Firm News Archives - Page 28 of 76

Insurers Cannot Ignore Actual Job Requirements or Worsening Symptoms That Occur After a Claim for Disability Insurance Benefits is Filed

There are many tactics that insurance companies use to downplay, or even ignore, the severity of an insured’s illness or injury in an attempt to deny a claim for long-term disability insurance benefits. For example, insurance companies will often attempt to limit their determination of whether a person is disabled to the date a claim is filed, regardless of whether a condition is progressive or takes a turn for the worse after the claim is filed. However, under Employee Retirement Income Security Act of 1974 (“ERISA”), once documentation of a worsening condition or worsening symptoms is provided to the insurance company prior to a final denial, it must be considered. Additionally, insurance companies will often ignore the actual requirements of a person’s job, and rely upon a description of a similar occupation contained in the Dictionary of Occupational Titles (“DOT”), a publication produced by the United States Department of Labor which identifies, among other things, the physical requirements of various occupations. Insurance companies will then rely on the often less demanding physical requirements of a comparable occupation contained in the DOT in order to claim that disabled individuals are capable of performing the requirements of their occupation. As demonstrated in a recent decision from the Northern District of California, judges will not allow insurance companies to use their subtle tricks to avoid paying a valid claim for disability benefits.

In Montoya v. Reliance Standard Life Insurance Company, No. 14-cv-02740-WHO (N.D. Cal. Sep. 27, 2016), Mr. Montoya was a mental health therapist who filed a claim for disability benefits from Reliance Standard Life Insurance Company (“Reliance”) due to his carpal tunnel syndrome, pain in both of his hands, neck pain, back pain, acute stress reaction, and depression. After initially concluding that Mr. Montoya was disabled for a limited period of time due to evidence of temporary psychiatric impairment, Reliance denied his claim insisting his medical records failed to support an impairment that would preclude returning to work. Mr. Montoya’s pain and symptoms became progressively worse after he filed his claim for disability benefits with Reliance. After Mr. Montoya appealed Reliance’s denial of his claim, he was examined by a physician hired by Reliance to determine his level of impairment. Reliance requested that the examining physician determine the presence or absence of an impairing condition only as of the date that Mr. Montoya’s temporary psychiatric impairment ended. Based upon Reliance’s request, the examining physician did not consider Mr. Montoya’s subsequent medical records indicating he was unable to return to his job duties due to worsening of his carpal tunnel syndrome, revealing additional diagnoses of wrist derangement and cervical radiculopathy, and showing a significant increase in his pain since the date Reliance determined his temporary psychiatric impairment ended. The examining physician hired by Reliance prepared a report indicating that based upon his examination of Mr. Montoya, he was capable of working in a sedentary capacity as of the date his temporary psychiatric impairment ended.

Reliance also ignored the amount of typing and fingering required by Mr. Montoya’s occupation by citing to the DOT title for “caseworker/Social Services,” last updated in 1991, which only required “occasional” fingering and typing. However, Mr. Montoya’s testimony and the job description provided by his employer indicated his job required computer work at least 40% of the time, significantly more than “occasionally.” Mr. Montoya argued that Reliance should not be able to rely on a DOT title that was last updated in 1991 for a determination of what his occupation entails in terms of fingering and computer work. Instead, Mr. Montoya asserted that Reliance should consider his actual job tasks which required substantial typing/fingering that he is not able to perform.

The District Court found that Reliance erred in relying upon its examining physician’s report. Specifically, the court noted that the examining physician failed to explain why he could testify as to what Mr. Montoya’s limitations were when his temporary psychiatric impairment ended. The court noted that it was improper for Reliance to fail to explain why it was appropriate to limit its review of Mr. Montoya’s physical ailments after the date his psychiatric impairment ended when the record was replete with evidence that his pain worsened significantly after that time. In other words, as long as records indicating Mr. Montoya’s worsening condition were provided to Reliance prior to a final decision regarding his entitlement to disability benefits, they were part of the administrative record and must be considered in the determination of his disability. The District Court further determined that Reliance should have considered Mr. Montoya’s actual job tasks as a mental health therapist which required substantial typing/fingering that he is not able to perform. The court noted that it was unreasonable for Reliance to rely solely on the DOT definitions last updated in 1991 to determine the requirements of Mr. Montoya’s job as of 2012, particularly given the evidence in the record.

The court ruled in favor of Mr. Montoya and determined that Reliance acted unreasonably. It is important to remember that this case was decided under the de novo standard of review, like almost all cases involving claims for disability benefits under ERISA in California. This means that the judge reviews all of the documents in the insurer’s possession at the time it rendered a final decision, and then determines whether the insured is entitled to disability benefits without deferring to the insurer’s decision. Therefore, while a worsening condition or worsening symptoms will be considered in determining a claimant’s entitlement to disability benefits, is important to understand that the administrative record essentially closes when your insurer renders a final decision on your claim.

Ultimately, as the Montoya case illustrates, if your insurer denied your claim while ignoring portions of your medical records or ignoring your actual job requirements, there is a good chance we can help. Please contact McKennon Law Group and let us see if we can assist you.

Federal Court Criticizes Long-Term Disability Insurer for “Paper Reviews” and Dismissing SSA Award

Were you denied benefits by your group long-term disability insurer without the insurance company’s doctor examining you in-person? Did your insurer deny your claim even though the Social Security Administration concluded you are disabled? If so, the McKennon Law Group may be able to help get your disability benefits by appealing the insurer’s decision or by filing a lawsuit against it in federal court. As experienced ERISA disability insurance lawyers who have handled hundreds of individual and group long-term disability claims, we see all too often insurance companies unjustly deny claims based purely upon a “paper review” of the employee’s medical records by a biased medical consultant and, worse yet, often by just an unqualified nurse employed by the insurer. No rational doctor would determine whether his patient is disabled from working without examining him. But that is precisely how group disability insurers deny claims on a regular basis, hiring a doctor to perform a cursory review of the claimant’s medical records without ever examining him or speaking to him. Unfortunately, it is a widespread, endemic practice in the disability insurance industry.

Fortunately for claimants, courts often criticize this “pure paper review” practice to decide claims. A federal court in Oakland, California recently did in the case of Lin v. Metropolitan Life Insurance Company, 2016 WL 4373859 (N.D. Cal. Aug. 16, 2016). In that case, Senior United States District Judge Saundra Brown Armstrong was persuaded that Metropolitan Life Insurance Company (“MetLife”) improperly terminated Steven Lin’s disability benefits based in large part on the fact that MetLife’s doctors never examined him.

Mr. Lin has a Ph.D. in chemistry and was employed by TriNet as its Director of Polymer Technologies when he had to stop working because his kidney failed. His job required him to generate ideas, focus and concentrate, and provide leadership and direction to subordinate chemists. Fortunately, years earlier he had enrolled in TriNet’s employee welfare benefit plan, including for long-term disability benefits, in case of such a dire event. The plan was funded by a group disability insurance policy issued by MetLife to TriNet for the benefit of its employees including Mr. Lin.

Mr. Lin submitted a claim to MetLife for long-term disability benefits and reported he could not perform his job because of kidney failure, headaches, chest pain, fatigue, loss of memory and sleepiness. At just 48 years old he underwent a kidney transplant obtained from a cadaver. He was positive for Hepatitis B at the time of his surgery.

MetLife initially approved Mr. Lin’s claim. Over the course of the next several years Mr. Lin was regularly examined by his personal physician, Shahrzad Zarghamee, a nephrologist, to mandate his continuing disability. After documenting Mr. Lin’s consistent fatigue and headaches in her progress notes, Dr. Zarghamee concluded that her patient, Mr. Lin, could not work because he was unable to focus or concentrate, experienced extreme exhaustion when he tried to focus on even mundane matters, and consistently suffered from debilitating headaches and chronic fatigue on a daily basis.

Despite the opinion of Dr. Zarghamee, MetLife terminated Mr. Lin’s benefits four years after it started paying them based upon the opinions of three other doctors, two of which were MetLife’s employees and another, nephrologist Michael Gross, M.D., of which MetLife hired as a consultant. MetLife’s doctors reviewed Mr. Lin’s medical records and concluded based purely on that review, without ever examining him, that his kidney function was normal and there was no objective support in his medical records for his subjective complaints of fatigue and pain. MetLife thus concluded Mr. Lin was not disabled from working based on what its doctors said.

MetLife acknowledged in its termination letter that the Social Security Administration awarded Mr. Lin Social Security disability benefits. But MetLife summarily dismissed the award by stating that a Social Security finding of disability does not guarantee the continuation of long-term disability benefits. Without analyzing why, MetLife stated that its decision may differ from the Social Security Administration because it “may not have the same information that was utilized in making our decision.”

Mr. Lin sued MetLife for recovery of disability benefits under ERISA. The Court conducted a bench trial to determine whether MetLife properly terminated Mr. Lin’s benefits. The Court found MetLife made the wrong decision, that Mr. Lin was in fact disabled. It reinstated his disability benefits and ordered MetLife to pay them plus interest and attorneys’ fees.

In the key part of its analysis, the Court criticized MetLife’s use of “paper reviews” instead of retaining a doctor to actually examine Mr. Lin:

[O]ther aspects of the administrative record also persuade the Court that MetLife erroneously terminated Plaintiff’s benefits. In particular, the Court finds it significant that MetLife terminated Plaintiff’s benefits without actually examining him.

The Ninth Circuit has recognized that an insurer’s decision to conduct “a ‘pure paper’ review. . ., that is, to hire doctors to review [the claimaint]’s files rather than to conduct an in-person medical evaluation of him” may raise “questions about the thoroughness and accuracy of the benefits determination.” Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 634 (9th Cir. 2009) . . . .

Here, MetLife’s termination decision was predicated principally on the reports of its outside consultant, Dr. Gross, and its Medical Director. Both of these individuals evaluated Plaintiff’s claim for benefits without physically examining him. . . . While MetLife was not necessarily required to conduct a personal examination of Plaintiff as a prerequisite to terminating his benefits, the fact that MetLife failed to do so—in contravention to the recommendation of its own consultant—further underscores the result-driven nature of MetLife’s decision to terminate Plaintiff’s benefits.

The Court found the opinions of Mr. Lin’s treating physicians more than sufficient to establish he was disabled despite the contrary opinions from the insurance company’s “paper reviewers.” The Court also rejected MetLife’s contention that “objective” medical findings showing disability is required, not just a treating physician documenting Mr. Lin’s subjective complaints of chronic fatigue and pain in her progress notes.

Finally, the Court held that, in order to terminate Mr. Lin’s insurance policy benefits, MetLife was required to meaningfully address why its decision differed from that of the Social Security Administration who, in fact, had found Mr. Lin disabled under its rules. It held that analysis must entail comparing and contrasting the definition of disability in MetLife’s policy to that used by the Social Security Administration and also the medical evidence considered by each, not simply dismissing the Social Security award with an entirely generic, conclusory analysis like MetLife did. Because of that conduct, coupled with MetLife’s decision to rely on “paper reviews,” the Court was persuaded that MetLife improperly terminated Mr. Lin’s benefits and that he was disabled within the meaning of its policy.

The Court also explained that MetLife was not allowed to discount the Social Security Administration’s disability finding in court based upon a rationale MetLife first raised during the litigation. In other words, by failing to use the rationale during the claim administrative process, MetLife waived any right to employ it in court: “MetLife cannot attempt to downplay the significance of the SSA award on a ground that was not specified in its termination letter.”

If you are an employee covered under your employer’s group short-term disability, long-term disability, life insurance or health insurance policy and had your claim denied, do not give up. If your insurer denied your claim without examining you, or, even after you were awarded Social Security disability benefits, there is a good chance we can help. You should immediately contact the McKennon Law Group, a law firm specializing in ERISA insurance and employee benefits litigation. Let us decide whether your claim was wrongfully denied and let us see if we can assist you.

McKennon Law Group’s California Insurance Litigation Blog Nominated for The Expert Institute’s Best Legal Blog Contest

Newport Beach, Ca. October 4, 2016 – McKennon Law Group’s California Insurance Litigation Blog has been selected to compete in The Expert Institute’s Best Legal Blog Competition.

From a field of hundreds of potential nominees, McKennon Law Group’s California Insurance Litigation Blog has received enough nominations to join the one of the largest competitions for legal blog writing online today.

Now that the blogs have been nominated and placed into their respective categories, it is up to their readers to select the very best. With an open voting format that allows participants one vote per blog, the competition will be a true test of the dedication of each blog’s existing readers, while also giving up-and-coming players in the legal blogging space exposure to a wider audience.

Each blog will compete for rank within its category, while the three blogs that receive the most votes in any category will be crowned overall winners.

The competition will run fromOctober 3rduntil the close of voting at12:00 AM on November 14th, at which point the votes will be tallied and the winners announced.

The competition can be found athttps://www.theexpertinstitute.com/blog-contest/. Here is a direct link to our blog’s listing, which will allow our readers to vote for our blog.

https://www.theexpertinstitute.com/legal-blog/insurance-litigation-blog/

About The Expert Institute:

Founded in 2011, The Expert Institute is a technology-driven platform for connecting qualified experts in every field with lawyers, investment firms, and journalists looking for technical expertise and guidance. The Expert Institute combines a vast database of pre-screened experts with a talented case management team capable of custom recruiting experts to fit the specific needs of our clients. The Expert Institute also maintains one of the internet’s most visited blogs on expert witnesses, in addition to an extensive case study archive and expert witness resource center.

Robert McKennon Publishes Article: Ninth Circuit: ‘Independent’ Physicians may Favor Insurers

In the September 8, 2016 edition of the Los Angeles Daily Journal, Robert McKennon of the McKennon Law Group published an article regarding the use of so-called “independent” physicians used by insurance companies as a pretense to deny valid claims. In the article entitled “9th: ‘Independent’ Physicians may Favor Insurers,” Mr. McKennon summarized the recent U.S. Court of Appeals for the Ninth Circuit case, Demer v. IBM Corporation LTD Pan, 2016 DJDAR 8929 (9th Cir. Aug. 29, 2016), in which the Court noted that insurance companies frequently pay doctors a substantial amount of money to review files, and therefore their opinions are likely biased in favor of the insurance company that pays them.

The article is postedbelowwith the permission of the Los Angeles Daily Journal.

9th: ‘Independent’ Physicians may Favor Insurers

By Robert J. McKennon

Insurance companies that provide group long-term disability insurance benefits governed by the Employee Retirement Income Security Act of 1974 (ERISA) usually hire a doctor which they typically refer to as an “Independent Physician Consultant” (IPC) to review the insured’s medical records and give an opinion about whether the insured is disabled. But is the insurance company’s doctor really independent and unbiased? Often times, the IPC never meets with or examines the insured, and does not even discuss the matter with the insured’s physicians. Yet, the IPC determines that the insured is capable of working simply by spending a few hours reviewing his medical records. The IPC typically disagrees with the opinions of the insured’s treating physicians, who have treated the insured for months or even years. Almost invariably, the insurer favors the opinion of its IPC over the opinions of the insured’s physicians. When this happens, what is an insured to do?

In a published opinion favorable to insureds that addresses this issue,Demer v. IBM Corporation LTD Pan, 2016 DJDAR 8929 (Aug. 29, 2016), the 9th U.S. Circuit Court of Appeals demonstrated that it understands that insurance companies frequently use doctors and pay them a substantial amount of money for their services, and therefore their opinions are likely biased in favor of the insurance company that pays them. The 9th Circuit held that a district court’s review of an insurance company’s benefits decision, when it is based upon the opinion of an IPC, should be tempered by skepticism because of the financial incentive that the IPC has to pander to the insurer’s interests (again, who uses them often and pays them significant amounts of money).

InDemer, the plan participant, Daniel Demer, was an employee of IBM Corporation LTD Plan. Suffering from severe recurrent depression, spinal stenosis, chronic osteoarthritic pain, and chronic headaches and unable to continue working, he filed a claim for long-term disability benefits. MetLife, which had a structural conflict of interest because it both evaluated claims made against the plan and funded claims, initially approved his claim after concluding he was incapable of performing the duties of his occupation. However, after two years, the plan required that Demer be unable to work in any occupation for which he was suited by education, training and experience in order to qualify for benefits, and MetLife denied his claim relying primarily on the opinion of its IPC indicating that despite his supported functional limitations, Demer was capable of working in a sedentary position.

Demer appealed MetLife’s claim denial, and MetLife subsequently upheld its denial relying on the opinions of two other IPCs. One of the IPCs was board certified in physical medicine and rehabilitation. He determined that while Demer “likely had a modicum of discomfort” from “neck and back pain related to spinal degeneration,” he retained physical functional capacity to perform a sedentary occupation despite a contrary conclusion from Demer’s treating physician. MetLife’s other “independent” physician consultant, board certified in psychiatry, claimed that despite the fact that Demer was taking powerful narcotic and neurological medications and asserted that he suffered from significant medication side-effects that cause fatigue and an impediment to his comprehension and communication, there was no objective data to establish functional impairment as a result of the medications he was taking.

Demer filed suit, arguing in part that MetLife operated under a conflict of interest because two of the IPCs that MetLife hired to review the medical record previously conducted a substantial number of reviews for Metlife and received significant compensation from MetLife for their services. For 2009 and 2010, one IPC performed more than 250 reviews/addendums per year, earning more than $125,000 each year. For the same time period, the other IPC performed between 200-300 reviews/addendums each year, and received more than $175,000 from MetLife each year. Based on the number of reviews and the amount of compensation, Demer asserted that the IPCs’ opinions should be questioned because the doctors had financial incentives to render opinions favorable to MetLife. Demer further argued that, because MetLife relied on the doctors’ opinions in denying him relief, the doctors’ conflict is imparted to MetLife and therefore the court should view their opinions with skepticism. The court noted that this argument is comparable to conventional approaches to discrediting the testimony of retained experts whose objectivity may be challenged based on the number of times he or she has served as an expert in support of a party and the amount of compensation received.

The district court entered judgment in favor of IBM and MetLife finding no abuse of discretion, but the 9th Circuit reversed. Thec court concluded that because MetLife’s consulting physicians earned a substantial amount of money from, and performed numerous medical record reviews for, MetLife, an inference was raised that there was a financial conflict which influenced the physicians’ assessment. It held that this conflict was a factor to be considered in reviewing MetLife’s decision under the abuse of discretion standard. Since MetLife failed to negate any inference of a financial conflict of interest, the court determined that “the number of examinations referred and the size of the professional fees paid to a reviewer may compromise the neutrality of an expert.”

The court further concluded that MetLife abused its discretion in denying Demer’s claim that his mental functional capacity was affected by his medications. The court determined that since it was undisputed that Demer took powerful narcotic medications, that these medications were medically necessary, and because they have known strong side-effects, MetLife’s conclusion (that Demer’s complaints regarding medication side-effects was not credible) was unsupported. A dissent disagreed, and stated that he would abandon “skepticism” as a separate standard of review in ERISA cases.

Even though theDemercase involved the abuse of discretion standard of review, insurers will argue that this case will have little application in de novo review cases in which the conflict analysis is not used. In California, the abuse of discretion standard of review will likely become uncommon in future cases because of California Insurance Code Section 10110.6, which renders discretionary language “void and unenforceable” in policies, contracts and certificates that provide funds for life insurance or disability insurance coverage for California residents. However, even in de novo review cases, it is advisable to remind the courts of the rationale behind the “skepticism” rule as even the 9th Circuit noted the similarity to the arguments made in non-ERISA cases. Thus, this case is useful to establish that the opinion of an insurance company IPC who never examined the insured and who undermines or rejects an insured’s credible evidence of disability should be viewed skeptically where the insured’s disability is supported and verified by the insured’s treating physicians who treated and examined the insured.

ERISA Penalties: When Can Plan Administrators Be Fined for Failing to Timely Produce the Administrative Record?

When insurance companies deny long-term or short-term disability, life or health insurance claims, it is vital that the plan participants and their beneficiaries be able to receive the claim file (also known as the Administrative Record) and ERISA Plan documents so that they can review them and challenge these claim denials. It is therefore not surprising that ERISA Plan administrators are required to comply with certain claims procedures and requests for information from plan participants, otherwise, under ERISA, they could be fined up to $100 per day for each day they fail to comply. Pursuant to 29 U.S.C. § 1332(c)(1), a plan administrator:

… who fails or refuses to comply with a request for any information which such administrator is required to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court’s discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper.

The Ninth Circuit Court of Appeals, in Lee v. ING Groep, N.V., No. 14-15848, No. 14-15936, 2016 WL 3974176 (9th Cir. 2016), recently joined all other Circuits except for the Fourth and Fifth Circuits, in finding that only on the plan itself, not the claims administrator, can be penalized under 29 U.S.C §1332(c)(1).

In Lee, Mr. Lee, a former employee of ING Management, LLC, filed a claim with his long-term disability plan governed by ERISA and initially received long-term disability benefits before his claim for benefits was later terminated. ING North America Insurance Corporation (“ING”) was the plan administrator of Mr. Lee’s long-term disability plan, and the claims administrator was ReliaStar Life Insurance Company (“ReliaStar”). On February 5, 2010, Mr. Lee’s attorney requested from ReliaStar copies of all communications, including e-mails, from ING’s attorney, and a copy of all documents including the Plan Documents. ING did not produce the requested e-mails until November 9, 2011 (over 1.5 years later) and did not produce the Plan Documents until March 11, 2013 (over 2 years later). The district court imposed a penalty of $27,475.00 on ING for failing to timely produce the Plan Documents and the requested e-mails. ING subsequently appealed this decision.

The Ninth Circuit Court of Appeals affirmed the district court’s decision to impose a penalty on ING for its failure to timely produce the Plan Documents, but reversed the district court’s decision to impose a penalty on ING for its failure to produce the requested e-mails. The Court of Appeals noted that the e-mails were only required to be provided to Mr. Lee pursuant to C.F.R. §2560.503-1(h)(2)(iii), which imposed requirements on benefit plans and not plan administrators, and 29 U.S.C. §1332(c)(1) only applies to documents that plan administrators are required to produce. The Court of Appeals noted that a failure to follow claims procedures imposed on benefits plans, such as those outlined in C.F.R. §2560.503-1(h)(2)(iii), does not give rise to penalties under 29 U.S.C. §1332(c)(1). The Court of Appeals further noted that “Plans” and “plan administrators” are separate entities with separate definitions under ERISA and penalties under 29 C.F.R. §1132(c)(1) can only be assessed against “plan administrators.” Because C.F.R. §2560.503-1(h)(2)(iii) does not impose any requirements on plan administrators, it cannot form the basis for a penalty under 29 U.S.C. §1332(c)(1). The Court remanded the case to the district court to assess a penalty based solely on the failure to timely produce the Plan Documents.

Given that many of the claims procedures governing the handling of an ERISA claim are imposed upon benefit plans and not on plan administrators, ERISA plan participants might not have the opportunity to seek penalties when they are unable to obtain claim related documents. However, they can expect that when a claims administrator fails to comply with ERISA regulations designed to protect the integrity of the claims and appeal process, their claims will be given the appropriate review before a judge. Claim and plan administrators are aware that they face significant liability at trial, even without statutory penalties, such a plan benefits due under long-term or short-term disability policies or life and/or health insurance policies. This is why seeking out highly experienced ERISA attorneys such as the McKennon Law Group PC will substantially increase the chance of obtaining the disability, health and life insurance benefits to which plan participants and their beneficiaries are entitled.

When is a Group Long-Term Disability Insurance Plan Not an ERISA Plan? When it’s Established and Maintained by a Church to Qualify as an ERISA-exempt Church Plan – That’s When

You know church can be very good for you, but you probably never contemplated that church could help you in ways other than spiritually. Let’s say you find yourself in this position: you become disabled, work for a church-related employer and now want to make a disability claim under your short-term disability and/or long-term disability insurance policy. You wonder: is my claim covered by ERISA or will I have those really good state law remedies because ERISA does not apply? Your question was recently answered by the Ninth Circuit Court of Appeals, albeit in a pension plan case.

“Church plans” are exempt from the federal regulatory requirements of ERISA. However, language contained in the relevant ERISA statute left the rules what constitutes a “church plan” open to multiple interpretations. The Ninth Circuit closed the door to multiple interpretations and clarified exactly what is required to qualify as a church plan exempt from the regulatory requirements of ERISA.

Pursuant to 29 U.S.C. § 1002(33)(A), the term “church plan” means a plan established and maintained by a church or by a convention or association of churches. However, 29 U.S.C. § 1002(33)(C) confuses these two seemingly straightforward requirements by providing that a plan established and maintained by a church or a convention or association of churches includes a plan maintained by a “principal-purpose organization,” the principal purpose or function of which is the administration of funding a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention of churches. This raises the question of whether the requirement that a plan be established by a church is eliminated by § 1002(33)(C) since it can be argued that it only requires a plan be maintained by a principal-purpose organization. In other words, does this mean the plan must be established by a church to be eligible for the church plan exemption, or does it mean the plan qualifies for the church plan exemption even if it is established by an organization other than a church whose principal purpose is religiously-affiliated and who maintains the plan?

In Rollins v. Dignity Health, No. 15-15351, 2016 WL 3997259 (9th Cir. 2016), employees of a nonprofit hospital system, Dignity Health, established by Catholic Sponsoring Congregations, received pension benefits through a single pension plan maintained by Dignity Health, which adopted a resolution to treat the plan as a church plan. Ms. Rollins, who was a participant in the plan, filed a putative class action against Dignity Health alleging its plan was not a church plan and it violated numerous ERISA requirements. Dignity Health conceded that the plan did not comply with ERISA but alleged that it did not need to since it qualified for the church-plan exemption even though its plan was not established by a church. Dignity Health contended that pursuant to 29 U.S.C. § 1002(33)(C), a church plan need not be established by a church if it is maintained by a principal-purpose organization. The district court granted partial summary judgment against Dignity Health holding that a plan must be established by a church and maintained by either a church or a principal-purpose organization to qualify for the church-plan exemption. The district court then certified its order for interlocutory appeal given the substantial ground for difference of opinion and the Court of Appeals accepted jurisdiction.

The Court concluded that the phrase “includes” contained in 29 U.S.C. § 1002(33)(C) (a plan established and maintained by a church or a convention or association of churches includes a plan maintained by a “principal-purpose organization”), serves only to broaden the definition of organizations that may maintain a church plan and does not eliminate the requirement that a plan must be established by a church. The Court noted that the legislative history revealed that Congress inadvertently excluded plans maintained by church-controlled or church-affiliated pension boards rather than the churches themselves, so Congress relaxed this requirement by adding the language in § 1002(33)(C) to address only the problem of maintenance by church-controlled or church-affiliated pension boards.

The Court was unpersuaded by Dignity Health’s argument that establishment by a church is not required since other federal statutes support that a church plan does not need to be established by a church, noting that the statute at issue specifically requires church establishment and it would not construe terms to have the same meaning when Congress explicitly defined the terms differently. The Court concluded that its reading of the statute did not involve a constitutional Establishment Clause violation or a Free Exercise violation and it affirmed the district court’s ruling and remanded the action for further proceedings.

Now that you know about Rollins, you can look to see if your group long-term disability or life insurance plan was established and maintained by a church organization, so you can now determine if you will be facing that beast called ERISA.

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