Clawback Provisions and the Value of Money

When a person becomes disabled and becomes eligible for benefits under their long term disability plan, that person may also at the same time qualify for benefits from other insurers or public benefits plans, like Social Security Disability. Some long term disability plans include “clawback” provisions, meaning that the plan is entitled to recover the additional money granted from outside sources to the applicant

However, calculations in clawback provision are not always cut and dry, and can amount to differences in the thousands of dollars, as exemplified in Elliot v. ELS Long Term Disability Plan.

Mr. Elliot became permanently disabled and became eligible to receive the maximum $10,000 per month under the plan, exclusive of cost of living adjustments (“COLA”). Mr. Elliot then applied for Social Security Disability (“SSD”) benefits on Marhc 12, 2004. In June 2006, he received an award retroactive to February of 2003, $72,954.50.

As a result, the long term disability plan permanently reduced Mr. Elliot’s benefits and recalculated his amount to $8,775 a month, down from $10,716. The plan also claimed a clawback of $79,384.15, an amount larger than his retroactive SSD award.

The standard of how courts review a plan – with little or significant deference – depends on whether a plan unambiguously gives discretionary authority to the plan administrator to determine plan benefits. Where it does, as here, the courts review the decision under an “abuse of discretion” standard, meaning the plan’s decision is overturned only where it can be shown that the plan administrator abused its discretion.

Here, the plaintiff was able to do just that. Court reversed the plan’s decision, as it found it arbitrary and capricious. Specifically, the plan incorrectly mixed past and present dollar amounts, by decreasing Mr. Elliots original $10,000 award, awarded in 1999 dollars, by his SSD award, awarded in 2003 dollars.

 ERISA long term disability is a complicated area of law. For attorney who can help, contact Delfino Green & Green.

A Victory for Plaintiff in the 9th Circuit

The 9^th Circuit recently decided the ERISA claim of Kathy Dine in Dine v. MetLife Insurance. The 9^th Circuit reversed the district court's decision and agreed with Dine, stating that MetLife abused its discretion when denying her long term disability benefits.

The Court found it indisputable that MetLife, as the administrator of the plan, had a structural conflict of interest, because it "both evaluates claims for benefits and pays benefits claims." Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 112 (2008). While the existence of a conflict of interest is only one of the factors to consider, the Court found that “[a] higher degree of skepticism is appropriate where the administrator has a conflict of interest." Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 676 (9th Cir. 2011). The administrator has the burden of proving that the conflict of interest did not improperly influence its decision. See Muniz v. Amec Constr. Mgmt., Inc., 623 F.3d 1290, 1295 (9th Cir. 2010).

Finding that an administrator abused its discretion depends on the specific facts of the case. In this case, the Court found that MetLife abused its discretion for three reasons. First, the record indicated that MetLife notified Dine by letter that it was "presently reviewing [the] claim" and stated that if "additional information is needed to complete our review, we will notify you accordingly." However, MetLife then denied Dine's appeal, stating that she had submitted insufficient evidence. Second, MetLife's determination that Dine was not disabled contradicted the opinion of her treating physician. Third, MetLife ignored its own reviewing physician's advice to order an independent medical examination.

If your long term disability ERISA claim has been denied, speak to an experienced disability insurance attorney at Delfino Green and Green.

Ninth Circuit Allows Additional Defendants in ERISA cases

The Ninth Circuit recently heard a case of Laura Cyr v Reliance Standard Life Insurance Company, where it reconsidered its precedent on which parties may be sued as defendants in ERISA litigation.

Previously, the Ninth Circuit held that under the ERISA statute, only the benefit plan itself or the plan administrator was considered a proper defendant. In this recent court ruling, the Ninth Circuit overruled its prior decisions, stating that there is no such limitation in the statute, and that other entities may be sued.

In this case, Laura Cyr was the vice president of Channel Technologies, where she was terminated in October 2000. She filed a claim for long term disability benefits based on a back condition. The Reliance Standard Life Insurance Company approved the payment of benefits based on Cyr’s salary of $85,000 a year.

The following year, Cyr filed and settled a gender discrimination lawsuit against her employer, and as a result her salary was retroactively adjusted to $155,000 a year. Cyr then contacted Reliance to adjust the benefits package based on this new salary, which Reliance never did.

Ms. Cyr filed a lawsuit against 1) the Reliance insurance company, 2) the CTI Benefit Program (the “Plan”), and 3) her employer, CTI, as the plan administrator. Following precedent, the district court initially ruled in favor of Reliance, which claimed that since it was not the plan administrator, it was not a proper defendant.

However, after supplemental briefings, district court reversed itself, finding that Reliance was functioning as the plan administrator. The court granted Cyr’s summary motion judgment, with attorneys fees in the amount of $384,052, costs, and prejudgment interest.

Hearing the case en banc, the Ninth Circuit reviewed the controlling language in this action, 29 U.S.C. Section 1132(a)(1)(B):

A civil action may be brought by a participant or beneficiary … to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of this plan.

The court found that Cyr was authorized to bring a civil action under this provision, and that the statute does not limit which parties may be proper defendants in that action.

Due to this ruling, disabled workers may have more opportunities to recover everything they are entitled to under the law. Plaintiff’s attorneys will have the opportunity to go after defendants previously insulated from liability by the old precedent. As in this case, plans and plan administrators may have no actual authority to authorize benefits to the worker, and this ruling will allow attorneys to go after the logically responsible parties to enforce worker rights.

Learn more about how our San Francisco ERISA attorneys can help, contact Delfino Green & Green at 415-442-4646 or 866-545-7298 Toll Free.