Blogging Employee Benefits

October 31, 2006

Key ADEA Ruling from Divided En Banc 6th

Filed under: ADEA, Disability, Litigation — Fuguerre @ 5:37 pm

By demonstrating that a retirement plan’s disability benefits provision facially discriminates on the basis of age, the EEOC has established a prima facie case of age discrimination, according to a divided en banc 6th Circuit ruling reversing its original panel’s decision. (Equal Employment Opportunity Commission v. Jefferson County Sheriff’s Department, 03-6437) The full 6th further ruled that no evidence of discriminatory animus is required, since discriminatory intent was directly evidenced by the facially discriminatory nature of the plan. Perhaps somewhat less clear was the court’s rejection of its precedent in Lyon v. Ohio Education Assn and Professional Staff Union, by which earlier proceedings in Jefferson County had felt bound.

Prior to July 2000, a participant under the Kentucky Retirement System was ineligible to receive disability retirement benefits unless the individual was less than normal retirement age at disablement. After the current litigation commenced, an amendment modified the key condition to exclude from disability retirement any member who was eligible for an unreduced retirement allowance. The en banc panel found this plan design to be facially discriminatory on the basis of age in at least two ways: (1) Employees who remain in active service beyond a specified age are excluded from a particular employment benefit because of age; and (2) Even members who do become entitled to disability benefits receive lower benefits under the plan than similarly situated younger members.

Lyon‘s definition of a prima facie ADEA claim can no longer stand.

Previous rulings for this case had followed much the same path considered by the en banc panel, but had followed Lyon precedent, which had held the opposite of the two key rulings in the current case under arguably similar circumstances. Retracing steps all the way back to the origins of ADEA itself, the 6th now seems to see it differently, stating, “We believe that [OWBPA’s] legislative history is compelling evidence that when revising the ADEA in response to Betts, Congress intended to prohibit the very sort of age-based discrimination that the original panel [in the current case], bound by Lyon, condoned in this plan.” Yet although concurring with the majority opinion, Circuit Judge Rogers observes inter alia not only that it is unnecessary to overrule Lyon except to the extent that former precedent is inconsistent with the current holding, but that this decision leaves us with a fair degree of uncertainty, wryly quipping, “I would leave to future litigants the task of going through Lyon and identifying what survives and what does not.”

Dissenting opinion found relevant distinction between the Kentucky Retirement System design and the landmark Betts template, the crucial distinction being that Betts’ Ohio plan provided younger workers with a specific benefit that was withheld from older workers, whereas the Kentucky system’s design provides disability benefits that are intrinsically no different than normal retirement benefits. Perhaps the point at which one ought to commence Rogers’ task, then, might be to speculate which long-accepted normal retirement benefit designs could now come under renewed scrutiny, with an ever-evolving light?


April 6, 2006

In-House MD OK for Disability Claims

Filed under: Disability, Litigation — Fuguerre @ 7:20 am

The singular fact of working in-house does not disqualify a doctor from rendering an independent opinion any more than does paying an outside doctor to do the same….

The district court misapplied the arbitrary and capricious standard by undervaluing the opinion of a long-term disability plan administrator's in-house doctors, according to a 7th Circuit decision reversing the district court to grant summary judgment for the plan in denial of disability benefits. [Davis v. Unum, Nos. 05-2001 and 05-2165] Rejecting the argument that in-house doctors pose an inherent conflict of interest, the appellate court saw no need for the plan administrator to verify the in-house doctors' conclusions with outside doctors as long as the in-house decision was reasonable and the in-house doctors had no specific stake in the outcome.

The appellate court also faulted the district court for expecting the plan administrator's in-house doctors to conduct a personal examination of the claimant or communicate directly with his personal physicians, versus the medical file review that had been conducted. Finally, the appellate court disagreed with the district court's criticism of the brevity of the in-house doctors' reports, commenting –

[T]here is nothing in ERISA or our precedent requiring doctors to write like lawyers or plan administrators.

March 23, 2006

Church Plan Exemption Inapplicable to Religious Hospital’s Disability Plan

Filed under: Church Plan, Disability, Litigation — Fuguerre @ 7:10 pm

A disability plan sponsored by a Baptist hospital does not qualify for exemption from ERISA as a church plan, according to an 8th Circuit ruling affirming the district court’s denial of motion to remand to local jurisdiction. However, the 8th also affirmed the district court’s judgment instructing the plan administrator to re-open the administrative record and re-determine the claim, finding the original benefits denial to lack support. [Chronister v. Baptist Health, No. 05-1565]

The claimant appealed removal of the case to federal district court, arguing that the Baptist hospital where she had been employed is a religion-based hospital whose disability plan is exempt from ERISA as a church plan. The hospital is a charitable organization sharing common religious bonds and convictions with the Baptist church, including a prohibition against elective abortions. Leaders of the organization are required to be members of Baptist churches, and the organization has not elected ERISA coverage. The court disagreed, observing that the Baptist convention had not been involved in governance of the hospital for nearly 40 years, does not appoint or approve the hospital’s board members, and restricts its denominational requirement to a limited group of hospital employees. Accordingly, the court ruled the hospital’s disability plan an ERISA plan, not a church plan.

The plan administrator’s denial of benefits was reviewed under the abuse-of-discretion standard, since the plan granted discretionary authority. a less deferential standard was denied, there being insufficient evidence of conflict or procedural irregularity. Nevertheless, the plan administrator had terminated disability benefits after 24 months solely on the basis of a plan provision restricting benefits for “self-reported symptoms” despite objective medical evidence that precluded reliance on that plan provision. Accordingly, the appellate court affirmed the district court’s decision to remand the case to the plan administrator for a new determination of the claim.

March 21, 2006

Standard of Review If Conflicting Plans Presented to the Court

Filed under: Disability, Litigation — Fuguerre @ 8:07 pm

Relying on the disability plan document filed in an affidavit containing a “complete and accurate copy of the claim file” instead of a different, unauthenticated plan document submitted in an attachment to the insurer’s legal brief, a divided 8th Circuit has ruled that termination of disability benefits should have been reviewed under a de novo standard. [Barham v. Reliance Standard Life Insurance Company, No. 05-2485]

When the claimant filed suit following termination of disability benefits under her employer’s ERISA plan, the district court called for the parties to submit a copy of the administrative record and to file briefs addressing the appropriate standard of review. The plan included in the insurer’s claim file affidavit included a copy of the group policy which did not grant the insurer discretion to interpret the plan or determine eligibility for benefits. The insurer’s subsequent brief included an attachment with a different copy of the plan, with no affidavit verifying authenticity or accuracy. Based on the brief’s version of the plan, which did grant discretion to the insurer, the district court reviewed the benefit determination using the abuse-of-discretion standard, under which the district court found the insurer’s denial of benefits supported by substantial evidence.

The appellate court pointed out that it did not condone that the claimant failed to note the discrepancy in the policies until filing the reply brief, but felt free to pursue the issue where the new argument supplemented an argument raised in the initial brief. Turning then to the “unorthodox manner” whereby a different policy had been introduced, the appellate court faulted the district court for considering the second version without seeking satisfactory explanation for the contradiction. Finding nothing in the record contradicting or explaining the claim file version, the appellate court relied on that plan to direct that the case be remanded to the district court for review of the benefit decision under the de novo standard.

Dissenting opinion agreed that the case should be remanded, but to determine the correct version of the plan, rather than to dictate a change in the standard of review based on reliance solely on the original filing. “After all, the quest of this court should be a search for the truth, not a search for error.”

March 15, 2006

SPD at Disablement Sets Standard of Review

Filed under: Disability, Litigation — Fuguerre @ 11:26 pm

There is no doubt in our minds that a right that may be denied by an administrator’s incorrect, but not arbitrary, interpretation of the plan is substantively diminished as compared with one not subject to erroneous decisions.

The SPD in effect when an individual became disabled and entitled to disability benefits, not an amended SPD in effect later upon benefit denial, establishes the appropriate standard of judicial review of a plan administrator’s benefits determination, according to a 2nd Circuit ruling reversing a district court decision. [Gibbs v. Cigna, No. 05-3879]

The SPD in effect when the claimant became disabled did not include language granting the plan administrator discretionary authority. The SPD in effect when claim for additional benefits was denied had been modified to grant the administrator sole discretion over the determination of eligibility for and amount of benefits. Observing that the issue of which SPD governed for purposes of establishing the review standard, the appellate court ruled that the amended SPD was inapplicable to the claim since the right to the disability benefits had vested upon disablement, based on the terms of the plan. The 2nd Circuit respectfully disagreed with the premise of the 3rd’s Smathers decision to the effect that the amendment granting discretion had not affected the substance of the claimant’s benefits, distinguishing that and other decisions holding claim denial timing to decide the controlling SPD as involving benefit rights that had not yet vested.

Accordingly reviewing the benefit denial de novo, the appellate court ruled that the district court had erred in disregarding the plan administrator’s admission that the claimant was not classified within a particular group of employees specifically identified under plan terms, relying instead on contrary evidence to conclude the claimant to be in that class, and on that basis to not be entitled to the claimed additional benefits. Finding sufficient evidence to support each side’s interpretation of compensation to be taken into account for the disability benefit determination, the appellate court ruled the grant of summary judgment inappropriate, and returned the case to the district court for further proceedings.

Disability Benefit Denial Reversed

Filed under: Disability, Litigation — Fuguerre @ 6:36 pm

A disability plan’s administrator/insurer failed to comply with ERISA when it terminated an individual’s benefits without reviewing the specific ground for its decision, according to a 5th Circuit ruling reversing the district court’s summary judgment for the administrator. Moreover, although the individual had only appealed the district court decision without moving for summary judgment on his own behalf, the appellate court remanded the case to the district court with specific instruction to enter judgment in favor of the individual. [Robinson v. Aetna, No. 05-50567]

The plaintiff’s job as a sales representative for an alcoholic beverages distributor had necessitated driving 25% of his work time prior to suffering a stroke that permanently impaired peripheral vision in one eye. Initially his employer’s disability plan administrator (who also served as plan insurer) awarded him with disability benefits, given plan terms that characterized total disability as inability to perform the “material duties” of one’s “own occupation.” A year and a half later, confusing information from the individual’s own doctor led the plan administrator to believe that the vision problem had improved; and despite clarification from the personal physician, supporting correspondence from another treating physician, and advice from one of the administrator’s own physicians – all recommending disability with respect to any occupation requiring the operation of a motor vehicle – the administrator terminated the disability benefits. The explanation first given by the administrator in communication stating that the individual had exhausted administrative remedies: the administrator claimed to have conferred with an unidentified vocational consultant, who had advised that driving was not a material duty of a sales representative in the general economy. Attached to the plan administrator’s motion for summary judgment in the district court was an occupation description from the Department of Labor’s Dictionary of Occupation Titles (DOT), which listed 28 activities as more important than driving for a sales representative in the general economy.

Evaluating adherence to ERISA procedures under a substantial compliance standard, the appellate court found that the plan administrator had failed to comply with ERISA’s requirement to provide review of the specific ground for the benefits denial. The plan administrator also failed to comply with ERISA regulations requiring identification of vocational experts used for an adverse benefits decision. The appellate court found these procedural errors to extend beyond mere technical noncompliance or a de minimus violation, stating that the failures denied the claimant meaningful review of the termination of benefits.

Turning to the benefits denial decision itself, the appellate court found that the district court erred in considering the DOT attachment, because that evidence had not been in the administrative record prior to the litigation. Although the plan gave the administrator discretion, the appellate court reviewed the decision under a modified abuse of discretion standard, seeing the plan administrator as having an “inherent conflict of interest” in its dual role as both administrator and insurer. However, even granting the administrator “all but a modicum” of deference, the appellate court found no concrete evidence in the record to support the administrator’s conclusion that driving ought not be considered a material duty of the claimant’s job.

March 6, 2006

Settlement Agreement Based on ERISA Plan

Filed under: Disability, ERISA Preemption, Litigation — Fuguerre @ 3:15 pm

Long-term disability benefits under a confidential settlement agreement between an employee and employer are governed by ERISA, since the settlement agreement expressly provided that the benefits would be controlled by the ERISA plan in which the employee had originally participated. The individual’s state law claims are therefore preempted by ERISA, which does not provide the relief sought by the individual, according to an unpublished summary order by the 2nd Circuit affirming district court dismissal of those claims. [Ross v. Liberty Mutual Insurance Company, 05-4138]

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