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January 2010

Recent Developments in ERISA Case Law

Insurance Law Quarterly Newsletter - Q1 2010

In the September 2009 edition of DRI Magazine For The Defense, the attorneys of Gordon & Rees published an article entitled A Year After Glenn-No Clear Path. The article discussed the impact of the United States Supreme Court decision in Metropolitan Life Ins. Co. v. Glenn, 128 S.Ct. 2343 (2008) on ERISA claims, specifically how circuit courts are handling the relatively-new discovery issues and the ultimate decisions on the claims themselves. Several of the circuit courts in which Gordon & Rees litigates have handed down recent noteworthy decisions:

Recent Ninth Circuit Opinions

In Dupree v. Holman Professional Counseling Centers, 572 F.3d 1094 (July 29, 2009), the Ninth Circuit followed the language of the ERISA plan in determining that there was no coverage under a health insurance plan for non-emergency services at a non-contracted facility. The Ninth Circuit ruled that the clear language of the ERISA plan repeatedly asserted that non-contracted provider services were not covered.

In Montour v. Hartford Life & Accident Ins. Co., 582 F.3d 933 (September 14, 2009), the Ninth Circuit determined that a conflict of interest heavily influenced the benefits decision and ruled for plaintiff. Specifically, the Court pointed to the administrator's bias in advocating its position that the claimant was not disabled, its reliance on surveillance that was consistent with the claimant's self-reported limitations, and its decision not to seek an independent medical examination and instead rely on "paper reviews" when it was not clear that the medical reviewers had all the pertinent information. Going further, the Ninth Circuit took umbrage with the administrator's failure to explain why it reached a different conclusion than the Social Security Administration, given that the administrator required the claimant to apply for benefits and would benefit financially from the award.

The Ninth Circuit upheld the one-year limitations provision in a summary plan description (SPD), finding that the SPD limitations period clause which was placed in the Claims Procedure section of the SPD complied with ERISA regulations and (assuming, without ruling that the Doctrine of Reasonable Expectations applied to a self funded ERISA plan, met the plan participants' reasonable expectations. Scharff v. Raytheon Company Short Term Disability Plan, et. al, 581 F.3d 899 (September 9, 2009). Importantly, in Scharff, the Ninth Circuit declined to import into ERISA federal common law a California insurance regulation which imposes a duty to inform claimants of statutory deadlines.

In a decision that is likely to have serious ramifications, in October of 2009, the Ninth Circuit determined that the Montana Insurance Commissioner's practice of denying approval to insurance forms with discretionary clauses was saved from ERISA preemption by the Savings Clause (29 U.S.C.ยง 1144(b)). Standard Ins. Co. v. John Morrison, 584 F.3d 837 (October 27, 2009). This case is likely to have a far-reaching impact as a number of Insurance Commissioners have stated their intention to deny any application for an insurance policy containing discretionary language, including California's Insurance Commissioner. Read an in-depth analysis of Standard Insurance Company v. Morrison

The unpublished decision of Chellino v. Kaiser Foundation Health Plan, Inc., 2009 LEXIS 24350 (November 5, 2009) further illustrates how the Ninth Circuit is likely to apply Glenn to benefits decisions. As with Montour, the Ninth Circuit found an abuse of discretion in connection with a fibromyalgia claim. Among other factors the Ninth Circuit pointed to the administrator's reliance on surveillance, which comported with the claimant's self-reports of limitation, the reliance by a reviewing physician on a Functional Capacity Evaluation that the claims administrator considered invalid, the requirement that the claimant produce objective evidence of her fibromyalgia that was not available because there is no objective evidence, and the reliance on a vocational assessment which adopted the medical reviewer's inaccurate report.

Recent Fifth Circuit Decisions

By contrast, the Fifth Circuit takes the instruction in Glenn that the conflict of interest is "a factor" in determining abuse of discretion literally. The Fifth Circuit noted that while the Glenn decision repudiated that circuit's previous "sliding scale" approach to conflicts of interest, the cases discussing a sliding scale analysis were still compatible with the Glenn "factor" methodology. In Holland v. International Paper Company Retirement Plan, 576 F.3d 240 (July 16, 2009), the Fifth Circuit found that while the employer's funding of a trust to pay benefits and its employee's roles as plan administrator created a conflict, the conflict was not a significant factor, because the contributions were irrevocable and a decision to pay benefits did not directly impact the employer's bottom line.

In Swanson v. Hearst Corporation Long Term Disability Plan, 586 F.3d 1016 (November 3, 2009), the Fifth Circuit upheld the ERISA Plan's failure to exhaust administrative remedies affirmative defense when the claimant failed to timely submit evidence on her appeal, finding a letter sent within the appeal period advising the Plan of the intention to appeal was insufficient to constitute an appeal.

In Cooper v. Hewlett-Packard Co., 2009 LEXIS 27640 (December 16, 2009), the Fifth Circuit found that Glenn did not apply to that case because the payor of the Plan employed a contract administrator to evaluate claims, stating that Glenn only applies when the administrator has a conflict of interest-where the plan administrator both evaluates and pays the benefits claims. Accordingly, the review was a straightforward abuse of discretion review in which the Fifth Circuit determined that the administrator had not abused its discretion in finding the claimant did not meet the ERISA Plan's definition of "total disability."

Recent Tenth Circuit Decisions

In Holcomb v. Unum Life Ins. Co., 578 F.3d 1187 (August 11, 2009), the Tenth Circuit commented that the Glenn decision abrogated the Tenth Circuit's previous approach to evaluating conflicts of interest in which it shifted the burden to the administrator to establish by substantial evidence that the denial of benefits was not arbitrary and capricious when evidence of a conflict was presented. Applying the Glenn "combination of factors" analysis, the Tenth Circuit concluded that the insurer did not abuse its discretion, and in fact, that the insurer took steps to reduce its inherent bias by hiring independent physicians and furnished them with all necessary information.

On September 30, 2009, the Tenth Circuit, in Salisbury v. Hartford Life and Accident Ins. Co., 583 F.3d 1245 upheld a district court's determination that the contractual suit limitations provision in an ERISA Plan barred a claim for benefits.

On November 2, 2009, the Tenth Circuit remanded a case involving accidental paralysis and rehabilitation benefits to the district court for a de novo review because the claimant submitted evidence supporting a covered diagnosis and the administrative record was inadequate for a full consideration of eligibility for benefits. The Tenth Circuit instructed the district court to supplement the record, if it deems necessary, because of complex medical questions. Rasenack v. AIG Life Ins. Co., 585 F.3d 1311.

The Tenth Circuit, by contrast to the Ninth Circuit, held that ERISA preempts the Utah insurance regulation prohibiting discretion-granting clauses in ERISA plans except in certain plans with specific "safe harbor" language. Hancock v. Metropolitan Life Ins. Co., 2009 U.S. LEXIS 28545 (December 29, 2009).

In Graham v. Hartford Life & Accident Ins. Co., 2009 U.S. App. LEXIS 28550 (December 29, 2009), the Tenth Circuit determined that ERISA governed a plan established by the National Rural Letter Carriers Association, the exclusive collective bargaining representative, because the United States Postal Service did not establish the Plan or contribute payments to it, and thus, it was not exempt from ERISA. Thereafter, applying Glenn, the Tenth Circuit agreed that the award of disability retirement was not evidence of a disability even though Hartford did not explain how it weighed this evidence.


Ronald K. Alberts
Lisa K. Garner