Category: ERISA

ERISA Plan Administrator Cannot Unilaterally Ignore Treating Physicians, Appeals Court Confirms

A recent appeals court ruling emphasizes that ERISA plan administrators cannot ignore the opinions of a claimant’s treating physicians absent tangible evidence those opinions are wrong.  In Hennen v. Metropolitan Life Insurance Company, the appellate court ruled the plan administrator acted arbitrarily in discounting the opinions of the claimant’s treating physicians and remanded the claim for a full and fair review.

After a back injury, Hennen applied for long-term disability (“LTD”) benefits with her employer’s group policy insured by MetLife.  MetLife agreed that Hennen was disabled and paid benefits for two years.  But after two years, MetLife terminated Hennen’s benefits, finding that the Plan’s limitation for neuromusculoskeletal disorders cut off Hennen’s benefits after two years of payments.   Hennen sued under ERISA, arguing she fell within an exception to the two-year cutoff because she had radiculopathy.

The U.S. Court of Appeals for the Seventh Circuit ruled for Hennen.  Although the court acknowledge ERISA required deference to MetLife’s decision because the plan contained discretionary language, the court noted discretionary authority did not permit MetLife to act arbitrarily in deciding Hennen’s entitlement to benefits.  The court determined MetLife acted arbitrarily when it discounted the opinions of four doctors who diagnosed Hennen with radiculopathy in favor of the opinion of one physician who ultimately disagreed, but only while recommending additional testing that MetLife declined to pursue.

The court noted that even though a plan administrator is typically permitted to chose which medical opinions to rely on, its decision must still have a rational explanation.  Every physician who examined Hennen since 2012 concluded she had radiculopathy.  These doctors’ opinions had substantial medical support.  While MetLife chose to ignore these doctors’ opinions in favor of its own employee Dr. McPhee, that decision was arbitrary.  Dr. McPhee recommended Hennen undergo further testing and an independent medical examination in order to determine whether Hennen’s radiculopathy diagnosis was correct, but MetLife ignored that suggestion.  The court emphasized:

Here, MetLife took an extra step for its own benefit when it referred Hennen’s file to Dr. McPhee for review. But when Dr. McPhee recommended that MetLife take an additional step for Hennen’s benefit — to confirm whether his lone opinion that she did not suffer from radiculopathy was accurate—MetLife declined to take that step.That was arbitrary and capricious.

The court also emphasized “Although it is reasonable for MetLife to require objective support for a diagnosis of radiculopathy, it would be unreasonable to discount clinical observations of Hennen’s treating physicians in favor of testing that is inconclusive for the condition.”

The court ordered Hennen’s claims be remanded to MetLife for the full and fair evaluation ERISA mandates.

The Hennen decisions represents an important enforcement of ERISA’s requirement that insureds and claimants be afforded a fair and objective determination of their entitlement to benefits, even where the Plan affords the plan administrator discretionary authority.

Medical Proof Required to Deny ERISA Claims Based on Intoxication Exclusion Says Fifth Circuit

Many ERISA plans and insurance policies contain provisions excluding coverage for losses caused by the insured’s intoxication.  In cases where the plan or insurer asserts such an exclusion, the question becomes what evidence must the insurer put forward in order to prove the insured was intoxicated and the exclusion applies?

The U.S. Court of Appeals for the Fifth Circuit recently answered that question in White v. Life Insurance Company of North America.  Life Insurance Company of North America (“LINA”) issued an ERISA-governed life insurance policy insuring Mr. White with Mrs. White as the beneficiary.  Mr. White was killed in a horrible car crash in which his vehicle crossed the center line and struck an oncoming 18-wheeler head-on.

LINA denied coverage asserting the policy’s intoxication exclusion precluded coverage because Mr. White was drunk at the time of the crash.  Weather and road conditions were clear at the time of the crash, Mr. White’s vehicle appeared to function properly, and paramedics reported smelling alcohol on Mr. White’s breath.  Hospital staff took blood and  urine samples from Mr. White that tested negative for alcohol but contained undefined amounts of amphetamines, cocaine, opiates, benzodiazepine, and cannabinoids.  The tests were preliminary and only indicated the presence, not the amount, of controlled substances.

The Court agreed with Mrs. White.  The LINA life insurance policies excluded coverage for death “caused” by Mr. White’s intoxication.  The policy (borrowing from Arkansas law) defined intoxication to mean “influenced or affected by the ingestion of alcohol [or] a controlled substance…to such a degree that the driver’s reactions, motor skills, and judgment are substantially altered and the driver, therefore, constitutes a clear and substantial danger or physical injury to himself or herself or another person.”

The Court found LINA’s evidence failed to meet the policy definition of intoxication.  LINA relied on the opinion of a toxicologist who opined it was impossible to estimate the level of Mr. White’s impairment at the time of the crash based on the preliminary test results.  The toxicologist opined only that “in the absence of any other cause of the collision, the drugs in [Mr. White’s] system could explain his level of impairment that resulted in his crash.”

Accordingly, the Court entered judgment in favor of Mrs. White.  The White case is an important reminder that ERISA plans and insurers cannot deny claims by asserting exclusions that lack tangible factual support.

ERISA Plan Cannot Recover Overpayments Resulting From The Plan’s Own Mistake

Most employee benefit plans (e.g., employer-sponsored health or disability insurance) allow the plan to recover excess overpayments it provides the insured.  This typically occurs where the plan provides benefits that are duplicated by another source of funding.  For instance, most long-term disability plans provide that benefit payments are offset by amounts the insured receives from a Social Security Disability claim.  These provisions are generally enforceable.

The Ninth Circuit Court of Appeals recently refused to uphold the plan’s right to repayment where the overpayment was due to the plan’s own error.  In its unpublished decision in Mrkonjic v. Delta Family-Care and Survivorship Plan, the court held Delta’s employee benefit plan could not recover overpayments from Myrkonjic caused by Delta’s improper denial of Myrkonjic’s initial claim for benefits.

Myrkonjic became disabled following a work injury and applied for long-term disability (“LTD”) benefits from his employer Delta’s employee benefit plan.  Delta denied Myrkonjic’s claim.  During the ensuing thirteen-year lawsuit over Myrkonjic’s right to LTD benefits, Myrkonjic took early retirement under Delta’s retirement plan in order to provide a source of income during the period he could not work and was not receiving LTD payments.

After years of litigation, Delta agreed Myrkonjic was entitled to LTD benefits.  But Delta subtracted from Myrkonjic’s LTD payments amounts Delta had paid him in early retirement benefits, relying on language in the governing plan documents permitting Delta to make an offset accounting for duplicative benefits.  Delta’s calculation of Myrkonjic’s offsets differed from the manner in which Delta typically calculated offsets: “Normally…If the offsets exceed the benefit, the claimant receives nothing but does not owe excess offsets back to the Plans.  The Plans concede that they calculated Myrkonjic’s LTD benefits inconsistently with their normal method.”

The Ninth Circuit determined Delta’s offset calculation was improper.  Noting “Myrkonjic would up in federal court in the first place” and “was forced to elect early retirement” “because the Plans improperly refused to approve his LED application”, the court ruled the Plans should have resolved the offset “so as to leave Myrkonjic no worse off from their mistakes.”

 

ERISA Appeal FAQs

ERISA, the federal law governing most employer-sponsored benefits (e.g., health, disability or life insurance, or pension or retirement benefits) gives participants the right to appeal the Plan or insurer’s denial of payment or benefits (in legalese, an “adverse benefit determination”).  Plans and insurers are required to be transparent about participants’ appeal rights.  Unfortunately, adverse benefit determination notices often fail to adequately explain participants’ appeal rights and important deadlines.

Below is a “cheat sheet” listing some of the issues relevant to participants’ rights to appeal an adverse benefit determination under ERISA:

  • You must appeal before filing suit.  ERISA generally requires participants to exhaust their administrative remedies before filing suit.  This requires going through the Plan or insurer’s internal appeal process before bring a lawsuit.  If you sue before exhausting the appeal process, the court will likely dismiss the lawsuit and your claim could be barred.  Note that ERISA typically requires only one appeal – while Plans often provide for multiple levels of appeal, participants are generally free to file suit after the first appeal is denied.  Indeed, in most cases, successive rounds of appeal serve no purpose other than to permit the Plan or insurer to bolster its position with several rounds of supposedly “independent” review that typically rubber-stamp the original adverse benefit determination.
  • You must appeal within the deadline.  Once the Plan or insurer renders an adverse benefit determination, the deadline starts running in which to appeal the decision.  The deadline is often short, depending on the details of the Plan documents.  Failure to timely appeal will often irrevocably destroy your right to dispute the adverse benefit determination or file a lawsuit.
  • Your appeal must contain all relevant information.  If the appeal is denied and the participant files a lawsuit, the evidence that can be presented in the lawsuit is often limited to the information submitted to the Plan or insurer during the appeal process.  Thus, it is critical to submit all potentially relevant information during the appeal process.  Even information that might seem irrelevant at first could potentially become relevant in a lawsuit.
  • Your appeal must account for the Plan documents and the Plan or insurer’s investigation.  Despite federal regulations requiring transparency in ERISA claims, adverse benefit determination notices often fail to contain important information relevant to the dispute.  This includes the full Plan documents setting forth participants’ rights under the Plan.  It also includes the Plan’s or insurer’s claim file, which often contains internal notes or other evidence reflecting the true basis for the adverse benefit determination.  Acquiring this information and addressing it with rebuttal evidence is critical to prevailing in any appeal or lawsuit challenging the denial of payment or benefits.

ERISA appeals can be complex, and failure to follow the appropriate procedures can be fatal to participants’ rights to coverage or benefits.  It is critical to carefully scrutinize all correspondence with the Plan or insurer, the governing Plan documents, and the applicable evidence before submitting an appeal.

Court of Appeals Clarifies Policy Causation Language In Favor Of The Insured

When language in one part of your ERISA policy says your claim is covered, can the company rely on language elsewhere in the policy to deny your claim?  The Ninth Circuit Court of Appeals recently answered “no.”  In Dowdy v. Metropolitan Life Ins. Co., the court ruled the conflicting language about what caused the insured’s loss did not  preclude coverage.

Mr. Dowdy’s leg was amputated following a car crash.  He made a claim under his ERISA-governed Accidental Death & Dismemberment insurance policy with MetLife, purchased through Mrs. Dowdy’s employer.

MetLife denied coverage, claiming the amputation was excluded because it was complicated by Mr. Dowdy’s diabetes.  MetLife relied on language in the policy requiring the loss to be the “direct result of the accidental injury, independent of other causes,” and excluding injuries for losses related to “illness or infirmity” or “infection occurring in an external accidental wound.”  Under this language, MetLife claimed the right to deny coverage for any amputation “contributed to” or “complicated by” diabetes.

The court ruled the language could be read two ways, but that the Dowdys prevailed under either interpretation.  Under one interpretation, coverage existed if the injury was the “predominate or proximate cause,” while under the more stringent interpretation, coverage was barred as long as the excluded condition (diabetes) “substantially contributed” to the loss.

While agreeing diabetes was “a factor” in the injury leading to the amputation, the court determined there was no evidence diabetes “substantially” contributed to the injury.  The court relied on definitions of “substantial” requiring “a significant magnitude of causation” demonstrating the diabetes was “more than merely related to the injury.”

Since Mr. Dowdy’s medical records established only that diabetes “complicated” Mr. Dowdy’s wound, the court determined diabetes did not “substantially” contribute to the injury. The car crash caused a severe injury that nearly severed Mr. Dowdy’s leg.  The subsequent infection and wound issues were complicated by diabetes, but did not cause Mr. Dowdy’s amputation.

Because this type of language frequently appears in Accidental Death & Dismemberment policies as well as health and disability policies, the Dowdy ruling is helpful for many ERISA participants seeking coverage.