In Alexandre v. National Union Fire Insurance Company, 514 F.Supp.3d 375 (D. Mass. 2021), the U.S. District Court of Massachusetts held that National Union’s determination that an insured’s death was by suicide was not arbitrary or capricious.

Alexandre was a participant in a group accident insurance plan provided by her employer. The plan was funded by a policy issued by National Union, which also administered claims. The plan is governed by ERISA.

Alexandre’s husband died after falling nine stories from the interior of a hotel. Alexandre sought payment of accidental death benefits in the amount of $500,000. National Union denied the claim on the grounds that the husband’s death was a suicide, which was an exclusion contained in the policy. Alexandre brought suit. The case was initially filed in the Southern District of Florida, but was moved to Massachusetts pursuant to a motion for a change of venue pursuant to 28 U.S.C. §1404(a).

The court first determined that National Union’s decision would be reviewed under the arbitrary and capricious standard of review.

The court then examined whether the husband’s death was an accident applying the First Circuit’s analysis set forth in Wickman v. Northwestern National Insurance Co., 908 F. 2d 1077 (1^st Cir. 1990). National Union had concluded that the incident occurred as related in the police investigation conducted of the death, which described the husband’s volitional and purposeful conduct as sprinting out of the hotel room and hurdling himself over the tenth floor railing of the hotel. The court held that this conclusion was not arbitrary or capricious given that the summary was authored by a state official in the exercise of official duties and included the medical examiner’s investigation and interviews with two witnesses.

The court also found that National Union was not arbitrary or capricious in finding the death was by suicide. That evidence included the death certificate, which ruled the death a suicide.

Alexandre pointed to an 11^th Circuit decision that holds that in ERISA death benefit cases, where the evidence is inconclusive as to whether a deceased died by accidental or intentional means, the use of the legal presumption against suicide and in favor of accidental death is appropriate. The court held that the 11^th Circuit case was not binding on it, even though the case was originally filed in Florida. The court referenced a recent decision by the First Circuit holding that, after a federal-question case is transferred pursuant to §1404(a), the transferee court should apply its own circuit’s precedent concerning the meaning of federal law. The court then went on to find that even if the 11^th Circuit’s decision was persuasive, the evidence in the case was not inconclusive because there was substantial evidence in support of National Union’s decision, including that both the investigator’s summary and death certificate found the death was a suicide.

Summary judgment was granted in favor of National Union.

In Shields v. United of Omaha Life Insurance Company, 2021 WL 982322 (D. Me. 2021), the U.S. District Court of Maine, applying the arbitrary and capricious standard of review, upheld United of Omaha’s denial of a claim for supplementary life insurance benefits for failure to submit evidence of insurability.

Shields’ husband’s employer provided the husband with a life insurance benefit plan. When the husband was hired in 2008, he applied for the guaranteed issue of life insurance, along with supplemental life coverage in an amount equal to three times his salary. Because the amount of supplemental coverage he requested exceeded the guaranteed limit by $100,000, Shield’s husband was required to submit evidence of insurability to United of Omaha. Under the terms of the plan, it was the employer’s obligation to provide those forms to the employees and submit them to United of Omaha. Those forms were never provided to the husband and never submitted to United of Omaha, but the employer withheld premiums for the full amount of coverage applied for.

After the husband’s death in 2018, Shields made a claim for the amount of benefits she believed her husband was insured for. The husband had been paying premium for this amount of coverage since 2008. United of Omaha denied the claim in excess of the guaranteed issue. It upheld the determination on appeal and suit followed.

Shields first sought benefits pursuant to 29 U.S.C. §1132(a)(1)(B). The court found that United of Omaha’s decision was not arbitrary and capricious because the plan language unambiguously required United of Omaha to approve evidence of the good health of an employee in order to trigger coverage above the guaranteed issue limit. Because evidence of insurability had never been submitted, the court found that United of Omaha’s decision was not arbitrary and capricious.

The court next addressed Shields argument that United of Omaha waived any objection to the payment of the coverage by accepting 10 years’ worth of premiums. The court rejected this argument. It noted that waiver is defined as an intentional relinquishment or abandonment of a known right. Because United of Omaha lacked actual knowledge that the husband had failed to submit evidence of insurability it did not know it was relinquishing a right by accepting premium.

The court also rejected the argument made by Shields that waiver could be established based upon the employer’s actions on the grounds that the employer acted as United of Omaha’s agent. The court found the plan made clear that the employer did not have authority to act on United of Omaha’s behalf.

Lastly, the court addressed Shields’ argument for equitable relief pursuant to §1132(a)(3). While finding that Shields could seek alternative relief pursuant to that provision of ERISA, the court found that Shields failed to demonstrate that United of Omaha breached any fiduciary duty it owed to her or her husband.

Summary judgment was entered in favor of United of Omaha.

Group Co-Chair

jhamilton@mirickoconnell.com

Group Co-Chair

ccollins@mirickoconnell.com

Of Counsel

ngunnard@mirickoconnell.com

Joe Hamilton continues to serve as the editor for the Defense Research Institute's ERISA Update.

Chris Collins and Nancy Gunnard, along with Joe Hamilton, presented at the Annual Legal Update at the New England Claims Association conference in April.

In Ministeri v. Reliance Standard Life Insurance Company, 2021 WL 495151 (D. Mass. 2021), the U.S. District Court of Massachusetts, applying de novo review, determined that Reliance’s denial of the payment of life insurance benefits was incorrect.

Ministeri’s husband was insured for basic and supplemental life insurance through a plan provided by his employer and funded by a policy issued by Reliance. The plan was governed by ERISA.

On May 2, 2014, Ministeri’s husband was hospitalized for what turned out to be a brain tumor. He ultimately took leave from his employer on August 8, 2014 and applied for disability benefits under a plan also funded by Reliance. He died on October 2, 2015.

When Ministeri applied to recover the basic and supplemental life benefits, Reliance denied the claim on the grounds that Ministeri’s husband was no longer covered under the plan at the time of his death. Suit followed.

The court first determined whether Ministeri’s husband remained a member of the eligible class. He would have been eligible so long as he was at least a part-time employee, and a corporate vice president or above. The court found Ministeri’s husband satisfied both conditions.

Reliance argued that Ministeri’s husband was not a part-time employee because he did not work 20 hours each week after he became ill in May 2014. The court rejected this argument and determined that an employee was part-time if they regularly worked at least 20 hours a week, rather than someone who worked 20 hours every week. The court also found that Ministeri’s husband was a corporate vice president until taking leave in August 2014.

The court next found that under the terms of the plan the basic life coverage would remain in force for 14 months after Ministeri’s husband stopped working in August 2014. Because Ministeri’s husband died just before the 14 months ended, she was entitled to the proceeds of the basic life coverage.

The court also found that Ministeri was entitled to the supplemental life coverage. Reliance had argued that coverage had expired because Ministeri or her husband had failed to notify Reliance that they wanted to continue the supplemental life coverage after the husband stopped working. The court found that the notice argument was barred by Reliance’s failure to notify Ministeri of those grounds during the claims process.

The court entered summary judgment in favor of Ministeri for the total amount of the benefits claimed.

In Primerica Life Insurance Co. v. Bailey, 2021 WL 927462 (D. Mass. 2021), the U.S. District Court of Massachusetts addressed cross-claims in an interpleader action.

Donovan, the deceased, acquired an $800,000 life insurance policy, partially as security for a loan received from the Crotts. Later, Donovan changed the beneficiary of the policy naming his brother, Bailey, as sole beneficiary.

After Donovan’s death, a dispute arose as to the entitlement to the proceeds of the policy. Primerica filed an interpleader action in U.S. District Court. Thereafter, Crotts filed cross-claims against Bailey seeking equitable substitution and a constructive trust. Bailey then moved to dismiss both claims.

The court agreed that the cross-claim for equitable substitution must be dismissed. The court noted that equitable substitution is a remedy available in connection with a divorce and separation agreement in accordance with a decision by the Massachusetts Supreme Judicial Court. The court refused to extend the remedy of equitable substitution to a secured transaction.

With regard to the constructive trust, the court noted that such a trust may be imposed to prevent unjust enrichment resulting from fraud, a violation of a fiduciary duty or confidential relationship, mistake, or other circumstances in which a recipient’s acquisition of legal title to property amounted to unjust enrichment. While noting that a constructive trust is also an equitable remedy, not an independent cause of action, the court held that it would look at the claim as one for unjust enrichment. The court found that Crotts adequately pled all elements of unjust enrichment, and that there was a question of fact as to whether Bailey knew about the change in the designation of beneficiary being made to defeat the Crotts’ security interest in the proceeds. Thus, the court allowed that claim to stand.

In Ortiz v. Union Independiente, 2021 WL 2010656 (D. P.R. 2021), the U.S. District Court of Puerto Rico held that in order to bring a claim for breach of fiduciary duty under ERISA the plaintiffs were not required to first exhaust administrative remedies.

A group of retired employees of the Puerto Rico Telephone Company sued their union and a company the union had retained to design a group health plan for the retirees, claiming breach of fiduciary duties. The essence of the claim was that the union had failed to obtain an appropriate health plan for them. The retirees claimed that the union failed to exercise appropriate diligence and prudence and violated 29 U.S.C. §1104(a)(1)(B).

The union brought a motion to dismiss. The court first addressed whether the claim was contract-based or statute-based. The court noted that the First Circuit has distinguished between contract-based claims and statute-based claims and has only, to date, required the exhaustion of administrative remedies on contract-based claims. The court found that the allegations that the union had knowingly induced the retirees to sign up for a health plan that did not provide appropriate coverage would constitute a breach of fiduciary duties and because it would require the interpretation of the terms of ERISA was a statute-based claim.

Noting that the First Circuit had not decided whether statute-based ERISA claims require the exhaustion of administrative remedies, the court concluded that it did not. Referring to another case decided in the District of Puerto Rico, the court found that, absent a clear directive from Congress, the court would abdicate its duty by erecting a barrier to justice in the name of efficiency. The court also held that there was no practical reason requiring exhaustion of remedies in the case and that it was unclear what remedies retirees were supposed to exhaust.

The court denied the motion to dismiss.

In Willitts v. Life Insurance Company of North America, 2021 WL 735784 (D. Mass. 2021), the U.S. District Court of Massachusetts dismissed a claim brought pursuant to the Massachusetts consumer protection statute, Chapter 93A, on the grounds that it was preempted by ERISA.

Willitts had sued Life Insurance Company of North America (“LINA”) and his employer on a variety of claims arising from his request for short-term disability benefits. Included in the complaint was a claim pursuant to Chapter 93A.

LINA brought a motion to dismiss that claim on the grounds it was preempted by ERISA. The court agreed. Applying the well-established rule that ERISA preempts state-law claims if the trier of fact would need to consult the ERISA plan to resolve the claim, the court found that the complaint’s factual allegations that supported the Chapter 93A claim all would require the court to consider the ERISA plan. Therefore, that claim was dismissed.

The court also dismissed a claim against Willitts’ employer for an alleged violation of 29 U.S.C. §1140, which prohibits employers from taking disciplinary action against an employee in order to keep the employee from obtaining ERISA benefits. The court found that the complaint did not allege sufficient facts for it to conclude that Willitts was fired in order to prevent him from receiving ERISA benefits.

In Genworth Life Insurance Company v. New Hampshire Department of Insurance, 174 N.H. 78 (2021), the Supreme Court of New Hampshire agreed with Genworth that New Hampshire Department of Insurance regulations regarding long term care insurance premiums were beyond the power bestowed upon the Department by statute.

In 2015, the Department issued regulations that capped the maximum percentage rate that long-term care policy premiums could be increased based upon the age of the policyholder. Genworth challenged these regulations in state court. The trial court sided with the Department. Genworth then appealed to the Supreme Court of New Hampshire.

While Genworth raised arguments regarding the constitutionality of the regulations, the court sided with Genworth on the grounds that the Department exceeded its statutory powers by issuing the regulations.

The applicable statute provided the Department with the ability to enact reasonable rules that “promoted premium adequacy” or “protected policyholders in the event of substantial rate increases.” The court interpreted promoting premium adequacy to mean to support an insurer’s capability of maintaining premiums at sufficient levels to cover anticipated costs of claims over the life of the long-term care policies. The court found that an insurer’s ability to cover costs depends, at least in part, on an insurer’s ability to increase rates when the actuary assumptions applied when the policies were issued prove flawed. The court then agreed with Genworth that the rate increase caps failed to promote premium adequacy because the regulations restricted the insurer's ability to raise premium in the event of higher costs.

The court also found that the regulations did not protect policyholders in the event of substantial rate increases because the rate-increase caps in the regulations did not protect policyholders “in the event of” substantial rate increases. That is, the regulations applied before any rate increases were approved.

The court reversed the decision of the trial court.

In Shepardson v. American Family Life Assurance Company of Columbus, 2021 WL 916217 (D. Mass. 2021), the U.S. District Court of Massachusetts dismissed the complaint on the grounds that the claims were barred by the policy’s contractual limitations, or the applicable state statute of limitation.

Shepardson’s husband was covered by a cancer policy acquired from AFLAC. In 2014, Shepardson’s husband submitted a claim for medications for his diabetes, which was a consequence of his cancer. The claim was denied in October 2014. Shepardson filed suit in April 2020.

AFLAC filed a motion to dismiss. It first claimed that the breach of contract claim was barred by the policy’s three-year limitation provision, which barred any legal action after three years from the time that proof of loss was required to be furnished. The court determined that the policy required written proof of loss to be provided by December 17, 2014. Therefore, suit would have had to be brought by December 17, 2017. Because suit was not filed until April 2020, the claim was late. The court noted that contractual limitation periods are enforceable under Massachusetts law and therefore dismissed the contract claim.

Shepardson also brought a claim for intentional infliction of emotional distress. The court found that was barred by the state three-year statute of limitation for tort claims, finding that the time began to run on that claim when AFLAC first denied coverage.

Lastly, the court found that the Chapter 93A was barred by the four-year statute of limitations. The court noted that the time to file the Chapter 93A claim began to run when Shepardson knew or should have known of appreciable harm resulting from AFLAC’s actions. The court held that for insurance claims, that occurs upon notice of the insurer’s denial of the claim, at the latest. In a footnote, the court noted that the contractual limitation period would not apply to the claim under Chapter 93A.

In Conformis, Inc. v. Aetna, Inc., 2020 WL 1210293 (D. Mass. 2020), the U.S. District Court of Massachusetts granted a motion to dismiss all of an assignee’s ERISA claims, but denied a motion to dismiss the claims of the plan participant.

John Schaub was covered under a health care plan provided by his employer and funded by a policy issued by Aetna Life Insurance Company. Schaub needed a knee replacement and wanted a customized replacement manufactured by Conformis. While the customized knee replacements have been manufactured by Conformis since 2011 and were approved by multiple health insurers, Aetna deemed it to be experimental and investigational. Therefore, when Schaub sought approval for his knee replacement using a Conformis device, Aetna denied it. Despite this, Schaub went ahead with the knee replacement and then assigned his claim to Conformis.

Suit was brought under ERISA by both Conformis and Schaub. Aetna sought to dismiss all claims.

The court dismissed Conformis’ claims because the ERISA plan specifically provided that no assignment would be effective unless agreed to in writing by Aetna. The court noted that the First Circuit previously decided that ERISA leaves the assignability of health care benefits to the plan. The court also rejected Conformis’ argument that the anti-assignment provision of the plan was contrary to public policy.

In addition, the court dismissed Conformis’ state law claims for product disparagement, tortious interference with a contractual relationships, and violations of Chapter 93A. The court found that Conformis did not meet the elements of a prima facie case for either product disparagement or tortious interference. In addition, because the Chapter 93A claim hinged upon the product disparagement and tortious interference claims, that claim was dismissed as well.

The court, however, denied Aetna’s motion to dismiss Schaub’s ERISA claims, at least at the motion to dismiss stage. Therefore, it allowed Schaub’s claim for ERISA benefits, his claim for breach of fiduciary duty, and for denial of a full and fair review to proceed.

In Weissman v. United Healthcare Insurance Company, 2021 WL 858436 (D. Mass. 2021), the U.S. District Court of Massachusetts denied a motion to dismiss a putative class action suit. United Healthcare administered a number of self-funded group health plans governed by ERISA. Each of the class representatives had made a claim, under health plans administered by United Healthcare, for Proton Beam Radiation Therapy (“PBRT”), a form of radiation used to destroy cancerous tumors. The claims were denied as being medically unnecessary and experimental.

Because the court was addressing a motion to dismiss, it was required to accept as true all well-pleaded facts, analyze those facts in the light most favorable to the plaintiffs, and draw all reasonable factual inferences in favor of the plaintiffs. Using this standard, the court denied the motion to dismiss.

The complaint contained a claim for breach of fiduciary duty, and also a claim for denial of benefits.

As to the breach of fiduciary duty claim brought pursuant to 29 U.S.C §1132(a)(3), United Healthcare sought to dismiss it because the plaintiffs also sought relief for the denial of benefits pursuant to 29 U.S.C. §1132(a)(1)(B). The court found that while the plaintiffs could not recover under both sections of the statute, both could be alleged in the complaint.

With regard to the denial of benefits claim, the court found that the plaintiffs had alleged sufficient facts to withstand a motion to dismiss.

Finally, United Healthcare made two additional arguments regarding the relief the plaintiffs sought in the case. The plaintiffs, in their complaint, requested that the court order United Healthcare to undergo an accounting and disgorgement of profits. They also sought prospective injunctive relief. The court refused to dismiss either request. The court found that if the allegations of the complaint were borne out, it was possible that the §1132(a)(1)(B) remedy of repayment of benefits might turn out to be inadequate and therefore it was premature to foreclose the possibility of equitable relief, including an accounting and disgorgement.