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INSIDE THIS ISSUE ERISA Death Benefits Payable to Former Husband, Despite Divorce Agreement Relinquishing His Claim.............................................................................4 Life Policy Rescinded Due to Insured’s Failure to Disclose Mitral Valve Prolapse...................................5 Fourth Circuit Reaffirms “Intermediate Rule” For Removal of Cases with Multiple Defendants ...........6 Mailing of Lapse Notice Can Be Proved By Sufficiently Reliable Computer Records....................6 Claim under ERISA Section 502(a)(3) Permitted Against Plan Participant’s Personal Injury Attorney ...........................................................7

MAY 2011

CIGNA v. Amara: Supreme Court Considers Effect of Inconsistencies Between ERISA Plan Terms and SPDs

The Employee Retirement Income Security Act of 1974 (“ERISA”) was enacted to protect … the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.

29 U.S.C. § 1001(b).

Accidental Death Benefits Not Payable Where Drowning Caused by Heart Attack................8

ERISA represents a “‘careful balancing’ between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans.” Aetna Health Inc. v. Davila, 542 U.S. 200, 215 (2004) (citation omitted). To maintain that balance, a principal objective of ERISA is to provide for and promote nationally uniform plan administration.

ERISA Claim Decision Was Reasonable, Despite Violation of DOL Regulations......................8

As part of ERISA’s disclosure and reporting requirements, plan sponsors must communicate benefit plan provisions to plan participants and beneficiaries through a Summary Plan Description (“SPD”).

LTD Claim Remanded for Consideration of Plaintiff’s Social Security Disability Award.............9 State Law Claims, Fiduciary Breach Claim, and Jury Demand Dismissed....................................10

SPDs, which are the primary vehicle for informing plan participants and beneficiaries of the benefit plans in which they participate, must be both “written in a manner calculated to be understood by the average plan participant” and “sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan.” 29 U.S.C. § 1022(a).

ERISA and its implementing regulations contain detailed provisions specifying the information that must be included in an SPD, including “[c]ircumstances which may result in disqualification, ineligibility, or denial or loss of benefits.”

CONTINUED ON PAGE 2>>

<<CONTINUED FROM PAGE 1 See 29 U.S.C. § 1022(b); 29 C.F.R. § 2520.102-3.

Problems Caused by Conflicts Between Plan Terms and SPDs Problems arise, however, when there is a conflict between the terms of the plan and the information provided in an SPD. In such instances, courts uniformly hold that favorable terms in an SPD override conflicting terms contained in plan documents.

Because plan participants and beneficiaries have only the SPD to consult when making important benefits-related decisions, the SPD is binding on the plan and its administrators.

Importantly, conflicting terms in an SPD cannot be cured by disclaimer language referencing the plan. Otherwise, the purpose underlying the SPD requirement – that is, simplifying and explaining complex plan documents – would be meaningless.

ERISA allows plan participants and beneficiaries to bring civil actions to recover benefits under a plan or to enforce or clarify rights under a plan. 29 U.S.C. § 1132(a)(1). Although courts generally agree that SPDs control over conflicting plan language, the likelihood of recovery resulting from such a conflict has been jurisdiction driven. Circuits are split regarding whether and to what extent a participant or beneficiary may rely on the conflicting language of an SPD to establish a claim for benefits against a plan.

Various Standards Have Been Applied by Circuit Courts The Seventh and Eleventh Circuits apply a demanding detrimental reliance standard, under which a plan participate or beneficiary must prove actual harm from reading the SPD and acting (or not acting) based on the information contained therein.

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See Health Cost Controls of Ill. v.

Washington, 187 F.3d 703 (7th Cir. 1999); Branch v. G. Bernd Co., 955 F.2d 1574 (11th Cir. 1992).

On the other end of the spectrum, the Third, Fifth, and Sixth Circuits apply a no reliance standard, under which plan participants and beneficiaries are not required to show either reliance on or harm flowing from a deficient SPD. Entitlement to recovery is established based solely on the inadequacy of the SPD, regardless of whether the participant or beneficiary even read the SPD. See Burnstein v. Ret. Account Plan for Employees of Allegheny Health Educ. & Research Found., 334 F.3d 365 (3d Cir. 2003); Washington v. Murphy Oil USA Inc., 497 F.3d 453 (5th Cir. 2007);

Flacche v. Sun Life Assurance Co. of Canada (U.S.), 958 F.2d 730 (6th Cir. 1992).

The remaining circuits apply standards that fall in between these extremes. The First, Fourth, Eighth, and Tenth Circuits apply a reliance or possible prejudice standard, under which the participant or beneficiary must show either significant reliance on or possible prejudice from a faulty SPD. See Govoni v. Bricklayers, Masons & Plasterers Int’l Union of Am., Local No. 5 Pension Fund, 732 F.2d 250 (1st Cir. 1984); Aiken v.

Policy Mgmt. Sys. Corp., 13 F.3d 138 (4th Cir. 1993); Greeley v. Fairview Health Servs., 479 F.3d 612 (8th Cir. 2007); Chiles v. Ceridian Corp., 95 F.3d 1505 (10th Cir. 1996).

Finally, the Second Circuit applies a likely harm standard, under which prejudice is presumed in favor of the participant or beneficiary after an initial showing of likely harm resulting

from the faulty SPD. The employer is then afforded an opportunity to rebut the presumption through evidence that the faulty SPD was in effect harmless error. See Burke v. Kodak Ret. Income Plan, 336 F.3d 103 (2d Cir. 2003).

Supreme Court Grants Certiorari In light of these differing standards, and mindful of ERISA’s objective of uniform application, the Supreme Court has decided to weigh in on the proper standard to apply in situations where there are inconsistencies between the SPD and the underlying plan documents.

On June 28, 2010, the Supreme Court granted certiorari in CIGNA Corporation v.

Amara, a class action from the Second Circuit with approximately 26,000 class members, in which the court of appeals summarily affirmed the district court’s decision applying the likely harm standard.

348 Fed. Appx. 627 (2d Cir. 2009), cert. granted, 130 U.S. 3500 (Mem) (2010).

The Court heard oral argument on November 30, 2010.

The parties addressed the issue of whether the SPD constitutes part of the plan and – depending on the answer – whether the appropriate remedy was for plan benefits under 29 U.S.C. § 1132(a) (1)(B) or for equitable, non-monetary relief under 29 U.S.C. § 1132(a)(3).

Other issues addressed were the requirements of SPDs, the issue of inconsistent information versus nondisclosure, the meaning and origin of the likely harm standard, the practical implications of the differing standards, and the application of contract and trust law. A decision is expected by June 2011.

CIGNA Corporation v. Amara arose out of CIGNA’s conversion of its defined benefit pension plan to a cash balance retirement plan. 534 F. Supp. 2d 288 (D. Conn. 2008).

Following the conversion – despite the stated minimum benefit equal to the previously accrued benefits under the pension plan – some plan participants had opening balances that were less

than their previously accrued benefits and, in many cases, no additional benefits were accrued for a significant amount of time. Id. at 303. This phenomenon, known as “wear away,” was caused by both the method used to calculate the opening balances and interest rate fluctuations. Id.

At issue in the case, among other things, was whether the information provided by CIGNA to its employees in the SPD (and other materials) regarding the conversion and the cash balance plan satisfied the requirements under ERISA. Id. at 295.

The SPD stated “that participants would never receive less than the minimum benefits,” but did not mention wear away – which “was well known and understood by CIGNA at the time of CIGNA’s adoption of a cash balance plan.” Id. at 304, 310.

The District Court’s Ruling The district court found that the information provided by CIGNA was inadequate “and in some instances, downright misleading.” Id. at 296.

Applying the likely harm standard, under which no showing of reliance is required and a rebuttable presumption of prejudice is applied, the court held that likely harm and prejudice resulted from the deficient SPD, despite the fact that full disclosure would not have altered the value of the converted benefits. Id. at 351, 354.

The court noted that the SPD provided

by CIGNA “likely, and quite reasonably, lead participants to believe” that wear away would not occur in the transition to a cash balance plan and that the full

benefits under the pension plan would be included in the opening account balances. Id. at 354.

The court concluded that “CIGNA’s successful efforts to conceal the full effects of the transition” deprived plaintiffs of the opportunity to take timely action in response, such as protesting at the time of implementation, leaving CIGNA for an employer with a more favorable retirement plan, or pursuing litigation.

Id. at 354.

Is Showing of Likely Harm Sufficient?

In its petition for certiorari, CIGNA phrased the issue as “[w]hether a showing of ‘likely harm’ is sufficient to entitle participants in or beneficiaries of an ERISA plan to recover benefits based on an alleged inconsistency between the explanation of benefits in the Summary Plan Description or similar disclosures and the terms of the plan itself.”

CIGNA argued that the likely harm standard effectively provides for strict liability for SPD deficiencies, allows for windfall recoveries based on SPD language neither read nor relied on, and is inconsistent with the balance that ERISA attempts to achieve between protection of plan participants and the promotion of plan formulation.

The opposing view is that overruling the likely harm standard would vitiate the statutory and regulatory requirements designed to adequately inform plan participants and beneficiaries of their

rights and obligations, and create a disincentive for plan sponsors to provide clear, concise, and accurate disclosures.

Conclusion This case provides the Supreme Court with an opportunity to resolve the split authority and achieve a uniform standard nationwide. As stated by the district court: [T]he questions raised in this case are vitally important to both employers and employees (and their families). Given how potentially significant retirement plans and planning are to the great majority of Americans – employers and employees alike – this is one area where the answers should be clear, explicit, and definite.

534 F. Supp. 2d at 295.

The outcome of CIGNA Corporation v.

Amara will have significant implications for the costs and liability associated with providing, maintaining, and amending employee benefit plans.

The result will affect the future of litigation resulting from inconsistent or incomplete information provided in SPDs. Requiring individualized reliance would limit the number and/or viability of such lawsuits (and greatly reduce the number of putative class members in the case of class action suits), while adoption of a less stringent standard – such as the Second Circuit’s likely harm standard – would have the opposite effect.

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ERISA Death Benefits Payable to Former Husband, Despite Divorce Agreement Relinquishing His Claim Boyd v. Metropolitan Life Ins. Co., 2011 U.S. App. LEXIS 6605 (4th Cir. Mar. 31, 2011)

As an employee of Delta Air Lines, Boyd participated in an ERISAgoverned life insurance plan administered by MetLife. At the time of her death in November 2008, the plan documents on file with MetLife designated Boyd’s former husband as her primary beneficiary. Boyd had made that designation in 2001.

Boyd’s mother, her son, and the personal representative of her estate sued MetLife, contending that the former husband had relinquished his right to claim the death benefits by entering into the property settlement agreement, which was approved by order of the state court in the divorce case.

Boyd and her husband were divorced in April 2008, and a state court order was entered to approve their property settlement agreement.

The order provided: “Each party relinquishes and disclaims all right, claim or interest … in the property … of the other, including … the right to receive proceeds … as a beneficiary under any life insurance policies.”

The district court held that MetLife had correctly paid the benefits to the former husband. That order was appealed to the Fourth Circuit Court of Appeals, which agreed.

Boyd never changed her beneficiary designation, although she had the right to do so by sending a written request to MetLife. The plan did not specify any procedure that could be followed by beneficiaries who wished to waive their claims to benefits.

Both the former husband and Boyd’s mother, who was the contingent beneficiary, claimed the death benefits. MetLife determined that the benefits should be paid to the former husband, since he was the beneficiary of record, and it paid the benefits to him.

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The Fourth Circuit concluded that the issue was controlled by Kennedy v.

Plan Administrator for DuPont Savings & Investment Plan, 129 S.Ct. 865 (2009), in which the Supreme Court endorsed the “plan documents rule,” holding that ERISA plan administrators must look solely to “the directives of the plan documents” in determining how to disburse benefits.

Boyd’s mother relied, however, on footnote 13 in Kennedy, in which the Court said that its ruling did not “address a situation in which the plan documents provide no means for a beneficiary to renounce an interest in benefit.” Because the Delta plan contained no means to renounce benefits, the mother argued that the plan documents rule did not apply.

The Fourth Circuit held that this distinction did not require a different result, noting that Boyd’s former husband “filed a claim for benefits, belying any claim that he wanted to refuse them.” Rejecting the mother’s argument, the court said that “[n]othing in Kennedy authorizes a plan administrator to disregard a validly executed beneficiary designation form where the beneficiary has made no effort to disclaim his right to benefits.”

Despite the absence of a plan procedure by which a beneficiary could refuse benefits, the court concluded: [E]ven where such procedures are absent, the beneficiary can still make his intent clear by refusing to take benefits.

Moreover, to the extend the plan participant wishes to direct benefits to a different party, she can simply change the designation on file.

Given the easy availability of these options – not to mention their simplicity – we see no reason to force plan administrators to scrutinize waivers extrinsic to plan documents.

The court noted that the same conclusion was reached by the Eighth Circuit under essentially identical facts in Matschiner v. Hartford Life & Accident Ins. Co., 622 F.3d 885 (8th Cir. 2010).

Life Policy Rescinded Due to Insured’s Failure to Disclose Mitral Valve Prolapse Milam v. Metropolitan Life Ins. Co., No. 1:09-cv-00111-WLS (N.D. Ga. Mar. 17, 2011) Crosby applied to MetLife for life insurance in 2005. In her application, Crosby failed to disclose a diagnosis of mitral valve prolapse and treatment for related symptoms, in response to the question whether “within the past 10 years [she had] received treatment, attention, or advice from any physician … or been told by any physician … that he/she had …any … disease or disorder of the heart or circulatory system.”

MetLife relied on Crosby’s answers to the application questions, and issued a life insurance policy in the “select preferred” premium rate classification.

In 2007, during the policy’s two-year contestable period, Crosby died in a motorcycle accident. Her beneficiaries submitted claims to recover benefits under the policy. MetLife obtained Crosby’s medical records, which revealed a long history of mitral valve prolapse, related symptoms, and medical treatment.

Under MetLife’s underwriting guidelines in effect in 2005, had Crosby’s mitral valve prolapse been disclosed, she would not have qualified for coverage in the “select preferred” premium rate classification. Rather, she would have been offered coverage in the “standard” rate classification, resulting in a higher premium.

MetLife denied the beneficiaries’ claims for benefits on the grounds that (1) the policy was subject to rescission and void ab initio due to material misrepresentations in the application, and (2) if Crosby’s true medical history been disclosed, the policy would not have been issued in the “select preferred” premium rate classification.

The beneficiaries sued MetLife to recover death benefits under the policy, plus a penalty and attorney’s fees under O.C.G.A. § 33-4-6, for MetLife’s alleged “bad faith” denial of insurance benefits.

MetLife asserted a counterclaim, seeking rescission of the policy on

any or all of the grounds enumerated in O.C.G.A. § 33‑24‑7(b), and a declaration that the policy was void ab initio and of no effect.

During discovery, counsel for the beneficiaries took the deposition of MetLife’s associate chief underwriter, who testified that if Crosby’s mitral valve prolapse and related medical history had been disclosed in her application, the policy would have been issued in the “standard” rate classification.

This testimony was corroborated by MetLife’s underwriting guidelines, which provided that to qualify for the “select preferred” rate classification, the applicant was required to have “no history” of cardiovascular problems.

The court granted summary judgment to MetLife, declaring that the policy was properly rescinded. The court emphasized that the testimony of MetLife’s underwriter was uncontradicted, and the underwriting guidelines clearly supported MetLife’s position.

The beneficiaries opposed MetLife’s motion in large part based on an affidavit from an expert cardiologist, who was identified for the first time at the summary judgment stage.

Based on Crosby’s medical records, the cardiologist questioned whether she had been properly diagnosed with mitral valve prolapse.

The court struck the affidavit, holding that the beneficiaries could not rely on an expert witness identified after discovery and in response to MetLife’s motion for summary judgment.

The court further emphasized that whether Crosby was, in fact, properly diagnosed with mitral valve prolapse was irrelevant.

Crosby believed that she had mitral valve prolapse, and she sought medical treatment for it many times before submitting her application to MetLife. Her failure to disclose the condition in the application properly resulted in rescission of the policy.

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Fourth Circuit Reaffirms “Intermediate Rule” For Removal of Cases with Multiple Defendants Barbour v. Int’l Union, United Auto., Aerospace and Agric. Implement Workers of Am., 2011 U.S. App. LEXIS 1695 (4th Cir. Jan. 27, 2011) Plaintiffs moved to remand the action to state court, arguing that the removal was untimely.

The district court ruled that the notice of removal was timely filed, noting that the “case . . . [provides] an excellent opportunity for the Fourth Circuit to clarify” its position first articulated in McKinney v. Board of Trustees of Maryland Community College, 955 F.2d 924 (4th Cir. 1992).

In this multi-defendant case, the defendants filed a joint notice of removal more than 30 days after one of the defendants was served with a copy of the complaint, but less than 30 days after another defendant was served, and before a third defendant had been served at all.

In McKinney, the Fourth Circuit adopted the rule requiring a notice of removal to be filed within 30 days of service on the first-served defendant, but allowing later-served defendants 30 days from the date they are served to join the notice of removal. This is commonly referred to as the “intermediate rule” because it lies between the Fifth Circuit’s “firstserved defendant” rule and the “lastserved defendant” rule followed by the Sixth, Eighth, Ninth, and Eleventh Circuits.

Under the “first-served defendant” rule, the notice of removal must be filed within 30 days of service on the first-served defendant, and all other defendants – even those not yet served – must join within that initial

30 day period. In contrast, the “lastserved defendant” rule permits each defendant 30 days from service to file a notice of removal, so long as all other defendants join.

On appeal in Barbour, a divided panel adopted the “last-served defendant” rule and affirmed the district court’s ruling that the joint notice of removal had been timely filed. The appeal was then reheard en banc, where the majority reaffirmed the “intermediate rule” of McKinney and concluded that the removal was not timely filed.

The Fourth Circuit found that the “intermediate rule” was most consistent with the language of 28 U.S.C. § 1446(b), because it applies the statute’s “requirement to act within thirty days of service to all defendants, including the first- and last-served.”

Thus, in the Fourth Circuit, “the firstserved defendant must file a notice of removal within thirty days of service; later-served defendants have to join the notice within thirty days of service upon them.”

Mailing of Lapse Notice Can Be Proved

By Sufficiently Reliable Computer Records Russell v. Nationwide Life Ins. Co., 2010 U.S. App. LEXIS 23449 (4th Cir. Nov. 12, 2010) Russell sued Nationwide to recover death benefits under a life insurance policy issued to her deceased husband.

The decedent had an arrangement with his employer under which the employer agreed to pay the policy premiums by deducting them from his salary. In light of that arrangement, the decedent directed Nationwide to change his address of record to that of his employer.

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When the decedent’s employment ended, it was understood and agreed that he would assume responsibility for making the premium payments.

However, because the decedent failed to notify Nationwide to change his address of record, all billing statements and other correspondence continued to be mailed to his former employer.

Approximately three months after his employment ended, the decedent

missed a premium payment.

Nationwide then mailed a past due notice to the decedent at the address it had on record – that of his former employer – explaining that the policy would lapse unless payment was received within the grace period.

Nationwide never received a payment, and the policy lapsed.

While the parties disputed whether the decedent ever received the past due notice, it was undisputed that he did

not pay the premium by the end of the grace period or at any time thereafter.

The decedent died approximately seven months after the grace period expired.

notices, was sufficient to prove proper mailing. Under Virginia law, proper mailing establishes a rebuttable presumption of actual receipt – which Russell failed to rebut.

A bench trial was held on the sole issue of whether Nationwide mailed, and the decedent actually received, the past due notice required under Virginia law. The trial court determined that Nationwide’s automated billing system, which also generated past due

On appeal, Russsell challenged the trial court’s determination that Nationwide had met its burden of proving proper mailing of the past due notice. The Fourth Circuit noted that “[b]y deciding to rely on auto-generated records stored in a computer system,

as opposed to the generation and retention of a hard copy notice, . . .

Nationwide has opened itself up to a challenge.”

The Court found, however, that there is no legal requirement to take such precautions and held that “computerized evidence can, as a matter of law, establish proof of proper mailing if it is sufficiently reliable.”

The trial court’s decision was affirmed.

Claim under ERISA Section 502(a)(3) Permitted Against Plan Participant’s Personal Injury Attorney AirTran Airways, Inc. v. Elem, 2011 U.S. Dist. LEXIS 35470 (N.D. Ga. Mar. 8, 2011) AirTran sued Elem and her personal injury attorney under section 502(a) (3) of ERISA seeking reimbursement of more than $131,000 in self-funded health plan benefits paid by AirTran to Elem. The benefits were paid to cover medical expenses incurred due to injuries Elem sustained in a motor vehicle accident.

Elem filed a personal injury lawsuit against the responsible driver.

Despite the fact that AirTran provided Elem and her attorney with ample notice of the plan’s subrogation and reimbursement rights, the lawsuit was settled for $500,000 and the settlement funds were distributed to Elem and her attorney without reimbursing the plan.

After the personal injury lawsuit was settled, AirTran invoked section 502(a) (3) to impose an equitable lien on the settlement funds and to recover the full amount paid as health benefits from the funds in the possession of Elem and the attorney.

The attorney filed a motion to dismiss the complaint under Fed. R. Civ. P. 12(b)(6), arguing that he was not a plan fiduciary, and therefore, was not subject to suit under ERISA. He further argued that he “innocently” possessed settlement funds as an attorney fee that should not be subject to the plan’s reimbursement provisions.

The court denied the attorney’s motion to dismiss, noting that unlike other sections of ERISA, section 502(a)(3) does not limit the defendants against whom a plan fiduciary may proceed to obtain equitable relief. Thus, in Harris Trust and Savings Bank v.

Salomon Smith Barney, Inc., 530 U.S. 238 (2000), the Supreme Court held that a non-fiduciary can be a proper defendant under section 502(a)(3).

The court noted that the Fifth and Sixth Circuits had extended the rationale of Harris Trust to attorneys of plan participants who hold settlement funds that should be reimbursed to the plan. See The Longaberger Co. v. Kolt, 586 F.3d 459 (6th Cir. 2009); Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot and Wansbrough, 354 F.3d 348 (5th Cir. 2003).

Following these authorities, the court held that counsel for an ERISA plan beneficiary may be subject to suit under section 502(a)(3) if (1) funds rightfully belonging to a plan were wrongfully transferred; (2) the attorney had “actual or constructive knowledge” of the circumstances that rendered the transfer wrongful; and (3) the plan seeks appropriate equitable relief, such as restitution or imposition of a constructive trust.

AirTran had alleged that (1) settlement funds rightfully belonging to the plan under its subrogation

and reimbursement provisions were wrongfully transferred to the attorney; (2) the attorney had actual knowledge of the plan’s subrogation and reimbursement rights and therefore knew that any transfer of settlement funds to the attorney was wrongful; and (3) AirTran was entitled to equitable relief via imposition of a constructive trust or equitable lien or through a theory of unjust enrichment.

Thus, the court held that each of the section 502(a)(3) elements was satisfied and the attorney was subject to suit.

The court rejected the attorney’s argument that he merely “innocently possess[ed] funds paid as compensation for legal services rendered,” noting that AirTran attached letters to its complaint showing that the attorney was expressly informed of the subrogation and reimbursement rights of the plan.

The court further observed that Harris Trust did not require the attorney himself to engage in any wrongdoing.

Rather, all that was required was that the attorney “had knowledge of the wrongful transfer” of funds owed to the plan, which AirTran alleged in its complaint.

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Accidental Death Benefits Not Payable Where Drowning Caused by Heart Attack

Miller v. Hartford Life & Acc. Ins. Co., 2010 U.S. Dist. LEXIS 24717 (N.D. Ga. Mar. 17, 2010) Miller’s husband was a participant in an ERISA-governed accidental death and dismemberment plan sponsored by his employer. While swimming laps at a community pool, “he suddenly grimaced and submerged” under the water.

When paramedics arrived on the scene, Miller’s husband was in cardiac arrest and was breathing abnormally.

Although he had a pulse when the paramedics arrived, he died shortly thereafter.

The medical examiner concluded that it was likely that the decedent “experienced a cardiac event that resulted in his becoming submerged while swimming, which was consistent with a natural disease process occurring in a hostile environment (i.e., the water of a swimming pool), resulting in [the decedent’s] death.”

In order to qualify for AD&D benefits under the plan, the decedent’s death had to be caused by “bodily injury resulting directly and independently of all other causes from an accident …” Hartford denied Miller’s claim for benefits because it determined that

the decedent’s death was not the direct result of an injury, independent of all other causes.

Reviewing Hartford’s decision under the arbitrary and capricious standard, the district court first conducted a de novo review of the claim decision. It noted that in the context of accidental death claims, the Eleventh Circuit has adopted the “substantially contributed” test, which states that “a pre-existing infirmity or disease is not to be considered as a cause unless it substantially contributed to the disability or loss.”

Accordingly, the court concluded that Hartford’s decision was not de novo wrong, given that the administrative record supported its conclusion that a cardiac event due to heart disease was a substantially contributing cause of the decedent’s death, and therefore, the facts were “entirely consistent with Hartford’s determination that [the decedent] did not die from drowning with no other substantial cause.” The court therefore denied Miller’s motion for summary judgment, and granted Hartford’s motion for trial on the papers.

ERISA Claim Decision Was Reasonable, Despite Violation of DOL Regulations Worsley v. Aetna Life Ins. Co., 2011 U.S. Dist. LEXIS 7170 (W.D.N.C. Jan. 25, 2011) After a motor vehicle accident in 1996, Worsley returned to work in 1997, but reported that his pain medications caused him to fall asleep at his desk.

Worsley’s employer would not accommodate this issue, leading Worsley to submit a claim for long-term disability benefits under his employer’s ERISA plan in July 2001.

Aetna approved his claim for disability from his own occupation, and later 8

approved benefits for disability from any occupation.

Although Worsley’s medical records documented pain treatment through 2006, his treating physician noted a reduction of pain in 2001, 2003, and 2005. Throughout this time, Worsley reported working four hours per day at his cabinet-making business. In 2005, his salary increased from

$500 to $700 per month.

These facts prompted Aetna to investigate Worsley’s ongoing disability.

Aetna’s investigation included surveillance, which revealed that Worsley worked eight hours per day at his cabinet-making business. A conflicting report from his treating physician, stating that Worsley was too impaired to work, led Aetna to request a functional capacity evaluation.

The FCE showed that Worsley was capable of working full time at a medium capacity. When presented with the FCE, his treating physician confirmed the results of the FCE. Based on these facts and two corroborating independent physician reviews, Aetna determined that Worsley was no longer disabled from any occupation in 2006.

In his motion for summary judgment, Worsley argued first that Aetna did not have discretionary authority,

because the language in the SPD was insufficient to confer discretion.

The court rejected this argument, noting that the group policy contained sufficient language to confer discretion.

Worsley also noted a discrepancy between the group policy’s definition of disabled (unable to earn 70% of predisability income), and the SPD’s definition (80%). The court rejected this argument as well, stating that Worsley failed to show how the discrepancy affected the final determination when Aetna used the more favorable 80% figure.

Worsley showed that Aetna had failed to provide him with 582 documents, consisting of computerized claims notes, when he originally requested all documents relevant to his claim.

He argued that this failure violated 29 C.F.R. § 2560.504-1(h)(2). However, Worsley did not include a claim for the violation in his complaint.

Therefore, the court considered the violation only with regard to whether Aetna abused its discretion. Because Aetna successfully demonstrated that the claims notes only included information which was contained elsewhere in the file, the court determined that the failure to produce those documents prior to the litigation did not prejudice Worsley.

Finally, Worsley argued that the court should not consider Aetna’s affidavit respecting its claims procedures and the steps taken to neutralize its structural conflict of interest. Citing Denmark v. Liberty Life Assur. Co. of Boston, 566 F.3d 1 (1st Cir. 2009), the court found it appropriate to consider Aetna’s affidavit for limited evidence regarding procedural safeguards.

Based on the evidence, the court determined that Aetna’s claim decision was reasonable.

LTD Claim Remanded for Consideration of Plaintiff’s Social Security Disability Award Timmerman v. Hartford Life & Acc. Ins. Co., 2010 U.S. Dist. LEXIS 7044 (D.S.C. Jan. 28, 2010) Timmerman sought to recover longterm disability benefits under an ERISA-governed plan sponsored by his employer, which was funded by a group insurance policy issued and administered by Hartford.

Timmerman, who was a sales manager for a liquor distributorship, claimed that he was unable to work due to shortness of breath. In order to determine whether Timmerman was disabled from his “own occupation,” Hartford conducted an occupational analysis.

Because the plan defined “own occupation” as it was performed in the general workforce, not the specific job performed for an employer, Hartford relied on the Department of Labor’s Dictionary of Occupational Titles in determining that Timmerman’s occupation was that of “Manager, Sales.”

Significantly, the DOT classified the

occupation as sedentary, whereas the job description provided by Timmerman’s employer described more strenuous physical duties.

After reviewing Timmerman’s medical records and the opinion of his treating physician, who opined that Timmerman could perform the physical requirements of his sedentary occupation as described by the DOT, Hartford determined that Timmerman was not disabled from his “own occupation.”

On appeal, Timmerman submitted an affidavit stating that he had been approved for Social Security disability benefits, but he did not include any documentation of those benefits. Hartford’s letter upholding its determination on appeal did not reference Timmerman’s receipt of SSDI benefits. Timmerman then filed suit.

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<<CONTINUED FROM PAGE 9 The district court reviewed Hartford’s claim decision under the arbitrary and capricious standard, and determined that the denial of Timmerman’s claim was not fully supported by the evidence, given the failure to adequately consider his receipt of SSDI benefits. The court determined that the case turned on whether the job duties as described

by Timmerman’s employer were representative of the job in the general workplace, or whether the sedentary duties described in the DOT were more accurate.

The court noted that disability, as defined by the Social Security Administration, was similar to the plan’s definition, and even required a greater showing to establish disability. In addition, the Fourth Circuit said that the DOT is used in SSDI benefits cases as an acceptable way to determine a claimant’s occupation in the general workforce.

Thus, the court concluded, Hartford had used a resource often used by the SSA in assessing disability and had applied a similar definition of disability, yet failed to obtain or consider the Social Security award.

Although the court noted that the contrasting Social Security opinion did not “inherently render Hartford’s decision denying benefits an abuse of discretion,” by not reviewing it, Hartford had made its decision without adequate evidence.

Hartford argued that it was not required to consider a Social Security award because Timmerman had not provided a copy of the award and it was under no obligation to secure evidence. The court agreed in part, determining that it would be “inappropriate” to reverse Hartford’s decision based on its failure to obtain the Social Security information, and it also noted that it did not find any improper motivation or bad faith on Hartford’s part.

Nevertheless, the court determined that it was within its discretion to direct a remand to consider the information.

Indeed, the information was readily available from Timmerman or the SSA, and the plan required participants to apply for SSDI, and described how the benefits would impact LTD benefits.

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State Law Claims, Fiduciary Breach Claim, and Jury Demand Dismissed Thompson v. Aetna Health, Inc., No. 1:10-cv-2245 (N.D. Ga. Jan. 21, 2011)

Thompson sued Aetna, alleging wrongful denial of his claim for medical expense benefits for gastric bypass surgery.

The complaint consisted of six counts: (1) wrongful denial of benefits, (2) breach of contract, (3) breach of fiduciary duty, (4) breach of the implied covenant of good faith and fair dealing, (5) violation of the Georgia Unfair Claims Settlement Practices Act, and (6) a claim for attorney’s fees.

Aetna moved to dismiss the state law claims in their entirety. Although Thompson agreed that ERISA applied to some of the claims, he contended that he was entitled to more than he could recover under ERISA, including “remuneration for Defendant’s bad faith handling of his claim in addition to the wrongful denial of benefits.”

In considering the motion to dismiss, the court reviewed the purpose of ERISA, as a “comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.”

Shaw v. Delta Air Lines, 463 U.S. 85, 90 (1983).

The court observed that in order to maintain nationwide uniformity, ERISA contains broad provisions preempting state law.

The court first determined that the plan was governed by ERISA under the test developed in Donovan v.

Dillingham, 688 F.2d 1367 (11th Cir. 1982). The court next considered whether Thompson’s state law claims “related to” the plan. The court stated that a state law claim relates to an ERISA plan whenever the alleged conduct at issue is intertwined with the refusal to pay benefits.

Although Thompson argued that his claims should survive because he was seeking remuneration for Aetna’s alleged bad faith, the court found that “the manner in which his claim was handled does not exempt the plaintiff’s state law causes of action from preemption where the conduct allegedly constituting bad faith was intertwined with the denial itself.”

The court found that Thompson’s claims under Counts II, IV, and V were preempted, because the allegations were necessarily intertwined with the refusal to pay benefits. Likewise, to the extent that Count III related to state law claims for breach of fiduciary duty, it was also preempted. The court dismissed each of those counts.

The court likewise granted Aetna’s motion to dismiss with respect to plaintiff’s simultaneous claims to recover benefits under § 1132(a)(3) and for breach of fiduciary duty under § 1132 (a)(1)(B). Citing Rosario v.

King & Prince Seafood Corp., 2006 WL 2367130 (S.D. Ga. 2006), the court

stated that if allegations of misconduct were sufficient to state a claim under § 1132(a)(1)(b), then Thompson was precluded from asserting the same allegations through a breach of fiduciary duty claim under § 1132(a) (3).

a breach of fiduciary duty outside of the ERISA framework. The court rejected this argument, stating “this allegation amounts to no more than factual filler to substantiate the plaintiff’s improper denial of benefits claim” under § 1132(a)(1)(B).

Thompson argued that he could maintain his (a)(3) claim because he alleged conduct that would constitute

Finally, the court granted Aetna’s motion to strike Thompson’s jury demand.

The court said that the

Seventh Amendment, which ensures the right to a trial by jury in suits at common law, was inapplicable to ERISA cases, because a claim for benefits under 29 U.S.C. § 1132(a)(1) (B) is equitable in nature. Because the only remaining claim was an ERISA claim for improper denial of benefits, Thompson was not entitled to a trial by jury.

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Sanders Carter

Kent Coppage

Aaron Pohlmann

We are pleased to announce the launch of smlperspectives.com, Smith Moore Leatherwood’s online legal magazine that presents matters of law that relate to our clients.

Future articles contained in this newsletter, ERISA and Life Insurance News, will be posted worry, we’re still printing hard copies.) We welcome your thoughts and comments regarding the online articles.

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