Search the News Archive

ERISA Preemption and State Bans on Discretionary Clauses

"Following the promulgation of a model law by the National Association of Insurance Commissioners that bans the inclusion of so-called discretionary clauses in health and disability insurance policies, several states have issued laws or regulations adopting the NAIC's model law.... The reason discretionary clauses have been singled out for attention is because of a 1989 Supreme Court ruling, Firestone Tire & Rubber Co. v. Bruch ... The Supreme Court held in Firestone that the typical judicial review standard applied in adjudicating ERISA cases is the de novo standard, which requires the court to independently adjudicate whether the benefit claimant is entitled to the benefits sought."

Discretionary Clauses and Choice of Law in ERISA Cases

"[E]ven if [Firestone Tire and Rubber Co. v. Bruch] discretion-granting language is present, that does not necessarily end the discussion, as illustrated by a recent ruling from a federal court in California.... [T]he court was presented with insurance policy documentation that clearly reserved discretionary authority to the insurer, Principal. Yet the court found the grant of discretion was negated and applied the de novo standard of judicial review[.] The court's rationale involved a choice of law determination." [Hirschkron v. Principal Life Ins. Co., No. 15-cv-00664 (N.D. Cal. Oct. 29, 2015)]

District Court Says 'Aetna's Goal Was to Deny the Plaintiff's Claim'

"The court was disturbed by Aetna's insistence on 'objective medical evidence' in the absence of a policy requirement mandating such evidence. Moreover, the court found that the nature of [the employee's] impairment made it impossible for him to produce the type of evidence that Aetna demanded. The court was also dubious about the validity of Aetna's vocational assessment and also questioned its medical consultants' findings.... [The court] pointed out that Aetna did not have a license to ignore reliable evidence, yet it appeared to the court that Aetna did just that." [Charles v. UPS Long Term Disability Plan, No. 12-06223 (E.D. Pa. Oct. 29, 2015)]

Court Looks at Calculating Credit and Taxes in Disability Benefits Case

"[If] a worker is promised a tax-free disability insurance benefit, and that employee later becomes simultaneously eligible to receive both long-term disability payments and Social Security disability insurance payments, which reduce the LTD payments, does the insurer get to offset the gross amount of SSDI or the after-tax net amount? ... The court ruled that no language in the plan supported the plaintiff's claim that the offset of Social Security benefits would be based on the net benefits after taxes and that illustrations in a summary plan description ... compelled a conclusion that the gross benefit is offset.... The court's ruling appears unjustified." [Troiano v. Aetna Life Ins. Co., No. 14-496-ML (D.R.I. Sept. 30, 2015)]

When Does ERISA Apply to Small Business Owner Benefit Plans?

"The court noted that for the ERISA exemption to apply, the corporation would need to have been owned by one person and his or her spouse. In this particular situation, however, the plaintiff owned the company along with two others, so the ERISA exemption did not apply." [Silverman v. Unum Group, No. 14-CV-6439 (S.D.N.Y. July 30, 2015)]

Release of Employment-Related Claim May Unintentionally Release ERISA Benefit Claim

"[T]he court determined that Dr. Gonda was highly educated and had sufficient time to review and consider the settlement agreement, which he reviewed with an attorney who was representing him in the employment case. Dr. Gonda also received consideration for the release, which explicitly referenced ERISA claims against his employer and related parties. The court expressed concern that disability benefits were not discussed during the settlement negotiations and LINA also waited for three years while internal appeals were pending before raising the issue." [Gonda v. The Permanente Medical Group, No. 11-cv-01363-sc (N.D. Cal. Feb. 17, 2015)]