This month’s Friday Five covers cases relating to disputes between beneficiaries to life insurance policy proceeds, an insurer’s use of independent medical reviewers and in-house nurses to evaluate claims, the preexisting condition limitation, and shifting attorney’s fees to counsel for the parties (as opposed to the parties themselves).

1. Tenth Circuit Refuses to Drag Insurer Into Dispute Between Life Insurance Beneficiaries. In a dispute over life insurance proceeds, the insurer received and paid life insurance benefits to a beneficiary. Then, after payment to the initial beneficiary, another former beneficiary stepped forward and claimed an entitlement to the same benefits. After losing during the administrative process, the dissatisfied former beneficiary sued the insurer. He alleged, among other things, that the insurer should have more fully investigated the legitimacy of the prevailing beneficiary’s claim. The Tenth Circuit clarified that, at most, the insurer had to consider “readily available information” and that the insurer satisfied its investigative duty, particularly because the plaintiff failed during the administrative appeal process to supply additional evidence to challenge the prevailing beneficiary’s claim. Although the court sided with the insurer on the merits, it rejected the insurer’s argument that it was also entitled to reimbursement of its fees and costs. The Tenth Circuit determined that the plaintiff’s position was grounded in sufficient merit to avoid any sanctions. Stachmus v. The Guardian Life Ins. Co. of Am., No. 20-7019, 2021 WL 1590006 (10th Cir. Apr. 23, 2021).

2. Court Rejects Challenges to Independent Medical Reviews of Insurer. In a recent long-term disability benefits dispute, the court rejected a variety of attacks by the plaintiff on the insurer’s independent medical reviews. The court found that “[d]isagreeing with [medical reviewers’] conclusions is not the same as disputing their methods.” The court further, and relatively easily, found that there was evidence that the reviewers performed a sufficiently in-depth review and if the plaintiff wanted the reviewers to look at additional information, it always remained the plaintiff’s obligation to supply the same. It also found that the reviewers were sufficiently independent from the insurer and from each other to ensure the legitimacy of the review process. In the end, although the court applied the de novo standard of review and expressly noted that it not agree in toto with the insurer’s conclusion that the plaintiff was able to work a full 40-hour work week, it still found that the plaintiff failed to meet her burden to establish an underlying disability. Kay v. Hartford Life & Accid. Ins. Co., No. 19-209, 2021 WL 1378742 (S.D. Cal. Apr. 12, 2021).

3. Court Affirms Application of Preexisting Condition for Later-Occurring Stroke. The plaintiff, an anesthesiologist, made a claim for long-term disability benefits following a stroke at the age of thirty-eight, which, according to the plaintiff, rendered her permanently disabled due to diminished mental capacity. The insurer denied the claim under the pre-existing condition limitation due to the plaintiff’s recent pregnancy and treatment for existing mitral valve stenosis (a narrowing of the heart’s mitral valve) during the applicable lookback period. While the court agreed that the plaintiff did not suffer from the ultimately disabling event, a stroke, during the lookback period or receive any treatment directly for the same, the court further determined that the plaintiff received treatment for conditions that contributed to, or caused, her eventual stroke, during the relevant lookback time period. Because the conditions for which the plaintiff was treated during the lookback period for the preexisting condition limitation were sufficiently related to the stroke, as opposed to remote, attenuated, or unrelated to the disabling event, the court affirmed the insurer’s application of the exclusion. Williams v. United of Omaha Life Ins. Co., No. 20-1001, 2021 WL 1648526 (M.D. Fla. Apr. 12, 2021).

4. Insurer Able to Rely on In-House Nurse, as Opposed to a Physician, for Claims Review. The Eighth Circuit was faced with a challenge to an insurer’s use of an in-house nurse, as opposed to a medical doctor or other external medical resource, to review a claim for long-term disability benefits. The court found that nothing in the plan documents prohibited the insurer from using an in-house nurse, while, also according to the court, there was no per se rule under ERISA that precludes an insurer from relying on a nurse instead of a physician. Prior to affirming the trial court’s grant of summary judgment to the insurer, the appellate court also reviewed the applicability of a relatively unique Arkansas state regulation, which prohibits the use of discretionary clauses in insurance contracts, including those that could inform the standard of review applicable in ERISA cases. The Eighth Circuit determined that the prohibition did not apply to the policy at issue, which originated before the effective date of the regulation, particularly because of the express prospective application of the regulatory language. Roebuck v. Usable Life, No. 19-1855, 2021 WL 1216217 (8th Cir. Apr. 1, 2021).

5. Fee Shifting Not Available Against Attorneys Representing Parties. In a life insurance dispute, the Eleventh Circuit was faced with a question of first impression as to whether the ERISA fee shifting provisions permit a fees award against counsel, as opposed to the counsel’s client. After a successful motion to dismiss and judgment on the pleadings, the district court awarded the insurer its fees and specifically directed the plaintiff’s counsel to pay the same, blaming counsel for the defective nature of the claims. For a number of reasons, the appellate court found that “precedent, common sense, and principles of statutory interpretation establish that the [ERISA fee shifting] statute allows a fee award against parties, not their counsel.” The Eleventh Circuit noted, however, that the insurer could still pursue opposing counsel for sanctions under Rule 11 or other non-ERISA sanctions provisions as appropriate, and the appellate court further found that the insurer could ask the district court to re-shift fees to the opposing party under ERISA, instead of counsel. Peer v. Liberty Life Assurance Co., No. 19-13974, 2021 WL 1257440 (11th Cir. Apr. 6, 2021).