This month’s Friday Five covers recent cases relating to interpretation of the term, "own occupation," the appropriate remedy for termination of benefits where the administrator’s review was limited to the "own occupation" standard and what constitutes an arbitrary and capricious calculation of benefits. We also discuss two decisions addressing whether claims related to excessive premiums charges are covered by ERISA and whether insurance agents are considered employees entitled to ERISA benefits.

1. The Third Circuit holds that the term "own occupation," where undefined in a group policy, means a job performed for a specific employer rather than as performed in the national economy. The Third Circuit recently affirmed the District of New Jersey’s rejection of an insurer’s interpretation of the term "own occupation" upon arbitrary and capricious review. The group long-term disability policy at issue did not define the term "own occupation." The insurer interpreted "own occupation" to mean the insured’s job as performed in the national economy, rather than as performed for the insured’s specific employer. The Third Circuit relied on its prior decision in Lasser v. Reliance Standard Life Insurance Co., 344 F.3d 381 (3d Cir. 2003), wherein it “held that the term ‘regular occupation’ is unambiguous and refers to ‘the usual work that the insured is actually performing immediately before the onset of disability[,]' at least where no other definition appears in a policy or has been otherwise anticipated by the parties." The court further reasoned that there was no legal difference between the terms "own occupation" and "regular occupation." Patterson v. Aetna Life Insurance Company, No. 17-3566, 2019 WL 479209 (3d Cir. Feb. 7, 2019).
2. The Ninth Circuit affirms dismissal of ERISA claims against health insurers alleged to have charged excessive premiums. Small business owners who were members of Montana’s Chamber of Commerce brought action against insurance companies that marketed health insurance plans to the Chamber’s members, asserting breach of fiduciary duty and prohibited transaction claims under ERISA, as well as several state-law claims based on the companies’ alleged hidden and excessive surcharges in insurance premiums that were used to pay kickbacks to the Chamber. The District of Montana dismissed all causes of action. On appeal, the Ninth Circuit affirmed dismissal of the ERISA claims. In dismissing the ERISA § 502(a)(2) breach of fiduciary duty claim, the court reasoned that the defendants were not fiduciaries because they did not exercise discretion over plan management or control over plan assets. The court explained that the defendants were merely negotiating at arms-length to set rates and collect premiums prior to any agreement being executed. Further, the allegedly excessive premiums collected did not qualify as plan assets because the plans were fully insured and the premiums were not held in trust. The court dismissed the ERISA § 502(a)(3) prohibited transaction claim because the underlying remedies sought, which were restitution and disgorgement, were not equitable in nature. However, the court reversed the dismissal of the plaintiffs’ state-law claims and remanded for further proceedings. The court held that these claims were not preempted by ERISA because they did not have an impermissible connection with an ERISA plan. Rather, the state-law claims were connected to negotiations occurring prior to any ERISA-regulated relationship. The Depot, Inc. v. Caring for Montanans, Inc., No. 17-35597, 2019 WL 453485 (9th Cir. Feb. 6, 2019).
3. The Sixth Circuit holds that insurance agents are not “employees” entitled to ERISA benefits. Current and former insurance agents filed a class action alleging that an insurer misclassified them as independent contractors, while treating them as employees, in order to avoid paying them ERISA benefits. Upon de novo review, the Sixth Circuit reversed the decision from the Northern District of Ohio, finding that the agents were independent contractors, rather than employees, and thus were not entitled to benefits under ERISA. The Sixth Circuit applied the common law agency test set forth in Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 321, 112 S.Ct. 1344, 117 L.Ed.2d 581 (1992). The court reasoned that even though the insurer sought out potential agents who were untrained, and retained some right to override the agents’ hiring and firing decisions regarding agency staff, the sale of insurance was a highly specialized field that could be learned elsewhere. Further, agents had primary authority over hiring and paying their assistants, invested heavily in their offices and instrumentalities, paid rent and worked out of their own offices, earned commissions on sales, were not eligible for other employment benefits, paid taxes as independent contractors, and the agent agreement governing the parties’ business relationship indicated that they structured their relationship so that agents were to be treated as independent contractors. Jammal v. American Family Insurance Company, 914 F.3d 449 (6th Cir. 2019).
4. The Middle District of Georgia awards a plan participant 24 months of back payment of long-term disability benefits and remands the case to the administrator to determine whether benefits are payable under “any occupation” definition of disability. The Middle District of Georgia granted summary judgment in favor of an ERISA plan participant and awarded back payment of long-term disability benefits. On de novo review, the court held that the participant’s medical documentation supported a finding that the participant could not perform his own occupation due to a significant change in his mental and physical functional capacity because of his HIV/AIDS diagnosis. The court reasoned that the participant’s viral counts were significantly different from that of a healthy person, the participant’s treating physician noted specific physical and mental decline, which included impaired attention, depression, and inability to make decisions, and consultants who had worked directly with the participant prior to termination of his employment explained that the participant fainted while walking to meetings. The administrator only reviewed the participant’s claim under the policy’s "own occupation" definition of disability. However, after 24 months of benefits were paid, the definition changed from "own occupation" to "any gainful occupation." Further, benefits for mental disorders were capped at 24 months. Therefore, the court awarded only payment of 24 months of back benefits, and remanded the case to the plan administrator to determine whether the participant was entitled to benefits beyond 24 months. Knox v. United of Omaha Life Insurance Company, 7:17-CV-168, 2019 WL 517627 (M.D. Ga. Jan. 30, 2019).
5. A Plan administrator’s sole reliance on an employer’s calculation of a participant’s benefits eligible earnings (BEE) without performing its own independent calculation was arbitrary and capricious. The Southern District of New York determined that a plan administrator’s calculation of group long-term disability benefits was arbitrary and capricious where the administrator relied solely on the BEE calculated by the plan participant’s employer and never performed its own calculation. The participant was a financial advisor for a global firm. His employer reported a BEE of just over $34,000 a year. According to the court, "no one who works at [the participant's employer], or any other investment bank, in a position like [the participant's] makes just over $34,000 a year," and the administrator should have known that. Ricciardi v. Metropolitan Life Ins. Co., No. 16-3805, 2019 WL 652883 (S.D.N.Y. Feb. 15, 2019).