ERISA - Attorneys' Fees Archives

Ninth Circuit Appeal Court Finds ERISA Disability Claimant Achieved “Some Success on the Merits” Under Hardt Where the District Court Remanded His Disability Claim to the Insurer Due To Deficiencies in the Initial Claims Review Process

The Ninth Circuit has recently joined the majority of federal courts in adopting the rule that if a claimant is able to convince a federal court to rule that an insurer’s review of an ERISA claim is deficient and it remands the matter back to the insurer based on the deficiencies, that constitutes “some success on the merits.” This is significant because it will support a claimant’s motion for attorneys’ fees. The United States Supreme Court decided in Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 in 2010, and since then, most federal courts have found that a remand to the claims administrator/insurer is considered “some success on the merits” for purposes of an award of attorneys’ fees under Hardt, but the Ninth Circuit had not spoken on the issue until recently, when it too adopted the rule in its holding of Woolsey v. Aetna Life Ins. Co., No. 20-16885, __ Fed. Appx. __, 2022 WL 1598964 (9th Cir. 2022).

Michael Woolsey filed suit in federal district court after his claim for disability benefits was denied by Aetna. The district court remanded Woolsey’s claim to Aetna, finding that Aetna did not provide him with a full and fair review because its review process was deficient. The district court determined that a remand was warranted because Aetna (1) failed to assess the aggregate effect of Woolsey’s medical conditions; (2) gave dismissive treatment to reports from his treating specialists; (3) failed to address specific vocational requirements as required by the plan; (4) failed to inform Woolsey of a deficiency in the record and to consider those missing records; (5) failed to disclose independent reviewers’ reports; (6) failed to adequately explain what was necessary to correct the record; and (7) failed to adequately investigate his physicians’ reports. While the procedural errors and deficiencies did not warrant a de novo review, the district court concluded that their cumulative effect prevented a full development of the record and a “full and fair review,” relying on 29 U.S.C. Section 1133(2).

Woolsey moved for attorneys’ fees. The district court denied Woolsey’s motion holding that its remand to Aetna did not constitute “some success on the merits” because Woolsey did not prevail on his central claims. Woolsey appealed to the Ninth Circuit, which reversed the district court’s decision, holding that the district court erred in applying the Hardt standard. The Ninth Circuit held that in reaching its decision, the district court failed to comply with the ruling in Hardt that district courts should avoid lengthy inquiries into how substantial a party’s success was. The Ninth Circuit further held that “some success on the merits” does not require a district court to assess the strength of the plaintiff’s claim and noted that while the Supreme Court remained silent on what constitutes the minimum success required to enable a successful motion for attorneys’ fees, it did not suggest that the requisite success was limited to the circumstances of the Hardt remand order. The Ninth Circuit concluded that the Supreme Court’s characterization of the remand in Hardt was far more than a trivial or purely procedural success, and the Hardt court’s decision not to set the remand as the minimum threshold required for “some success on the merits” makes it clear that less favorable relief can also meet the standard.

The Ninth Circuit denoted in its holding that any remand order on its own is not necessarily sufficient to provide a basis for a claimant to be awarded attorneys’ fees. The distinction here is that Woolsey’s claim was remanded because Aetna’s review of his claim had been deficient, suggesting that had the court found Aetna’s claim review to be complete and with no violations of ERISA, but rather remanded the claim on some strictly procedural ground, such remand would likely not provide a basis for him to be awarded attorneys’ fees. Although Aetna argued that the remand did not constitute “some success on the merits” because Woolsey did not expressly seek a remand in his complaint, the Ninth Circuit rejected this argument, holding that a party’s “success” is not required to be in the form of the court granting the relief that was expressly sought in the complaint.

The implication of the Ninth Circuit’s decision in Woolsey is that the door is open for ERISA claimants in the Ninth Circuit to move for attorneys’ fees when there is a remand to the claims administrator/insurer based on a court’s findings that the insurer violated ERISA in a material manner such that a claimant did not receive a full and fair review under ERISA. As the Hardt standard is somewhat vague, Ninth Circuit in Woolsey provided much needed guidance with regard to under what circumstances warrant a finding of “some success on the merits” that can give rise to a recovery of attorneys’ fees.

Aside from the impact that the Ninth Circuit’s decision has on claimants’ ability to move for attorneys’ fees in situations involving remands, another incidental impact it will likely have is to improve of the quality of insurers’ claim-review processes. Prior to Woolsey, insurers litigating in the Ninth Circuit knew that they had a chance of defeating claimants’ motions for attorneys’ fees by arguing that remand does not constitute “success on the merits.” Without any potential liability for attorneys’ fees, insurers are more likely to provide deficient reviews of claims, knowing that a district court may well remand the decision, but that such process would effectively cost the insurer nothing, because there was no risk of being ordered to pay attorneys’ fees based on a remand. Now, however, those insurers know that the Ninth Circuit courts will apply the Hardt standard consistently with other federal courts. Therefore, those insurers are more likely to provide better initial claims reviews in efforts to avoid orders to pay attorneys’ fees.

Considering the Ninth Circuit’s holding in Woolsey, claimants facing similar situations as Woolsey did can now operate with the knowledge that an insurer’s deficient claims review can open the door for attorneys’ fees to be awarded to them.

If you believe your insurer has not given your disability, life or accidental death claim a full and fair review, the experienced attorneys at McKennon Law Group PC can assist you to recover your denied insurance benefits and attorneys’ fees, whether a court determines your eligibility for benefits or remands your claim to the insurer for further review.

Court Rules That “Near Fatal” Levels of Methamphetamine Did Not Trigger Drug Exclusion Based on the Ordinary Meaning of the Terms in the ERISA Accidental Death & Dismemberment Policy And That Death Was Accidental

Accidental Death & Dismemberment (“AD&D”) Insurance Update: Northern District of California Construes the Terms of ERISA-governed AD&D Policy Against the Insurer, Finds that “Near Fatal” Levels of Methamphetamine Did Not Trigger Policy’s Drug Exclusion

On November 15, 2021, Judge Phyllis Hamilton, in Santos v. Minnesota Life Ins. Co., 2021 WL 5302950 (N.D. Cal. Nov. 15, 2021), ruled in favor of an administrator of the estate of a 55 year-old engineer and Apple employee who died alone in his apartment after falling backwards and hitting his head. The death certificate listed the immediate cause of death as “blunt force head trauma with subdural hematoma.” The death certificate indicated that the death was “drug related,” but it also indicated that the manner of death was accidental.

The decedent was insured through an ERISA plan sponsored by his employer, Apple. Under the plan he had $311,000 in life insurance coverage and $311,000 in AD&D coverage. The insurance company paid the life benefit, but it denied coverage under the AD&D policy based on the policy’s “drug exclusion” that provided that the death benefit is not payable where the insured’s death results from or is caused directly or indirectly by: “being under the influence of any prescription drug, narcotic, or hallucinogen, unless such prescription drug, narcotic, or hallucinogen was prescribed by a physician and taken in accordance with the prescribed dosage.” The insurance company also tried to avoid liability under the AD&D policy based on its contention that the incident was not an “accident” due to the significant levels of methamphetamines found in the decedent’s system.

The policy beneficiary filed suit under ERISA based on the insurer’s improper denial of AD&D coverage. The court found that the death was accidental under federal common law and that the policy’s “drug exclusion” did not apply. The beneficiary was entitled to recover the wrongfully denied $311,000 accidental death benefit, and she was entitled to file a motion to recover her attorneys’ fees and costs.

There are three important things to take away from what was a relatively easy decision by the former U.S. Chief District Judge of the Northern District of California who took senior status last February. First, ERISA cases are governed by federal common law, and under federal common law, the term “accident” is interpreted based on the reasonable expectations of the insured. The court explained federal common law assessment of “accident,” using the test mandated by the Ninth Circuit in Padfield v. AIG Life Insurance Company, 290 F.3d 1121, 1126 (9th Cir. 2002):

A death or injury may be “deemed ‘accidental’ under a group accidental insurance policy established under ERISA if the death [or injury] was unexpected or unintentional.” 10 Couch on Insurance § 139:16 (3d ed. 1995 & 2000 Supp.). In determining whether death, or the injury that caused death, was unexpected or unintentional, courts have undertaken an overlapping subjective and objective inquiry. The court first asks whether the insured subjectively lacked an expectation of death or injury. See Wickman v. Northwestern Nat’l Ins. Co., 908 F.2d 1077, 1088 (1st Cir. 1990) (“Requiring an analysis from the perspective of the reasonable person in the shoes of the insured fulfills the axiom that accident should be judged from the perspective of the insured.”). If so, the court asks whether the suppositions that underlay the insured’s expectation were reasonable, from the perspective of the insured, allowing the insured a great deal of latitude and taking into account the insured’s personal characteristics and experiences. See id. If the subjective expectation of the insured cannot be ascertained, the court asks whether a reasonable person, with background and characteristics similar to the insured, would have viewed the resulting injury or death as substantially certain to result from the insured’s conduct.

Applying this analysis, the court found that the decedent’s death was unexpected because a reasonable person in his position would not have viewed the resulting injury and death as substantially certain to result from his conduct. Therefore, the death was accidental under controlling Ninth Circuit precedent, Padfield.

Second, the terms in insurance policies are interpreted based on their usual and ordinary meanings, and ambiguities are interpreted in favor of the insured. Here, the court found that crystal meth was not a “prescription drug” nor a “narcotic” nor a “hallucinogen” based on the ordinary meaning of the terms and with reference to the Merriam-Webster dictionary. Accordingly, it found that the policy’s drug exclusion did not apply. Minnesota Life lost this case because the terms in the drug exclusion in its policy, although broad, did not include more specific wording, such as “controlled substances.” Decisions in cases like this will necessarily depend on the interpretation of the language in the policy at issue.

Third, ERISA claims that are subject to California law will most likely be reviewed de novo by the district court. The court will not give any deference to the insurer’s denial of the claim. This is important to understand because there a number of cases relating to the key issue of whether the death was “accidental” that are distinguishable because they were decided under the deferential “abuse of discretion” standard. It is important to not give up on your claim before consulting a qualified and experienced California life insurance attorney/ AD&D insurance attorney.

McKennon Law Group PC specializes in handling accidental death insurance claims that have been improperly denied by insurance companies based on their misinterpretation of their own policies and on their failure to adequately investigate claims. Under both ERISA and California law, claimants may be able to recover their attorneys’ fees incurred in challenging improper denials of benefits. If you have been denied coverage under a life insurance or AD&D policy, please contact us at (949) 387-9595 to obtain a free consultation.

After McKennon Law Group PC Aggressively Won Case and Filed Attorney’s Fees Motion, District Judge David O. Carter Awards Plaintiff in ERISA Disability Case Nearly $90,000 in Attorneys’ 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.

Cassim v. Allstate Insurance: Attorney’s Fees in Contingency-Fee “Bad Faith” Cases

Since 2004, when the California Supreme Court ruled that a “portion” of contingency attorney’s fees are recoverable in bad-faith insurance cases, plaintiffs and their lawyers have been able to recover attorney’s fees based in part on the specific terms of the contingency-fee retainer agreement. For starters, in order to recover attorney’s fees in these actions, a policyholder must prove that (1) contractual benefits were withheld in bad faith, and (2) reasonable fees were incurred by the policyholder to recover those benefits. However, any attorney’s fees incurred merely to prove the alleged “bad faith” claims are not recoverable at all; only fees incurred to prove actual coverage are recoverable. Cassim v. Allstate Insurance, 33 Cal.4th 780, 811 (2004).

In Cassim, plaintiffs Fareed and Rashida Cassim purchased a home in Palmdale in 1989 and insured the property against loss with Allstate Insurance. In December 1990, a fire (later determined to be arson) caused damage to the home. Although the fire burned only in the master bedroom and kitchen, the extensive heat, smoke and water damage to the rest of the structure rendered the entire home uninhabitable. After plaintiffs proved “bad faith” on the part of Allstate Insurance, a jury awarded plaintiffs a combined $3,594,600 in compensatory damages and $5 million in punitive damages. The plaintiffs’ attorney had a 40%-contingency-fee agreement.

The Cassim court held that a proper calculation of attorney’s fees requires the trier of fact to determine the percentage of fees attributable to securing just the contract recovery. This formula is based on the percentage of the attorney’s overall efforts devoted to the contractual recovery portion of the case and is divided into three categories: contract claim only, bad-faith claim only, and both claims. The Supreme Court remanded the case to the trial judge to make the calculation.

Using hypothetical numbers, and assuming a total compensatory award of $1 million, the 40% contingency fee would be $400,000. If the policyholder’s lawyer spent 1,500 total hours on the case and can prove the breakdown as follows: 200 hours on the contract claim only, 800 hours on the bad-faith claim only and 500 hours on both claims, then the trier of fact could, reasonably, conclude that one-half of the hours spent on the joint “contract and bad faith” issues are fairly attributable to the contract; i.e., half of 500 hours, or 250 hours, plus the 200 hours from the contract claim only, would total 30%. That 30% of the total attorney’s fee ($400,000) would be recoverable as well: $120,000 extra paid to the plaintiffs.

However, the Cassim court also cautioned judges to disregard fee agreements designed solely to manipulate the calculation of recoverable costs to the policyholder’s benefit, as have been shown to exist in some cases in the intervening years. For instance, the case of Pulte Home Corporation v. American Safety Indemnity, 14 Cal.App.5th 1086 (2017) disallowed a last-minute modification of a fee agreement from contingency to hourly, as an improper attempt to inflate the attorney’s fee (and punitive damage) award. This case involved the development of two residential housing projects that were built beginning in 2003 and sold between 2005-2006. The various subcontractors were required to name the developer as an “additional insured” on their policies, some of which were issued by American Safety. In 2013, several homeowners sued Pulte for alleged defects in the work performed by the subcontractors who were insured by American Safety. American Safety denied coverage and refused to provide a defense to Pulte because the construction had taken place 10 years prior.

Pulte sued American Safety, and prevailed on the “bad faith” claims, but American Safety then appealed the trial court’s award of attorney’s fees and punitive damages as violating the dictates set forth in the Cassim case, specifically improperly attempting to inflate the attorney’s fee (and punitive damage) award. Pulte’s lawyer in the bad-faith case originally had entered into a contingency-fee agreement with Pulte, which would have resulted in a fee award of only $371,000 under the Cassim formula, set forth above.

After the trial on bad faith, but before the punitive damage phase, Pulte “modified” the fee agreement to be based on an hourly rate instead and, thereafter, claimed an additional $274,000 in attorney’s fees actually incurred and paid, for a total of $645,000. The trial court disagreed with American Safety’s assertion that the change in the fee agreement was to manipulate the process. After making deductions for fees unrelated to pursuing amounts due under the insurance contract, the trial court awarded Pulte $471,313.52 in attorney’s fees. Based on the one-to-one ratio with attorney’s fees, the trial court also awarded $500,000 in punitive damages.

The Court of Appeal reversed, stating, “We have serious concerns that this change in Pulte’s fee agreement was apparently ‘designed to manipulate the calculation of Brandt fees’ to the plaintiff’s benefit.” Id. at 1132. The court also rejected Pulte’s argument that, because Pulte had actually incurred and paid the hourly fee, that amount must be considered as the proper amount for the attorney-fee award. The court concluded that the judge should have based the attorney-fee award on the agreement in force during the trial and, therefore, remanded the case to recalculate the proper amount of attorney’s fees (and to adjust the punitive damage award, since because it was based on the improper attorney-fee award). Id. at 1133.

The good news for plaintiffs’ attorneys is that any “bad faith” case can be prosecuted under a contingency-fee agreement, based on the Cassim case, and an award of attorney’s fees based on that fee agreement may be possible. California courts continue to define the outlying boundaries for recovering contingency attorney’s fees, but at least there is no question that “reasonable” fees (attributable to proving actual coverage) are recoverable.

Fee-Shifting: When are Attorneys’ Fees Recoverable in ERISA Cases?

Challenging a wrongfully denied claim for life, health, long-term disability or accidental death and dismemberment benefits can be a very time-consuming endeavor for law firms handling these types of cases. The resources required to fight a sophisticated insurer can quickly become very expensive. Without the ability to collect attorney’s fees, many wrongfully denied insurance claims would go unchallenged, not for lack of merit, but due to a lack of economic viability. Fortunately, the Employee Retirement Income Security Act of 1974, or ERISA, allows for recovery of attorneys’ fees upon a showing of some degree of success on the merits. In other words, a meritorious lawsuit under ERISA will almost certainly result in making the culpable party (usually the insurer who denied the claim) foot the bill. Without this key incentive, insureds and their attorneys would be hard-pressed to pursue a wrongfully denied claim for benefits. Although not the subject of this article, attorney’s fees may also be obtained in non-ERISA state court insurance bad faith cases too.

In this article, we focus on the importance of ERISA’s fee-shifting provisions and some of the contours of that statutory remedy. First, we provide a brief background on attorneys’ fees in our legal system, largely governed by the “American Rule.” Next, we discuss ERISA’s fee-shifting provision as a statutory exception to that rule and as applied by the Ninth Circuit in Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974 (9th Cir. 2001).

The “American Rule”
In the U.S., our legal system largely allocates responsibility for attorneys’ fees in accordance with the American Rule. Unlike the English Rule, its American counterpart assigns each party responsibility for his or her own attorneys’ fees, unless a statute or contract provides otherwise. This responsibility applies even if the other party is at fault. The American Rule contrasts with the English Rule in that the latter awards attorneys’ fees to the winner as an element of damages, i.e., the loser pays. Many believe the English Rule is a fairer approach, although it may unfairly penalize parties for defending or pursuing an action where the legal outcome is uncertain.

ERISA’s Fee-Shifting Provision
ERISA provides a “fee-shifting,” statutory exception to the American Rule. See 29 U.S.C. § 1132(g)(1). More like the English Rule’s loser-pays regime, this provision grants the court discretion to award reasonable attorneys’ fees and costs in an ERISA action. ERISA’s generous fee-shifting provision does not even require that the party prevail to be entitled to attorneys’ fees. As the U.S. Supreme Court declared in Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010), under ERISA, the court may award attorneys’ fees based solely on a showing of some degree of success on the merits.

When Does ERISA’s Fee-Shifting Provision Apply?
As discussed in various other blogs on the subject, employee benefits governed by ERISA typically require at least one mandatory internal appeal to the insurer (if the Policy has such a provision, which they typically do). Thus, if you have a long-term disability policy through your employer, and the governing policy or plan document requires appeal of any denial or termination of benefits, one would have to exhaust that internal appeal before he could file a lawsuit. Failure to do so may prevent the participant from filing a lawsuit in the future.

ERISA’s fee-shifting provision applies only to those fees incurred in preparation of litigation and not typically in the requisite administrative appeals process. However, there are exceptions to this rule. One case that discusses such an exception is Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974 (9th Cir. 2001), in which the Ninth Circuit Court of Appeals approved an award of attorneys’ fees for work that would otherwise be considered part of the administrative process. In Dishman, the court approved plaintiff’s attorneys’ fees because it found that there was nothing to pare off, as the insurer did not make an adequate administrative remedy available to plaintiff.

The plaintiff, Mr. Dishman, struggled with disabling migraines for many years before he could no longer work. Unum accepted Mr. Dishman’s claim; however, after a few years, Unum assigned Mr. Dishman’s claim to its Complex Claim Unit and hired several private investigators. Instead of conducting medical evaluations, Unum’s investigation focused on Mr. Dishman’s potential affiliation with a Colorado company. Based on this information, Unum called Mr. Dishman and cancelled his benefits, later retracting the cancellation, calling it a “suspension.”

The correspondence that followed appear as attempts to engage in the administrative appeals process under ERISA. Mr. Dishman’s attorney corresponded with Unum on his behalf, proposing that Mr. Dishman be examined by a neutral neurologist. Unum declined and requested further information related to Mr. Dishman’s potential employment in Colorado. Mr. Dishman attempted to comply with Unum’s requests for some time, but when Mr. Dishman’s attorney requested a copy of Unum’s claim procedure, his first request was ignored. As to his second request, Unum responded only that it “does not have a Claims Procedure with regard to the suspension or termination of benefits.”

Although this back-and-forth looks akin to an attempted administrative process, the court determined that Unum’s conduct communicated to Mr. Dishman that he had no administrative recourse. Accordingly, the Court upheld the District Court’s exception to the exhaustion requirement because Unum gave Mr. Dishman inadequate notice of the denial and available appeals procedure. Further, the court also largely agreed with the District Court’s award of all Mr. Dishman’s attorneys’ fees (absent interest thereon) because:

[T]here was nothing to pare off […] none of the claimed hours were expended in connection with the exhaustion of administrative procedures, inasmuch as Unum did not make any administrative remedy available to the plaintiff.

In sum, the courts have long-acknowledged the importance of this recovery provision in achieving the fundamental goals of ERISA. It provides a financial incentive for attorneys to represent plan participants, beneficiaries or fiduciaries with wrongfully denied claims for benefits. It also penalizes administrators for claims handling misconduct by forcing them to internalize those costs. Along with other statutory incentives, the threat of looming attorneys’ fees gives real teeth to ERISA’s procedural protections, increasing the cost of failure to comply with these ERISA protections. McKennon Law Group PC has recovered significant attorney’s fees in many of the bad faith and ERISA insurance matters it has handled for our clients. This has allowed our clients in those cases to keep all or most of their disability, life, accidental death and long-term care benefits.

Attorneys’ Fee Awards in ERISA Cases: McKennon Law Group PC Gets A Large One

Most employee benefits are governed by a federal law called the Employee Retirement Income Security Act of 1974 (“ERISA”), including life insurance, health insurance, disability insurance, pensions and other benefits offered by employers to their employees through their employee benefit plans. Sometimes the plan, or an insurance company if the plan’s benefits are funded by an insurance policy, wrongfully refuses to pay benefits that are due to an employee. If an employee files a successful ERISA lawsuit to collect his plan benefits, he is entitled to recover his attorneys’ fees incurred in the lawsuit. The applicable ERISA statute, 29 U.S.C. section 1132(g)(1), states: “In any action under this subchapter . . . by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” In Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010), the Supreme Court interpreted that statute and concluded a plan participant is entitled to recover his “reasonable attorneys’ fees” if he achieves some degree of success on the merits of the case.

That begs the question. What are reasonable attorneys’ fees in an ERISA case? The hourly rates charged by ERISA lawyers and the amount of time spent on a case can vary greatly, depending on the experience, skill and reputation of the attorney involved and the complexity of the matter. Hourly rates of up to $700 for highly experienced attorneys have been approved for ERISA cases by California federal district courts, including fee awards in the multiple hundreds of thousands of dollars.

The McKennon Law Group PC recently obtained such an award in Reddick v. Metro. Life Ins. Co., No. 3:15-CV-02326-L-WVG, 2018 WL 637938 (S.D. Cal. Jan. 31, 2018), where the Court approved its hourly rates of up to $700 and awarded it 100% of its fees, almost $300,000. We prevailed in that ERISA lawsuit filed against Metropolitan Life Insurance Company (“MetLife”), our client’s group long-term disability insurer, after MetLife terminated his benefits. Our client was a financial advisor that could no longer perform his job duties because of debilitating, post-surgical low back pain and impaired concentration caused by his pain medication. On the eve of trial, after the McKennon Law Group PC prevailed on two critical evidentiary motions, the disability insurer capitulated and agreed to pay our client all his benefits. The insurer, however, offered to pay just a small fraction of the firm’s attorneys’ fees and costs, contending they were unreasonable in amount. We promptly filed a motion to recover our attorney’s fees, which MetLife vigorously opposed.

On January 31, 2018, in a detailed 11-page opinion, the Honorable Judge M. James Lorenz of the United States District Court for the Southern District of California granted our motion. The Court ordered MetLife to pay 100% of our attorneys’ fees (and some costs), together totaling $294,391. Judge Lorenz concluded that the firm’s hourly rates of $700, $600 and $290 for Robert McKennon, Joseph McMillen and Stephanie Talavera, respectively, are reasonable for ERISA work given their strong experience and outstanding abilities, including decades handling insurance coverage, ERISA and bad faith insurance lawsuits. Judge Lorenz concluded that every minute of the firm’s time spent on the case was reasonable and recoverable from the disability insurer, MetLife:

[C]onsidering the quality of the work produced by [McKennon Law Group PC] and the successful result obtained, the Court finds reasonable the 515.1 hours counsel spent on this case.

Key Take Away
You should hire an experienced ERISA lawyer to represent you if your claim for life, health, disability or pension benefits is denied, even if they are more expensive than a less qualified lawyer. The law permits you to recoup your reasonable attorneys’ fees from the insurer or plan that wrongfully denied your benefits. Thus, it is the insurer that will end up paying for your better-quality representation, not you. In the Reddick v. MetLife case, our client was able to keep 100% of his long-term disability insurance benefits.

If your claim for short-term disability, long-term disability, life, retirement or health benefits has been denied, you can call (949) 387-9595 for a free consultation with the attorneys of the McKennon Law Group PC, several of whom previously represented insurance companies and are exceptionally experienced in handling both ERISA insurance claims and non-ERISA California insurance bad faith claims.

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