This month’s Friday Five explores decisions from around the country discussing differences between the scope of discovery and ability to add documents to the record on a claim for review challenging the denial of LTD benefits, LTD and LWOP policies, the breadth of discretion available to claims administrators and the always important topic of timely action by insurers in issuing claims decisions.

1. Is an insured permitted to obtain limited discovery and add documents to the record on review when challenging the denial of long term disability benefits? No, in an ERISA benefit denial case, the district court sits in a role more akin to an appellate tribunal than a trial court and as such discovery and additions to the record are not permitted unless (a) a good reason has been found to exist when a party makes a colorable claim of bias; and (b) where a plan administrator is responsible for evaluating and paying benefit claims. With respect to the latter scenario, some discovery may be appropriate on the issue of whether a structural conflict has morphed into an actual conflict, especially where a plan administrator has failed to take steps to insulate the decision making process against the potentially pernicious effects of structural conflicts. If discovery is allowed, it must be narrowly tailored so as to leave the substantive record essentially undisturbed. The claimant attempted to establish “bias” by arguing that Defendant’s policy of relying on the opinions of non-examining physicians, not considering the conclusion of the Social Security Administration, refusing to consider evidence submitted after the claim was closed, and failing to consider claimants’ cognitive limitations resulting from his chronic pain condition, were indicative of bias and/or influenced by a structural conflict of interest. The First Circuit rejected all arguments by claimant, concluding that they did not support a colorable claim of bias nor did they establish the influence of a structural conflict of interest sufficient to justify discovery outside of the administrative record. Notably, because the Court found that claimant failed to raise a colorable claim of bias or that Defendant’s denial was improperly influenced by the structural conflict of interest, claimant was also not permitted to take discovery regarding the statistics of the doctors who reviewed his file. Germana v. Hartford Life & Accident Ins. Co., No. 3:23-CV-30065-MGM, 2024 WL 3416026 (D. Mass. July 15, 2024).
2. Is an insured entitled to group life insurance benefits when the policy was cancelled prior to the claim and the insured argues that the insurer (a) waived its right to cancel the plan for falling under the required participation level; and (b) did not properly provide notice and give the insured the opportunity to convert to individual life insurance? No, because the plan allowed for cancellation, cancellation occurred prior to the claim, and notice of cancellation was provided. The claimant’s wife owned and operated Allure Salon in Starkville, Mississippi. In December 2007, Guardian issued Allure Salon a group life insurance plan that covered Mrs. Edwards and three other full-time salon technicians. The plan's terms granted Guardian the right to cancel the plan on the “policy anniversary date or premium due date” if “less than two employees are insured.” Mrs. Edwards was diagnosed with cancer in 2019. Later that year, in November 2019, she became the only participating employee under the group plan. Then in 2020, the COVID-19 pandemic hit, and Guardian chose to temporarily suspend its practice of terminating plans that had dropped to one participant from September 2020 through October 2021. However, once the suspension ended, Guardian mailed a prenotification of cancellation letter to Allure Salon and Mrs. Edwards. Guardian then sent a final cancellation letter on December 31, 2021, stating the group plan was being cancelled effective January 15, 2022 because of low group participation. After the Allure Group Plan had been cancelled, no further premiums were paid. Mrs. Edwards passed away on May 27, 2022. Plaintiff sued for state-law claims for insufficient notice and wrongful cancellation or, in the alternative, recovery of plan benefits under 29 U.S.C. § 1132(a). Guardian moved for partial summary judgment on the state-law claims, arguing the claims were preempted by ERISA. The Court found that ERISA preempted the state-law claims, and only the claim for benefits under ERISA would proceed. Guardian then moved for summary judgment on the ERISA claim and the Court granted summary judgment in favor of Guardian finding that Guardian canceled the Allure Group Plan before Mrs. Edwards’s death and before a claim under the policy was made. Plaintiff argued that Guardian waived its right to cancel the plan for falling under the required participation level when it became aware that Ms. Edwards was the only participating employee at the end of 2019, yet continued to accept premium payments for over two years before choosing to cancel the policy. The Court rejected the wavier argument based upon the undisputed fact that the policy was canceled months before Plaintiff tried to make a claim. The Court explained that the Fifth Circuit had held that a waiver analysis does not include review of the defendants’ actions prior to the claim for benefits. Plaintiff also argued that Guardian's cancellation was an improper exercise of its rights under the plan since it did not properly provide notice to the insured. However, the plan did not contain a provision entitling Plaintiff to benefits for improper or untimely notice. Second, even if such a plan provision existed, the Court found that there was no genuine fact issue as to whether Guardian mailed a cancellation notice. As noted by the Court, a letter properly addressed, stamped, and mailed may be presumed to have been received by the addressee in the due course of the mail. Edwards v. Guardian Life Ins. of Am., No. 1:22-CV-145-KHJ-MTP, 2024 WL 3404606 (N.D. Miss. July 12, 2024).
3. Will a Court transfer a case to another venue when the transfer will serve the convenience of the parties and the witnesses and will promote the interest of justice? Yes. a district court is vested with discretion to transfer a civil action to another district pursuant to 28 U.S.C. § 1404(a) where: (1) venue is proper in the transferor district; (2) venue and jurisdiction are proper in the transferee district; and (3) the transfer will serve the convenience of the parties and the witnesses and will promote the interest of justice. As jurisdiction and venue were proper in the transferee district and venue was proper in the transferor district, the Court analyzed the private and public interest factors to determine whether the transfer would serve the convenience of the parties and the witnesses and promote the interests of justice. The private interests are (1) the plaintiff's choice of forum; (2) the situs of the material events; (3) the relative ease of access to sources of proof; (4) the convenience of the parties; and (5) the convenience of the witnesses. Because Plaintiff resided in the proposed transferor district and not this transferee district, the Court gave little deference to his choice. Additionally, the Court noted that because the situs of events occurred in the transferee district as Plaintiff applied and received his denial of benefits in the transferee district, the transferee district would not present difficulty for the parties to access documents or call witnesses. With respect to the public interest factors which focus on the efficient administration of the court system, the Court found that both districts are equally capable of handling an ERISA case in terms of capacity and substance. Cline v. Prudential Ins. Co. of Am., No. 23-CV-15091, 2024 WL 3455089 (N.D. Ill. July 18, 2024).
4. Does an insurer abuse its discretion in determining that an insured has failed to meet its burden of establishing an entitlement to benefits if the insurer fails to timely supply to claimant the new evidence the company relied upon in denying his administrative appeal and rendering its final adverse benefits determination? Yes, since 2018, the Department of Labor has required that every employee benefit plan maintain a procedure by which a claimant shall have a reasonable opportunity for a full and fair appeal of an adverse benefit determination to an appropriate named fiduciary of the plan. The claims procedures, in the context of disability plans, requires that prior to issuing an adverse benefit determination, the plan administrator shall provide the claimant, free of charge, with any new or additional evidence considered, relied upon, or generated by the plan, insurer, or other person making the benefit determination...in connection with the claim. The evidence must be provided sufficiently in advance of the date on which the notice of adverse benefits determination on review is required. Here, Guardian provided the evidence it relied upon to deny benefits on the same day it notified claimant of its final decision to uphold on appeal the termination of benefits. Because Guardian failed to provide the evidence in advance of the determination, it unlawfully deprived claimant of a full and fair review of his claim and adverse benefit determination and the matter was remanded to the administrator for review. Additionally, the court denied the claimant’s request for fees pursuant to section 1132(g) of ERISA. ERISA does not award fees to the prevailing party outright; but rather, allows for attorney's fees for either party in accordance with the district court's discretion. Here, because the case was being remanded for further review based on a procedural error, the Court declined to award fees. Sami v. The Guardian Life Ins. Co. of Am., No. 23-CV-20168, 2024 WL 3495322 (S.D. Fla. July 22, 2024).
5. Does an insurer abuse its discretion in determining whether an insured is entitled to LTD benefits when the insurer fails to consider the combination of all limitations caused by the sickness or injury? Yes, in deciding entitlement to benefits, an insurer must review the collective limitations caused by the sickness or injury in making a disability determination. Plaintiff, an attorney and partner at a law firm since 2016, was diagnosed with invasive breast cancer in October 2018. In March of 2019, Defendant Unum approved Plaintiff’s long-term disability benefits (“LTD benefits”). Approximately two years later, Unum decided Plaintiff was not disabled, closed Plaintiff’s claim, and discontinued her LTD benefits. Over the next year-and-a-half, Plaintiff provided Unum with hundreds of pages of additional medical records and information, to no avail. In April 2021, Plaintiff formally appealed Unum’s decision, which Unum denied based on a review of Plaintiff’s physical capabilities and not her cognitive abilities which were fully supported by the medical records provided by claimant and claimant’s own self-reporting. Plaintiff filed the instant case under ERISA alleging that Unum improperly terminated her LTD benefits and sought an order reinstating her LTD benefits. A court's review of plan determinations is de novo unless the plan grants discretionary authority to the plan administrator. As the plan here does not give Unum discretionary authority, the Court reviewed Unum's determination de novo and gave no deference to Unum’s decision on plan interpretation and the facts. The Policy at issue indicated that a claimant was disabled if they were limited from performing at least one of the material and substantial duties of their occupation due to the sickness or injury. This required the Court to look at the combination of all limitations caused by the sickness or injury in making a disability determination. In reaching its determination that Plaintiff was in fact disabled, the Court noted that when Unum initially approved the claim for LTD benefits in February 2019, it based its decision on Plaintiff’s inability to complete the material and substantial duties of her occupation because of her recent breast cancer diagnosis. In September 2019, however, Unum determined that Plaintiff was no longer disabled due to her breast cancer diagnosis and extended Plaintiff’s benefits based on her mental health disability which was substantiated by her treating psychiatrist’s documentation. Because Unum first found Plaintiff was disabled based on her breast cancer diagnosis and then because of her mental health, Unum did not review Plaintiff's claims that she was disabled on a different basis—cognitive impairment. Unum’s failure to consider all bases for the claim renders its termination of LTD benefits improper. Further, the evidence presented by Plaintiff supports the conclusion that Plaintiff’s cognitive abilities have been impacted, rendering her unable to perform the duties of a lawyer. The Court also noted that in a termination of benefits case, unless information available to an insurer alters in some significant way the previous payment of benefits, this weighs against the propriety of an insurer's decision to discontinue those payments. As such, the Court found that Unum improperly terminated Plaintiff’s LTD benefits and ordered Unum to reinstate Plaintiff’s LTD benefits retroactively to the date of termination, resume paying Plaintiff ongoing LTD benefits, and awarded Plaintiff reasonable attorney fees and costs and prejudgment interest. Wessberg v. Unum Life Ins. Co. of Am., No. CV 22-94 (JRT/DLM), 2024 WL 3444044 (D. Minn. July 15, 2024).