Firm News Archives - Page 8 of 76

Ten Things to Consider and Look For in Your ERISA Short-Term and Long-Term Disability Plans When Selecting Benefits or You Want to File a Claim

1. Obtain a full copy of your plan and administrative record. The full plan will not typically be a benefit summary or a print-out from a website. It will be fairly long and many definitions and it will recite your ERISA plan terms, policies and procedures for filing a claim and handling the claim, claim denials, appeals of claim denials, etc. The claims administrator will likely not have a copy of the full plan. You can request a copy of the full plan from your Employer’s Human Resources department or often from the claims administrator (the insurer or third-party administrator). You can request a copy of the administrative record from the claims administrator, which is often an insurance company such as MetLife, Unum, and Liberty Mutual.

2. Read the Plan. Your Plan document controls the rights and obligations of the parties, including all plan participants and beneficiaries. Thus, if you have an ERISA claim for Short-Term and Long-Term Disability benefits, you should read the plan carefully. A human resources representative, a customer service representative for the insurance company that administers your disability benefits, or your claims administrator may tell you what your benefits are over the telephone or in an e-mail. You cannot rely on what a representative tells you over the phone. The Plan document controls the benefits available, not what someone tells you over the telephone or via e-mail. If there is any confusion, ask the representative to tell you what specific Plan provision they are referencing and ask them to send you a letter documenting what they are telling you.

3. Understand the difference and transition between Short-Term Disability (STD) and Long-Term Disability (LTD). Be aware that getting STD insurance does not automatically mean that you have LTD insurance. If you want to ensure financial stability if you suffer a long-term disability in the future, you will want to ensure that you select the appropriate amount of LTD coverage because STD benefits will only last you about three to six months. LTD coverage will often last until your 65th birthday. Additionally, some plans provide for an automatic transition between STD and LTD benefits, but others have a gap of time between STD and LTD benefits or require two, separate applications for the STD and then the LTD benefits.

4. Select the appropriate coverage amount. Employers often provide an automatic base STD amount and allow you to opt into higher coverage for STD. LTD insurance coverage is often optional and offers several coverage levels for the amount of benefits you would like to receive if you become disabled. Be sure to select the coverage that you want, and make sure you fill out any forms, like a Statement of Health, to ensure that you receive the coverage you select.

5. Confirm your coverage. Get a confirmation of coverage in writing, either a print-out of the premiums that you are paying for each insurance coverage you have chosen through your employer or a certificate that states the exact coverage you receive. Make sure you always have a current document showing your benefits coverage, which will usually be once a year after coverage selection or two to four months after you begin new employment.

6. Time to appeal a claims decision. Read the appeals or grievance section to determine your appeal rights and deadlines. The first appeal must be submitted within 180 days of the date you receive the initial denial, pursuant to ERISA. However, there may be a second appeal, which is sometimes mandatory and sometimes voluntary. Whether there is a second appeal and whether it is mandatory or voluntary is critical to pursuing your disability claim in court if it is denied. Additionally, although ERISA requires that you have 180 days to file your first appeal, you may have only 30 or 60 days to file your second appeal. Be aware that you can and should contact an attorney as soon as you receive any notice, oral or written, from your insurance company that your claim will be or has been denied. An attorney can help you with your first and second appeals of the denial of your STD and/or LTD benefits, which will also help if you need to go to court to force the insurance company to pay you your benefits because the attorney will ensure that your disability claim record during the administrative appeals is complete and will help a judge understand that you are disabled.

7. Read the definitions. Terms like “disability,” “your occupation,” “physician’s care,” and other words may have special definitions under your policy. Make sure you know what is required under your plan’s specific definitions in order to successfully claim disability benefits. You should also look for the “Elimination Period” in your STD and LTD plans. The Elimination Period is the time period you are unable to receive benefits under that plan, a type of “waiting period.” For STD benefits, it is often no more than a week. For LTD benefits, it is often the duration for which STD benefits are paid, so the LTD Elimination Period generally lasts approximately three to six months from the date of your disability.

8. Statute of Limitations and Contractual Limitations Period. These will be the period of time by which you must file a lawsuit to obtain disputed benefits. To file a lawsuit for benefits pursuant to an ERISA plan, you must first submit appeals (at least one, but no more than two). The contractual limitations period may appear in a section titled, “Legal Action.”

9. Who is the Plan Administrator? Look for a name and address of the Plan Administrator in the Plan. If your claim has been denied, send a written request to the Plan Administrator for all plan documents. The Plan Administrator is required to provide the plan documents to you within 30 days. 29 U.S.C. § 1024. Federal regulations allow you to file a lawsuit to seek penalties from the Plan Administrator in the amount of $110 per day for each day the plan documents are not provided beyond the 30-day period. 20 U.S.C. § 1132(c)(3); 29 C.F.R. § 2575.502c-1.

10. Calculate your STD and LTD weekly or monthly benefits. STD and LTD benefits may be paid as a percentage (e.g., 50%, 60%, 70%) or multiplier amount (e.g., 1x, 2x, 3x) of your regular earnings. Your STD and LTD benefits amount may be different depending on what level of coverage you chose in your most recent benefits selection. For example, you may receive only 50% of your base earnings in STD benefits but 65% of your base earnings as LTD benefits. Additionally, almost all STD and LTD policies will “offset” your benefits with any other disability-related income you may receive, including SSDI, SSI, and state disability insurance income. If you apply for LTD benefits, many policies will require that you apply for SSDI, which is disability insurance offered by the federal government. If and when you are approved for SSDI, that amount will be subtracted from your future benefits payments of your LTD benefits.

If your ERISA claim has been denied, knowing when to sue may be integral to the success of your claim. It is important to have experienced and highly qualified disability, health and life insurance attorneys, like those at the McKennon Law Group PC. Fill out our free consultation form today to set a time to discuss your claim with one of our attorneys, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.

Robert J. McKennon Recognized as 2019 “Super Lawyer – Insurance Coverage”

McKennon Law Group PC is proud to announce that its founding shareholder Robert J. McKennon has been recognized as one of Southern California’s “Super Lawyers” and appears in the 2019 edition of Southern California Super Lawyers magazine published in January 2019. Mr. McKennon has received this prestigious designation every year since 2011. Mr. McKennon was voted by his peers for this award and he was recognized for his excellence in representing his clients as an insurance claims denial attorney, especially with respect to his work representing life, health and disability policyholder clients. Each year, Super Lawyers magazine, which is published in all 50 states and reaches more than 14 million readers, names attorneys in each state who attain a high degree of peer recognition and professional achievement. The Super Lawyer designation is given to less than 5% of lawyers nationally after being nominated and voted on by their peers.

USA Today Publishes Article—Why millennials should consider disability insurance

On January 29, 2019, USA Today published an article, “Why millennials should consider disability insurance,” by Robert Powell. The article argues for the importance of purchasing disability insurance at a young age, since most insureds are left with the financial strain of not having a stable income stream after disability. These insureds often never consider purchasing disability insurance, or think they have enough coverage. At McKennon Law Group PC, we see the impact of the denials of our client’s benefits every day, and fight to overturn the denial decisions of insurance claims our clients expected insurance companies to pay upon becoming disabled. As we have seen, purchasing additional private disability insurance can prove to be crucial.

The article describes how the odds of being unable to work because of sickness or accidental injury are greater than the odds of a premature death. Because of this, millennials should start thinking about disability insurance when planning for retirement:

The question any working person needs to answer, says Kevin Lynch, a faculty instructor at The American College of Financial Services, is this: “How will you support yourself the day you wake up but are unable to get up?”

The author describes that while sometimes a disability arises from a work-related accident or illness, which workers’ compensation may cover, and employers often provide group short- and long-term disability coverage as a benefit, individual disability policies can be helpful to supplement a group plan or provide additional coverage if a group plan is unavailable.

The author encourages millennials to consider the fact that they’re not invincible. He notes that the best asset when you’re a young worker is your earning potential. Indeed, a 30-year-old earning $100,000 a year will gross $3.5 million over the course of her working years. But if that money cannot be earned due to sickness or injury, the potential for financial failure rises greatly. “Without income, one cannot spend, save, invest or donate,” says Yan Katz, a financial adviser with The Bulfinch Group.

Since policies typically provide about 66% of gross wages, Katz says that the right benefit amount to purchase would be any portion of your current paycheck, including commissions and bonus, not covered by your employer’s benefit plan.

The article further discusses the many definitions of disability, including own-occupation, modified own-occupation, any-occupation and modified any occupation. The most sought-after policy definition is “own-occupation” which means you will be considered disabled if you are unable to perform each and every responsibility of your current position. He further notes that the younger you are, the better your chances of being successfully underwritten.

At McKennon Law Group PC, we often see insureds suffer from the financial strain of having their long-term disability claim denied. A claim denial can be an especially traumatic experience when an insured expects a disability insurance company to provide benefits in a time of need. As this article discusses, most people never expect to become disabled. Even worse, they expect to be covered by an employer’s group policy, only to find their claim denied with no additional sources of income. Under these circumstances, private disability insurance has proven to be exceedingly important in providing a financial safety net for our clients.

For a full view of the USA Today article, take a look at the article, here.

Breach of Fiduciary Duty under ERISA: Ninth Circuit Clarifies That Mere Disclosure of Plan Documents Is Insufficient “Actual Knowledge” to Trigger Statute of Limitations

In pension and savings plan cases, it can often take several years before an employee realizes that there has been a breach of fiduciary duty. Typically, an employee’s financial loss triggers an investigation that later reveals the facts of the breach. But how long does an employee have to bring a claim in court? The answer depends on the employee’s “actual knowledge” of the facts of the breach or violation. There is a conflict among federal circuit courts of appeal on whether an employee should be deemed to have knowledge of 401(k) prospectuses and fund information simply because the employer makes this information available to the employee. In a recent decision by the Ninth Circuit, Sulyma v. Intel Corp. Investment Policy Comm., 909 F.3d 1069 (9th Cir. 2018), the court clarified that mere disclosure does not equate to actual knowledge of the employee sufficient to begin the statute of limitations. The employee must actually be aware of the facts constituting the breach more than three years before filing suit.

The Employee Retirement Income Security Act of 1974 (“ERISA”) governs pension plans, including employer sponsored 401(k) retirement plans. ERISA imposes duties of loyalty and care upon fiduciaries as well as liability for breach of those duties. See 29 U.S.C §§ 1104 (duties) and 1109 (liability of breach). Fiduciaries must act “solely in the interest of the participants and beneficiaries” and exercise “the care, skill, prudence, and diligence … that a prudent man acting in a like capacity and familiar with such matters would use.” Id. § 1104(a)(1). Employees bringing a claim for breach of fiduciary duty must do so within three years of the “earliest date on which the employee has actual knowledge of the breach or violation,” and no more than six years after the last action which constituted a part of the breach or violation. Id. § 1113.

In Sulyma, the Ninth Circuit clarified that an employee must be actually aware of the facts of the breach and not merely in possession of materials from which the employee could have discovered the breach. Sylyma, 909 F.3d at 1076. Like many employees, Plaintiff Christopher Sulyma did not pay too much attention to the lengthy disclosures and prospectuses associated with his employer’s 401(k) plan. Sulyma worked for Intel between 2010 and 2012, during which time he was automatically enrolled in Intel’s Target Date 2045 Fund (“the 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 made allocations to alternative investments such as hedge funds and private equity funds, which charged higher than average fees and underperformed the market. Although Sulyma accessed some of the disclosures during his employment, Sulyma testified that he did not know 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 § 1104 of ERISA on the basis that Intel 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 before the U.S. District Court for the Northern District of California 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 since 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, reasoning that had Sulyma read the Fund literature more than three years prior to filing his complaint, he would have known about the allegedly imprudent investments. Construing Intel’s motion to dismiss as a motion for summary judgment, the district court granted summary judgment in favor of Intel holding that Sulyma’s claim was barred by ERISA’s three-year statute of limitations under 29 U.S.C. § 1113(2).

On appeal, the Ninth Circuit reviewed the district court’s grant of summary judgment de novo and employed a two-step process to determine whether Sulyma’s claim was barred by section 1113(2). First, the court isolated and defined the underlying violation on which plaintiff’s claim is founded. Second, the court inquired into whether plaintiff had “actual knowledge” of the alleged breach or violation. Sulyma, 909 F.3d at 1072-73. With respect to the first prong, the record showed that although the Fund did not always invest in alternative investments, the imprudent actions alleged by Sulyma occurred during his employment, as early as 2010. Id. at 1071. The primary issue on appeal was whether the district court correctly interpreted section 1113(2)’s requirement of “actual knowledge” sufficient to begin the three-year statute of limitations prior to October 2012.

First, looking to the statute itself, the Ninth Circuit acknowledged that neither “knowledge” nor “actual knowledge” is defined in ERISA. Sulyma, 909 F.3d at 1073. Examining the history of section 1104 and 1106 cases, the court noted that in 1987, Congress amended section 1113(2) to remove constructive knowledge from triggering the limitations period. Id. The Ninth Circuit found that the district court erred when it inferred that Sulyma had actual knowledge merely because he received Fund documents that disclosed its investment strategy. Id. Such an inference is akin to constructive not actual knowledge. Id. The court explained, “the statutory phrase ‘actual knowledge’ means what it says: knowledge that is actual, not merely a possible inference from ambiguous circumstances.” Id. at 1076 (quoting Ventura Content, Ltd. v. Motherless, Inc., 885 F.3d 597, 609 (9th Cir. 2018), cert. denied.). “Actual knowledge,” the court reasoned, “must mean something more than simply knowledge of the underlying transaction, which does not necessarily disclose the nature of the breach.” Id. at 1076. Therefore, Sulyma’s knowledge regarding the Fund’s allocations could not be inferred from Intel’s disclosures.

The court noted its split with the Sixth Circuit’s holding in Brown v. Owens Corning Investment Review Committee, 622 F.3d 564, 571 (6th Cir. 2010). In Brown, the Sixth Circuit held that “when a plan participant is given specific instructions on how to access plan documents, their failure to read the documents will not shield them from having actual knowledge of the documents’ terms.” Id. The Ninth Circuit disagreed with this reasoning, stating that plan participants under Brown are charged with constructive knowledge, not actual knowledge. Sulyma, 909 F.3d at 1076. Constructive knowledge is insufficient to trigger the statute of limitations because Congress specifically amended ERISA to repeal it from section 1113(2). Id.

Finally, the court rejected Intel’s argument that there are “strong policy reasons” to concluding that the actual knowledge standard has a broader meaning. Id. The court disagreed, positing that Sulyma could just as easily argue policy reasons favoring a narrow interpretation of the actual knowledge standard to “promote fiduciary accountability.” Id. The court declined to insert itself in the policy debate, instead leaving it to Congress to decide. Therefore, the Ninth Circuit held that for a defendant to prevail on a statute of limitations defense on a section 1104 claim, “[it]must show that there is no dispute of material fact that the plaintiff was actually aware that the defendant acted imprudently.” Id.

The Sulyma decision is significant because it prevents fiduciaries from prematurely starting the statute of limitations by inundating an employee with lengthy plan disclosures and later arguing that the employee was on notice of potential ERISA violations. While it is important to review documents impacting major financial decisions, employees may not know that a fiduciary has breached its duty of care until the consequences materialize. This decision provides further clarity to ERISA litigants and levels the playing field for employees who discover a breach of fiduciary duty years after receiving plan documentation.

Court Says the Development of a Disabling Condition after Surgery for an Unrelated Condition Does Not Preclude Recovery of ERISA Disability Benefits under Pre-Existing Condition Exclusion

Insurance companies often seek to exclude insureds from coverage through their long-term disability (“LTD”) plans by asserting the pre-existing condition exclusion. If an applicant for LTD benefits has a non-disabling condition or becomes disabled as a result of a condition that developed after corrective surgery for an unrelated condition, is the applicant excluded from receiving benefits? In a plaintiff-friendly decision, Hines v. Unum Life Ins. Co. of Am., 2018 WL 6599404 (N.D. Ohio Dec. 17, 2018), the court held that the plaintiff-disability claimant could not be excluded from coverage due to a vision disability on either the basis that she had received a diagnosis for a non-disabling condition before she became disabled or that she had developed a new condition after corrective surgery for an unrelated condition. The court held that the insurer, Unum Life Insurance Co. of America (“Unum”), had incorrectly denied LTD benefits to the plaintiff and had done so in bad faith, entitling the plaintiff to an award of attorneys’ fees.

Linda M. Hines had a slowly developing cataract condition. Ms. Hines underwent a September 2013 surgery to remove the cataract right-eye lens and replace it with a monovision intraocular lens. Her left eye remained uncorrected for reading and was able to be used for distance vision. After unremarkable and temporary post-surgical issues, Ms. Hines returned to work. Eight months after her surgery, Ms. Hines first complained about blurred vision and difficulty fusing the images from her two eyes. Her doctor diagnosed her with anisometropia (a neurological condition where the brain becomes unable to mesh the separate images given by each eye) in May 2014. Ms. Hines’ condition worsened and she applied for LTD benefits subsequent to her diagnosis.

Defendant Unum issued and administered an LTD group policy for Ms. Hines’ former employer (the “Plan”). Unum denied her benefits application and her subsequent appeal of their denial based on its finding that Ms. Hines was disabled from a left-eye cataract and anisometropia. Unum found that the Plan coverage excluded her left-eye cataract as a pre-existing condition because she received consultation or diagnostic services for it during the look-back period. See id. at *2.

The Plan, which is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), provided that it “does not cover any disabilities caused by, contributed to by, or resulting from [the insured’s] . . . pre-existing condition.” Hines, at *1. The Plan excluded coverage for pre-existing conditions that met two criteria: (1) “[the insured] received medical treatment, consultation, or services . . . in the 3 months just prior to [the insured’s] effective date of coverage,” and (2) “the disability begins in the first 12 months after [the insured’s] effective date of coverage.” Unum’s denial stated that anisometropia was a pre-existing condition because “[t]he results of the [right-eye cataract surgery with monovision intraocular lens implantation] produced monovision resulting in the diagnosis of anisometropia.” Id. at *3.

The court reversed Unum’s denial of benefits to Ms. Hines on three distinct bases. Firstly, the court held that there was no evidence that Ms. Hines’s left-eye cataract diagnosis had ever been or was currently a disabling condition. Because Ms. Hines’s left-eye cataract did not disable her, it could not meet the terminology of “the disability” used in the second condition for the exclusion of coverage due to a pre-existing condition.

Secondly, the court ruled that Ms. Hines’s anisometropia, as the diagnostic terminology is used in the medical profession, was not diagnosed during the look-back period. Ms. Hines’s medical records showed that, during the look-back period, she had anisometropia-refractive differences between one’s eyes-in the literal sense, the definition which the Unum reviewer applied. However, the medical profession generally applies the “anisometropia” diagnosis only to those who have symptomatic anisometropia, where a patient’s brain cannot fuse the dissimilar images generated by the differently refractive eyes, and Ms. Hines did not report symptomatic anisometropia until well after the look-back period. After considering the literal and medical usage of “anisometropia,” the court held that Unum could not properly rely on the literal definition of anisometropia, but rather, Unum should have recognized the medical usage of the term which is only applied to symptomatic anisometropia. Thus, the court found that Unum could not exclude her from coverage based on the presence of anisometropia because there was no such diagnosis during that period.

Thirdly, the court held that the Unum was incorrect in finding that Ms. Hines’s “right-eye cataract surgery during the look-back period produced monovision that resulted in [her] anisometropia, and thus that the Plan excluded her anisometropia as a pre-existing condition.” Id. at 5. The court found that Unum could not provide a logical explanation for what pre-existing condition caused Ms. Hines’s anisometropia. As her right-eye cataract was successfully removed, it could not be a pre-existing condition that caused her anisometropia because her right-eye cataract condition had been properly remedied. The court recognized that Unum sought to argue that the right-eye cataract surgery was the pre-existing condition precipitating Ms. Hines’s anisometropia, but the court rejected the characterization of surgery itself as a “pre-existing condition,” since it was “at most a necessary consequence of the right-eye cataract pre-existing condition.” Id.

Moreover, the court distinguished the right-eye cataract surgery from the simultaneous lens replacement surgery that produced the refractive difference in her eyes leading to symptomatic anisometropia: “Replacing the bad lens with a monovision lens . . . was not . . . a necessary component of that [cataract] surgery.” Id. In so finding, the court held that there are limits to the chain of causation, and that the substantial evidence showed that the causal relationship between the right eye cataract (pre-existing condition) and the anisometropia (disabling condition) was too attenuated. Id.

The court also emphasized that “reasonably foreseeable consequence[s]” are significant to assessing whether a disability is caused by, contributed to by, or resulted from a pre-existing condition. Id. at *6. Since the anisometropia was not reasonably foreseeable from the pre-existing condition of her right-eye cataract because the right-eye cataract and the cataract surgery were unrelated to the lens replacement except for timing, those conditions could not be paired to justify Unum’s denial of benefits to Ms. Hines.

For these reasons, the court held that Unum had incorrectly denied Ms. Hines’s application for LTD benefits. The court also considered Ms. Hines’s request for attorney’s fees and costs and awarded them based on a finding that the insurer had acted in bad faith. The court wrote:

The record does not offer a smoking gun revealing Unum’s bad faith, but several factors add up to reveal Unum’s duty to pay fees. Unum inaccurately represented physician statements, omitted potentially relevant medical information, and followed up with reviewers in such a way as to suggest that they “try again.” The Unum reviewers’ ambiguous evaluation responses generate even more concern. They largely dance around the questions without providing a principled, reasonable answer and explanation. And yet Unum was still able to cherry-pick language and carry on with its preferred course of action.

Id. The court, concerned about such improper conduct by Unum and other insurance companies, held that Unum’s bad-faith behavior and other considerations merited attorney’s fees to be paid to Ms. Hines.

Conclusion

When insurance companies deny LTD benefits, they often resort to connecting an insured’s disabling condition with some other, unrelated condition. As Hines shows, there must be substantial evidence linking the causal relationship between pre-existing conditions and disabling conditions. Further, when insurers deny coverage due to pre-existing conditions, they must do so in good faith and provide cogent, reasonable explanations. Unequivocally inaccurate findings and manipulation of language and rationales by insurance companies will likely result in reversal of the benefits denial and awarding of attorney’s fees and costs to the insured.

Discovery Disputes in ERISA Breach of Fiduciary Duty Cases: Do the Usual Limitations Apply?

Discovery Disputes in ERISA Breach of Fiduciary Duty Cases: Do the Usual Limitations Apply?

The Employee Retirement Income Security Act of 1974 (“ERISA”) manages many of the benefits people receive from their employers. These benefits include short-term and long-term disability insurance, health insurance, life insurance, accidental death and dismemberment insurance and pension plans. When a claim under an ERISA plan is denied, the beneficiary usually must file an administrative appeal with the Claims Administrator for the benefits. If, after filing an administrative appeal, the Claims Administrator still denies the claim, the beneficiary may sue the Claims Administrator to obtain the benefits in question. ERISA claims differ from more traditional law suits. A judge, not a jury, determines whether the beneficiary is entitled to damages and/or equitable relief. The parties generally cannot pursue written discovery or depose people with relevant information. The court typically decides the claim based on a review of the documents contained in the Administrative Record that had previously been submitted to the Claims Administrator during the administrative process.

Whereas the administrative process may be an effective method of channeling evidence and streamlining court proceedings, for certain types of claims, the process simply does not work well. All Claims Administrators have basic obligations to the beneficiaries under their plans. The Claims Administrator cannot put its own interests above those of the plan’s beneficiaries. When a Claims Administrator breaches that obligation, a beneficiary may bring a claim for a Breach of Fiduciary Duty under ERISA Section 502(a)(3). For example, a Claims Administrator may have misled a beneficiary into thinking they had $300,000 in life insurance benefits when, in fact, they only had $50,000 in benefits. This situation could arise for a variety of different reasons such as eligibility under applicable plan documents because of a beneficiary’s salary. The Claim Administrator’s misstatements may even be unintentional. The beneficiary has still been misled. In such a scenario, the beneficiary may bring a claim for a Breach of Fiduciary Duty. Depending on the nature of the deception, however, the beneficiary may not be able to obtain all needed evidence during the administrative review of the denial. The powerful tools of the discovery process may be required.

Thankfully for beneficiaries, courts reasonably acknowledge that such a limitation should not apply in the context of breach of fiduciary duty claims. For example, in Friemon v. Nat’l Carriers’ Conference Comm., 2018 WL 6171439 (E.D. Mo. 2018), Matheson Friemon sought discovery in a dispute with his former employer Union Pacific Railroad Company (“UPRR”). The underlying dispute arose out of whether Mr. Friemon was eligible for Supplemental Sickness Benefits (“SSB”) under UPRR’s employee benefit plans. Mr. Friemon alleged that UPRR maintained complete control over the application process for SSB, failed to inform him of the deadline to apply for those benefits and failed to provide him with the relevant paperwork for the application.

UPRR disputed its status as a fiduciary under the plan. Mr. Friemon sought discovery on the issue of UPRR’s status as a fiduciary. UPRR challenged Friemon’s right to obtain the discovery. The court ruled that Friemon could propound the discovery in question. The court reasoned that the restrictions to discovery in matters arising under ERISA do not apply to claims of an equitable nature. Claims that are equitable in nature “do not benefit from the administrative process.” Id. at *2 (internal quotations omitted). The court permitted Friemon to conduct his discovery.

Other courts have come to similar conclusions. One such example is Jensen v. Solvay Chemicals, Inc., 520 F. Supp. 2d 1349 (D. Wyo. 2007). In Jensen, plaintiffs worked for Solvay Chemicals, Inc. They accrued benefits under Solvay Chemical’s pension plan. Solvay Chemicals restructured its pension plan. Plaintiffs alleged that the restructuring of the pension plan froze their retirement benefits and lowered the rate of benefit accrual for older employees and employees who had worked for Solvay Chemicals for longer periods of time.

After bringing suit, Plaintiffs sought to propound discovery. Plaintiff filed a motion for permission to seek discovery as an exception to the general rule that ERISA plaintiffs can seek only very limited discovery. The motion went before a magistrate judge, who denied it. The plaintiffs appealed the decision to the district court judge, who overturned the magistrate’s decision. The magistrate had reasoned that “judicial review is limited to the administrative record and any outside discovery is not allowed, except in unusual circumstances.” Id. at 1352. The district court held that plaintiffs could propound their discovery because one of plaintiffs’ claims was for a breach of fiduciary duty. As the district court explained:

Case law does not constrain discovery under ERISA § 502(a)(3) actions. Id. The limited discovery ordered by [the magistrate] and proscribed by [the Tenth Circuit] is limited to claims arising under ERISA § 502(a)(1)(B). This is logical as these actions do not benefit from the administrative process. Courts are not required to give deference to plan committees or fiduciaries in § 502(a3) actions and therefore limitations to the administrative record are not required. Section 502(a)(3) actions are to enforce rights not arising under ERISA plans, but rather arising from ERISA itself. Therefore, a finding that claims arise from ERISA § 502(a)(3) reverts discovery into the traditional realm and is governed under traditional federal, circuit, and local procedure.

Id. at 1355-56; see also Kostecki v. Prudential Ins. Co. of Am., 2014 WL 5094004 (E.D. Mo. 2014) (granting a motion for leave to conduct discovery due to Plaintiff’s claims seeking equitable relief).

Making certain that the administrative record contains all relevant documents and information is very important to litigation of ERISA claims. However, sometimes, a beneficiary simply cannot obtain all needed evidence through the traditional administrative process. During these circumstances, a beneficiary can potentially seek discovery, depending on the nature of the claims brought before the court and the wrongs inflicted upon the beneficiary. Many claims are simply for the wrongful termination of benefits. Under those circumstances, a beneficiary may only be able to obtain limited discovery. See Jensen, 520 F.Supp.2d at 1352. However, a beneficiary can sometimes circumvent the traditional ERISA process in order to obtain the information needed and convince the judge that they are entitled to benefits. This is especially true in breach of fiduciary duty cases.

If your ERISA claim has been denied, knowing when to sue for breach of fiduciary duty in ERISA cases may be integral to the success of your claim. It is important to have experienced and highly qualified disability, health and life insurance attorneys, like those at the McKennon Law Group PC. Fill out our free consultation form today to set a time to discuss your claim with one of our attorneys, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.

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