Why is My Insurance Company Offering Too Little?

June 3, 2024 | by Mehr Fairbanks Trial Lawyers

Your insurance company may not be paying all the recoverable depreciation you are owed on your homeowners insurance claim.

If you have had property damage at your home and received an insurance claim payment from your insurance company, you may be wondering why this payment is significantly less than the cost to repair your property.

Insurers will often refer to the initial payment to you as “actual cash value” or a payment that has “depreciation” deducted. The term “actual cash value” simply means the cost to replace your roof minus the depreciation of your roof. This is often calculated by the insurance company using a computer estimating software called Xactimate.

The Employee Retirement Income Security Act of 1974

March 24, 2023 | by Mehr Fairbanks Trial Lawyers

ERISA Disability

An experienced Kentucky ERISA disability lawyer can explain why disability insurance and other forms of insurance that are provided through your employer or union fall under a federal law known as The Employee Retirement Income Security Act of 1974, or “ERISA.”

Like many other employee benefits, ERISA disability law is designed to protect employees who have paid for or been promised these benefits through their employer. These benefits include:

Puzzling Pension Plans

March 24, 2023 | by Mehr Fairbanks Trial Lawyers

what-is-erisa
A pension plan is an employee benefit plan established or maintained by an employer (or employee organization) that provides retirement income for employees. Primarily, pension plans are funded by the employer. More recently, traditional pension plans are becoming less available. Companies have replaced them with alternative plans (like 401(k) retirement savings plans) because they are less costly for employers. Some companies, like UPS, still have pension plans in place for their employees. However, when UPS reclassified some of their positions from nonunion to union it negatively impacted those employees’ pension plans. Consider the following:

Ralph Gragg worked for UPS as a driver hauling freight for approximately thirty years. When UPS decided to reclassify Mr. Gragg’s position, he transitioned from being a nonunion worker to a union worker. With his new classification status, his pension plan would then be funded by two distinctly different pension plans that existed within UPS. Each pension plan had a “Social Security Leveling Option” that would “increase the beneficiary’s monthly benefit before age 65 and thereafter reduce it by the amount of his Social Security benefit.” Gragg v. UPS Pension Plan, 55 F.4th 1059, 1061 (6th Cir. 2022). Mr. Gragg selected the “Social Security Leveling Option” for both of his pension plans. Each plan sent Mr. Gragg a letter that indicated what his payments would be before and after receiving his Social Security benefit. Each plan indicated that his monthly payment would be reduced by $1754 (the anticipated amount for his Social Security benefit).

However, when Mr. Gragg retired and began collecting his Social Security benefit each plan was reduced by his Social Security benefit for a combined total of $3508. When Mr. Gragg inquired about the discrepancy with each plan individually, they both responded with complicated messages that, in the end, indicated that the “reduced benefit amount was the correct amount.” Id. So, in November of 2020 Mr. Gragg filed a lawsuit against the UPS Pension Plan. He asserted a claim under the Employee Retirement Income Security Act, 29 U.S.C. § 1132 (a)(1)(B), that alleged that both pension plans paid him less than he was entitled to each month. Namely, $1754 less due to both plans being reduced by that exact amount.

Court Rules in Favor of Workers in Early Retirement Suit Motion

August 31, 2022 | by Mehr Fairbanks Trial Lawyers

Recently, a federal judge in Pennsylvania ruled in favor of the plaintiffs in an action brought against DuPont and Corteva Inc. (defendants). The court held that the Defendants’ motion to dismiss was premature, and that the case could continue through the litigation process. The case concerns the claim brought by employees of DuPont and Corteva alleging that the companies acted in violation of ERISA’s fiduciary duties by changing their early retirement policy after a corporate merger. The Defendants attempted to dismiss the case by arguing that the workers who initiated the suit were not classified as “employees” and therefore ineligible for early retirement. The court disagreed, rejecting the motion, and stating that it was still too early in the suit to determine whether this was adequate grounds for dismissal, and that such a determination would be more appropriate in the summary judgment phase or left to a jury.

Additionally, the judge stated that the “Plaintiffs have pled sufficient[ly] to allege that the administrative committee did not act reasonably in terminating their rights to early retirement … and that they had a legally enforceable right to benefits under the plan.” The violations at issue concern the Defendants’ actions following corporate restructuring. After a merger between DuPont and Dow Chemical Co., three separate entities were created: Corteva, Dow Inc., and DuPont. The named Plaintiff, Cockerill, stated that he had structured his career relying on DuPont’s early retirement options. Cockerill has worked for the corporation for over 20 years under the Rule of 85 early retirement plan (“Plan”). The Plan provided that early retirement was available if the sum of an employee’s age and the years they had worked at the company totaled to 85. Thus, Cockerill would have been eligible for retirement at the age of 58. The issue arose when DuPont became Corteva, and the retirement plan’s time frame divested as Cockerill was considered terminated from DuPont and a new employee of Corteva. However, no changes to Cockerill’s job were made and he continued to perform in the same role he had for DuPont. After the switch to Corteva, Cockerill was informed that the earliest year in which he could retire had changed from 2027 to 2034 due to the change in retirement plan management.

Representation for the plaintiffs has proposed a subclass of DuPont employees who did not qualify for early retirement due to the merger, though had been fired from the companies for “lack of work.” In response, the Defendants argue that the suit must be dismissed, as the plans at issue only applied to “employees” for the “company,” and members of the subclass did not meet the requirements of the description. In order to be considered an “employee,” the Defendants argue that a worker must have been employed by the original E.I. DuPont de Nemours and Co. or a subsidiary. The subsidiary at issue in the case, Specialty Products, is argued to not qualify as it was not affiliated with the original DuPont at the time the company diverged.

Court Solidifies Rights of Insured Under an Ambiguous Policy

August 10, 2022 | by Mehr Fairbanks Trial Lawyers

The First Circuit recently affirmed the position that when a policy or plan is ambiguous, it should be interpreted in favor of the insured. The case that gave rise to the question is Ministeri v. Reliance Standard Life Insurance Company. The facts of the case concern a denial by the Defendant (“Reliance”) for life insurance benefits due to the widow of a Plan member, Renee Ministeri (“Plaintiff”). Reliance argued that the Plaintiff’s late husband, Anthony (the member of the plan at issue), did not have coverage under the policy because it had lapsed due to his absence from work caused by a severe medical condition. Anthony passed away in 2015, with Reliance claiming that the policy lapsed during the time he was not working.

The dispute revolved around unclear language in the policy regarding the definitions of “actively” working in the role of “corporate vice president.” Further, the facts were unclear about the amount of hours Anthony had worked during the relevant period. The Court held that “under a reasonable construction of the phrase, Ministeri could be regarded as an ‘Active … Corporate Vice President’ as long as he was a non-retired employee holding a job title matching the rank of Corporate Vice President.” Further, the Court’s ruling stated that no dispute existed as to whether Ministeri’s status as a current employee was terminated prior to his formal announcement of leave in 2014. Thus, the Court rejected Reliance’s argument concerning the interpretation of the ambiguous terms in this section of the policy.

Reliance proffered a second argument, opining that $500,000 in supplemental coverage was not available to Renee Ministeri in addition to the $592,000 in basic coverage provided by the policy. Reliance argues that Renee failed to apply for the portability provision of the policy, though it was noted during oral arguments that she had applied for supplemental coverage. Applying for supplemental coverage was the Plaintiff’s avenue to enacting the portability provision, against which Reliance did not argue. Judge Bruce M. Selya stated in his opinion that Reliance delayed their defenses to the Plaintiff’s claims in violation of ERISA; his opinion read, “[Reliance] chose to keep quiet about its discovered basis for denial until litigation ensued … that is precisely the sort of delayed reaction ERISA forbids.”

Former NFL Player Wins in ERISA Case

August 5, 2022 | by Mehr Fairbanks Trial Lawyers

Recently, a federal judge in Texas court ruled in favor of retired NFL player, Michael Cloud, determining that the administrators of The Bert Bell/Pete Rozelle NFL Player Retirement Plan (“Plan”) violated their fiduciary duties under ERISA in denying Cloud a full and fair application review. Cloud’s appeal concerned his eligibility for the highest level of disability benefits under the Plan, which was subsequently denied by the Defendants.

Cloud boasts an impressive NFL career, playing 7 seasons, including for the New England Patriots during their 2004 Super Bowl winning year. Cloud additionally played for the Kansas City Chiefs and the New York Giants between 1999 and his retirement in 2006. During his career, Cloud states that he injured “virtually every aspect of his body” as well as endured numerous cases of head trauma known as “dings” (an instance where a player’s vision goes black due to a hard hit to their head). One of Cloud’s last head injuries sustained in 2004 led to his early retirement, as the frequency and severity of the injuries had caused “cumulative mental disorders.” In 2010, Cloud began receiving benefits under the retirement Plan, and was found to be “totally and permanently” disabled in 2014. Subsequently, in 2016 Cloud applied for reclassification under the Plan but was denied both initially and on appeal.

Cloud brought an action against the Plan in 2020, alleging that his application for reclassification was never fully reviewed by the Defendants. He alleged that the Defendants (including six board members for the Plan) did not adequately review his over 1000-page application. Instead, a paralegal was made to write a summary of the application for the administrators. It has been speculated that the decision on the matter was already drafted before the administrators viewed the summary of the new appeal, as it cited to incorrect documents that belonged to the wrong benefits plan. Further, the denial letter included contradicting information with written minutes taken at the board meeting during their deliberation; the minutes state that the only reason for the denial was the Cloud did not show by clear and convincing evidence the existence of a new injury, while the letter additionally states that the application was made outside of a 180-day deadline among other timing issues. During closing arguments, counsel for Cloud stated that the issue of unfair denial is not new nor exclusive to Cloud, and that the Plan consistently failed to fully review applications by reviewing as many as 50 at a time with no discussion of the specific cases.

Sixth Circuit Revives ERISA Claim, Provides Opportunity for Discovery

July 19, 2022 | by Mehr Fairbanks Trial Lawyers

The 6^th Circuit recently heard a case in which participants in a TriHealth (“Defendants”) 401(k) fund (“Plan”) alleged that the administrators of the Plan breached their fiduciary duty to the participants by offering costly mutual fund options. The 6^th Circuit revived one of the class claims, though affirmed the lower court’s dismissal of other claims brought under ERISA. This case was brought by the named Plaintiff, Danielle Forman, and included allegations that TriHealth breached its fiduciary duties under ERISA by charging high fees to participants, providing funds that underperformed their counterparts, and offering expensive actively managed options. The decision to dismiss these claims relied heavily on the precedent set in Yosaun Smith v. CommonSpirit Health et al. (follow the link to see a summary of CommonSpirit: https://www.mehrfairbanks.com/blog/sixth-circuit-affirms-dismissal-of-erisa-case-holding-that-plan-management-was-not-imprudent/).

However, one of the claims against TriHealth was not governed by the CommonSpirit decision. The 6^th Circuit panel of judges stated that “[t]he gist [of the claim] is this: Even if a prudent investor might make available a wide range of valid investment decisions in a given year, only an imprudent financier would offer a more expensive share when he could offer a functionally identical share for less.” Therefore, “The plaintiffs in this last respect have stated a plausible claim that TriHealth acted imprudently.”

Forman’s attorney argued that the differences between the fees charged for the respective funds were “sort of a bulk purchase discount”, and that “[s]hare classes that were in the fund lineup were simply more expensive than other share classes of the same fund that were available to the Defendants for years.” This argument weighed into the panel’s decision to uphold this particular claim while dismissing the others. They further rejected arguments made by the Defendants that the Plaintiffs hadn’t provided a comparable plan to demonstrate that the retail share classes’ returns were lower than other options available to the Defendants. The Court stated, “Unlike a claim premised on an imprudent choice between two different mutual funds that perform differently over time, a claim premised on the selection of a more expensive class of the same fund guarantees worse returns.”

Sixth Circuit Affirms Dismissal of ERISA Case, Holding that Plan Management was not Imprudent

July 18, 2022 | by Mehr Fairbanks Trial Lawyers

Yosaun Smith v. CommonSpirit Health et al. concerns the Plaintiff’s, Yosaun Smith (“Smith”), action against the administrators of her ERISA retirement plan, Defendants CommonSpirit (“CommonSpirit”) and Catholic Health Initiatives Retirement Plans Subcommittee (“Subcommittee”) alleging that the Defendants violated ERISA when they did not replace “actively managed mutual funds with passively managed mutual funds.” The Court of Appeals for the Sixth Circuit upheld the decision from the district court, affirming that ERISA does “not give the federal courts a broad license to second-guess the investment decisions of retirement plans,” and that remedies are only available under ERISA when a fiduciary duty has been violated. Thus, the Plaintiff in this case alleged no facts supporting the conclusion that the Defendants had violated any fiduciary duties under ERISA.

Over the last few decades, employer provided retirement funds have commonly been structured as defined-contribution 401(k) plans. These plans allow participants to contribute pre-tax income to accounts, the amount often matched by employers. Therefore, the value of the assets in the account is the determining factor of the amount participants will receive in their payout; “A beneficiary’s payout thus may ‘turn on the plan fiduciaries’ particular investment decisions.’” ERISA provides that under a defined-contribution plan, participants may bring an action for breach of fiduciary duty against the plan administrators if the fund is imprudently managed. Until recent years, plans were actively managed by plan fiduciaries where “the portfolio manager actively makes investment decisions and initiates buying and selling of securities in an effort to maximize return.” However, more recent trends have enabled investors to use index funds, creating a “fixed portfolio structured to match the overall market or a preselected part of it.” This option means that there is “little to no judgment” involved in the management of the plan.

The Plaintiff in this case is an employee of Catholic Health Initiatives (otherwise known as CommonSpirit Health) and has been a participant in its defined-contribution 401(k) plan (“Plan”) since 2016. The Plan is administered by an appointed administrative committee and serves more than 105,000 participants with more than $3 billion in assets. Options available to participants include index funds with low management fees (0.02%) as well as funds that are actively managed with management fees up to 0.82%. If employees do not select a fund, they are placed by default into the Fidelity Freedom Funds, which are actively managed. These are a group of “target date fund[s]” meaning that “managers change the allocation of the underlying investments that they hold over time, say by selling funds that hold stocks to buy a greater proportion of funds that hold bonds or cash.” The purpose of this management is the “reallocation of asset types [allowing] managers to protect an employee’s investment gains and spare her the unpredictability of market fluctuations as she approaches retirement.”

Eleventh Circuit Rules in Favor of ERISA Beneficiary

July 15, 2022 | by Mehr Fairbanks Trial Lawyers

The Eleventh Circuit Court of Appeals in Gimeno v. NichMD, Inc. analyzed whether Section 1132(a)(3) of ERISA provides authorization for a beneficiary of a plan governed by ERISA to sue for ‘”appropriate equitable relief’” due to violations of the plan or relevant statute. Thus, the question presented to the court is whether “Section 1132(a)(3) create[s] a cause of action for an ERISA beneficiary to recover monetary benefits lost due to a fiduciary’s breach of fiduciary duty in the plan enrollment process[.]” The Court answers this question in the affirmative, stating that a court “may order typical forms of equitable relief under Section 1132(a)(3).”

This decision reverses that of the district court, which had held that “such a claim would be futile.” The basis for this reversal is the common practice of awarding “equitable surcharge” in cases where a fiduciary’s breach of duty caused a beneficiary to sustain losses. The facts of the case center around the plan holder, Justin Polga, and his spouse, Raniero Gimeno (“Plaintiff”). Polga was an M.D. and an employee of NCHMD, Inc., a subsidiary of NCH Healthcare System Inc. (“Defendants”). When initially hired by the Defendants, the HR department assisted Polga in filling out the relevant paperwork. Gimeno was listed as the primary beneficiary under the relevant plan (“Plan”) and NCH Healthcare the administrator. Polga decided to elect to pay for $350,000 in “supplemental life insurance coverage on top of $150,000 in employer-paid coverage.” In order to receive this coverage, it was required that Polga submit “an evidence of insurability form,” however this form was not provided in his enrollment paperwork nor did the HR department attempt to rectify the error. Therefore, Polga was never properly enrolled on the program according to the insurance company. Despite this fact, the Plan “deducted premiums corresponding to $500,000 in life insurance coverage from Polga’s paychecks.” Further, Polga was provided with benefits statements that included the $500,000 in coverage.

When Polga passed away, the Plaintiff filed a claim with the Plan’s insurance company for benefits as the named beneficiary. The claim was partially denied, as the company approved the claim for the amount of benefits excluding the supplemental amount. Subsequent to this denial, the Plaintiff filed suit to recover the supplemental benefits, alleging that “by failing to notify Polga of the need for the form and misleading him about the nature of his coverage, the defendants breached their fiduciary duty to administer the plan fairly and properly, to inform Polga of his rights and benefits, and to ensure that all application forms were correctly completed and submitted.” As a remedy, the Plaintiff also sought that the Defendants be required by order to pay the benefits that would have been received if not for the breach – “the unpaid $350,000.”

Court Certifies ERISA Class Action Against Aetna

June 3, 2022 | by Mehr Fairbanks Trial Lawyers

A federal court in Pennsylvania recently certified a class of Plaintiffs under Defendant Aetna Life Insurance Co.’s disability benefits plan (“Plan”). The Plaintiffs alleged that the Defendants forced beneficiaries who had received payments for personal injury claims to send the payments back to the company in violation of ERISA.

The named Plaintiff, Joanne Wolff, first filed suit against Aetna in 2019 when the company asked for the repayment of over $50,000 in long-term disability benefits stemming from a temporary disability suffered by the Plaintiff after a car wreck. At the time of the request, Wolff told the Defendants that her employer, Bank of America, did not allow reimbursement, and negotiations ended in an agreement that that Wolff would pay $30,000 despite this fact.

This did not end the dispute, however, and Wolff along with an at least 48-member class now allege that Aetna violated ERISA when it required reimbursement payments of long-term personal injury disability payments. Aetna responded that class certification would be inappropriate, as the proposed class did not meet the specifications required for certification under the Federal Rules of Civil Procedure. Mainly, the Defendants argued that some of the members of the proposed class should be disqualified, thus the number of participants in the class did not meet the numerosity requirement. It argued that since some of the members of the class were from different companies, there was not sufficient typicality to fulfill the requirements under the Civil Rules and members under other employers should be disqualified, reducing the class number to 28. Aetna also argued that timing issues barred several more participants under the relevant statutes of limitations.