|Life, Health, Disability and ERISA Litigation Group:
Joe recently completed co-authoring a chapter in an upcoming ABA publication titled Dispute Resolution of Life Insurance Claims.
Joan has been reappointed as a Vice-Chair of the Life Insurance Law Committee of the ABA.
Dave participated in the group's second annual seminar on Practical Insights and Strategies in Life, Health, Disability and ERISA Litigation.
Chris Collins authored an article in DRI's most recent ERISA Report titled "Discretionary Clause Bans: Fifteen Years Later the Battles Wage On".
Kevin assisted the group in authoring the Massachusetts chapter of DRI's The Law of Life Insurance.
Welcome to the Fall 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.
FIRST CIRCUIT FINDS NO GRANT OF DISCRETIONARY AUTHORITY
The First Circuit Court of Appeals in Rodriguez-Lopez v. Triple-S Vida, Inc., 850 F.3d 14 (1st Cir. 2017) reversed the U.S. District Court of Puerto Rico's determination that Triple-S had discretionary authority to decide Rodriguez's claim. Accordingly, it remanded the case to the District Court to decide the case under the de novo standard of review.
Rodriguez was covered under a disability plan provided by his employer, Mova. The plan named Mova as the plan sponsor and administrator and stated the plan sponsor had discretionary authority to determine eligibility for benefits and to construe the terms of the plan.
The plan was funded by a group policy issued by Jefferson-Pilot, but the plan documents did not grant discretionary authority to Jefferson-Pilot. Subsequently, Triple-S replaced Jefferson Pilot. Thereafter, what the plan stated would be performed by Jefferson-Pilot was performed by Triple-S. However, the plan was not amended to reflect this change, nor was a new SPD sent to plan participants.
After Rodriguez's claim was denied, he brought suit. The District Court granted summary judgment to Triple-S, finding that it had discretionary authority to determine benefits and that Triple-S's decision was not arbitrary or capricious. Rodriguez appealed.
The First Circuit stated the threshold question was whether the provisions of the plan reflected a clear grant of discretionary authority to Triple-S. It held it did not. Triple-S could not point to any plan language specifically establishing that it had discretionary decision-making authority. The Court rejected Triple-S's argument that because it was actually making benefit decisions in place of Mova, discretionary authority had implicitly been transferred to it. The Court held any delegation of discretionary authority must be clearly stated in the plan.
The Court also rejected the argument by Triple-S that because the plan granted Jefferson-Pilot the authority to grant and deny benefits, discretionary authority existed. The Court noted that the plan gave Jefferson-Pilot, not Triple-S, the role to grant or deny benefits but again the plan was not amended to reflect Triple-S as a substitute. In addition, the plan did not give Jefferson-Pilot any discretion either.
DISABILITY DECISION ARBITRARY AND CAPRICIOUS WHEN WRONG OCCUPATION IS UTILIZED
In Doe v. Standard Insurance Company, 852 F.3d 118 (1st Cir. 2017), the First Circuit Court of Appeals reversed the U.S. District Court of Maine's decision which upheld Standard's benefit determination.
Doe was employed as a lawyer, specializing in environmental law. She was covered by a group disability plan provided by her law firm, and governed by ERISA. Standard issued the policy and administered claims.
The dispute between Doe and Standard emanated from a disagreement over the start date of the disability. Doe claimed she became unable to engage in her occupation as an "environmental lawyer" in November 2011. Standard determined that Doe continued to work in the occupation of "lawyer" until January 2012. The distinction was important because it had a significant impact on the benefit amount, which was calculated based upon Doe's earnings in the year prior to the start of her disability.
In support of her claim, Doe's firm sent a job description for Doe's specific occupation, which was an environmental lawyer. The plan provided benefits if a claimant was unable to perform the material duties of her own occupation. However, the plan also provided that the occupation for lawyers with at least five years' experience would be the type of legal practice in which they specialized. While there was no dispute that Doe specialized in environmental law, Standard identified Doe's occupation as a lawyer, not an environmental lawyer. Standard relied primarily on the Dictionary of Occupational Titles ("DOT") which included the occupation of lawyer, but did not include the occupation of environmental lawyer.
While the District Court ruled in favor of Standard, the First Circuit, applying the arbitrary and capricious standard of review, found that Standard's reliance on the DOT description of a generic lawyer was arbitrary and capricious. The Court held that Standard was obligated to assess whether and to what extent Doe's impairments compromised her ability to carry out the duties of an environmental lawyer. The Court noted that there was no evidence in the record which supported an assumption that an environmental lawyer and a lawyer were equivalent terms that could be used interchangeably. The proper inquiry should have been whether the record contained substantial evidence that Doe was able to perform the material duties of an environmental lawyer.
Noting that Doe was no longer able to perform her duties as an environmental lawyer as of November 2011, the Court disregarded the fact that Doe had performed non-billable activities from November 2011 to 2012, such as work on boards and committees and pro bono work.
The Court ordered that retroactive benefits be paid to Doe. The Court elected not to remand the case for further proceedings, finding that it was most equitable to bring an end to the dispute and award benefits.
In an unusual move, the Court also ordered that a copy of the decision be sent to the Maine Department of Insurance.
NAMED BENEFICIARY OF ANNUITIES DEEMED TO BE A REQUIRED PARTY IN SUIT CHALLENGING PAYMENT OF BENEFIT
In Maldonado-Vinas v. National Western Life Insurance Co., 862 F.3d 118 (1st Cir. 2017), the First Circuit Court of Appeals reversed a decision by the U.S. District Court of Puerto Rico that the recipient of annuity payments was not a required party to a suit challenging those payments.
Francisco Iglesias was named as a beneficiary of two annuities purchased by his brother, Carlos. After Carlos' death, National Western paid the benefits to Francisco.
Approximately two years later, Carlos' widow and two sons sued National Western seeking return of the premiums paid for the annuities on the grounds that the application for the first annuity was signed by a person claiming to be a licensed agent in Puerto Rico, but was not licensed; that the second annuity was void because Francisco, as the owner of the annuity, never signed the application; and because both annuities were purchased with money from the conjugal partnership between Carlos and the widow.
National Western moved to dismiss the complaint on the grounds that Francisco was a required party to the action and that joinder of Francisco was not feasible because he resided in Spain. Reviewing the requirements of Federal Rule of Civil Procedure 19(a), the District Court denied National Western's motion. After the plaintiffs prevailed on a motion for summary judgment, National Western appealed.
The First Circuit found that Francisco was a required party to the case. The primary rationale for the Court's decision was that without Francisco, National Western would be in the position of possibly having to pay the annuities twice. The Court noted that it is an object of Courts to prevent the payment of any debt twice.
The First Circuit remanded the case to the District Court because it had not exercised its discretion as to whether it was feasible to add Francisco. If not, the District Court would then be required to determine whether the action should proceed among the existing parties or be dismissed.
MENTAL HEALTH SERVICES NOT MEDICALLY NECESSARY
In this ERISA matter, the claim was denied by BCBS on the basis that the treatment was not medically necessary. The claimant's son, who was insured under the plan, had severe mental health issues beginning in early childhood. As a young adult, the symptoms became exacerbated. The child became physically aggressive toward his parents and he was eventually enrolled in a wilderness therapy program in Utah. After treatment there ended, the child was enrolled in Gateway Academy, a private school treatment center also located in Utah. While at Gateway he was provided several psychiatric evaluations and consultations. The claimant submitted charges for these treatments to BCBS and they were paid even though BCBS explained an exception was being made because the treatment was administered by an unapproved and out-of-network provider. Later, the claimant submitted substantial charges for the period of time the child was living at Gateway. BCBS denied the claim as not being medically necessary for the child's condition. After an appeal and subsequent denial, suit was filed.
The case had a long procedural history. The denial of benefits was first upheld by the District Court applying the deferential standard of review. That decision was appealed to the First Circuit who found that the de novo standard of review should have applied. On remand, the District Court, applying the de novo standard of review, again entered summary judgment in favor of BCBS for the same reasons previously found under the arbitrary and capricious standard of review. Specifically, that the claimant did not demonstrate that the treatment was medically necessary.
The First Circuit upheld the District Court finding that the District Court not only properly found that the services were not medically necessary, but that the Plan did not provide coverage for services rendered in an educational setting. The Court noted that the dispositive issue was not whether the course of treatment was beneficial, but rather whether the course of treatment was covered under the plain language of the Plan. The Court found the services were not.
SERVICES PROVIDED AT SKILLED NURSING FACILITY NOT MEDICAL CARE
In Huerth v. Anthem Insurance Companies Inc., 2017 WL 2743387 (D.Mass. 2017), the U.S. District Court of Massachusetts upheld Anthem's denial of a claim for services received at a skilled nursing facility on the grounds the services did not satisfy the health plan's criteria for medical care.
Huerth suffered an injury that left him paralyzed from the waist down. While he continued working for many years, he ultimately took a retirement which included lifetime health insurance benefits. Subsequently, Huerth moved into a skilled nursing facility. Years later, his employer switched claims administrators for the benefit plan. The new administrator, Anthem, denied 43 claims for services billed by the skilled nursing facility. Huerth administratively appealed a number of those denials, which were upheld, and then filed suit.
The Court, applying the arbitrary and capricious standard of review, upheld Anthem's decision. Anthem's clinical guidelines provided specific criteria which needed to be satisfied in order for claims to be paid. After reviewing those guidelines, the Court concluded that it could not find that Anthem abused its discretion in denying those claims.
The Court also rejected other arguments by Huerth. He first challenged the decision based upon a conflict of interest. However, the Court found that any conflict did not affect its conclusion that no abuse of discretion occurred.
Huerth also argued that the rational provided by Anthem of its determination was inadequate. Noting that denial letters need not detail every bit of information in the record, but only have enough information to render the decision to deny benefits susceptible to judicial review, the Court found that Anthem's denial letters contained the reasons for denying the benefits.
Lastly, Huerth also brought claims against the skilled nursing facility under state law. The Court remanded those claims to state Court given that all federal claims had been resolved. The Court declined to exercise supplemental jurisdiction over the state law claims.
COURT UPHOLDS RESCISSION OF MEDICAL INSURANCE POLICY FOR FAILURE TO DISCLOSE HEART DISEASE
In Wallis v. HCC Life Insurance Company, 2017 WL 875802 (D.N.H. 2017), the U.S. District Court of New Hampshire upheld the rescission of a major medical insurance policy issued by HCC to Wallis.
In March 2014, Wallis completed an application for medical insurance with HCC. The application asked whether he had been diagnosed, treated, or taken medication for, or experienced signs or symptoms of heart disease within the past five years. Wallis answered no. In fact, from January 2011 to at least August 2012, Wallis had been repeatedly seen by cardiologists after being hospitalized for atrial fibrillation. Three cardiologists had reported that Wallis suffered from "organic heart disease". Also, during that period, Wallis' treating physician repeatedly discussed with him the fact that due to his heart disease he might need to undergo drug therapy or a surgical procedure.
Later in 2014, Wallis submitted a claim for a cardioconversion procedure and a cardiac ablation related to his heart disease. HCC denied the claim on the grounds it was a pre-existing condition and also rescinded the policy. Wallis sued.
By statute, New Hampshire allows a rescission where the applicant makes a false statement with the actual intent to deceive or if it materially affected the acceptance of the risk or the hazard assumed by the insurer. Under New Hampshire law, a false statement as to medical history is held to affect the acceptance of the risk as a matter of law. In addition, HCC submitted an affidavit, which was uncontroverted, that stated that had Wallis disclosed his diagnosis, HCC would not have issued the policy.
While Wallis attempted to create an issue of fact by claiming he had discussed his heart condition with HCC's agent, the Court held that based upon the information presented, a jury could not plausibly conclude that Wallis informed HCC's agent that he had a cardiac occurrence in January 2011. Thus, finding Wallis' statement in the application to be false, the Court held HCC properly rescinded the policy.
The Court also held that Wallis' claim was excluded based upon the pre-existing condition provision of the policy. That provision excluded claims related to a condition for which Wallis received medical treatment, diagnosis, care or advice within the preceding two years of the effective date of the policy. The Court found it unequivocal that Wallis had done so and upheld the denial of the claim on this basis also.
Summary judgment was entered in favor of HCC.
COURT ASSESSES CIVIL LIABILITY AGAINST PERPETRATORS OF FRAUD SCHEME
In Transamerica Life Insurance Company v. Caramadre, 2017 WL 752145 (D.R.I. 2017), the U.S. District Court of Rhode Island entered summary judgment on several claims brought by two insurers against individuals responsible for a stranger-initiated annuity transaction scheme.
The scheme was orchestrated by two individuals, Joseph Caramadre and Raymour Radhakrishnan. Both individuals pled guilty to committing mail fraud, wire fraud, identity fraud, obtaining signatures by false pretenses, forgery, and conspiring to defraud and obtain significant sums of money from insurance companies. Transamerica and Western Reserve Life Assurance Co. of Ohio then brought a civil action against Caramadre, Radhakrishnan and others.
The insurers brought motions for partial summary judgment. The defendants, appearing pro se, failed to file a timely opposition and their late submission was stricken by the Court. As a result, the insurers' motions were essentially unopposed.
The Court found Caramadre and Radhakrishnan liable under Rhode Island General Law, §9-1-2 which provides for civil liability for any person who causes injury by reason of a commission of a crime.
The Court also found liability for RICO violations stemming from the criminal enterprise.
Finally, the Court allowed the insurers to pierce the corporate veil of a limited liability company formed by Caramadre.
The Court also considered counterclaims brought by the defendants for breach of contract, promissory estoppel, breach of the duty of good faith and fair dealing, and negligent infliction of emotional distress. After reviewing the allegations, the Court dismissed the counterclaims as a matter of law.
Several additional claims by the insurers remain pending. Therefore, no final judgment has yet been entered.
COURT ALLOWS DEPOSITION OF IME PHYSICIAN IN ERISA ACTION
Kamerer v. Unum Life Insurance Company of America
, 2017 WL 1758095 (D.Mass 2017), the U.S. District Court of Massachusetts, while denying the most of the claimant's requests for discovery in an ERISA action, did allow a short deposition of the IME physician.
Kamerer was covered under a disability plan provided by her employer and governed by ERISA. After benefits were discontinued, Kamerer filed suit. She sought to undertake discovery including documents showing efforts to mitigate the effects of Unum's structural conflict of interest; performance reviews of employees; documents regarding a regulatory settlement agreement; and a two-hour deposition of the IME physician.
Citing the established rule in the First Circuit that a very good reason is needed to overcome the strong presumption that the record on review is limited to the record before the administrator, the Court denied all but the deposition.
Kamerer has premised most of her arguments on an allegation that Unum Life was looking for reasons to terminate her benefits. The Court held that even if that were the case, it would not be evidence of bias or unfair claims processing because such behavior is to be rationally expected of an insurance carrier with a legitimate interest in limiting its costs to those required under the policies. The Court held this serves a legitimate public interest in minimizing fraud and helping to ensure a fair and economical marketplace in which overall costs are held down.
The Court did allow the two-hour deposition of the IME physician on the grounds of Kamerer's allegation that the physician had spoken publicly that it was his job to assist employers and insurance companies to unmask insurance fraud. The Court held that because the physician made comments that indicate he may favor insurers and employers, a deposition would aid the Court in determining his credibility and the appropriate weight to be given to the physician's opinion
Joseph M. Hamilton represented Unum Life Insurance Company of America.
COURT UPHOLDS DENIAL OF DISABILITY BENEFITS
In Murphy v. Aetna Insurance Company, 2017 WL 347447 (D.R.I. 2017), the U.S. District Court of Rhode Island adopted the Magistrate's Report and entered summary judgment in favor of Aetna, finding Murphy was not eligible for any additional long-term disability benefits.
Murphy, through an employee benefit plan provided by her employer, had received LTD benefits for two years because she was unable to perform the duties of her occupation due to acute liver failure related to alcoholic hepatitis. After two years, Murphy's eligibility for receiving continued benefits depended on a determination that she was unable to work at "any reasonable occupation". Murphy's liver disease stabilized after hospitalization and abstinence from alcohol. However, she still suffered from cirrhosis, renal insufficiency, pancreatitis, and liver disease. Other than fatigue, Murphy's treating physicians found that her cirrhosis was clinically stable, her liver function tests were within normal limits and her hemoglobin was normal. The primary complaint was fatigue.
In response to an inquiry from Aetna, Murphy's treatment physician found she had a capacity to perform sedentary work. A functional capacity evaluation found Murphy had sedentary work capacity, and a transferable skills analysis found her background was compatible with four jobs in the labor market. Finally, an independent medical review found no support that Murphy could not work.
Applying the arbitrary and capricious standard of review, the Court upheld Aetna's decision to deny additional LTD benefits. The Court noted Murphy had engaged in a number of normal activities including parenting and engaging in regular exercise. That, combined with her treating physician's report, which was never changed, that Murphy could perform sedentary work, the functional capacity evaluation, and the transferable skills analysis, the Court found that the record as a whole provided substantial evidence to support Aetna's denial of benefits.
DISABILITY BENEFITS LIMITED BY MENTAL DISORDER LIMITATION PROVISION
Santana was covered by an employee welfare benefit plan provided by his employer. In 2007, Santana became unable to work due to severe depression. The plan provided total disability benefits for only 24 months for depression. Santana was notified of this. He responded by claiming to also suffer from asthma, arthritis, hypertension, high cholesterol and blood sugar problems. MetLife had the medical information reviewed by outside independent physicians who all concluded that the evidence did not show Santana had any functional or physical limitations due to a medical condition. Santana then sued.
The Court applied the arbitrary and capricious standard of review. It found that substantial evidence supported MetLife's denial of ongoing benefits. The Court found that Santana's argument was essentially that he disagreed with the conclusions of the independent physicians. The Court noted that Santana's complaint came down to the fact that the independent physicians did not defer to the diagnosis of his personal doctors.
The Court found that the independent physicians considered all of the medical evidence and rejected Santana's argument that he should have been physically examined by those physicians. The Court found that the fact the physicians did not examine Santana did not decrease the credibility of their medical opinion.
Addressing other arguments raised by Santana, the Court found that MetLife's structural conflict of interest had no bearing on the decision. The Court noted that Santana did not argue how or even whether the conflict affected the decision. The Court also rejected Santana's arguments that MetLife violated his procedural rights, finding that Santana had failed to show any prejudice by any such alleged violations.
Summary judgment was entered in favor of MetLife.
COURT REVIEWS SCOPE OF CIVIL INVESTIGATIVE DEMAND BY MASSACHUSETTS ATTORNEY GENERAL
Under the Massachusetts Consumer Protection Act, Massachusetts General Law Chapter 93A, the Attorney General has the authority to investigate potential violations of Chapter 93A. The Attorney General recently did just that by opening an investigation into the sale of firearms in Massachusetts.
In denying Glock's motion to quash the CID, the Court noted the following:
- Section 6 authorizes the AG to obtain and examine documents whenever she believes a person has engaged in or is engaging in any method, act or practice declared to be unlawful by the chapter.
- There is no requirement that the AG have probable cause to believe that a violation of Chapter 93A has occurred. She needed only have a belief that a person has engaged or is engaging in conduct declared to be unlawful by Chapter 93A.
- Section 6 should be construed liberally in favor of the government.
- Glock, as the party moving to set aside the CID, bears the burden of showing that the AG acted arbitrarily or capriciously in issuing the CID.
- The CID may not contain a request to produce what would be unreasonable or improper if contained in a subpoena issued by a Court, or would require the disclosure of documents that are protected by a privilege.
- In objecting to the burdensome nature of the CID, Glock must show that producing the requested documents would seriously interfere with the functioning of the company by placing excessive burdens on manpower or requiring the removal of critical records.
MISREPRESENTATION AND BREACH OF CONTRACT CLAIM PREEMPTED BY ERISA
Kingsland sought additional life insurance benefits under a plan provided by her employer, and funded by a group policy issued by Prudential. Kingsland contended that she was not provided the correct amount of life benefits after her husband died.
Kingsland brought a claim for benefits pursuant to ERISA, but also brought claims of breach of contract and misrepresentation against the employer. Upon receiving a motion to dismiss, Kingsland voluntarily dismissed those claims, but then sought to reassert them through a motion to amend. The defendants opposed the motion, and the Court denied it.
Noting the longstanding case law in the First Circuit that preempts breach of contract and misrepresentation claims when they relate to ERISA plan, the Court found no basis to deviate from well-established precedent.
DID YOU KNOW?
Did you know that Mirick O'Connell's Life, Health, Disability and ERISA Litigation 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!
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