“Mailbox Rule” Does Not Help Plaintiff Prove She Mailed Appeal Of Claim Denial

January 31, 2012 | Appeals | Employment & Labor | Insurance Coverage

Under the common law “mailbox rule,” the proper and timely mailing of a document raises a rebuttable presumption that the document was received by the addressee. A recent decision by the U.S. Court of Appeals for the Sixth Circuit in a case involving a claim for short term disability benefits makes it clear, however, that the mailbox rule requires more than a mere allegation by a plaintiff that a document was mailed before a court will find that the document was received.

The case arose in 2003, when the plaintiff, while employed by Norton Healthcare, Inc., suffered a series of strokes that, she claimed, left her unable to work after November 26, 2003. She applied for short term disability benefits, which the plan administrator, Hartford-Comprehensive Employee Benefits Services Company (Hartford-CEBSCO), denied on April 20, 2004. In denying her claim, Hartford-CEBSCO determined that the plaintiff had not presented sufficient evidence to show that she was “totally disabled” as required by the plan.

In August 2008, more than four years after the denial, the plaintiff went to court. She alleged that, on July 2, 2004, she had appealed Hartford-CEBSCO’s decision denying her short term disability benefits by certified mail. She attached to her complaint as “Exhibit B” an appeal letter dated July 2, 2004. Hartford-CEBSCO contended, however, that it had not received the July 2, 2004 appeal letter, until it received a letter from the plaintiff’s attorney, sent on April 30, 2007, which included a copy of the letter dated July 2, 2004. Hartford-CEBSCO alleged that the April 30, 2007, letter was the first time the plaintiff had notified it of her desire to appeal the denial of her claim. Because the plan provided that a written appeal had to be submitted within 180 days of the denial of a claim, Hartford-CEBSCO denied the plaintiff’s appeal.

The district court granted summary judgment in favor of the defendants on the plaintiff’s short term disability benefits claim, finding that the plaintiff could not maintain her claim against the defendants because she had failed to exhaust administrative remedies prior to bringing her lawsuit. The district court reasoned that the plaintiff had not filed her appeal within 180 days of the denial of her claim as required by the plan. In making that ruling, the district court rejected the plaintiff’s argument that she was entitled to a rebuttable presumption under the mailbox rule that she had sent her appeal letter on July 2, 2004.

The plaintiff appealed to the Sixth Circuit, contending that the district court had erred in finding that she had failed to exhaust her administrative remedies under the plan. She argued that she was entitled to the rebuttable presumption of the mailbox rule that she mailed her appeal letter for her short term disability benefits claim on July 2, 2004, within the plan’s deadline for appeals.

The circuit court affirmed the district court’s decision. It noted that it had not determined whether the common law mailbox rule applied to ERISA cases such as the suit filed by the plaintiff in this case, but it found that even if it were to extend the rule to ERISA cases, the plaintiff had not provided sufficient evidence to raise a presumption of receipt under the rule.

As the circuit court explained, the plaintiff’s evidence consisted of an appeal letter dated July 2, 2004, that was attached to the plaintiff’s complaint and the plaintiff’s affidavit, in which she described her conduct involving the appeal letter and stated, in part:

That on or about July 2, 2004 I prepared and typed on my computer a draft letter of appeal regarding my short term disability claims. . . . Later that same day, I retyped the draft letter and added the correct address of [Appellee] Hartford-CEBSCO. . . . This letter was appended to the Complaint as Plaintiff’s Exhibit ‘B’ and was mailed to the address shown thereon.

Both the district court and the circuit court concluded that the plaintiff’s statements in the affidavit were not sufficient to show that the plaintiff had mailed the letter on July 2, 2004. The circuit court pointed out that, for the presumption of receipt to arise under the common law mailbox rule, a party must present evidence that the letter was “properly addressed, had sufficient postage, and was deposited in the mail.” The Sixth Circuit found that there was nothing within the plaintiff’s affidavit that stated that she had “affixed sufficient postage or, more critically, when she deposited the letter in the mail.” Under the common law mailbox rule, it is well settled that if a letter properly directed is proved to have been either put into the post office or delivered to a postal worker, it is presumed, from the known course of business in the post office, that it reached its destination at the regular time and was received by the person to whom it was addressed. The circuit court concluded, however, that the plaintiff’s exhibit and affidavit did “not support such a conclusion.”

The circuit court also noted that some court decisions suggested that a party who sought to invoke the mailbox rule presumption needed to support with corroborating evidence that the document was mailed. Without definitely ruling whether corroborating evidence was required, the circuit court noted that, in addition to the plaintiff’s affidavit not indicating the date on which she had mailed the appeal, she had not presented any “third party evidence” to support her affidavit.

The circuit court then ruled that the district court had not erred in granting the motion for summary judgment in favor of Hartford-CEBSCO and Norton on this basis. [Laird v. Norton Healthcare, Inc., 2011 U.S. App. Lexis 20253 (6th Cir. Oct. 6, 2011).]

Comment: At least one federal circuit court of appeals, in Schikore v. BankAmerica Supplemental Ret. Plan, 269 F.3d 956 (9th Cir. 2001), has held that the common law mailbox rule applies in ERISA cases when the employee benefits plan is

silent on how to determine when an application is received by a plan administrator. The court in that case stated that, in applying the common law mailbox rule, the claimant has the initial burden of showing the application was timely mailed and could meet this burden by presenting a sworn declaration that the application was timely mailed.

VA Benefits May Not Be Offset Against Long Term Disability Benefits, Circuit Rules

When the plaintiff in this case became too disabled by his multiple sclerosis (MS) symptoms to work for Sumaria Systems, he submitted a claim for long term disability benefits under the company’s plan. Sun Life and Health Insurance Company approved the claim and began paying benefits in January 2005.

The plaintiff, a veteran of the Vietnam War, receives monthly disability benefits from the Department of Veterans Affairs (VA) pursuant to the Veterans’ Benefits Act (VBA) as a result of his MS, which was determined to be a service-related disability contracted during a period of war. In 2007, the plaintiff completed a supplemental questionnaire from Sun Life disclosing his receipt of these benefits. Sun Life then took the position that it was entitled to offset the amount that the plaintiff received in VA benefits, noting that the plan provided that monthly disability payments could be reduced by “other income.” Specifically, the Sun Life plan defined “other income” as “[a]ny amount of disability or retirement benefits under: a) the United States Social Security Act [SSA] . . . ; b) the Railroad Retirement Act [RRA]; c) any other similar act or law provided in any jurisdiction.” Sun Life recalculated the plaintiff’s benefits, offsetting his VA benefits, and claimed a net overpayment of $20,831.06 for the years that he received both VA and plan benefits without offset.

After the plaintiff timely appealed the decision and Sun Life denied his appeal, the plaintiff sued. The district court found that because MS was the same disability underlying both plan and VA benefits, the VA benefits qualified as “other income” and should be offset. The plaintiff appealed.

In reversing the district court ruling, the circuit court explained that the “other income” section of the plan provided for an other-income offset to occur if benefits were received from the SSA or the RRA or “any other similar act or law provided in any jurisdiction.” It then declared that although the plan administrator ultimately must have determined that the VBA was similar to the SSA or the RRA because the plaintiff’s VA benefits were offset, it could find “no evidence in the record” that the plan administrator undertook “a meaningful analysis of this federal legislation in making this determination.” Instead, the circuit court stated, the plan administrator “simply informed” the plaintiff that he was “on notice” that his VA benefits could be offset because his original application for benefits contained an inquiry as to what other disability income benefits he was receiving, and VA benefits were included as an example of possible income in the inquiry. The circuit court ruled, however, that all that could be gleaned from the application’s language was that Sun Life was interested in knowing what other sources of income were available to the plaintiff. The application did “not describe the other sources of income as ‘offsets.'” The circuit court also pointed out that the actual plan (as opposed to the application) did not contain any other provision expressly putting the plaintiff on notice that VA benefits would be offset.

Accordingly, the circuit court disagreed with the plan administrator’s decision to offset the plaintiff’s VA benefits, ruling that those benefits, for a wartime service-related disability, as a matter of statutory construction did not derive from an act that was “similar to” the SSA or RRA. The SSA and RRA disability benefits’ programs were both federal insurance programs based on employment and the amount of an award under their terms depended on how much had been paid in. Conversely, it continued, the VA benefits the plaintiff was entitled to receive were not from an “insurance” program, but instead were considered obligatory compensation for injuries to service men and women during military duty.

Simply put, the circuit court concluded, the VBA was in “no relevant way” similar to the SSA or the RRA. Accordingly, it reversed the district court’s decision and ordered the district court to enter judgment in favor of the plaintiff. [Riley v. Sun Life and Health Ins. Co., 657 F.3d 739 (8th Cir. 2011).]

Circuit Court Upholds Administrator’s Decision To Terminate Long Term Disability Benefits

Through her employer, the plaintiff in this case was covered under a long term group disability plan insured by Sun Life and Health Insurance Company. After she became disabled as a result of a heart condition, she applied for long term disability benefits. The plaintiff’s claim was approved, but she was advised that periodic medical updates would be required to verify that she remained totally disabled.

Although the plaintiff’s treating physician confirmed the plaintiff’s disability in statements he submitted to Sun Life, his office notes were often inconsistent with the statements submitted to Sun Life.  The office notes suggested that the plaintiff’s condition was much improved and that she was capable of, and engaged in, much more activity than the disability statements disclosed.  Sun Life ordered surveillance of the plaintiff’s activities on two dates in the spring of 2008. The surveillance videos showed the plaintiff engaged in activities with a fluidity of movement, without need of assistance, and without apparent effort. Sun Life engaged an independent medical consultant to evaluate the plaintiff’s medical records and the surveillance tapes. On the basis of those medical records and the surveillance tapes, the consulting physician concluded that the plaintiff was capable of returning to her own occupation.

Sun Life notified the plaintiff that her disability benefits would be discontinued effective May 31, 2008, and the plaintiff appealed. While the plaintiff’s disability termination was on administrative appeal, the Social Security Administration (SSA) awarded the plaintiff Social Security benefits; the plaintiff submitted the SSA award information to Sun Life for consideration during the appeal process.

During the pendency of the administrative appeal, Sun Life engaged a second independent medical reviewer to assess the plaintiff’s claim. Based on the plaintiff’s medical records (which included the results of certain clinical tests) and the surveillance videos, this physician also concluded that the plaintiff was capable of returning to work at her own occupation.

Sun Life then determined that the plaintiff was not totally disabled from the position she held with her employer before she filed for disability.  Sun Life acknowledged its receipt and consideration of the SSA’s decision to approve the plaintiff’s claim for disability benefits, but advised that it was not bound by that decision, that the SSA may not have had all of the information Sun Life had, and that eligibility under the plan depended on the specific terms of the policy. The plaintiff went to court to challenge Sun Life’s termination of her disability benefits. The district court affirmed the termination of the plaintiff’s long term disability benefits, and she appealed.

In its decision affirming the district court decision, the circuit court explained that it had established a multi-step framework for review of ERISA benefit decisions:

(1) Apply the “de novo” standard to determine whether the claim administrator’s benefits-denial decision is “wrong” (i.e., the court disagrees with the administrator’s decision); if it is not, then end the inquiry and affirm the decision.

(2) If the administrator’s decision in fact is “de novo wrong,” then determine whether the administrator was vested with discretion in reviewing claims; if not, end judicial inquiry and reverse the decision.

(3) If the administrator’s decision is “de novo wrong” and the administrator was vested with discretion in reviewing claims, then determine whether “reasonable” grounds supported it (hence, review the decision under the more deferential arbitrary and capricious standard).

(4) If no reasonable grounds exist, then end the inquiry and reverse the administrator’s decision; if reasonable grounds do exist, then determine if the administrator operated under a conflict of interest.

(5) If there is no conflict of interest, then end the inquiry and affirm the decision.

(6) If there is a conflict of interest, the conflict should merely be a factor for the court to take into account when determining whether an administrator’s decision was arbitrary and capricious.

The circuit court found that the district court had properly applied this framework. As the circuit court noted, the district court first concluded that Sun Life’s decision to terminate benefits was not de novo wrong. The circuit court agreed with this conclusion, observing that her treating physician’s conclusion of total disability was contrary to the assessments of the two non-examining medical experts who reviewed her medical history and the surveillance tapes and who both opined that she was capable of returning to her own occupation. The circuit court pointed out that “[n]o special weight is to be accorded the opinion of a treating physician,” and that although approval of Social Security benefits may be considered, it was “not conclusive” on whether a claimant also was disabled under the terms of an ERISA plan.

That the circuit court concluded that Sun Life’s decision was not de novo wrong should have ended the inquiry under the circuit court’s multi-step framework. It pointed out, however, that the district court also considered the reasonableness of Sun Life’s decision as if the decision were de novo wrong and still concluded the termination of benefits was due to be affirmed after considering all steps of the multi-step framework; the district court concluded that Sun Life had not abused its discretion; its decision had not been arbitrary and capricious; and, after consideration of the entire record, termination was a reasonable determination.

The circuit court declared that even assuming the decision of Sun Life was de novo wrong (an assumption the circuit court emphasized that it did not accept), the administrative record showed that a reasonable basis existed for Sun Life’s benefit decision, and its decision was not arbitrary and capricious. [Ray v. Sun Life & Health Ins. Co., 2011 U.S. App. Lexis 21438 (11th Cir. Oct. 21, 2011).]

Amount Of Settlement Payment Must Be Offset Against Worker’s Compensation Benefits, Court Says

In June 2006, after being diagnosed with an aggressive form of leukemia, a customer service representative at Northeast Bank in Minneapolis took an unpaid leave to undergo a double stem cell transplant. In February 2007, after returning to work, the customer service representative allegedly was mistreated by Northeast management because she continued to suffer from cancer-related complications and required various accommodations. She was terminated on August 4, 2009; Northeast stated that she was terminated due to excessive tardiness, but the customer service representative maintained that this reason was a pretext for terminating her because of her disability.

In November 2009, the woman filed a lawsuit against Northeast alleging disability discrimination under the Minnesota Human Rights Act (MHRA). She asserted that, as a result of the bank’s adverse treatment and wrongful discharge, she suffered damages, including but not limited to lost wages, lost benefits, emotional distress, and humiliation. In January 2010, the parties entered into a settlement agreement pursuant to which Northeast agreed to make three payments totaling $50,000: (1) a payment in the amount of $18,423 for unspecified damages that was subject to withholding of taxes and issuance of an IRS form W-2; (2) a payment in the amount of $18,423 for emotional injury damages that was subject to issuance of an IRS form 1099-MISC; and (3) a payment to the woman’s attorney of $13,154 for attorney fees that would have been recoverable under the MHRA.

In the meantime, the woman established an unemployment-benefit account and began receiving unemployment-insurance benefits. In September 2010, however, the Minnesota Department of Employment and Economic Development (DEED) issued a determination of ineligibility for the period from January 24, 2010 to July 24, 2010. The notice stated that the woman had received $18,423 from her employer that was deductible from her unemployment benefits and that she was required to repay an overpayment of $9,438.

The woman appealed the determination of ineligibility. After an evidentiary hearing, an unemployment-law judge (ULJ) found that $18,423 of her settlement for unspecified damages met the definition of wages, constituted severance pay or other payment, and was properly deducted from her unemployment benefits. She filed a request for reconsideration, which the ULJ denied. She then appealed the ULJ’s decision to the Minnesota Court of Appeals. The issue before the appeals court was whether the ULJ had erred by determining that a portion of the settlement payment that the woman received from her employer was a payment that rendered her ineligible for unemployment benefits and that had to be deducted from the unemployment benefits that she already had received.

In its decision, the court addressed the ULJ’s ruling that a portion of the settlement payment was for wages in the form of severance pay. The court noted that Minnesota law provides that an applicant is not eligible for unemployment benefits for any week in which he or she was receiving, had received, or had filed a request for severance pay, bonus pay, sick pay, or other payments – but not for deductible earnings or back pay – that was equal to or in excess of the applicant’s weekly unemployment benefits. Further, these payments must be “paid by an employer because of, upon, or after separation from employment,” but only if the payment was considered wages at the time of payment.

The court noted that the ULJ found that, because the settlement agreement between the woman and Northeast required Northeast to withhold taxes and issue a form W-2 for the $18,423 payment for unspecified damages, that payment constituted a severance or other payment under Minnesota law and thus constituted wages. It then ruled that the ULJ had erred in making this determination.  According to the court, nothing in the record suggested that the woman or Northeast intended for the $18,423 payment to function as severance pay or as any of the types of payments enumerated in the Minnesota statute. The court noted that the woman had indicated that the payment did not have any connection to her length of service at Northeast or a severance plan, and that Northeast testified that the payment was in compensation for lost wages.

However, that finding did not resolve whether the ULJ had properly ruled that the payment also constituted wages under the Minnesota statute.  It next considered whether the payment constituted back pay, which must be deducted from unemployment benefits under Minnesota law.  The court said wages were “all compensation for services” and included, in relevant part, “back pay as of the date of payment.” In the employment discrimination context, it continued, the purpose of back pay was to make the former employee whole by compensating the former employee for wages that he or she would have earned but for the former employer’s wrongful conduct. Thus, it reasoned, the issue it had to decide was whether Northeast’s settlement payment of $18,423, from which taxes were withheld, compensated the woman for wages she lost as a result of Northeast’s alleged discrimination, or whether it compensated her for emotional distress that she suffered.

The court noted that the settlement agreement did not specifically state that the woman was receiving back pay for lost wages. But, it observed, in her complaint, the woman stated that she was seeking compensation for emotional injuries and lost wages. Pursuant to the settlement agreement, the woman received two payments of $18,423 – one for alleged emotional injuries and one for unspecified damages. Because one of the $18,423 payments compensated her for alleged emotional injuries, the court said that it followed that the other $18,423 payment was to compensate her for lost wages. The court therefore concluded that, read together, the woman’s complaint and the settlement agreement indicated that the $18,423 payment for unspecified damages was compensation for lost wages.

The court also found that the method of reporting the two payments for tax purposes further demonstrated that the $18,423 payment for unspecified damages was compensation for lost wages. In employment-discrimination cases, it said, payments for nonphysical injuries due to emotional distress were reportable on Form 1099-MISC, whereas payments for back pay that constituted wages were reportable on Form W-2. Accordingly, the settlement agreement provided that one of the $18,423 payments-the one for alleged emotional distress – was to be reported on a form 1099-MISC, whereas the other $18,423 payment – the one for unspecified damages – was to be reported on a W-2 form. This distinction in the settlement agreement strongly suggested that the $18,423 payment for unspecified damages was, in fact, for lost wages, according to the court.

Because the record demonstrated that the $18,423 for unspecified damages was compensation for lost wages, the court concluded that, for any week in which the woman received unemployment benefits, the state was entitled to deduct the amount of back pay that she received for that week. [Peterson v. Northeast Bank – Minneapolis, 2011 Minn. App. Lexis 126 (Minn. Ct. App. Oct. 11, 2011).]

Court Refuses to Enforce Broad EEOC Subpoena for Information from Employer Charged with Discrimination under the ADA

During the course of an investigation into a charge that Loyola University Medical Center had discriminated against an employee based on a disability in violation of the Americans with Disabilities Act (ADA), the Equal Employment Opportunity Commission issued a Request for Information from Loyola. The request sought, among other things, (1) a list of employees who were ordered by certain supervisors to take “fitness for duty exams” (FDEs) since January 2008, (2) the results of the evaluations and the types of testing performed on those individuals, and (3) the reasons each listed employee was required to submit to the FDEs.

Loyola promptly responded to the request and stated that only one employee had been required to submit to an FDE by the specified supervisors. However, Loyola refused to disclose the name of the employee, the results of the test, or the circumstances surrounding the request for the test. In support of its refusal, Loyola cited various federal and state confidentiality laws that it claimed did not permit disclosure of the requested information.

In an effort to compel Loyola to produce the requested information, the EEOC issued a subpoena on February 25, 2011. Although the initial request was limited to information regarding FDEs requested by specific supervisors, there was no such limitation in the subpoena. Rather, the subpoena demanded the following information of every individual subjected to an involuntary FDE since January 2008:

  • The name, job title, address, and telephone number of each employee tested;
  • The date and reason that each employee was tested;
  • The name and position of the individual who required each test;
  • Any documentation, including medical records and witness statements, to support the reason for subjecting each individual to a test;
  • The results and copies of each exam;
  • The reasons that an employee was either permitted or not permitted to return to work; and
  • The name and position of the person who made the decision of whether or not each employee was permitted to return to work.

In response, Loyola sent a letter to the EEOC stating that it could not provide the information requested in the subpoena. Loyola maintained that the dissemination of this information would violate federal and state medical confidentiality laws.

On June 30, 2011, the EEOC commenced an action in federal district court against Loyola to enforce the subpoena. In response, Loyola asserted that the subpoena was overly broad in that it requested irrelevant information, and that the information was privileged by various federal and state confidentiality laws.

The court refused to enforce the subpoena. It explained that Title I of the ADA grants the EEOC the authority to investigate charges of employment discrimination based on a disability. Moreover, this investigatory authority is very broad and includes access to “virtually any material that might cast light on the allegations against the employer.” The court said that it had to enforce an administrative subpoena provided that the investigation was within the agency’s authority, the subpoena was not too indefinite, and the information sought was reasonably relevant.

In this case, the court continued, to assess the relevance of the requested information, it had to examine the nature of the charge. It observed that the charge provided “very limited information about the alleged discrimination,” stating only that the employee who had brought the charge against Loyola had been “subjected to medical tests” and that she believed that she had been “discriminated against because of a disability.”

According to the court, the medical records of other employees would shed no light whatsoever on whether the FDE given to the employee who had brought the charge against Loyola was related to the performance of her professional obligations. The information sought by the EEOC, the court found, was “not relevant” to the underlying charge.

The court also rejected the EEOC’s contention that the information it sought was relevant to whether the employee had been singled out for an FDE based on her disability as well as whether she had been subjected to different medical tests from other similarly situated employees. In the court’s view, even under this theory, the subpoena remained unenforceable because the information requested by the EEOC was not sufficiently tailored to the particular circumstances of the investigation. Specifically, the subpoena was not directed to obtaining information regarding individuals with the same position or similar duties as the employee who had filed the charge. Rather, the subpoena sought the “highly sensitive medical information of every Loyola employee that was required to submit to an FDE.” Furthermore, the EEOC did not limit its subpoena, as it did in its initial request, to employees who were ordered to submit to FDEs by the same supervisor that ordered the employee who had filed the charge to submit to the exam. When the initial request only unearthed one such employee, the court noted, the EEOC greatly increased the scope of its request to include any employees who had been ordered to undertake these exams, independent of which supervisor required them to do so.

For these reasons, the court found, the EEOC failed to demonstrate either that the information sought was relevant to the underlying charge or that the information might reveal related evidence of discrimination. Because the subpoena was unenforceable, the court concluded, it did not have to address whether the information requested was protected by federal and state confidentiality laws. [U.S. Equal Employment Opportunity Comm’n v. Loyola Univ. Med. Center, 2011 U.S. Dist. Lexis 118286 (N.D. Ill. Oct. 13, 2011).]

Reprinted with permission from the February 2012 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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