Blog - Page 32 of 110 - McKennon Law Group

On March 24, 2020, after a bench trial in a 46-page opinion, Eastern District of California federal court Judge Troy Nunley ruled in favor of McKennon Law Group PC’s client in her ERISA lawsuit against her long-term disability insurer MetLife, who had denied her claim for long-term disability benefits. She had worked for Kaiser Permanente in a sedentary position in its HR department and obtained the MetLife disability coverage through her employer. Judge Nunley pointed out many weaknesses in MetLife’s denial decision, including the fact that it relied almost entirely on the reports of its own hired medical consultants who “only performed paper reviews of Plaintiff’s medical records and neither observed nor treated Plaintiff personally.” Nor did MetLife’s medical consultants, he reasoned, speak with any of her treating physicians (who had decided she was disabled after examining her in person for years). Judge Nunley afforded one of MetLife’s consultants, nurse Bachner, “with less weight as she is not a physician.”

He harshly criticized MetLife’s doctor consultant because his opinions were “not well-supported” and conclusory: “Dr. Hinrichs simply summarized the medical records he reviewed and then made a conclusion” without explaining which specific medical records supported his conclusion. Judge Nunley also determined that MetLife’s doctor “disregarded Plaintiff’s subjective reports of pain and only focused on what he deemed to be ‘objective’” evidence of disability, violating Ninth Circuit case law. As “Plaintiff correctly points out, it would be an abuse of discretion for the Court to fail to consider Plaintiff’s subjective account of pain. Kibel v. Aetna Life Ins. Co., 725 F. App’x 475, 477 (9th Cir. 2018) (citing Demer v. IBM Corp. LTD Plan, 835 F.3d 893, 904–07 (9th Cir. 2016)).”

The firm had several strategic battle victories along the way that contributed to winning the war for our client. We prevailed on a motion for partial summary judgment, where the Court ruled that the standard of review at trial would be de novo. We augmented the administrative record with the client’s favorable Social Security disability finding. Judge Nunley found that our client was totally disabled from performing the material duties of her own sedentary occupation because her physicians concluded, based on several in-person exams, that she had severe low back and heel pain that prevented her from sitting for more than two hours per workday or from standing on her own, which well-reasoned opinions the Court found much more credible than MetLife’s “paper reviewers.”

The Court entered judgment in our client’s favor requiring MetLife to reverse its disability insurance claim denial and pay our client all her benefits for the Policy’s “own occupation” period, plus prejudgment interest for the last seven years. This decision will allow our client to collect all her substantial attorneys’ fees and costs she incurred aggressively fighting MetLife for the last five years.

In this several-part blog series titled The Basics of an ERISA Life, Health and Disability Insurance Claim, we discuss the basics of an ERISA life, health, accidental death and dismemberment and disability claim, from navigating a claim to handling a claim denial and through preparing a case for litigation. In Part Nine of this series, we discuss insurer reliance on sub rosa surveillance, which can be either the death knell to a claim for benefits or strong proof of disability. Sub rosa, a Latin phrase literally meaning under the rose, is a surveillance investigation that takes place in secrecy.

Insurers often use such surveillance when investigating the activities of their insureds, especially when they investigate disability claims. They spend inordinate amounts of money conducting surveillance on benefits claimants. This often results in insurers paying thousands of dollars for a private investigator to track claimants’ movements and videotape claimants outside of their home. Whatever activity a disability claimant is engaged in will be observed and recorded, such as gardening, running errands, going for a walk, going to the gym or attending a doctor’s appointment. Insurers often conduct surveillance when they have their claimants attend an independent medical examination or functional capacity examination, hoping to catch them in activity inconsistent with their claims of disability or their asserted limitations or restrictions concerning activities of daily living.

Typically, insurers will attempt to use surveillance footage to assert that their insureds are capable of working and thus not entitled to disability benefits, often overstating the level of recorded activity or over-relying on it, drawing the conclusion that because of the activities recorded, a disability claimant can work at a full-time job. While this may seem suspect, insurance companies have the right, and indeed the duty, to thoroughly investigate claims. In California, an insurer’s failure to reasonably investigate an insurance claim may result in bad-faith liability. See Egan v. Mutual of Omaha Life Ins. Co., 24 Cal.3d 809, 819 (1979); Guebara v. Allstate Ins. Co., 237 F.3d 987, 996 (9th Cir. 2001).

However, courts have warned insurers against over-reliance on surveillance, particularly where a plaintiff’s reported restrictions are consistent with the video surveillance. Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 633 (9th Cir. 2009) (“[T]hat Plaintiff could perform sedentary activities in bursts spread out over four days does not indicate that he . . . is capable of sustaining activity in a full-time occupation.”); Bertelsen v. Hartford Life Ins. Co., 1 F.Supp.3d 1060 (E.D. Cal. 2014). For example, in Lin v. Metropolitan Life Ins. Co., 2016 WL 4373859 (N.D. Cal. Aug. 16, 2016), defendant MetLife suggested that the insured’s ability to travel on a two-week trip to China was inconsistent with his disability. However, the court disagreed and found that a closer reading of the office note mentioning the trip showed that the plaintiff reported consistent symptoms throughout his trip. As the court said, “[T]he mere fact that Plaintiff traveled to China does not undermine his claim that his conditions were debilitating.” Id. at *8; see also Bertelsen, 1.F.Supp.3d at 1073 (“[T]he Court also notes the inordinate amount of weight Defendant placed on the surveillance information. The Ninth Circuit has admonished district courts to not overly rely on surveillance video, particularly where the restrictions are consistent with the video surveillance.”)

It should be obvious that a videotape showing a few minutes of activity does not most of the time indicate full-time work ability. In Beaty v. Prudential Insurance Co., 313 F.App’x 46, 49 (9th Cir. 2009), the Ninth Circuit rejected the insurer’s attempt to rely on “unsupportable inferences from a surveillance video and reports which show the plaintiff engaging in a variety of normal day-to-day activities” and criticized the insurer’s failure to explain how activities show “she can perform the duties of her occupation.” Other courts have likewise ruled that an overstatement of a claimant’s activities in surveillance footage is improper, and they warned that activities observed for a short amount of time do not necessarily translate into full-time work capacity. For example, in Thivierge v. Hartford Life, 2006 WL 823751, *11 (N.D. Cal. Mar. 28, 2006), the district court held that activities observed “for a couple of hours on five out of six days [that the claimant] was under surveillance does not mean that Plaintiff is able to work an eight-hour[-per-]day job.”

In a recent decision, Black v. Hartford Life Ins. Co., 2019 WL 2422481, *9 (D. Or. June 10, 2019), the District Court of Oregon found that the defendant insurer overstated surveillance findings. The court noted that, of the 16 hours of surveillance, including five hours during which the plaintiff was away from his house, the surveillance company returned less than 16 minutes of footage that was comprised of small clips that frequently lasted less than one minute each. The court found the video in this case to be “ambiguous at most, and misleading at worst.” Id. Further, the court found that the activities depicted “do not show [that the plaintiff] is capable of maintaining work and are not necessarily inconsistent with Plaintiff’s reported limitations. Plaintiff is recorded riding a bus and running errands. These errands include getting a haircut, using ATMs, and purchasing food. Defendant provides no explanation for how these activities might translate to the work environment.” Id. Further, the plaintiff’s treating physician reviewed the video and still opined that the plaintiff was disabled. Id. The court ultimately found that the surveillance video evinced a level of functioning that was entirely consistent with the plaintiff’s own self-reported limitations, and that the defendant insurer’s “overstatement and over-reliance on this surveillance weighs against Defendant’s decision to terminate benefits.” Id. at *10; see Montour, 588 F.3d at 633 (“[S]igns of bias” included Hartford’s decision to “overstate . . .and over-rel[y] on surveillance of Plaintiff,” and “[this] bias infiltrated the entire administrative decision-making process, which leads us to accord significant weight to the conflict.”).

It is important to carefully review the surveillance videos to determine exactly what conduct the claimant is doing and compare that to the claimant’s restrictions and limitations. In another recent decision, Fleming v. Unum Life Ins. Co., 2018 WL 6133859 (C.D. Cal. Nov. 20, 2018), the Central District of California heavily criticized the defendant Unum’s overreliance on surveillance footage. Id. at *8. The court in Fleming noted that bending at the waist and leaning into a car did not relate to the claimant’s restrictions and limitations, as her degenerative disc disorder and resulting neck pain are her primary disabling conditions. Id. The court added, “The fact that Fleming took out the trash or bent down to place a one-pound cooler in her car does not render her capable of her full-time employment as a litigation attorney.” Id.; see Vertigan v. Halter, 260 F.3d 1044, 1050 (9th Cir. 2001) (“This court has repeatedly asserted that the mere fact that a plaintiff has carried on certain daily activities . . . does not in any way detract from her credibility to her overall disability. One does not need to be ‘utterly incapacitated’ in order to be disabled.” (citation omitted)).

The Ninth Circuit is understandably skeptical of insurers’ reliance on brief surveillance footage as alleged proof of a claimant’s capacity to work full time. See Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1162 n.36 (9th Cir. 2001) (affirming the district court’s rejection of video surveillance as alleged proof of work capacity and noting that the footage “did not shed much light on whether she could function full time as a trial attorney”); Fleming, 2018 WL 6133859 at *8.

While surveillance videos can sometimes be fatal to a claim, our firm has found that insurers frequently over-rely on surveillance, making great leaps of logic to conclude that minutes of surveillance means our clients can work at a full-time job. It is crucial to carefully scrutinize each second of the surveillance videos relied upon by the insurer to deny a claim. Then, it is necessary to compare the videos and the stated activities to the claimant’s restrictions and limitations, and even have a doctor or treating physician review the surveillance video and provide an opinion. Claimants should be wary of their actions in public and be mindful that an insurer may have hired a private investigator to surveil their activities. But courts have pushed back on over-reliance of these surveillance videos, understanding that these videos often depict a cursory and biased snapshot of a claimant’s abilities. We have significant experience handling cases in which an insurer over-relies on surveillance to deny a claim. If this has occurred, please contact McKennon Law Group PC for a free consultation so that we may assess your matter.

When insurance companies, including those offering disability, life, health or accidental death policies, engage in conduct that is sufficiently egregious, a court may award punitive damages against the insurance company. Under Arizona law, to support an award of punitive damages in an insurance bad faith case, the plaintiff must prove a willful and knowing failure to process or pay a claim known to be valid. Farr v. Transamerica Occidental Life Ins. Co. of California, 699 P.2d 376, 383 (1984). Recently, the Ninth Circuit grappled with a large punitive damages award issued by an Arizona jury in a long-term disability insurance case. In McClure v. Country Life Insurance Company, No. 18-16661 (February 27, 2020), the Ninth Circuit upheld a jury verdict awarding $2.5 million in punitive damages against defendant CC Services, Inc. (“CCSI”), the entity that administered the plaintiff’s claim.

After suffering a head injury in November 2012, Plaintiff Benjamin McClure developed severe depression and became unable to work. He filed a disability claim with his insurer, defendant Country Life Insurance Company (“Country Life”) and defendant CCSI undertook claims handling responsibilities. Defendants approved and paid McClure’s claim for thirteen months, but terminated his claim in April 2014. At trial, McClure contended that he was especially vulnerable and susceptible to emotional injury, and that the bad faith termination of benefits exacerbated his depression, resulting in extreme emotional distress and suicidal ideations for which he was hospitalized a number of times. McClure also contended that defendants terminated his claim without a reasonable basis and adequate investigation, ignored medical facts that supported the claim and misinterpreted medical facts to their advantage.

Following a jury trial, the jury returned a verdict in favor of McClure on his breach of contract and bad faith claims and found that the defendants were jointly liable for the conduct of the insurance adjusters handling the claim. The jury awarded $1.29 million in emotional distress damages and $2.5 million in punitive damages against each defendant. After the district court upheld the jury award and entered judgement in favor of McClure, the defendants appealed. The Ninth Circuit affirmed the judgement finding that the district court did not abuse its discretion in upholding the emotional distress and punitive damages award.

The Ninth Circuit first addressed defendants’ argument that there was insufficient evidence that Country Life and CCSI engaged in a joint venture. The Court determined that the jury’s conclusion that a joint venture existed was supported because Country Life had no employees of its own, all employees who made claim decisions were employed by CCSI and CCSI employees were compensated in part based on the profitability of Country Life. Therefore, a reasonable jury could infer that Country Life and CCSI shared in the control and management of the venture.

The Ninth Circuit then determined that the evidence supported the separate punitive damages award against CCSI. Of note, the defendants did not challenge the punitive damages award against Country Life. Under Arizona law, a business may be vicariously liable for punitive damages for acts of an employee that are committed in furtherance of the business and within the scope of employment. Hyatt Regency Phx. Hotel Co. v. Winston & Strawn, 907 P.2d 506, 515 (Ariz. Ct. App. 1995). The Court found that the CCSI employees’ actions were undertaken in furtherance of and within the scope of the employment and there was sufficient evidence of evil intent in terminating McClure’s benefits, justifying an award of punitive damages. For instance, evidence was presented that defendants’ claims adjuster knew that McClure suffered from major depressive disorder and panic attacks, that there was no basis to reject the opinions of McClure’s treating doctors who found that he suffered from disabling depression, that McClure had been hospitalized as suicidal and that terminating disability benefits could be devastating.

With regard to emotional distress damages, the Ninth Circuit found that the jury’s $1.29 million award was not “grossly excessive or monstrous” and that the jury could have reasonably inferred that the benefit termination aggravated McClure’s emotional distress. Defendants had argued that there was insufficient evidence that they caused McClure significant emotional distress and that the jury’s award was based on improper speculation. The district court concluded that McClure had offered sufficient evidence from which a jury could infer that defendants’ conduct resulted in McClure’s emotional distress. The jury had heard testimony from those close to McClure regarding his severe emotional pain brought on by financial hardship due to the denial of benefits. The Ninth Circuit agreed that McClure had presented sufficient evidence to justify the emotional distress award.

One final issue the Ninth Circuit addressed on appeal was defendants’ claim that the district court erred in limiting its expert’s testimony. At trial, after it was revealed that defendants’ bad faith expert witness’ definition of insurance bad faith was inconsistent with Arizona law, the district court ruled that defendants’ expert could not opine as to whether defendants’ conduct amounted to good faith or bad faith because any such opinion would have been unreliable. In finding that the district court did not abuse its discretion, the Ninth Circuit stated that the lower court “reasonably concluded that [the expert’s] testimony would have been an improper expert opinion on an ultimate issue of law.”

With the help of his attorneys, McClure was able to secure a victory against an insurance company who acted dishonestly every step of the way while putting its own profits ahead of the interests of its insured. If you believe you have been the victim of a bad faith insurance denial with regard to your disability, life, health or accidental death policy, please contact the McKennon Law Group PC. Having well-qualified, experienced attorneys on your side can make all the difference.

On March 3, 2020, in the matter of Earl Durham v. Aetna Life Insurance Company, Case No. 8:19-cv-01494-DOC-DFM, Judge David O. Carter of the U.S. District Court, Central District of California granted the McKennon Law Group PC’s motion for attorneys’ fees, costs and interest after its client prevailed in his ERISA lawsuit. Aetna had wrongfully terminated Durham’s disability benefits and then reversed its decision and reinstated his claim shortly after the lawsuit was filed. The Court approved hourly rates of $750 for Managing Shareholder Robert McKennon and $525 and $375 for associates Andrea Soliz and Nicholas West, respectively. In granting the motion, the Court rejected several of Aetna’s arguments, including that Durham should not recover fees for work done after the administrative denial but prior to filing the Complaint. The Court concluded that McKennon Law Group PC’s pre-filing efforts were in direct pursuit of the litigation and were recoverable. The Court also rejected Aetna’s argument that fees incurred after Aetna made a $35,000 settlement offer were not compensable, finding that there was no precedent to support this argument and that Aetna’s $35,000 offer was not reasonable. In the end, after determining that Durham was entitled to a fee award because he had achieved “some degree of success on the merits,” the Court awarded him almost $90,000 in fees, costs and interest.

Under the Employee Retirement Income Security Act of 1974 (“ERISA”), an employee who prevails in a lawsuit against his insurance company to collect ERISA-governed plan benefits – including life, health, disability or accidental death benefits – is entitled to recover his attorneys’ fees incurred in the lawsuit. The Supreme Court in Hardt v. Reliance Standard Life Insurance Co., 560 U.S. 242, 245 (2010) concluded that a plan participant is eligible to recover “reasonable attorneys’ fees” if he achieved “some degree of success on the merits” of his claim. What constitutes a reasonable fee in an ERISA case will vary greatly depending on the experience and skill of the attorney involved and the complexity of the case. The two main components of a reasonable fee are reasonable hourly rates and reasonable time expenditures.

In the matter of Earl Durham v. Aetna Life Insurance Company, Case No. 8:19-cv-01494-DOC-DFM, the McKennon Law Group PC filed a motion to recover attorneys’ fees after prevailing in the ERISA lawsuit. Aetna had wrongfully terminated our client’s long-term disability benefits based on an improper interpretation of a plan limitation asserting that the alcohol limitation in the plan limited our client’s claim to two years because he had alcohol induced liver damage. Shortly after we filed the complaint asserting that Aetna’s interpretation was wrong, Aetna reversed its denial decision, reinstated our client’s disability claim and paid him all past-due disability benefits. We then filed a motion seeking attorneys’ fees, costs and interest, which Aetna vigorously opposed. In granting the motion, the Court approved hourly rates of $750 for Managing Shareholder Robert McKennon and $525 and $375 for associates Andrea Soliz and Nicholas West, respectively.

The Court found that our client had achieved “some degree of success on the merits” because Aetna ultimately reinstated his LTD claim, issued payment for past-due benefits and continued to pay benefits. The Court concluded, “Durham litigated his claim and caused Aetna to reconsider its position and grant him his benefits, thereby obtaining full relief through settlement.” The Court also rejected several of Aetna’s arguments for a reduction of fees, including that our client should not recover fees for work done after the administrative denial but prior to filing the Complaint. Aetna’s argument was based on the well-settled principle that recovery under ERISA is limited to work done in connection with a formal action. Cann v. Carpenter’s Pension Trust Fund for Northern California, 989 F.2d 313, 316 (9th Cir. 1993). Aetna claimed that McKennon Law Group PC’s work done after the administrative denial but five months prior to filing the lawsuit was not done in connection with the formal action. The Court disagreed and determined that all of McKennon Law Group PC’s pre-filing efforts were in direct pursuance of the litigation and were, thus, recoverable. The Court also rejected Aetna’s argument that fees incurred after Aetna made a $35,000 settlement offer were not compensable, finding that there was no precedent to support this argument and that Aetna’s $35,000 offer was not reasonable. In the end, the Court awarded our client almost $90,000 in fees, costs and interest.

Because ERISA permits claimants to recover attorneys’ fees when they prevail in litigation, claimants should not be deterred from hiring experienced, well-qualified ERISA lawyers like the McKennon Law Group PC to help them recoup their wrongfully denied benefits in court. In these instances where attorneys’ fees are awarded, the insurance company pays the fees and the claimants are able to keep all of their life, health, disability or accidental death benefits. This result affords claimants fair access to federal courts and is consistent with ERISA’s underlying purpose, which is to protect the interests of participants in employee welfare benefit plans.

In the March 6, 2020 issue of the Los Angeles Daily Journal, the Daily Journal published an article written by the McKennon Law Group PC’s Robert J. McKennon. The article addresses a recent case by the Supreme Court of the United States, Intel Corporation Investment Policy Committee v. Sulyma, which upheld the Ninth Circuit’s holding that generic disclosures by plan administrators do not trigger the three year statute of limitations for breach of fiduciary duty claims under ERISA. Given the Supreme Court’s emphasis on what the individual plan beneficiary consciously knows and the increasing importance of breach of fiduciary duty claims under ERISA, this will likely help a variety of plan beneficiaries by guaranteeing that their otherwise meritorious claims are not barred by a statute of limitations triggered by stray statements in the volumes of documents ERISA plans send to their beneficiaries every year.

Victory for Plan Beneficiaries in US Supreme Court Ruling

The Supreme Court’s decision in a case last week will have wide-reaching implications. Now, plan administrators can no longer hide behind the volumes of unintelligible disclosures they make every year. Employers and plan fiduciaries may now be exposed to litigation challenging plan actions for a much longer time than they had anticipated.

By Robert J. McKennon

Just a decade ago, breach-of-fiduciary-duty claims under the Employee Retirement Income Security Act were not common. That changed in 2011 when the U.S. Supreme Court broadened the scope of equitable relief available under ERISA utilizing breach of fiduciary claims in its landmark decision in Cigna Corp. v. Amara, 563 U.S. 421, 441 (2011). The Supreme Court recognized that equitable relief under ERISA could take a variety of forms, including, equitable estoppel, waiver and monetary damages in the form of equitable surcharge. Before, even if there had been a breach, the available remedies were often meaningless. Now, courts have the power to order the offending administrator to provide meaningful redress. A claim may arise from a plan’s refusal to honor a life insurance policy after it has received numerous premiums and made repeated statements that someone was covered under the policy. And, a plan may be held liable for making misstatements about the value of someone’s pension benefits. In a post-Amara world, breach of fiduciary duty claims under ERISA have become increasingly important.

Breach of fiduciary duty claims under ERISA are subject to a somewhat complicated statute of limitations. Under 29 U.S.C. Section 1113, there are three different potential deadlines by which a suit must be brought. First, “under §1113(1), suit must be filed within six years of the date of the last action which constituted a part of the breach or violation or, in cases of breach by omission, the latest date on which the fiduciary could have cured the breach or violation.” Second, “suit must be filed within three years of the earliest date on which the plaintiff had actual knowledge of the breach or violation.” Id. (emphasis added). Finally, in cases of fraud or concealment, suit must be brought within six years of the date of discovery. See id.

Given the importance of these claims in a post-Amara world, the significance of the Supreme Court’s recent decision in Intel Corporation Investment Policy Committee v. Sulyma, 2020 DJDAR (Feb. 26, 2020), becomes clear. In Sulyma, the Supreme Court handed down a commonsense opinion that will help employees secure their pension and employee benefits. In Sulyma, the court clarified that disclosure of information by a plan administrator in a generic mailing does not necessarily mean that a beneficiary possesses the “actual knowledge” required to trigger the three-year statute of limitations on a breach of fiduciary duty claim arising under ERISA.

Like many employees, Christopher Sulyma did not pay much attention to the lengthy disclosures and prospectuses associated with his employer’s 401(k) plan. Sulyma worked for Intel Corporation between 2010 and 2012, during which time he was automatically enrolled in Intel’s Target Date 2045 Fund. The fund was managed by an investment committee appointed by Intel’s board of directors. Intel provided Sulyma with various disclosures about the fund’s investments, which were also available on two websites. These documents revealed that the fund had made allocations to alternative investments such as hedge funds and private equity funds, which charged higher-than-average fees and underperformed in the market. Although Sulyma accessed some of the disclosures during his employment, he testified that he did not know that Intel had allocated the fund’s portfolio in alternative investments, or that this was the reason for the fund’s poor performance.

In 2015, Sulyma eventually learned of the fund’s poor performance and brought claims against Intel’s oversight committees under section 1104 of ERISA on the basis that Intel had made imprudent investments, failed to disclose those investments, failed to monitor the performance of those investments and failed to remedy other defendants’ ERISA violations despite knowing about them. What followed was a battle over whether Sulyma’s claims were barred by ERISA’s three-year statute of limitations.

Intel moved to dismiss Sulyma’s complaint, arguing in the district court that ERISA’s three-year statute of limitations barred Sulyma’s claims. Sulyma filed his action against Intel on October 29, 2015, and Intel claimed Sulyma had actual knowledge of the alleged breach before October 2012 because he had access to the fund documents as early as 2010. The district court sided with Intel and imputed the knowledge of the fund’s portfolio allocation to Sulyma.

On appeal, the 9th U.S. Circuit Court of Appeals reversed the district court’s granting of summary judgment. Neither “knowledge” nor “actual knowledge” is defined in ERISA. The 9th Circuit emphasized the plain meaning of the phrase. It concluded that actual knowledge refers to what the person consciously knows. The 9th Circuit found that the district court had erred when it inferred that Sulyma had actual knowledge merely because he had received fund documents that disclosed Intel’s investment strategy.

The Supreme Court affirmed the 9th Circuit’s ruling. The Supreme Court explained that “Although ERISA does not define the phrase ‘actual knowledge,’ its meaning is plain.” “[T]o have ‘actual knowledge’ of a piece of information, one must in fact be aware of it.” The court examined a variety of sources to confirm this meaning, but, as the court explained, “Dictionaries are hardly necessary to confirm the point, but they do.” Of note, the term “actual” separates the type of knowledge required by Section 1113 from the legal concept of constructive knowledge. Constructive knowledge is the kind in which the law imputes knowledge “to a person who fails to learn something that a reasonably diligent person would have learned.” By contrast, actual knowledge means that the person, at some point, consciously knew the fact in question. Here, Congress clearly intended to make clear that the person must be aware of the fact in question in order for the three-year statute of limitations to begin. Mere inclusion of the fact amid the text in volumes of documents regularly sent to plan participants is insufficient to impart actual knowledge.

The Supreme Court’s decision was not entirely bad for Intel or employers. The court explained that the “usual ways” of proving actual knowledge remain available to plan administrators. “Inferences from circumstantial evidence” can still be used by plan administrators to establish when the statute of limitations should begin to run. Furthermore, a participant cannot engage in “willful blindness,” the act of refusing to inform oneself of a piece of information. However, constructive knowledge cannot trigger the three-year statute of limitations.

The Supreme Court’s decision in Sulyma will have wide-reaching implications. Now, plan administrators can no longer hide behind the volumes of unintelligible disclosures they make every year. Employers and plan fiduciaries may now be exposed to litigation challenging plan actions for a much longer time than they had anticipated. Given the significant increase in ERISA breach of fiduciary duty claims and litigation, employees who seek to recover promised employee benefits will greatly benefit from this ruling.

Robert J. McKennon is a shareholder of McKennon Law Group PC in its Newport Beach office. His practice specializes in representing policyholders in life, health and disability insurance, insurance bad faith and ERISA litigation. He can be reached at (949) 387-9595 or rm@mckennonlawgroup.com. His firm’s California Insurance Litigation Blog can be found at mslawllp.com/news-blog/.

McKennon Law Group PC Wins ERISA Disability Trial against Long-Term Disability Insurer MetLife

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