a new claim is to amend the complaint in accordance with Federal Rule of Civil Procedure 15(a).

”

A few weeks after the complaint was filed, Ms. Juan’s attorney provided a signed Form W-8BEN. Minnesota Life paid the life insurance and accidental death insurance benefits, with interest computed at 6% per annum. The group

policy provided that interest would be paid “at an annual rate determined by [Minnesota Life], but never less than 4% per year.” Ms. Juan then contended that additional interest was owed under a Georgia statute.

Ms. Juan filed a motion for summary judgment, alleging for the first time that Minnesota Life was a de facto plan administrator, and that it also was liable for a penalty under 29 U.S.C. § 1132(c)(1) for failure to provide plan documents. Minnesota Life and Shaw Industries filed crossmotions for summary judgment. Their motions were granted, and Ms. Juan’s motion was denied.

The court rejected as untimely Ms. Juan’s claim to recover a penalty from Minnesota Life for the alleged failure to provide plan documents stating, “At the summary judgment stage, the proper procedure for plaintiff to assert a new claim is to amend the complaint in accordance with Federal Rule of Civil Procedure 15(a). Plaintiff has failed to properly assert any

such new claim, and as a result, Minnesota Life is not liable for an ERISA penalty.”

The court also held that Minnesota Life was the claims administrator, not the plan administrator, as defined by ERISA. “Because Minnesota Life was not the plan administrator ...,” the court said, “it cannot be liable for the penalty, even if it had received a request for plan documents.”

Finally, the court rejected Ms. Juan’s claim that a Georgia interest statute applied and held that the right to recover interest on the death benefits was governed by the law of Nebraska, where the group policy was delivered. Because Nebraska law required interest at a rate less than the minimum rate of 4% required by the policy, Minnesota Life had already paid all interest that could be due under the policy, the court said.

Regarding the claim for a penalty against Shaw Industries, the court noted that when Ms. Juan’s attorney requested information, a representative of Shaw Industries responded promptly, asking for an executed release from her husband’s estate. However, Ms. Juan’s attorney “did not respond with the requested information or in any way at all.”

Because the obligation to provide plan documents is triggered “upon written request of any participant or beneficiary,” 29 U.S.C. $ 1024(b) (4), the court held that a plan administrator is not required to provide documents to a third party unless authorized in writing by the participant or beneficiary to do so.

“While a plan administrator may be penalized for ignoring a request for information,” the court said, “Shaw Industries quickly responded in an attempt to obtain the estate’s consent. In so doing, Shaw Industries acted consistently with ERISA.”

Claim for Life Insurance Benefit Barred by Failure to Exhaust Administrative Remedies Lopez v. Reliance Standard Life Ins. Co. | 2016 WL 3191242 (W.D.N.C. June 3, 2016)

Lopez submitted a claim for life

that letter and notified Lopez and her

insurance benefits to Reliance Standard

attorney that its denial of coverage had

arising out of the death of Ricardo

become final.

Galarza. At the time of his death,

Lopez filed a breach of contract

Galarza was insured under a group life

claim in state court, and Reliance

insurance policy issued by Reliance

Standard removed the case to federal

Standard to his employer, RSI Home

court. Reliance Standard then moved

Products, to fund benefits under an

for

employee welfare benefit plan.

arguing that the complaint should be

judgment

on

the

pleadings,

Reliance Standard denied Lopez’s

dismissed because Lopez had failed

claim because of discrepancies in the

to exhaust administrative remedies

name, age, and marital status of Galarza

available to her under the plan and

and the person identified on the death

ERISA. The court converted the

certificate submitted by Lopez.

motion to one for summary judgment

The denial letter, dated April

and granted the motion.

30, 2013, informed Lopez that she

The court first determined that

could request a review of the claim

Lopez’s breach of contract claim

determination within 60 days. The

was preempted by section 502(a)

letter further informed Lopez that

of ERISA, 29 U.S.C. § 1132(a), such

“failure to request a review within

that it had jurisdiction over the claim.

the 60 days ... may constitute a

Next, the court held that Lopez’s claim

failure to exhaust the administrative

was barred by her failure to exhaust

remedies available under [ERISA] and

administrative remedies: “While ERISA

may affect your ability to bring a civil

does not contain an explicit exhaustion

action under [ERISA].”

provision, an ERISA welfare benefit

Lopez did not seek a review of the

plan participant must, nevertheless,

claim determination within 60 days of

both pursue and exhaust plan remedies

receiving the letter. In August 2014,

before gaining access to the federal

Reliance Standard received a letter from

courts,” the court said. Accordingly,

counsel for Lopez requesting a review.

summary judgment was granted for

Reliance Standard declined to consider

Reliance Standard.

ERISA & LIFE INSURANCE NEWS

5

Statute Barring Defense Based on Application Does Not Prevent Insurer from Relying on Policy Exclusion

Court Denies Dismissal of Complaint Against Potential Plan Administrator

Russell v. Gill | 2016 WL 1452494 (S.C. App. Apr. 13, 2016)

This case involves an intoxication

intoxication exclusion, because its

exclusion in an individual disability

proof of delivery of the policy was

policy. Russell applied to Penn Life

insufficient. That statute provides:

for the policy in 1999. The policy

“Every insurer doing accident

was issued with an intoxication

or health insurance business in the

exclusion, providing that Penn Life

State shall deliver with each policy

would “not be liable for any loss

of insurance issued by it a copy of

which result[ed] from [the insured]

the application made by the insured

being: (1) intoxicated; or (2) under

so that the whole contract appears

the influence of any narcotic unless

in the application and policy of

taken on the advice of a Physician.”

insurance. If the insurer violates this

In 2002, Russell increased his and

to the policy on account of anything

he received a receipt with similar

contained in or omitted from the

monthly

disability

benefit,

“ ”

language. Neither party disputed that the policy contained the intoxication exclusion.

In

2008,

Russell

was

injured in a

application. If the insurance policy

The statute does not bar... defenses based on... the policy itself.

is

issued

upon an oral application, no

defense

is allowed to the policy on account

of

motorcycle accident and was issued

anything contained in or omitted

a citation for driving under the

from the oral application.”

influence. He applied for disability

On appeal, the South Carolina

benefits under the policy, which

Court of Appeals reversed, finding

Penn Life paid until it learned that

that a violation of the statute only

alcohol may have been a factor in

prohibits an insurer’s use of any

the accident.

defense “on account of anything

Russell filed suit, alleging bad faith

contained in or omitted from the

refusal to pay first-party benefits,

application.”

breach of contract to procure

not bar an insurer from asserting

insurance, and breach of contract.

defenses based on the terms of the

Penn Life filed a counterclaim for

policy itself.

declaratory judgment that Russell’s

Because

The

the

statute

does

intoxication

loss was not covered because of the

exclusion was contained within

intoxication exclusion.

the policy, rather than within the Circuit

application, the Court of Appeals

Court held that a statute, S.C

held that § 38–71–30 did not

Code

prohibit Penn Life from enforcing

The

South §

Carolina

38–71–30,

prevented

Penn Life from enforcing the

6

requirement, no defense is allowed

ERISA & LIFE INSURANCE NEWS

the exclusion.

Haysman v. Metropolitan Life Ins. Co., 2016 WL 1305360 (S.D. Ga. Mar. 28, 2016)

Haysman purchased life insurance as part of an ERISA plan established by his employer, Patcomp Inc. After Haysman’s death and the denial of his beneficiaries’ claim for death benefits, plaintiffs brought suit under ERISA against MetLife, which issued the coverage, and an entity called Bill Lucas & Associates, Inc. (BLA), described by plaintiffs as being “actively engaged in soliciting, enrolling, and servicing the Employee Benefit Plan of Patcomp and its employees.”

The complaint alleged that BLA was “the agent and representative of Defendant Patcomp in the administration and carrying out of the employee benefit plan and acted on behalf of the Plan Administrator in carrying out the requirements of the plan.” Finally, the complaint asserted that BLA “advis[ed] employees of Patcomp on all aspects of said benefit plans, including determinations of eligibility for benefits.”

BLA moved to dismiss the complaint, asserting that it was “utterly devoid of any contention that [BLA] is a plan administrator or fiduciary subject to liability as an ERISA entity.” Plaintiffs argued that they had “properly alleged that Defendant BLA was a ‘de facto Plan Administrator with control over the employee benefits program of Patcomp.’”

The court denied the motion to dismiss, concluding that plaintiffs had “sufficiently alleged that Defendant BLA is a plan administrator.” Among the allegations, the court noted, was the “contention that Defendant BLA was somehow involved in determining whether individuals were eligible for plan benefits.” According to the court, “[t]his type of activity would render Defendant BLA a plan administrator and subject to suit under ERISA for the improper denial of benefits.”

The court acknowledged that “it very well may be that Defendant BLA does not qualify as a plan administrator.” At this early stage of the litigation, however, only a “short and plain statement” of the claim showing entitlement to relief was required.

ERISA Denial of Benefits Affirmed, Despite Award of SSDI Benefits Sobh v. Hartford Life and Accident Ins. Co. | 2016 WL 3564380 (11th Cir. July 1, 2016)

Sobh, a former employee of JPMorgan

disability in the plan was different from

whose

Chase Bank, sued to recover long term

that utilized by Social Security, and that

governed by plan documents, the Social

disability

assessments

disability benefits under his employer’s

Hartford had reviewed “key evidence”

Security Administration employs a highly

ERISA plan after his claim was denied

that was not considered by the Social

particularized,

under the “any occupation” standard. The

Security Administration, including the

evaluation

denial of benefits was based in part on a

surveillance material and the opinion of

regulations.”

surveillance video, described as reflecting

the treating physician that Sobh could

no impairment, and the opinion of an

“perform full-time sedentary work.”

five-step

process’

are

‘sequential

prescribed

by

Moreover, “the circumstances that caused Hartford to conclude that Sobh

independent medical examiner that Sobh

The trial court granted summary

was no longer disabled did not occur

was capable of employment that allowed

judgment in favor of Hartford, and Sobh

until two years after the Social Security

for frequent positional changes.

appealed. Affirming the trial court’s

Administration’s determination.”

Hartford acknowledged that Sobh

ruling, the Eleventh Circuit noted that its

Specifically, the court noted, the

had been awarded Social Security

decision was not altered by the decision

“Social Security Administration did not

disability benefits, but according to the

of the Social Security Administration.

have before it at the time it made its

court, the company “explained why

First, the court wrote, the determination

disability determination, the surveillance

Hartford reached a different conclusion

of disability under the plan differed

video recordings or Sobh’s treating

than the Social Security Administration

significantly from the “framework” utilized

physician’s opinion that Sobh was able to

regarding disability benefits.” During the

by the Social Security Administration.

perform sedentary work.” As a result, the

administrative review of the claim denial,

In a footnote, the court elaborated that

earlier Social Security determination was

Hartford noted that the definition of

“[u]nlike ERISA claim administrators,

“of little consequence.”

“Right of Payment” versus “Rate of Payment” Distinction Irrelevant for Out-of-Network Case Alliance Med, LLC v. Blue Cross and Blue Shield of Ga., Inc. | 2016 WL 3208077 (N.D. Ga. June 10, 2016)

A

group

of

medical

Nonetheless, the providers moved to remand the case to state court. The issue was whether the state law claims were subject to complete preemption by

providers

to set out certain state law claims for

ERISA and therefore supported federal

brought suit in state court against Blue

misrepresentation, fraud, and unfair

question removal jurisdiction.

Cross, which removed the case to

trade practices. The providers admitted

The court noted that the gravamen of

federal court. Following removal, the

that some of the insurance agreements

the claims was “the difference between

providers

at issue constituted ERISA plans.

the

amended

their

complaint

rates

paid

to

out-of-network

ERISA & LIFE INSURANCE NEWS

7

providers and the representations made

terms of provider contracts, rather than

Defendants and Plaintiff’s patients.” In

to the employers that purchased policies

the terms of the plan itself.

addition, it “would be difficult, if not

from Defendants.” The court concluded

The court, however, determined that

impossible, to determine the amount of

that these claims “were directly related to

this distinction “is irrelevant in cases

damages without considering the plan

the terms of the plans themselves.”

involving

documents.”

out-of-network

providers

the

because a ‘rate of payment’ dispute is

The court denied the motion to

distinction between “rate of payment”

governed by the provider agreement.”

remand. The court further concluded

cases and “right of payment” cases.

Here, the providers were not “in-network

that it could exercise supplemental

Cases addressing the former issue

providers and thus do not hold a provider

jurisdiction under 28 U.S.C. § 1367

are sometimes determined not to be

agreement with Defendants.”

as to state law claims that were not

The

providers

relied

on

that

preempted by ERISA, because they

amount of payment (versus the right to

resolution of the claims would “necessarily

arose out of the “same common nucleus

payment) may be dependent upon the

require examining the contract between

of operative fact.”

removable to federal court, because the

The

court

also

concluded

One-Year Contractual Limitation Provision Bars Claim for Death Benefits under ERISA Plan Webb v. Liberty Life Assurance Co. of Boston | 2016 WL 3087455 (N.D. Ga. June 1, 2016)

Webb was a participant in an

Mrs. Webb filed suit on June 12,

ERISA-governed plan sponsored by

2015. Liberty moved for summary

his employer, Adobe. He was insured

judgment based on the contractual

under a group policy issued by Liberty,

“ ”

providing basic and optional life and accidental death insurance benefits. On December 27, 2013, Mr. Webb died from a self-inflicted gunshot wound to the head.

By December 31, 2013, Adobe provided Liberty with the information it was required to submit and noted that the cause of Webb’s death was a “possible suicide.” On January 24, 2014, Liberty received Mrs. Webb’s

The court found “no reason not to enforce the contractual limitations period.”

the time Proof is otherwise required.”

Citing

Harrison

v.

Liberty

Life

Assurance Co. of Boston, 2011 WL 2118954, at *2 (N.D. Fla. May 27, 2011), the court construed the contractual limitation provision to mean that a legal action could not be filed “more than one year plus 30 days from the date of loss,” unless it was not “reasonably possible” for the claimant to submit proof within 30 days of the date of loss,

Under the group policy, a legal

in which case the legal action could not

action could not be commenced “more

be filed more than two years plus 30

than one year after the time Proof of

days from the date of loss.

claim is required.” The “proof of claim”

Because Mrs. Webb could, and

certificate, which stated that the cause

provision stated: “Satisfactory Proof of

did, submit the required proof of loss

of death was suicide.

loss must be given to Liberty no later

within 30 days of the loss, the court

On January 27, 2014, Liberty paid

than 30 days after the date of loss.

concluded the applicable limitations

the basic life benefit to Mrs. Webb

Failure to furnish such Proof within such

period was one year and 30 days

but denied the other benefits based

time shall not invalidate or reduce any

from the date of loss, or January 27,

on suicide exclusions. On March 26,

claim if it was not reasonably possible

2015. Mrs. Webb did not file suit until

2014, Mrs. Webb, through an attorney,

to furnish such Proof within such time.

June 12, 2015. The court found “no

appealed

completed claim form and the death

8

limitations provision.

of the claimant, later than one year from

and

Such Proof must be furnished as soon

reason not to enforce the contractual

provided additional proof. On June 23,

as reasonably possible, and in no event,

limitations

2014, Liberty upheld its decision.

except in the absence of legal capacity

judgment in favor of Liberty.

the

claim

decision

ERISA & LIFE INSURANCE NEWS

period”

and

granted

ERISA Preempts State Community Property Law in Interpleader Action

Insured Who Is Already Totally Disabled by Sickness Cannot Recover Lifetime Benefits Based on Injury Silverman v. Unum Life Ins. Co. of Am. | Case No. 1:13-cv-04296 (N.D. Ga. July 12, 2016)

Companion Life Ins. Co. v. McCreary, 2016 WL 3090649 (D.S.C. May 9, 2016)

Companion Life issued a group life insurance policy, insuring employees of The Society of St. Vincent de Paul as part of an employee welfare benefit plan. Rodney Moore, an employee of The Society, enrolled in the group policy and designated his mother, Jean Bankett, as the beneficiary.

The policy was delivered in Arizona, where Moore worked and lived until his death. After his death, Moore’s wife, Michelle McCreary, claimed that she was entitled to 50% of the death benefit under the community property law of Arizona.

Faced with competing claims for the death benefit, Companion Life filed an interpleader action. The court recognized and the parties did not dispute that the policy was governed by ERISA. McCreary argued, however, that there was no conflict with ERISA if the court were to apply the Arizona community property law first, awarding her 50% of the death benefit, prior to administering the plan to pay the remaining benefit to Bankett as the designated beneficiary.

Citing Egelhoff v. Egelhoff, 532 U.S. 141 (2001), the court rejected McCreary’s argument. The Arizona community property law related to and attempted to affect benefits paid pursuant to the plan, and therefore, was preempted by ERISA. The court also rejected Bankett’s assertion that she should receive an award of interest on the death benefit as compensation for the delay caused

by McCreary’s claim. The court found that Companion Life’s interpleader action was properly filed. Auto Parts Mfg. Miss., Inc. v. King Constr. of Houston, LLC, 782 F.3d 186, 194 (4th Cir. 2015) (“It is not for the district court, in determining whether interpleader is proper, to consider whether the competing claims are meritorious.”).

Dr. Silverman, an endocrinologist,

the

maximum

benefit

period

was insured under two individual

for disability due to sickness

disability policies issued by Unum.

was reached in 2013. Silverman

The policies provided a maximum

then sued, seeking a declaratory

benefit period to age 65 for total

judgment that he was entitled to

disability due to sickness. Accident

lifetime benefits for total disability

benefit riders provided lifetime

due to injury under the accident

benefits if Silverman became totally

benefit riders.

disabled as the result of an accidental

Unum

filed

a

motion

for

bodily injury that “prevents [the

summary judgment, which was

insured] from engaging in his regular

granted. The court noted that at the

occupation.”

time of his traumatic brain injury, working

Silverman “had already been forced

in May 2009 due to illness. He

Silverman

stopped

to leave his endocrinology practice

submitted a claim for total disability

as a result of sickness.” Thus, the

benefits

based

myasthenia

court said, the question was this:

gravis,

peripheral

on

neuropathy,

“[A]ssuming that Silverman’s injury

degenerative disc disease, and other

would ordinarily have prevented

medical conditions. Unum began

him from engaging in his regular

paying

benefits

occupation, is his injury nonetheless

under the sickness provisions of the

outside the policy because he was

policies in July 2009, after Silverman

already completely prevented from

had satisfied the elimination period.

engaging in his regular occupation?”

total

disability

Two and a half months later, in

The court held that lifetime

September 2009, Silverman suffered

benefits were not payable. “There is

a traumatic brain injury when he fell

no evidence that Silverman would

down a flight of stairs. According

have been able to practice in 2011,

to his doctor, Silverman sustained

when he submitted his claim, or

a post concussive syndrome with

even in 2013, when Unum ceased

cognitive impairment, which “would

making benefit payments, since

significantly impact his continuing

these same unabated conditions

practice as a physician.”

rendered him completely unable

In 2011, Silverman submitted

to practice beginning in 2009,” the

a claim to Unum, seeking lifetime

court said. “Thus, the effect of his

benefits

accident

injury could not have prevented

benefit riders. Unum denied the

him from doing something he was

claim, stating, “[y]our injury, or fall

already unable to do. Accordingly,

in September 2009, was not the

a material condition of the ‘total

cause of your Total Disability.”

disability’ definition is not met,

Unum total

under

the

continued

disability

to

pay

benefits

until

meaning Silverman is not entitled to the [lifetime] benefit.”

ERISA & LIFE INSURANCE NEWS

9

Loss Due to Intoxication Cannot Be Established by Elevated Blood Alcohol and its Common Effects Prelutsky v. Greater Georgia Life Ins. Co. | 2016 WL 4177469 (N.D. Ga. Aug. 8, 2016)

Prelutsky, a partner in a law firm, was a participant in an ERISA plan and

Three weeks later, Prelutsky was

was insured under a group disability

transferred to a long-term rehabilitation

policy.

the group policy, disability caused by, resulting from, or related to intoxication was excluded from coverage.

While on a ski vacation in

facility. The admitting physician noted

The insurer denied Prelutsky’s claim

Aspen, he fell down a flight of stairs,

that Prelutsky had a history of binge

based on the intoxication exclusion, citing

resulting in traumatic brain injuries. No

drinking and that he was intoxicated

a federal regulation describing physical

one witnessed the fall. His son found

when he fell.

The records from the

and mental symptoms associated with

him unconscious.

rehabilitation facility contained several

a BAC between 0.20 and 0.29 (e.g.,

references to Prelutsky’s “blood alcohol

stupor, severe motor impairment, loss of

level of 0.25 at the time of his fall.”

understanding, impaired sensation, loss

Within 20 minutes after arriving at the hospital, Prelutsky’s blood alcohol concentration (“BAC”) was 281 mg/ dL. The test records stated:

“These

unconfirmed ‘screening’ results are to be used for medical purposes only.

They are not intended for non-medical purposes (e.g., employment and/or legal testing).” The medical records were replete with other references to Prelutsky’s intoxication, including: “Patient ... drank heavily this evening; fall 20 carpeted steps with immediate loss of consciousness.

10

family friends are present in the ER.”

His son and

ERISA & LIFE INSURANCE NEWS

“ ” The insurer could not sustain its burden by relying solely on Prelutsky’s blood alcohol concetration.

of consciousness, possibility of falling).

Prelutsky appealed, submitting an affidavit from the owner of the Aspen home, who stated she did not see Prelutsky fall, but he did not appear intoxicated before the fall. The owner speculated that Prelutsky tripped over his ski pants.

Prelutsky submitted a claim for

The insurer obtained an independent

benefits. The insurer had discretionary

medical records review. Citing medical

authority to administer the claim and was

treatises, the physician noted that

responsible for paying benefits. Under

at “0.25% BAC, the individual needs

assistance in walking, and experiences

the homeowner’s personal opinion that

intoxication.” The court rejected the

total mental confusion.”

Prelutsky did not appear intoxicated.

insurer’s argument that, because there

Because

Prelutsky’s BAC was .281 at the time,

The court construed the intoxication

was no eyewitness, further investigation

the physician opined that intoxication

exclusion to require a causal link

would not have yielded any information

most probably contributed to the fall.

between Prelutsky’s intoxication and

as to the cause of the fall.

The insurer upheld its claim decision.

his loss. Citing Capone v. Aetna Life Ins.

The court suggested that Prelutsky’s

On cross-

Co., 592 F.3d 1189 (11th Cir. 2010), and

son and the family friends who were in

motions for judgment, the court noted

cases from other jurisdictions, the court

the ER could have provided additional

that the insurer had a minimal burden

concluded the insurer could not sustain

information

of proof (i.e., to show that the injury was

its burden by relying solely on Prelutsky’s

physical and mental state immediately

“related to” intoxication) and that the

BAC and a general list of alcohol’s

preceding the fall.” The court identified

deferential standard of review applicable

effects. Nor would a medical expert’s

additional “facts that logically could

in ERISA cases applied. But the court

opinion as to causation be sufficient if

[have been] investigated to evaluate the

granted judgment for Prelutsky, finding

based solely on such evidence.

relationship between the intoxication

Prelutsky filed suit.

Plaintiff’s

Thus, the court concluded the insurer

and the fall,” such as the volume of

was required to conduct a further

alcohol consumed, the type of alcohol

the insurer’s decision to be both de novo wrong and an abuse of discretion.

“regarding

evidence

investigation to determine if Prelutsky’s

consumed, the time period over which

sufficient to establish that Prelutsky

intoxication resulted in a “degradation

it was consumed, whether Prelutsky

was intoxicated at the time of the fall,

of his physical and cognitive abilities

was tired as a result of physical activity,

stating it was reasonable to place more

such that the causal link can reasonably

and whether he was wearing attire that

weight on the medical evidence than

be drawn between the injury and

might cause a fall.

The

court

found

the

ERISA & LIFE INSURANCE NEWS

EDITORS

SANDERS CARTER

K E N T C O P PA G E

A N D R E A C ATA L A N D

OTHER CONTRIBUTORS TO THIS ISSUE

MANNING CONNORS

MARY RAMSAY

JENNIFER RATHMAN

ERISA & LIFE INSURANCE NEWS

11

Smith Moore Leatherwood LLP Attorneys at Law Atlantic Center Plaza 1180 W. Peachtree St. NW Suite 2300 Atlanta, GA 30309-3482 T 404.962.1000 F 404.962.1200 www.smithmoorelaw.com

E R ISA a nd L i fe In s u ran ce News articl es are al s o

AVAI LABLE ONLI NE

w w w. s m i t h m o o re l a w. co m /s u b s c r i b e . a s px