This month’s Friday Five explores recent decisions that elucidate the difference between disputes that call upon the discretion and judgment of a court compared to disputes where the court is called upon to follow hard-and-fast rules without discretion. Examples of disputes implicating the judgment of a court include questions as to whether an insurer’s decision is arbitrary and capricious, and whether a successful claimant’s application for attorney’s fees including the rates and time spent by counsel are reasonable. Examples of disputes where courts are called to follow strict rules include disputes involving claimants failing to exhaust administrative remedies, and claims filed outside of the applicable statute of limitations or statute of repose.

1. Will a district court affirm a termination of LTD benefits under the arbitrary and capricious standard where a claimant’s physician certifies disability and claimant has qualified for SSDI benefits, but where a comprehensive review of the claim indicates that the claimant does not meet the definition of disabled? Yes, if the insurer can demonstrate that its review of the file was full and fair and relied on a comprehensive view of the claim. Claimant was a conference plan coordinator from 2004 until she ceased work in June 2016 due to worsening symptoms of fibromyalgia, radiculopathy, neuropathy and chronic pain. Claimant’s physician, with whom she had been treating since 2010, supported a claim for both short term and long term benefits which were both approved in 2017. Claimant was approved for SSDI benefits in January 2019, but the insurer informed her in April 2019 that it would terminate her LTD benefits at the end of 24 months, concluding that she could not meet the “any occupation” standard of disabled. While her physician continued to opine that she had significant limitations, her tests indicated that she also had significant abilities such as normal gait and muscle strength. In reviewing the claimant’s file, the insurer obtained the opinions of two board-certified physicians who interviewed claimant and spoke with her treating physician. The insurer’s experts opined that claimant was capable of sedentary work, and based on those opinions the insurer terminated LTD benefits. Claimant then filed a claim in federal court and the parties both filed dispositive motions. The court concluded that the arbitrary and capricious standard of review applied. Using that standard, the court determined that the insurer provided a full and fair review of the claim, and that its reviewers appropriately relied on the absence of objective clinical findings to determine that claimant was not precluded from sedentary employment. The court granted summary judgment for the insurer. Hamilton v. Unum Life Ins. Co. of Am., No. 20-cv-11119, 2021 WL 6133991 (E.D. Mich. Dec. 28, 2021).
2. Will a district court dismiss a case where claimant has failed to exhaust administrative remedies? Yes, when the claimant cannot articulate any basis for failing to follow and exhaust available administrative procedures. Claimant filed a claim for death benefits based on her deceased husband’s group plan with the Kansas Public Employees Retirement System. The insurer denied the claim, but claimant did not request a hearing before filing her lawsuit, despite a statutory requirement to do so. The insurer filed a Rule 12(b) motion to dismiss and argued that claimant’s claim should be dismissed for failure to exhaust administrative remedies. Claimant argued that the requirement to seek a hearing should be excused, or that her attorney’s demand letter before filing suit effectively exhausted her administrative remedies. The court rejected both arguments, and dismissed the case. The court reasoned that claimant could not demonstrate that there would have been any deficiencies in the hearing, so the requirement to seek a hearing could not be excused. Similarly, the court reasoned that nothing about the attorney’s demand letter accomplished the same function as exhausting administrative remedies. Carlson v. Standard Life Ins., No. 21-1179, 2022 WL 65811 (D. Kan. Jan. 6, 2022).
3. Will a district court strictly construe a statute of limitations where the claimant does not file a case within the allotted time? Yes, when the applicable dates are clearly discernable. The claimant worked in the Johns Hopkins University Applied Physics Laboratory. He was awarded partial LTD benefits beginning in 1992. The insurer had a medical review performed on claimant in 2017. Based on that review, the insurer terminated claimant’s benefits by letter dated January 11, 2018, and upheld the termination in a letter dated September 10, 2018. Claimant did not file a case in federal court until September 8, 2021, two days shy of the three year anniversary of the letter upholding the termination. The September 10, 2018 letter did not advise claimant of the applicable statute of limitations. While current regulations require a claimant to be advised of the applicable statute of limitations, that requirement did not come into effect until 2002, so it did not apply to claimant’s claim which originated in 1991. The court rejected claimant’s argument that the statute of limitations began to run with the September 10, 2018 letter denying claimant’s administrative appeal, because the underlying policy required claimant to provide a proof of loss within ninety days of the decision terminating benefits and the statute ran from that deadline, expiring in April 2021. The court granted the insurer’s motion to dismiss the claim based on the statute of limitations. Hurley v. The Hartford, No. SAG-21-2307, 2022 WL 36444 (D. Md. Jan 4, 2022).
4. Will a court reject a claim contesting the termination of a plan where the plan provided the insurer with the right to terminate it and where the claim is brought outside of the statute of repose? Yes, where the language permitting termination is clear, and where the claim contesting the ability to do so is brought outside of the statute of repose. Retirees brought a class action claim against their former insurer employer disputing the employer’s decision to terminate what the retirees believed were permanent life insurance policies. The insurer had represented to the employees that their life insurance benefits were “paid up” “for life,” but the summary plan description reserved to the insurer the right to modify or terminate the benefit plan. The district court granted summary judgment to the insurer, ruling that the insurer unambiguously gave the insurer the ability to terminate the life insurance benefits and that the retirees’ claims were time-barred. On appeal, the Eleventh Circuit first focused on the language in the summary plan description that “the Employer intends to continue the Plan indefinitely, but reserves the right to change, amend or terminate the Plan or any provisions of the Plan at any time.” The appellate court ruled that this language was unambiguous and that the retirees could not introduce extrinsic evidence to try to modify it. The appellate court also affirmed the decision that the retirees’ claims were time-barred by the six year statute of repose under 29 U.S.C. § 1113. The last time that retirees claim that the insurer made a representation to the effect that their life insurance was “paid up” was in 2006, and the retirees did not file their claims until more than seven years after that date. Klaas v. Allstate Ins. Co., 21 F.4th 759 (11th Cir. 2021).
5. Will a court impose an award of attorney’s fees where the court determines that an insurer’s conduct is “culpable” and where the court determines claimant’s counsels’ rates and time to be reasonable? Yes, when the claimant can establish that a fee award is appropriate and rates and time allocated are reasonable for that forum. Claimant filed a federal lawsuit against the insurer after the insurer terminated her LTD benefits. The district court had earlier granted claimant’s motion for summary judgment reversing the insurer’s decision to terminate benefit, and had determined that claimant was entitled to an award of attorney’s fees. When the parties could not agree on the amount of fees, claimant filed a motion for attorney’s fees. The court analyzed the fee request under the five factors identified by the Third Circuit in Ursic v. Bethlehem Mines, 719 F.2d 670 (3d Cir. 1983). The court determined that the insurer’s conduct was sufficiently “culpable” to award attorney fees because the court had previously determined that the insurer acted in an arbitrary and capricious manner in terminating the claimant’s LTD benefits, and that overall the factors favored awarding fees. The court then considered the rates and hours charged by claimant’s counsel. The court concluded that the rates charged from $350 to $500 depending on the attorney’s experience were reasonable, citing to recent decisions from the same district finding rates between $316 and $880 reasonable depending on the level of experience. The court also analyzed the number of hours expended by claimant’s counsel, especially the 215.8 hours expended by lead counsel, and determined that the total amount of time and time on specific tasks was reasonable. The court imposed a total fee award of $155,925. Patrick v. Reliance Std. Life Ins. Co., No. 19-2106-CFC, 2021 WL 6335082 (D. Del. Dec. 17, 2021).