This month's Friday Five discusses cases that probe the issue of what is appropriately considered in litigation regarding LTD benefits. Some cases seem to state the obvious, for example when a court issues an order directing that only specific claims may be pled, a litigant acts improperly by disregarding the order and adding other claims. Other cases take a considerably deeper dive into the more complex issue of how a court reviews an insurer’s analysis of facts supporting a claim denial.

1. Can a claimant's counsel go too far in pursuing non-ERISA claims? Apparently yes. On March 23, 2018, the district court granted a motion to dismiss a five count complaint containing state law and ERISA claims related to denial of benefits under an employee health insurance benefits plan, but the court granted the plaintiff leave to amend to assert a single claim under § 502(a)(1)(B). Rather than following the court’s instruction to file a single count amended complaint, the plaintiff's counsel filed a three count complaint including claims for breach of fiduciary duty and punitive damages. The defendant moved to dismiss, and by order dated January 11, 2019, the court dismissed the fiduciary duty and punitive damages claims. The defendant moved for sanctions pursuant to Federal Rule 11, ERISA's fee shifting provision (§ 1132(g)(1)) and the inherent authority of the court. The court rejected the Rule 11 argument because the defendant did not establish that it followed the procedure outlined in the rule to provide notice of the motion and a 21-day safe harbor provision. The court ruled that a decision was more appropriate under its inherent authority, rather than under ERISA’s fee shifting provision. The court granted the sanctions motion as unopposed, ruling that sanctions were appropriate because the plaintiff's counsel disregarded an explicit instruction from the court, and directed the defendant to submit evidence of its costs and attorney’s fees in filing the second motion to dismiss and the motion for sanctions. Hocheiser v. Liberty Life Assurance Co. of Boston, No. 3:17-cv-06096 (D.N.J. July 15, 2019).
2. Can a plaintiff satisfy the definition of disabled if he is able to return to work in his own occupation? The plaintiff, an attorney in private practice, obtained LTD benefits after his billable time decreased significantly due to health issues. The insurer terminated benefits after approximately three years when it learned that he resigned from his law firm and began full-time employment as an attorney in state government. The plaintiff argued that he continued to meet the definition of disability because he did not earn 80 percent of his pre-disability earnings. The insurer argued that the plaintiff could no longer meet the definition of disabled because he was able to perform the material duties of his own occupation. In granting summary judgment in favor of the insurer based on abuse of discretion review, the court rejected the plaintiff's argument that the material duties of an attorney in state government are different from the material duties of an attorney in private practice. Sizemore v. Northwestern Mut. Life Ins. Co., No. 2:17-cv-00789, 2019 WL 2619293 (S.D. W.Va. June 26, 2019).
3. Can a plan participant pursue liability in the absence of coverage? Potentially, yes. Mr. Maness's wife passed away, and in making arrangements for her funeral and burial, American Funeral Financial, LLC (AFF) contacted Maness’s employer to verify that a group life insurance policy had funds to cover the expenses, and the employer allegedly confirmed that it did. After the funeral, AFF made a claim against the insurance policy but was told that the employer made a "misverification of dependent coverage." AFF sued the employer in state court for negligence and misrepresentation. The employer removed to federal court, arguing that ERISA preempted AFF's state law claims. In remanding the case to state court, the federal court concluded that AFF was not claiming a wrongful denial of benefits, but rather was claiming that the employer's misstatement about coverage caused it to pay Mrs. Maness's funeral and burial expenses. American Funeral Financial, LLC v. UPS Supply Chain Solutions, Inc., No. 1:17-cv-05475, 2019 WL 3252402 (N.D. Ga. July 19, 2019).
4. Can an insurer act reasonably in resolving conflicting information about an insured by determining that the insured no longer meets the definition of disabled? Bowman was granted LTD benefits after he was forced to stop his job as a maintenance mechanic due to back injuries. After two years, when the definition of disabled changed to the "any occ" standard, the insurer terminated benefits, concluding that Bowman could perform other jobs, just not his original job. In reviewing the insurer's decision under the arbitrary and capricious standard, the court concluded that the insurer’s decision to reconcile conflicting evidence about Bowman’s condition by determining that he no longer met the definition of disabled was not an abuse of discretion. Similarly, the court rejected Bowman’s argument that there was a conflict of interest because the insurer is a for-profit company. Quoting Till v. Lincoln Nat’l Life Ins. Co., 182 F. Supp.3d 1243 (M.D. Ala. 2016), aff'd 678 F. Appx. 805 (11th Cir. 2017), the court concluded that "a structural conflict of interest is unremarkable in today’s marketplace, and the existence of the conflict is not a license, in itself, for a court to enforce its own preferred de novo ruling about a benefits decision." Bowman v. Reliance Standard Life Ins. Co., No. 2:11-cv-1046-ALB, 2019 WL 3072589 (M.D. Ala. July 12, 2019).
5. Does an insurer act arbitrarily in basing a decision to deny benefits on a selective discussion of facts? Lacko worked as a senior manager in the audit department of a private accounting firm. She stopped working, complaining of a combination of impairments, including gastroparesis, diabetes, rheumatoid arthritis, congestive heart failure and others. While she received some STD benefits, claims for STD and LTD benefits were denied. The district court granted summary judgment in favor of the insurer, and Lacko appealed. The Seventh Circuit reversed the decision, and remanded the matter for a fresh administrative decision taking into account the appellate court’s discussion of issues. The appellate court concluded that the insurer engaged in "a selective presentation of evidence in the record, focusing on the portions that will support a denial of the claim and ignoring or misrepresenting the facts that could demonstrate the disability." The appellate court concluded that the insurer acted arbitrarily and with a conflict of interest. Specifically, the appellate court articulated that the insurer did not adequately address the fact that Lacko was approved for Social Security benefits, where the insurer used a different occupational description and did not address the combination of Lacko's impairments. Lacko v. United Omaha Life Ins. Co., 926 F.3d 432 (7th Cir. June 12, 2019).