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Tag: ERISA

How to Handle a Group Life Insurance Claim Denial

Posted on by Tatiana Kadetskaya
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Tatiana KadetMany employees receive life insurance coverage as part of their employee benefits. A group life insurance has many advantages over private life insurance policies.

First, group life insurance coverage is usually offered at low prices and is available not only to employees, but also to their qualified dependents.

Second, the employee does not have to keep track of monthly premium payments as the employer withdraws life insurance premiums from the employee’s paycheck and transfers them to the insurer regularly. This protects the employee from a possible missed payment which could result in a policy lapse.

Finally, the employer’s human resource department acts as a liaison between the employee and the insurer, so if there are questions or changes, the employee can simply turn to the employer for help.

What leads to denied life insurance claims?

Ideally, the employee should be given accurate information about his life insurance benefits and any changes in the employee’s status should be handled promptly and efficiently.

Unfortunately, it’s not uncommon both for insurance companies and employers to make mistakes regarding life insurance benefits, provide wrong information, fail to update records and fail to maintain or forward documents to the appropriate department.

These practices often lead to a denied life insurance claim when the employee or his dependent dies.

When a group life insurance claim is denied, the beneficiary may find himself struggling with paying funeral expenses and other financial obligations associated with the death of a loved one.

A family who loses the only breadwinner and receives a denial letter from the life insurance company may feel despair. However, beneficiaries whose life insurance claims have been denied are not left without recourse.

Every unfair life insurance claim denial can be disputed and appealed.

A better Understanding of ERISA

Most group life insurance polices are controlled by ERISA (“The Employee Retirement Income Security Act of 1974”). ERISA provides a wide range of protections for employees and their families.

One of the main purposes of ERISA is to protect the interests of participants and beneficiaries by establishing standards of conduct, responsibility, and obligation for fiduciaries (usually employers and insurance companies) and provide for appropriate remedies and ready access to federal courts.

ERISA imposes high standards of fiduciary duty upon administrators of an ERISA plan. ERISA’s fiduciary duty encompasses three components:

  1. The first is a duty of loyalty which requires that all decisions regarding an ERISA plan must be made with an eye single to the interests of the participants and beneficiaries;
  2. ERISA imposes a prudent person fiduciary obligation, which is codified in the requirement that a plan fiduciary exercise his duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims.
  3. ERISA requires that a fiduciary act for the exclusive purpose of providing benefits to plan beneficiaries.

In addition, ERISA entitles employees to free access to all the documents pertaining to their life insurance policies. This means that upon the employee’s request, the employer and/or the insurer must provide a copy of the life insurance policy, proof of premium payments and all relevant documents.

There can be many ways in which the insurance company and the employer breach their fiduciary duties.

How to recognize unfair life insurance claim denial

Below is a list of some practices that may result in an unfair life insurance claim denial:

  1. Employer failed to update its employment records after an employee became part-time, disabled, was terminated, etc.;
  2. Insurance company continued to charge premiums after it had received an employee’s waiver of premium application;
  3. Insurance company extended coverage without requesting evidence of insurability and later claimed that no coverage should have been issued;
  4. Employer or insurance company made material misrepresentations about coverage;
  5. Employer and insurance company failed to inform an employee about his rights to convert or port coverage;
  6. Employer failed to provide a copy of the life insurance policy to its employees;
  7. Employer failed to advise an employee that his/her dependent is not considered a qualified dependent under the policy and collected premiums for the dependent coverage.

ERISA allows beneficiaries whose claims have been denied to file an administrative appeal and request reconsideration. Since ERISA imposes strict deadlines and other restrictions during the appeal process, we encourage all employees and their families to consult a life insurance attorney before considering filing an administrative appeal.

 

About the Author: The author’s name is Tatiana Kadetskaya. Tatiana Kadetskaya runs a Law Firm devoted to the practice of life insurance law, experienced in all aspects of life insurance law, including ERISA claim denials and claims against insurance companies and employers.


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U.S. Supreme Court Accepts Cert in Dudenhoeffer ERISA Moench Presumption of Prudence Case

Posted on by Paul Secunda
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Paul SecundaToday, the United States Supreme Court granted certiorari in a case where the 6th Circuit found that a company may have breached its fiduciary duties under ERISA by continuing to offer company stock as a retirement plan investment option even after the value of the stock plunged.

The case is Fifth Third Bancorp v. Dudenhoeffer, No. 12-751 (don’t ERISA cases have the best names?) and here is the decision below in the 6th Circuit.  SCOTUSBlog says the case is likely to be heard in March.  The Solicitor General had urged the Court to hear the case.

The issue is whether courts should apply a presumption of prudence or reasonableness (sometimes called the Moench presumption based on a similar case by that name in another circuit court) when a company,  like Fifth Third, decides to retain investments in its own securities for its ESOP (employee stock ownership plan) when the stock’s price dropped 74 percent because of the company’s involvement in subprime mortgage lending.  The employees in the retirement plan claim they were never alerted to the company’s new riskier investment course.

Participants in Fifth Third’s ESOP filed an ERISA class action, asserting that the company’s actions  violated their fiduciary responsibilities to plan participants and beneficiaries by imprudently investing in company stock.  Initially, the U.S. District Court for the Southern District of Ohio had determined that Fifth Third did not violate ERISA because plan fiduciaries are entitled to a “presumption of prudence” permitting investment in their own stock and the plaintiffs had not overcome that presumption by showing that the company had plausibly abused their discretion in investing the ESOP money in the company stock.

The participants appealed to the 6th Circuit, supported by an amicus brief by the Department of Labor (DOL).  The DOL maintains that the presumption of prudence should not apply and that plaintiffs had plausibly alleged a breach of fiduciary duty.  The 6th Circuit agreed, at least as far as holding that the presumption should not be applied at the pleading stage of the lawsuit.

The 6th Circuit also held that Fifth Third acted as an ERISA fiduciary when it incorporated its Securities and Exchange Commission (SEC) filings into the ESOP’s plan documents. The Court did not take cert. on a challenge to this finding.

The case law had been trending in favor of the presumption of prudence in these stock-drop cases in recent years, with the Sixth Circuit being a notable exception. It is always hard to predict where the Court will come out on ERISA fiduciary cases, but given that the Court granted cert. on the question as presented by the company (and did not re-write the question as requested by the Solicitor General), we may gain some insight. The question presented is:

Whether the Sixth Circuit erred by holding that respondents were not required to plausibly allege in their complaint that the fiduciaries of an employee stock ownership plan abused their discretion by remaining invested in employer stock, in order to overcome the presumption that their decision to invest in employer stock was reasonable, as required by the Employee Retirement Income Security Act of 1974 . . . and every other circuit to address the issue.

Phrasing the question presented in such a leading manner suggests only one possible reasonable answer upholding the presumption of prudence in ERISA stock drop cases.  But we shall see.

This article was originally printed on Workplace Prof Blogs on December 16, 2013.  Reprinted with permission.

About the Author: Paul Secunda is a professor of law at Marquette University Law School.  Professor Secunda is the author of nearly three dozen books, treatises, articles, and shorter writings. He co-authored the treatise Understanding Employment Law and the case book Global Issues in Employee Benefits Law.  Professor Secunda is a frequent commentator on labor and employment law issues in the national media.  He co-edits with Rick Bales and Jeffrey Hirsch the Workplace Prof Blog, recently named one of the top law professor blogs in the country.


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Unanimous Supreme Court in Heimeshoff Permits Contractually-Based SOLs in ERISA Denial of Benefit Cases

Posted on by Paul Secunda
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Paul SecundaThis morning, the United States Supreme Court issued its decision in  Heimeshoff v. Hartford Life & Accidental Life Ins. Co., concerning statute of limitation accrual issues for benefit claims under Section 502(a)(1)(B) of ERISA.

The Court unanimously held that Hartford’s Long Term Disability Plan’s requirement that any suit to recover benefits be filed within three years after “proof of loss” is due is enforceable.  More specifically, “[a]bsent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limita­tions period, even one that starts to run before the cause of action accrues, as long as the period is reasonable.”  Causes of action for benfit under ERISA do not start to accrue until a final internal appeal decision.  Because Heimeshoff failed to file a claim for long-term disability ben­efits with Hartford within the contractual SOL period, the Court concluded her claim was rightfully denied by Hartford.

While ERISA does not provide a statute of limitations for denial of benefit claims, many plan administrator have in place a contractual 3-year limitations period like Hartford’s.  Writing for the unanimous Court, Justice Thomas held the Plan’s limitations provision enforceable under the rule set forth in Order of United Commercial Travelers of America v. Wolfe, 331 U. S. 586, 608, which provides that a contractual limi­tations provision is enforceable so long as the limitations period is of reasonable length and there is no controlling statute to the contrary.  This conclusion was especially supported, according to the Court, by the ERISA principle that contractual limitations should be enforced as written under ERISA’s written plan rule.

There may still be limitations in place in the future to finding these contractual SOLs valid.  If the limitations period is unreasonably short or if there is a controlling statute to the contrary, the Plan’s limitations provision can be overridden. Moreover, the Court held that courts are well equipped to apply traditional doctrines, such as waiver or estoppel and equitable tolling that nevertheless may allow partic­ipants to proceed on stale claims. However, consider in this regard Heimseshoff in light of U.S. Airways vs. McCutcheon. 

Although Heimeshoff says traditional equitable doctrines may circumscribe application of statutes of limitations to protect participants, McCutcheon said plans can include terms that explicitly preclude application of traditional equitable doctrines.  So does this mean that employers will quickly amend their plans to preclude application of equitable doctrines? It very well could be the case.

Here, in any event, the period was not unreasonably short and, in fact, most internal benefit appeals are completed within one year so that there should be sufficient time for most ERISA plaintiffs to bring their suit in a timely manner.  Even Justice Ginsburg remarked in oral argument that there might have been essentially legal malpractice in this case in that Heimeshoff’s attorney may have failed to diligently pursue her claim (she had about a year to file her case even after her internal appeal had been finally denied).

Although this decision may not be that important in the long-run as there is not much evidence that plan administrators have used these SOLs to prevent participants to bring claims, the one part of the decision that seemed fanciful to me was this idea that plan participants and beneficiaries “agree” with their plans to these SOLs.  The Court said this with regard to this critical aspect of the case: “the parties have agreed by contract to commence the limitations period at a particular time.”

As I wrote previously when oral argument occurred in this case in October, benefit plans are classic contracts of adhesion with usually no bargaining between the parties taking place.  It is legal fiction to say that most participants consented to this provision.  Nevertheless, it is hard to argue, under the circumstances, that this unilateral term is unreasonable, as long as equitable principles and regulations exist to prevent plan administrators from gaming the system to prevent judicial review of claims decisions. Whether such equitable principles will continue to exist, however, post-Heimeshoff and McCuthcheon is anyone’s guess but I am skeptical.

Somwhat called this case. Here is what I wrote in October: “I fear this pro-employer/pro-plan sponsor court will adopt the written plan requirement rule and permit the plan sponsor to unilaterally set in the plan document an accrual date and a length for the statute of limitations.”

This article was originally printed on Workplace Prof Blog on December 16, 2013.  Reprinted with permission.

About the Author: Paul Secunda is a professor of law at Marquette University Law School.  Professor Secunda is the author of nearly three dozen books, treatises, articles, and shorter writings. He co-authored the treatise Understanding Employment Law and the case book Global Issues in Employee Benefits Law.  Professor Secunda is a frequent commentator on labor and employment law issues in the national media.  He co-edits with Rick Bales and Jeffrey Hirsch the Workplace Prof Blog, recently named one of the top law professor blogs in the country.


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4th Cir: “Proof Satisfactory to the Administrator” = De Novo Review of Benefit Claims

Posted on by Paul Secunda
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Paul SecundaThanks to friend of the blog, Jon Harkavy, for sending along this potentially important ERISA denial of benefit claim case from the 4th Circuit.

In Cosey v Prudential, (4th Cir. Nov. 12, 2013), the Fourth Circuit held that the common plan formulation “proof satisfactory to the administrator” does not unambiguously confer discretion on the administrator and thus subjects the administrator’s decisions to de novo judicial review (as opposed to arbitrary and capricious review under the Firestone/Glenn standard).

Like Jon, I find this decision interesting, as it has the potential to cut back on the abuse-of-discretion standard of review for many ERISA plans.  However, I suspect that in response to this Court’s decision, we are likely to see many plan amendments adding language which more unambiguously states the plan’s intention to get the benefit ofFirestone discretionary review for its benefit determination decisions.

This article was originally printed in Workplace Prof Blog on November 18, 2013.  Reprinted with permission.

About the Author: Paul Secunda is a professor of law at Marquette University Law School.  Professor Secunda is the author of nearly three dozen books, treatises, articles, and shorter writings. He co-authored the treatise Understanding Employment Law and the case book Global Issues in Employee Benefits Law.  Professor Secunda is a frequent commentator on labor and employment law issues in the national media.  He co-edits with Rick Bales and Jeffrey Hirsch the Workplace Prof Blog, recently named one of the top law professor blogs in the country.


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Same-sex spouse gets ERISA death benefit

Posted on by Ross Runkel
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Sarah Farley had worked at a law firm where she participated in the firm’s Profit Sharing Plan – a plan qualified under the Employee Retirement Income Security Act (ERISA). The Plan provides that death benefits be paid to the participant’s “surviving Spouse.”

Sarah then married Jean Tobits in Canada. When Sarah died, both Jean and Sarah’s parents claimed the death benefits.

The dispute went to federal district court in Pennsylvania (Cozen O’Connor PC v. Tobits) where the judge had no trouble deciding that Jean was Sarah’s surviving spouse.

In United States v. Windsor (US Supreme Court 06/26/2013) the Supreme Court held that Section 3 of the Defense of Marriage Act (DOMA) – defining “spouse” as a person of the opposite sex – is unconstitutional. Therefore, since Sarah and Jean were lawfully married, and that marriage is recognized by the laws of Illinois, ERISA has to be interpreted as meaning Jean was Sarah’s spouse. And thus the law firm’s ERISA plan has to be interpreted as meaning Jean was Sarah’s spouse.

This leaves me with one huge question: Will you get the same result in every state? That seems doubtful to me. The opinion in Windsor (a 5-4 decision) relied heavily on the fact that Windsor’s same-sex marriage was recognized by the State of New York (and the Tobits marriage was recognized by the State of Illinois). As Justice Kennedy put it, “DOMA’s principal effect is to identify a subset of state-sanctioned marriages and make them unequal.” So, if you’re in a state where same-sex marriages are not recognized, it may be difficult to apply the logic of the Windsor case.

Hat Tip to Mike Reilly at Lane Powell, who writes Boom: The ERISA Law Blog.

This article originally appeared on Ross Runkel Report on August 13, 2013.  Reprinted with permission

About the Author: Ross Runkel Ross Runkel is a full-time labor-management arbitrator, professor of law emeritus, and former editor of Employment Law Memo.


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Obama and the Future of Labor and Employment Law

Posted on by Paul Secunda
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Obama With the historic election of Barack Obama as the 44th President of the United States and the substantial gains for Democrats in the House and Senate, there is almost certainty that there will be significant labor and employment law reform in the near future.

Not being a shrinking violet by any means, I would like to add my two cents about what such reform should be about.  Although I previously posted a similar analysis of what the next President should do on the Marquette Law School Faculty Blog about three weeks ago, I want to sharpen these past comments and add some new ideas.

President-elect Obama should first focus on the following four broad areas in the labor and employment law context: labor rights, workplace anti-discrimination and civil rights, employee benefit rights, and public employee rights.

Labor Rights: The percentage of American workers covered by union contracts is now below 8%, as opposed to 16% as recently as 1985. Without unions to fight for them, workers fall behind in wages, benefits, and standard of living. Unionized workers earn more and are more likely to have pensions and health insurance than non-unionized workers.  Workers should have the freedom to choose whether to join a union without harassment or intimidation.

President-elect Obama should therefore sign the Employee Free Choice Act, a bipartisan effort to assure that workers can exercise their right to organize and secure initial agreements with their employers.  Obama should also act to restore collective bargaining rights to nurses and other workers excluded as “supervisors,” and to ban employers’ practices of permanently replacing striking workers. He should also sign into law the Public Safety Employer-Employee Cooperation Act to assure public safety workers who put their lives on the line every day their right to bargain collectively.  Finally, President-elect Obama should work to appoint members of the National Labor Relations Board who will work to protect employee choice by outlawing employer captive audience meetings during election campaigns and overruling Dana Corp. and putting back in place the traditional voluntary recognition bar.

Workplace Anti-Discrimination and Civil Rights: President-elect Obama should work for legislation requiring employers to provide at least seven days of paid sick leave to employees and expanding the Family and Medical Leave Act (FMLA) to cover more workers (to employers with 20 or more employees). He should also protect the wages of working women by signing into law a legislative nullification of the Ledbetter decision, which will promote paycheck equity and help close the pay gap that leaves working women earning only 77 cents for every dollar earned by men.

President-elect Obama should also sign legislation to extend § 1983 civil rights claims to actions against federal officials so that federal employees can vindicate their constitutional rights to speech and privacy. Finally, he should expand Title VII and fully include all LGBT individuals (yes, such legislation must include transgendered individuals) under its protections.

Employee Benefits Rights: With more than 47 million Americans-–including 9 million children–without health insurance, President-elect Obama needs to sign a universal health care plan into law before the end of his first term.  This plan structure should include guaranteed eligibility, comprehensive benefits, and affordable premiums and co-payments, with subsidies for families that cannot afford the premiums.  Additionally, ERISA should be amended to provide for less preemption of state health care finance laws so that states can experiment in providing all of their citizens adequate health care.  Obama should also work to amend ERISA to provide monetary, make-whole remedies to employees who suffer from mismanagement of their employee benefits and work for the legislative nullification of the Russell/Mertens line of Section 502(a)(3) equity cases.  In this regard, I have proposed the ERISA Civil Rights Act of 2009, which will act much in the way the Civil Rights Act of 1991 amended Title VII.  Among the changes, the right to compensatory and punitive damages in appropriate cases with caps, the right to a jury trial when such damage is sought, and right to make-whole, equitable relief under current Section 502(a)(3).

Public Employee Rights: First and foremost, President-elect Obama should select Justices who will overule the Garcetti case and return to Pickering and the mandate that employer efficiency interests and employee constitutional rights to speech, expression, association, and privacy be balanced under the First and Fourteenth Amendments.  As to federal employees, Congress should amend the Civil Service Reform Act of 1978 and provide that federal employees are free to bring their First Amendment claims directly to federal court under a re-structured Section 1983, without having to go through the current inadequate, administrative remedies now available.  (This would entail a newly-constituted Supreme Court overruling the Bivens case of Bush v. Lucas).  Such legislation would also provide whistleblowers under Sarbanes-Oxley and in other areas the protection they really need to go out on the limb and report danagerous and fraudulent conditions in the workplace.

Believe it or not, the above suggestions would merely start the process of affording American employees the same basic workplace rights as their international counterparts. Note that I have not even broached what must be an essential component of any comprehensive labor and employment law reform in this country – the institution of just cause workplace protection as the default rule for American employees.

All of this will help return the United States to its international stature and allow it again to not only be a beacon of democracy and freedom, but also the envy of the world insofar as how it treats its working men and women.

Cross-posted from the Workplace Prof Blog.

About the Author: Paul Secunda joined the Marquette University Law School as an associate professor of law in the summer of 2008. He teaches employment discrimination, employee benefits, labor law, employment law, civil procedure, and seminars in special education law, global issues in employee benefits, and public employment law. Professor Secunda is the author of nearly three dozen books, treatises, articles, and shorter writings. He is also the author, along with Rick Bales and Jeff Hirsch, of the treatise, Understanding Employment Law, along with Sam Estreicher and Rosalind Connor, of the case book, Global Issues in Employee Benefits Law, and of the Teacher’s Manual to the 14th Edition of the Cox, Bok, Gorman & Finkin Labor Law casebook.Professor Secunda is a frequent commentator on labor and employment law issues in the national media and has written numerous columns and op-eds for the National Law Journal and Legal Times. He co-edits with Rick Bales and Jeffrey Hirsch the Workplace Prof Blog, recently named one of the top law professor blogs in the country, which is part of the Law Professors Blog Network.


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