The Friday Five: Five ERISA Litigation Highlights - December 2024

This month’s Friday Five explores recent decisions including the impact of a COVID furlough on eligibility for LTD benefits, what constitutes a breach of an employer’s fiduciary duty, what defines total proof of disability or is viewed as a severe procedural violation, and the appropriate weight given to a treating physician’s conclusions. 

The Saul Ewing ERISA Litigation Team

1. Can the court consider new information not in the initial claim application for long-term disability benefits? Karen Moratz (“Plaintiff”) sued Reliance Standard Life Insurance Company (“Defendant”) for denial of her long-term disability (“LTD”) claim under her employer’s welfare benefits plan (“Policy”). Plaintiff worked as a flutist for the Indianapolis Symphony Orchestra (“ISO”) until she was furloughed in March of 2020 because of the COVID-19 pandemic. On September 1, 2021, the ISO invited furloughed musicians to return to work. On February 12, 2022, Plaintiff applied for LTD benefits for long COVID symptoms experienced in December 2020 and February 2021. To be eligible under the Policy, a person must be an active, full-time employee working “for a minimum of 20 hours during a regular work week”. Under the Policy terms, Plaintiff’s coverage would have terminated in March 2020, but Defendant extended LTD coverage for an additional ninety days to June 2020. Defendant denied the claim on February 18, 2022, providing that Plaintiff was not part of an Eligible Class of employees at the time she claimed disability. Plaintiff sued for wrongful denial of her claim arguing that she became re-eligible for benefits because she was rehired by the ISO on September 1, 2021. On August 31, 2022, Plaintiff submitted an administrative appeal of the denial and on January 27, 2023, Defendant notified Plaintiff of its decision to uphold its initial denial. On appeal, Plaintiff submitted evidence of new dates of eligibility and disability that were not in her initial claim application. The court denied Plaintiff’s motion for summary judgement and noted that a claimant may not present a new or different claim for benefits on administrative appeal and that a claimant is bound to the claim she sets forth in her initial application. Diaz v. Prudential Ins. Co. of Am., 499 F.3d 640, 643 (7th Cir. 2007). The court held that once Plaintiff was furloughed in March of 2020, she ceased being an active, full-time employee and that both potential dates of disability reported in Plaintiff’s claim forms were during her furlough and after the June 2020 date when the coverage ended. Moratz v. Reliance Standard Life Insurance Company, 2024 WL 4580890 (USDC, S.D. IN, September, 19, 2024)
2. Whether a husband has a valid claim to his deceased wife’s accidental injury insurance benefits regardless of the employer’s delegation of claims administration to the insurer. Karen A. Justman (“Deceased”) worked for Accenture LLP (“Employer”) when she ate raw oysters at a restaurant on August 21, 2021, and became ill, required hospitalization, and subsequently died on August 28, 2021 from septic shock. The Deceased was enrolled in a group life insurance plan (“Plan”) offered by her Employer that included basic accidental life insurance coverage equal to the Deceased’s base salary and an additional optional accidental death and dismemberment (“AD&D”) coverage of three times her base salary. The Plan designated Prudential Insurance Company of America (“Insurer”) as the Claims Administrator. The Plan provides that “if you die as a result of an accident, as determined by the Claims Administrator, your beneficiary will receive Optional AD&D benefits in addition to the benefits provided under the Basic Life/AD&D and the Optional Life Insurance Plan.” The Deceased’s husband submitted a claim to the Insurer for both basic and optional accidental group life benefits. The Insurer denied the claim concluding that the Deceased died of a “medical illness and/ or sickness” and not an “Accidental Injury ... as the direct result of an Accident” and later upheld its decision on appeal. The Husband sued both the Insurer and Employer for the wrongful denial of benefits under Section 1132(a)(1)(B) of ERISA. The court based its decision to dismiss the Husband’s ERISA claim against Employer on CIGNA Corp. v. Amara, 563 U.S. 421, 438 (2011), where the Supreme Court instructed that summary plan descriptions are communications to participants about the plan but do not constitute the terms of the plan for purposes of a claim for the denial of benefits under Section 1132(a)(1)(B). The court provided that to state a claim for an ERISA breach of fiduciary duty claim, it must allege: (1) a plan fiduciary; (2) breached an ERISA-imposed duty; (3) causing a loss to the plan. The court held that the Husband did not plausibly state a claim for breach of fiduciary duty because he did not allege which ERISA-imposed fiduciary duty Employer breached and there was no allegation of loss to the Plan. Mark l. Justman v. Accenture LLP, Prudential Insurance Company of America, 2024 WL 4631646 (USDC, E.D. PA, October 30, 224)
3. Summary judgment motions on whether the Plaintiff provided total proof of disability to qualify long-term disability benefits. Gerard Rieger (“Plaintiff”) worked full time for Allergan, Inc. (“Employer”) when he went on leave and received short-term disability (“STD”) benefits for migraines from September 30, 2020, until March 28, 2021, under a policy issued by Reliance Standard Life Insurance (“Defendant”). Plaintiff’s claim for long-term disability (“LTD”) benefits was approved for March 29, 2021 through May 29, 2021. Plaintiff’s employment ended on September 20, 2021 and the policy provided that Plaintiff would receive future benefits for 24 months if he remained Totally Disabled. For Plaintiff to be eligible beyond 24 months he “must be totally disabled from performing the material duties of Any Occupation. Any Occupation is one that the Insured's education, training or experience will reasonably allow.” Under the terms of Employer’s LTD benefits plan, the plan administrator has full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions. On April 4, 2022, Defendant informed Plaintiff that he did not satisfy the definition of Total Disability and he was no longer entitled to LTD benefits beyond February 28, 2022. Section 502(a)(1)(B) of ERISA allows a participant to bring a claim to recover benefits due to him under the terms of the plan. Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011) (citing 29 U.S.C. § 1132(a)(1)(B)). Where the benefit plan grants discretionary authority to the plan administrator in determining eligibility benefits covered by ERISA, the denial of such benefits is reviewed under an arbitrary and capricious standard. Id. The court found that under the arbitrary and capricious standard of review, Defendant’s decision to deny benefits was not without reason and there was sufficient evidence for a reasonable person to agree that Plaintiff did not meet his burden to show that as of February 28, 2022, the severity of migraines impaired his ability to work. The court granted Defendant’s motion for summary judgement because the proof upon which Defendant initially approved disability benefits were not the same a year later when benefits were terminated. Gerard Rieger, v. Reliance Standard Life Insurance Company, John Does 1-10, 2024 WL 4664180 (USDC D NJ, November 4, 2024)
4. Whether the denial of benefits of long-term disability benefits constitute an abuse of discretion. Douglas Brown (“Appellant”) worked for Covestro, LLC (“Employer”) who provided him with long-term disability insurance through Standard Insurance Company (“Appellee”). Appellant stopped working in June 2019 due to back pain and applied for long-term disability benefits (“LTD”) in December 2019. The initial claim was approved March 2020. Appellee terminated Appellant’s benefits in June 2021 and Appellant appealed to Appellee’s ERISA Review Committee (“Committee”) that upheld the denial. Appellant filed a lawsuit in District Court challenging the Committee’s determination. The District Court granted Appellee’s motion for summary judgment and denied Appellant’s motion finding that the Committee did not commit a severe procedural violation when it failed to disclose a supplemental report to Appellant. Appellant appealed arguing that the District Court should have applied a de novo standard of review. “[w]here a plan administrator possesses discretionary authority to determine eligibility for benefits ... we review the administrator's decision under an abuse of discretion standard.” Bergamatto v. Bd. of Trs., 933 F.3d 257, 263–64 (3d Cir. 2019). The court sometimes applied de novo review if a claims administrator possesses discretionary authority but did not exercise that discretion, such as when the administrator provides no reason for the denial. See Gritzer v. CBS, Inc., 275 F.3d 291, 295–96 (3d Cir. 2002). “[a]lthough the Supreme Court has never suggested that the standard of review applied to ERISA administrators' benefits determination should change because of procedural irregularities ... [s]ome circuits substitute de novo review for deferential review only when the plan administrator committed severe procedural violations.” James v. Int'l Painters & Allied Trades Indus. Pension Plan, 738 F.3d 282, 283 (D.C. Cir. 2013). The court applied an abuse of discretion standard and granted summary judgment in favor of Appellee finding that the record contained ample evidence establishing that Appellant was not totally disabled and that Committee's procedural errors did not rise to the level of a severe procedural violation. Douglas Brown v. Covestro LLC Welfare Benefits Plan, 2024 WL 4751199 (3d Cir., November 12, 2024)
5. Whether the Plaintiff’s claim for LTD benefits was supported by objective medical evidence. Anticia Macalou (“Plaintiff”) was employed by McKinsey & Company (“Employer”) and received short-term disability benefits administered by First Unum Life Insurance Company (“Insurer”) under Employer’s Group Long-Term Disability Insurance Policy (“Policy”). Plaintiff submitted a claim for long-term disability benefits (“LTD”) and Insurer informed Plaintiff that she was not approved for LTD benefits because she was not disabled within the meaning of the Policy. Plaintiff appealed the decision and the Insurer affirmed its decision. Plaintiff alleged disability due to major depressive disorder, anxiety disorder, post-traumatic stress disorder (“PTSD”), and attention deficit/hyperactivity disorder (“ADHD”). The Court found that the length and nature of Plaintiff’s relationships with her treating providers rendered their opinions more credible and persuasive than those of the Insurer’s file reviewers. The Court noted that it was significant that none of Insurer’s file reviewers treated, examined, or spoke to Plaintiff prior to the initial claim denial or during her appeal. In such cases, a court may accord greater weight to the conclusions of treating physicians than to those of non-examining physicians. The Court agrees with Plaintiff’s treating provider’s view that Plaintiff’s symptoms “transcend her ‘job situation,’ and would likely be present in any high pressure work environment.” The Court further rejected the Defendant’s argument that Plaintiff’s symptoms were due to the “racist and toxic” environment that she perceived at McKinsey specifically, rather than a more general medical condition. The Court therefore held that Plaintiff demonstrated by a preponderance of the evidence that she was disabled from performing her regular occupation within the meaning of the terms of the Policy and awarded her LTD benefits to the date of judgment along with reasonable attorneys’ fees and costs. Anticia Macalou v. First Unum Life Insurance Company, 2024 WL 4867091 (USDC SD NY, November 22, 2024)