Cody Allison, Author at Cody Allison & Associates

Law and Medicine Intersect

There are not many areas of the law in which medical proof is so necessary to be able to make a successful claim. Below is a useful article on this subject. Remember, if you need help in making a long-term disability claim, we are here to help.

HEALTH LAW AND ETHICS ERISA Litigation and Physician Autonomy

Peter D. Jacobson, JD, MPH

Scott D. Pomfret, JD

THE FEDERAL EMPLOYEE RETIREMENT INCOME SECURITY ACT (ERISA) looms like a colossus over the man- aged care environment. Originally enacted to regulate employer-sponsored pension plans, the statute also covers health care benefits established by self-insured employers (with few exceptions, such as for governmental employees). According to recent Department of Labor estimates, ERISA applies to approximately 125 million US citizens.1 ERISA has created a regulatory vacuum by preempting state regulation of managed care organizations (MCOs) and drastically limiting state medical liability lawsuits against MCOs, while providing minimal federal regulation in their place. 2-4 For physicians, ERISA preemption has indirectly caused courts to favor MCOs’ cost containment initiatives over traditional notions of physician autonomy. 5 The treatment a physician recommends is vulnerable to a managed care utilization management process largely unconstrained by state regulation or liability law, inevitably resulting in reduced physician autonomy. The consequences of ERISA preemption lie at the heart of proposed congressional patients’ rights legislation that would restore the primacy of the patient-physician relationship and permit state legal challenges to cost containment programs. At issue is control over physicians’ clinical decisions and the ability to challenge improperly operated cost containment programs. Because ERISA plays a vital role in the relationship between physicians and MCOs, it is important for physicians to understand what ERISA is, how it operates, and how it influences clinical decision making and physician autonomy in the managed care era. In this article, we outline ERISA’s major provisions, analyze trends in ERISA litigation applicable to physicians, and conclude by discussing the policy implications and

significance of these trends for physician autonomy. AN ERISA PRIMER Overview Congress enacted ERISA in 1974 primarily to regulate pension plans, but it also included health benefit plans within its scope. 6 ERISA’s goals are to establish uniform national standards, safeguard employee benefits from loss or abuse, and encourage employers to offer those benefits. To achieve these objectives, ERISA imposes strict requirements on pension plan administrators for reporting and disclosure, 7 participation and vesting, 8 funding, 9 and performance of fiduciary obligations. 10 ERISA does not mandate that employers offer benefit plans, but provides a structure for national uni-

formity of administration once such plans are extended. Only a few of these requirements apply to health benefit plans, in part because Congress did not pursue the impli-

cations of regulating both pension and health benefit plans under 1 statute. Nor could Congress have anticipated the dominance of the managed care model. As a result, ERISA provides almost no federal regulation of health plans. Nevertheless, ERISA has 3 provisions that directly affect physician autonomy: ERISA’s preemption clause, its limited remedial scheme, and its fiduciary duty obligation. Author Affiliations: School of Public Health, University of Michigan, Ann Arbor

(Mr Jacobson) and Ropes and Gray, Boston, Mass (Mr Pomfret). Corresponding Author: Peter D. Jacobson, JD, MPH, School of Public Health, Uni-versity of Michigan, 109 Observatory, Ann Arbor, MI 48109-2029 (e-mail: pdj@umich.edu). Health Law and Ethics Section Editors: Lawrence O. Gostin, JD, the Georgetown/ Johns Hopkins University Program in Law and Public Health, Washington, DC, and Baltimore, Md; Helene M. Cole, MD, Contributing Editor, JAMA.

The Employee Retirement Income Security Act (ERISA), enacted in 1974 to regulate pension and health benefit plans, is a complex statute that dominates the managed care environment. Physicians must understand ERISA’s role in the relationship between themselves and managed care organizations (MCOs), including how it can influence clinical decision making and physician autonomy. This article describes ERISA’s central provisions and how ERISA influences health care delivery in MCOs. We analyze ERISA litigation trends in 4 areas: professional liability, utilization management, state legislative initiatives, and compensation arrangements. This analysis demonstrates how courts have interpreted ERISA to limit physician autonomy and subordinate clinical decision making to MCOs’ cost containment decisions. Physicians should support efforts to amend ERISA, thus allowing greater state regulatory oversight of MCOs and permitting courts to hold MCOs accountable for their role in medical decision making.

ERISA’s Preemption Clause Traditionally, states are responsible for regulating health care delivery, and litigation against health care providers is resolved under state law. Medical liability lawsuits are rarely heard in federal courts. ERISA alters the traditional approach by preempting state law, which means that state laws purporting to regulate health plans may not be enforced in any court. 11 In this context, state laws include legislation and regulations, such as those mandating particular benefit coverage, and most medical liability actions targeting MCOs. Courts have interpreted the preemption clause broadly to prevent enforcement of state laws ranging from laws protecting the patient-physician relationship to litigation challenging how cost containment initiatives are implemented. The courts have held that Congress intended such broad preemption of state law to allow a multistate employer to offer a single, nationally consistent plan to all its workers without the cost and inconvenience of complying with contradictory state regulations, legislation, or litigation. National uniformity conforms with congressional intent to keep the costs of administering an employee benefit plan (EBP) low to encourage employers to offer health care coverage. 12 In assessing whether a particular state law is prohibited, courts look sequentially to each of the 3 parts of the preemption provision. First, courts must decide whether the state law “relates to” an EBP. 13 In doing so, courts consider whether the challenged law burdens the administration of plan benefits or has only a remote impact on them. Courts generally hold that ERISA preempts state laws that bind employers or plan administrators to particular benefit choices or that preclude the uniform administration of an EBP. 14 For example, a state lawsuit challenging a benefit determination, such as

an MCO’s denial of additional hospital coverage, “relates to” a health plan because that challenge would require the court to interpret the plan’s benefits, hence binding the administrator to certain actions. But laws with only a remote or incidental effect on plan administration, such as a surcharge on hospital services, may not “relate to” the EBP.

A law is not preempted merely because it “relates to” a plan. Courts must also interpret 2 qualifying provisions, the savings clause and the deemer clause. ERISA’s savings clause provides that laws regulating the business of insurance, even if they “relate to” a managed care plan, will not be preempted. This allows states to continue to enforce state laws governing the business of insurance by saving state regulation of health insurance, such as solvency requirements, from preemption. In turn, the deemer clause qualifies the savings clause. The deemer clause prevents states from deeming (or characterizing) an ERISA-covered plan as the business of insurance.

States may not characterize a self-funded plan as an insurer to circumvent the effect of the “relates to” clause. As an example of how these terms interact, consider a state law mandating certain health insurance benefits. That law “relates to” an ERISA plan since it would involve the structure of plan benefits. Even though the legislation would be

saved from preemption insofar as it regulates EBPs that purchase traditional insurance policies, it would still be preempted if, for example, a state attempted to apply the statute to a self-funded EBP. Under the deemer clause, a self-funded EBP cannot be an insurer. ERISA’s Limited Remedies Although much state litigation is preempted, ERISA provides some relief for injuries to health plan participants through its civil enforcement scheme. A plan participant or beneficiary may bring a civil action against an administrator who fails to comply with a request for information about the plan, to recover claimed benefits, to enforce rights under the terms of the plan, or to clarify rights to future benefits. 15 A plan participant may also bring suit against a plan fiduciary who breaches any fiduciary duties and may seek to enjoin practices that violate ERISA or the terms of the plan. Even if victorious, a plan participant can usually only recover the amount of the benefits that should have been provided, as well as certain incidentals such as attorneys’ fees. This is a decidedly more limited remedy than what is usually available under state law, through which the patient might be able

to recover damages for any economic losses, non-economic damages for pain and suffering, and possibly punitive damages (especially in cases alleging bad faith insurance denial). 16 Take, for example, a challenge to an improperly denied benefit filed in state court. If the MCO successfully invokes preemption, the plaintiff will be forced to sue instead under ERISA’s limited civil enforcement scheme. Effectively, this insulates the MCO from exposure to monetary damages, except for what it would have paid (the amount of the denied benefit) in the first place. Fiduciary Duties ERISA imposes a fiduciary duty on those who make discretionary decisions on behalf of the EBP. A fiduciary must discharge his/her discretionary functions “solely in the interest of the participants and beneficiaries” of the plan. 17 In many, but not all cases, 18 courts have held that MCOs are subject to this fiduciary duty when making certain decisions, such as reviewing the appropriateness of a physician’s treatment recommendations. 19 On the other hand, MCOs and employers are not considered fiduciaries for establishing or changing the terms of the plan. Thus, the fiduciary duty extends only to decisions made once the plan is in place. 20,21 Employers must provide whatever health benefits they promise but need not offer plans at all and can change what they offer af-

ter giving plan beneficiaries proper notice. In exercising the fiduciary duty, an obvious problem is that the clinical needs of one patient may conflict with the

MCO’s economic interests. Increasingly, disappointed plan participants have sued for breach of fiduciary duty, often challenging the denial of physician-prescribed benefits, especially when there is a potential conflict of interest. 22

ERISA LITIGATION AND PHYSICIAN AUTONOMY 922 JAMA, February 16, 2000—Vol 283, No. 7

To determine whether an MCO breached its fiduciary duty when denying plan benefits (ie, that the denial is not solely in the interest of the participant), courts use different levels of scrutiny based on the amount of discretion granted to the MCO under the EBP. Generally, courts are very deferential, upholding the plan administrator as long as the decision was not arbitrary and capricious. 23,24 In most cases, courts have equated compliance with the terms of the EBP as, by definition, acting “in the interests” of the plan participant. In this sense, the court limits its review to ensuring that the MCO reasonably comported with the terms of the EBP. 25 As a result, MCOs retain power vis-a-vis physicians by controlling the interpretation of EBP terms (including medical necessity). But in a case from which the plan profits directly from the denial, the potential conflict of interest must be considered a factor in deciding whether there was an abuse of the fiduciary’s discretion.

26 RECENT CASE TRENDS MCO Malpractice Liability

For many years, courts have monitored quality of care through medical liability lawsuits. Originally, physicians were the targets of such suits, then hospitals were added, and now MCOs have been held liable under state tort law. When a patient receives care under a health plan not governed by ERISA (as when a person buys his/her own health

insurance), MCOs have been held directly liable for their own actions, such as the failure to maintain safe and adequate facilities, select and retain competent physicians, oversee all patient care within the institution, and ensure quality care. 26 Managed care organizations can also be held vicariously (indirectly) liable for malpractice committed by physicians who are independent contractors. The primary factors affecting whether a court will impose vicarious liability include the amount of influence the MCO has over the clinical decision, patients’ perceptions of the relation ship between the physician and the MCO, and the manner in which the health plan is marketed. Managed care organizations operating in contexts other than ERISA may also be subject to state consumer protection or bad faith insurance laws for improper processing of claims that results in delayed or denied care. 16 In non-ERISA cases, courts are essentially following the pattern of establishing liability that was applied to hospitals beginning in the 1960s. 28 Managed care organizations covered by ERISA operate under different rules. ERISA preempts many state law claims alleging that the MCO’s denial or delay in care caused an adverse medical outcome. Those types of lawsuits may be brought in federal court as actions under ERISA’s civil enforcement scheme, but the limited remedies available effectively insulate MCOs from liability and, therefore, accountability for these medical outcomes. Liability may be

borne instead entirely by physicians. The practical effect is that MCOs often control resource allocation, but physicians (and patients) bear the costs when resource allocation decisions produce adverse outcomes. In these cases, the patient’s only remedy is to sue the physician, regardless of how much influence over the clinical decision the physician actually exercised. Courts have not been consistent in deciding whether all or merely some state law claims against MCOs will be preempted. Until recently, led by early Supreme Court doctrine, lower federal courts have interpreted the phrase “relates to” very broadly, preempting most state law tort suits challenging health plan innovations and medical decisions. For example, courts generally have held that challenges to delayed or denied care relate to an EBP and are preempted, 29 including litigation alleging that the structure of the EBP was responsible for poor medical outcomes. But in New York State Conference of Blue Cross and Blue Shield Plans v Travelers Insurance Co, 30 the Supreme Court permitted New York State to impose a tax on all insurers except Blue Cross and Blue Shield, reasoning that a uniform tax only tangentially relates to ERISA plan administration. This decision signaled a scaling back on the breadth of preemption. After this decision, courts have been less vigorous in finding ERISA preemption. Narrowing preemption has inspired other related changes. The most important change is that courts have erected a critical distinction between state tort law challenges to the technical quality of care (ie, liability claims for substandard clinical care) and state law challenges to the quantity of care (involving improper plan benefit decisions). The latter must be brought in federal court subject to ERISA’s limited remedies; the former would be heard in state court. In practice, the quantity/quality distinction may signal a nascent trend toward holding MCOs accountable at least in some circumstances, especially, if courts strain to characterize a dispute as involving quality. By way of example, the court in Bauman v US Healthcare, Inc 31 recently held that the defendant’s policy of discharging a newborn within 24 hours without adequately considering the medical appropriateness in a given case could be challenged in state court as substandard quality of care. As their liability expands,

MCOs may begin to reconsider the ways in which they review clinical decisions, as the United Healthcare decision 32 signaled recently by shifting greater clinical authority back to physicians. It is one thing to deny treatment when potential liability rests with the treating physician, but it is an other to deny the claim when the organization might also be held responsible. Consider, for example, state litigation seeking to hold an MCO indirectly liable for the actions of an affiliated physician. Because substandard care is litigation about the quality of care and not the quantity of benefits, the case will probably be heard in state court. And because state courts assess liability based in part on the amount of influence the MCO exerts over clinical decision making, MCOs may seek to avoid liability by loosening their control below the threshold required by state law. The result is increased physician autonomy. While this result is what we anticipate, greater liability exposure could alternatively lead an MCO to protect itself by exerting stricter oversight of clinical decisions. Exactly how MCOs respond will need to be studied. Preemption is not the only area in which this trend toward judicial reconsideration may be emerging. In recent years, many lawsuits charging MCO misconduct that resulted in adverse outcomes from delayed or denied care have been cast as breaches of fiduciary duty under ERISA. 33 No patient has yet recovered a judgment in such a case 34; but to the extent such suits are successful, MCOs might be less likely to second-guess clinical decision making. To date, the decisions have been inconsistent and no truly coherent doctrine has yet emerged. Most courts have explicitly refused to be the agents of a major overhaul of ERISA doctrine, preferring to leave such a role in the legislative arena. 5 Utilization Management A central aspect of the managed care environment is the emergence of new organizational forms, including utilization management processes, which have mixed clinical and financial functions. Managed care organizations rely heavily on utilization management techniques, such as preauthorization for high-cost medical interventions, to reduce costs. The more courts uphold utilization management decisions, the less control the treating physician has over the clinical encounter. In state cases for which ERISA does not apply, courts have held generally that physicians and MCOs may share liability for bad outcomes. 35,36 By contrast, ERISA preemption clearly shields MCOs from liability in state courts for utilization management decisions, even when these are arguably medical and not merely administrative in nature. So far, federal courts have uniformly held that utilization management decisions relate to benefit plans and are preempted, regardless of whether medical care recommended by the treating physician is denied. For instance, in Danca v. Private Health Care Systems Inc, 37 the court supported the prevailing view that a utilization review dispute was pre-empted by ERISA because it is part of the process used to assess a benefit dispute. 38 And in Corcoran v United Health Care Inc, 39 the court concluded that United’s utilization management program, whose denial of hospital care resulted in the death of a fetus, made medical decisions in the context of determining benefits. Accordingly, the court preempted Corcoran’s lawsuit under ERISA. By holding that the administrative aspect of the utilization management process trumps the medical aspect (ie, that it is more a quantity than a quality decision), the federal courts, through ERISA, pro-

vide wide latitude for health care plans to control costs, at the possible expense of both individual access to health care services and the treating physician’s clinical autonomy. State Legislative Initiatives As part of the backlash against managed care, many state legislatures have tried to safeguard physician autonomy. This legislation has ranged from prohibiting gag clauses to comprehensive reforms designed to limit the primacy of cost containment strategies. In many instances, courts have ruled that these laws are preempted by ERISA, although the decisions are by no means uniform. Such rulings have essentially negated state legislative attempts to restore physician

autonomy and have reinforced health plan control over clinical decisions. The most extensive attempt to regulate MCOs is the Texas statute 40 requiring an external appeals process for health care denials and allowing subscribers to sue the MCO for poor quality of health care. A federal district court recently upheld the right to sue, based on the quality/quantity distinction, yet overturned the external grievance process as preempted by ERISA. 41 Although the case is on appeal, that the court preempted the external review process as a law “relating to” an EBP is an indication of the ERISA-created hurdles facing state laws that try to bolster clinical autonomy. Just as troublesome, the current uncertainty in ERISA litigation makes it difficult, if not impossible, to predict which state laws will be preempted. As an example, courts have split on whether any willing provider laws are preempted by ERISA. 42,43 Any willing provider laws would require MCOs to contract with any provider willing to meet the MCO’s established criteria and are intended to preserve patient choice of physician. Compensation Arrangements Another important cost containment mechanism used by MCOs is to provide financial incentives to plan physicians to restrain costs. For instance, salary withholds and bonuses are used as compensation incentives for limiting referrals to specialists and other high-cost procedures. No court has yet ruled that these financial incentives violate public policy, though some non-ERISA cases have permitted challenges to be tried before a jury. 44 ERISA does not regulate how MCOs create incentive structures to motivate contracting physicians’ compliance with cost containment measures. More importantly, ERISA preemption may prevent states from trying to regulate such compensation and incentive arrangements through tort law or legislation. A typical case is

Lancaster v Kaiser Foundation Health Plan of Mid-Atlantic States Inc, 45 in which the court held that the plaintiff ’s state law claim alleging negligence in establishing and operating an incentive program that encouraged physicians not to prescribe certain expensive tests and not to refer to specialists, was preempted by ERISA. The plain-

tiff claimed that this program was a substantial factor in her physicians’ failure to diagnose her brain tumor for 5 1⁄2 years until it had invaded 40% of her brain. The court characterized the establishment and operation of this incentive scheme as an administrative decision affecting the provision of benefits and therefore dismissed the claim as preempted. Not all courts have agreed. 46 A more recent case perhaps presages a different direction based on breach of fiduciary duties (with, of course, the corresponding limit on remedies under ERISA). In Herdrich v Pegram, 47 the court held that a patient could sue for breach of fiduciary duty based on an allegation that the nature of incentive arrangements between the MCO and the physicians caused her to be deprived of proper medical care and that the MCO reaped economic gain from this deprivation. Even though the Herdrich court specifically noted that the existence of economic incentives would not automatically be tantamount to a breach of fiduciary duty, this case is a potentially significant extension of the rationale advanced in non-ERISA cases. If read broadly and followed by other courts, this case could augur an attack on the underlying financial incentives at the core of managed care, perhaps by seeking to enjoin their use. 47 However, Herdrich may represent a legal theory that is viable only in an extreme case in which “a fiduciary jettisons his responsibility to the physical well being of the beneficiaries in favor of loyalty to his own fi-

nancial interests,” 46 and the Supreme Court has agreed to review the decision.

COMMENT

ERISA has played an important role in facilitating, and perhaps stimulating, the development of managed care. But this undeniable policy benefit has come at a high cost to some individual plan subscribers and to physicians. From a policy perspective, ERISA has created a regulatory vacuum in which states cannot act and there is no comparable federal regulatory mechanism. From a legal perspective, ERISA has essentially insulated MCOs from liability by blocking state courts from resolving litigation challenging managed care practices. From a clinical perspective, ERISA has facilitated reductions in physician autonomy relative to health plan influence over clinical decisions. Policy Consequences This analysis suggests several consequences of importance to physicians. First, the effect of judicial interpretations of ERISA is to subordinate physician autonomy and the patient physician relationship to managed care cost containment goals. Implicitly, ERISA reinforces the status quo of the health care delivery market and hence managed care’s current market domination. Second, perceiving themselves bound by ERISA, courts do not champion either physician autonomy or the patient-

physician relationship. Courts that once protected physician autonomy, are no longer doing so. 49 Judges repeatedly suggest that complaints against managed care should be taken to the legislative branches of government rather than to the courts. Since state legislative initiatives are often barred by ERISA preemption, Congress appears to be physicians’ best hope for change or relief. As of this writing, congressional action to amend the preemption provision (so that state legislatures and courts may act with fewer constraints) or to create new federal regulations similar to recent state initiatives appears to be unlikely. During the 1999 session, the House of Representatives enacted a bill that would permit patients to sue MCOs for damages in state courts, but the Senate bill does not contain a right-to-sue provision. Although House and Senate conferees have been meeting to reconcile the 2 bills, the prospects for enactment are slight, in part because the House conferees are largely opposed to the right-to-sue provision. Regardless, physicians should continue to support attempts to remove ERISA preemption. Even though treating physicians would remain accountable, MCOs should also be held accountable for both financial decisions that affect clinical treatment and for their implicit role in making medical decisions. Physicians should not be left in the untenable position of being entirely responsible for cost containment provisions over which they have almost no control. By exposing MCOs to similar liability considerations, MCOs

will not be able to influence medical decisions with impunity, which may enhance physician autonomy. Short of eliminating ERISA preemption, Congress could also amend ERISA by expanding on the available remedies. Consistent with the goal of maintaining national uniformity, Congress could retain preemption but allow individuals to sue for monetary damages in federal court for an ERISA violation. Congress could also direct the US Department of Labor (as the appropriate regulatory agency) to develop regulations that would more effectively protect the patient-physician relationship. For instance, regulations might address patients’ rights to notice of a denial of care and to an external grievance panel. Physician Autonomy An assumption animating this article is that deference to physician autonomy is a desirable goal for better patient care. To some, that proposition may not be self-evident. After all, public concern with rising health care costs and perceived harms from overtreatment in the fee-for-service era led

directly to managed care’s cost containment innovations and concomitant restrictions on physician autonomy as public policy objectives. Indeed, constraints on physician autonomy predate the effects of ERISA litigation. 50 Thus, one scenario suggests that if Congress removes ERISA preemption and helps restore physician autonomy, man aged care’s cost containment goals may be difficult to achieve. This outcome seems unlikely given the current policy environment. Another possible scenario is that MCOs might respond to eliminating ERISA preemption by imposing more aggressive utilization management controls, ironically reducing physician autonomy below what it is under current financial incentives. Yet there is no indication that MCOs are eager to accept the additional liability consequences that may result from greater control over clinical decisions. No matter whether Congress changes ERISA preemption or expands ERISA’s limited remedies, the tensions among physicians, MCOs, and patients will not be resolved easily.

ERISA LITIGATION AND PHYSICIAN AUTONOMY

JAMA,

February 16, 2000—Vol 283, No. 7

925

Even if there are some downsides to physician autonomy, patient care ultimately depends on the treating physician’s ability to maintain patient trust while balancing patient demands for high-quality care with the MCO’s legitimate cost containment efforts. In truth, these cost containment programs are needed corrections to an unsustainable fee-for-service system, and many physicians have worked effectively to mediate managed care’s constraints. Yet, inevitably, some patients will not be well served by this system. Either there will be undue delay in arranging health care, or benefits will be denied that should have been provided. In those situations, holding MCOs legally accountable provides incentives for better health care plan administration. ERISA preemption simply goes too far in removing the liability threat

for improper undertreatment.

Funding/Support:

Support for this article was provided by an Investigator Award in Health Policy Research from the Robert Wood Johnson Foundation, Princeton, NJ. Acknowledgments:

We thank Stephen Modell, MD, David Hyman, MD, JD, and Edward Goldman, JD, for comments on a previous draft.

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UncategorizedJune 24, 20240 comments

by Cody Allison

Federal Judge, William Acker, Testifies Before Congress About ERISA

Below, you will find an interesting transcript which shares some of the thoughts of a senior Federal judge who had lots of ERISA cases tried before him. He has a lot of experience in this area of the law and his thoughts on it are very enlightening.

Remember, if you have questions about making a long-term disability claim, we are here to help. Contact us today!

THE FOLLOWING IS A TRANSCRIPT OF TESTIMONY OF WILLIAM M. ACKER, JR. SENIOR UNITED STATES DISTRICT JUDGE NORTHERN DISTRICT OF ALABAMA BEFORE THE COMMITTEE ON FINANCE OF THE UNITED STATES SENATE SEPTEMBER 28, 2010

It is a privilege to be able to share with you this morning some of the thoughts of a trial judge who has been grappling with ERISA for twenty-eight years. Appointed in 1982, I sweated over ERISA, and watched other courts sweat over it, until in 1998 I wrote the law review article that probably prompted this Committee to invite me. The article was entitled “Can the Courts Rescue ERISA?” A copy of that article is attached to my testimony as Exhibit “A.” Although my old arguments are now somewhat dated, my answer to the question then was “NO”, and since that time I have not changed my mind. The courts have not rescued ERISA. If anything, they have dug the ERISA hole deeper.

I am not saying that the courts, including the Supreme Court, have not tried to make sense of ERISA, and to make it workable, but in truth, the situation is worse in 2010 than it was in 1998, and getting worse every day. I hope that the Committee is not as interested in citations of authority to support my views as it is in the views themselves, acquired from experience as a trial judge confronted for twenty-eight years with a constantly changing ERISA. I am assuming that except for Chairman Baucus, whose State

has done away with the so-called “discretionary clause”, for Senator Stabenow, whose State has done the same thing, and for Senator Cornyn, whose State is in the process

of doing it, if it has not already done so, and, who, as Texas Attorney General, was sued by Corporate Health Insurance in the case that became central to the “five-to-four”

decision by the Supreme Court in Rush Prudential v. Moran, the other members of this Committee have no specialized knowledge about ERISA, or of the effect that the so-called “discretionary clause” (first given prominence by the Supreme Court in Firestone v. Bruch) has had on the ERISA courts and litigants as they plod along. The Committee has already heard or will hear testimony from others who are my intellectual equals or my superiors, who support the continuation of the “discretionary clause”,

as central to ERISA benefits decision-making. I will try to explain why the “discretionary clause” is a disaster, both as a matter of economics and as a denial of “due process”.

The Economic Effect of Bruch “The Law of Unintended Consequences” Bruch put the fox in the hen house when it authorized ERISA plan administrators to operate under

the now universally used provision (except for Michigan and Montana) that allows the plan administrator both to interpret the plan and to decide how to apply it to a particular disability claim. This concept not only is foreign to logic and common sense, but is unworkable and expensive. I am attaching as Exhibit “B” a copy of the initial

order I routinely use in ERISA disability benefits cases. A look at it from top to bottom will illustrate the complexity of court decision-making, something that only takes place after the already lengthy processing of the administrative claim, and after the claim has been denied upon final review by the plan administrator. A driving force behind the idea of granting the insurer/plan administrator/plan sponsor almost unbridled discretion is the belief that the procedure will lessen costs and lessen the time spent on

ERISA cases. This contention is the main argument in the amici curiae briefs filed in support of Standard Insurance Company’s unsuccessful certiorari petition that sought to

overturn the decision that confirmed Montana’s right to eliminate the “discretionary clause”. It is, of course, true that in drafting legislation, Congress has an obligation to consider the economic impact, as well as the needs of society. This judge is willing to assume that Congress engaged in that debate before it enacted ERISA. The language

it chose in 1974, if it had not, over time, been altered or obliterated by the courts, would provide for de novo consideration by a court of all denials of ERISA benefits.

ERISA’s Section 502(a)(1)(B) straightforwardly provides that any beneficiary of a plan governed by ERISA can bring a “ civil action… to recover benefits due him under

the terms of his plan”. Rule 2 of the Federal Rules of Procedure provides: ” There is one form of action – the civil action”. This language recognizes nothing less because even if they win, the award of a fee is within the court’s discretion. A claimant faces a structurally-conflicted decision-maker, whose self-interest not only bears on the way it looks at the claim, but provides every reason to prolong the review process. Once the case gets to court, using the Brunch “abuse of discretion” standard, a voluminous court opinion will eventually emerge. It will necessarily compare in detail the hearsay of opposing medical experts and vocational experts who opine on the income that can be realized from an alternative job that the plaintiff can perform and the try to justify either an “abuse of discretion”, or no “abuse of discretion”. The trial judge, if he or she takes Bruch seriously, starts by being intimidated. This problem was exacerbated by the Supreme Court in Metropolitan Life v. Glenn. In that case, the high court, which quickly acknowledged the existence of a structural conflict-of-interest, held that judges must consider the conflict-of-interest as a factor i determining whether or not there has been an “abuse of discretion”. This new rule encourages plan administrators to create procedures that look like a blunting of their conflict-of-interest. It also increases

the work of the trial court. After the Complaint has been filed, the court must first decide whether to limit its consideration to a review of the so-called administrative record, which may be a thousand pages, or to allow limited discovery during which the plaintiff can also seek evidence that may place more weight on the inherent conflict-of-interest. This judge does not criticize his fellow jurists, but sympathizes with them, for the head scratching they do as they decide a controversy under the instructions given in Bruch and Glenn. Not only does Bruch tilt the scales against the beneficiary on questions of fact, but on the plan. Ordinarily, the interpretation of a contract is for a court or for a jury. In one of my cases, Oliver v. Coca Cola, the Eleventh Circuit held that my opinion interpreting the plan to resolve an obvious ambiguity against the draftsman, was correct, but another panel of the Eleventh Circuit, in a separate case, held that the same plan was reasonably construed the other way by the Coco-Cola

claims committee, meaning that Coca-Cola’s claims committee did not abuse its discretion when it arrived at its favorable construction of the contract Coca-Cola had drafted.

Oliver was remanded to me with instructions to remand it, in turn to the Coca-Cola claims committee for its reconsideration. If the case had not been settled as that point, the courts would still be laboring over it. What Shell is the Pea Under? Another chore for the trial courts that needs to be removed arises from the fact that defendants don’t confess their liability, and plaintiffs don’t know which entity to sue. The funding source for the payment of monetary benefits is often obscure. I will give you an example from my personal experience. In Florence Nightingale Nursing Service. v. Blue Cross, the only defendant named in the Complaint was Blue Cross, but the truth was that the

plan sponsor, who was the only obligor, was Integraph Corporation, the employer of the beneficiary. Integraph only hired Blue Cross to be its claims administrator. Blue Cross did not file a third-party complaint against Integraph. I accidentally flushed out the problem during a pre-trial conference, and obtained the agreement of the pla sponsor and the claims administrator, who were represented by the same counsel, that if liability was found on one or the other would pay. If I had not ironed out this problem beforehand, and a judgment had not been entered against Blue Cross which was not a proper party, I do not know what would have happened. The long and short of it is that the “independent” consideration of an ERISA claim as contemplated by Congress would have judicial resources and clients’ money. When Standard Insurance Company asserted in its petition for certiorari in the Montana case, that doing away with “discretionary clauses will lead to far more complex and costly litigation”, it was not only wrong as a matter of fact, but was using a scare tactic. If Congress doubts me, I recommend an experiment in which Congress will now reiterate what it said in 1974 (with no possible misunderstanding this time) that de novo trials are the only appropriate procedure in ERISA cases, and wait to see the cases and judicial opinions that are produced. If I am proven wrong, I will gladly eat my words. At my age that may be a safe bet. Justice Delayed Is Justice Denied, you have heard the cliche “justice delayed is justice denied”. It has real application to ERISA. My friend and fellow district judge, Brock Hornby of the District of Maine, as recently as July, 2010 in Kane v. SI Metro Services, held that a plan beneficiary had plausibly demonstrated the futility of the final appeal to the plan administrator insisted upon by the administrator, and therefore could go directly to court to contest the lower level claim denial. As a judge, I have never been asked to go as far as Judge Hornby, although in the only case I ever argued before the Supreme Court if the United States, I did convince the Court to excuse my client’s failure to exhaust remedies that were futile. If you have time, take a look at Glover v. St. Louis & San Francisco Railroad decided in 1969. I have had many ERISA benefits cases that, before they got to me, had bounced around the administrative process for years. By the time the matter gets to me, the beneficiary is not only administratively exhausted, but, unless he has dies trying, his health has deteriorated to the point that a remand to the plan administrator for reconsideration is tempting. If the parties, to start with, understood that a denial would shortly result in a trial on the merits, serious settlement negotiations would take place before access to the court is sought. Plan administrators have often asked me to remand cases to them, asserting that they have uncovered something that now casts doubt on their administrative decision. Many courts remand under such circumstances. This procedure of course, prolongs the agony. I do not remand such cases to the plan administrator unless ordered to do so by a higher court. Until Congress grants relief, I will continue scrupulously to follow the directions given by the Supreme Court in Bruch and Glenn, that is, if there is a “discretionary clause”. Applicability of Rule 56 attached as Exhibit “C”, is an opinion I wrote on September 16, 2010, attempting to explain the impossibility of using Rule 56 as a vehicle for what Congress in 1974 described as a “civil action”, but which has evolved into a “judicial review”, sort of like a Social Security administrative review. If there is no real dispute of material fact, Rule 56 disposition is, of course, appropriate, but there is almost always a dispute of material fact. Competing doctors strangely see things differently, even unsworn hearsay, and are subject to questions of credibility. If the employer/insurer/plan administrator is privileged to decide the truth of the “facts”, and where those “facts” lead, as well as what the plan means, the decision is rarely for the beneficiary where those “facts” lead, as well as what the plan means, the decision is rarely for the beneficiary, that is, unless it is a slam dunk, and not always then. It is difficult enough to read a thousand page administrative record, extensive briefs, and write an opinion that finds the decision-maker to have abused its discretion, or not to have abused its discretion, but Rule 56 does not to fit this scenario. In footnote 4 of the Eighth Circuit’s recent opinion in Khoury v. Group Health Plan, it worried over this problem, saying: Courts have struggled with the use of summary judgment to dispose of ERISA cases…We decline to use the propriety of the use of summary judgment procedures in this case because the issues was not raised by the parties…If a district court rejects the ruling of the administrator, the district court would then have to independently weigh the evidence in the administrative record and render de novo factual determinations, contrary to the summary judgment standard of review. The Eighth Circuit obviously had reservations about courts resolving factual disputes. Super-Duper Preemption In 1995, the Supreme Court of Alabama in Weems v. Jefferson-Pilot Life, held that Alabama courts have jurisdiction over ERISA cases, and that extra-contractual and punitive damages are recoverable because the Seventh Amendment gives the right to trial by jury. That decision still stands in Alabama, although the Alabama trial courts, unless a defendant first removes the case to federal court, dismiss an ERISA case without prejudice sua sponte. They are influenced by the federal courts that have suggested the complete “exclusivity” of federal courts over ERISA cases. I call this “super-duper preemption”. There is no language in ERISA, any more than in the Fair Labor Standards Act or in Title VII, that denies concurrent jurisdiction to the state courts. I do not blame the Alabama trial courts for doing what they do, although I have no reason to doubt that they can handle ERISA cases as well as I can, if not better. There is ambiguity as to whether ERISA creates this “super-duper preemption” The federal and state courts need to be on the same page on this question, and Congress should write that page in a clear hand.

Conclusion. I have covered some, if not all, of my pet peeves. ERISA jurisprudence will stay as messed up as it is, unless Congress reworks it. The courts have not rescued

ERISA, and cannot be expected to do so. The most important legislative change that I implore you to make is to make it clear that when Congress says “civil action”, as it did

in 1974, it means what it said, “civil action and not “judicial review”. Thank you for the opportunity to share these thoughts with you.

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Our law firm fights on behalf of individuals to obtain their long-term disability benefits.

If you believe you have been wrongfully denied your ERISA, or non-ERISA, long-term disability benefits, give us a call for a free lawyer consultation. You can reach Cody Allison & Associates, PLLC at (615) 234-6000. We are based in Nashville, Tennessee; however, we represent clients in many states (Tennessee, Kentucky, Georgia, Alabama, Texas, Mississippi, Arkansas, North Carolina, South Carolina, Florida, Michigan, Ohio, Missouri, Louisiana, Virginia, West Virginia, New York, Indiana, Massachusetts, Washington DC (just to name a few). We will be happy to talk to you no matter where you live. You can also e-mail our office at cody@codyallison.com. Put our experience to work for you. For more information go to www.LTDanswers.com.

UncategorizedJune 17, 20240 comments

by Cody Allison

ERISA / History & Purpose – McParland

When you are making a claim for long-term disability through your company’s insurance plan, you will be dealing with the ERISA law. Below is an article which explains the history and purpose of this law. This article will help you become more familiar with the areas of the law you are navigating. However, these laws are often confusing. If you need help making your long-term disability claim, call us. We are ready to help you!

Our law firm fights on behalf of individuals to obtain their long-term disability benefits.

If you believe you have been wrongfully denied your ERISA, or non-ERISA, long-term disability benefits, give us a call for a free lawyer consultation. You can reach Cody Allison & Associates, PLLC at (615) 234-6000. We are based in Nashville, Tennessee; however, we represent clients in many states (Tennessee, Kentucky, Georgia, Alabama, Texas, Mississippi, Arkansas, North Carolina, South Carolina, Florida, Michigan, Ohio, Missouri, Louisiana, Virginia, West Virginia, New York, Indiana, Washington DC (just to name a few). We will be happy to talk to you no matter where you live. You can also e-mail our office at cody@codyallison.com. Put our experience to work for you. For more information go to www.LTDanswers.com.

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ERISA: A Statute’s History, Purposes, and Progression

by Ryan McParland

Introduction

The Employee Retirement Security Act of 1971 (ERISA) is a complex and wide-reaching federal statute, regulating most pension, welfare, and health plans offered by employers to their employees. ERISA applies to virtually all private-sector corporations, partnerships, and proprietorships, including non-profit corporations–regardless of their size or number of employees. The goals of ERISA are to provide uniformity and protections to employees. While ERISA compliance is enforced primarily by the Department of Labor, employee benefit plans may also be regulated by other government agencies, such as the Internal Revenue Service and astate’s Department of Insurance. Failure to comply with ERISA can result in enforcement actions, penalties, and/or employee lawsuits. United States Dep’t of Labor, Frequently Asked Questions About Pension Plans and ERISA, http://www.dol.gov/ebsa/faqs/faq_compliance_pension.html.

Because ERISA can dictate the course of these benefit plans without much state law interference or regulation, it can improve in certain plan areas (i.e.pension reform) while remain stagnant in others (i.e. welfare benefit plans). In this article, I will provide the history and statutory purposes of ERISA, as well as evaluate where the evolution of this statute stands today.

ERISA: Definition and History

ERISA is the principal federal statute that regulates employee benefit plans. The primary employee benefit plans not covered by ERISA include government plans, church plans, plans “maintained solely for the purpose of complying with applicable workmen’s compensation laws or unemployment compensation or disability insurance laws,” plans “maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens,” and unfunded excess benefit plans. See Id. at §1003(b). ERISA is a wide-reaching statute that covers most employee benefit plans and affects a majority of the U.S. population. Craig Copeland, Retirement Plan Participation and Retirees’ Perception of Their Standard of Living, EBRI Issue Brief, http:// www.ebri.org/pdf/EBRI_IB_01-2006.pdf at 1, 31.

ERISA regulates both “employee pension benefits plans” and “employee welfare benefits plans”. Pension benefit plans provide income to retired employees. See Treas. Reg. §1.401-1(b)(1)(i) (as amended in 1976). The two types of pension plans are the defined benefit plan and the defined contribution plan.

A defined benefit plan sets a predetermined amount that an employee will receive upon retiring. See Id. at §1.401-1(a)(2)(ii). Usually, the employer agrees to pay the employee a certain monthly benefit upon retirement at a predetermined age. The employee can continue to work past the predetermined retirement age, but should not expect to receive the defined benefit until he retires. The benefits paid to the employee are based on certain factors, including “years of service and compensation received”. Id.

A defined contribution plan is one in which an employee and employer pay into an individual account in the employee’s name. See Treas. Reg. supra note 5, at (ii). The two most common defined contribution plans are a 401(k) plan and a profit-sharing plan. “In a 401(k) plan, the employee makes contributions from current income into an account, which the employer may or may not match.” 26 U.S.C. §401(k). With the 401(k), the employee is given certain investment options including mutual funds, stocks, or bonds. This way, the employee’s individual account may earn income through investment. A profit-sharing plan is one in which an employee can share in the profits of his employer.The employer decides which portion of the profits will be shared and determines when and how the employee will receive these funds.

Employee welfare benefit plans provide for a wide range of benefits such as health care, disability, and prescription coverage to active employees and their dependents. 29 U.S.C. §1002(1) (B). Some plans continue to provide these benefits after retirement. In the United States, roughly “75 percent of workers considered their health benefits to be their most important non-cash compensatory benefit”. See 29 U.S.C.A. §1001(b).

Purposes of ERISA

ERISA was created to “protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.” S. Rep. No. 117 (1993).

With ERISA, Congress intended to implement uniform protection for employee benefits upon retirement. The advantage for employers came with creation of a single, comprehensive set of rules to follow regarding employee benefit plans. Before ERISA, employers would be subject to different state laws regarding employee benefit plans, often creating confusion, particularly for employers engaged in interstate commerce. ERISA’s preemption provision states that it “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plans.” 29 U.S.C. §1144(a).

Without this provision, ERISA’s laws and policies would be meaningless, as an employer would be forced to follow state statutes regarding employee benefits. This could encourage employers, in an attempt to save money, to conduct business only in the states with the most lenient employment benefit laws. The preemption provision applies only to state laws that deal with areas covered in ERISA. A state law should be preempted if it: negates any ERISA plan provision, affects relations among the primary ERISA entities, affects the structure or administration of the plan, or has an economic impact on the plan.

Judicially Declared Purposes/Objectives

Courts have stated many purposes for ERISA. Among these objectives are encouraging the growth and development of voluntary, private employer-financed benefit plans, and minimizing financial and administrative burdens on employers. Siskind v. Sperry Ret. Program, Unisys, 47 F.3d 498, 503 (2d Cir. 1995). Another judicially-stated goal is protecting and promoting the interests of plan participants and beneficiaries. Boggs v. Boggs, 520 U.S. 833 (1997). Still another court has declared that ERISA is designed to provide for employees victimized by inequitable plan provisions of poorly funded plans. In re C. D. Moyer Co. Trust Fund, 441 F. Supp. 1128, 1132 (E.D. Pa. 1977). Courts have also held that ERISA is meant to ensure that if a worker has been promised a defined benefit upon retirement and has fulfilled the required conditions to obtain it, the worker actually receives it (Michael v. Riverside Cement Co. Pension Plan, 266 F.3d 1023-25 (9th Cir. 2001)) and protect employees from the economic hardship of joblessness, and reward employees for past service to the employer (Bennett v. Gill & Duffus Chems., Inc., 699 F.Supp. 454, 459 (S.D.N.Y.1988).

In Siskind, former employees filed action against their employer’s retirement program. They claimed the program violated ERISA’s fiduciary provisions and sought injunctive relief. The court ruled for the defendant and determined that an employer could discriminate among employees regarding eligibility for special retirement programs. Siskind, 47 F.3d 504. By allowing an employer to determine certain guidelines for participation in a benefit plan, ERISA encourages the growth and development of voluntary, private employer-financed benefit plans.

In Muse v. Int’l Bus. Machines Corp., employees brought action against their former employer, alleging that the employer breached ERISA’s fiduciary provision by not informed employees of a better early retirement plan offered. 103 F.3d 490, 492 (6th Cir. 1996). The court ruled for defendant, stating plaintiffs were unable to show they were knowingly deceived by their employer and thus a fiduciary breach had not occurred. Id. at 495. Also, the court held that the plaintiffs could not bring a separate state law claim based on the breach, since it would be preempted by ERISA. Id. ERISA creates a singular venue for its claims, which in turn minimizes financial and administrative burdens on employers involved in litigation.

The wife of a deceased pension plan participant brought action against his sons in Boggs v. Boggs. 520 U.S. 833. She claimed that ERISA preempted Louisiana community property laws, which allowed her husband’s first wife to transfer her interest in the participant’s pension plan. Id. The Court held that ERISA did preempt the Louisiana law. Id. at 844. Preempting state community property laws, especially those involving testamentary instruments, allows ERISA to protect and promote the interests of plan participants and beneficiaries.

In re C. D. Moyer Co Trust Fund is a response to an application by the Pension Benefit Guaranty Corporation (PBGC). PBGC was created under ERISA (29 U.S.C. §1302) “to administer the mandatory pension plan termination insurance program in Title IV of ERISA.” Id. at (a). In PBGC’s application, the corporation requested a trustee appointment to disburse excess funds created from the termination of C. D. Moyer Co Trust Fund (The Fund). The main objective of this application was to provide for employees who had been victimized by inequitable plan provisions or poorly funded plans. Yet the application was denied because The Fund was able to pay benefits to participants and met the minimum funding standard required. In re C.D. Moyer, 441 F.Supp. 1133. Although unsuccessful here, PBGC exists for the purpose of plan participant protection.

ERISA ensures that if a plan administrator has promised an employee a benefit, he or she will actually receive it. In Michael v. Riverside Cement Co. Pension Plan, a former employer brought action alleging that his early retirement benefits were unjustly reduced by an amendment to his plan, an action in violation of ERISA’s anti-cutback rule, which provides that a participant’s accrued benefits will not be reduced by an amendment to the plan. 266 F.3d 1023. The plaintiff in Michael had retired in 1983, and when he came back to work for his former employer in 1988, the benefit plan had been changed by an amendment. Id. The court held that the amendment was a violation of ERISA’s anti-cutback rule, since plaintiff had already accrued the benefits promised with his previous retirement, and he was therefore entitled to them when he chose to retire again. Id. at 1029.

In Bennett v. Gill & Duffus Chemicals, Inc., former employees brought action to recover severance pay allegedly owed to them under ERISA. 699 F.Supp. 454. ERISA deems that a severance payment plan is a form of employee welfare benefit plan. 29 C.F.R. § 2510.3-2(b)(1). The Bennett plaintiffs were involuntarily terminated due to company downsizing, and after termination, the company had refused to award any severance pay benefit to former employees. 699 F.Supp. 461. The court held that this refusal was a violation of an ERISA severance benefit plan that existed at the company. Id. Defendant was ordered to pay their employees severance pay, including interest. Id. This exemplifies how ERISA protects employees from the economic hardship of joblessness and rewards employees for past service to the employer.

ERISA and Its Stated Objectives (Pension Benefit Plans)

“ERISA established minimum standards employees must satisfy to ensure the receipt and protection of benefits when they either leave their job or die” (29 U.S.C. §1051-1056.)

Before ERISA, it was unclear how long an employee would need to wait before his or her defined benefit plan became vested. Sometimes, this could take up to 10 years. Certain plans would require that an employee stay with the company until retirement to receive any benefit.

ERISA has successfully established minimum guidelines for to defined benefit plan vesting. These minimum guidelines, however, make defined benefit plans expensive for employers to administer. Under ERISA, an employer must hire an actuary to ensure that the required contributions are being met. Therefore, the investment risk of the plan is shouldered by the employer. The employer is also required to participate in the PBCG and to pay a premium of $34 per participant. Those employees whose benefits are not received by the time specified have a cause of action for an ERISA violation. Compliance with ERISA standards has made defined benefit plans unpopular with most employers.

There were roughly 170,000 defined benefit plans in 1980. Facts From EBRI: Retirement Trends In The United States Over The Past Quarter-Century, EMPLOYEE BENEFIT RESEARCH INST., 2007. By 2004, there were only 47,000. Id. The major factor in this decline is the fact that ERISA does not require that an employee make a specific contribution to the plan. In most instances, funding comes solely from the employer. Richard W. Stevenson, The Fight Over Tax Changes: The Marriage Penalty, and More, N.Y. TIMES, July 23, 2000, at 116. For this reason, employers are more likely to provide a defined contribution plan.

Indeed, use of defined contribution plans became widespread after the creation of ERISA. With these plans, investment risk is the employee’s burden. Although the employer makes no promise to any benefit upon retirement, ERISA’s disclosure duties give the employee some control over retirement benefits. ERISA’s standards have inadvertently forced employees to participate in more risky pension benefit plans. In defined contribution plans, the employee exchanges the promise of a benefit upon retirement for, the ability to control his or her investment. Ironically, ERISA’s minimum standards, which are meant to ensure employee benefits upon retirement, have done just the opposite, making popular a pension benefit plan that actually promises nothing.

ERISA and Its Stated Objectives (Welfare Benefit Plans):

“[T]he only statutory requirements imposed upon employee welfare benefit plans are the reporting and disclosure requirements of Part I and the fiduciary responsibility standards of Part IV.”(Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 679 F.2d 1307, 1311 (9th Cir. 1982)

ERISA’s participation, vesting, and funding standards do not apply to employee welfare benefit plans. However, ERISA still preempts all state laws that relate to welfare benefit plans. See 29 U.S.C. §1144(a).

A plaintiff’s cause of action against a welfare benefit plan must be within ERISA’s civil enforcement provisions. 29 U.S.C. § 1132(a). This provision states that a civil action may be brought by a participant or beneficiary to recover benefits due him under the terms of the plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. Therefore, if the provision does not provide plaintiff with a cause of action, he is denied access to the courts for his claim.

The language of the civil enforcement provisions state that a plaintiff can recover only the benefits due under his plan, severely limiting his remedy. ERISA does not account for the consequential damages that come with a refusal of welfare benefits. A plaintiff is to receive only what he should have received in the first place. As a result, there is no punishment for fraudulent behavior by insurance companies. A great danger that insurance companies will unjustly refuse coverage to those in need is thus created.

In conclusion, while ERISA aims to protect employee’ benefits, it is greatly deficient in certain areas. The preemption provision should not be applied to welfare benefit plans. It offers no source of relief for many plaintiffs, and when it does offer relief, the relief is minimal. In order for the stated objectives of ERISA to be fully realized, this provision should be modified.
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Ryan McParland is a 3L at Albany Law School. He will be graduating this spring and has a concentration in Business Law. He is currently working as an intern for Albany Law School’s Tax Clinic, where his main duties at the clinic include researching tax law and negotiating settlements with the IRS on behalf of low-income individuals. He is also an ACES teaching fellow and is actively involved in Moot Court.

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UncategorizedJune 10, 20240 comments

by Cody Allison

Armani v. Northwestern Mut. Live Ins. Co.

In this 2016 case, where an employee challenged the denial of long-term disability benefits under the Employee Retirement Income Security Act and the district court found that he failed to show that he was disabled from “all occupations” after July 18, 2013, remand was warranted because an employee who could not sit for more than four hours in an eight-hour workday could not perform “sedentary” work that required “sitting most of the time,” and the district court erred in concluding that he had not established that he was unable to perform the four positions the insurance company had identified based on his functional capacity as of April 18, 2013, despite the fact that all four positions were classified as “sedentary,” and despite undisputed evidence that, as of that date, he was unable to sit for more than four hours a day.

Outcome: Judgment vacated in part and case remanded.

If you need assistance navigating your claim for short term or long-term disability benefits under ERISA, or it is time to sue the insurance company, please do not hesitate to give Cody Allison & Associates, PLLC a call (844) LTD-CODY, (615) 234-6000. or send us an e-mail Cody@codyallison.com. We provide representation nationwide and have successfully sued all the major insurance companies in many states. Our headquarters are located in Nashville, Tennessee. We offer a free consultation and would love to speak with you.

UncategorizedJune 3, 20240 comments

by Cody Allison

Mitchell v. CB Richard Ellis Long Term Disability Plan

In this 2009 case, an employee challenged a plan administrator’s denial of long-term disability benefits under the Employee Retirement Income Security Act of 1974, 29 U.S.C.S. § 1001 et seq., the administrator abused its discretion because he was receiving appropriate treatment and was unable to earn 80% of his pre-disability earnings during the elimination period and the next 24 months, and was impaired in his capacity to work, despite working full-time hours; [2]-The policy contained no exclusion or preclusion of coverage where the date of onset of disability occurred before the effective date of the plan; [3]-Because the administrator failed to raise a compulsory counterclaim requesting that the district court determine the respective rights and responsibilities between the administrator and the prior administrator, the district court did not err by declining to reach the issue.

Outcome: Judgment Affirmed.

UncategorizedMay 28, 20240 comments

by Cody Allison

Lelu v. Hartford Live & Accident Ins. Co.

In this 2009 case, the employer was the plan sponsor and plan administrator of an ERISA long-term disability benefits plan. The insurance company was the claims administrator of the plan. The insured sought to depose a nurse who worked for the employer. The nurse was responsible for processing doctors’ notes for the employer’s employees who received sick pay and short-term illness benefits. The employer’s short-term illness program was not administered by the insurance company. The insurance company opposed the discovery because the nurse would not provide information regarding or participate in its decision to deny the insured long-term disability benefits. The court found that the insured had not shown that there was something in the administrative record or other evidence that established that the insurance company was aware of information in the possession of the employer that it should have considered in making its decision on the claim for long-term disability benefits. Absent such a showing, discovery from the nurse or others regarding the employer’s short-term illness and/or salary continuation program decisions was not appropriate.

Outcome: The motion for a protective order was granted.

UncategorizedMay 20, 20240 comments

by Cody Allison

Chapman v. Choicecare Long Island Term Disability Plan

In this 2002 case, due to a mental disability, the claimant submitted a long term disability benefits application to an insurance company that was under contract with the plan to pay the plan’s benefits. The insurance company denied the claimant’s claim as untimely filed and informed the claimant that a written request for review of a claims denial had to be sent within 60 days of the receipt of the notice of denial. The claimant’s attorney’s letter asking for review was 10 days late, and the insurance company denied the appeal. The appellate court found that the plan itself was a proper defendant in the action and the plan could be held liable in its own name for a money judgment under 29 U.S.C.S. § 1132(a)(1)(B). The difficulties that the claimant’s counsel encountered because of the claimant’s inability to participate in her representation due to her mental illness, and the brevity of the 10 day delay provided a basis for finding that counsel acted with due diligence. Thus, on remand, the proof proffered by the claimant’s counsel was sufficient to warrant an evidentiary hearing as to whether the claimant’s mental illness impaired counsel’s efforts to file a timely request for review.

Outcome: The judgment of the district court was vacated and the case was remanded to the district court for further proceedings to address the issue of whether the 60-day time limit was enforceable given that such limitation was not mentioned in either the policy or the plan’s summary plan description.

UncategorizedMay 13, 20240 comments

by Cody Allison

Gibbs v. CIGNA Corp.

In this 2006 case, the district court held that $ 150,000 in “guaranteed” “minimum compensation” paid to the executrix’s husband was not a salary under his long-term disability plan and, therefore, should not have been included in the calculation of his disability benefits. The court held that the administrator’s decision was subject to a de novo standard of review, and that there were genuine issues of material fact surrounding whether the husband received a salary, prior to becoming disabled, that should have been included in the calculation of his disability benefits. The court held that, because the husband’s benefits had vested, the summary plan description in effect at the time the benefits vested governed for purposes of determining the standard of review. An amendment to the summary plan description granting discretionary authority to the plan administrator did not apply to the husband’s claim because his right to disability benefits vested prior to defendants’ amendment of the plan. The district court erred in disregarding defendants’ admission that the husband was not a so-called “CFA Associate” under the plan. There were material issues of fact concerning whether he received a “salary.”

Outcome: The court vacated the judgment and remanded to allow the district court to determine whether the $150,000 in “guaranteed” “minimum compensation” was intended by the parties to be a salary or a draw on future commissions earned.

UncategorizedMay 7, 20240 comments

by Cody Allison

Geiger v. Zurich Am. Ins. Co.

In this 2023 case, an insurer did not abuse its discretion in denying long-term disability (LTD) benefits to plaintiff under ERISA, as considering the Booth factors and the standard of review, the insurer’s interpretation of plaintiff’s employer’s LTD plan’s terms, purpose and goals was reasonable; the insurer did not abuse its discretion by not obtaining additional vocational evidence, as neither the plan nor case law affirmatively required it to have done so; [2]-Plaintiff’s claim that the insurer failed to consider how the amount of stress involved in his job might impact his cardiac conditions was improper, as the plan defined “disabled” as the inability to perform the material and substantial duties of one’s regular occupation due solely to sickness or injury, and nowhere in the records did any physician opine that plaintiff could not perform the duties of his job because of stress.

Outcome: Judgment affirmed.

UncategorizedApril 29, 20240 comments

by Cody Allison

Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan

In this 1995 case, Plaintiff brought action based on a denial of his claim for long-term disability benefits pursuant to the Employee Retirement Income Security Act, 29 U.S.C.S. § 1132(a). The district court granted summary judgment in favor of defendants. On appeal, plaintiff argued that the district court improperly excluded the new medical evidence of chronic fatigue syndrome in its de novo review. The court reversed and remanded the decision. The court held that new evidence was to be considered under certain circumstances to enable the full exercise of informed and independent judgment. The court concluded that the evidence regarding chronic fatigue syndrome had to be considered on remand as one possible explanation for the disability that plaintiff experienced. The court reasoned that consideration of that explanation was part of the determination of whether physical symptoms were in whole or in part a cause of plaintiff’s disability such that benefits had to be paid. It was an additional explanation, it was not a new claim.

Outcome: The court reversed and remanded the decision of the district court and held that the new evidence should have been considered to enable the full exercise of informed and independent judgment

UncategorizedApril 22, 20240 comments

Author: Cody Allison

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