Employee Benefit Plan Review – From the Courts

California Federal Court Permits Plaintiff in ERISA Suit to Proceed Under a Pseudonym

The plaintiff in this case, appearing anonymously as John Doe, filed a lawsuit against Lincoln National Life Insurance Company alleging violations of the Employee Retirement Income Security Act of 1974 (ERISA). Specifically, the plaintiff alleged that, since June 12, 2013, he had been disabled, as defined under the Marin Individual Practice Association Long Term Disability Plan, due to “multiple serious physical health problems, including HIV and HIV associated neurocognitive decline,” yet Lincoln National had terminated his claims under the plan effective September 9, 2015.

Concurrently with the filing of his complaint, the plaintiff filed an ex parte motion seeking leave from the district court to proceed under a pseudonym due to the sensitive and confidential nature of his HIV and psychiatric health issues.

The district court granted the plaintiff’s motion to proceed under a pseudonym.

In its decision, the district court explained that a party may preserve his or her anonymity in judicial proceedings in special circumstances when the party’s need for anonymity outweighed prejudice to the opposing party and the public’s interest in knowing the party’s identity. Simply put, the district court added, courts had to weigh the party’s need for anonymity against the risk of prejudice to the defendant and the public’s interest in the case.

Here, the district court observed, the plaintiff feared that proceeding under his true name would expose him to harassment, embarrassment, and discrimination. The district court noted that the plaintiff represented that he had “maintained the confidentiality of his HIV and psychiatric health issues,” except to a limited circle of family, friends, medical personnel and insurers.

The district court acknowledged that public discourse, understanding, and acceptance of these issues had improved in recent years, but said that it recognized that society continued to place “at least some stigma on those diagnosed with HIV,” and fear of negative treatment due to HIV remained “reasonable and understandable.” Moreover, the district court added, the plaintiff’s decision to maintain the confidentiality of his status implicated “significant privacy concerns” that demonstrated the plaintiff’s need for anonymity.

Next, the district court found that no prejudice to Lincoln National existed at this point of the litigation, reasoning that the plaintiff had provided sufficient information in the complaint, such as his claim number and the dates of his communications with Lincoln National, to allow Lincoln National to ascertain his identity. Therefore, the district court said, Lincoln National had no need for the plaintiff to disclose his identity in a public forum.

The district court, noting that Lincoln National had not yet been served and, therefore, had not had the opportunity to respond to the plaintiff’s motion, added that if Lincoln National could identify any prejudice that would attach as a result of the plaintiff’s prosecution of this action anonymously, it could raise that so that the district court could evaluate the propriety of continuing to allow the action to proceed anonymously or whether any prejudice could be mitigated.

Finally, the district court decided that the public interest was not advanced by publication of the plaintiff’s identity. It found that the public did not need not know the plaintiff’s real name to understand the nature of his claims or the legal proceedings in this action. Rather, the district court concluded, the public interest was “better served” by allowing the plaintiff to advance anonymously, rather than subject him to the uncomfortable position either of dismissing what might be legitimate claims or publicly disclosing highly confidential medical information that could “place him in harm’s way.” [Doe v. Lincoln National Life Ins. Co., 2017 U.S. Dist. Lexis 117110 (N.D. Cal. July 26, 2017).]

Fourth Circuit Upholds Claim Fiduciary’s Interpretation of Suicide Exclusion in Case Stemming from Former Navy Seal’s Death

The plaintiff’s husband, a former Navy SEAL, had been deployed to Iraq, Afghanistan, and Kuwait. During that time, he was exposed to enemy gunfire and blasts from mortar fire. Upon retirement from the military, he was diagnosed with post-traumatic stress disorder, major depressive disorder, generalized anxiety disorder, and chronic traumatic encephalopathy.

Despite seeking treatment, he was found dead in the driver’s seat of his car with a gunshot wound to his head. The death was ruled a suicide. According to the plaintiff, during his military service, her husband had experienced sub-concussive blasts that had injured his brain and had impaired his ability to resist the impulse to kill himself. Thus, the plaintiff contended, he had not been sane at the time of his death.

At the time of his death, the plaintiff’s husband was working for a company and participated in its employee benefit plan, which provided basic and supplemental life insurance through group policies funded and administered by Unum Life Insurance Company of America.

After her husband died, the plaintiff applied for benefits under both policies. Unum granted benefits under the basic policy, but denied benefits under the supplemental policy, based on the suicide exclusion in that policy.

The plaintiff sued Unum.

The U.S. District Court for the Eastern District of Virginia affirmed the denial of benefits and granted summary judgment to Unum. Applying the abuse of discretion standard of review, the district court first found the suicide exclusion valid. Then, the district court ruled that Unum had reasonably interpreted the plan term “suicide” to include sane and insane suicide and decided that Unum had substantial evidence to support its conclusion that the exclusion applied.

The plaintiff appealed to the U.S. Court of Appeals for the Fourth Circuit. First, she argued that the suicide exclusion in the supplemental life insurance policy violated Virginia law prohibiting insurers from using suicide as a defense to the payment of life insurance benefits unless the insurer included “[a]n express provision . . . limiting the liability of the insurer to an insured who, whether sane or insane, dies by his own act within two years from the date of the policy.” According to the plaintiff, the absence of the phrase “whether sane or insane” in Unum’s suicide exclusion nullified the exclusion.

The plaintiff also argued that, because the suicide exclusion in the Unum policy did not include a clause specifying that suicide could be “sane or insane,” the exclusion did not apply to suicides committed by insane persons, such as her husband.

The Fourth Circuit affirmed the district court’s decision in favor of Unum.

In its decision, the circuit court ruled that Unum’s exclusion sufficiently complied with Virginia law because a policy only had to provide “sufficient notice of an exclusion and its limit of two years to comply with the statute.” A valid suicide exclusion did not need to use any “magic” words to comply with the Virginia law, the circuit court said.

The Fourth Circuit then rejected the plaintiff’s other argument, deciding that it was not unreasonable for Unum to interpret “suicide” to mean any non-accidental, self-inflicted death. The circuit court said that because people could reasonably understand the term “suicide” to include any non-accidental, self-inflicted death regardless of mental state, it would “defer to Unum’s interpretation.”

The circuit court ruled that because Unum had reasonably interpreted the suicide exclusion to encompass insane suicide, whether the plaintiff’s husband was sane at the time of his death had no bearing on the outcome of the plaintiff’s lawsuit. There was substantial evidence in the record to support Unum’s conclusion that the suicide exclusion applied, the Fourth Circuit concluded. [Collins v. Unum Life Ins. Co. of America, 2017 U.S. App. Lexis 12060 (4th Cir. July 6, 2017).] 

Eighth Circuit Upholds Plan Administrator’s Interpretation of Ambiguous Language in Accident Insurance Policy

While the plaintiff’s husband was on his delivery route, driving his employer’s truck, the truck was struck by an oncoming vehicle that crossed the center divider. The plaintiff’s husband died on impact.

The plaintiff filed a claim for accidental death and spousal benefits under a blanket accident insurance policy that had been issued to her husband’s employer by National Union Fire Insurance Company of Pittsburgh, Pennsylvania. The policy was governed by the Employee Retirement Income Security Act of 1974 (ERISA).

The insurer denied the claim pursuant to a policy provision that excluded coverage if the insured “was operating a conveyance he had been hired to operate.” It reasoned that because the plaintiff’s husband had been hired to operate the conveyance he was driving and because he was operating it at the time of the accident, the exception to coverage applied and there was no coverage.

For her part, the plaintiff argued that coverage was required because her husband died as a result of being struck by a conveyance that he had not been hired to operate and that he was not operating at the time of the accident.

The plaintiff sued and, applying the abuse of discretion standard of review, the U.S. District Court for the Eastern District of Arkansas upheld National Union’s denial of benefits and dismissed the complaint.

The plaintiff appealed to the U.S. Court of Appeals for the Eighth Circuit, which affirmed.

In its decision, the Eighth Circuit noted that, at the time of the accident, the plaintiff’s husband was operating one conveyance and was struck by another one. It then ruled that the exception in the National Union policy was “ambiguous” because it was not clear whether the conveyance it referred to that precluded coverage was the one operated by the plaintiff’s husband or the one that struck him. The circuit court explained that where, as here, the terms of a plan were susceptible to multiple, reasonable interpretations, an administrator’s choice among the reasonable interpretations was not an abuse of discretion.

The circuit court then held that although the plaintiff’s interpretation of the policy was a reasonable one, National Union’s interpretation was equally reasonable. The circuit court deferred to National Union’s interpretation, concluding that it had not abused its discretion in denying the plaintiff’s claims for accidental death and spousal benefits. [Donaldson v. National Union Fire Ins. Co. of Pittsburgh, PA, 2017 U.S. App. Lexis 13258 (8th Cir. July 24, 2017).]

Court Rejects Mental Health Parity Act Claim Stemming from Denial of Coverage for Therapeutic Wilderness Program

The plaintiff in this case, a full-time employee of NextEra Energy, Inc., and a participant in its employee health plan, said that his son, who was covered by the plan as a beneficiary, had suffered from “mental health issues” including “depression, low self-esteem, suicidal ideation, and drug use.” The plaintiff added that his son’s therapist had recommended that his son be treated in an intensive, in-patient setting and that the plaintiff and his spouse had chosen to send their son to a wilderness program in Utah that the plaintiff characterized as a mental health service provider.

The plaintiff’s application for the program to be covered under the NextEra health plan was denied and Cigna Health and Life Insurance Company, the plan’s claims administrator, upheld the denial following the plaintiff’s internal appeal. According to the plaintiff, the denial was “based exclusively on the plan’s exclusion for all wilderness-related treatment without regard to the services’ medical necessity.”

The plaintiff sued Cigna under the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the Parity Act), which is incorporated in the Employee Retirement Income Security Act of 1974 (ERISA). He argued that, by categorically refusing to cover therapeutic wilderness programs, Cigna dismissed out of hand their “individual bona fides” or the “individual medical needs of [] particular insured[s],” while a plan compliant with the Parity Act would evaluate these factors case-by-case.

Cigna moved to dismiss, and the U.S. District Court for the Southern District of Florida granted Cigna’s motion.

In its decision, the district court explained that Congress had enacted the Parity Act “to end discrimination in the provision of insurance coverage for mental health and substance use disorders as compared to coverage for medical and surgical conditions in employer-sponsored group health plans.” The Parity Act imposes liability on group insurance plans that institute treatment limitations that are “more restrictive” on “mental health or substance use disorder benefits” “than the predominant treatment limitations applied to substantially all [covered] medical and surgical benefits” or that are separately “applicable only with respect to mental health or substance use disorder benefits.”

The district court then decided that the plaintiff’s argument was “not persuasive.” It said that he mischaracterized what undisputed documents showed to be “a mere application of generalized criteria” as, instead, a “blanket exclusion for services at wilderness treatment centers.” According to the district court, neither the summary plan description (SPD) nor Cigna’s standards contained any terms that limited coverage of a residential program because it was conducted in the wilderness. Rather, the district court added, under the heading “Mental Health and Substance Abuse,” the SPD stated, in part, that “[c]overage under the [p]lan for treatment of mental health and substance abuse is essentially the same as coverage for physical illnesses and injuries under the medical plan.” The district court said that this principle was “entirely consistent with the Parity Act.”

The district court pointed out that Cigna indeed excluded coverage for wilderness programs, but the district court determined that it was not because of their location. The district court said that, instead, Cigna applied certain broader criteria to deny coverage for wilderness programs. Among the criteria that wilderness programs did not meet were the requirements that they provide a multidisciplinary team and consistent supervision by licensed professionals.

The district court further observed that the Parity Act targeted limitations that discriminated against mental health and substance abuse treatments in comparison to medical or surgical treatments, and that the plaintiff’s claim did not allege such a comparison but, rather, considered wilderness programs “in isolation” and rested on the fact that coverage for a mental health treatment was sought and denied. In ruling that the plaintiff had not stated a valid claim for relief under the Parity Act, the district court concluded that, if the plaintiff’s allegations adequately stated a claim under the Parity Act, then a violation of the Parity Act would occur whenever a plan denied coverage for any mental health or substance abuse treatment, regardless of the plan’s terms. [Welp v. Cigna Health and Life Ins. Co., 2017 U.S. Dist. Lexis 113719 (S.D. Fla. July 20, 2017).]

Sixth Circuit Upholds Decision Limiting Long-Term Disability Benefits Where Disability Stemmed from Abuse of Opioids Taken Pursuant to Prescription

The plaintiff in this case received long-term disability benefits on the basis of her treating rheumatologist’s diagnosis of pain, fatigue, and cognitive problems associated with lupus and fibromyalgia. However, subsequent treating physicians and independent medical experts expressed doubt over the initial diagnosis and opinion, instead attributing the plaintiff’s disabling fatigue and cognitive problems to her “massive” prescription opioid regimen for lupus and fibromyalgia.

On the basis of these later medical opinions, plan administrator United of Omaha Life Insurance Company determined that the plaintiff was disabled due only to the effects of her opioid regimen – not lupus and fibromyalgia – and invoked a provision in the long-term disability plan that limited benefits to 24 months when the disability was due to “substance abuse,” defined as “any condition or disease, regardless of its cause, listed in the most recent edition of the International Classification of Diseases as a mental disorder.”

Within 24 months, the plaintiff exhausted all of her administrative remedies within United of Omaha’s claims and appeals procedures and her benefits were terminated.

The plaintiff then brought suit in the U.S. District Court for the Middle District of Tennessee under the Employee Retirement Income Security Act of 1974 (ERISA). She contended that the plan language did not apply in the case of opioids taken pursuant to a doctor’s prescription.

The district court granted United of Omaha’s motion for judgment on the administrative record, reasoning that there was substantial evidence to support United of Omaha’s determination that the plaintiff was disabled due to her opioid regimen, and that it was neither arbitrary nor capricious for United of Omaha to invoke the 24-month substance abuse limitation in the plan once it determined that her disability was due to her opioid regimen.

The plaintiff appealed to the U.S. Court of Appeals for the Sixth Circuit.

The circuit court affirmed the district court’s decision, concluding that it had properly determined that United of Omaha had not abused its discretion in interpreting the plan language. [Blount v. United of Omaha Life Ins. Co., 2017 U.S. App. Lexis 11779 (6th Cir. June 30, 2017).]

Successful ERISA Plaintiff Is Awarded His Attorneys’ Fees

The plaintiff in this case worked as a full-time controller for the Renaissance Insurance Agency from November 3, 2008 to May 18, 2011. On January 6, 2011, the plaintiff injured his back lifting a backup power supply while at work. He was diagnosed with a lumbar region sprain, muscle spasms and sciatica, and he stopped working on May 18, 2011.

As a Renaissance employee, the plaintiff was insured under a group long-term disability policy issued by Northwestern Mutual Life Insurance Company. The plaintiff submitted a claim on July 15, 2011, reporting that his back injury prevented him “from sitting, standing, walking, driving, and concentrating for prolonged periods of time without experiencing a lot of pain &/or difficulty.”

Between September 2011 and January 2012, the plaintiff continued to visit chiropractors, pain specialists, and physicians, all of whom confirmed that the plaintiff’s disability precluded him from working. On January 16, 2012, another chiropractor indicated that the plaintiff was limited to sitting for four hours a day and to standing and walking for two hours a day, but believed that the plaintiff’s condition would improve and that he could return to work on July 6, 2012. Based on these medical records, Northwestern’s reviewing physician determined that the plaintiff was capable of working in a sedentary position.

By letter dated July 9, 2013, Northwestern informed the plaintiff that his LTD claim was being closed because his records did not support a disability under the “own occupation” or “any occupation” test. The plaintiff appealed the decision and asked for review by a second doctor. After being assigned to review the plaintiff’s records, another physician also found that the records “[did] not support that [the plaintiff] would be precluded from sedentary-level work.”

Northwestern informed the plaintiff that it was upholding its claim decision, and he sued the insurer under the Employee Retirement Income Security Act of 1974 (ERISA).

Following a bench trial, the U.S. District Court for the Central District of California awarded the plaintiff benefits for the remainder of the first 24 months of his disability under the plan – nine days total – but also found that the plaintiff had failed to show by a preponderance of the evidence that he was disabled from “all occupations” after July 18, 2013.

The plaintiff appealed to the U.S. Court of Appeals for the Ninth Circuit, which vacated the part of the district court judgment denying the plaintiff his long-term disability benefits and remanded the case for further proceedings. The district court then entered judgment for the plaintiff, and he asked the district court to award attorneys’ fees.

The district court granted the plaintiff’s request.

In its decision, the district court explained that, in any action brought by a plan participant, beneficiary, or fiduciary under ERISA, the court in its discretion may allow a reasonable attorneys’ fee to either party. The district court added that a successful ERISA participant who prevailed in a lawsuit to enforce rights under the plan “ordinarily” should recover an attorneys’ fee unless special circumstances would render such an award unjust.

The district court then decided that the plaintiff was entitled to his attorneys’ fees, even though Northwestern had not acted in bad faith in denying the plaintiff’s claim.

In determining the amount of attorneys’ fees the plaintiff was entitled to receive, the district court presumed that the lodestar figure – the plaintiff’s lawyers’ reasonable hourly rate multiplied by the reasonable hours they expended on his behalf – represented a reasonable fee.

It noted that:

• The plaintiff’s lead counsel requested an hourly rate of $675 for 144.5 hours he spent on the case;
• The plaintiff’s lead counsel said that he spent an additional four hours reviewing and responding to Northwestern’s opposition to the plaintiff’s fee request; and
• Another of the plaintiff’s attorneys requested an hourly rate of $450 per hour for 3.8 hours he spent on the case.

The district court then ruled that the hourly rates of $675 and $450 were reasonable because they reflected the “prevailing market rate in this community for [the lawyers’] levels of experience.”

The district court also found that the 144.5 hours and 3.8 hours the plaintiffs’ two lawyers spent preparing for and litigating the case were “reasonable.” The lawyers’ time sheets did “not appear to be excessive, redundant, nor otherwise unnecessary” and were “not duplicative.”

The district court next decided that four hours was reasonable for reviewing Northwestern’s opposition to the plaintiff’s fee request. The district court concluded that the plaintiff’s lead counsel should be compensated using the hourly rate of $675 per hour multiplied by the 148.5 hours he spent working on the case, for a total fee of $100,237.50. The district court awarded the plaintiff’s other lawyer $1,710 ($450 per hour times 3.8 hours).

Lastly, the district court ruled that prejudgment interest should be added to the benefits owed to the plaintiff, at a rate equal to the average one-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System for the calendar week preceding the due date of any past due benefit payment, compounded annually. [Armani v. Northwestern Mutual Life Ins. Co., 2017 U.S. Dist. Lexis 117203 (C.D. Cal. July 24, 2017).]