A recent case from the U.S. District Court for the District of Utah serves as a useful reminder to sponsors of employee group health plans that benefits denial letters should contain the plan’s time limit for filing a lawsuit. In that case, the plan had a 180-day limitation period for bringing legal action, and the plaintiff filed suit after that deadline. The court noted that a number of other courts have interpreted ERISA regulations to require denial letters to include any plan-imposed time limit for filing suit. We previously discussed two such cases on our blog here and here. Finding the plan’s limitation period was unenforceable because it was not included in the final claim denial letter, the court applied the most closely analogous statute of limitations under state law. Employers are reminded to review their template denial letters to ensure the plan’s time limit for filing a lawsuit is… Continue Reading
The recent decision in Hampton v. National Union by the U.S. District Court for the Northern District of Illinois highlights the importance of following the provisions in ERISA plan documents for delegating fiduciary duties to entities acting as plan fiduciaries, such as third-party service providers and insurers. Following the death of her husband, who was an employee of The Boeing Company (?Ç£Boeing?Ç¥), the plaintiff sought to recover accidental death and dismemberment benefits under insurance policies sponsored by Boeing, for which she was the sole designated beneficiary. After National Union, which underwrote and co-administered the policies with AIG Claims, Inc., denied the plaintiff?ÇÖs initial benefits claim, as well as her appeal of such denial, the plaintiff brought suit under ERISA. The plaintiff argued that the court should apply a de novo standard of review (i.e., no deference given to the plan fiduciary?ÇÖs prior decisions) because National Union did not have discretionary… Continue Reading
California recently enacted Senate Bill 855 (?Ç£SB 855?Ç¥), which expands certain requirements related to mental health and substance use disorders. SB 855 applies to any California ?Ç£health care service plan contract?Ç¥ or disability insurance policy issued, amended, or renewed on or after January 1, 2021. Significantly, SB 855 renders ?Ç£void and unenforceable?Ç¥ any provision in a health care service plan contract that reserves discretionary authority to the plan to determine eligibility for benefits or coverage, interpret the terms of the contract, or provide for standards of interpretation or review that are inconsistent with California law. If this provision is not preempted by ERISA as applied to an employer-sponsored group health plan, such mandate could eliminate the deferential standard of review that would otherwise be available under ERISA to the plan administrator. SB 855 is available here.
Plan sponsors of severance plans that set forth the terms of one severance plan in multiple plan documents should consider combining those documents into one document or carefully reviewing each plan document to ensure there are no inconsistencies (including relating to eligibility, effective dates, and benefits) and that each document not only references the other documents but is incorporated into the other documents by reference. Otherwise, the plan sponsor may risk one of the documents being deemed a pay practice exempt from ERISA, subjecting the plan sponsor to state law claims in any state where employees are covered. This risk was recently highlighted in Caggiano v. Teva Pharm. USA, Inc., where former employees (?Ç£Plaintiffs?Ç¥) of Teva Pharmaceuticals, Inc. (?Ç£Defendant?Ç¥) brought two state law causes of action against Defendant based on the denial of separation pay benefits under Defendant?ÇÖs severance plan, which was comprised of a Separation Benefits Plan (?Ç£SBP?Ç¥), a… Continue Reading
The U.S. Court of Appeals for the Tenth Circuit recently held that the choice of law provision contained in a long-term disability insurance policy (the ?Ç£LTD Policy?Ç¥) controlled when determining which state law applied to the case. The LTD Policy, which was subject to regulation under ERISA as an employee benefit plan, stated that it was governed by the law of Pennsylvania, where Comcast (the employer) was incorporated and had its principal place of business. The employee argued that Colorado law controlled, because Colorado is where the employee worked for Comcast and filed the lawsuit. This was important because Colorado insurance law prohibited granting discretion to the plan administrator to interpret the LTD Policy, whereas Pennsylvania law did not prohibit this deferential standard. Generally, a plan administrator?ÇÖs denial of benefits under an ERISA plan is reviewed by a court de novo (i.e., without deference being paid to the plan administrator?ÇÖs… Continue Reading
Generally, when discretionary authority is delegated to the plan administrator of an ERISA plan, a court reviewing the denial of a benefits claim is limited to determining whether the plan administrator abused its discretion in denying the claim. In a prior seminal case, Firestone Tire & Rubber Co. v. Bruch, the U.S. Supreme Court held that, when there is no delegation of discretionary authority, a denial of benefits is to be reviewed de novo (i.e., without deference to the plan administrator?ÇÖs previous decision). The U.S. Court of Appeals for the Fifth Circuit (whose jurisdiction includes Texas, Louisiana, and Mississippi) interpreted Firestone to only require de novo review of a denial of benefits based on an interpretation of plan language, but not denials based on factual determinations. The Fifth Circuit recently overturned its longstanding precedent in order to bring its interpretation of Firestone in line with eight other federal circuit courts… Continue Reading