New 11th Circuit Fiduciary Duty Case

The scope of ERISA’s fiduciary duties was recently analyzed by the Eleventh Circuit in Cotton v. Massachusetts Mutual. The plaintiffs in Cotton accused the carrier of misrepresentation, fraud and promissory estoppel and sought equitable relief requiring that certain life insurance policies perform as described in a whole life policy presentation. The District Court in this case, while rejecting a benefits claim as well as promissory estoppel and individualized fiduciary breach relief, held that the defendants had violated ERISA fiduciary duties entitling the plan to overall relief. The Circuit Court’s reversal focused on the insurer’s role as an alleged fiduciary. Although the carrier had conceded it was a fiduciary for the purpose of making death benefit determinations, it maintained that the plaintiffs had failed to establish that it was a fiduciary for any other purpose. The court agreed. The court noted that “simply urging the purchase of (insurance) products does not make an insurance company an ERISA fiduciary with respect to those products.” Thus it is important to consider not only the scope of ERISA’s fiduciary duties but also the role of the players in a plan, with an emphasis upon whether they truly perform fiduciary duties.

The Heightened Arbitrary and Capricious Standard

Long time no blog – got a bit behind with a 2-week flu bug and the game of catch up that followed.

As I previously suggested the “standard of review” can drive the ultimate outcome in an ERISA benefits case. Many close cases involve the so-called “heightened arbitrary and capricious” standard of review. This is where the plan decision maker, although protected by discretion-granting language in the plan document, operated under a conflict of interest. The 11th Circuit has taken the position that a “poisoning of the well” should be presumed in such instance and deference to the plan reduced or eliminated. All kinds of interesting issues crop up in these cases. A recent decision out of the Southern District, Fick vs. Met Life, is particularly interesting on the issue of the evidence that can be considered by the Court.

The Fick Court held that relevant evidence outside the claims file could include: 1) the technical competence of the claims decision maker, 2) the exact nature of the information considered by the decision maker and 3) the routine claims practices followed in reaching the decision. So far so good for claimants who seek discovery. But the Court held that the plan overcame the burden against it by showing that it enlisted the help of two independent case evaluators and objectively considered all of the claimant’s evidence.

Here’s what bothers me about this opinion: it pays homage to 11th Circuit case law which underscores the dangers of the taint caused by a conflict of interest but then too easily forgives it. Plans routinely use consultants to deny claims. Does that “routine practice” justify giving them a hall pass? 11th Circuit case law gives plans the opportunity to overcome the taint by showing that their decision was in the overall best interests of plan participants and beneficiaries. This, in my opinion, is a heavier burden.

ERISA Seminar

If you're interested in a general ERISA overview seminar consider attending the Labor and Employment Law Section's Certification Review Course in Orlando. I'll be giving a presentation entitled "ERISA / COBRA". You can find the brochure here.

Standards of Review 101

The standard of review in a benefits case often drives the outcome. This was illustrated in a recent Middle District opinion: Dowling v. Metropolitan Life Insurance Co. Courts recognize three standards of review. The “pure arbitrary and capricious” standard of review is highly deferential to the Plan. The “heightened arbitrary and capricious” standard of review governs where the claims decision maker operated under a conflict of interest. Under Eleventh Circuit precedent, it is presumed that this conflict infected the decision unless the decision maker can show otherwise. Thus, less deference is given to the Plan under this standard. Finally, the “de novo” standard of review gives no deference to the Plan. Which standard governs depends on whether the Plan included adequate protective language in plan documents, as well as the afore-mentioned presence (or not) of a conflict of interest. More on this in a later post.

In Dowling, Judge Moody noted that the plaintiff’s own treating physicians were equivocal and that the defendant’s consultants found that he could perform sedentary work. The Court held that the pure arbitrary and capricious standard of review applied. Not surprisingly, the Court upheld the benefits denial.

Plaintiffs can win “pure arbitrary and capricious” cases but seldom if ever without the unequivocal help of the treating physicians.

The Unum Settlement

ERISA benefits litigators are well aware that Unum (and its various permutations, e.g., Unum Provident, First Unum, etc.) is the nation’s largest disability insurer. On November 18, 2004, New York State Attorney General Elliott Spitzer announced a landmark settlement with Unum resolving a multi-state investigation into alleged unfair claims-handling practices. The settlement requires Unum: (1) to reassess approximately 200,000 claims that previously had been denied; (2) to completely restructure its claims-handling procedures to ensure objectivity and fairness; and (3) to pay a 15-million-dollar fine.

The settlement will revive long denied claims including many that were clearly time barred. It will also give current litigants a shot at a remand to the plan. The ultimate outcome of all this “reassessment” is anyone’s guess.

The settlement agreements are worth a read. You can find them here.

Fees ... please

A recent decision out of the Southern District illustrates the attorneys’ fees analysis applicable to ERISA cases in Florida. Plaintiff’s counsel in Smith v. Reliance Standard Life Insurance Company, successfully prosecuted a claim for long-term disability benefits, recovering $319,200 in principal plus pre-judgment interest of $72,149.

In the Eleventh Circuit, five factors are considered in determining whether to award attorneys’ fees in an ERISA case:

1. The degree of the opposing party’s culpability or bad faith;

2. The ability of the opposing party to satisfy an attorneys’ fee award;

3. Whether an award of attorneys’ fees would deter similarly situated persons;

4. Whether the parties requesting fees sought to benefit all plan participants and beneficiaries or sought to resolve a significant legal question regarding ERISA; and

5. The relative merits of the parties’ positions.

The District Court found that two factors did not favor the award of fees: there was no evidence of bad faith, and Plaintiff’s claim did not resolve a significant legal question regarding ERISA. Nonetheless, the Court awarded fees.

This case reminds us that one need not have all five fee factors present to prevail on a fees’ claim. In fact, a prevailing plaintiff in a benefits action should typically be capable of showing the defendant’s ability to pay an award, the deterrence effect of the benefits award, and the obvious merit of the plaintiff’s position. It is worth additionally noting that the Court found $300 per hour reasonable.

Welcome to My Blog

Let me introduce myself. I'm Marcus Castillo, an attorney specializing in ERISA litigation in Clearwater, Florida. ERISA, for those of you who may not know, is the federal law governing most group employee benefits. It's sort of a stealth law in the sense that most folks don't know much about it and won't unless they lose those benefits. Trust me - when those benefits are lost ERISA becomes very relevant to the unfortunate victim. My job is to help clients recover the benefits that were wrongfuly denied them. This may require the filing of an ERISA lawsuit in Federal Court.

The mission of this web log aka blog is to be a resource regarding recent happenings in ERISA law as handed down in Florida and the Courts that govern Florida (including the 11th Circuit Court of Appeals in Atlanta as well as the U.S. Supreme Court). Since my practice is largely devoted to disability insurance claims I intend to pay particular attention to decisions in those type of cases.

I welcome all comments and look forward to hearing from you.