As most ERISA claimants know (or will shortly into their lawsuit find out), a District Court’s review of an adverse benefit determination is normally limited to the materials in the administrative record, that is, the materials that were presented to and/or considered by the insurance company while the claim was still under consideration. Indeed, that facet of ERISA litigation is the main reason why ERISA appeals need to be handled with extreme care, for an appeal often serves as a claimant’s final opportunity to present evidence helpful to the cause.

There is precedent for a District Court to consider evidence that is dehors (or outside) the administrative record where “good cause” to do so is shown, but a recent decision from the Eleventh Circuit takes it a step further. In the case, the disability insurer, Life Insurance Company of North America (“LINA”), had required Diane Melech (the claimant) to pursue a Social Security Disability Income (“SSDI”) claim — a practice universally pursued by disability insurers, because when a claimant succeeds with an SSDI claim, the insurer gets to offset the amount received. But before the SSDI claim was decided, LINA denied Ms. Melech’s disability claim, and while she was in the process of appealing LINA’s denial, the Social Security Administration (“SSA”) had her submit to two (2) medical examinations (which, in turn, generated two (2) reports). Although Ms. Melech’s SSDI claim was thereafter approved, and LINA was apprised of that fact, the reports were never presented to LINA, and LINA never sought to obtain them. Instead, LINA denied Ms. Melech’s appeals, after which she brought suit.

The District Court found in LINA’s favor, deciding that the decision to deny benefits was correct based on the record before it — a record that did not include the reports generated by the two (2) SSA physicians. The Eleventh Circuit, by 2-1 vote, viewed the matter differently, holding that once LINA took the self-serving step of requiring Ms. Melech to pursue an SSDI claim, it became obligated to consider the evidence presented to the SSA in conjunction therewith (regardless of whether or not that evidence had found its way into the administrative record). In other words, having sent Ms. Melech to the SSA in pursuit of SSDI benefits, LINA had an affirmative obligation to seek out and obtain the evidence presented to the SSA.

Melech v. Life Ins. Co. of N. Am., 739 F.3d 663 (11th Cir. 2014)

On December 16, the Supreme Court of the United States resolved a split among the Circuit Courts of Appeals on an issue of critical importance to disability claimants and administrators alike: the statute of limitations. By way of background, we begin by noting that ERISA does not contain a statute of limitations for “benefit recovery” claims — that is, claims brought under 29 U.S.C. 1132(a)(1)(B). When forced to analyze a claim’s timeliness in the face of a statute that does not specify a limitations period, courts generally apply the most analogous state law limitations period, which in New York State would be 6 years (the statute of limitations applicable to claims for breach of contract). Notably, however, most states (New York included) allow contracting parties to make adjustments to the limitations period, and indeed many long-term disability plans contain clauses that purport to do just that. In that regard, the clause at issue in the case required claimants to bring suit within 3 years after “proof of loss” is due.

Notice that the clause actually functions to shorten the limitations period in two (2) distinct ways. The first (and more obvious) way is that it reduces the number of years that a claimant has to sue from 6 (in New York) to 3. The other (more subtle) change is that it sets as the event that serves to “start the clock” the date when proof of loss is due, as opposed to the date that the claim accrues. Couple that with ERISA’s administrative remedy exhaustion requirement, and what this all means is that where there is present a clause like the one in question, a claimant’s time to sue will begin to expire before (sometimes well before) he or she is empowered to commence suit.

And as illogical and potentially inequitable as this arrangement may seem to some, it has now received the blessing of all 9 justices of the Supreme Court, who indicated that in the “rare case” where an administrative review is so drawn out that the claimant is prevented from bringing suit in a timely manner, courts are “well equipped to apply traditional doctrines” that would serve to allow the claimant to proceed nevertheless.

Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S. Ct. 604 (2013)

In the “prototypical” ERISA benefits case, a claimant sues a provider to obtain benefits asserted to have been wrongfully withheld. Occasionally, however, the dynamic is reversed, with the benefit provider going on the offensive and the claimant being the target. This happens, generally speaking, in one of three scenarios: (i) when a disability benefit provider is looking to recover or “recoup” benefits paid, because the recipient of the benefits subsequently received benefits from a different source (e.g., Social Security) that the provider is permitted (under the terms of the plan) to offset; (ii) when a claimant obtains a third-party recovery that covers (in whole or in part) medical expenses for which a benefit provider made payment; and (iii) when a benefit provider is trying to recover benefits that it claims to have paid in error.

In March 2013, the Second Circuit held in Thurber v. Aetna Life Ins. Co. that a disability insurer should be permitted to recoup benefits that are subject to an offset (category (i) above) notwithstanding the fact that when recoupment was first sought, the funds were no longer in the claimant’s possession (because they had, in the vernacular used by the court, “dissipated”). The decision contains an excellent synopsis of the Supreme Court’s treatment of recoupment cases over the years, and there is, at present, an application pending to have the Supreme Court review the “dissipation” issue on which the case is centered. More on that if the application is granted. Stay tuned.

Thurber v. Aetna Life Ins. Co., 712 F.3d 654 (2d Cir. 2013)

In the world of employee benefits law, the applicable standard of review is a frequently-disputed threshold issue, and for good reason. An employee claimant’s bid to overturn an adverse benefit determination stands a far better chance of succeeding under “de novo” review, wherein the District Court reviews the record anew, divorced from any presumption of correctness, and stripped of any notion of deference. Conversely, where the standard of review is “arbitrary and capricious,” and the District Court is thus tasked to determine if the benefit determination was “without reason, unsupported by substantial evidence or erroneous as a matter of law,” the employee claimant faces a more difficult challenge.

And upon what consideration or set of considerations does this preliminary (yet hugely important) issue hinge? On the presence or absence of certain “magic” language in the subject plan (i.e., language conferring upon the decision-maker discretion to determine benefit eligibility). And although most of the decisions that have come down in this area have focused on whether a particular sentence or phrase suffices to confer discretion, a recent District Court decision wrestled with a different issue.

In the case, the insurer asserted that the “magic” language is contained in both the plan and the summary plan description (SPD). As respects the language in the plan, however, the insurer faced a problem: nearly identical language had been deemed by the Second Circuit, some eight (8) years earlier, insufficient to confer discretionary authority. That meant that if the insurer were going to succeed in forcing “arbitrary and capricious” review, it would need to rely on the language in the SPD.

Citing to the Supreme Court’s 2011 decision in CIGNA Corp. v. Amara, the District Court first held that statements contained within an SPD do not automatically constitute plan terms. In order for an SPD to be made part of the plan, the District Court held, there must be an explicit provision to that effect. And while finding that the SPD in question did in fact contain the “magic” language, the District Court concluded that because SPD had not been explicitly incorporated into the plan, de novo review was appropriate.

Wenger v. Prudential Ins. Co. of Am., 2013 WL 5441760 (S.D.N.Y. Sept. 26, 2013)

On September 27, Judge Mae A. D’Agostino (N.D.N.Y.) issued a decision in a case involving a rarely-covered subject: the propriety of a purported “offset.”  An offset, for those who may not know, is a payment received by a claimant, from a source other than the disability insurer, that the disability insurer is permitted (under the terms of the plan or policy) to deduct from the monthly benefit payment that it would otherwise be required to remit.  The most frequently encountered example is Social Security Disability Income (SSDI) benefits.

In the case, the plan authorized an offset for, among other things, Social Security disability benefits that the “employee or any third party receives on the employee’s behalf.”  The employee in question was receiving SSDI, and there was no disagreement that the amounts received constituted a valid offset.  Instead, the controversy arose in reference to the Social Security Administration’s payment of Dependent Social Security Disability (DSSD) benefits, which are payable when the recipient of SSDI benefits has one or more dependent children.  Contending that DSSD benefits constitute Social Security disability benefits “that a third party receives on the employee’s behalf,” the insurer claimed an offset.  The employee, however, disagreed.

Judge D’Agostino resolved the dispute in the employee’s favor, ruling that DSSD benefits are not benefits that a third party receives on the employee’s behalf, but rather benefits that a third party receives on his or her own behalf.  In other words, the court held that while nothing prohibits an insurer from providing that DSSD benefits constitute an offset, the plan in question simply failed to do so.

Brutvan v. CIGNA Life Ins. Co. of N.Y., 2013 WL 5439151 (N.D.N.Y. Sept. 27, 2013)