Justia Insurance Law Opinion Summaries

More than nine years ago, Butler checked into a substance-abuse treatment facility to obtain inpatient rehabilitation for her alcohol addiction. She sought coverage for the treatment through her husbandView "Butler v. United Healthcare of TN" on Justia Law

Hayden worked as an office manager at MMI beginning in 1997 and was covered by its long-term disability plan, insured and administered by Liberty and subject to the Employee Retirement Income Security Act, 29 U.S.C. 1001. Hayden suffers from chronic hepatitis C, pancreatitis, fibrocystic breast disease with breast implants, degenerative arthritis, breast carcinoma, hypothyroidism, hypotension, hypertension, and crepitation and decreased range of motion around her shoulders, cervical spine, hips, and knees. She stopped working in January 2010, and applied for benefits under the plan. She also submitted evidence from four doctors detailing general anxiety disorder, major depression, and insomnia. The district court affirmed the denial of benefits on Hayden’s physical-disability claim but remanded her mental-disability claim because the plan administrator failed to consider medical evidence from three doctors. On remand, the plan again rejected Hayden’s claim, and the district court affirmed. The Sixth Circuit affirmed with respect to Hayden’s physical-disability claim but reversed with respect to her mental-disability claim, instructing the district court to award Hayden mental-health benefits consistent with the terms of the plan.View "Hayden v. Martin Marietta Materials, Inc." on Justia Law

As a Solvay employee Moyer participated in Solvay’s ERISA- governed Long Term Disability Plan. In 2005 MetLife initially approved Moyer’s claim for benefits. MetLife reversed its decision in 2007 after determining that Moyer retained the physical capacity to perform work other than his former job. In an administrative appeal, MetLife affirmed the revocation on June 20, 2008. Moyer’s adverse benefit determination letter included notice of the right to judicial review but failed to include notice that a three-year contractual time limit applied. The Summary Plan Description failed to provide notice of either Moyer’s right to judicial review or the applicable time limit. On February 20, 2012, Moyer sued MetLife, seeking recovery of unpaid plan benefits under 29 U.S.C. 1132(a)(1)(B). The district court held that the plan’s limitations period barred Moyer’s claim, noting that the plan documents—which were not sent to participants unless requested—stated that there was a three-year limitations period for filing suit, so that MetLife provided Moyer with constructive notice of the contractual time limit. The Sixth Circuit reversed. Exclusion of the judicial review time limits from the adverse benefit determination letter was inconsistent with ensuring a fair opportunity for review and rendered the letter not in substantial compliance.View "Moyer v. Metropolitan Life Ins. Co" on Justia Law

Plaintiffs, employed by defense contractor Qinetiq to work on a military base in Iraq, were enrolled in Qinetiq’s Basic Long Term Disability, Basic Life, and Accidental Death and Dismemberment insurance policies, governed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001, under a single contract with Prudential. Qinetiq paid the premiums. Plaintiffs also purchased, with their own funds, supplemental coverage under the same terms as the basic policies; there was a single summary plan description. An employee would file a single claim for basic and supplemental coverage benefits. The plan booklets provided that loss is not covered if it results from war, or any act of war, declared or undeclared. These exclusions applied to both the basic and supplemental policies. The plaintiffs were not otherwise uninsured for excluded injuries. Qinetiq obtained insurance required by the Defense Base Act, 42 U.S.C. 1651. After Prudential denied claims, the plaintiffs sued, alleging violations of the state consumer fraud acts and the Truth in Consumer Contract, Warranty, and Notice Act; breach of contract and breach of the implied covenant of good faith and fair dealing; and intentional or negligent misrepresentation or omission. They contended that Prudential fraudulently induced them to buy supplemental coverage knowing that any claim they filed would likely be subject to the war exclusions, rendering supplemental coverage effectively worthless. The district court dismissed, treating the basic and supplemental policies as components of a single plan, and holding that all state law claims were preempted by ERISA. The Third Circuit affirmed, holding that the supplemental coverage cannot be “unbundled” from ERISA coverage.View "Menkes v. Prudential Ins. Co. of Am." on Justia Law

Hayssen and its employees were parties to a Plant Closing Agreement that promised medical benefits upon retirement. In 1996, Bemis acquired Hayssen and assumed its obligations. Bemis reduced benefits under the Agreement: increasing co-pays and deductibles and eliminating its prescription drug program. Former employees sued under the Employee Retirement Income Security Act, 29 U.S.C. 1132, and the Labor-Management Relations Act, 29 U.S.C. 185(a). The court certified a class, but granted summary judgment to Bemis, reasoning that the Agreement did not establish a lifetime interest in a certain level of benefits. About a month later, Bemis eliminated all medical benefits under the Agreement. The Seventh Circuit reversed, concluding that the parties intended to provide lifetime medical coverage. On remand, the court granted a preliminary injunction forcing Bemis to restore the benefits eliminated in 2009 and provide a basic Medicare Part D drug benefit. The court awarded fees and costs, finding that the company’s position was not substantially justified. The judge struck billing entries that were vague or for time not reasonably expended on the case, concluded that the lawyers’ billing rates were reasonable, and calculated the lodestar amount to reach an award of $403,053.75, for four years of advocacy, including an appeal and trial preparation. The Seventh Circuit affirmed.View "Temme v. Bemis Co., Inc." on Justia Law

In 2011, Michigan passed the Health Insurance Claims Assessment Act, Mich. Comp. Laws 550.1731–1741, to generate revenue needed to fund its obligations under Medicaid. The Act functions by imposing a one-percent tax on all “paid claims” by “carriers” or “third party administrators” to healthcare providers for services rendered in Michigan for Michigan residents. “Carriers” include sponsors of “group health plan[s]” set up under the strictures of the Employee Retirement Income Security Act, 29 U.S.C. 1002–1461. On top of the tax, every carrier and third-party administrator paying the tax must submit quarterly returns with to the Michigan Department of the Treasury and “keep accurate and complete records and pertinent documents as required by the department.” Every carrier and third-party administrator must also “develop and implement a methodology by which it will collect the [tax]” subject to several conditions. SIIA sought a declaratory judgment that ERISA preempted the Act, and an injunction, to prevent implementation and enforcement of the Act against the ERISA-covered entities. The district court dismissed, concluding that the Act did not offend ERISA’s express preemption clause because the Act did not “relate to” an ERISA-governed benefit plan. The Sixth Circuit affirmed, finding that the statute escapes the preemptive reach of ERISA.View "Self-Ins. Inst. of Am., Inc. v. Snyder" on Justia Law

In 2010, plaintiffs and Tidyman’s Management Services Inc. (TMSI) filed a complaint against Michael A. Davis and John Maxwell in their capacities as officers and directors of TMSI and/or its subsidiary, Tidyman’s LLC, alleging breach of corporate duties arising out of a merger between TMSI and SuperValu, which created Tidyman’s LLC. Plaintiffs requested punitive damages and attorney fees. The merger at issue occurred despite advice from a financial advisor TMSI had retained that the company should be sold, and the complaint alleged that the directors and officers had misrepresented the merit of the transaction. TMSI is a Washington corporation with its principal place of business in Montana, and was a member of Tidyman’s LLC; employee shareholders owned TMSI. A corporate liability insurance policy was in place that purported to insure Davis and Maxwell against liability incurred in their positions as officers and directors of Tidyman’s LLC. The Policy was to provide a legal defense for Davis and Maxwell throughout the federal ERISA litigation. The issues this case presented to the Montana Supreme Court were: (1) whether the District Court was correct in concluding Montana law, rather than Washington law, applied in this case; (2) whether the District Court erred in concluding that the corporate liability insurer breached its duty to defend without analyzing coverage under the policy; (3) whether the District Court erred in denying the insurer a hearing and discovery on reasonableness and collusion related to the stipulated settlements; and (4) whether the District Court erred by awarding pre-judgment interest, or in its determination of when the interest began accruing. The Montana Court concluded that genuine issues of material fact regarding reasonableness precluded summary judgment on the amount of the stipulated settlements. Accordingly,the Court reversed judgment on the stipulated settlements and remanded this case for further proceedings. The Court affirmed on all other issues. View "Tidyman s et al. v. Davis et al." on Justia Law

Plaintiffs challenged an insurance company's use of "retained asset accounts" (RAAs) as a method of paying life insurance benefits in the ERISA context. They presented the district court with two basic questions: (1) whether the insurer's method of paying death benefits in the form of RAAs constitute self-dealing in plan assets in violation of ERISA section 406(b); and (2) whether this redemption method offended the insurer's duty of loyalty toward the class of beneficiaries in violation of ERISA section 404(a). The district court answered the first question in favor of the insurer and the second in favor of the plaintiff class. The court then awarded class-wide relief totaling more than $12,000,000. Both sides appealed. Upon review, the First Circuit Court of Appeals agreed with the district court that the insurer's use of RAAs in this case did not constitute self-dealing in plan assets. However, the Court disagreed with the district court's answer to the second question and held that the insurer's use of RAAs did not breach any duty of loyalty owed by the insurer to the plaintiff class. View "Merrimon, et al v. Unum Life Insurance Company" on Justia Law

Central States, an employee benefit plan governed by the Employee Retirement Income Security Act, provides health insurance for Teamsters and their families. Guarantee Trust provides sports injury insurance for student athletes. Each of 13 high school and college athletes, all children of Teamsters, holds general health insurance from Central and sports injury insurance from Guarantee. Each suffered an injury while playing sports (most often football) between 2006 and 2009, and sought coverage from both companies. Each time Guarantee refused to pay the athlete’s medical expenses, and each time Central paid the bill under protest. The district court entered a declaratory judgment under ERISA, 29 U.S.C. 1132(a)(3)(B), that, when coverage of student athletes overlap, Guarantee must pay, and ordered Guarantee to reimburse Central for the payouts to the 13 students. The Sixth Circuit, affirmed in part characterizing the case as a “you first” paradox, or ‘gastonette.” An ERISA plan may coordinate benefits with another policy, but may not redefine the coverage of another policy. Absent the Central plan, the Guarantee policy would cover the sports injuries at issue without question. An ERISA plan must keep doing what it would do in another plan’s absence. That amounts to coordinating benefits, not redefining coverage. View "Cent St, SE & SW Areas Health & Welfare Fund v. First Agency, Inc." on Justia Law

Hi-Lex has about 1,300 employees. Blue Cross Blue Shield of Michigan (BCBSM) served as a third-party administrator (TPA) for Hi-Lex’s Health and Welfare Benefit Plan since 1991. Under the Administrative Services Contracts (ASCs) between the parties, BCBSM agreed to process healthcare claims for Hi-Lex employees and grant those employees access to BCBSM’s provider networks. BCBSM received an “administrative fee” set forth in ASC Schedule A on a per-employee, per month basis. In 1993, BCBSM implemented a new system, “retention reallocation,” to retain additional revenue. Regardless of the amount BCBSM was required to pay a hospital for a given service, it reported a higher amount that was then paid by the self-insured client. Hi-Lex allegedly was unaware of the retention reallocation until 2011, when BCBSM disclosed the fees in a letter and described them as “administrative compensation.” Hi-Lex sued, alleging breach of fiduciary duty under the Employee Retirement Income Security Act, 29 U.S.C. 1104(a). The court awarded Hi-Lex $5,111,431 in damages and prejudgment interest of $914,241. The Sixth Circuit affirmed that: BCBSM was an ERISA fiduciary and breached its fiduciary duty under ERISA section 1104(a), that BCBSM conducted “self-dealing” in violation of section 1106(b)(1), and that Hi-Lex’s claims were not time-barred. View "Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of MI" on Justia Law