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Life, Health & Disability e-Report
First Circuit
Winter 2017
Life, Health, Disability and ERISA Litigation Group:
    Joe Hamilton
Joe Hamilton spoke in January at the American Conference Institute's forum on Litigating Insurance Disability Claims.

 Joan Vorster

David Fine

Elizabeth Greene  

Chris Collins spoke at the Defense Research Institute's Annual Meeting in Boston in October.

Kevin Kam, with Chris Collins, published an electronic alert regarding the Department of Labor's new ERISA disability claim regulations.


 Life, Health, Disability and ERISA Litigation Group

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Welcome to the Winter 2017 edition of Mirick O'Connell's Life, Health and Disability e-Report - First Circuit.  This newsletter provides a summary of decisions rendered by the First Circuit Court of Appeals, the United States District Courts within the circuit, and state appellate courts within the same geographic area.  We hope the newsletter will be beneficial to you.
For your convenience, we have included hyperlinks with direct access to the full decision for each case.  Decisions reproduced by permission of Westlaw.
Should you wish to learn more about Mirick O'Connell's Life, Health, Disability and ERISA Litigation Group, please visit our website at www.mirickoconnell.com, or contact Joseph M. Hamilton Joan O. Vorster or J. Christopher Collins.

In O'Shea v. UPS Retirement Plan, 837 F.3d 67 (1st Cir. 2016), the First Circuit Court of Appeals, in connection with a dispute regarding an annuity benefit, addressed several claim handling issues.
The issue in the case was whether the family of a deceased UPS employee was entitled to annuity payments when the employee died prior to the start of his retirement.  The district court ruled in favor of the plan that benefits were not owed.  The First Circuit affirmed.
In addressing the claim for benefits, the court, applying the arbitrary and capricious standard of review, cited a prior holding that in order to uphold the decision, it need only find that the record as a whole supported the finding that the decision was "plausible." 
One of the issues in the case was the interpretation of plan language.  The court held that it need not decide the "best reading" of the plan.  Rather, the court only need consider whether the interpretation by the claim administrator of the plan and its application of those terms was "reasoned and supported by substantial evidence." 
The court also addressed O'Shea's argument that the plan was prohibited from relying on a section of the plan documents which was not specifically cited in the denial.  While noting that ERISA's notice provisions require plan administrators to provide adequate notice of a claim determination including setting forth the specific reasons for the denial, the court also held that strict compliance was not required, and that as long as the beneficiary was supplied with the statement of reasons that, under the circumstances of the case, permitted a sufficiently clear understanding of the administrator's position to allow effective review, there was no violation. 
The court went on to hold that while the specific section of the plan relied upon in the litigation was not specifically cited by UPS in its denial letters, the fact that UPS had consistently explained to the O'Sheas that they were not entitled to the annuity payment because their father died while he was still an active employee and prior to his retirement was sufficient.


In Troiano v. Aetna Life Insurance Company, 844 F.3d 35 (1st Cir. 2016), the First Circuit Court of Appeals upheld Aetna's right to recover, as an offset against disability benefits, the full amount Troiano received from the Social Security Administration as a result of her disability.
Troiano was covered by a benefit plan which provided disability coverage.  The plan, provided by her employer, was funded by a policy issued and administered by Aetna.  Troiano received benefits under the plan.  Subsequently, she was awarded SSDI benefits, including a substantial back benefit. 
With respect to Troiano's future monthly benefit payments, Aetna reduced those benefits by the full amount of the SSDI benefit.  Troiano argued that her benefit should only be reduced by her SSDI payment, after taxes.  Aetna refused and suit followed.  The U.S. District Court of Rhode Island entered judgment in favor of Aetna.  Troiano appealed.
Troiano first attacked the standard of review.  The district court had applied the arbitrary and capricious standard.  The First Circuit held it need not resolve the issue because even applying de novo review, Troiano still lost.  The court held in favor of Aetna for several reasons. 
The court found the textual context in which the offset language of the plan appeared made it clear that it was the gross benefit that was to be offset against the disability benefit.  The plan also contained a sample SSDI offset which showed a deduction of the full amount of the SSDI benefit. 
The court also noted that the administrative consequences of Aetna having to calculate the amount of net benefit received by claimants would result in a tremendous increase in the administrative burden for the plan. 
Troiano also challenged the denial of discovery by the district court.  With respect to conflict of interest discovery, the court held that Troiano failed to meet her burden of proof that the structural conflict of interest influenced the decision in some way.  With respect to the remaining discovery requests, the court noted that the district court found Troiano was engaging in a fishing expedition and, as such, the district court did not abuse its discretion in denying the discovery.


In Ramirez v. UnumProvident Life and Accident Insurance Company, 2016 WL 7131477 (D.Puerto Rico 2016), the U.S. District Court of Puerto Rico awarded disability benefits and found that the claim was not barred due to a legal disability. 
Ramirez was covered under an employee benefit plan provided by his employer.  He became disabled for health-related problems on August 21, 2013.  He was fired on January 23, 2014 and on May 14, 2014 the Financial Industry Regulatory Authority suspended his broker's license effective June 9, 2014 for failure to cooperate with an investigation.
Ramirez filed a disability claim in February 2014, shortly after the elimination period in the policy ended.  Benefits were denied on the grounds that the disability was the result of Ramirez's legal issues, the resulting termination from employment and his loss of his license.  The decision was upheld on appeal and Ramirez sued.
In reaching its decision to deny the claim, the company relied upon an exclusion in the policy which prohibited payments for any loss caused solely by the suspension, revocation or surrender of a professional license to practice in the insured's occupation.  The court held that because the medical records showed that Ramirez's disability commenced prior to the loss of his license, his disability could not have been caused solely by the loss of his professional license.  Therefore, the court found that Ramirez was entitled to benefits.


In Gonzalez-Guzman v. Metropolitan Life Insurance Co., 2016 WL 6496221 (D. Puerto Rico 2016), the U.S. District Court of Puerto Rico allowed MetLife's motion to transfer the case from Puerto Rico to Florida.
Guzman filed suit in U.S. District Court in Puerto Rico alleging breach of contract and violation of the Americans with Disabilities Act arising from a denial of disability benefits.  He contended that Florida common law applied to his breach of contract claim.  MetLife moved to transfer the case on the grounds of convenience to the parties and witnesses; because Florida law would apply; and because all events relevant to the complaint took place in the Southern District of Florida.  Guzman opposed the motion. 
The court analyzed the issue based upon 28 U.S.C. §1404(a) which allows the court discretion to transfer the case "for the convenience of parties and witnesses, in the interest of justice ..."  Analyzing the well-established factors under the statute, the court first found that the convenience of the parties weighed against transfer because Guzman resided in Puerto Rico.  However, the court found that convenience to the witnesses weighed heavily in favor of transfer.  The court noted that the convenience of witnesses was "probably the most important factor."  Noting that essentially all of the non-party witnesses were located in Florida, this factor tipped in favor of transfer. 
MetLife also contended that all key documents were located in Florida; Guzman did not dispute that issue.
Finally, noting that Florida law applied, the court held that the Southern District of Florida would be more familiar with that law and in a better position to apply it than a court in Puerto Rico.
Therefore, applying all these factors, the court transferred the case to the Southern District of Florida.


In Brown v. Sedgwick Claims Management Services, Inc., 2016 WL 4273193 (D.Puerto Rico 2016), the U.S. District Court of Puerto Rico denied a motion to dismiss an in-house medical consultant as a defendant in an ERISA benefits claim.
Brown was a participant in an employee welfare benefit plan provided by his employer.  The plan provided long-term disability benefits.  Sedgwick administered claims on behalf of the plan. 
Brown was denied disability benefits after the plan's in-house medical doctor recommended that Brown's claim be denied.  After exhausting his administrative appeals, Brown sued.
A motion was filed seeking the dismissal of both Sedgwick and the in-house consultant from the case.  The court denied the motion.  Citing to First Circuit precedent that a defendant in an ERISA benefits action is the party that controls administration of the plan, the court held that Sedgwick, even as a third-party administrator, was a proper defendant.  The court ruled similarly as to the in-house consultant.  Because the consultant recommended denial of the benefit claim, the court held that he had discretionary authority over plan decisions and was a proper defendant; a surprising ruling.
As to other issues brought in the motion to dismiss, the court held that Brown's breach of fiduciary duty claim must be dismissed because he had appropriate relief through his benefits claim brought pursuant to 29 U.S.C. 1132(a)(1)(B). 
The court also dismissed Brown's claim for extra contractual benefits on the grounds it was preempted by ERISA, and struck his request for a jury trial holding that he was not entitled to a jury trial on an ERISA claim.  


In Doe v. Blue Cross & Blue Shield of Rhode Island, 2016 WL 4223331 (D.R.I. 2016), the U.S. District Court of Rhode Island found that the de novo standard of review would apply to a review of a health benefit claim.
Doe sued Blue Cross after her claim for in-patient mental health treatment was deemed not medically necessary by Blue Cross. 
The threshold issue addressed by the parties was the standard of review to be applied to Blue Cross decision.  The court, citing the First Circuit's recent decision in Stephanie C. v. Blue Cross Blue Shield of Massachusetts, 813 F.3d 420 (1st Cir. 2016) held that the language contained in the plan did not adequately grant discretion to Blue Cross. 
The plan language in this case was similar to that in Stephanie C.  In effect, the plan language only gave Blue Cross the power to decide claims but did not unambiguously give it discretionary authority.  As such, the court held the de novo standard of review would apply.  


In Gillis v. Aetna Disability Services, 2016 WL 7799645 (D.Mass. 2016), a magistrate of the U.S. District Court of Massachusetts recommended Aetna's motion for summary judgment be allowed.  Subsequently, the district court adopted the magistrate's report.
Gillis, who represented himself, was employed as a clerk.  His employer provided a disability plan funded by a group policy issued by Aetna.  Gillis claimed to be totally disabled due to knee pain.  Aetna paid benefits for a period of time, and then discontinued them.  While Aetna did not dispute that Gillis suffered from an impairment, it found he was still able to perform sedentary work.  Suit followed.
Gillis made four arguments in support of his claim for benefits, all of which were rejected by the court. 
First, Gillis argued that Aetna's decision was arbitrary and capricious because it differed from Social Security's.  The court, while noting that an SSA determination was not controlling, stated that Aetna could not completely disregard it.  The court found the Administrative Record showed Aetna took SSA's determination into consideration.  While the medical reviewer did not explicitly explain why he disagreed with SSA, the court held that was not a reason to set aside the decision.
The court also rejected Gillis's argument that Aetna failed to give sufficient weight to his treating physician's opinion.  The court noted there is no requirement that any particular weight be given to a treating physician's opinion, but that the opinion must be taken into consideration.  The court found that Aetna did take the treating physician's opinion into consideration.  It also noted the treating physician's failure to engage in a peer-to-peer review process with Aetna's medical reviewers.
Gillis next argued that Aetna should have made more of an effort to conduct the peer-to-peer review interview with his treating physician.  The court found that Aetna made more than ample attempts including multiple phone calls and fax requests.
Finally, the court rejected Gillis's argument that Aetna should have conducted a physical examination of him.  The court noted that a plan administrator may exercise its judgment as to when a medical exam is warranted.  The court also noted the fact that three separate reviewing physicians were comfortable rendering an opinion on Gillis's disability status based on his medical records also demonstrated that Aetna's decision was not arbitrary and capricious.


In Host v. First Unum Life Insurance Company, 2016 WL 3814807 (D.Mass. 2016), the U.S. District Court of Massachusetts remanded the disability claim for further review of whether Host's income loss was the result of an injury that rendered him disabled.
Host was employed by Deutsche Bank.  In the fall of 2009, Host suffered a back injury that prevented him from traveling, one of the duties of his occupation.  According to Host, notwithstanding the injury, he continued to work full time.  In February 2010, Deutsche Bank notified Host that he would not receive a bonus for 2009 and would be terminated at the end of April.  He subsequently claimed disability benefits under the benefit plan provided by Deutsche Bank.  The plan was funded by a policy issued by First Unum and claims were also administered by First Unum. 
First Unum denied Host's claim on the grounds that any loss of income he incurred was not the result of his injury but rather the decision by Deutsche Bank to terminate him.  Host challenged that, alleging that he was fired due to his disability and therefore was entitled to benefits.
First Unum moved for summary judgment.  However, Host filed a motion to remand the case seeking to open up the Administrative Record to add materials generated in a lawsuit he filed against Deutsche Bank.
The court allowed the motion to remand without giving any opinion as to the strength of Host's disability claim.  The court based its decision on its conclusion that the information that First Unum had obtained from Deutsche Bank, through its human resources department, was not sufficiently reliable given the information Host had provided. 
Joan O. Vorster and Kevin Kam represented First Unum.

In Harding v. Aetna Life Insurance Company, 2016 WL 3983242 (D.Me. 2016), the U.S. District Court of Maine held that Aetna properly assigned 50% of a tort settlement as an offset against Harding's disability benefits.
Harding received disability benefits under an ERISA plan as a result of a car accident.  He was covered under a plan provided by his employer which was funded by a policy issued by Aetna.  Claims under the policy were also administered by Aetna. 
Harding obtained a $100,000 settlement from the driver of the other vehicle in the accident.  A dispute arose as to whether any of that settlement could be considered an offset under the terms of the ERISA plan.
The plan provided that "other income benefits" would be offset against the LTD benefit.  Other income benefits included disability payments from liability insurance for a disability caused by a third party, including settlements.  The plan also provided that if the payment received for the disability was in a lump sum, even if it was not specifically identified as such, Aetna could consider 50% to be payable for the disability.  Because the settlement agreement Harding entered into did not attribute any specific funds to the disability, Aetna attributed 50% to it. 
Harding challenged Aetna's decision arguing that the settlement agreement did not constitute a disability payment.  The court disagreed.  While noting that the settlement agreement did not explicitly list disability as a claim that Harding was releasing, the very broad language of the agreement covering all claims resulting from the accident certainly would include disability-related damages.  Therefore, the court held that since nothing in the settlement agreement specified what portion should be allocated towards disability payments, Aetna was entitled to use the plan provision to assign 50% to the disability offset.
The court granted summary to Aetna.

In Sugalski v. The Paul Revere Life Insurance Company, 2016 WL 4473412 (D.Mass. 2016), the U.S. District Court of Massachusetts, while upholding the offset of a tort settlement against disability benefits paid from an ERISA plan, made an adjustment to the amount of the offset. 
Sugalski received disability benefits under an ERISA plan as a result of an injury suffered at her gym.  She was covered under a plan provided by her employer which was funded by a policy issued by Paul Revere.  Claims under the policy were administered by Paul Revere.  Sugalski obtained a $425,000 settlement from two defendants she sued for her injuries.  A dispute arose as to whether any of that settlement could be considered an offset under the terms of the ERISA plan.
While the court, in an earlier ruling, agreed with Paul Revere that a portion of the settlement did constitute an offset against the disability benefits, the court remanded the claim to Paul Revere for an apportionment of the claim between lost income, and pain and suffering.  Only lost income could be considered as a deduction from the disability benefits. 
Paul Revere conducted another review of the claim and made a determination as to the amount to be allocated to both lost income and pain and suffering.  After notifying the court of its decision, and despite no objection from Sugalski, the court, on its own, conducted a review of the new decision and concluded that Paul Revere should also have allocated some portion of the settlement to scarring.  The court then decided that rather than remanding the case for another review, it allocated a portion of the settlement to scarring.  The court gave no explanation as to how it arrived at the allocation.  It then entered judgment in favor of Paul Revere for the revised amount.

Joseph M. Hamilton and David L. Fine represented Paul Revere.

In Hack v. AXA Equitable Life Ins. Co., 2016 WL 5662016 (D.Mass. 2016), the U.S. District Court of Massachusetts granted a motion to remand a suit for disability benefits to the Massachusetts state court.
Hack, a physician, claims he is entitled to total disability benefits as opposed to the residual disability benefits that were paid to him by Equitable.  The claim was handled by a third-party administrator.  When Hack filed suit, he named both Equitable and the TPA as defendants.  The TPA was non-diverse.
The defendants removed the case to federal court asserting fraudulent joinder.  Hack moved to remand.  Hack brought claims against the TPA of negligence, intentional interference with contractual relations, and a violation of the Massachusetts Consumer Protection Act, Chapter 93A.  The defendants contended the complaint failed to state any viable cause of action against the TPA.
The court allowed the motion to remand primarily because no Massachusetts appellate court has specifically addressed whether a negligence claim may be brought by an insured against a third-party administrator.  Given that, the court held that there was no clear and convincing evidence that there was no "reasonable possibility" that a Massachusetts court would find the complaint stated a cause of action for negligence against the TPA.  Therefore, remand was appropriate.
Joseph M. Hamilton and Kevin Kam represented the defendants.


In Savings Bank Life Insurance Company of Massachusetts v. Fleming, 2016 WL 7197370 (D.Mass. 2016), the U.S. District Court of Massachusetts dismissed an interpleader action on the grounds that it lacked subject matter jurisdiction.
Paul Fleming divorced his wife in 1982.  At that time he had a life insurance policy with SBLI.  The marital separation agreement required Fleming to keep his two children as beneficiaries of the policy.  Subsequently, however, Fleming remarried and named his new wife the beneficiary.
After Fleming's death in 2015, both his wife and two children submitted a claim for the life insurance benefit.  SBLI filed an interpleader action in federal court pursuant to 28 U.S.C. §1335 which provides for federal jurisdiction over an interpleader action where at least $500 is at issue and at least two claimants are of diverse citizenship.  SBLI satisfied both of these conditions.
After allowing SBLI to deposit the disputed funds into court, and allowing SBLI's motion to dismiss, the court reconsidered and found it lacked subject matter jurisdiction.  The court relied upon Supreme Court precedent which holds that diversity jurisdiction of federal courts does not extend to cases involving divorce, alimony, or child custody.  The court then concluded that because the dispute regarding the insurance proceeds turned upon the validity and meaning of the separation agreement which "appeared" to have been incorporated into the divorce decree, the court concluded it had no jurisdiction. 
The court also noted that a federal forum was not "necessary" to resolve the dispute because the Massachusetts Rules of Civil Procedure also provide a mechanism for interpleader.
The decision appears to be a somewhat tortured extension of the Supreme Court precedent regarding federal courts' intervention in divorce proceedings, and a strained reading of the jurisdictional statutes.  The court failed to cite even one other case which dismissed an interpleader action on the same grounds.


In Leonard v. General Electric Company, 2016 WL 4098713 (D.Mass. 2016), the U.S. District Court of Massachusetts held that accidental death benefits were not payable under an ERISA plan where the death was caused or contributed to by alcoholism. 
James Leonard was insured under two life insurance benefit plans provided by GE.  The plans were funded by group policies issued by Metropolitan Life Insurance Company ("MetLife"). 
Leonard died in 2008.  He was an alcoholic and died approximately three weeks after being brought to the emergency room with complaints of alcohol withdrawal and abdominal pain.  He was found to have had an injury to his spleen.  He was also found to have alcoholic liver disease, alcohol withdrawal syndrome, and other issues.  At the hospital the doctor gave Leonard's prognosis as poor and he died days later.  The death certificate reported the manner of death was natural.
Leonard's beneficiaries filed a claim for the life insurance benefits.  MetLife paid the basic death benefit but did not pay an accidental death benefit.  The benefit plans paid accidental death benefits only if the death was caused solely by accidental means, independently of all other causes.  The plans also provided that no benefits would be payable if the death was caused or contributed to by a disease.
About eighteen months after Leonard's death, the beneficiaries obtained a physician's letter which challenged the cause of Leonard's death, and raised the argument the death was the injury to the spleen caused by a fall.  However, the letter was not submitted to MetLife until four years after it was received and almost five years after Leonard's death.  Nevertheless, MetLife reviewed the claim and denied it on the grounds that there was insufficient proof that Leonard's injury to his spleen was caused by an accidental fall; that even if it was, the record did not support that the injury was the sole and independent cause of his death; and, at the very least, Leonard's alcoholic liver disease contributed to the death.  MetLife also found that the claim for the accidental death benefit was untimely.  The plans required proof of claim to be made not later than 180 days after death, or as soon as reasonably possible.
Applying the arbitrary and capricious standard of review, the court first found that the accidental death benefit claim was not timely.  Fatal to the claim was the fact that the beneficiaries had the physician's report in their possession but did not submit it to MetLife until four years later.  Significantly, the court also stated, citing other decisions from the District of Massachusetts, that the notice prejudice rule set forth in Massachusetts General Law Chapter 175, §112 did not apply to an ERISA claim. 
While the court did not need to go further, it also held that Leonard's death was not accidental.  The court held that the physician letter submitted by the plaintiffs was at best equivocal as to whether Leonard injured his spleen in a fall.  In any case, the court held there was substantial evidence to support MetLife's finding that any injury caused by a fall was not the sole and independent cause of Leonard's death.  The overwhelming evidence in the record established that Leonard's chronic liver disease, if not the sole cause, at least contributed to the death.
The court entered summary judgment in favor of the defendants.


In Estate of Jose Pabon-Lugo v. American General Life Insurance Co., 2016 WL 3945165 (D. Puerto Rico 2016), the U.S. District Court of Puerto Rico, applying Puerto Rico law, found that life insurance benefits were not payable for the death of the insured who killed himself while intoxicated. 
Two policies were at issue.  Both included an exclusion prohibiting payment where the death was by "suicide, sane or insane."  The plaintiff argued that the insurers had the burden of proving that the insured intended to kill himself.  The plaintiff also argued the insurers could not meet their burden because the insured was severely intoxicated at the time of his death, thereby rendering him incapable of forming the intent to commit suicide.
The district court had issued a certification to the Puerto Rico Supreme Court to address the question under Puerto Rico law.  However, the Supreme Court denied the certification.  Therefore, the district court, interpreting Puerto Rico contract law, sided with the majority of courts which have reviewed this issue.  The court held the plain language of the suicide exclusion is such that the parties must have intended to cover every case of suicide and not attempt to measure the degree of insanity.  The court went on to hold that the clause was not ambiguous and that the clear and express terms of the exclusion with the unqualified words "sane or insane" encompassed the entire range of possible mental states of the insured. 
The court entered summary judgment in favor of the insurers.


In Rivera v. Union De Tronquistas De Puerto Rico Local 901, 2016 WL 3647683 (D.Puerto Rico 2016), the U.S. District Court of Puerto Rico refused to impose a statutory penalty upon an employer who failed to provide a COBRA notice.  The court's decision was based upon the lack of any prejudice to the plaintiff or bad faith on the part of the employer. 
Rivera was employed by the defendant.  After Rivera's discharge in January 2013, the employer failed to notify him of his rights under COBRA.  He filed suit seeking statutory penalties, but summary judgment was granted in favor of the employer.  Rivera then moved for reconsideration.  The court denied the motion.
The court noted that in its summary judgment decision, it had found that the employer failed to provide Rivera with the appropriate COBRA notice and that, as such, the employer could be liable for up to $110 per day in statutory penalties.  The court noted that while neither bad faith on the part of the employer or prejudice to Rivera was required to support the imposition of penalties, courts have been disinclined to impose penalties in the absence of either. 
The court found that while Rivera claimed to have been prejudiced by the lack of notice, the allegations were speculative.  He provided no proof or any details regarding how he was specifically harmed by the lack of medical insurance.  He also failed to provide evidence of harm such as higher premiums for insurance. 
The court also reiterated that it found no bad faith on the part of the employer, or any evidence to suggest there was an ongoing and systemic disregard of COBRA by the employer.
While Rivera argued the penalties should have been imposed for deterrence sake, the court stated that while it could do so, the First Circuit Court of Appeals had accepted the use of bad faith or prejudice as the dispositive factors.  


Did you know that Mirick O'Connell's Life, Health, Disability and ERISA Group represents clients throughout New England? With offices in Boston, Westborough and Worcester, our attorneys are within an hour of all the major courts in Massachusetts; Hartford, Connecticut; Providence, Rhode Island; and southern New Hampshire. In addition, our attorneys are admitted to practice not only in Massachusetts, but in Connecticut, New Hampshire and Rhode Island as well. We have repeatedly and successfully represented our clients in each of these jurisdictions. So remember, we are not here for you just in Massachusetts; think New England!


For more information on Mirick O'Connell's
Life, Health, Disability and ERISA Litigation Group, contact:

Joseph M. Hamilton

Joan O. Vorster

J. Christopher Collins

This overview is intended to inform our clients of developments in the law and to provide information of general interest.  It is not intended to constitute legal advice regarding a client's specific legal issues and should not be relied upon as such.  This newsletter may be considered advertising under the rules of the Massachusetts Supreme Judicial Court.


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