Mertens v. Hewitt Associates, 508 U.S. 248 (1993).

Mertens v. Hewitt Associates, 508 U.S. 248 (1993).  Plaintiffs were employees who participated in the Kaiser Steel Retirement Plan.  The Plan failed to change its actuarial assumptions resulting in inadequate funding of the plan and a decrease in vested pension benefits due them under the plan.  Plaintiffs sued, among others, the plan’s actuary, whom it alleged knowingly failed to disclose the plan’s funding shortfall.  The case went the Supreme Court on the question of whether ERISA permits suits for money damages against nonfiduciaries who knowingly participate in a fiduciary’s breach of fiduciary duty. 

 

The actuary was not a fiduciary under § 1002(21)(A) because it did not exercise discretionary control or authority over the plan’s management, administration, or assets.  Plaintiffs instead sued under § 1132(a)(3) “(A) to enjoin any act or practice which violates any provision of [ERISA] or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of [ERISA] or the terms of the plan…”  Specifically, Plaintiff’s contended that requiring the actuary to make the plan whole again for the losses resulting from its alleged knowing participation in the plan’s breach of fiduciary duty would constitute “other equitable relief.”

 

Justice Scalia first doubts whether ERISA § 1132(a)(3) allows actions against nonfiduciaries, noting that the statute allows not for appropriate equitable relief “at large” but only for the purpose of “redress[ing any] violations or …enforce[ing] any provisions” of ERISA or an ERISA plan.  But the actuary disclaimed reliance on this point, so he moved on.

 

Justice Scalia interpreted “appropriate equitable relief” in this context to mean categories of relief that were typically available in equity, such as injunction, mandamus and restitution, but not compensatory damages, which is what plaintiffs were seeking here.  Id at 257.  He reasoned that there are two senses of the phrase equitable relief, one of which was any relief that one could obtain in a court of equity, but the other of which were those remedies typically available in equity.  He argued principally that since all relief available for breach of trust (the kind of breach at issue here) was available from a court of equity, using that sense of the term would result in limiting the relief under § 1132(a)(3) “not at all.”  (emphasis in original).  Id at 257. 

 

Justice Scalia was nonplussed by the argument that so limiting § 1132(a)(3) would mean that the ERISA statute – which was enacted to protect plan participants and beneficiaries – would offer less protection than they had prior to its enactment, since before its enactment nonfiduciaries were liable under state law for the kind of acts alleged in this case.  He dismissed the vague notion of a statute’s basic purpose, while pointing out that the definition of fiduciary in ERISA is broader than under traditional law and that nonfiduciaries would become liable when they met the function definition of a fiduciary of having control and authority under the plan.  Id. at 262, citing § 1002(21)(A).  He finished by pointing out the increased premium costs that on his view would result from exposure of nonfiduciaries to this kind of liability.  Id. at 262-263.

 

Justice White dissented, arguing that the words appropriate equitable relief referred to all remedies available in equity under the common law of trusts, whether or not they were the exclusive remedies of breach of trust.  Id. at 268.  Among other arguments he pointed out that the majority was wrong to suggest that equitable relief would not be limited at all under § 1132(a)(3) on this interpretation, since there were legal remedies not available at common law for a breach of trust that were available at law, namely extracompensatory relief such as punitive damages.

Advocate Health Care Network v. Stapleton, 137 S.Ct. 1652 (2017). 

Advocate Health Care Network v. Stapleton, 137 S.Ct. 1652 (2017).  A number of church-affiliated nonprofit hospitals were sued by their employees claiming that the hospitals do not fall within ERISA’s church-plan exemption and that they must therefore comply with ERISA in administering their pension plans.  Their argument was that the plans were not established by a church and that the ERISA church-plan exemption requires them to have been established by a church. The hospitals defended on the grounds that to qualify as church-plans they need not have been so established.  The court held for the hospitals. 

ERISA exempts “church plans.”  § 1003(b)(2).  Church plans were originally defined as plans established and maintained for its employees by a church or by a convention or association of churches exempt from tax under 501(c)(3) of the tax code.  § 1003(33)(A).  ERISA was amended in 1980 to broaden the definition of church plans.  Under the new language, the term employee of a church was defined as including an employee of any organization exempt from tax as a corporation organized and operated exclusively for religious purposes under 501(c)(3) (not just a church or convention or association of churches), as long as they are controlled by or associated with a church.  § 1002(33)(C)(ii)(II).  The new language then provided that a plan established and maintained for its employees by a church includes a plan maintained by an organization the principle purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits for the employees of a church (as defined above).  §1002(33)(C)(i).

The plans at issue in this case were established by hospitals that qualify as church-affiliated nonprofits under § 1002(33)(C)(ii)(II)) and were maintained by them.  But they were not established by them.  They were established by the hospitals themselves.  The Court thus had to interpret the following language from §1002(33)(C)(i):  “A plan established and maintained for its employees…by a church…includes a plan maintained by an organization…the principle purpose or function of which is the administration or funding of a plan or program for the provision of retirement or welfare benefits, or both, for the employees of a church…” The question was, does it mean that a plan established and maintained for its employees by a church includes only plans that were established and maintained by the kind of organization described (defined by the court as a principle-purpose organization)?  Or does include plans that were not established by but are maintained by a principle-purpose organization?

The Court analyzed the language as follows:  When Congress wrote that “A plan established and maintained by a church includes…”, the word tells the reader that a different type of plan should receive the same treatment, i.e. exemption from ERISA, as the type described in the old definition.  And those newly favored plans are those “maintained by” a principle-purpose organization, irrespective of whether they were established by a church.  The Court concluded that a plan maintained by a principle-purpose organization qualifies as a “church plan” regardless of who established it.

It is worth noting that the Court explicitly did not decide whether the defending hospitals had the needed “association” with a church under § 1002(33)(C)(iv) or, if they do, whether their internal benefits committees count as principle-purpose organizations.  See n. 2, 3.  Judge Sotomayor concurred but pointed out that the hospitals at issue operate for-profit subsidiaries, earn billions in revenue and compete in the secular market.  She cautioned that the provisions governing which organizations qualify as principle purpose organizations permitted to maintain “church plans” need to be construed in line with their text and with a view toward effecting ERISA’s broad remedial purposes.

FMC Corporation v. Holliday, 498 U.S. 52 (1990).

The issue before the Court was whether a state law precluding subrogation (reimbursement) of health care benefits paid by health insurers of ERISA health benefit plans out of third party settlements applied to a self-insured plan.  The Court held that ERISA pre-empted the application of the state law as applied to the self insured plan.

The daughter of an employee who was the member of a health care plan provided and paid for by his employer (self-funded, not insured by an insurance company) and was injured in an auto accident.  The self funded plan paid health care benefits.  The employee settled an auto accident claim on behalf of his daughter.  While that suit was pending the self-funded plan sought declaratory judgment in federal court that it was entitled to reimbursement through its subrogation rights in the plan despite the state law outlawing such subrogation rights. 

To decide the issue, the Court had to interpret the pre-emption language of the ERISA statute.  The Court summarized that statute as follows:

"Except as provided in subsection (b) of this section [the saving clause], the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." § 514(a), as set forth in 29 U.S.C. § 1144(a) (preemption clause).

"Except as provided in subparagraph (B) [the deemer clause], nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities."§ 514(b)(2)(A), as set forth in 29 U.S.C. § 1144(b)(2)(A) (saving clause).

"Neither an employee benefit plan . . . nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies." § 514(b)(2)(B), as set forth in 29 U.S.C. § 1144(b)(2)(B) (deemer clause).

The Court found that the state anti-subrogation law ‘relates to’ an employee benefit plan within the meaning of the first (preemption) clause cited above.  So it would be pre-empted under that provision unless it is a law that regulates insurance, banking or securities within the meaning of the second (savings) clause cited above.  The Court found that the state anti-subrogation law does regulate insurance and is therefore saved from pre-emption under the savings clause.  But plans that are self-funded cannot be ‘deemed’ to be insurers, under the third (deemer clause) cited above, so self funded plans are not subject to insurance regulations saved under clause two.  This plan was self-funded.  The Court therefore held that it cannot be deemed to be an insurer and therefore the state anti-subrogation law, though saved from pre-emption under the second clause as applied to insurers of ERISA regulated, employer sponsored health plans.  “[T]he saving clause retains the independent effect of protecting state insurance regulation of insurance contracts purchased by employee benefit plans.” 

Here is the breakdown of how pre-emption operates in these scenarios:

“State laws that directly regulate insurance are "saved" but do not reach self-funded employee benefit plans because the plans may not be deemed to be insurance companies, other insurers, or engaged in the business of insurance for purposes of such state laws. On the other hand, employee benefit plans that are insured are subject to indirect state insurance regulation. An insurance company that insures a plan remains an insurer for purposes of state laws "purporting to regulate insurance" after application of the deemer clause. The insurance company is therefore not relieved from state insurance regulation. The ERISA plan is consequently bound by state insurance regulations insofar as they apply to the plan's insurer.”  (Id. at 61)

Firestone Rubber Co. v. Bruch, 489 U.S. 101 (1989)

Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989).  Firestone sold five plants to Occidental.  Most of the employees were rehired by Occidental.  Firestone had a termination pay plan, a retirement plan and a stock option plan, all regulated by ERISA.  Respondents were employees rehired by Occidental who sought benefits from Firestone under the termination plan, arguing that under the plan that the sale constituted a “reduction in work force” under the plan.  Firestone denied benefits on the grounds that the sale to Occidental did not constitute a “reduction in work force.”  Several respondents also sought information concerning the plan that Firestone refused to provide on the grounds that they were no longer “participants” in the plan and not entitled to the disclosure. 

 

The Supreme Court held that a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.  This is true whether the plan is funded or unfunded and regardless of whether the administrator or fiduciary is operating under a possible or actual conflict of interest.  If a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion.’  Citing Restatement (Second) of Trusts §187, Comment d (1959). 

 

ERISA does not set out the standard of review for an action under § 1132(a)(1)(B).  ERISA abounds with the language and terminology of trust law and the Court has held that courts should develop a federal common law of rights and obligations under ERISA-regulated plans.  Citation omitted.  In determining the appropriate standard of review the Court is guided by principles of trust law.  Citation omitted.  Trust principles make a deferential standard of review appropriate when a trustee exercises discretionary powers.  Citation omitted.  When trustees are in existence a court of equity will not interfere to control them in the exercise of a discretion vested in them by the instrument under which they act.  Citation omitted from a case from 1875).  Firestone’s termination pay plan did not confer power to the administrator to construe uncertain terms or give it deference in making eligibility determinations.  Absent such a grant of deference, courts construe terms in trust agreements without deferring to either party’s interpretation.  This trust law de novo standard of review is consistent with the judicial interpretation of employee benefit plans prior to the enactment of ERISA.    

 

The term ‘participant’ is defined in §1002(7) as “any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit…from an employee benefit plan…or whose beneficiaries may be eligible to receive any such benefit.”  The Supreme Court held that the term participant is naturally read to mean either or reasonably expected to be in currently covered employment or former employees who have a reasonable expectation of returning to covered employment or who have ‘a colorable claim’ to vested benefits.  (Citations omitted).  To establish that he or she “may become eligible” for benefits, a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future.  The Court remanded the case to the Court of Appeals a determination on this issue.    

Ordorf v. Paul Revere Life Insurance Company, 404 F.3d 510 (1st Cir. 2005).

Ordorf v. Paul Revere Life Insurance Company, 404 F.3d 510 (1st Cir. 2005). Plaintiff appealed the district court’s denial of benefits on de novo review of an ‘own occupation’ disability policy.  He started benefits in 1995 for drug dependency but was limited to three years of benefits for that condition.  Before benefits ended for that reason he informed defendant he was disabled due to back problems.   Plaintiff treated for back injuries beginning in 1976.  He did have objective evidence of disc disease and had multiple treatments over the years.  The question for the first circuit was what is entailed in a de novo review.  Firestone v. Bruch, 489 U.S. 101 (1989) makes clear that in plan language disputes no deference is given and courts should apply the normal rules for contract interpretation.  But it also includes a conclusion to deny benefits based on a set of facts.  The court agreed with the plaintiff that the correct standard is whether, upon a full review of the administrative record, the decision of the administrator was correct.  De novo review generally consists of the court’s independent weighing of the facts and opinions in the record to determine whether the claimant has met his burden of showing that he is disabled within the meaning of the policy.  Plaintiff bears the burden of making a showing sufficient to establish a violation of ERISA.  GRE Ins. Group v. Met. Boston Hous., 61 F.3d 79, 81 (1st Cir. 1995).  As in deferential review, see Liston v. Unum, 330 F.3d 19 (1st Cir. 2003) on de novo review, the focus of judicial review is ordinarily the record made before the administrator and at least some very good reason is needed to overcome that preference.  After an exhaustive review of the medical history and other facts, the court concluded that Plaintiff did not meet his burden because he worked for years despite back pain and treatment, he originally became disabled for drug dependency, his back pain was controllable even after he went out on disability, his recreational life was inconsistent with his claim, the SSA decision did not establish disability due to back problems alone and his claim based on the back disability came only after he expressed concerns with work issues as he started to cope with the idea of getting cut off from benefits based on the drug disability limitation. 

 

Other notable rules and statements.  The plan is limited to the grounds of denial it articulates to the claimant.  Citing Glista v. Unum Life Ins. Co., 378 F.3d 113, 128-29 (1st Cir. 2004).  (It’s hard to see how this applies to de novo review).  Summary judgment is just a vehicle for deciding the issue.  Liston v. Unum, 330 F.3d 19 (1st Cir. 2003).  The fact that judicial review is de novo does not itself entitle a claimant to a trial or to put on new evidence. 

Lavery v. Restoration, 2018 WL 1524398 (D.Mass.)

Lavery v. Restoration, 2018 WL 1524398 (D.Mass.) plaintiff/employee sought damages from his defendant/employer which he alleged wrongly classified him as an independent contractor.  Among other damages he sought the value of benefits from an ERISA governed benefits plan due him had he been classified as an employee.  Defendant/employer moved to dismiss that count as preempted by ERISA.  ERISA preempts state laws that ‘relate to’ ERISA plans.  Under Supreme Court and 1st Circuit law, state laws relate to ERISA if (1) they mandate benefit structures, (2) bind an administrator to a particular choice or (3) provide an alternate enforcement mechanism.  This case concerned whether the Massachusetts independent contractor law and wage law provide an alternate enforcement mechanism in this instance.  The court analyzed the case as coming under the 1st circuit’s decision in Hampers, in which the court found that an employee’s claim that he should have been included in a benefit plan was preempted because it would have to evaluate or interpret the terms of the ERISA-governed plan.  Plaintiff here argued that his case was different because the wrongful act here was the decision to classify him as an independent contractor, not a decision not to enroll him in a benefits plan.  The Court found for defendant/employer, following dicta in Hampers that ERISA preempts state law causes of action for damages where the damages must be calculated using the terms of the ERISA plan.  The court stated it was bound by precedent without a particularly compelling reason not to follow it, and therefore rejected Plaintiff’s argument that that cannot be right because as other circuits have pointed out it would leave participants without a remedy.

Ovist v. Unum, 2018 WL 3853739 (D.Mass.).  

Ovist v. Unum, 2018 WL 3853739 (D.Mass.). A court may transfer a case to another venue (another court) where a case may have been brought, upon a motion by the party wanting the transfer, but the moving party must show that considerations of convenience and judicial efficiency “strongly favor” the transfer.  Here Magistrate Judge Hennessy recommended denying Defendant Unum’s motion to transfer venue from Massachusetts to Florida, even though the Plaintiff lives and worked in Florida and Massachusetts had no connection to the case’s operative facts.  Unum failed to show that considerations of convenience and judicial efficiency strongly favored litigating the claim in the second forum.  These motions often come down to witness convenience, but in an ERISA review there is no trial and both parties indicated there would be no witnesses.  The fact that the Plaintiff chose this forum (because her lawyer practices here) bore some, but very little, weight, and Defendants could not overcome their burden of showing that convenience or judicial efficiency strongly favored the transfer.  The takeaway: plaintiffs should choose their venue to suit themselves, and let plans or insurers try to transfer the case if they desire. 

Weddle v. LINA, 2018 WL 2376358.

Plaintiff whose benefits were terminated after insurer scheduled a number of IMEs when Plaintiff could not attend, including one when she was visiting her dying father, included a state law claim for intentional infliction of emotional distress along with her claim to reinstate ERISA benefits and for attorney’s fees.  ERISA supersedes, or ‘preempts,’ state law causes of action that ‘relate to’ an employee benefit plan.  To make this determination, courts evaluate whether a court must evaluate or interpret the terms of the ERISA-regulated plan in order to determine the outcome of the state law claim.  The court looked at two ways that the insurer’s actions could have inflicted emotional distress.  The first was that it terminated and refused to reinstate her benefits knowing it would cause her emotional distress.  To make this decision a court would have to evaluate whether the insurer had a legitimate basis for terminating benefits, which would require interpreting and applying the terms of the plan.  The court found this theory was preempted.  But the other way to view the claim was that the insurer inflicted emotional distress when it scheduled the IMEs at times it knew she could not attend, including at a time her father was dying.  To determine whether this action caused emotional distress would not require any interpretation of the ERISA benefit plan.  The court therefore found it was not preempted by ERISA.  But the court went on to decide that this behavior by the plan, even if true, would not rise to the level of ‘extreme and outrageous conduct’ that would be ‘utterly intolerable in a civilized society,’ which is what constitutes intentional infliction of emotional distress under state law.  The magistrate judge (magistrates sometimes write decision that are recommendations, which the judge must adopt or not) therefore recommended that the judge dismiss the state law claim for intentional infliction of emotional distress.

Gross v. Sun Life, 320 F.Sup.3d 240 (D.Mass. 2018).

Gross v. Sun Life, 320 F.Sup.3d 240 (D.Mass. 2018). Decision on Plaintiff’s motion for interest, attorneys’ fees and costs after Plaintiff prevailed in an appeal to the first circuit.  Prejudgment interest was set at 12%, which is the Massachusetts statutory rate and also reflected Defendant’s earnings over that time period.  The 1st circuit instructed the court to consider the dual objectives in awarding prejudgment interest: making the plaintiff whole and preventing unjust enrichment.  The court looked to plaintiff’s market rate borrowing cost (not substantiated) and missed opportunity cost (S&P 500 at 9.8%).  For unjust enrichment the Court looked at Defendant’s return on equity for the relevant years (9.5, 18.9, 12.2, 12.6, 12.4, 12.8%).  The court of appeals had instructed that awarding interest at a rate less than the value of the money earned would create a perverse incentive to delay payments while it earned interest.  The court also noted that Sun Life operates in Massachusetts and the state statutory interest rate reflects the legislature’s considered view of the likely rate or return.

 

Attorneys’ fees were based on the loadstar method of a reasonable rate times the number of reasonably expended hours.  The main attorney spent 322 hours over five years, including an appeal, summary judgment and appeal to the first circuit, which was found reasonable.  The court reduced the rate by 25% for the hours spent during the period when the lawyer threatened an opposing party’s witness in an effort to obtain an opinion more favorable to his client and then misrepresented his conduct about it.  Costs were reduced but the numbers were comparatively insubstantial.

Jane Doe v. Harvard Pilgram, 2018 WL 4237288 (1st Cir.).

Jane Doe v. Harvard Pilgram, 2018 WL 4237288 (1st Cir.). Health benefits case in which participant was admitted to a mental health facility.  HPHC paid for the initial stay, then denied coverage for additional time.  Then she was readmitted and HPHC paid again.  Plaintiff sued after an unsuccessful appeal where she said the record was incomplete.  After suit was filed, HPHC told Plaintiff she had additional claims whose administrative remedies had not been exhausted.  The parties agreed to a post lawsuit review during which time Plaintiff submitted more evidence.  After HPHC denied that review HPHC filed an updated administrative record that did not include anything submitted after the final denial before suit was filed.  Plaintiff filed a motion to expand the record.  The district court denied it and found for HPHC.  Plaintiff appealed to the first circuit. 

            Plaintiff challenged the district court’s decision on the definition of the administrative record and the finding on the merits.  Regarding the record, the first circuit’s rule is that the decision for judicial review is the final administrative record and, absent a good reason or very good reason, courts reviewing that decision are limited to the evidence presented to the administrator as of that time.  Held that the administrative record for review includes documents submitted or generated as part of the post-filing review.  The court found that there was an unambiguous agreement to include this evidence in the record and found that in none of its cases had it suggested that an ERISA fiduciary can unilaterally walk away from a clear agreement with the beneficiary concerning the status of an administrative review under a plan.  The court had previously found that an administrative record can be reopened and the records supplemented.  Gross v. Sun Life Assurance Co. of Canada, 734 F.3d 1 (1st Cir. 2013).  Therefore there was a more than good reason to deem the documents submitted to HPHC after filing suit to be part of the record. 

            Regarding the review standard on the merits, the court held that where the court is reviewing the merits of an ERISA benefits denial de novo it will review the court’s factual findings for clear error.  They specifically offered no opinion on the standard of appellate review when the court below reviews a discretionary determination under the arbitrary and capricious standard.  See ft. 3.   They  cited a recent Supreme Court case, U.S. Bank National Ass’n ex rel. CWCapital Asset Management LLC v. Village at Lakeridge, LLC, -U.S.-, 138 S.Ct. 960, 200 L.Ed.2d 218 (2018).  They reasoned that summary judgment in the ERISA context is akin to judgment after a bench trial.

Lavery v. Restoration Hardware, 2018 WL 3733936.

Plaintiff had an office visit for a lesion on his back on April 25, 2014 at which his primary care physician suspected that it was a basal cell carcinoma (a non-life threatening skin cancer) and recommended he consult a dermatologist.  He began working on May 12, 2014 and his coverage under the plan began June 1, 2014 according to the plan administrator and based on communications between the claims administrator (Aetna) and the employer/plan administrator.  Plaintiff went to a dermatologist on June 10, 2014 and was diagnosed with malignant melanoma (life threatening cancer requiring chemotherapy) on June 19, 2014.  Plaintiff stopped working on September 29, 2014 and ultimately sought LTD benefits.  The pre-existing condition provision in the policy provided that “a disease or injury is pre-existing if, during the three months before the date you last became covered [the look back period]: it was diagnosed or treated; or services were received for the disease or injury; or you took drugs or medicines prescribed or recommended by a physician for that condition.”  The claims administrator’s initial pre-x assessment by a clinical consultant concluded that the malignant melanoma was not pre-existing because there was no evidence of a definitive diagnosis and management for it during the look back period.  Another Aetna employee on the same day recommended denying the claim, without receiving any new medicals and without providing any adequate reasoning.  The claim was denied.  On appeal, the same basic pattern recurred: a clinical consultant recommended overturning the denial because the disease was not pre-existing, but again another Aetna claims administrator overrode the recommendation and denied the appeal.  Just before issuing the final denial, Aetna added a note to the claim file indicating that the effective date of coverage was not June 1, 2014 but July 1, 2014, based on a new Summary of Coverage that had been issued on June 23, 2014 that changed eligibility to the first day of the calendar month following the date the employee completes a 30 day probationary period.  If applicable to the claim, this would mean that the June 10, 2014 dermatologist appointment and June 19, 2014 diagnosis of malignant melanoma would be in the pre-x period and would make the disease pre-x under the plan. 

 

            The case was before the judge for ‘summary judgment’ and also for Defendant’s motion to enlarge the administrative record to include affidavits purporting to show steps taken by the Defendant to guard against any conflict of interest that Aetna has as both the decider of the claim and the payer of any benefits found due.   The court reviewed the rule that there is a strong presumption that the record on review is the one before the administrator when it made its determination but that new evidence relating to the procedure as opposed to the merits of the decision that outside evidence may be relevant and may be allowed based on the discretion of the court.  The court assumed that the evidence was considered but still found in favor of the plaintiff.

 

            Regarding the determination on the merits based on a look back period calculated based on the original June 1, 2014 coverage date and a focus on the initial consultation with the primary care physician, the court focused on the lack of any explanation for Aetna’s change in position in either the initial decision or the decision on appeal, especially because it did not receive any additional evidence and because the initial determination that was changed had been detailed and specific, calling them unexplained reversals.  Aetna’s reasoning did not explain why it was reasonable to conclude that the lesion was itself a disease or injury or why the mere presentation of the lesion to the primary care physician constituted receipt of ‘services’ for a ‘disease or injury.’

 

            Regarding the determination on the merits based on the new, July 1, 2014 coverage date that would have included the June 19, 2014 diagnosis, the court found that it would not award summary judgment to Defendants based on this reasoning because Plaintiff did not have a full and fair opportunity to contest it during the appeal period, citing Glista.  As to whether it was appropriate to award benefits or remand to determine whether Plaintiff was on notice of the new Summary of Coverage provisions, the court found that even if he was, he had his dermatologist appointments before he could have had notice of the June 23, 2014 provisions.  ERISA does not allow modifications that affect benefits that have already become due, which is analogous to the situation here where Plaintiff would have reasonably relied on the Summary of Coverage in effect when he decided to have his appointment when he did, according to which any diagnosis received at that time would not be considered pre-existing and subject to exclusion under the plan.  

Kamerer v. UNUM, 2018 WL 4539693 (D.Mass.) 

Plaintiff’s summary judgment granted and benefits reinstated on a de novo review where she had been receiving benefits from 2004 to 2013 for fibromyalgia with secondary depression where an early arthritis specialist wrote that her depression could be playing a role and it was difficult to know where was primary, on group and individual own occupation policies.  Her doctors supported her claim.  Unum had an internal clinical consultant review the file and found her not disabled and they terminated her benefits.  Then they reinstated pending an in person evaluation with an IME ordered by a second in house doctor.   The IME doctor said there were longstanding symptoms in excess of objective findings and no identified basis to conclude disability.  He said she had fibromyalgia but could do her job functions if psychological symptoms are not taken into account, but she said he only spent 5 minutes with her.  Unum’s in house consultant based on the IME said she was not disabled and that her pain was secondary to psychological symptoms.  The second in house doctor then concluded she was not disabled and that her pain was secondary to psychological issues.  On appeal another internal doctor reviewed the file

 

            Burden of proof.  Plaintiff has the burden of demonstrating that she is disabled within the terms of the policy by a preponderance of the evidence.  Has to show she cannot meet one of the necessary conditions of her employment. 

 

            Type of proof.  It is unreasonable to require objective evidence of a diagnosis that evades objective verification.  See Cook v. Liberty Life Assurance Co., 320 F.3d 11, 21 (1st Cir. 2003).  No argument as to diagnosis.  Regarding evidence of inability to work due to the symptoms of the illness, where a plan gives an insurer discretion it is not arbitrary to require objective evidence.  But on de novo review the court looks to the totality of the evidence.  Cites Gross v. Sun Life Assur. Co. of Canada, 734 F.3d 1,22 (1st Cir. 2013). 

 

            Weighing the evidence.  Administrators can’t arbitrarily refuse to credit a claimant’s reliable evidence, including of treating physicians.  Black & Decker Disability Plan v. Nord, 538 U.S 822,823 (2003).  Where the credibility of the claimant is a factor the impressions of the examining doctors sensibly may be given more weight than those who looked only at paper reviews.  Gross v. Sun Life Assurance Company of Canada, 880 F.3d 1, 14 (1st Cir. 2018).  While subjective reports of pain are difficult to prove, they should be accorded some weight on the ledger.  Gross v. Sun Life Assur. Co. of Canada, 763 F.3d 73, 84 (1st Cir. 2014).  Opinions of internal paper reviews may be given less weight when credibility is central to a plaintiff’s claim.  Gross, 880 F.3d at 14.  None of the reviewers offered any reasons to disagree with the numerous other medical professionals that had seen Plaintiff over many years and without reason arbitrarily refused to credit their findings.  Court found there was objective evidence – the fibromyalgia tender point tests.  Court concluded that there was some objective evidence and overwhelming subjective evidence and found her disabled.

 

            Regarding the mental health limitation, the court said (1) burden of proof shifts to defendant; (2) caused by or contributed to by means the mental condition must be a but-for cause of disability; and (3) on the fact, the IME doctor’s diligence was disputed and the in house doctor just reiterated that opinion, so not much weight was given to them.

Gross v. Sun Life Assur. Co. of Canada, 880 F.3d 1 (1st Cir. 2018). 

Appeal of district court’s de novo granting of plaintiff’s summary judgment motion for benefits, where the case originally went up to the first circuit but was remanded for additional administrative proceedings relating to the significance of surveillance evidence.   The court found that plaintiff had already met her burden of showing disability and that on remand the surveillance video did not undermine the court’s prior assessment of the medical evidence. 

Multiple examining doctors found plaintiff disabled due to chronic pain, inability to sit, severely diminished use of her right arm, due to reflex sympathetic dystrophy (RSD), fibromyalgia, complex regional pain syndrome (CRPS) or the like.  The PT who performed the FCE found her credible, as did her doctors and her co-workers, who wrote letters of support.  Several doctors speculated she had psychological factors contributing, and diagnostic tests were negative.  There were nine days of surveillance.  Most days showed little activity, but on three days she acted in ways inconsistent with her restrictions and limitations, including driving longer than expected, using her right hand to pump gas, going into a store and bending, kneeling and reaching.  She stopped to rest on both drives, and video showed her having effects from these activities, including limping and being taken to her car in a wheelchair after visiting her mother in the hospital.  The only doctor who both examined plaintiff and reviewed the video was an IME for the insurer.  He originally found her disabled, but after reviewing the video he changed his mind, but added that she should be reevaluated.  On remand the insurer got two more paper reviews and plaintiff got two more supportive letters, from a pain specialist and from the PT who did the FCE. 

Standard of review.  The court made it de novo in Gross I for plans that require proof ‘satisfactory’ to the reviewer.  As to the standard on appeal, since the court upheld the district court even on de novo review, it did not have to address whether the appeal should be de novo or for clear error.

Evaluating the evidence.  The video surveillance and reviews of it did not dislodge the finding that plaintiff met her burden of showing she’s disabled.  The questionable activities on surveillance were not far from the limitations established.  Pain medication and the nature of the diseases could account for the activities.  The insurer and the two IME reviewers failed to assess the questionable activities in the context of the nine days, during which the investigator saw little activity on most days.  Fluctuation in physical abilities is predictable and the new assessments failed to account for that.  This was true even though the record reflected some exaggeration by the plaintiff. 

Weight of reports by treating physicians and paper reviewers.  Where the determination of disability depends on an assessment of largely subjective, self-reported symptoms, those who have had in person exposure, whether treating physician or not, have access to information not available to non-examining doctors.  Where the claimant’s credibility is a central factor, and particularly where a claimant’s in person presentation of symptoms was credited by the IME, the impressions of examining doctors may be given more weight than those who only did paper reviews.

The court addressed sanctions for plaintiff’s attorney for threatening to sue the IME if he did not “correct” his medical opinions, then lied to the first circuit about it, where he had already been sanctioned in the past.  No sanctions given, but did direct that his actions be reported to his professional conduct counsel in Kentucky. 

Prejudgment interest.  Prejudgment interest is not in the ERISA statute but a court has discretion to grant it and its discretion extends to the rate to be applied.  The two primary factors are the remedial objectives of ERISA, which are served by making a participant whole and to prevent unjust enrichment.  The complexity in setting a rate is the ever-changing relationship between statutory interest rates and the actual cost of money.  In determining the rate, the court’s task is to identify a fair percentage reflecting both the rationale of full compensation and ERISA’s underlying goals.  Citing Cottrill v. Sparrow, Johnson & Ursillo, Inc, 100 F.3d 220 (1st Cir. 1996).  The court set it at the federal statutory rate (§ 1961(a)).  The first circuit said that was too low and the court did not give reasons for the rate, so it was vacated for a reassessment.

Attorney’s Fees.ERISA provides for attorney’s fees at 29 U.S.C. § 1132(g)(1).The district court used the loadstar analysis, which is an assessment of hours reasonably spent and a determination of a reasonable hourly rate. Matalon v. Hynnes, 806 F.3d 627, 638 (1st Cir. 2015).The district court awarded $96,243.50, a reduction of more than $188,000 from the requested fees.Reduction of out of state counsel’s rate based on his local area did not exceed the court’s authority.As to hours, 105.5 attorney hours for summary judgment motions was cut in half by the court below based on discounting time spent on losing arguments.The first circuit said that was in error.But as to total hours, the court found no abuse in finding that unreasonable and concluded a 25% reduction would reflect the success of plaintiff and the view that the hours were excessive.