The Friday Five: Five Current ERISA Litigation Highlights – June 2019
This month's Friday Five covers recent cases addressing: (1) the propriety of a remand for an administrative determination regarding a claimant's "any occupation" disability claim; (2) the viability of breach of fiduciary duty claims against disability insurers; (3) the scope of ERISA's governmental plan exemption; (4) the nature of duties that are "material" to one's regular occupation; and (5) the appropriate method to calculate pre-disability earnings.
The Saul Ewing Arnstein & Lehr Employee Benefits/ERISA Litigation Team
1. The Western District of New York denies a disability insurer the opportunity to consider a claimant's "any occupation" claim on remand. In a lengthy opinion, a New York federal judge recently held, among other things, that where an insurer had before it a record that spanned eight years, including a finding of disability by the Social Security Administration, a remand was not necessary in order to determine the plaintiff's eligibility for "any occupation" period benefits. Applying de novo review, the court first determined that the plaintiff was entitled to benefits during the underlying policy's twelve-month "own occupation" period. The court then determined that the plaintiff was also entitled to "any occupation" period benefits (even though his claim for such benefits had not gone through the administrative process), holding that "[n]o reasonable argument" could be made that the record was incomplete. The court also emphasized that while the insurer could theoretically obtain new evidence in the form of an independent medical examination or a functional capacity evaluation of the plaintiff, the defendant failed to do so during its administration of the plaintiff's "own occupation" claim. The court therefore concluded that remand would be a "useless formality." Khan v. Provident Life & Accident Ins. Co., No. 1:15-cv-00811 (MAT) (LGF), 2019 WL 1970516 (W.D.N.Y. May 3, 2019).
2. The District of Kansas allows a breach of fiduciary duty claim against a disability insurer to proceed. A Kansas federal judge recently denied a disability insurer's motion to dismiss an insured's breach of fiduciary duty claim on the basis that dismissal of the claim would be premature. Among other things, the plaintiff claimed in her breach of fiduciary duty claim, which was filed under 29 U.S.C. § 1132(a)(3), that the insurer had needlessly delayed and obstructed the release of medical examination results procured by the insurer and failed to convey "complete and accurate information" to the plaintiff during its administration of her claim. The insurer moved to dismiss the claim, arguing that the plaintiff, who had also sued for wrongful denial of benefits, was precluded from pursuing simultaneous claims under 29 U.S.C. § 1132(a)(1)(B) and 29 U.S.C. § 1132(a)(3). The court rejected this argument, holding that because the alleged breaches of fiduciary duty occurred during the insurer's administration -- rather than its denial -- of the plaintiff's disability claim, the plaintiff had plausibly suffered a "separate and distinct injury." Brende v. Reliance Standard Life Ins. Co., No. 15-CV-9711-JAR-TJJ, 2019 WL 2250142 (D. Kan. May 24, 2019).
3. Is a public library's disability plan subject to ERISA's governmental plan exemption? The Southern District of New York recently answered in the negative, holding, among other things, that a public library does not perform a governmental function. The plaintiff, an employee of the Brooklyn Public Library, filed a disability claim in New York state court, which the defendant insurer removed to federal court. The plaintiff moved to remand the case to state court, arguing that no federal question existed to support federal jurisdiction because the Brooklyn Public Library's disability plan was a "governmental plan" within the meaning of 29 U.S.C. § 1003(b)(1) and was therefore exempted from ERISA's ambit. The court disagreed, rejecting the plaintiff's argument that the library had "undertaken the governmental function of educating the citizens of Brooklyn." Instead, the court held that simply providing free educational opportunities does not amount to performing a government function. The court concluded that the plan was not exempted from ERISA and retained jurisdiction. Skornick v. Principal Fin. Grp., No. 18-CV-4324 (CS), 2019 WL 1723741 (S.D.N.Y. Apr. 18, 2019).
4. Does a specific aspect of one's job always constitute a material duty of one's occupation? The Fifth Circuit reversed the Southern District of Mississippi's decision to grant summary judgment in favor of an insured, drawing a distinction between specific or unique features of a person's specific employment and the "material duties" of that person's occupation. The district court had held that the plaintiff, who was diagnosed with Raynaud's phenomenon (a circulatory disorder that can cause gangrene if one is exposed to cold temperatures), was disabled from performing her occupation as a Hazard Analysis Critical Control Point Coordinator (HACCPC) at Peco Foods, Inc. This position required the plaintiff to routinely work in near-freezing temperatures. The Fifth Circuit reversed the district court, agreeing with the insurer's vocational rehabilitation specialist, who had opined that the plaintiff's position fell under the broader occupation of "sanitarian" according to the Department of Labor's Dictionary of Occupational Titles. The Fifth Circuit held that the material duties of this occupation did not require exposure to the cold, such that while the plaintiff could not work as an HACCPC at Peco, she was not disabled from working as a sanitarian. Nichols v. Reliance Standard Life Ins. Co., No. 18-60499, __F.3d__, 2019 WL 2223614 (5th Cir. May 23, 2019).
5. Can an insurer rely on an employer's representations regarding an insured's pre-disability earnings when a written agreement cuts against those representations? No, according to the Northern District of Illinois. A plaintiff insured's five-year compensation package provided for a guaranteed annual salary of approximately $322,000 during the first two years of his employment and vested discretion in his employer to reduce his $322,000 salary thereafter based on lack of productivity during the latter three years. On the first day of the plaintiff's third year of employment, his employer reduced his salary. The plaintiff thereafter became disabled in the first quarter of the third year, and sued for disability benefits that were based on the $322,000 salary amount, claiming that this sum constituted his pre-disability earnings. The defendant insurer, relying on the representations of the plaintiff's employer, claimed that the plaintiff's higher salary was not reflective of his actual salary at the time he became disabled. Applying de novo review, the court granted summary judgment in favor of the plaintiff, holding that the plaintiff's employment agreement was dispositive -- the employer's reduction of the plaintiff's salary was improper because it was contractually entitled to reduce his salary due to his performance only during the latter three years of his employment term -- and whatever amount the employer "deemed correct [was] irrelevant." Schewitz v. Aetna Life Ins. Co., No. 18-CV-6119, 2019 WL 2189263 (N.D. Ill. May 21, 2019).