Brininger LTD APRIL 1998 ERISA NEWSLETTER

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Supreme Court

First Circuit

Second Circuit

Third Circuit

Fourth Circuit

Fifth Circuit

 Thibodeaux v. Continental Casualty Insurance Company, ____ F.3d ___, (5th Cir. 1998). Plaintiff -appellant argued that, for purpose of determining the meaning of the phrase "totally disabled" courts should use the meaning under state law instead of the definition in the plan. Following Hammond v. Fidelity & Guaranty Life Ins. Co., 965 F.2d 428 (7th Cir. 1992), the Fifth Circuit held that ERISA preempts state decisional rules regarding policy interpretation.

Sixth Circuit

Seventh Circuit

 Cozzie v. Metropolitan Life Insurance Company, ___ F.3d ___ (7th Cir. 1998). Cozzie, as surviving spouse of her deceased husband sued for $42,000 in accidental death benefits. Mr. Cozzie died in a one car accident. Mr. Cozzie's blood alcohol level was twice the Illinois legal limit. Plan denied Ms. Cozzie's claim for benefits claiming the death was not accidental.

Ms. Cozzie sued. District court applied the arbitrary and capricious standard of review.

Seventh Circuit held that the correct standard of review was the arbitrary an capricious standard since the plan explicitly states that MetLife" determines conclusively for all parties all questions arising in the administration of the Program and any decision of the insurance company is not subject to further review.".

The Court then had to decide whether the determination by Defendant that Mr. Cozzie's death was not accidental since it was reasonably foreseeable because of the amount of alcohol drank by Mr. Cozzie. The Court followed the tests for arbitrary and capriciousness set out in Chalmers v. Quaker Oats Co., 61 F.3d1340, 1344 (7th Cir. 1995). Those factors are possible bias on the part of the fiduciary, the complexity of the issues, the process of the decision-making body, the extent to which the fiduciaries utilized the services of experts as necessary, and finally the soundness of the fiduciary's ratiocination.

Court, citing a number of cases involving death and intoxicants determined that an accident means an event not reasonably foreseeable. Court was troubled that the summary plan description did not exclude a death such as this:

The absence of an explicit exclusion must be given significant weight in any review of the reasonableness of a decision by the fiduciary to deny coverage. ERISA requires that the plan summary's description of coverage be "sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. sec. 1022(a)(1). Here, the plan does not specifically exclude from coverage the conduct at issue but does exclude other conduct--notably suicide, attempted suicide and purposely self-inflicted injury. (Footnotes omitted) However, given the amount of alcohol ingested here and the exclusion of any other cause for the accident, we cannot say that it was arbitrary and capricious for MetLife to determine that this particular vehicular death was no "accident." Nevertheless, we caution that plan drafters would be well advised to demonstrate significant circumspection in attempting to require these general plan terms to bear too much weight.

Dugan v. Smerwick Sewerage Company,__ F.3d ___ (7th Cir. 1998). This is a suit to recover plan contributions.

Eighth Circuit 

Ninth Circuit

Tenth Circuit

 

Phelps v. U.S. West, Inc., ___ F.3d ___ (10th Cir. 1998). Phelps retired believing Defendant would give him lifetime health benefits. Five years after retiring Phelps, believing that Defendant was trying to systematically put the retirees into HMOs, Phelps filed a class administrative claim seeking to have Defendant reaffirm its commitment to provide lifetime health benefits. Before receiving a denial at the administrative review stage, Phelps sued to enforce Defendant's commitment to provide life time benefits to retirees. About a week after Phelps sued, the administrator denied Phelps' claim but said the plan would be amended to acknowledge Defendant's commitment to provide lifetime benefits. . Two months after Phelps sued, Defendant amended the plan to provide the lifetime benefits. About a month later the parties resolved other issues and entered into a stipulation of dismissal. Phelps then moved for attorneys' fees in the amount of $27,072.50.

District court denied the fees adopting the magistrates finding that Phelps was not the prevailing party and because the five factors were not in Phelps favor.

Tenth Circuit affirmed the denial of fees because Phelps could not show his lawsuit caused the plan amendment.

 

Capital Cities/ABC, Inc. v. Ratcliff, __ F.3d ___ (10th Cir. 1998). Court determined that the people who delivered the newspaper pursuant to an agency agreement were not employees for purposes of obtaining Plan benefits.

 

Eleventh Circuit

Blue Cross & Blue Shield Of Alabama v. Sanders, ____ F.3d ___ (11th Cir. 1998). Court was called upon to decide the meaning of a subrogation clause. The version of the Plan at issue here was executed on August 23, 1991, with a retroactive effective date of January 1, 1991. The "Subrogation" provision of the Plan stated in part:

If the Claims Administrator pays or provides any benefits for a Member under this Plan, it is subrogated to all rights of recovery which that Member has in contract, tort or otherwise against any person or organization for the amount of benefits paid or provided. That means that the Claims Administrator may use the Member's right to recover money from that other person or organization.

Separate from and in addition to the Claims Administrator's right of subrogation, if an Employee or a member of his family recovers money from the other person or organization for any injury or condition for which benefits were provided by the Claims Administrator, the Member agrees to reimburse the Claims Administrator from the recovered money that amount of benefits the Claims Administrator has paid or provided.... The right to reimbursement of the Claims Administrator comes first even if the Member is not paid for all of his claim for damages ... or if the payment he receives is for, or is described as for, his damages (such as personal injuries) for other than health care expenses....

In March 1991, Defendant Sanders was injured in a car wreck. The Plan paid $12,678.69 in medical bills. In November 1991 Defendant Sanders filed suit against the tortfeasor. Defendant Sanders obtained a default judgment which was settled in October 1992 for $200,000.

In April 1996, Plaintiff Blue Cross, the Claims Administrator of the self-funded plan, sued for other equitable relief under 29 U.S.C. § 1132(a)(3) to recover the $12,678.69. In their answer, Defendant Sanders admitted that Plaintiff was a plan fiduciary. The district court granted Plaintiff Blue Cross's Motion for Summary Judgment.

Eleventh Circuit determined that Blue Cross had standing as a fiduciary (since claims administrators can be a fiduciary) and as bringing a claim under 29 U.S.C. § 1132(a)(3). Court held that ERISA preempts the Alabama statute related to subrogation. The Eleventh Circuit rejected the Plaintiff's argument that a 2-year statute of limitations applied. "We hold that a fiduciary's action to enforce a reimbursement provision pursuant to 29 U.S.C. § 1132(a)(3) is most closely analogous to a simple contract action brought under Alabama law. Accordingly, we apply Alabama's six-year statute of limitations for simple contract actions." On appeal the Sanders alleged that Blue Cross could not retroactively apply the amendment regarding subrogation. Eleventh Circuit held that since Sanders failed to raise this issue in the district court, Sanders waived it on appeal.

Engelhardt v. The Paul Revere Life Insurance Company

D.C. Circuit