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Terry v. Bayer Corporation, 1998 U.S. App. LEXIS 11284 (1st Cir. May 27, 1998)-The First Circuit that the Committee's determination that Terry's claim was late was not arbitrary and capricious. Thus the First Circuit joined the Eleventh and Fourth Circuit in strictly construing administrative review deadlines. Go to detailed analysis
Krumme v. WestPoint Stevens, Inc., 1998 U.S. App. LEXIS 8364 (2nd Cir. May 1, 1998)-Following Dooley v. American Airlines, 797 F.2d 1447 (7th Cir. 1986), cert. denied, 479 U.S. 1032 (1987), the second circuit held that a change in the discount rate (for purposes of determining lump sum pension distribution) is not a plan amendment. Go to detailed analysis.
Herman v. Cook, 1998 U.S. App. LEXIS 11363 (2nd Cir. May 13, 1998)(unpublished). Affirming partial granting of summary judgment in favor of Secretary of Labor on a breach of fiduciary duty claim.
Fornarotto
v. American Waterworks Company, Inc.; 1998 U.S. App. LEXIS
10113 (3rd Cir. May 13, 1998)-This was a disability claim arising
from an injury caused by a third party. Plaintiff settled with the Third Party
and attempted to collect long-term disability benefits in another action. In
November of 1996, Fornarotto's state court personal injury action was settled
for $450,000, and a Stipulation of Dismissal with Prejudice was filed. Shortly
thereafter, on February 7, 1997,defendants filed a motion for summary judgment
in Fornarotto's removed ERISA action. They alleged that the ERISA action arose
from the same set of facts as Fornarotto's personal injury action and was
therefore barred by New Jersey's entire controversy doctrine. The district court
agreed and granted defendants' summary judgment motion.
Fornarotto's personal injury action was grounded in traditional negligence, thus issues of fault, duty, causation, agency, and contributory negligence controlled. None of those issues is relevant to his ERISA action. The issues here involve an employer's obligation to pay disability compensation under the provisions of a pension plan. Even if the employer and Chiapetta, the driver of the car that struck Fornarotto, both prevailed in the state court tort action, the defendant-employer would be no better off here so long as Fornarotto could establish he was "disabled" under defendant's plan.
The Third Circuit reversed the district court.
Edmonds v. Hughes
Aircraft Company, 1998
U.S. App. LEXIS 9419 (4th Cir. May 8, 1998)
Fallo
v. Piccadilly Cafeterias, Inc., 1998 U.S. App. LEXIS 10719 (May 29,
1998)-Fallo quit working for Piccadilly in February 1992. Fallo elected COBRA
coverage. In January 1993, Fallo's diabetic wife became pregnant. On August 23,
1993, Scott Fallo's father, by certified mail, sent Piccadilly notice that Kasey
Fallo was "disabled" by her pregnancy and that she relied upon her
disability to extend further their health insurance benefits under COBRA for an
additional 11 months. The Fallos mailed a check dated September 5, 1993 to
Piccadilly to cover their premiums. On September 8, 1993, Piccadilly responded
that it would not extend coverage unless Kasey Fallo obtained a determination
"that she is disabled for purposes of Social Security" within 60 days
of August 25, the date that the initial extension of coverage ended. Piccadilly
returned the Fallos premium check on September 27, 1993. Piccadilly eventually
denied coverage
In either April 1994 or June 1994, the Fallo's applied with the Social Security Administration asking the SSA to declare Ms. Fallo disabled. In November 1994, the Social Security Administration determined that Kasey Fallo was disabled for Social Security purposes between March 1993 and October 1994.
Under the provisions of COBRA, a qualified beneficiary may extend the period of health insurance coverage from the date of a qualifying event until at least 18 months from that date. Termination of employment is a qualifying event that triggers this extended coverage. The qualified beneficiary may extend coverage for an additional period of 11 months for a total of 29 months from the termination of employment, if the qualified beneficiary provides notice within the initial 18 months of extended coverage that he or she was found to have been disabled under Title II or XVI of the Social Security Act. This disability must have been present at the time of or within 60 days of the qualifying event such as the termination of employment.
Under the statue and the terms of the plan, the Fallos were not entitled to the 11 months worth of additional COBRA since Ms. Fallo's disability , for Social Security purposes, began one year after the qualifying event. However, the Fifth Circuit reversed the district court's grant of summary judgment in favor of Piccadilly.
The Fifth Circuit determined the language in the summary plan description superceded the statute and the plan document. Piccadilly's SPD describes the right to continuation coverage as follows:
Additionally, the eighteen (18) month period may be extended for an extra eleven (11) months (to twenty-nine (29) months) if a person is determined to be disabled (for Social Security disability purposes) and the Employer is notified of that determination with[in] (60) days.
Under the language of the SPD, then, the Fallos needed to obtain a Social Security disability finding stating that Kasey Fallo was disabled during the 18 month initial extension and needed to notify Piccadilly's plan administrator within 60 days of that determination. The Fallos met this requirement.
SEC
v. Johnston, 1998 U.S. App. LEXIS 8343; 1998 FED App. 0132P (6th Cir.) (6th
Cir. May 1, 1998)-ERISA does not protect the assets in a pension plan from a disgorgement
order if the plan only benefits the owner/sole employee.
Mathews v. Sears Pension Plan, 1998 U.S. App. LEXIS 9562 (7th Cir. May 13, 1998)-Sears used the January 1, PBGC discount rate to calculate lump sums. The Treasury Department allows plans to use the PBGC rate at January 1 or the rate at the date of distribution. Sears adopted this language but still used the January 1 date to calculate the lump sum. A temporary regulation required Sears to pick the applicable date. Later, Sears amended the plan to state the January 1 rate was applicable. The summary plan description always referred to the January 1 date.
Plaintiffs argued that their lump sum should be calculated with the lower rate at the time of distribution.
Judge Posner held that the rate at January 1 was the correct date since the SPD referred to it and that was the way Sears interpreted the plan. Judge Posner also held that the summary plan description takes precedent over the plan document unless the plaintiff can show actual reliance on the plan documents.
Mers v. Marriott International Group Accidental Death and Dismemberment Plan, 1998 U.S. App. LEXIS 9399 (7th Cir. May 8, 1998)
Woo v. Deluxe Corp., 144 F.3d 1157 (8th Cir. 1998)-Challenge to grant of summary judgment to employer and insurer in ERISA action. Held: Insurer's decision to deny long-term disability benefits lacked support in the record. Affirmed in part, reversed in part. See detailed analysis.
Solger v. Walmart Stores, Inc., 1998 U.S. App. LEXIS 9608 (8th Cir. May 14, 1998)- Wal-Mart's employee health insurance plan imposes a $5,000 cap on coverage of treatment of temporomandibular joint (TMJ) conditions. Susan Solger, a Wal-Mart employee, asked Wal-Mart to precertify coverage of treatment for a condition resulting from the partial disintegration of two TMJ implants she had received before she began working for Wal-Mart. The proposed treatment consisted of surgery on Solger's TMJs, ears, and skull. This surgery was expected to cost over $50,000. Wal-Mart agreed to pay, but only $5,000; Wal-Mart's plan administrator determined that the $5,000 cap applied to all of Solger's proposed treatment.
The Eighth Circuit held that the $5000 cap applied to the TMJ's, the ears and the skull.
Mathews v. Trilogy Communications, Inc., 1998 U.S. App. LEXIS 9691 (8th Cir. May 14, 1998)-Mathews was an outside sales person. Mathews, due to his insulin dependent diabetes, had passed out twice while at work. In February 1995, Trilogy changed auto insurance carriers. The new carrier, Chandler Sampson, pulled the driving records of all outside sales people including Mathews. Mathews' record revealed that he had been ticketed for speeding on June 30, 1993, and March 18, 1994, and that his driver's license had been suspended for driving under the influence of alcohol on June 22, 1993. The record also showed that Mathews' license had not been reinstated until June 15, 1994. Based on its review of the employees' records, Chandler Sampson notified Trilogy that Mathews and three other employees had problem driving records. In July 1995, Chandler Sampson informed Trilogy that it planned to monitor Mathews and another employee, and that they would be excluded from coverage for any additional driving violations.
In June 1995, Mathews passed out again from his diabetes and broke his leg. Trilogy, through its self-insured medical plan, paid $15,000 in medical bills related to the leg. Mathews did not tell anyone at Trilogy that his diabetes caused the broken leg.
In August 1995 Chandler Sampson learned that Mathews had received another speeding ticket in April 1995 and notified Trilogy it would no longer cover Mathews. Trilogy asked Mathews about the driving record. Mathews claimed the record was inaccurate but offered no proof of the inaccuracies. Trilogy then fired Mathews.
District Court granted summary judgment on Mathews ADA and ERISA § 510 claims. Eighth Circuit affirmed since Mathews could not show he could perform the essential elements of the job-drive a car.
Herman v. Mercantile Bank, NAN., 1998 U.S. App. LEXIS 8342 (May 1, 1998)- Lenco, Inc., was a closely held corporation in Jackson, Missouri, that manufactured a variety of products. In 1984, Mercantile Bank was the trustee of Lenco's Employees' Stock Ownership Plan (ESOP), a plan under which Lenco employees owned Lenco stock. On April 5, 1984, Mercantile, acting as trustee of the ESOP, sold the ESOP's stock in Lenco to Jerry Ford in one of several transactions by means of which Ford acquired all of Lenco's stock. Later that day Lenco's ESOP Committee appointed Paul Mueller to replace Mercantile as trustee of the ESOP. The following day, Mueller had the ESOP buy back from Ford the Lenco stock it had sold him the day before, for the same price for which it had sold that stock. In the late 1980s Lenco began to experience financial problems, and on June 20, 1989, it filed for bankruptcy. Following Lenco's bankruptcy, the ESOP lost the vast majority of its funds.
The Secretary of Labor subsequently brought this suit against Mercantile Bank, alleging that Mercantile was liable under ERISA, for the ESOP's buy-back of Lenco stock. The Secretary alleged that Mercantile continued to have fiduciary duties to the ESOP despite the appointment of Mueller as successor trustee and thus was liable, although Mercantile did not itself conduct the buy-back, because Mercantile failed to take action to prevent it and also because Mercantile failed to ameliorate the buy-back's consequences to the ESOP when it was reappointed trustee of the ESOP after Mueller's death in 1985. Following a bench trial, the District Court entered judgment for Mercantile. The Secretary appealed.
Eighth Circuit concluded that the District Court did not clearly err in finding that the value of the Lenco stock was such that a prudent fiduciary in Mueller's place would have bought the stock for the price that Mueller paid. Accordingly, Mueller did not violate ERISA in conducting the buy-back. Because the buy- back was not in violation of ERISA, Mercantile, on any theory of the case, cannot be liable for it under ERISA.
Horton v. Reliance Standard
Life Insurance Company, 1998 U.S. App. LEXIS 10168 (11th Cir.
May 20, 1998)
Herman v. South Carolina National Bank, 1998 U.S. App. LEXIS 9778 (11th Cir. May 15, 1998)
Heller
v. Fortis Benefits Insurance Company, 1998 U.S. App. LEXIS 8347 (D.C. Cir.
May 1, 1998)-After paying Heller disability benefits from 1986 through 1991 due
to Heller's back injuries. Fortis terminated the benefits and sought reimbursement
of the benefits paid when Fortis determined Heller was not eligible for the benefits. Fortis
investigated and believed she worked at her
husband's law practice. Fortis also obtained a vocational report indicating there
were jobs Heller could perform. Three doctors also opined that Heller could
work. On January 15, 1993, Fortis terminated the benefits and demanded repayment
of the benefits from December 15, 1988 forward because Heller was working. The denial
letter failed to notify Heller of her appeal rights. Heller's attorney
sent in some documents. Fortis notified Heller's attorney that it was treating
the documents as a request for an appeal. Two days after receiving this notice
from Fortis, Heller sued. Fortis counterclaimed for restitution of benefits paid
Heller after January 1991. The district court resolved the case on cross-motions
for summary judgment, ruling in Fortis' favor on both Heller's claim and its
counterclaim. The court found that Fortis was entitled to $19,811.00 in
restitution, the amount erroneously paid to Heller after her fifth year of
receiving benefits.
Heller argued that the denial letter was deficient. The D.C. Circuit acknowledged that it may have been but the courts need to look at the review process as a whole. Heller also argued that the appeals process was meaningless since it would have been nothing more than the claims adjuster reviewing its own work. D.C. circuit found this argument to be meritless since Heller did not use the appeals process. "Not only did she shortcut any review that might have occurred, but she even asserted in her complaint that she had exhausted her administrative remedies. Under the circumstances, she cannot establish that she was denied "a fair opportunity for review" of her claim because she never gave Fortis a chance to complete its review." Nor can she show that Fortis' processing of her claim denial prejudiced her because she immediately filed suit against the insurer. By doing so before exhausting the remedies provided by her insurer, Heller's position now is no different than it would have been if Fortis had neglected to process her correspondence as an appeal.
D.C. Circuit also found the granting of summary judgment in Fortis' favor to be proper since the medical evidence and the vocational evidence in the administrative record showed that Heller could work.
D.C. circuit approved a causer of action for restitution under 29 U.S.C. § 1132(a)(3) following the Third Circuit. D.C. Circuit allowed Fortis to obtain restitution even though the plan did not expressly allow restitution.