Do I Have A Case?

Fourth Circuit Limits ERISA Plan Administrators’ Ability to Use Discretion as Grounds for Denials of Coverage

May 16, 2022 | by Mehr Fairbanks Trial Lawyers

The Court of Appeals for the Fourth Circuit recently held that under ERISA, the “deferential review” standard is not a one size fits all seal of approval for plan administrators’ reasoning in denying claims. The case giving rise to this decision is Garner v. Central States and Southwest Areas Health and Welfare Fund Active Plan in which the Defendants denied the Plaintiff’s claim for the reimbursement of medical costs related to their back surgery. A court in North Carolina provided the original ruling in the case (later upheld by the Court of Appeals) that the plan at issue had “abused its discretion” in denying the claim.

The case boiled down to two significant issues relating to the determination that benefits would be denied, each addressed by the Court of Appeals. The first relates to the omission of an MRI scan in the documents to be analyzed by the first reviewing doctor in making their decision on the availability of benefits. This omission was held to be significant, as the results of the MRI were crucial to the Plaintiff’s treating doctor’s decision to operate. Secondly, no notes from the Plaintiff’s treating doctor relating to the decision to conduct surgery and discussion of the MRI were provided to the reviewing doctor.

The Plaintiff’s initial appeal was denied on the grounds that a second reviewing doctor had reached the same conclusions as the first. Thus, according to the Defendants, the lack of information provided to the first doctor did not preclude denial. The Court disagreed with this argument, stating that the issues with the first doctor’s review were not cured by the concurrence of the second doctor, as their opinion also misstated facts surrounding the Plaintiff’s need for surgery. As a result, the Court held that the Defendants’ denial of the claim was not “the result of a deliberate, principled, reasoning process.”

Court of Appeals Holds that Individual Arbitration Agreements do not Apply to ERISA Plans as a Whole

May 5, 2022 | by Mehr Fairbanks Trial Lawyers

The Court of Appeals for the Sixth Circuit recently held that when a claim is brought under ERISA § 502(a)(2), individual arbitration agreements signed by employees do not apply. The rationale behind this decision is that claims brought under § 502(a)(2) are brought by the Plan, not by the individual employees who had signed the agreements.

The Plan at issue in this case is the “Partner’s Plan” (Plan), a “defined contribution” plan sponsored by one of the Defendants, Cintas. Defined contribution plans offer participants the opportunity to select investment options from a “menu” chosen by the plan’s sponsor (in this case, Cintas). Individual accounts are created for each participant, their value determined by the amount they have contributed, fees associated with management of the plan, and the market performance of the investment options selected.

ERISA requires fiduciaries to fulfill certain duties to plan participants, the two at issue in this case being the duty of loyalty and the duty of prudence. The duty of loyalty requires that plans be managed “for the best interests of its participants and beneficiaries,” while the duty of prudence requires that plans be managed “with the care and skill of a prudent person acting under like circumstances.” The Plaintiffs in this case allege that these duties were breached when the Defendants only offered opportunities to invest in “actively managed funds” and when excessive recordkeeping fees were charged to participants. The Plaintiffs brought action against Cintas, as well as its Investment Policy Committee and Board of Directors. These entities within the company are responsible for administering and appointing members to investment committees. The suit is putative class action encompassing all participants in the Plan and their beneficiaries during the relevant class period.

Hospital Argues that ERISA Fees were Reasonable, But Will the Court Agree?

April 18, 2022 | by Mehr Fairbanks Trial Lawyers

Recently, the Boston Children’s Hospital asked a judge in federal court to dismiss a case brought by former employees that alleged the charging of “exorbitant” fees relating to the management of ERISA retirement plans. The Hospital argues that fees associated with the plans were not exorbitant and no damage was sustained by plan members under the class, thus the case against them should be dismissed. The Hospital additionally argues that there was no requirement for them to pick the lowest possible costs for administration of their ERISA plans. Further, they argue that the plaintiffs in the class at issue were not deeply invested in the plans that are involved.

The Plaintiffs (former employees of the Hospital) in the class allege that the Hospital’s fiduciary duties under ERISA were breached when they overcharged participants for fees relating to recordkeeping. Further, the Plaintiffs allege that the Hospital encouraged participants to invest in funds that were more expensive than others and underperformed compared to their counterparts. The case was originally brought by four former employees of the Hospital, with the class now encompassing compensation for 18,580 employees. The Plaintiffs state that while participants in similar plans were required to pay between $23 to $42 per year in recordkeeping fees, participants in the Hospital’s plans at issue paid $73. The large size of the plan, according to the Plaintiffs, would have enabled them to negotiate for lower fees if the Hospital had been proactive about ensuring the performance of their duties to the participants.

The Hospital counters in their motion to dismiss that, “ERISA does not require Children’s to select the least expensive or best performing investment, and Plaintiff’s cannot plausibly allege a breach merely by pointing to alternative target date funds that have some similarities and that purportedly cost a bit less or performed a bit better.” Further, the Hospital alleges that the Plaintiffs are essentially attempting to make arguments that are directly opposed, stating that there are no comparable plans that are both less expensive and perform better than that those at issue in the case. Regarding the plans exemplified by the Plaintiffs as less expensive, the Hospital states that the cheaper plans did not perform as well as those chosen by the Defendant. The plans argued by the Plaintiffs to be comparable also had different payment structures and provided different services to participants, according to the Hospital.

11th Circuit Holds that Settlement Amounts may Count as Basis for Bad-Faith Claims

April 14, 2022 | by Mehr Fairbanks Trial Lawyers

Recently, an 11^th Circuit Court in Florida held that when a private settlement constitutes an “excess judgment” under an insurance policy, the insured(s) can use the amount in the settlement to bring a bad-faith claim against their insurer. This decision overturns a previous 2019 decision (which was unpublished) stating that the only method through which insureds could establish a bad-faith excess judgment claim was after the case had reached a jury verdict at trial. The insureds in this case are now able to bring suit against their insurer, Geico Insurance, for allegedly agreeing to a settlement in excess of policy limits.

The policy at issue in this case was an auto insurance policy that gave coverage for up to $100,000 (per person) for bodily injury. The insureds under the policy were at fault in an accident, causing serious bodily injury to the other party, the costs of which exceeded the policy limits. When the parties could not reach an agreement during settlement negotiations, the injured driver sued the insureds in Florida state court. The insureds were then provided with counsel by Geico for the duration of the suit, as was dictated by their policy. The parties eventually reached an agreement in the form of a settlement, but the amount agreed upon drastically exceeded the policy limits. The terms of the settlement delineated that one of the insureds (the owner of the vehicle involved in the accident, but not the driver at the time) would pay to the injured party $474,000. This amount is small compared to the amount the settlement required of the at-fault driver, which came out to $4.47 million. The settlement also included that Geico would agree to not hold the insureds in breach of the policy through acceptance of the offer.

Florida state law provides that insureds may bring bad-faith insurance claims when the insurer grants an “excess judgment,” meaning that the insurer (in bad-faith) chose to accept a settlement agreement that exceeded policy limits. Under this principle, the insureds filed a claim against Geico, requesting damages amounting to the total agreed upon in the settlement that was over the $100,000 policy limit. Prior to this decision, the case against Geico would have been dismissed since the excess judgment was not award through a jury verdict after trial. Judge Kevin C. Newsom disagreed with this precedent, as his opinion on the matter stated, “a jury verdict is not a prerequisite to an excess judgment in a bad-faith action.” Judge Newsom’s reasoning relies on Florida state law, reiterating that when insureds are, “subject to excess judgments, they [can] prove causation in their bad-faith case.” Further, Judge Newsom states that previous opinions in lower courts which had relied on the older decision may not have properly interpreted the state law. He states that the reliance on the precedent was caused through a misinterpretation of another previous case in which a jury verdict happened to be present, which should not have resulted in a requirement that a jury verdict must exist in all cases.

North Carolina Court Grants Class Certification and Approves Settlement Amount in ERISA Case

March 10, 2022 | by Mehr Fairbanks Trial Lawyers

Recently, a Federal Court in North Carolina approved a settlement for over $3 million between a Coca-Cola (Defendant) bottling plant and a class of former employees. The named Plaintiffs brought the action against the Defendant alleging that the company had violated their fiduciary duties by presenting “risky” investment options to ERISA plan holders while additionally charging excessive fees. The Court held that the amount of the settlement was “fair, reasonable and adequate, taking into account the costs, risks and delay of litigation, trial and appeal.” Pursuant to this decision, the Court also ruled that the class presented by the Plaintiffs was appropriate for certification and includes all “participants and beneficiaries” under the plan in question. This totals around 13,000 individuals, according to a motion brought by the named Plaintiffs which is now moot after the Court’s certification of the class.

The details of the settlement agreement include statements that the Defendants denies any “wrongdoing or legal liability,” as well as the Defendants’ opinion that the group of 13,000 individuals was not appropriate for class certification. The specific wrongdoing alleged by the Plaintiffs is that the Defendants could have used their large size as a corporation in order to ensure that record-keeping and management fees were low for plan participants, which the failed to do. Additionally, Plaintiffs contend that the Defendants “imprudently” chose higher cost management services, though they had been presented with lower cost alternatives. According to the Plaintiffs, these decisions made by the corporation and its plan fiduciaries caused monetary losses into the millions. Lastly, the Plaintiffs contend that coupled with the breach of fiduciary duties through the above-mentioned means, the Defendants also breached their duties through their failure to disclose information concerning the fees and “risks” of the investment options they had selected. Further, the Plaintiffs state that the Defendants did not make an effort to actively monitor those in charge of administering their ERISA plans, thus further acting imprudently and in violation of their duties to the participants.

Prior to this proceeding, the Defendants had moved to dismiss the case in early 2021, a request which was subsequently denied in March the same year. The Court ruled that the Plaintiffs had presented a case that should move past the initial pleading stage of the trial process, and thus dismissal would be inappropriate. The parties will now move forward with the settlement agreement, with the Plaintiffs now as a certified class.

Interruptions to Travel in 2020 Spur Travel Insurance Policy Holders to Bring Suit Against Insurers, Arguing for Reimbursement of Premiums

March 3, 2022 | by Mehr Fairbanks Trial Lawyers

In 2020 more than ever, the risk of interrupted travel plans loomed for those seeking to spend time and money planning trips in an uncertain world. With the Covid-19 pandemic an ongoing source of disruption for travelers across the globe, the decision to seek insurance coverage for trips was, and remains to be, justified. But what if the insurer doesn’t hold up their end of the deal? A federal court in New York is preparing to hear such a case in Seibel v. National Union Fire Insurance Company of Pittsburg, PA et al. This case concerns travel insurance policies bought by the Plaintiffs, who are alleging that the insurers overcharged on certain pre-departure and post-departure bundled plans by not reimbursing the “unearned portion of premiums” on trips that had been cancelled.

The suit was filed by the named Plaintiff, Nicholas Seibel, on behalf of a class including other individuals who held travel insurance policies with the Defendants, and were allegedly improperly required to pay premiums due to the policies’ failure to distinguish between pre-departure and post-departure coverage plans. This class is stated to be over 100 members, all purchasers of “lump-sum travel policies.” There is an additional subclass, asserting violations of Pennsylvania state law, specifically the Pennsylvania Consumer Protection Act. In the main case at issue, Seibel alleges that the Defendants routinely charge policy holders for all-inclusive travel insurance plan premiums, then subsequently refuse to reimburse any portion of the premium costs that were not earned. In fact, these premiums were impossible for the policyholders to earn due to cancellations occurring before the chance to depart.

Seibel had purchased two policies from the Defendants, one for a 10-day trip to Paris and one for a 5-day cruise to Miami. The Paris trip cost over $29,000 (as it was Seibel and four other travelers), and was cancelled in August of 2020, two months before the proposed departure date (intended to be in October, 2020). Each policy respectively provided the same pre- and post-departure coverage, the former including a promise of reimbursement for “non-refundable deposits” upon the cancellation of a trip before departure. The post-departure coverage included provisions for reimbursement for interruptions of the trip, medical emergencies, and the loss or theft of baggage. Essentially, Seibel argues that since premiums are paid to cover risks that may take place post-departure, if said departure never occurs, the insurer should be required to refund the amount of premiums paid on the policy. The Plaintiffs’ complaint further alleges that the policy does not include any provision for how to deal with the reimbursement of unearned premiums that have been pre-paid by the policy holder and qualifies the areas that are covered under a provision as “indemnification for travel related perils.”

Are Insurers Required to “Make Good” on their Promises of Coverage? A California District Court is Poised to Interpret the Novel Issue of a “Making Good Provision”

February 28, 2022 | by Mehr Fairbanks Trial Lawyers

When a policy contains a “cost of making good provision,” is an insurer able to wholly deny coverage falling under its purview, even if it just applies to a small part of the claim? This question was recently brought to the Central District Court of California in The Haven at Ventura, LLC v. General Security Indemnity Company of Arizona, et al. In this case the Plaintiff, Ventura, brought suit against the Defendant, General Security, alleging an improper denial of benefits under a $69 million “builders risk policy.” The underlying circumstances giving rise to a claim for coverage in this action began in September of 2020, and concern mold damage to new, incomplete buildings on the Plaintiff’s property. After expert evaluation, it was determined that the buildings needed “detailed remediation,” a request for the cost of repairs subsequently filed with the Plaintiff’s insurer. During this period, the correction of the damage sustained caused the opening of the residential property to be delayed, thus resulting in additional financial damages to the Plaintiff. The claims brought by the Plaintiff under the builders risk policy included “faulty workmanship” and “excluded dampness of atmosphere.” Coverage was subsequently denied by the named Defendant and several other involved insurance providers.

The Plaintiff states that multiple attempts were made to avoid the process of litigation, but upon the inability to come to an agreement, they felt it necessary to file suit. The Plaintiff brought their claim against the Defendants for breach of contract and is asking the Court for upwards of $5 million as a result of the loss of income from their inability to collect rent during the period that the damaged buildings were undergoing repairs. An interesting aspect of this litigation is the novelty of the “cost of making good provision” at issue in the policy, as it is not yet as common in the United States as in foreign courts in Europe and Canada. This kind of provision essentially requires the insurer to cover the costs of making a covered property “good” or in other words, back to its original condition after damage as occurred. The Plaintiff’s argument relies on the intent and purpose of such a provision, and states that a complete denial of coverage is in opposition with the intended results of its inclusion in the policy. The Plaintiff further argues that in order to determine how the “make good” provision should be interpreted the Court should look to the example set by countries that have applied them for decades. The Plaintiff asserts that under this method of interpretation, their argument that the “make good” provision did not apply to the entirety of the claim and thus cannot be relied upon to deny the claim in full must prevail.

Counsel for the Plaintiff states that an argument blaming “damp atmosphere” for the mold damage is not based on adequate evidence, and thus the Defendants’ assertion that this was the underlying cause of the mold damage is incorrect. Further, the Plaintiff contends that the relevant provision applies to damages from “faulty workmanship” taking place directly adjacent to a loss, and not the kind of damages at issue in this circumstance, therefore the Defendant’s justification for denial under the “make good” provision is invalid. The Defendants have not yet responded to the allegations, though the next steps in this case will undoubtedly be cause for attention due to the novelty of the provision at issue.

Do I Have a Case? What to Know About Multi-Vehicle Car Accidents

January 26, 2021 | by Mehr Fairbanks Trial Lawyers

Some car accidents are more complicated than others. Were you injured in a car wreck involving multiple vehicles? How do you determine who is at fault? Kentucky applies “pure comparative fault” when determining who is responsible for causing a collision. This means it is possible more than one person could be responsible for compensating you for your injuries. This also means that even if you are partially at fault yourself, you can still recover for your injuries, but only to the extent of the percentage liability of the other drivers.

For example, assume a car pulls out in front of you and you collide with it. Behind you, another driver is not paying attention and crashes into the back of your car. Each driver will be responsible for his or her percentage share of liability for your injuries, whether it is determined to be 50/50, 70/30, 90/10, or some other amount. A similar scenario could apply in a multi-party pile up, or a chain reaction rear-end collision.

What does this mean for you?

Do I Have a Case? We Have the Answers About Your Life Insurance Policy

November 20, 2020 | by Mehr Fairbanks Trial Lawyers

Q: My life insurance policy was canceled because I missed a premium. What do I do?

A: How long has it been since your premium was missed? If it was less than 30 days, all life insurance policies should have a clause that says that you can make that payment during a grace period of no less than 30 days. If it has been more than 30 days, then you can apply for reinstatement of the life insurance policy. The policy can normally be reinstated up to three years after you miss your payment. You have to file an application, produce evidence of “insured ability satisfactory to the insurer” and pay all of the back due premiums along with interest.

It is important that you act quickly if you discover your policy has lapsed and that you find out from the insurance company what your options are. You may need counsel to assist you and there may be other grounds for reinstating the policy or forcing them to reinstate it without filing the reinstatement application. Sometimes insurance companies will do new underwriting on a person and find that they are not satisfactory because their health has declined. In that instance, it might be worth speaking to a life insurance lawyer.