From the Courts

Job Applicant Fails in Suit Challenging Company’s Decision to Rescind Conditional Job Offer Based on His Medical Exam

The plaintiff in this case applied for a systems engineer position with Southern Nuclear Operating Company at one of its nuclear power plants. Southern Nuclear extended the plaintiff a job offer contingent on satisfactory completion of a medical evaluation. During the plaintiff’s evaluation, he informed Southern Nuclear that he suffered from bipolar disorder. His medical records indicated that he took medication to manage the disorder, that he had not experienced any bipolar episodes in six or seven years, and that his previous bipolar episodes only had occurred when doctors attempted to take him off of his medication. The plaintiff acknowledged, however, that he recently had attempted to alter his medication regimen and, that in spite of his health care provider’s recommendation, he was not being treated by a psychiatrist.  

Southern Nuclear’s medical team determined that the plaintiff only could be hired if several conditions were met, including compliance with his medication regimen and a restriction from working on “safety-sensitive systems and equipment” for one year while Southern Nuclear verified his compliance with his medication regimen. Because the systems engineer position required that the plaintiff work on safety-sensitive systems and equipment, Southern Nuclear decided that it could not hire the plaintiff, and it rescinded his conditional job offer.

The plaintiff sued Southern Nuclear, arguing that it had misused information it had obtained during a required medical evaluation to discriminate against him, in violation of the Americans with Disabilities Act (ADA), 42 U.S.C. § 12112(d)(3)(C). The district court granted summary judgment in favor of Southern Nuclear, and the plaintiff appealed to the U.S. Court of Appeals for the Eleventh Circuit.

The Eleventh Circuit affirmed. The Eleventh Circuit explained that Section 12112(d)(3)(C) of the ADA permits medical exams as a condition of employment so long as the results of such examinations are not used in violation of some other provision of the ADA. For the plaintiff in this case to be successful under Section 12112(d)(3)(C), the circuit court continued, he needed to show not just that the information was gathered but that Southern Nuclear had not used the information properly. The circuit court noted that Section 12112(d)(3)(C) that prohibits discrimination “on the basis of disability.” Thus, the circuit court reasoned, for the plaintiff to prevail under Section 12112(d)(3)(C), he had to demonstrate that Southern Nuclear had used the results of his examination to discriminate on the basis of his disability, which depended on whether the plaintiff had demonstrated that he was a disabled individual.

The Eleventh Circuit pointed out, however, that the plaintiff had admitted that he could not demonstrate that he was an individual with a disability. Accordingly, the circuit court concluded, the district court had properly granted judgment in favor of Southern Nuclear. [Wetherbee v. The Southern Co., 754 F.3d 901 (11th Cir. 2014).]

Comment: Two other circuit courts of appeals have ruled that plaintiffs suing under Section 12112(d)(3)(C) must prove that they are disabled to show a violation of the ADA.
The U.S. Court of Appeals for the Seventh Circuit, in O’Neal v. City of New Albany, 293 F.3d 998 (7th Cir. 2002), stated that, “If the applicant is not disabled, … then the applicant cannot recover under § 12112(d)(3)(C).” Similarly, the Tenth Circuit Court of Appeals, in Garrison v. Baker Hughes Oil Field Operations, Inc., 287 F.3d 955 (10th Cir. 2002), declared that, “to recover under subsection 12112(d)(3)(C) a plaintiff must show the employer used collected medical information to discriminate on the basis of a disability.”

It also is worth noting that federal regulations provide that “if certain criteria are used to screen out an employee or employees with disabilities … the exclusionary criteria must be job-related and consistent with business necessity.” (Emphasis added.)

Long Term Disability Insurer May Offset VA Benefits Received By Employee Against Benefits Payable under Its Plan, Circuit Court Decides

In this case, the plaintiff served for six years as a physician in the United States Army. Upon his honorable discharge in July 2003, the plaintiff worked in the private sector and was insured under a group long term disability policy issued by Sun Life Assurance Company of Canada as part of an employer-sponsored benefits plan governed by the Employee Retirement Income Security Act of 1974 (ERISA).

In 2009, the plaintiff was diagnosed with amyotrophic lateral sclerosis (“ALS”). Under the Sun Life policy, he was entitled to receive monthly disability benefits of 60 percent of his total monthly earnings up to a maximum of $15,000 per month. Pursuant to a Veteran’s Administration (“VA”) regulation, the plaintiff’s diagnosis with ALS also entitled him to a monthly disability benefit from the VA.

The plaintiff made a claim for disability benefits with Sun Life. In response, Sun Life explained that his VA benefits would be offset against monthly benefits due under the Sun Life policy as “Other Income Benefits” received pursuant to any “Compulsory Benefit Act or Law … or any other act or law of like intent.”

The plaintiff initiated an administrative appeal of Sun Life’s decision, which the insurer denied. The plaintiff then sued Sun Life, and the parties filed cross motions for summary judgment. 

The district court ruled in favor of Sun Life, deciding that the VA benefits were properly offset as “Other Income Benefits” under the Sun Life policy. The plaintiff appealed to the U.S. Court of Appeals for the Tenth Circuit.

The circuit court affirmed. In its decision, the circuit court first rejected the plaintiff’s argument that Sun Life should not have considered his VA disability benefits as “Other Income Benefits” because the policy did not specifically list them as such.

The Tenth Circuit then rejected the plaintiff’s argument that the term “Compulsory Benefit Act or Law” was ambiguous and that the ambiguity should be resolved in his favor to exclude the VA benefits as “Other Income Benefits.” The circuit court found “nothing ambiguous” about the term “Compulsory Benefit Act or Law.” It pointed out that VA regulations established a presumption of service connection for ALS for any veteran who developed ALS any time after separation from military service. Because the VA was required by law to pay the plaintiff’s disability benefits, the circuit court ruled, Sun Life was entitled to offset those benefits under the terms of its policy. [Holbrooks v. Sun Life Assurance Co. of Canada, 2014 U.S. App. Lexis 12741 (10th Cir. July 7, 2014).]

Circuit Court Upholds Decision Terminating Long Term Disability Benefits

The plaintiff in this case worked for Progressive Corporation as a claims specialist, analyzing and determining Progressive’s liability for losses or damages, attempting settlement with claimants and attorneys, corresponding with and interviewing witnesses and claimants, and calculating and paying claims. The plaintiff’s last active day of work was August 13, 2007.

Progressive’s employee benefit welfare plan included long term disability (LTD) coverage. In part, the Progressive plan provided benefits for disability resulting from a “mental or nervous disorder or disease.” These benefits generally were subject to a 24 month limitation.

On November 13, 2007, the plan administrator, Metropolitan Life Insurance Company, received a claim from the plaintiff seeking LTD benefits under the Progressive plan. MetLife approved her claim the following January, granting LTD benefits retroactive to November 13, 2007. MetLife determined that the plaintiff had a mental or nervous disorder, specifically, recurrent major depression. Accordingly, MetLife advised the plaintiff that her LTD benefits were subject to a 24 month maximum and, thus, were scheduled to cease on November 12, 2009. At that time, MetLife also advised the plaintiff that to remain eligible for LTD benefits, she had to continue to satisfy the definition of disability and all other requirements under the plan and to periodically provide updated medical information regarding her disability.

On March 7, 2008, the plaintiff was notified that her application for Social Security benefits had been approved, and that she would receive benefits effective February 2008. Once the plaintiff notified MetLife that she was receiving Social Security, her LTD benefits were adjusted, as provided under the plan.

On March 14, 2008, MetLife advised the plaintiff that it needed additional information from her and her doctors to verify that she still was eligible for LTD benefits. MetLife also faxed medical records requests to the plaintiff’s three treating doctors of record: a psychiatrist, a psychologist, and a neurologist. MetLife failed to receive the requested records and it terminated the plaintiff’s LTD benefits effective May 14, 2008. Soon thereafter, however, MetLife received records from the plaintiff’s psychologist and neurologist, and it reinstated the plaintiff’s LTD benefits effective May 15, 2008.

On August 20, 2008 and on September 30, 2008, MetLife again requested that the plaintiff provide records of her recent medical information. The plaintiff complied; however, based on her most recent medical records, MetLife concluded that she was capable of performing the duties of her claims specialist position and it terminated her LTD benefits. MetLife mailed the termination letter on November 6, 2008.

The plaintiff appealed MetLife’s decision. MetLife enlisted two doctors to evaluate the plaintiff’s medical records, and each authored a report concluding that her medical records did not demonstrate that she suffered from impairments that rendered her unable to perform the duties of her occupation from November 7, 2008 onward. These reports were sent to the plaintiff’s psychologist and neurologist, who previously had provided records to MetLife; MetLife asked for their comments and additional clinical evidence if they disagreed with the reports, but they did not respond.

On January 30, 2009, MetLife still had not heard from the plaintiff’s doctors and it issued its decision denying the plaintiff’s administrative appeal. In its letter, MetLife acknowledged that the plaintiff had received Social Security benefits but explained that a Social Security award did not guarantee the approval or continuation of LTD benefits and that the Social Security Administration’s determination was separate from and governed by different standards than MetLife’s review and determination pursuant to the terms of the Progressive plan. The notice concluded by advising that the latest review constituted “MetLife’s final determination on Appeal in accordance with the Plan and federal law” and that the plaintiff had the right to file a civil lawsuit under ERISA.

Four months later, on June 3, 2009, MetLife received a letter from an attorney retained by the plaintiff requesting documents and information relating to her claim. The letter further requested 45 days to present additional information and argument in support of the plaintiff’s claim for LTD benefits. Although MetLife agreed to consider materials through July 31, 2009, the attorney sent letters to MetLife on July 29, 2009, in September 2009, and in December 2009 stating that he anticipated submitting additional records on the plaintiff’s behalf. Although there were numerous occasions thereafter in which the attorney suggested that he was, or by a certain date would be, done submitting additional materials, and other occasions where MetLife indicated its desire to resolve the claim on the file as supplemented, the attorney apparently kept sending additional materials to MetLife periodically over the course of the next two-plus years.

On December 12, 2011, the plaintiff’s attorney submitted an additional document dated October 19, 2011, and noted that he had no additional evidence to submit. On February 13, 2012, the attorney wrote MetLife declaring he had submitted his last evidence on December 12 and that MetLife’s purported 45-day deadline for a response had passed. In early April 2012, without any further communication, the plaintiff filed suit against MetLife, seeking benefits under ERISA.

MetLife moved for judgment as a matter of law. The district court granted the motion, and the plaintiff appealed to the U.S. Court of Appeals for the Eleventh Circuit.

The Eleventh Circuit affirmed. In its decision, it rejected the plaintiff’s argument that MetLife had denied her a full and fair review by failing to inform her of materials she needed to perfect her appeal. The circuit court explained that a notice of an adverse benefit determination must include, “in a manner calculated to be understood by the claimant,” a “description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary.”  The circuit court then stated that it required only that notice of an adverse benefit determination “substantially comply” with this requirement. The circuit court then stated that it agreed with the district court that MetLife had provided the plaintiff with the necessary information, noting that in MetLife’s November 6, 2008 notice advising the plaintiff that her LTD benefits would be terminated, MetLife stated the following with regard to the plaintiff’s right to appeal:

If you wish to further pursue your LTD claim the following information is needed to review from [the plaintiff’s psychologist]; Current psychiatric evaluation, office visit notes, medical records, and/or testing which documents an impairment in functional abilities that would prevent you from performing the essential duties of your occupation. Medical information needed from [the plaintiff’s neurologist]; Abnormal examination, diagnostic testing to confirm a severity of impairments, current functional capabilities and restrictions and limitations, an updated treatment plan and certification of disability.

The Eleventh Circuit pointed out that the plaintiff had advised MetLife that she was not submitting additional information and that she would rely on her physicians to do so. Accordingly, the circuit court ruled, MetLife had provided the appropriate information in its adverse benefit determination letter.

The Eleventh Circuit then rejected the plaintiff’s argument that the district court should have considered the evidence that was submitted during her second appeal. It first found that there was no “second appeal,” adding that “MetLife was not required under the [Progressive plan] to review extra materials after it had denied her first appeal.” The plaintiff “not only received a timely decision on her initial claim but also a full administrative appellate review of her claim in accordance with the terms of the [Progressive plan],” the circuit court added. At that point, it stated, the plaintiff “was free to file suit in federal court because she had exhausted her administrative remedies.” Simply put, the circuit court ruled, documents that the plaintiff sent to MetLife over the two years following the denial of her administrative appeal “were not part of the record” considered when determining whether to deny the plaintiff’s LTD benefits. Accordingly, the Eleventh Circuit affirmed the district court as to this issue, as well. [Blair v. Metropolitan Life Ins. Co., 2014 U.S. App. Lexis 11747 (11th Cir. June 23, 2014).]

Circuit Court Upholds Reversal of Default Judgment in Favor of Plaintiff Who Served Secretary of Labor Instead of Head of Employer’s HR Department

The plaintiff in this case formerly worked for CIBER, Inc., which offered its employees a long term disability benefit (LTD) plan. The plaintiff stopped working on November 7, 2001 and filed an application for LTD benefits under the plan in May 2002 based upon an alleged pre-existing bi-polar disorder. The plan began paying the plaintiff benefits based on her mental illness, but those benefits could be paid only for two years under the terms of the plan.

The plaintiff later sought continued benefits, however, asserting that she was independently disabled based on back impairments resulting from an accident in April 2001. On January 12, 2004, the plan notified her that it was denying her claim for continued LTD benefits effective May 6, 2004 because she was not disabled by her back problems. The last of the plaintiff’s three administrative appeals was denied on October 24, 2005.

The plaintiff sued the plan in a Colorado state court on November 6, 2007. The plan failed to respond, the plaintiff moved for a default judgment, and the court entered a default on July 16, 2008. The court next entered a default judgment for $200,000 on August 1, 2008 and, on September 18, 2008, entered an order awarding the plaintiff her attorneys’ fees and costs.

The plaintiff began trying to collect the judgment, but the plan failed to pay. She returned to state court and obtained a writ of garnishment. The plan then asked the state court to set aside the default judgment, arguing that the plaintiff’s initial service of process had been improper because the plaintiff had served her complaint on the U.S. Secretary of Labor, rather than on the plan’s designated agent for service of process, and the plan had received no actual notice of the complaint until after the default judgment had been filed.

The state court entered a summary order, “upon being fully advised,” granting the plan’s motion to set aside the default judgment. The court vacated the default and set aside the default judgment and writ of garnishment. 

The dispute reached the U.S. Court of Appeals for the Tenth Circuit, where the plaintiff contended that the state court improperly had vacated the default judgment against the plan. She argued that because she had named the plan as the defendant in her state court lawsuit, service upon the Secretary of Labor was proper under the section of ERISA that provides that “[i]n a case where a plan has not designated in the summary plan description of the plan an individual as agent for the service of legal process, service upon the Secretary shall constitute such service.” She asserted that the plan’s summary plan description identified “CIBER, INC. Attention: Human Resources” as it agent for service of process and, therefore, that it did not name an “individual” as agent for service of process.

The circuit court rejected the plaintiff’s argument, determining that the plan “did identify a natural person as its agent for service of process.” The circuit court ruled that, as a practical matter, the plan’s designation of “CIBER, INC. Attention: Human Resources” as its agent for service of process identified the individual heading that department. As a result, it concluded, the plaintiff was not justified in serving the Secretary of Labor, and it ruled that the decision setting aside the default judgment as void was proper. [Bigley v. Ciber, Inc. Long Term Disability Coverage, 2014 U.S. App. Lexis 12498 (10th Cir. July 2, 2014).]

Six Year Delay in Challenging Settlement Was Too Long, Court Rules

Provident Life and Accident Insurance Company alleged that, on July 11, 1997, the defendant in this case met with an insurance agent and completed an application for disability insurance in which he denied having any preexisting conditions, reported that his last exam was normal, and denied having had, within five years of the application date, any medical or physical disorder not listed on the application. Provident issued a disability insurance policy to the defendant effective September 16, 1997.

According to Provident, on or about July 24, 2001, the defendant submitted a claim for long term disability payments under the policy, listing multiple sclerosis (MS) as the cause.

Provident said that it began paying disability benefits in September 2001, and that it simultaneously launched an investigation into the defendant’s claim. According to Provident, the defendant’s ex-wife came forward with information that the defendant had been diagnosed with MS prior to 1997. Provident said that it subsequently discovered medical records where the defendant complained of difficulty swallowing, episodic numbness and tingling on the right side of his body, tinnitus, spots in his vision, vertigo, migraine headaches, and numbness in his chest – none of which the defendant’s application had mentioned. Provident rescinded the policy and tendered a return of the premium check to the defendant, which he did not cash.

On August 4, 2006, Provident went to court seeking rescission of the policy and restitution for the benefits paid, which totaled approximately $186,000.

At a settlement conference on August 28, 2007, the parties agreed on terms of a settlement, which were memorialized in writing. The agreement provided for a mutual release of all claims, rescission of the policy, and an acknowledgment that the defendant would receive no further payments. In consideration, Provident agreed to forgive the money already given to the defendant and to pay him $10,000.

On September 7, 2007, the defendant faxed a letter to Provident’s attorney stating that he “decided … to reject the offer you made on August 28, 2007, and I accepted at the settlement conference.” Provident responded with a reminder that the agreement was binding and a request that the defendant sign a dismissal order and accept the check that would follow. After receiving no further communication from the defendant, Provident filed a motion to enforce the settlement agreement. In response, the defendant sent a letter to the court asking it to nullify the agreement on the ground that his disability had caused him to experience a high degree of anxiety during the settlement conference.

The court held a hearing at which it found that a settlement agreement had been reached. The court entered an order granting Provident’s motion and denying the defendant’s request to nullify the agreement. At the conclusion of the hearing, the defendant accepted the settlement check.

Nevertheless, on December 19, 2007, the defendant filed a motion to alter or amend the judgment and a motion to extend the time for him to file an appeal. The trial court refused to grant the defendant the relief he sought and he filed an appeal, which was denied on June 30, 2008. 

The case lay dormant for nearly six years. Then, the defendant filed a motion seeking relief from the judgment. The defendant apparently was claiming that the court should repeal the settlement agreement and impose sanctions because Provident had fabricated a pre-existing condition claim against him and had used this false information to file its lawsuit. The defendant maintained that Provident’s complaint was filled with “fraudulent information” lacking any evidentiary support, that Provident had relied on unsubstantiated testimony from his ex-wife, and that Provident had ignored medical evidence that he did not have MS prior to 1998.

The court rejected the defendant’s motion. It explained that the defendant had not demonstrated that his motion was timely, noting that motions claiming “fraud … misrepresentation, or misconduct by an opposing party” must be filed “no more than a year after the entry of the judgment.” The court concluded that the defendant’s motion was not timely even if it were to apply a “reasonable time” standard, given the amount of time that had passed. [Provident Life and Accident Ins. Co. v. Clarke, 2014 U.S. Dist. Lexis 89597 (E.D.Va. July 1, 2014).]

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