This month’s Friday Five covers cases relating to: (1) whether claim administrators can recover overpayments through a breach of contract claim under state law; (2) whether claim administrators can rely solely on a claimant’s medical records for a benefits determination; (3) what evidence supports the standard that claim administrators apply versus their mechanism for conducting an investigation; (4) whether an insufficient independent medical examination serves as grounds for overturning a benefits decision; and (5) how a court will interpret policy language that provides a limitation for disability caused or contributed to by mental or nervous disorders.
The Saul Ewing Employee Benefits/ERISA Litigation Team
- Can claim administrators recover overpayments through a breach of contract claim under state law? A District Court recently confirmed that disability claim administrators may not use state law claims to recover overpayments from plan participants. In Dean v. Aetna Life Insurance Company, the plaintiff sought recovery of long-term disability benefits from Aetna under a plan governed by ERISA. Aetna filed a counterclaim to recover overpayments from the plaintiff because Aetna paid Dean LTD benefits with no set-off for the Social Security Disability benefits the plaintiff received concurrently. The District Court found that Aetna’s counterclaim, filed as a state law breach of contract claim, was pre-empted by ERISA. The court explained that, unquestionably, a breach of contract cause of action, premised on state common law, is a state-law claim subject to ERISA preemption so long as it relates to the plan. Supreme Court decisions in Great-West v. Annuity Ins. Co., Sereboff v. Mid Atl. Med. Servs, and Montanile v. Bd. of Trustees of Nat. Elevator Indus. Health Benefit Plan as well as Sixth Circuit courts have similarly found that state-law claims seeking a return of unduly paid benefits cannot escape ERISA’s preemption. Accordingly, the court granted the plaintiff’s motion to dismiss Aetna’s counterclaim on preemption grounds alone. The court acknowledged that Aetna could have moved for relief under the authority of ERISA, 29 U.S.C. § 1132(a)(3), but it explicitly did not, and instead asserted its breach of contract counterclaim on supplemental jurisdiction which was fatal to its claim. Dean v. Aetna Life Insurance Company, et al, No. 21-CV-363, 2022 WL 847249, at *1 (S.D. Ohio Mar. 22, 2022).
- Can claim administrators rely solely on a claimant’s medical records for a benefits determination? Claim administrators in their benefit decisions often rely heavily upon a claimant’s medical records in making benefit determinations. The plaintiff in Kelly v. UNUM Group filed a motion for summary judgment on its claim to recover long-term disability benefits arguing that UNUM’s benefits decision was arbitrary and capricious in part because it solely relied on medical records to make their determination. The District Court determined that UNUM did not solely rely on records because it also interviewed the plaintiff and his primary healthcare providers about his conditions. The court further held that even had UNUM relied solely on the plaintiff’s medical records, the comprehensive nature of his records would have been sufficient to make an informed decision about his disability status. The court explained that nothing in the ERISA regulations required UNUM to take steps beyond a comprehensive examination of the insured’s medical records and other documents or records submitted by the insured. Moreover, UNUM went beyond the bare minimum by interviewing the plaintiff, attempting to interview his medical providers, sending proposed findings to the plaintiff for his response, and inviting the plaintiff to submit supporting records from his treating providers. The court also rejected the plaintiff’s argument that UNUM improperly based its determination solely on medical records prepared in the normal course of treatment. The court held that there is no requirement for an insurer to specifically review or give additional weight to records prepared by a physician with an eye towards a disability application, nor that an insurer discount records prepared in the normal course of care. Finally, the court held that ERISA does not require an insurer to conduct testing or functional capacity evaluations on an insured, nor did the plan in this case require an independent evaluation of the claimant by a physician. Accordingly, the court held that it was satisfied that UNUM conducted a full and fair review of the plaintiff’s benefits determination in compliance with ERISA’s requirements. Kelly v. UNUM Grp., No. 2:20-CV-00622-JNP-DBP, 2022 WL 833044, at *1 (D. Utah Mar. 21, 2022).
- What evidence supports the standard that claim administrators apply versus their mechanism for conducting an investigation? Plaintiffs receiving unfavorable benefit determinations often attack the standard that the claim administrator applied in interpreting medical records or other evidence relating to the plaintiff’s condition. In Kelly v. UNUM Group, the plaintiff not only objected to UNUM’s reliance on medical records, but also argued that UNUM applied the wrong standards to determine eligibility for disability benefits. For instance, the plaintiff objected that the test is not whether there is clinical evidence to support a change in functional capacity around the time he stopped working, nor is the test whether the normal medical work-up to date is consistent with his report that his medical condition had risen to the level to impair his ability to work or complete daily activities, nor is it whether a therapist’s session notes supported a decrease in cognitive functional capacity that would be expected to preclude performance of the plaintiff’s occupational demands; nor is the test whether the examinations, diagnostic findings, and other information in the claim file would be consistent with the existence, intensity, frequency and duration of the plaintiff's alleged symptoms. The court held that the allegedly incorrect “tests” were merely UNUM’s mechanisms for investigating whether the plaintiff met the definition laid out in its plan documents, that is, whether he was “limited from performing the material and substantial duties of his regular occupation due to sickness or injury which caused a 20 percent or more loss in his indexed monthly earnings. Examining whether the clinical evidence demonstrates a reduction in occupational capacity, whether his therapist’s notes demonstrate a reduction in cognitive functional capacity, or whether his medical work-up was consistent with his reports of chronic fatigue all pertain to determining whether he met the plan’s definition of disabled. Thus, the court held that UNUM did not apply the wrong tests. Rather, it used a number of different mechanisms to inform its decision. Kelly v. UNUM Grp., No. 2:20-CV-00622-JNP-DBP, 2022 WL 833044, at *1 (D. Utah Mar. 21, 2022).
- May an insufficient independent medical examination serve as grounds for overturning a benefits decision? Independent physician reviews can be helpful support for claim administrator’s decisions. However, in Bilkey v. Reliance Standard Life Insurance Company, the District Court granted summary judgment for the plaintiff finding that Reliance denied benefits primarily based on the opinion of an independent physician consultant, but the consultant’s report was fundamentally flawed. The consultant determined that the plaintiff’s physicians did not perform any functional assessment, but the court determined that the consultant’s reasoning, stated in two succinct paragraphs, was unsupported by the record evidence. The court further held that it was not apparent why a functional assessment would have been a component of the plaintiff’s medical treatment for his diagnosed medical condition (gastrointestinal disease). The court explained that most limiting gastrointestinal symptoms did not directly affect the plaintiff’s functional capabilities which is what functional assessments generally measure. Rather, the plaintiff’s symptoms interfered with her work attendance and the time she could spend on task, which were the main impediments to her working. Moreover, the plaintiff’s medical records did address her ability to work and function. The court explained that while the independent consultant was not required to agree with the plaintiff’s treating providers or to accept her subjective complaints about her symptoms, Reliance could not deny her benefits claim based on the consultant’s opinion that ignored a treating physician’s medical conclusions and other contrary evidence without explanation. The court concluded that it was arbitrary and capricious for Reliance to base a benefits denial on a consulting physician’s report that contained such significant omissions. Bilkey v. Reliance Standard Life Ins. Co., No. 20-CV-729-JDP, 2022 WL 873510, at *5 (W.D. Wis. Mar. 24, 2022).
- How will a court interpret policy language that provides a limitation for disability caused or contributed to by mental or nervous disorders? Plaintiffs and plan administrators continue to battle over interpretation and application of policy limitations relating to mental health concerns. In Matteo v. Reliance Standard Life Insurance Company, the policy’s “Mental or Nervous Disorders” limitation provided that monthly benefits for total disability caused by or contributed to by mental or nervous disorders will not be payable beyond an aggregate lifetime maximum duration of twelve months unless certain exceptions applied. The court determined that this policy language was even more clear than the language in Michaels v. The Equitable Life Assur. Soc’y of U.S. Emps., Managers, & Agents Long-Term Disability Plan, 305 F. App’x 896, 907 (3d Cir. 2009) where the policy said that benefits are not payable if “disability arises from or on account of” a mental condition. The court found that the policy here more clearly said that benefits are not payable for disability “caused by or contributed to by mental or nervous disorders.” Thus, the court held that at the summary judgment stage, its task was to determine whether the plaintiff remained totally disabled based on her physical limitations, or, in other words, if her physical symptoms rendered her disabled regardless of her mental condition. The court determined that the record supported the conclusion that the plaintiff's mental impairments caused or, at minimum, contributed to her physical impairments. Thus, the defendant's denial of benefits was not arbitrary and capricious on these grounds. Matteo v. Reliance Standard Life Ins. Co., No. CV-1811450-ES-MAH, 2022 WL 819600 (D.N.J. Mar. 17, 2022).
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