This month’s Friday Five covers cases relating to discovery in ERISA benefits cases, an appellate court strictly interpreting ERISA regulatory deadlines, a district court authorizing an ERISA breach of fiduciary duty claim based on alleged misrepresentations from an employer, another district court refusing to authorize a breach of fiduciary duty claim when the claimant was merely seeking compensatory damages, and an appellate court refusing to allow an insurer to employ new claims rationale not identified during the administrative process. 

1. Court Permits Deposition of Internal Medical Reviewer Based on String of Prior Cases Challenging the Same Reviewer. In a recent long-term disability case in Illinois federal court, the plaintiff made a motion to depose one of the insurer’s internal medical reviewers. The court noted that the plan granted the insurer discretion, which invoked the arbitrary and capricious standard of review. In cases under this heightened standard, Seventh Circuit precedent only allows discovery in “exceptional cases.” The claimant argued that one of those exceptional cases existed because the internal medical reviewer at issue was subject to a string of recent court opinions across the country challenging his medical opinions, noting his potential lack of expertise, and finding that he ignored contrary medical evidence before. As a result, the court agreed that the plaintiff should be permitted to depose the reviewer, but provided specific subject-matter parameters for the plaintiff to adhere to in the deposition. Braun v. Unum Life Ins. Co. of Am., No. 22-1223, 2022 WL 17740459 (N.D. Il. Dec. 16, 2022).
2. Third Circuit Rebuffs Insurer Who Took Too Long to Issue an Initial Denial, but Also “Rushed [the Denial] Out the Door.” Following judgment entered in favor of the claimant in a recent life insurance waiver of premium case, the insurer appealed to the Third Circuit on two issues. First, the Third Circuit agreed with the lower court that the insurer’s failure to timely deny benefits under the ERISA regulations, which required a decision within forty-five days of a claim, “dooms any argument that [claimant] was required to exhaust her administrative remedies before bringing suit . . . .” The court made quick work of the insurer’s procedural issue and relied on the “clear[]” text of the regulation, despite the insurer’s arguments otherwise. Second, while the Third Circuit noted that the decision to deny waiver of premium benefits may have had some support substantively, the appellate body noted “[m]ost importantly, when we examine how [insurer] actually made its decision, there is every appearance that the denial letter was the product of an arbitrary process.” The appellate court was most concerned with how the decision was “inexplicably rushed out the door” without having the benefit of all relevant information to support the decision. As such, the Third Circuit affirmed judgment in the claimant’s favor. Rizzo v. First Reliance Standard Life Ins. Co., No. 20-1144, 2022 WL 17729430 (3d Cir. Dec. 16, 2022).
3. Employee Sues for Breach of Fiduciary Duty for Faulty Eligibility Advice and Insurer’s Failure to Provide Plan Documents. The benefit plan at issue in a recent ERISA breach of fiduciary duty case expressly prohibited an employee from obtaining supplemental life insurance coverage on a spouse who was also an employee and beneficiary of the same plan. Despite this clear exclusion, the employer informed the employee-wife that she could obtain supplemental coverage on her husband, who was a coworker, which resulted in a $100,000 supplemental life insurance policy being issued on the husband. When the husband died, the insurer eventually denied the wife’s claim under the settled exclusion. The wife instituted a breach of fiduciary duty claim under ERISA Section 1132(a)(3) and the insurer moved to dismiss. While it was clear that the wife was not entitled to benefits under the plan and, as such, could not maintain a case for the wrongful denial of benefits, the court allowed the wife’s (a)(3) claim to proceed. The court reasoned that while the wife still might be seeking the amount of the death benefit, the suit was based on a different wrongful act than the denial of benefits – the employer’s misinformation about the plan, which, if true, would have entitled her to additional coverage on her husband. This alleged wrongdoing in the form of a misrepresentation, according to the court, supported a breach of fiduciary duty claim. The court also allowed the wife’s claim for the insurer’s failure to produce plan documents to proceed to discovery. Blackburn v. Reliance Standard Life Ins. Co., No. 22-95, 2022 WL 17082673 (W.D. Ky. Nov. 18, 2022).
4. Court Prohibits Claimant From Repackaging Denial of Benefits Claims Into Breach of Fiduciary Duty Claims Under ERISA. In another life insurance dispute, the claimant stopped working due to cancer and was later terminated by his employer. Upon termination, the employer also stopped paying premiums on the employee’s life insurance policy and informed the employee of the same. At the same time, the employee was engaged in the administrative process for short- and long-term disability benefits with the insurer. While the insurer stated the potential availability of life insurance waiver of premium benefits, the insurer made no mention that the employer had stopped paying the life insurance premiums already. As a result, when the employee passed away and his wife made a claim for the death benefit, the insurer denied benefits due to nonpayment of premium, resulting in a number of ERISA-related claims from the wife. The court granted the insurer’s motion to dismiss on all claims. Most informative, the court denied the plaintiff’s ERISA Section 1132(a)(3) finding that the statutory text generally only allows equitable relief when no other relief is available under ERISA. In this case, according to the court, because the plaintiff was clearly seeking compensatory damages, as opposed to equitable relief, the complaint was defective and should be dismissed. Anderson v. Reliance Standard Life Ins. Co., No. 22-4654, 2022 WL 17490542 (D. N.J. Dec. 7, 2022).
5. Ninth Circuit Reverses and Remands Disability Benefits Dispute When Trial Court’s Decision Relied on New Rationale of the Administrator Not Present During the Administrative Process. The Ninth Circuit recently reversed and remanded the district court’s approval of an administrator’s denial of long-term disability benefits. During the administrative process, the insurer focused on the claimant’s medical condition and inability to meet the definition of disability under the insurance policy. However, during litigation, for the first time, the insurer challenged the claimant’s credibility and argued that the claimant’s incredibility called all of the subjective records of pain and disability in the medical records into question. The Ninth Circuit concluded that “a district court cannot adopt post-hoc rationalizations that were not presented to the claimant, including credibility-based rationalizations, during the administrative process.” Collier v. Lincoln Life Ass. Co. of Boston, No. 21-55465, 2022 WL 17087828 (9th Cir. Nov. 21, 2022).