ABA EBC Benefit Claims Update

Transcription

1 ABA EBC Benefit Claims Update Standard of Review, Discretionary Authority, and Conflict Discovery Mark DeBofsky Daley DeBofsky & Bryant Chicago, Illinois Miguel F. Eaton Jones Day Washington, D.C. Suzanne Metzger 1199SEIU Benefit & Pension Funds New York, NY 1

2 Standard of Review It not only matters what you say but where you put it Frey v. Herr Foods, Inc. Employee Welfare Plan, 2012 U.S.Dist.LEXIS (E.D.Pa. December 12, 2012) Otherwise, pursuant to CIGNA Corp. v. Amara, 131 S.Ct (2011), discretionary language in plan summary is ineffective, except where the plan incorporates the summary - Eugene S v. Horizon Blue Cross Blue Shield of New Jersey, 663 F.3d 1124 (10 th Cir. 2011) or where a claim fiduciary appointment agreement injects discretionary authority - Siegel v. Connecticut General Life Ins.Co., 2013 U.S.App.LEXIS 11 (8 th Cir. January 2, 2013) 2

3 Standard of Review Discretionary Clause Bans Stephan v. Unum Life Ins.Co., 697 F.3d 917 (9 th Cir. 2012) discretionary clause permitted in amended policy, BUT: No longer lawful in California - Cal. Ins. Code Michigan law prohibiting discretionary clauses applies to amended policies - Pierzynski v. Liberty Life Assur.Co. of Boston, 2012 U.S.Dist.LEXIS (E.D.Mich. August 8, 2012); Breckenridge v. National Union Fire Ins.Co. of Pittsburgh Pa., 2012 U.S.Dist.LEXIS (E.D.Mich. September 19, 2012) 3

4 Standard of Review Discretionary Clause Bans Illinois law prohibiting discretionary clauses survived challenges raising Insurance commissioner s authority to ban discretionary clauses - Zuckerman v. United of Omaha Life Ins.Co., 2012 U.S.Dist.LEXIS (N.D.Ill. September 6, 2012) Issuance of policy to a trust outside of Illinois - Curtis v. Hartford Life & Acc.Ins.Co., 2012 U.S.Dist.LEXIS 5423, 53 EB Cases 2109 (N.D.Ill. January 18, 2012) 4

5 Standard of Review Discretionary Clause Bans Illinois (cont.) Incorporation of discretionary authority in an extrinsic claim fiduciary appointment - Ehas v. Life Ins.Co. of North America, 2012 U.S.Dist.LEXIS (N.D.Ill. November 29, 2012) Consistent with Unum Life v. Ward, 526 U.S. 358, 376 (1999)(insurers cannot displace any state regulation simply by inserting a contrary term in plan documents. ) 5

6 Arbitration ERISA class action claim subject to arbitration- Hornsby v. Macon County Greyhound Park, Inc., 2012 U.S. Dist. LEXIS (M.D.Ala.June 13, 2012) Citing AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745, 179 L. Ed. 2d 742 (2011) 6

7 Delegation of Discretionary Authority Fiduciaries can delegate certain fiduciary functions to Other fiduciaries (other than trustee responsibilities), and Persons other than named fiduciaries (other than trustee responsibilities). ERISA section 405(c)(1) Where properly delegated, determinations reviewed under Firestone deference (i.e., abuse of discretion) 7

8 Delegation of Discretionary Authority Example: LTD plan delegates authority third party administrator to decide eligibility for benefits or to decide appeals Claimants argue delegation defective: Contrary to plan, and/or Improperly delegated 8

9 Delegation of Discretionary Authority Procedure is Important: Belheimer v. FedEx Corp. LTD, 2012 WL (D.S.C. Nov. 28, 2012) Plan conferred authority for final determinations re: eligibility with FedEx (plan administrator) FedEx delegated to claims administrator (Aetna) authority to make eligibility and benefit determinations (including appeals) 9

10 Delegation of Discretionary Authority Method of Delegation Retirement Committee Investment Board (which is authorized by the plan to modify the plan) voted to outsource long term disability appeals based on the recommendation of the Corp. Benefit Appeals group Amended the Administrative Services Agreement 10

11 Delegation of Discretionary Authority Cross motions for partial summary judgment re: standard of review Plaintiff sought de novo: delegation not allowed by plan Defendant sought Firestone deference, arguing: Delegation comported with the plan Alt: Plan not specific on how the appeals committee was to be designated, thus any non-fedex entity could serve as the appeals committee 11

12 Delegation of Discretionary Authority Holding: Partial summary judgment for Plaintiff Reasoning: Investment Board vote did not modify the plan to allow for delegation Delegating via Admin. Svcs. Agreement is merely outsourcing appeals procedure where plan not modified Re: Alt argument: Plan vests FedEx with the right to appoint an appeal committee, not the right to outsource the entire process to a third party. 12

13 Delegation of Discretionary Authority Public Policy Trumps Procedure: Aschermann v. Aetna Life Ins. Co., 689 F.3d 726 (7 th Cir. 2012) LTD plan granted discretionary authority to determine eligibility to plan administrator and any insurer that underwrites the benefits. Insurer, in turn, delegated authority to predecessor of Aetna via Admin. Scvs. Agreement Court identified two issues, but did not address both: Is written delegation essential? (court did not address) Is this particular delegation authorized? 13

14 Delegation of Discretionary Authority Holding: Decision entitled to deference Reasoning: focused on public policy (plus a mixture of trust law and contract law) [D]elegation does not depend on express grant; instead, it is permissible unless it would be contrary to public policy or the terms of a promise. Plan does not forbid delegation, and plaintiff did not argue that it would contravene public policy 14

15 Conflict Discovery: After Glenn Metropolitan Life Ins. Co. v. Glenn, 554 US 105 (2008): Opened the door to conflict discovery Indicated the scope should be fact-specific Inherent structural conflict of interest exists where the claim reviewer is also the payor Weight of the conflict varies depending on the case facts Extra-record discovery into the merits still generally not permitted 15

16 Conflict Discovery: After Glenn Discovery might be used to consider whether the administrator: had a history of biased claims administration had properly considered the relevant medical evidence had taken active steps to promote accuracy and reduce potential bias walling off claims reviewers from finance imposing management checks that penalize inaccuracy 16

17 Conflict Discovery: Courts Set Limits Not unlimited Must be narrowly tailored Must intend to show something beyond structural conflict Must show good cause to go beyond the record Sometimes only allowed in close calls Generally not permitted where the de novo standard of review applies 17

18 Conflict Discovery: Financial Information YES Financial incentives, like bonus or reward programs Salary structures Employee compensation criteria Vendor contracts with third party medical reviewers Payments to third party medical reviewers No Profitability Executive bonuses 18

19 Conflict Discovery: History of Claims Administration Yes Statistical data on claims denials No Individual claims denials 19

20 Conflict Discovery: Internal claims guidelines, manuals, policies, procedures and safeguards Yes Internal policies and procedures Underwriting materials Training materials Manuals Criteria used to evaluate claim handlers 20

21 Conflict Discovery: The Claim Reviewer Maybe Performance evaluations No Personnel files 21

22 Conflict Discovery: Internal Memoranda Probably Communications with third party professionals, including memoranda, s, correspondence, reports and other documentation supporting their opinions and statements Maybe Communications with inhouse attorney 22