The Friday Five: Five ERISA Litigation Highlights - March 2025

This month’s Friday Five addresses cases covering ERISA preemption, the viability of a claim for benefits where the claimant alleges to have not received notice of a prior claim denial, an affirmance by the Circuit Court of a denial of benefits, and District Court reviews of decisions denying benefits.

1. Common law fraud claims based on an attempt to change the beneficiary of a life insurance policy are preempted by ERISA. In Lynch, one of the defendants attempted to change the beneficiary of a life insurance policy and make himself and another defendant the beneficiaries. The policy was insuring the life of Mr. Lynch and had named Ms. Lynch as the beneficiary. The insurer, Prudential, notified its broker on December 30, 2022 that the change in beneficiary form could not be accepted because it did not include a company or policy number and because of Mr. Lynch’s intervening death on December 8, 2022. The plaintiff, Ms. Lynch, claimed that the defendant employer and defendant insurance broker only disclosed to her that there was an effort to change the beneficiary, but intentionally withheld “relevant documents” and did not tell her that the effort failed, which caused her to incur unnecessary attorney’s fees. Ms. Lynch brought claims for “attempt to defraud” and “conspiracy to commit fraud in concealment.” The defendants argued that Ms. Lynch’s claims were completely preempted by ERISA, and the court agreed. The court held that the employer established a plan to provide employees’ beneficiaries a benefit in the event of death, and the claim therefore fell within the scope of ERISA, and Ms. Lynch asserted that she was the rightful beneficiary under the plan at issue, and, as a result, she had standing. The court rejected Ms. Lynch’s arguments that ERISA preemption was not applicable merely because she was disputing a change in beneficiary form or because she sought extracontractual relief. The court also found that Ms. Lynch’s claims turned directly on the implementation of the ERISA-governed plan at issue and, therefore, did not arise out of any other independent duty. Because both complete preemption elements were met – and, as a necessary result, also conflict preempted – the court dismissed Ms. Lynch’s complaint with leave to amend and re-plead. In addition, the court rejected Ms. Lynch’s request to certify its Order for appeal despite her pointing to other courts who have certified appeals in ERISA preemption cases. The court reasoned that Ms. Lynch failed to provide any argument or authority that there was a substantial ground for a difference of opinion. Lynch v. Filice et al., Case No. 2:24-cv-340-SPC-NPM, 2025 WL 589029 (M.D. Fla. Feb. 24, 2025).
2. Motion to dismiss denied based on allegations that proper notice from regarding denial/termination of coverage was never received. In DiGregorio, the plaintiff sought to recover life insurance benefits on behalf of her husband, which she claimed were wrongfully denied by her husband’s employer and its insurer. The life insurance and long-term disability policy at issue included a Life Insurance Waiver of Premium (LWOP) benefit, which waived future premiums beginning nine months after Mr. DiGregorio was declared disabled. Following her husband’s disability and subsequent death, the plaintiff submitted a request for life insurance proceeds. The insurer denied the claim, asserting that it had previously – two years prior – denied Mr. DiGregorio’s disability claim and LWOP benefits, and that after not having received an appeal or notice that the coverage would be converted or otherwise extended, the policy was terminated. The plaintiff claimed she was never notified of the denial by either the employer, its predecessor, or the insurer, and if she had been, she would have appealed the decision and paid the premiums independently to ensure continuation of coverage. The plaintiff brought claims under ERISA for the payment of life insurance benefits and for breach of fiduciary duty. The defendants moved to dismiss. In a Report and Recommendation, the magistrate judge rejected all of defendants’ arguments. First, the court rejected the argument that the plaintiff failed to exhaust administrative remedies. The plaintiff alleged that the employer failed to send her the required correspondence regarding an appeal – thus she could not possibly exhaust administrative remedies she did not know about. Further, exhaustion would have been futile where the insurer made it clear that an adverse decision would result. Second, the court found that, although “thin,” the complaint allegations were sufficient enough to state a claim that the employer was responsible for administration of certain benefits under the policy at issue for purposes of a motion to dismiss. Finally, the court acknowledged that, under Third Circuit precedent, the plaintiff would not be able to recover under Sections 502(a)(1)(B) and 502(a)(3), but she could assert both claims at the pleading stage. Here, the court found it plausible that the plaintiff’s breach of fiduciary duty claim could be based on a separate claim relating to misleading plan information rather than a claim for denial of benefits. In conclusion, the magistrate judge recommended that the motion to dismiss be denied. DiGregorio v. Trivium Packaging Co. et al., Case No. 23-2167 (W.D. Pa. Jan. 2, 2025).
3. Denial of long-term disability benefits affirmed based on “thorough opinion” of the District Court. In Slaughter, the insured sought long-term disability benefits under his former employer’s policy. The insurer denied the claim, reasoning that Mr. Slaughter was not disabled within the policy’s definition – more specifically, that his diagnosis of heart failure did not establish that he suffered from any physical or cognitive impairment “so significant that he could not work as a systems engineer.” In order to meet the plan’s definition of disabled, Mr. Slaughter was required to establish that he was “prevented from performing one or more essential duties of his occupation,” and, after careful consideration, the district court found that Mr. Slaughter failed to do so. The district court alternatively found that Mr. Slaughter did not prove that he was under “the regular care of a physician,” which was another requirement under the plan. As a result, the district court upheld the denial in what the Seventh Circuit described as “a thorough opinion that canvassed the medical evidence and carefully applied the policy'’ requirements for showing a disability.” Because the Seventh Circuit found no factual or legal errors in the district court’s analysis, it affirmed the denial of benefits. Slaughter v. Hartford Life & Accident Ins. Co., No. 24-2163, 2025 WL 546909 (7th Cir. Feb. 19, 2025).
4. Plan administrator’s denial of benefits vacated as not reasonable where the insurer failed to consider all relevant evidence in making its decision. In Gamache, the plaintiff alleged that the defendant pension fund wrongfully denied him disability benefits after an on-the-job injury. The plaintiff suffered an injury when he jumped off a conveyor belt and sprained his right ankle and was later diagnosed with a ligament tear. Plaintiff attended physical therapy and was periodically reevaluated by doctors who noted improvement and, in some instances, concluded that the plaintiff could return to pre-injury job activities, while other times indicated that the plaintiff was not capable of regular duty work. When the plaintiff sought long-term disability benefits, the fund initially denied the claim based on timing. On appeal, the fund clarified its position that the denial was actually based on the Social Security Administration (SSA) determination that he was not disabled. Plaintiff’s claim was reviewed by a third-party physician on appeal and ultimately his appeal was denied. The court concluded that the fund’s denial was not reasonable because it did not show that it considered all relevant evidence available to it. Rather, the fund focused its denial on the SSA decision and third-party physician but failed to consider the plaintiff’s additional medical records. The court made it clear that its ruling should not be interpreted to suggest a position as to whether or not the plaintiff met his burden, but rather that the fund had to make that determination in the first instance based on all relevant evidence. Therefore, the court vacated the denial of benefits and remanded the matter to the fund for reconsideration. Gamache v. IAM National Pension Fund, No. 23-cv-1131 (APM), 2025 WL 588202 (D.C. Feb. 24, 2025).
5. Denial of benefits supported by substantial evidence affirmed. In Li, the plaintiff alleged that his request for long-term disability benefits was improperly denied. Mr. Li submitted a disability application stating that he first noticed symptoms of “anxiety and depression” in early July 2021 and was treated by a physician in August 2021 with his last day of work in December 2021. Mr. Li reported that this condition was “partially related” to his occupation as a result of major shifts in duties. After receiving his application, the insurer requested additional clarification and documents and had its own physician provide a second opinion, who opined that Mr. Li would not be precluded from returning to his duties. The claim was denied. Mr. Li filed two appeals, the review of which included additional physician review, Mr. Li’s supplement to the record, and a request for two independent medical examinations. The denial was upheld on appeal and Mr. Li filed suit. Following a bench trial, the court found in favor of the insurer. First, the court determined that the arbitrary and capricious standard applied because the plan at issue granted the insurer discretion and the insurer complied with applicable regulations, including showing that its appeal process took into account all of Mr. Li’s physician’s submissions and that it provided Mr. Li with its basis for disagreeing with that physician’s views. Second, the court held that the denial of benefits was supported by substantial evidence, namely that the insurer provided “a reasoned analysis of the relevant record materials” which was grounded in its peer reviewers’ assessments. Because the insurer provided a reasoned explanation for discounting the opinions of Mr. Li’s physicians and the peer reviewers offered a detailed, substantive analysis of the relevant materials, the court concluded that the denial of benefits was not arbitrary. Li v. First Unum Life Ins. Co., No. 23cv6985 (DLC), 2025 WL 326492 (S.D. N.Y. Jan. 29, 2025).