In our blogpost of August 13, 2014, we featured the decision in Moyer v. Metropolitan Life Ins. Co., 762 F.3d 503 (6th Cir. 2014), wherein it was held that an insurer cannot invoke a statute of limitations defense that is grounded on plan language unless mention of the language was made in the insurer’s denial letter.  One year later, the Third Circuit expressed the exact same view.

Plan-based time limitations are commonplace, and they often serve to drastically shorten the period during which suit may be brought.  Accordingly, the Third Circuit’s decision, in tandem with that of the Sixth Circuit, is a significant victory for ERISA disability claimants.

Mirza v. Insurance Adm’r of Am., Inc., 800 F.3d 129 (3d Cir. 2015)

The primary weapon wielded by ERISA claimants derives from ERISA § 502(a)(1)(B), codified at 29 U.S.C. 1132(a)(1)(B), which authorizes a civil action “to recover benefits due.”  Still, a bit further down the list appears what many courts and commentators have dubbed the “catchall” provision: ERISA § 502(a)(3).  That provision authorizes suit to obtain, among other things, “other appropriate equitable relief.”  The question facing the Sixth Circuit, not to mention countless courts before it, was under what circumstances, if any, a claimant should be permitted to pursue both types of claims in tandem.

The claimant in the case, Daniel Rochow, was able to demonstrate that his long-term disability insurer’s decision to deny benefits was arbitrary and capricious, and he thus succeeded with his (a)(1)(B) claim.  While benefits were being withheld, however, his insurer garnered huge investment returns on the withheld amounts.  Pointing to those profits, Mr. Rochow leveled a claim under the equitable remedy of disgorgement, which he maintained was authorized under § 502(a)(3).

Over protests by the insurer, the district court allowed the disgorgement claim to go forward, and by a vote of 2-1, a panel of Sixth Circuit judges subsequently affirmed, 737 F.3d 415.  Thereafter, the Sixth Circuit agreed to rehear the case en banc, and on March 5, 2015, by an extremely tight margin, the panel decision was vacated.  According to the majority, which pointed to the Supreme Court’s decision in Varity Corp. v. Howe, 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996), to allow Mr. Rochow to recover disgorged profits under § 502(a)(3) in addition to his “benefit recovery” under § 502(a)(1)(B) would “result in an impermissible duplicative recovery, contrary to clear Supreme Court and Sixth Circuit precedent.”  The dissent, in contrast, argued that Mr. Rochow had been harmed in two (2) distinct ways, and that neither of the claims that he sought to advance, standing alone, was adequate to bring him the “make whole” relief that anyone in his position deserves.

The narrowness with which the en banc rehearing was decided portends potential Supreme Court review, but the case’s procedural irregularities (discussed at length in one of the concurrences) may prove to be a potent obstacle.

Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364 (6th Cir. 2015)

Under 28 U.S.C. § 1291, the jurisdiction of the federal Circuit Courts of Appeal is generally limited to “final decisions,” which means, in essence, that only when a district court has resolved all that there is to resolve is an aggrieved litigant then permitted to appeal. That feature distinguishes federal appellate practice from state appellate practice, where interim (or “interlocutory”) appeals are commonplace.

In the ERISA context, it is not uncommon for a “successful” claimant (that is, a claimant who has proven to the district court’s satisfaction that some aspect of the disability insurance company’s claims handling was violative of his or her ERISA rights) to be awarded a “remand” to the claim administrator, rather than an outright award of benefits. So the question becomes: is a remand order considered a “final decision,” such that the disability insurance company may immediately appeal it?

In a decision handed down today, the Second Circuit held that remand orders “generally are not ‘final’ because, in an ordinary case, they contemplate further proceedings by the plan administrator.” This is so, said the Second Circuit, even when the district court instructs the clerk to “close the case” and “enter judgment.” As to the fate of a remand order that, in contrast to the order before the court, cannot be construed as having retained jurisdiction over the case, the Second Circuit indicated that it would be addressed on “another day.”

Mead v. Reliastar Life Ins. Co., 768 F.3d 102 (2d Cir. 2014)

Although ERISA generally comes into play any time a dispute surfaces in the context of a benefit made available to the claimant through his or her employment, certain exceptions exist. One such exception covers governmental employees. Another concerns individuals covered under a “church plan,” which is a benefit plan covering employees of a church or comparable religious institution.

But what happens when an aggrieved claimant whose benefit plan unmistakably qualifies as a church plan nevertheless brings and prosecutes an ERISA case, only to claim, at the tail-end of the litigation (and after losing on the merits), that in fact ERISA is inapplicable? According to the Sixth Circuit, which deemed the issue non-jurisdictional and therefore subject to forfeiture, the claimant is out of luck.

Russell v. Catholic Healthcare Partners Employee Long Term Disability Plan, 2014 WL 3953722 (6th Cir. Aug. 14, 2014)

Concluding a nine-year court battle, John J. Donachie was awarded summary judgment against Liberty Life Assurance Company of Boston, the administrator of his employer’s LTD plan. As respects his request for attorneys’ fees, however, Mr. Donachie was not as fortunate. The District Court denied his application on the ground that he had failed to show that Liberty Life had demonstrated “bad faith” in its handling of the claim.

In a decision handed down March 11, the Second Circuit reversed the District Court’s denial of fees, and, in the process, made several important holdings. First, the court held that a reviewing court must consider whether a claimant has achieved “some degree of success on the merits.” It further held that while a District Court may award fees upon a showing of some degree of success, it may also drill further down by considering the five (5) so-called Chambless factors. And as respects the Chambless factors, the Second Circuit emphasized that a District Court “cannot selectively consider some factors while ignoring others,” that “bad faith” and “culpability” (both elements of the first Chambless factor) are distinct, and that a finding of culpability alone will satisfy the first factor.

Lastly, and perhaps most significantly, citing to Birmingham v. SoGen-Swiss Int’l Corp. Ret. Plan, 718 F.2d 515, 523 (2d Cir. 1983), the Second Circuit held that where (as here) a claimant not only achieved “some degree of success on the merits,” but also acquired “prevailing party” status, granting a fee request “is appropriate absent some particular justification for not doing so.” And finding no particular justification present, the Second Circuit awarded Mr. Donachie fees (and a remand to the District Court for the purpose of determining the amount).

Donachie v. Liberty Life Assurance Co. of Boston, 745 F.3d 41 (2d Cir. 2014)