From the Courts

October 31, 2014 | Appeals | Insurance Coverage

Circuit Court Upholds Decision Rejecting FMLA Claims Against Employer

The plaintiff in this case was employed by BT Americas, Inc., as a consultant for approximately three years. As a consultant, the plaintiff was assigned by BT Americas to work on telecommunications projects with client companies, and she often worked with employees of those companies.

The plaintiff took leave under the Family and Medical Leave Act (FMLA) from September 23 to October 5, 2010 and then returned to full time employment. After she was discharged in March 2011 for poor performance, she sued BT Americas, claiming that it had violated the FMLA by firing her in retaliation for her exercising her FMLA rights, and for interfering with the exercise of her FMLA rights in September and October 2010. 

The trial court granted BT Americas’ motion for summary judgment. The plaintiff appealed to the U.S. Court of Appeals for the Fourth Circuit, which affirmed.

In its decision, the Fourth Circuit first found that the district court had correctly concluded that BT Americas was entitled to summary judgment on the plaintiff’s claim that BT Americas had retaliated against her for taking FMLA leave. The circuit court rejected the plaintiff’s argument that BT Americas’ explanation for discharging her was a “pretext” for FMLA retaliation, noting that the nearly six-month gap between the plaintiff’s FMLA leave and her termination undermined her claim that the two events were connected.

The circuit court also found that the “uncontroverted evidence” was that the plaintiff had been given a performance improvement plan in September 2010 and ultimately was terminated because of her poor performance on a number of client accounts. Moreover, the circuit court continued, the record reflected that BT Americas had made numerous efforts to assist the plaintiff in improving her performance, but ultimately had terminated her when those efforts failed. In the circuit court’s view, the plaintiff had not introduced evidence from which a jury could find that BT Americas’ legitimate, nondiscriminatory reason for terminating her was pretextual and, therefore, it concluded that she could not maintain an FMLA retaliation claim.

The Fourth Circuit reached the same conclusion with respect to the plaintiff’s FMLA interference claim, upholding the district court’s decision that the plaintiff had not met her burden of demonstrating that BT Americas had interfered with the exercise of her FMLA rights. The circuit court observed that the plaintiff had notified BT Americas of her need for FMLA leave and had submitted the required documentation on September 22, 2010, which indicated that she could not work more than four hours per day, five days per week. The Fourth Circuit then pointed out that BT Americas had restructured the plaintiff’s schedule to a part-time schedule of 8:00 a.m. to 12:00 p.m., beginning the next day, September 23, 2010, and that for the nine-day work period that the plaintiff qualified for a reduced work schedule under the FMLA, BT Americas accommodated her.

The circuit court rejected the plaintiff’s contention that BT Americas had violated the FMLA when it informed her on October 5, 2010 that she either could return to work full-time or take continuous leave as provided under the FMLA. The circuit court explained that BT Americas made this decision because the client whose project the plaintiff was working on was unhappy with her reduced work schedule and BT Americas could not reach an acceptable work schedule solution with the client that satisfied both its and the client’s needs. Thus, the circuit court said, the plaintiff’s claim failed for the “simple reason that BT Americas was not required to provide a work schedule” to the plaintiff that would disrupt its operations, and the evidence was that a reduced work schedule (either in a flex or block form) was “unworkable.”

The circuit court concluded that because it was undisputed that BT Americas had accommodated the plaintiff’s request for a reduced schedule on “each and every day that she qualified for FMLA leave,” a reasonable jury could not conclude that BT Americas had interfered with her rights under the FMLA. [Ranade v. BT Americas, Inc., 2014 U.S. App. Lexis 15044 (4th Cir. Aug. 5, 2014).]

 

Daily Use of Vitamin Supplements at Doctor’s Direction Qualified as Medical Treatment for Purposes of Policy’s Pre-Existing Condition Clause

The plaintiff in this case was the president and a co-owner of Property Solutions Group LLC. In 1994, the plaintiff was diagnosed with retinitis pigmentosa, a progressive eye disease that eventually can lead to blindness. At his doctor’s direction and under his doctor’s supervision, the plaintiff took 15,000 units a day of a non-prescribed, over-the-counter vitamin A palmitate supplement.

Prior to June 2010, Property Solutions Group offered a group disability benefit plan governed by the Employee Retirement Income Security Act of 1974 (ERISA) that offered maximum gross benefits of $1,000 a month. Effective June 1, 2010, Property Solutions Group purchased a new policy from Sun Life Assurance Company of Canada. The Sun Life plan offered maximum gross benefits of $6,000 a month. The plan also included an exclusion for pre-existing conditions.  If Sun Life determined that an employee had a pre-existing condition, then the employee was not entitled to full benefits under the Sun Life plan.  The employee still was entitled to the same level of benefits that had been available under the prior plan.

On September 21, 2010, the plaintiff’s eye condition forced him to stop working. He applied for long term disability benefits under the plan, and Sun Life concluded that he was “Totally Disabled.” Nevertheless, Sun Life determined that the plaintiff was not entitled to the increased amount of $6,000 a month under the plan because his retinitis pigmentosa constituted a pre-existing condition for which he had been receiving “medical treatment” – his daily use of vitamin A supplements at his doctor’s direction. Because the plaintiff had received this medical treatment during the three-month period prior to the plan’s effective date, the policy’s pre-existing condition clause barred full benefits, Sun Life decided.

The plaintiff sued Sun Life, and the district court granted his motion for summary judgment. The district court found that Sun Life had abused its discretion in construing the pre-existing condition clause to apply to the plaintiff’s taking of supplements. According to the district court, Sun Life’s broad interpretation of the phrase “medical treatment” was contrary to the plan’s plain language and rendered portions of the clause meaningless and internally inconsistent.

Sun Life appealed to the U.S. Court of Appeals for the Eighth Circuit, which reversed.

In its decision, the circuit court explained that because the plan granted Sun Life discretionary authority to construe its terms, the issue was whether it was reasonable for Sun Life to conclude that the plaintiff’s vitamin A supplements constituted a “medical treatment.” The circuit court decided that Sun Life’s conclusion was reasonable.

The Eighth Circuit declared that the ordinary meaning of the phrase “medical treatment” would encompass the plaintiff’s vitamin A supplements. It said that the supplements were “medical” in the sense that they prevented or alleviated the progression of the plaintiff’s retinitis pigmentosa and that the daily supplement regimen constituted a “treatment” because it was the “manner,” in fact the only manner, by which the plaintiff could “care for” his condition. Thus, the circuit court ruled, each day the plaintiff continued his doctor-recommended regimen, he received medical treatment.

The circuit court acknowledged that the policy’s pre-existing condition clause could have been drafted specifically to cover the plaintiff’s supplement regimen, but it concluded that, in light of the ordinary understanding of what constituted a “medical treatment” and the purpose of the pre-existing condition clause, Sun Life had not abused its discretion in denying the plaintiff’s claim for benefits under the plan. [Kutten v. Sun Life Assurance Co. of Canada, 2014 U.S. App. Lexis 13814 (8th Cir. July 21, 2014).]

 

Insured’s More Than Six Year Delay in Notifying Disability Insurer of His Claim Dooms His Request for Benefits

On July 17, 2004, the plaintiff in this case, a dentist, was involved in a motorcycle accident. He did not notify Massachusetts Mutual Life Insurance Company (MassMutual), his disability insurer, about his claim for disability benefits resulting from the accident until March 4, 2011. At that time, the insurer sent him a claim package and asked him to complete certain forms. On April 12, 2011, the plaintiff submitted his forms and listed various medical conditions as resulting from the accident. 

MassMutual wrote to the plaintiff on April 21, 2011 to request that he “explain, in detail, why he filed a claim more than 6 years after the date on which he is claiming Partial Disability.” The plaintiff replied on June 3, 2011, attaching a letter from a doctor.

On October 20, 2011, MassMutual approved the plaintiff’s claim for disability benefits and assigned him a “temporary disability date of January 3, 2011.” On February 14, 2012, MassMutual wrote to the plaintiff to inform him of its conclusion that his “permanent date of disability” for the purpose of calculating his entitlement to benefits would be January 3, 2011. Among other reasons for this decision, MassMutual stated:

[W]e did not receive notice of claim from [the plaintiff] until March 4, 2011 and we did not receive the initial Proof of Loss until April 6, 2011. It is important to note that this is more than 6 1/2 years after [the plaintiff’s] reported date of disability. As a result of the late notice of claim and proof of loss submission, MassMutual’s rights have been severely prejudiced…. As such, we are unable to make an accurate assessment of any benefits to which [the plaintiff] may be eligible for prior to January 3, 2011.

            The plaintiff sued MassMutual on July 9, 2012, alleging that the insurer had breached the policy by failing to pay disability benefits to cover the period from July 17, 2004 to January 2, 2011, and by calculating his prospective benefits based on his average monthly income from the 12 months preceding January 3, 2011 rather than the 12 months preceding July 17, 2004. 

MassMutual moved for summary judgment, and the court granted its motion.

            In its decision, the court found that the plaintiff had failed to provide timely notice and had failed to provide timely proof of his claim, both as required by the policy. The court acknowledged that the policy provided an “escape valve” for delayed notice in certain instances by permitting notice “as soon as it is reasonably possible.” However, the court said, the policy provided only a one year extension for the deadline for submitting proof to MassMutual. With respect to submitting proof, the policy provided:

Written proof of claim must be given … before the end of 90 days after the end of each monthly period for which we are liable for benefits. However, if it is not reasonably possible to give us proof within this time limit, then proof may be given as soon thereafter as it is reasonably possible to do so. Unless the delay is due to legal incapacity, this extension of time is limited to one year.

The court explained that this provision barred the plaintiff’s claim to benefits prior to January 2011 because he had not submitted proof until April 2011. The court concluded by stating that although the policy permitted delay in providing proof where the insured was legally incapacitated, the plaintiff had not argued that he was, in fact, legally incapacitated.

Accordingly, the court concluded that MassMutual was entitled to summary judgment in its favor. [Hunter v. Massachusetts Mutual Life Ins. Co., 2014 U.S. Dist. Lexis 95808 (D. D.C. July 1, 2014).]

 

Exemption for Persons Employed in an Administrative Capacity Bars Auto-Damage Adjuster from Recovering Statutory Overtime

The plaintiff in this case began working for Government Employees Insurance Company (GEICO) in the summer of 2004 as an auto-damage adjuster. According to a compensation memorandum, GEICO agreed to pay the plaintiff an annual salary of $58,000 and a premium wage for every hour he worked over 38.75 hours per week. The plaintiff was required to obtain approval for any overtime compensation, but GEICO was obligated to compensate him for any overtime hours that he reported, regardless of whether he had received prior approval.

As an auto-damage adjuster, the plaintiff settled automobile damage claims through negotiations with GEICO policyholders, claimants, and repair facilities. He also negotiated prices for repairs and replacement parts.

When settling claims, the plaintiff traveled to automobile repair shops in New England to assess the damage to vehicles allegedly damaged by an accident. After examining a vehicle and speaking to a claimant, he would determine how much damage the vehicle suffered, whether the damage was actually caused by an accident, how much of the vehicle’s damage existed before the accident, and whether the vehicle should be considered a total loss.

GEICO issued the plaintiff a laptop with a database and software to assist him in appraising the damage to a vehicle. After making an assessment, he would input the figures into the database and the software would aggregate the cost of the damage. The plaintiff then would tell the claimant the amount the database said the claim was worth. If the claimant had proof that any of his figures were incorrect, the plaintiff could fix those errors. Each appraisal took, on average, an hour to complete.

The plaintiff was authorized to settle claims without approval for any amount up to $15,000 and could print checks from GEICO to claimants up to that limit. He also was authorized to declare a vehicle a total loss without approval.

The plaintiff left GEICO in 2011. Thereafter, he sued the company, arguing that it had failed to pay him for time he had worked in excess of 38.75 hours per week as provided in the compensation memorandum. The plaintiff also alleged that GEICO had failed to pay him overtime wages for working more than 40 hours per week in violation of the Massachusetts Fair Minimum Wage Act (MFMWA). GEICO moved for summary judgment, contending that the statute did not apply to the plaintiff as it did not apply to any person who was employed in an “administrative” capacity.

In its decision, the court first noted that although the plaintiff’s time sheets showed that he had been paid for all the hours he had worked, the plaintiff had testified that he repeatedly had informed his supervisor that he was working overtime and that his requests to list those hours on his time sheets had been denied. The court also found that there was evidence that GEICO knew that the plaintiff was working overtime hours. Accordingly, it ruled that there was a genuine issue of material fact as to whether GEICO had failed to pay the plaintiff for overtime hours he had worked in violation of the parties’ agreement, and it denied GEICO’s motion for summary judgment as to this claim.

The court found, however, that the plaintiff was exempt from the MFMWA because he was employed in an “administrative capacity” and, therefore, was not entitled to overtime pay, at one and a half times his regular rate of pay, for any hours he had worked over 40 per week. The court reasoned that the plaintiff exercised independent judgment to verify whether actual damage to a vehicle was consistent with the claimed damage, that the plaintiff was “on the lookout for fraud,” and that the plaintiff assessed the value of the damage to the vehicles, and it found “no genuine dispute as to whether plaintiff’s claim-adjustment work was administrative.” Accordingly, the court granted GEICO’s motion for summary judgment as to this claim. [Napert v. Government Employees Ins. Co., 2014 U.S. Dist. Lexis 99333 (D. Mass. July 22, 2014).]

 

Delaware’s One-Year Statute of Limitations Bars Plaintiff’s Claim for Benefits Under ERISA Disability Plan

In 1994, while the plaintiff was an employee of The Johns Hopkins University, she fell down a flight of steps and became disabled. She subsequently began to receive full disability benefits from Unum Life Insurance Company of America, the administrator for the Johns Hopkins long term disability insurance plan.

In May 1999, Unum concluded that the plaintiff’s restrictions and limitations were permanent, as confirmed by an independent medical examination and functional capacity evaluation, and that she suffered from permanent partial disability.

In Spring 2007, the plaintiff notified Unum that she had been hired by Gettysburg College for the 2007-2008 school year and that she would receive 7.5 hours per week of class time and $50,000 in salary for the school year. After acknowledging receipt of the plaintiff’s employment contract, Unum determined that she still was eligible for benefits under her disability plan.

On January 15, 2010, however, Unum notified the plaintiff that her condition had improved to the point that she was able to work full time, and Unum confirmed its decision to terminate the plaintiff’s benefits by letter dated September 17, 2010. 

On August 14, 2013, the plaintiff sued Unum in a federal district court in Delaware. Unum moved to dismiss the plaintiff’s complaint, arguing that the plaintiff’s claim under the Employee Retirement Income Security Act of 1974 (ERISA) was time barred by the Delaware statute of limitations. The court granted Unum’s motion.

In its decision, the court explained that because ERISA does not contain a statute of limitations for recovery of benefits, it had to look to the statute of limitations for the state law claim that was most analogous to the claim for benefits under ERISA.  In other words, the court continued, in this case it had to “borrow” the most analogous statute of limitations from Delaware – the forum state. 

The court then found that Delaware’s one-year statute of limitations was applicable to the plaintiff’s claim for recovery of benefits under the Johns Hopkins ERISA plan, running from the time her claim accrued. The court observed that a “non-fiduciary” claim such as the one the plaintiff was asserting accrued when a claim for benefits was denied. Because the plaintiff’s complaint was filed on August 14, 2013, more than one year from the decision to terminate her disability benefits (January 15, 2010) and more than one year even from the letter Unum later sent to the plaintiff confirming its the decision to terminate her disability benefits (September 17, 2010), the court concluded that the plaintiff’s ERISA claim was time-barred by the Delaware statute of limitations. [Friedland v. Unum Group, 2014 U.S. Dist. Lexis 83391 (D. Del. June 19, 2014).]

Reprinted with permission from the November 2014 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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