ERISA and Life Insurance News

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2017

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ERISA

& Life Insurance News

Covering ERISA and Life, Health and Disability Insurance Litigation

SPD May Be the Plan, Despite Reference to a Non-Existent “Official Plan Document” 4 Meritless Counterclaim against Interpleader Plaintiff Dismissed, but Plaintiff’s Claim to Recover Fees Denied 5 Life Insurer Did Not Breach the Contract by Using Cash Value to Cover Increased Monthly Premiums 5 Evidence Was Sufficient to Establish That Former Employer Provided COBRA Continuation Letter 6 NFL Retirement Plan Arbitrarily Refused to Consider New Evidence Supporting Former Player’s Claim 7 Physician Lacks Standing to Sue for Benefits Due to ERISA Plan’s Anti-Assignment Provision 8 Denial of Benefits under Intoxication Exclusion Upheld, Based on Expert Opinion as to Alcohol Effects 9 Trial Court Erred by Dismissing Provider Claims Based on Assignments Under Self-Funded Plans 10 District Court Rejects “Kitchen-Sink” Claims Against Plan Sponsor and Insurer

SPD May Be the Plan, Despite Reference to a Non-Existent “Official Plan Document” ERISA mandates that “[e]very employee benefit plan shall be established and maintained pursuant to a written instrument.”

29 U.S.C. § 1102(a)(1). The written instrument—often referred to as the plan document—“serves two of the primary goals of ERISA: informing employees of the benefits to which they are entitled, and providing some degree of certainty in the administration of benefits.” Feifer v. Prudential Ins. Co. of Am., 306 F.3d 1201, 1208 (10th Cir. 2002), quoting Wentforth v.

Digital Equip. Co., 933 F. Supp. 123, 127 (D.N.H. 1996).

The written instrument, or plan document, must (1) provide a procedure to establish and carry out a funding policy consistent with the plan’s objectives, (2) describe the plan’s procedures to allocate responsibilities for the operation and administration of the plan, (3) provide a procedure to amend the plan, and (4) specify the basis on which payments are made to and from the plan. 29 U.S.C. § 1102(b).

ERISA also requires a plan administrator to provide a summary plan description to each participant and beneficiary of the plan. Id. § 1024(b)(1). The summary plan description (“SPD”) must “reasonably apprise [plan] participants and beneficiaries of their rights and obligations under the plan” and must be “written in a manner calculated to be understood by the average plan participant.” Id. § 1022(a).

Plans typically consist of both documents: the “written instrument,” by which the plan sponsor “creates the basic terms and conditions of the plan,” and a separate summary plan description, by which the plan’s administrator “provides participants with the summary documents that describe the plan (and modifications) in readily understandable form.” Cigna Corp. v. Amara, 563 U.S. 421, 437 (2011).

Plan Document and SPD May Be Contradictory While both the plan document and the SPD are required, their provisions are not always consistent—sometimes

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because they were created at different times or by different entities, and sometimes as the result of careless drafting.

When the SPD contradicts, or is otherwise inconsistent with, the plan document, the Supreme Court has made clear that the SPD is not the “written instrument” required by § 1102, and that the plan document, not the SPD, controls. Amara, 563 U.S. at 438 (“the summary documents, important as they are, provide communications about the plan, but … their statements do not themselves constitute the terms of the plan”). (Emphasis by the Court.)

In a number of cases, employees or their beneficiaries have relied on Amara to argue that the requirements of an SPD were unenforceable because those requirements were not also contained in the plan document. Recognizing that an ERISA plan may consist of both the “written instrument” required by § 1102 and the SPD required by § 1024(b)(1), that argument has been rejected when the SPD requirement did not conflict with the plan document. See, e.g., Bd. of Trs. of Nat’l Elevator Indus. Health Benefit Plan v. Montanile, 593 F. App’x 903, 910 (11th Cir. 2014) (“Amara only precludes courts from enforcing summary plan descriptions … where the terms of that summary conflict with the terms specified in other governing plan documents.”) (Emphasis by the court.); Mull v. Motion Picture Indus. Health Plan, 865 F.3d 1207, 1210 (9th Cir. 2017) (“[N]either the Trust Agreement nor the SPD meets ERISA’s requirements for constituting a plan. But by clear design …, the two documents together constitute a plan.

Accordingly, we conclude that the ERISA plan is the Trust Agreement plus the SPD.”) (Emphasis by the court.)

Courts find it easier to reject the argument that an SPD is unenforceable when the SPD, by its terms, was intended to be part of the plan. Eugene S. v. Horizon Blue Cross Blue Shield of N.J., 663 F.3d 1124, 1131 (10th Cir. 2011) (Where the SPD was identified as a document forming the plan, “the SPD

does not conflict with the Plan or present terms unsupported by the Plan; rather, it is the Plan.”) (Emphasis by the court.)

But suppose there is only an SPD and no separate “written instrument”? Not infrequently, the plan sponsor (or the claims administrator) creates an SPD, which is issued to participating employees, but fails to maintain a separate plan document.

In that case, courts have held that the SPD, standing alone, can serve as both the governing plan document and the summary description. Alday v. Container Corp. of Am., 906 F.2d 660, 666 (11th Cir. 1990) (the SPD “functioned as the plan document” and “unambiguously set out the rights of the parties”).

and a written instrument but, instead, are deciding whether an SPD can function as a written instrument in the absence of a separate written instrument.

858 F.3d at 345.

The court held that an SPD can function as the plan document and that, in Rhea’s case, it did. “That is nothing peculiar,” the court said. Id. at 344. “Plan sponsors commonly use a single document to satisfy both requirements, and courts have blessed the practice.” Id. “[W]hen an SPD is a plan’s only plausible written instrument, courts assume that the SPD is the written instrument.” Id. at 346, citing Feifer,

SPD Stated That Non-Existent Plan Document Would Control

306 F.3d at 1208-10.

That was the situation in Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan, 858 F.3d 340 (5th Cir. 2017)—but with an additional twist. An SPD was issued to employees of Alan Ritchey, Inc. Although no separate “written instrument” existed, the SPD stated, “In the event of any discrepancy between this Summary Plan Description and the official Plan Document, the Plan Document shall govern.”

Rhea, the wife of an Alan Ritchey employee, suffered injuries from medical malpractice. The plan paid some of her medical expenses. When Rhea settled the malpractice claim, the plan sought reimbursement, relying on this language that appeared in the SPD and nowhere else: “[I]f a third party causes … Injury for which you receive a settlement, … you must use those proceeds to fully return to the Plan 100% of any Benefits you received for that … injury.”

When Rhea’s attorney asked to see the “official Plan Document,” the benefits administrator responded that the SPD “is the Plan document,” that it “contains all of the ERISArequired plan provisions,” and that it “operates as the Plan’s official plan document.”

Rhea sued, seeking a declaratory judgment that she was not required to reimburse the plan. She argued that, in the absence of the “official Plan Document” described in the SPD, no ERISA-compliant written instrument was in place, as a result of which the plan had no enforceable right of reimbursement. The plan filed a counterclaim for equitable relief. On cross-motions for summary judgment, the district court entered judgment against Rhea.

The Fifth Circuit affirmed, rejecting Rhea’s argument that Amara requires a plan’s SPD and written instrument to be separate documents. “To the contrary,” the court said, “where a plan has an SPD but no separate written instrument, the SPD can serve as the plan’s written instrument.” Distinguishing the relevant facts from those in Amara, the court wrote: We are not grappling with a conflict between an SPD

describing benefits when certain employees’ claims arose.

In Feifer, a “Program Summary” was the only document The Program Summary stated: This summary is for information purposes only and is not intended to cover all details of the Plan. The actual provisions of the Plan will govern in settling any questions that may arise.

A group insurance policy was issued later. It provided that disability benefits would be reduced by the receipt of Social Security disability benefits and workers’ compensation benefits but that offset provision did not appear in the Program Summary.

The employees argued that because the group policy had not been issued when their claims arose, the Program Summary controlled, and their disability benefits could not be reduced.

The Second Circuit agreed, holding that “[h]owever slap-dash” it may have been, the Program Summary and an accompanying memorandum “were ‘the plan’ for purposes of the plaintiffs’ actions under § 1132(a)(1)(B),” and they provided disability benefits without offsets for SSDI or workers’ compensation benefits. 306 F.3d at 1209-11.

In the Rhea case, the plaintiff’s fallback argument was that because the SPD referred to an “official Plan Document” that did not exist, the plan sponsor had misrepresented material facts, thereby breaching its duty of loyalty to her as an ERISA plan beneficiary and rendering the SPD unenforceable. The Fifth Circuit acknowledged it had “never addressed this issue,” but rejected the argument. Relying on Feifer, the court concluded that the statement in the Alan Ritchey SPD that discrepancies would be governed by a separate, but non-existent “official Plan Document” was “sloppy,” but that it did not render unenforceable the plan’s terms set out in the SPD.

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Meritless Counterclaim against Interpleader Plaintiff Dismissed, but Plaintiff’s Claim to Recover Fees Denied Lincoln National Life Ins. Co. v. Steward | No. 1:16-cv-03108 (N.D. Ga. May 31, 2017)

Lincoln National brought an interpleader action to resolve conflicting claims to the death benefit under a group life insurance policy. The two defendants asserted crossclaims against each other. One defendant, Steward, also filed a counterclaim against Lincoln, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation.

Steward’s theory was that Lincoln (1) breached the contract by “refusing” to pay him the death benefit; (2) breached the implied covenant of good faith by disclosing information about the policy to the other claimant without Steward’s consent, and by failing to require the other claimant to substantiate her claims; and (3) failed to inform Steward that it would disclose to the other claimant of the existence of a group benefit.

Eventually, the defendants resolved their claims and dismissed their crossclaims. However, Steward refused to dismiss his counterclaim. Lincoln filed a motion to be discharged from further liability, dismissed from the action, and awarded attorney’s fees and costs. Lincoln also moved to dismiss Steward’s counterclaim for failure to state a claim upon which relief can be granted.

Lincoln argued that Steward’s counterclaim should be dismissed because it was not independent of the issue raised by the interpleader action—determining which defendant was entitled to the death benefit. The district court noted that Eleventh Circuit precedent on counterclaim protections available to an interpleader plaintiff was not fully developed.

However, the Eleventh Circuit has relied on precedent from the Third Circuit, which holds that a counterclaim may only be maintained against an interpleader plaintiff if it is truly independent of the question of who was entitled to the disputed fund. Thus, the district court considered whether it was possible to separate Steward’s counterclaim from the interpleader action.

First, the court held that the counterclaim for breach of contract was not independent of the interpleader because it was based solely on Lincoln’s refusal to immediately pay the death benefit to Steward.

Next, the court determined that the claim for breach of the implied covenant of good faith and fair dealing failed to state a claim. Although this claim was arguably independent of the interpleader, Georgia law does not recognize a cause of action for breach of the implied covenant separate and apart from an underlying breach of contract action. In the absence of a valid breach of contract claim, the claim for breach of the implied covenant was dismissed.

Finally, the court determined that the claim for negligent misrepresentation, while arguably independent of the interpleader, failed to state a claim. Negligent misrepresentation claims must be based on an existing fact or a past event.

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Steward’s claim was that Lincoln misrepresented information about an event that had not yet taken place—whether it would disclose the existence of the group benefit to the other claimant. Thus, Steward failed to plead the required elements of a negligent misrepresentation claim.

Because Steward’s counterclaim was subject to dismissal, the court dismissed Lincoln as a party and discharged it from further liability.

Lincoln also contended that it was entitled to recover attorney’s fees from the interpleader fund, which is the usual practice in interpleader actions. However, courts in the Eleventh Circuit typically consider litigation expenses for interpleader actions to be part of an insurance company’s routine cost of doing business.

Lincoln asserted that the costs associated with Steward’s counterclaim were outside the normal course of business, because instead of consenting to Lincoln National’s dismissal, Steward filed a meritless counterclaim. The court agreed that the counterclaim protracted the proceedings. However, it held that an unsuccessful counterclaim is not necessarily sufficient to warrant an award of fees.

Life Insurer Did Not Breach the Contract by Using Cash Value to Cover Increased Monthly Premiums Hancock v. Americo Financial Life and Annuity Ins. Co | 2017 WL 3160022 (E.D.N.C. July 25, 2017)

In 1985, Investors Life issued a life insurance policy to Hancock, initially requiring a premium of $41.27 per month. The premium was increased to $44.62 when a rider was added.

Over the next two decades, and unbeknown to Hancock, the monthly premium continued to increase, so that the premium required to maintain the policy in force was approximately $160 per month. Hancock continued to pay $44.62 per month, however, and Investors Life took money from the policy’s cash value to cover the difference.

In 2013, Hancock discovered the increased payments and sued both Investors Life and Americo, its parent company, for breach of contract, declaratory and injunctive relief, equitable rescission, unjust enrichment, constructive trust, fraudulent suppression and concealment, fraud, breach of duties of good faith and fair dealing, unfair and deceptive trade practices, and violations of the North

Carolina RICO statute.

Defendants moved to dismiss for failure to state a claim because the policy by its terms provided for increased premiums.

The district court agreed with the defendants, noting that multiple policy provisions allowed increased premiums and, in fact, required increased premiums under certain circumstances to keep the policy in force. For example, the cover of the policy stated that it was a “flexible premium adjustable life insurance policy.”

The policy specifications referred to the initial monthly payment of $41.27 as the “minimum initial premium” and noted that the “amount of cash value payable on the maturity date depends upon the amount of premiums you pay,” and “coverage will end prior to the maturity date shown where … subsequent premiums are insufficient to continue coverage to date.”

The court further cited to the policy’s additional terms, details, and definitions to show that additional monthly deductions from the cash value might be

needed to cover cost of insurance. The court concluded that premium increases were “nearly inevitable” because “in order to maintain the cash value of the policy, in light of deductions for cost of insurance, premiums necessarily must rise substantially as the cost of insurance increases” over a period of 30 years. The court held that the defendants did not breach the terms of the policy by increasing premium rates.

The court similarly rejected plaintiff’s other arguments on principles of contract law. It held that the insurer was not required under contract law to clearly disclose premium increases.

Under North Carolina contract law, the court must determine what the contract requires, not what insurance regulations or industry standards require.

The court also rejected plaintiff’s tort claims, as they were merely disguised contract law claims. Finally, the court dismissed plaintiff’s fraud claims for failure to plead with specificity.

Evidence Was Sufficient to Establish That Former Employer Provided COBRA Continuation Letter DeBene v. BayCare Health System, Inc., | 688 F. App’x 831 (11th Cir. 2017)

DeBene was employed as a Senior Contract Manager for BayCare Health System, a community-based health system composed of 14 not-for-profit hospitals and numerous outpatient facilities.

DeBene also worked part-time as a “data mapper” for two software development firms that provided software programs to BayCare.

Employees of BayCare were permitted to have secondary employment, so long as no actual or potential conflict

of interest existed. Employees were required to disclose any business relationship that presented a potential conflict of interest and to notify their supervisors of any proposed outside employment, so it could be reviewed for potential conflicts.

DeBene did not disclose his parttime employment until he learned that BayCare was in litigation with one of the software firms and that BayCare employees had been subpoenaed to testify. BayCare terminated DeBene’s

employment for violation of the secondary employment policy.

Because DeBene had a pacemaker, he was concerned about continuing his health insurance. He sued BayCare, contending that BayCare violated the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) by failing to provide him with notice of his right to continue healthcare coverage after termination of his employment.

BayCare provided evidence that it had contracted with Benefit Concepts

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to provide COBRA election notices to qualifying former employees; that an election notice was generated and printed for DeBene; that Benefit Concepts followed its routine procedures for preparation and mailing of an election notice to DeBene; that other former BayCare employees were mailed notification letters on the same date; and that none of them reported not receiving a COBRA continuation notice.

“Providing notification of COBRA rights is important because employees are not expected to know instinctively of their right to continue their healthcare coverage,” the court said. Therefore, regulations require plan administrators to “use measures reasonably calculated to endure actual receipt of the material by plan participants.” 29 C.F.R. § 2520.104b-1(b)(1).

Recognizing that it had not “directly addressed what an employee must do to satisfy its notification obligations under COBRA,” the Eleventh Circuit held that BayCare provided evidence sufficient to establish that it met its obligation under COBRA to inform DeBene of his right to continue his healthcare coverage. The court affirmed the district court’s grant of summary judgment to BayCare.

NFL Retirement Plan Arbitrarily Refused to Consider New Evidence Supporting Former Player’s Claim Solomon v. Bert Bell/Pete Rozelle NFL Player Retirement Plan | 860 F.3d 259 (4th Cir. 2017)

Solomon was a professional football player who, after his retirement in 1995, began suffering symptoms associated with chronic traumatic encephalopathy (“CTE”), a degenerative brain condition, as well as chronic knee pain, chronic headaches, depression, and anxiety.

Doctors expected his symptoms to become more severe over time, and beginning in 2007, Solomon was no longer able to work.

Solomon participated in the Player Retirement Plan (“the Plan”), an ERISA plan providing disability benefits to retired players who become totally and permanently disabled (“TPD”), but with different benefit amounts depending on how long after retirement the player became TPD. Two benefit levels were potentially relevant to Solomon’s claim: – Football Degenerative, which applies when injuries cause TPD within 15 years after retirement from the NFL;, and Inactive, which applies when injuries lead to TPD more than 15 years after retirement.

Football Degenerative benefits are greater than Inactive benefits.

In March 2009, Solomon applied for disability benefits under the Plan, based primarily on his orthopedic problems.

Medical records submitted with his application, however, also contained evidence of brain injury. A two-person

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initial claims committee denied Solomon’s claim in November 2009. At that time, Solomon’s application for Social Security Disability Insurance (“SSDI”) benefits was pending.

In December 2010, Solomon submitted a second application for disability benefits, claiming total and permanent disability based on footballrelated neurological and cognitive

impairments. He submitted new medical reports discussing the severity of his CTErelated injuries. The Plan’s independent neurologist found that Solomon exhibited signs of CTE. In June 2011, Solomon was granted SSDI benefits with a disability onset date of October 29, 2008.

In August 2011, the Plan determined that Solomon was TPD, based on the Social Security determination, and

awarded him Inactive Benefits, finding that his TPD did not begin before the 15-year cutoff date. Solomon applied for reclassification, which the Plan denied. The Plan did not acknowledge or address the new evidence of a brain injury, which Solomon submitted with his 2010 claim, or its own expert’s determination.

Solomon sued. The district court found that the Plan was bound by the Social Security Administration’s disability onset date of October 29, 2008, which was within 15 years of retirement, or alternatively that the Plan abused its discretion. The district court concluded that Solomon should receive Football Degenerative benefits.

The Fourth Circuit affirmed, finding that the Plan abused its discretion. The court rejected the Plan’s argument that Solomon was not TPD in 2009 because the 2009 claim was based on Solomon’s orthopedic impairments.

The Fourth Circuit held the Plan acted arbitrarily when it restricted the evidence it would consider when evaluating Solomon’s 2010 application for benefits. The Plan could not simply rely on the reasons for its 2009 denial, which was based on orthopedic injuries, when considering Solomon’s 2010 application for TPD, which was based on brain injuries.

Moreover, the Plan required only that a player became TPD within the relevant time frame, and did not require the player to submit contemporaneous medical evidence that he was TPD prior to the cutoff date. The Plan should have considered the medical records submitted prior to the 2010 application if those records showed evidence of a brain injury, and the Plan was required to examine medical records created after the disability cutoff date if they showed Solomon became TPD before the cutoff date.

Finally, the Plan had no substantial evidence to contradict the reports of the experts, and it therefore abused its discretion in ignoring the unanimous agreement of medical experts concerning Solomon’s CTErelated disability.

Physician Lacks Standing to Sue for Benefits Due to ERISA Plan’s Anti-Assignment Provision Griffin v. Coca-Cola Enterprises, Inc. | 686 F. App’x 820 (11th Cir. 2017)

Dr. Griffin, a physician, sued CocaCola Enterprises seeking payment of medical expense benefits and penalties under ERISA. She alleged that BlueCross BlueShield HealthCare Plan of Georgia (“BCBS”) failed to pay the full amount owed for medical services provided to a participant in the Coca-Cola Enterprises ERISA plan.

Dr. Griffin sued under an assignment of plan benefits. However, the plan unambiguously stated: “Members cannot legally transfer the coverage. Benefits under [the plan] are not assignable by any member without obtaining written permission” from BCBS. Dr. Griffin claimed that BCBS waived its right to rely on that provision and, in the alternative, that the provision was preempted by Georgia law.

Because only plan participants and beneficiaries have standing to make claims under an ERISA plan, healthcare providers like Dr. Griffin can acquire derivative standing only through an assignment. However, citing to Physicians Multispecialty Grp. v. Health Care Plan of Horton Homes, Inc., 371 F.3d 1291, 1293-94 (11th Cir. 2004), the Eleventh Circuit held that an unambiguous anti-assignment provision in an ERISA-governed welfare benefit plan is valid and

enforceable. Additionally, Dr. Griffin failed to allege that she sought prior written permission for the assignment. Thus, without a waiver, Dr. Griffin did not have standing to claim benefits under the plan.

With respect to the alleged waiver, without deciding whether waiver principles applied under ERISA, the court determined that Dr. Griffin pleaded no facts that suggested waiver by BCBS, either express or implied. In fact, Dr. Griffin’s allegations made clear that her only communication with the plan before filing suit consisted of mailing a request for the summary plan description.

Finally, in support of her assertion that Georgia law preempted the anti-assignment provision, Dr. Griffin cited a Georgia statute mandating that plan benefits payable directly, or by assignment, to a participating healthcare provider also must be payable to non-participating providers on an equal basis. The Georgia law, however, did not prohibit a plan from barring assignment.

Thus, finding no waiver and no conflict with state law, the court affirmed the district court’s order dismissing Dr. Griffin’s complaint for lack of standing.

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Denial of Benefits under Intoxication Exclusion Upheld, Based on Expert Opinion as to Alcohol Effects Prelutsky v. Greater Georgia Life Ins. Co. | 2017 WL 2406730 (11th Cir. June 22, 2017), reversing 2016 WL 4177469 (N.D. Ga. Aug. 8, 2016)

Prelutsky, a 51-year-old lawyer, was a participant in his firm’s ERISA plan and was insured under a group disability policy.

While on a ski vacation in Aspen, he fell down a flight of stairs, resulting in traumatic brain injuries. No one witnessed the fall.

A hospital record noted that Prelutsky “drank heavily this evening; fall 20 carpeted steps with immediate [loss of consciousness].”

Within 20 minutes after arriving at the hospital, Prelutsky’s blood alcohol concentration (“BAC”) was 281 mg/ dL. “Intoxication” was listed among his diagnoses.

After undergoing brain surgery, Prelutsky was transferred to a longterm rehabilitation facility. One of the admitting diagnoses was “alcohol abuse (binge drinking [2-3 times per week]) with a blood alcohol of 0.250 at the time of his fall.” A physical therapist noted, “Alcohol abuse reported with a blood alcohol level of 0.25 at the time of his fall.”

Prelutsky submitted a claim for benefits. Greater Georgia had discretionary authority to administer the claim and was responsible for paying benefits. Under the group policy, disability caused by, resulting

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from, or related to intoxication was excluded from coverage.

Greater Georgia denied Prelusky’s claim based on the intoxication exclusion, citing a federal regulation describing the physical and mental symptoms associated with a BAC between 0.20 and 0.29, which included stupor, severe motor impairment, loss of understanding, impaired sensation, loss of consciousness, and the possibility of falling.

Prelutsky appealed, arguing that Greater Georgia failed to properly investigate the claim. Prelutsky also submitted an affidavit from the owner of the Aspen home, who said she did not see Prelutsky fall, but he did not “appear to be overly intoxicated” before the fall. The owner speculated that Prelutsky tripped over his ski pants.

Greater Georgia obtained an independent medical records review.

Citing medical treatises, the reviewing physician noted that at “0.25% BAC, the individual needs assistance in walking, and experiences total mental confusion.” Because Prelutsky’s BAC was .281 at the time, the physician opined that intoxication most probably contributed to the fall. Greater Georgia upheld its claim decision.

Prelutsky filed suit.

On crossmotions for summary judgment, the district court applied the Eleventh Circuit’s six-step test for reviewing an ERISA fiduciary’s denial of benefits.

The court concluded the decision was de novo wrong and was not supported by reasonable grounds.

Citing Capone v. Aetna Life Ins. Co., 592 F.3d 1189 (11th Cir. 2010), the district court reasoned that the “causal link” between alcohol intoxication and injury must be supplemented by a further investigation, if the only evidence was a blood test, a list of physical symptoms expected at a certain blood alcohol level, and a medical expert’s opinion as to causation based solely on such evidence.

The Eleventh Circuit reversed.

Because Greater Georgia was vested with discretion, the court concluded the dispositive question was whether there was a reasonable basis for the decision, based on the facts known when the decision was made.

The court answered that question in the affirmative.

The court concluded that Greater Georgia was entitled to rely on the opinion of the independent medical expert to determine that Prelutsky’s

injury was related to his intoxication.

The court found this causal link to be “especially strong” because Prelutsky was an otherwise healthy middle-aged man who “had no condition that would make him prone to fall.”

The court also concluded that Greater Georgia was entitled to discount the owner’s personal belief about what caused the fall because she

did not witness the fall or indicate how much time passed since she last saw Prelutsky and when he fell.

The court rejected the district court’s interpretation of Capone.

The court explained that the investigation in Capone was found to be unreasonable because the administrator failed to investigate eyewitnesses who could have directly

contradicted the administrator’s theory of the causal connection between the insured’s intoxication and his injury. Here, there were no eyewitnesses to Prelutsky’s fall or to the immediately preceding events. In other words, there were no witnesses who could disprove that Prelutsky’s intoxication was causally connected to his fall and subsequent injury.

Trial Court Erred by Dismissing Provider Claims Based on Assignments Under Self-Funded Plans BioHealth Medical Laboratory, Inc. v. Cigna Health and Life Ins. Co. | 2017 WL 3475030 (11th Cir. Aug. 14, 2017)

Two laboratories sued Cigna after it denied out-of-network benefits for blood and urine testing under both insured and self-funded ERISA plans.

The labs brought their claims based on assignments from their patients.

Cigna moved to dismiss, arguing among other things that the assignments only assigned rights under traditional insured plans, but did not assign rights to recover benefits under the self-funded plans, for which Cigna provided third-party claims administration services. The district court agreed with Cigna and concluded that the labs lacked standing to raise claims under the self-funded plans.

On appeal, the labs argued that self-funded plans were covered by the assignments because they conferred the right to sue for “all benefits under … any collateral source as defined by statute,” and because self-funded plans were “collateral sources” under Florida law.

The district court had determined that the “core focus” of the assignments was the ability to recover benefits “owed under any policy of insurance,” and that the labs misinterpreted the term “collateral source” as necessarily implicating selffunded plans.

The Eleventh Circuit, however, concluded that it “was improper for the district court to interpret the contract when considering the motion to dismiss.”

First, according to the appellate court,

there was “at least ambiguity” as to which state’s collateral source statute should be consulted, and “that alone is sufficient to render discovery into extrinsic evidence essential before the contract can be definitively interpreted.”

Moreover, the Eleventh Circuit held, the lower court’s interpretation “nullifies the collateral source language” because the language would be rendered “superfluous” if read “to also only assign the right to sue for benefits arising from traditional insurance policies ….” The court wrote that it was “not proper on a motion to dismiss to read out such contractual language when a party proffers an interpretation reasonably giving import to that language.”

Since the assignments identified

multiple possible sources, including “any policy of insurance, indemnity agreement, or any collateral source as defined by statute for services provided,” it was “plausible,” the court reasoned, that “more than traditional insurance policies” were within the scope of the assignments.

Finally, interpreting the assignments to include self-funded plans would not thwart the purposes of ERISA. Cigna’s role, the court held, was “largely the same for both types of plans,” and it was “plausible” to construe “my insurance company” as including “the party responsible for processing and paying benefit claims under the plan without regard to the ultimate bearer of the financial risk.”

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District Court Rejects “Kitchen-Sink” Claims Against Plan Sponsor and Insurer Hallman v. Liberty Life Assurance Co. of Boston | 2016 WL 6662706, (M.D. Ga. Nov. 10, 2016)

Hallman was insured under an ERISA-governed disability policy issued by Liberty to his former employer, Novelis Corporation.

Benefits were payable for 24 months if Hallman was disabled from his own occupation, after which benefits were payable only if he was disabled from “any occupation for which he has or becomes reasonably fitted by training, education or experience.”

Liberty paid Hallman benefits for two years, based on its determination that he was disabled from his own physically-demanding occupation as a crane operator for Novelis. While Liberty acknowledged Hallman’s conditions of chronic back pain, obstructive sleep apnea, morbid obesity, and diabetic neuropathy, it denied “any occupation” benefits, determining that Hallman was not disabled from sedentary work.

Hallman sued both Novelis and Liberty, alleging the claim decision was wrong and that Liberty failed to

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provide him with certain information during his appeal, thus depriving him of a full and fair review.

Hallman moved for summary judgment, while Liberty and Novelis moved for judgment on the administrative record. As a procedural matter, the court noted that because the parties relied on an agreedupon administrative record, judicial economy favored deciding the case using findings of fact and conclusions of law under Fed. R. Civ. P. 52, not summary judgment under Fed. R. Civ. P. 56. It also rejected Hallman’s attempt to incorporate into his brief his 74-page administrative appeal, consisting of counsel’s 27-page, single-spaced letter to Liberty and an article about chronic back pain. The court stated in a footnote that this document violated the court’s 20page limitation for response briefs.

The court denied Hallman’s motion and granted the defendants’ motion.

The court first determined that

Novelis was entitled to judgment because the disability benefits were paid by Liberty, not by Novelis, and Hallman failed to point to any evidence that Novelis played any role in Liberty’s determination.

The court then upheld Liberty’s decision that benefits were not payable under the “any occupation” definition of disability. “As long as a reasonable basis appears for [Liberty’s] decision ..., it must be upheld as not being arbitrary or capricious, even if there is evidence that would support a contrary decision,” the court said.

The court determined that Liberty had considered the totality of information in the record. As part of its review under the “any occupation” standard, Liberty reviewed medical records from plaintiff’s pain management physician, Dr. Ellis, who completed a form stating that Hallman was “totally disabled,” could not perform even sedentary work, and was being evaluated for possible

surgery. However, Liberty noted that no surgery had been scheduled.

On appeal, Dr. Kaplan, board certified in pain medicine and rehabilitation, reviewed Hallman’s complete file and spoke with Dr. Ellis, who told Dr. Kaplan that Hallman’s “biggest problem is transitioning from sitting to standing,” that a “sedentary capacity at most was endorsed,” and that Dr. Ellis had suggested bariatric surgery, which Hallman declined. Dr. Kaplan outlined specific restrictions on the amount of sitting, standing, walking, and lifting of which Hallman was capable during a work day.

While Dr. Ellis had opined that Hallman was totally disabled, the court determined “there was evidence in the administrative record that reasonably could have led Liberty to doubt that assessment—including Dr. Ellis’s own clarification of his position to explain that Hallman’s biggest problem was transitioning from sitting to standing

and that a sedentary capacity at most was endorsed. In addition, another of Hallman’s physicians had cleared him for sedentary work.” The court concluded that even if Liberty’s decision was not de novo correct, it was reasonable and was not arbitrary and capricious.

The court also rejected Hallman’s claim that he was denied a full and fair review and that he was entitled to a penalty, based on Liberty’s alleged failure to provide a copy of a surveillance video and the curriculum vitae of all of the experts consulted.

With respect to the video, Liberty established that the claim file contained a hyperlink to the video and that Liberty sent a thumb drive containing the claim file directly to Hallman on appeal. The record also reflected that Liberty had sent the entire claim file to Hallman’s lawyers three times. The court noted that plaintiff did not present any evidence

to establish that the video link was not included in any of the four claim file copies that Liberty had provided.

Therefore, the court could not conclude that Liberty failed to provide Hallman with a copy of the video.

Regarding the CVs, it was undisputed that Hallman’s counsel originally requested them in November 2013 and that Liberty did not provide them until July 2014.

Nevertheless, the court noted, Hallman did not establish that the documents were “relevant” because he did not point to evidence that they were relied on, submitted, considered, or generated in the course of making the benefit determination. See 29 C.F.R. § 2560.503-1(m)(8) (defining “relevant”). The court determined that even if the CVs were relevant to Hallman’s claim, there was no evidence that Liberty’s delay in sending the CVs adversely affected his ability to pursue his claim.

E R I S A & L i f e I n s u ra n c e Ne w s

Editors

S a nde r s C a r te r

K E nt C oppa g e

And r e a C ata l a nd

O t h e r C ont r i b u to r s to T h i s Iss u e

Emily Bridges

Dorothy Cornwell

Olivia Fajen

Jason Maertens

Lisa shortt

ERISA & Life Insurance News

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