The Friday Five: Five Current ERISA Litigation Highlights - March 2023

This month's Friday Five covers cases relating to issue preclusion, coverage where the policy terms are inconsistent with the parties’ behavior, application of the abuse of discretion standard of review, applicability of a waiver of premium provision and compliance with a mandatory appeals process.

The Saul Ewing LLP Employee Benefits/ERISA Litigation Team

1. Middle District of Florida Finds Issue Preclusion Bars Disability Benefits Under a Group Policy. The plaintiff – a doctor – alleged that his disability benefits were improperly terminated under one group and four individual disability insurance policies for vision problems which he asserted left him unable to practice medicine as a diagnostic radiologist as of May 1, 2010. The insurers initially found that the plaintiff was totally disabled and paid him monthly benefits until September 2015. Thereafter, the insurers notified the plaintiff that his disability benefits were terminated because he was no longer disabled within the meaning of the policies. Following a jury trial, the jury found that the defendants proved by a preponderance of the evidence that the plaintiff was no longer totally disabled within the meaning of any of their individual policies as of August 22, 2015 and therefore there was no breach of those policies (the “Individual Policy Litigation”). On May 2, 2022 the plaintiff filed a fourth amended complaint alleging under the amended group policy that (1) his disability benefits were improperly terminated and he was entitled to ERISA plan disability benefits and interest pursuant to 29 U.S.C. § 1132(a)(1)(B); and (2) he was entitled to attorney’s fees and costs pursuant to 29 U.S.C. § 1132(g)(1). The defendants moved for summary judgment on both ERISA claims. The defendants asserted the ERISA claims were precluded by the jury’s verdicts in the Individual Policy Litigation in which they held that the plaintiff was no longer totally disabled within the meaning of the individual policies, thereby precluding the plaintiff from asserting ERISA disability benefits claims under the amended group policy. On summary judgment, the court agreed with the defendants, finding they established that the parties in the Individual Policies Litigation and current litigation were identical or were privies, that the issue in the Individual Policies Litigation was actually litigated, both litigations involved identical issues, that the issue in the Individual Policies Litigation was a critical and necessary party of the judgment and that the plaintiff had a full and fair opportunity to litigate the pertinent issue in the Individual Policies Litigation. Thus, the court found the defendants had proven that issue preclusion applied and granted the defendants summary judgment on the first claim. Additionally, the court found for the defendants with regard to the second claim, finding that because the plaintiff did not achieve any degree of success on the merits of his ERISA claim, that he was not eligible for an award of attorney’s fees and costs. Allen v. First Unum Life Insurance Company, et al., Case No. 2:18-cv-69, 2023 WL 1781509 (M.D. Fla. 2023).
2. Third Circuit Affirms Denial of Life Insurance Benefits on Ex-Husband, Despite Informal Communications Indicating Coverage. The plaintiff – a woman who took out a life insurance policy on her then husband – sought coverage under her ex-spouse’s policy following his death. The Third Circuit, in affirming the District Court’s rejection of the plaintiff’s claim, found that under the policy’s plain terms an ex-spouse could not receive insurance coverage under the policy, which was subject to ERISA, 29 U.S.C. § 1001. Despite divorcing in 2013, the plaintiff, unaware that the policy only applied to current spouses, reenrolled her ex-husband in 2015, increasing the benefits to $300,000 and paying over $2,000 in premiums for the coverage. The plaintiff asserted, in part, that she was misled into believing that her ex-husband was covered by: (a) withdrawing premiums from her paycheck for his supposed coverage and (b) listing her ex-husband as a covered dependent on the company’s “Benefits Web Portal”. However, the Third Circuit court found that the plaintiff could not survive summary judgment on this claim because she failed to show that her reliance on these alleged misrepresentations was reasonable. The court found it was unreasonable as a matter of law because her interpretations of these sources “cannot be reconciled with the unqualified” plan language. See In re Unisys Corp. Retiree Med. Ben. ERISA Litig., 58 F.3d 896, 907 (3d Cir. 1995); see also Talasek v. Nat'l Oilwell Varco, L.P., 16 F.4th 164, 169 (5th Cir. 2021). Despite the plaintiffs many challenges to the underlying judgment and the plaintiff’s contentions that the defendants breached their fiduciary duties by accepting her premium payments when she was not entitled to coverage, the court affirmed the lower court’s decision. Staropoli, et al. v. Metropolitan Life Insurance Co., et al., Case No. 21-2500, 2023 WL 1793884 (3d Cir. 2023). 
3. District of Minnesota Finds Defendant Did Not Abuse Its Discretion in Discontinuing Long Term Disability Benefits Despite Conflicting Medical Opinions. On June 2, 2008 the plaintiff, a Field Sales Representative, was placed on disability leave due to a number of mental health conditions, including anxiety, depression, panic disorder, agoraphobia, and post-traumatic stress disorder (“PTSD”). After receiving short term disability payments for several months, the plaintiff applied and was approved for LTD and Social Security Disability benefits based on his depression and PTSD diagnoses. Following a physician’s finding that the plaintiff could return to work, the defendant discontinued the plaintiff’s benefits. Both parties sought summary judgment. The defendant argued it did not abuse its discretion in discontinuing payment of the plaintiff’s LTD benefits because: (1) the plaintiff did not establish his entitlement to continued benefits payments; (2) the opinions of medical consultants supported the defendant’s benefits decision; and (3) the plaintiff had not otherwise established that the defendant abused its discretion in discontinuing the plaintiff’s benefits. The court granted summary judgment for the defendant, finding that the defendant submitted the appeal file for review by two medical consultants who provided detailed analysis addressing why their conclusions differed from the plaintiff’s physician, and who referred repeatedly to details included in the plaintiff’s medical records. The court noted that “a plan administrator does not abuse its discretion in finding that an employee is not disabled when the record reflects conflicting medical opinions.” See Delta Family–Care Disability & Survivorship Plan v. Marshall, 258 F.3d 834, 843 (8th Cir. 2001). The court held that the record demonstrated such conflicting opinions and that with conflicting evidence on the record, there was no abuse of discretion. Id. Bijan v. UNUM Life Insurance co. of America, Case No. 21-cv-1813, 2023 WL 375649 (D. Minn. 2023).
4. Central District of California Finds Plaintiff Not Entitled to Premium Waiver Due to Failure to Meet Definition of “Totally Disabled” Under the Policy. The plaintiff - previously the Director of Employee Benefits - sought waiver of the premium on his life insurance policy (an employee welfare benefit plan governed by ERISA) due to disability. The plaintiff suffered from panic attacks, difficulty completing work tasks, lack of concentration both at home and at work, neurological disorders stemming from HIV, as well as many other symptoms. The life insurance policy under which the plaintiff was covered provided continuation of coverage and waiver of premium under certain circumstances, including for participants who become “totally disabled.” The policy defined “totally disabled” as: “You are diagnosed by a Doctor to be completely unable because of Sickness or Injury to engage in any occupation for wage or profit or any occupation for which You become qualified by education, training or experience.” The court held, however, that the plaintiff failed to establish that he was “totally disabled”. Under the policy and the law, the claiming participant had the burden of establishing total disability. The court held that the plaintiff failed to support his claim with contemporaneous treatment records. As such, the defendant’s decision to discontinue the plaintiff’s life insurance premium waiver was affirmed. Wilcox v. Dearborn Life Insurance, et al., Case No. 2:21-cv-04605, 2023 WL 424256 (C.D. Cal. 2023).
5. Southern District of New York Allows Plaintiff Opportunity for Further Review of Her LTD Benefits Coverage. The plaintiff brought an action to challenge the defendant’s determination that she was no longer eligible for LTD and life benefits, asserting that the defendant failed to follow the required appeals procedures under ERISA after it made this determination. The plaintiff sought a review on the merits of her benefits determination and reversal, or, alternatively, remand for further proceedings. The defendant asserted that the plaintiff failed to appeal her benefits determination and, as such, had no legal basis to challenge it, and if the court were to review the determination, that it should be upheld. A letter was sent on behalf of the plaintiff with supporting documentation challenging the plaintiff’s LTD benefits determination. However, the letter made no mention of the plaintiff’s life benefits. The court found this letter constituted an appeal. The court held in favor of the plaintiff in part, finding her communications with the defendant following the adverse LTD benefit determination were sufficient to constitute an appeal. The court remanded the plaintiff’s LTD benefits claim for further review consistent with the defendant’s appeal procedures. The court granted the defendant’s cross-motion with respect to the plaintiff’s claim for life benefits, which the court held the plaintiff made no effort to appeal. Israel v. Unum Life Insurance Co. of America, Case No. 21-cv-4335, 2023 WL 491039 (S.D. N.Y. 2023).

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This publication was written with contributions from former Associate, Amanda Dennis.