Employee Benefit Plan Review – From the CourtsMarch 6, 2020 | |
Ninth Circuit Affirms Decision Rejecting Suit Seeking Early Retirement Benefits
The U.S. Court of Appeals for the Ninth Circuit has affirmed a district court’s decision rejecting a plaintiff’s lawsuit seeking to overturn determinations by administrators of two retirement trusts governed by the Employee Retirement Income Security Act of 1974 (“ERISA”) denying his claims for early retirement benefits.
The plaintiff alleged in his lawsuit that the administrators of two retirement trusts had abused their discretion by denying him early retirement benefits in violation of ERISA. The U.S. District Court for the District of Oregon concluded that the administrators had not abused their discretion, and granted summary judgment in their favor.
The plaintiff appealed to the Ninth Circuit.
THE NINTH CIRCUIT’S DECISION
The Ninth Circuit affirmed.
In its decision, the circuit court explained that one of the trusts required that an applicant seeking early retirement benefits refrain “from any employment anywhere for wages or profit as a sheet metal worker.” The circuit court added that this trust’s administrator had concluded that the plaintiff’s current employment for the Bonneville Power Administration (“BPA”) as a welder constituted employment as a “sheet metal worker.” The administrator reasoned that the nature of the plaintiff’s work for the BPA was similar in nature to the work performed by other sheet metal workers.
The Ninth Circuit said that it was conceivable that one could work as a welder without being employed as a sheet metal worker – that is, not all welders necessarily were sheet metal workers. The circuit court ruled that the administrator’s rationale avoided “sweep[ing] within its ambit an overly broad range of skills” and that its interpretation of the trust’s provisions was “reasonable.”
Next, the Ninth Circuit explained that the second trust required that an applicant seeking early retirement benefits refrain “from any employment anywhere for wages or profit in the sheet metal industry.” The circuit court noted that this trust’s administrator had concluded that the plaintiff currently was working in the sheet metal industry, reasoning that the type of work he performed for the BPA was substantially similar to work that other sheet metal workers were performing. Regardless of the core nature of the BPA’s business, the circuit court added, it was “plausible” that some of its employees might be employed in the sheet metal industry while others were not.
Thus, the Ninth Circuit ruled, it was rational for the administrator to compare the work performed by other workers in the sheet metal industry with the work performed by the plaintiff at the BPA. The Ninth Circuit reasoned that although the plaintiff offered an alternative definition for “sheet metal industry,” he failed to exclude the administrator’s interpretation as “a reasonable possibility,” and the circuit court concluded that the administrator’s interpretation was reasonable. [Knudson v. Oregon Sheet Metal Workers Master Retirement Fund Trust, No. 18-35857 (9th Cir. Dec. 11, 2019).]
“Substantial Evidence” Supported Plan Administrator’s Decision to Terminate Disability Benefits, Eighth Circuit Rules
The U.S. Court of Appeals for the Eighth Circuit, affirming a district court’s decision, has ruled that “substantial evidence” supported a plan administrator’s decision to terminate the plaintiff’s long-term disability benefits based on exhaustion of mental illness benefits and the lack of a disabling physical condition.
The plaintiff worked as a medical billing specialist for Integris Health and was covered by a long-term disability benefits plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”).
The plaintiff ceased working for Integris on April 30, 2012 and filed claims for long-term disability benefits under the plan and for Social Security disability benefits based on depression and non-specific psychosis.
In October 2012, the Social Security Administration approved the plaintiff’s claim, and in November 2013 the administrator for the disability benefits plan approved the plaintiff’s claim effective as of November 11, 2012.
The plan administrator’s approval of benefits for the plaintiff was based on evidence of her mental illness; it did not find any support for a disability due to a physical impairment at that time. Under the plan, benefits based on mental illness were limited to a maximum of 12 months. The plan administrator subsequently determined that the plaintiff had received the 12-month benefit maximum as of November 10, 2013 and terminated her benefits as of that date.
In May 2014, the plaintiff appealed that decision, asserting that her mental illness was secondary to a physical impairment and, therefore, that she was entitled to benefits for a physical disability.
After an additional review of medical records, including independent medical reviews, the plan administrator determined that the plaintiff suffered from a disabling physical condition. Its determination was primarily based on the physical restrictions identified by one reviewing physician, who concluded that the plaintiff did not have the capacity to do sedentary work. The administrator reminded the plaintiff that she was obligated to continue to submit evidence of her disabling physical condition to continue to receive benefits.
Nearly a year later, the plan administrator learned that the only treatment the plaintiff was receiving was from a psychiatrist. The administrator asked that the plaintiff submit information about her claimed physical disability, reminding her that she had received all of the available mental illness benefits under the plan. The information that the plaintiff provided from her treating psychiatrist stated that she had little to no ability to work because of her mental illness and noted that it was not known whether her limitations were the result of a psychiatric or physical condition.
The plan administrator scheduled an independent medical evaluation. After examining the plaintiff, the independent examining physician concluded that the plaintiff suffered from Major Depressive Disorder with psychosis and noted that her treating psychiatrist had previously indicated that her mental illness was secondary to or exacerbated by a thyroid condition. The examining physician determined that the plaintiff had no physical impairment that precluded her from engaging in full-time work, but could not opine as to whether her mental illness was due to a physical or psychological condition. He acknowledged, however, that a possible link existed between thyroid disorders and psychotic episodes.
Based on the lack of clarity regarding the plaintiff’s mental illness, a case manager recommended an independent psychiatric review. A board-certified psychiatrist reviewed the records and spoke with the plaintiff’s treating psychiatrist, who noted improvement in her mental illness. The psychiatrist concluded that the plaintiff suffered from no mental illness that required restrictions or limitations or that prevented her from maintaining full-time work. A vocational manager later opined that, based on the functional capabilities identified by the independent examining physician, there were numerous jobs that the plaintiff could perform.
On October 1, 2016, the plan administrator notified the plaintiff that her benefits were being terminated as of that date because she no longer satisfied the policy definition of disabled. The plan administrator again noted that the plaintiff’s only potential basis for receiving benefits was physical disability because she had exhausted the mental illness benefits available under the plan. The plan administrator also determined that the plaintiff’s mental illness no longer precluded her from working, observing that her own treating psychiatrist had opined that she should consider returning to work.
The plaintiff appealed, arguing that the plan administrator had erroneously denied her benefits to which she was entitled under the plan. She asserted that her anti-psychotic medications caused her to suffer from side effects such as blurred vision, tremors, muscle stiffness, and fatigue. She also asserted that when her psychotic episodes occurred, she could not work for a period of two to three weeks. She did not raise any challenge to the plan administrator’s discussion of the lack of evidence of a disabling physical impairment.
Based on the plaintiff’s argument regarding the side effects of her medications, the plan administrator obtained an additional review from the reviewing psychiatrist. The reviewing psychiatrist again communicated with the plaintiff’s treating psychiatrist, who offered additional information about her psychotic episodes and the effects of medications she took during these periods. The reviewing psychiatrist ultimately concluded that the medical records did not support the plaintiff’s inability to work during her psychotic episodes and that the evidence did not show that she suffered from an impairing mental illness that precluded her from working after September 29, 2016.
The plan administrator notified the plaintiff that it was denying her appeal and upholding the termination of benefits. She then sued, seeking reinstatement of her benefits.
The U.S. District Court for the Eastern District of Arkansas granted judgment in favor of the plan administrator, concluding that substantial evidence supported its determination that the plaintiff no longer qualified for benefits.
The plaintiff appealed to the Eighth Circuit. There, she argued that the district court’s dismissal of her complaint was erroneous because, among other things, there was insufficient evidence of improvement in her condition and the plan administrator had not considered the potential medication side effects and the future risk of additional psychotic episodes.
THE EIGHT CIRCUIT’S DECISION
The Eighth Circuit affirmed.
In its decision, the circuit court explained that the plaintiff’s arguments ignored the “primary reason” for the plan administrator’s termination of benefits: the medical evidence in the record did not support a finding of a physical disability.
Indeed, the Eighth Circuit found that substantial evidence supported the plan administrator’s conclusion that the plaintiff did not suffer from mental illness as a result of a physical condition. It added that it was not an abuse of the plan administrator’s discretion to rely on the opinions of reviewing physicians over conflicting opinions of the plaintiff’s treating physicians unless the record did not support the denial of benefits to the plaintiff.
Moreover, the Eighth Circuit decided that the record provided substantial evidence for the plan administrator’s determination that the plaintiff was capable of full-time work, and that nothing in the record suggested that its decision was inconsistent with the plan language.
Finally, as to the plaintiff’s assertion that the plan administrator did not consider the side effects of her medications, the circuit court reasoned that the plan administrator had engaged in further review by requesting another report directly addressing this issue from the reviewing psychiatrist – even though this additional step was unnecessary in the absence of an underlying physical disability. The plan administrator “more than satisfied its obligation to engage in a full and fair review of [the plaintiff’s] claim,” the Eighth Circuit ruled.
The circuit court found that the plan administrator had engaged in a “meaningful review” of the plaintiff’s claim as it related to her complaints of both a physical disability and a disabling mental illness, despite her exhaustion of benefits based on mental illness alone. The court noted that the plaintiff’s arguments effectively amounted to nothing more than a request for the court to substitute its judgment for that of the plan administrator, which the court correctly pointed out “is inconsistent with [our] role as a reviewing court, where [we] are tasked with determining only whether [the plan adminstrator’s] decision was supported by substantial evidence. It concluded that substantial evidence did, in fact, support the plan administrator’s finding that the plaintiff suffered from no disabling physical condition or mental illness, and that the plan administrator had not abused its discretion in terminating the plaintiff’s benefits. [Miller v. Hartford Life and Accident Ins. Co., No. 19-1096 (8th Cir. Dec. 16, 2019).]
Second Circuit Upholds Decision Denying Long-Term Disability Benefits to Plaintiff
The U.S. Court of Appeals for the Second Circuit has upheld a district court’s decision that a plaintiff did not meet all of the elements required to be deemed “disabled” by his employer’s long-term disability plan.
The plaintiff sued the administrator of his employer’s long-term disability plan and the plan itself, which was governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), alleging his application for disability benefits had been unlawfully denied.
The U.S. District Court for the Southern District of New York dismissed his complaint, reasoning that the plain language of the plan and the plaintiff’s allegations established that he was not entitled to the claimed benefits.
The plaintiff appealed to the Second Circuit.
THE SECOND CIRCUIT’S DECISION
The Second Circuit affirmed.
In its decision, the circuit court explained that the plan provided that, for a claimant to be “disabled” for plan purposes, the claimant must:
- Be “unable to perform the material and substantial duties of [the claimant’s] regular occupation due to [the claimant’s] sickness or injury”;
- Be “under the regular care of a doctor”; and
- Have a 20 percent or more loss in monthly earnings due to that sickness or injury.
The Second Circuit agreed with the district court’s determination that the plaintiff was not “disabled” within the plan’s definition because the allegations in his complaint failed to satisfy the third prong of the three-part test. The circuit court noted that, according to the plaintiff, his employer had never reduced his monthly earnings while he was employed. Moreover, the circuit court continued, the plaintiff conceded that he had been terminated as part of a reduction in force and not because of his disability.
The circuit court was not persuaded by the plaintiff’s argument that the plan administrator’s decision was wrong because the Social Security Administration (“SSA”) had determined that he was eligible for disability benefits and the SSA required a causal link between a person’s disability and his or her capability to earn income.
The Second Circuit explained that SSA awards may be considered when determining whether a claimant was disabled under a plan. The circuit court concluded, however, that a plan administrator was not bound by such an award and was not required to accord deference to that determination because the plan’s governing standards might be different. [Sevely v. Bank of New York Mellon Corp. Long Term Disability Coverage Plan, No. 18-3247 (2d Cir. Dec. 13, 2019).]
Eighth Circuit Affirms Dismissal of Plaintiff’s Breach-of-Fiduciary-Duty Claim for Failing to Exhaust Administrative Remedies
The U.S. Court of Appeals for the Eighth Circuit, affirming a district court’s decision, has ruled that a plaintiff who failed to exhaust her administrative remedies could not bring a breach-of-fiduciary-duty claim against the administrator of an employee benefit plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”).
The plaintiff sued the plan administrator of an employee benefit plan governed by ERISA in connection with the termination of her disability benefits. She asserted two claims: first, under 29 U.S.C. § 1132(a)(1)(B), for “benefits due to [her] under the terms of [her] plan,” and second, under 29 U.S.C. § 1132(a)(3), for “appropriate equitable relief” for a breach of fiduciary duty.
The plan administrator argued that the plaintiff had not raised her breach-of-fiduciary-duty claim during the claim review process and, therefore, that she had not exhausted all of her administrative remedies. As a result, it contended, she could not assert that claim in her lawsuit.
The U.S. District Court for the Eastern District of Missouri concluded that the plan administrator had not breached its fiduciary duty, and the plaintiff appealed to the Eighth Circuit.
THE EIGHTH CIRCUIT’S DECISION
The Eighth Circuit affirmed.
In its decision, the circuit court explained that the claim review process in the plan’s summary plan description complied with ERISA and the applicable regulations; the plan administrator had notified the plaintiff of the review process; and the plaintiff had not raised her breach-of-fiduciary-duty claim during the review process.
The Eighth Circuit then ruled that administrative exhaustion was required for an ERISA breach-of-fiduciary-duty claim, and that the plaintiff’s failure to exhaust her administrative remedies doomed her claim.
The circuit court reasoned that ERISA required an administrative review process for any participant whose claim for benefits had been denied. Exhaustion, the circuit court continued, minimized frivolous lawsuits, promoted consistent treatment of claims, and enhanced the ability of trustees to interpret plan provisions. To fulfill these ERISA purposes, the circuit court added, claimants “may not avoid the administrative review process by dressing up a denial-of-benefits challenge as a breach-of-fiduciary-duty claim.”
The Eighth Circuit noted that the plaintiff alleged two fiduciary breaches, both rooted in the plan administrator’s internal policies and procedures.
First, she asserted that the plan administrator had not provided a copy of its clinical opinion to her medical providers or to her. Second, she contended that the plan administrator had improperly applied its standard of disability. She concluded that by ignoring her providers’ opinions and by discounting her subjective pain, the plan administrator had erroneously determined that she was not disabled.
The Eighth Circuit ruled that the plaintiff’s contentions merely re-litigated the plan administrator’s determination that she was not disabled. The circuit court noted that the plaintiff did not, for instance, provide authority that the plan administrator had failed to act with the “care, skill, prudence, and diligence [of] a prudent man,” which would establish an independent statutory claim against Aetna.
Accordingly, the circuit court concluded, the plaintiff had not administratively exhausted her breach-of-fiduciary-duty claim, and she could not proceed with that claim. [Jones v. Aetna Life Ins. Co., No. 18-1851 (8th Cir. Dec. 6, 2019).]
- Norman L. Tolle