This month’s Friday Five considers the potential impact of the DOL’s new regulations. We also cover recent cases relating to the important issues of overpayment recovery and AD&D policy coverage.

1. What issues should insurers consider as the courts begin to interpret the DOL’s revised claim regulations?   Earlier this week, Law360 featured an article by members of the Saul Ewing Arnstein & Lehr Employee Benefits/ERISA Litigation team analyzing key questions that insurers should consider in evaluating the litigation impact of the revised regulations, which apply to all disability claims filed on or after April 1, 2018.
2. When does a claim to recover plan funds sound in law, rather than equity? The Eastern District of Pennsylvania determined that a plan participant who received a payment for medical benefits from the plan in connection with an automobile accident was not liable in equity to reimburse the plan after he received a personal injury settlement check relating to the accident. Although the court found that the plan permitted the plan sponsor to seek reimbursement of the plan proceeds, the plan sponsor’s claim was barred after the insured deposited the funds in a joint account with his spouse and spent the proceeds. The court held that once the funds were converted into joint marital property, the plan sponsor’s equitable lien on the plan funds was extinguished. Thus, according to the court, “any claim the plaintiff would have over the defendant is a legal one, and not available under ERISA.” Carpenter Tech. Corp. v. Weida, No. 15-1936, 2018 WL 398297 (E.D. Pa. Jan. 11, 2018).

    

   The Northern District of Iowa reached a similar conclusion regarding the recoverability of life insurance proceeds paid to the wrong beneficiary. Specifically, the court determined that where an insurer failed to demand the return of “particular funds,” and instead claimed generally that it was entitled to recover $65,000 from the payee, the insurer’s claim sounded in law, rather than equity, and therefore was not cognizable under ERISA. Opheim v. Standard Ins. Co., No. C 16-4145-MWB, 2018 WL 396231 (N.D. Iowa Jan. 9, 2018).

3. Is a death resulting from autoerotic activity a covered accident under an accidental death policy? The Northern District of Illinois answered in the affirmative, granting summary judgment in favor of a claimant who argued that her husband’s death from autoerotic activity constituted an accident. Relying on prevailing Seventh Circuit law, the court reasoned that a death is “unexpected” from an objective perspective if death is not “substantially certain” to occur as a result of the conduct at issue. Simply because certain behavior is risky, the court concluded, does not mean that death is “substantially certain” to occur. Tran v. Minnesota Life Ins. Co., No. 17-cv-450, 2018 WL 1156326 (N.D. Ill. Mar. 5. 2018).
4. The Third Circuit recently found a disputed issue of fact existed in a case involving arbitrary and capricious review. The Third Circuit affirmed the Middle District of Pennsylvania’s determination that an arbitrary and capricious standard of review applied to an insurer’s benefit denial decision based on language in a “wrap document,” but nevertheless vacated a summary judgment award in the insurer’s favor, finding that a material factual dispute existed regarding whether the claimant’s subjective complaints of pain precluded her from working. The Third Circuit also noted that the insurer’s decision to forego an independent medical examination “may” have been arbitrary and capricious if evidence to support the claimant’s pain complaints existed. Killebrew v. Prudential Life Ins. Co. of Am., No. 17-2137, 2018 WL 526487 (3d Cir. Jan. 24, 2018).
5. A recent example of how the new “strict adherence” DOL standard may impact cases after April 1, 2018. The District of Maryland entered summary judgment in favor of an insurer despite some alleged procedural issues regarding the insurer’s handling of the underlying claim. The court took special care to distinguish between the “substantial compliance” standard that has, until now, been the law and the “strict adherence” standard set forth in the revised regulations. The court did not go so far as to state explicitly that the revised regulations would have resulted in a different outcome, but the court’s reference to the revised regulations at the very least indicates that courts are aware of their potential impact. Price v. Unum Life Ins. Co. of N. Am., No. GJH-16-2037, 2018 WL 1352965 (D. Md. Mar. 14, 2018).