ERISA News
A California ERISA Potpourri to begin the New Year
Los Angeles, CA: Something old and something new to begin the year on the California ERISA file. ERISA is the Employee Retirement Income Security Act (as amended 1974), a federal statute that also reaches into individual states and is designed to protect the rights, and the future incomes of workers having already retired, or nearing retirement and already beyond their peak earning years.
To that end, there’s a new rule that comes into effect in less than a week and applies to claims for disability benefits under ERISA made on, or after the first of January of 2018. The rule, recently finalized by the Employee Benefits Security Administration – an Arm of the US Department of Labor – relates to disability claims under Section 503 of ERISA.
The final version of the rule reflects a slight departure from the proposed rule, and now includes a requirement that notices of adverse benefit determinations need to spell out any applicable time limit for filing an ERISA lawsuit.
The rule kicks in on January 18. Employers both federally, and within the state of California need to be aware of the changes and comply, in order to avoid complications stemming from potential litigation.
Legal experts remind employers that maintaining and adhering to California’s equal pay law, which is now a year old, is important in terms of ERISA and pensions, given that higher pay leads to increased contributions, which can in turn grow a pension and retirement nest egg more quickly. Potential litigants bringing an ERISA lawsuit could claim that any employer having failed to implement equal pay as mandated under California law, may have also contributed to diminished growth of pension and retirement income under ERISA.
Meanwhile, on another ERISA front Anthem, Inc., in its Form 10-Q report filed with the US Securities and Exchange Commission (SEC) in early November for the quarterly period ending September 30, 2016 updated a long-standing court case that was launched when Anthem was known as WellPoint, Inc.
The Company said, “We are currently a defendant in eleven putative class actions relating to out-of-network, or OON, reimbursement that were consolidated into a single multi-district lawsuit called In re WellPoint, Inc. (n/k/a Anthem, Inc.) Out-of-Network “UCR” Rates Litigation that is pending in the United States District Court for the Central District of California.
“The lawsuits were filed in 2009,” Anthem continued. “The plaintiffs include current and former members on behalf of a putative class of members who received OON services for which the defendants paid less than billed charges, the American Medical Association, four state medical associations, OON physicians, OON non-physician providers, the American Podiatric Medical Association, California Chiropractic Association and the California Psychological Association on behalf of putative classes of OON physicians and all OON non-physician health care providers.”
Anthem went on to say that plaintiffs filed several amended complaints alleging defendants violated the Racketeer Influenced and Corrupt Organizations Act, or RICO, the Sherman Antitrust Act, ERISA, federal regulations, and state law by using the OON reimbursement database Ingenix, and by using non-Ingenix OON reimbursement methodologies.
Anthem noted the Court had dismissed all claims related to state and federal anti-trust claims, together with claims under RICO dismissed with prejudice.
“The only claims that remain after the court’s decision are an ERISA benefits claim relating to claims priced based on Ingenix, a breach of contract claim on behalf of one subscriber plaintiff, a breach of implied covenant claim on behalf of one subscriber plaintiff and one subscriber plaintiff’s claim under the California Unfair Competition Law,” the company said.
Anthem added the Court has since granted summary judgment to the defendant on all claims, but has yet to enter a judgement in the case. Thus, the ERISA case was still somewhat fluid as of November 2.
US Supreme Court to Review ERISA Findings from Appellate Courts
Washington, DC: A court challenge that pits church-based health networks against ERISA provisions and interpretations is to be heard by the highest court in the land, following notification on December 2 that the US Supreme Court is going to weigh in by agreeing to review recent decisions by the appellate courts. As one of the health networks is based in California, the case is expected to have some influence and impact on California ERISA labor law.
At issue is an interpretation of just what a church-affiliated hospital is, and whether or not it has to see affiliation with an actual, brick-and-mortar church in order to qualify for exemptions observed in the Employee Retirement Income Security Act (ERISA).
Amongst three health networks embroiled in the litigation is Dignity Health, headquarterd in California. Dignity has joined with Saint Peter’s Healthcare System, based in New Jersey, and Advocate Healthcare Network, which is based in Illinois.
The California ERISA dispute mirrored by the other two health networks has to do with provisions and fiduciary tenets normally required by ERISA. There are exemptions, however, for faith-based health networks affiliated with a church, whereby the latter – assuming they qualify – do not have to undertake fiduciary obligations and minimum-funding requirements.
What got them here was a putative class action launched by employees who assert their employers are not, in actual or real sense affiliated with a church in the first instance, and thus take exception to any claim by the health networks that they qualify for exemption under that qualification.
Based upon the assertion the church-based hospital(s) are capitalizing on an ERISA exemption for which they don’t correctly qualify, workers are therefore taking the position that their retirement funds have been left vulnerable with the lack of minimum funding requirements, insurance or disclosure should the funds dip beneath a certain plateau.
The health networks are fighting back, contending that any reversal of an exemption would oppose long-standing positions taken by the Internal Revenue Service (IRS), US Department of Labor (DOL) and the Pension Benefit Guaranty Corp.
Billions of dollars’ worth of claims are on the line.
According to documents, the Seventh, Third and Ninth Circuits found that the retirement plans of the three networks cannot be excluded from ERISA as “church plans.”
The health networks appealed their case to the US Supreme Court, which has agreed to review the findings of the lower appellate courts.
Religious freedom groups are defending the faith-based health networks, and their decision to take their ERISA case to the highest court in the land.
To that end the Alliance Defending Freedom group, in a statement following the decision by the high court to review, said that “the government shouldn’t attempt to go into the theology business by assuming it has the ability or expertise to decide whether a faith-based ministry is religious enough to be a ministry.”
The cases are Saint Peter’s Healthcare System et al. v. Laurence Kaplan, Case No. 16-86, Advocate Health Care Network et al., Case No. 16-74, and Dignity Health et. al. v. Starla Robbins, Case No. 16-258, in the Supreme Court of the United States.
California ERISA Lawsuit Alleges Pension Underfunding Worth $1.2 Billion
Los Angeles, CA: A California ERISA lawsuit is demonstrative of the interpretation possible with regard to just what is, and isn’t a so-called ‘church’ pension plan. The latter is a less-restrictive, less-regulated entity that is not required to meet the normally strict guidelines and requirements for managing an employee pension plan under provisions of the Employee Retirement Income Security Act, as amended in 1974.
A class action ERISA lawsuit was filed in 2013 by lead plaintiff Starla Rollins, at one time the billing coordinator for Dignity Health, a nonprofit associated with the Catholic Church. Rollins had complained that, in her view, the employee pension plan maintained by Dignity was grossly under-funded and did not conform to the standards and requirements set out according to ERISA guidelines.
It was an allegation not without substance, as Rollins asserted the pension fund had been shortchanged to the tune of $1.2 billion. Dignity’s response, in sum, remained that given Dignity’s association with the Catholic Church, Dignity qualified to operate and manage the fund as a church plan.
Rollins decided to let the Courts weigh in.
Dignity Health was established when two California-based congregations affiliated with the Sisters of Mercy established nonprofit hospital systems, subsequently merging everything into Catholic Healthcare West. The pension plans associated with Catholic Healthcare West, the hospitals and the two Sisters of Mercy congregations were brought together and merged in 1989.
Dignity does not dispute that it operates the pension fund without adhering to standard ERISA rules, but that it nonetheless manages the fund under a church plan exemption granted through a 1983 amendment to ERISA that allows organizations controlled by, or affiliated with a church, with the principal purpose of providing employee benefits, to
maintain church plans.
The initial ruling by the US District Court, Northern District of California went against the defendant – Dignity – given the court’s assertion that a church plan under ERISA is required to be established by an actual church. That ruling was appealed to the US Court of Appeals for the Ninth Circuit, which upheld the lower court’s ruling.
Dignity’s position, according to court records, holds that: “If a church plan may cover employees of a church-associated organization, and a church-associated organization may maintain the plan, Congress had no reason to insist that the church itself must establish the plan,” when ERISA was amended in 1983.
Writing for the panel, US Circuit Judge William Fletcher of the Ninth Circuit did not agree, citing Dignity for coming up with an argument based on a misreading of the legislative history of ERISA.
“There is nothing in the legislative history to suggest that Congress intended, in expanding the definition of eligible Employees, to eliminate the requirement that a church plan be established by a church,” Fletcher said. “Nor is there anything in
the legislative history to suggest that Congress intended, in broadening the definition of organizations that are authorized to maintain a church plan, to eliminate that same requirement.”
The two lower court’s rulings were appealed to the US Supreme Court, which on September 21st granted Dignity a temporary stay on the lower court’s ruling and mandate, which gives Dignity some breathing room until the high court has the opportunity to hear the case and weigh in.
The case is Dignity Health et al. v. Starla Rollins, Case No. 16-258, in the Supreme Court of the United States.
Florida Blue Agrees to Settle ERISA Lawsuit
Sacramento, CA: Florida Blue has agreed to settle an ERISA lawsuit, in a move that could have implications for a similar lawsuit filed in California. The lawsuit involves the insurer's refusal to cover Harvoni, a potentially life-saving drug that has been shown to successfully treat hepatitis C.
Tibble ERISA Lawsuit Dismissed
San Francisco, CA: An ERISA lawsuit nine years in the making has been dismissed, after making its way from the California courts up to the Supreme Court and being sent back to the lower courts. The lawsuit, which alleged violations of the Employee Retirement Income Security Act (ERISA), claimed breach of fiduciary duty. Now, the Ninth Circuit has dismissed the lawsuit, finding that the plaintiffs should have raised the claim of improper plan monitoring before the case went to the Supreme Court.
The Tibble lawsuit was filed against Edison International, and alleged plan fiduciaries made imprudent investments within the company’s ERISA plan. Plaintiffs claimed there were lower-cost versions of the investments available, but higher-cost versions were purchased. The problem, however, was the statute of limitations. Three of the six funds were initially purchased in 1999 but the lawsuit was not filed until 2007, beyond the six-year statute of limitations. Under the statute of limitations, lawsuits must be filed within six years of the most recent violation.
After three of the funds were dropped from the lawsuit, the plaintiffs appealed to the Supreme Court. The plaintiffs argued that the statute of limitations should not have begun running at the time the funds were purchased. Rather, violations should be counted for as long as the offending fund is part of the investment. In other words, it is not just the purchase of the investment but continually allowing it to remain in the plan that constitutes the most recent violation, the plaintiffs argued.
The Supreme Court agreed with the plaintiffs, finding the plan sponsors had an ongoing duty to monitor investments. The Supreme Court further ruled that the duty to monitor is separate from the duty of exercising prudence in choosing investments for an ERISA plan.
But, according to court documents, when the Supreme Court sent the lawsuit back to the Ninth Circuit, it instructed the lower court to determine whether the plaintiffs erred in not raising the “ongoing-duty-to-monitor” claim when the lawsuit was initially heard by the lower court.
The lower court found that it could not hear an argument on appeal that was not initially raised before the District Court or brought forward in the initial appeal. As a result, the Tibble claim was dismissed.
Although the lawsuit was dismissed, it still holds important implications for ERISA plan fiduciaries. The Supreme Court found that even where there is no change in an ERISA plan’s circumstances, fiduciaries have an ongoing duty to monitor investments and insure they are still in participants’ best interests. This means a fiduciary’s duties do not end with the purchase of the investment.
The lawsuit is Tibble et al. v. Edison International, et al, case number 10-56406, US Court of Appeals for the Ninth Circuit Court.
Court Grants Class-Action Status to ERISA Lawsuit
Los Angeles, CA: A California District Court judge has granted class certification to a California ERISA lawsuit filed against Transamerica Life Insurance Company. The lawsuit, filed by Jaclyn Santomenno and others, alleged Transamerica charged excessive fees, in violation of the Employee Retirement Income Security Act (ERISA).
According to court documents, Transamerica sells a 401(k) plan that is geared to small- and medium-size employers. That plan consists of a bundle of investment alternatives and administrative services. Employers who selected the plan package had 170 investment options from which the employers were able to select a smaller number to offer employees in their benefits package. They could either choose their own investments à la carte, or choose a pre-selected lineup.
That pre-selected lineup would qualify for Transamerica’s “Fiduciary Warranty,” according to court documents, which promises the investments meet ERISA’s “broad range of investments” requirement as well as its “prudent man standards.” Furthermore, if employers face a breach of fiduciary duty lawsuit from employees related to the plan, Transamerica reportedly promised to indemnify the employer and make the plan whole.
Each investment option in the plan is a separate account, the lawsuit states, and each separate account is linked to an underlying investment. Some of those accounts are traded by investment managers who are not affiliated with Transamerica. Transamerica, the lawsuit alleges, charges fees for most of the accounts, even accounts the company does not provide any services for.
Plaintiffs allege fees charged by Transamerica are excessive and, in some cases, unnecessary, breaching fiduciary duty under ERISA. Further breaching fiduciary duty, the lawsuit claims, Transamerica did not use its considerable weight to invest in the lowest price share class of mutual funds. Finally, the lawsuit alleges that Transamerica affiliates knowingly made transactions that are prohibited under ERISA.
In the first motion for class-action status, Judge Dean D. Pregerson denied class certification. Plaintiffs submitted a second motion for class certification, which the judge granted. In granting the motion, the judge noted that the class potentially includes 300,000 participants in around 7,400 plans, and found there were similar questions of law faced by each of the proposed class members.
“What makes the fees excessive, Plaintiffs explain, is the rates charged by TIM [Transamerica Investment Management] and TAM [Transamerica Asset Management] to outside clients, which are considerably lower than the fees charged to TLIC plans,” Judge Pregerson wrote in his decision.
The lawsuit is Jaclyn Santomenno et al v. Transamerica Life Insurance Company, et al., Case number 2:12-cv-02782, filed in US District Court, Central District of California.
Cigna Settles ERISA Lawsuit
Los Angeles, CA: Cigna has agreed to settle an ERISA lawsuit alleging patient harassment. The ERISA lawsuit was filed against Cigna by Nutrishare Inc, an intravenous nutrition provider. In the lawsuit, Nutrishare alleged Cigna harassed patients who attempted to use out-of-network benefits and denied coverage that should have been allowed.
According to court documents, Nutrishare alleges that Cigna advertised health insurance policies as giving patients the choice to obtain health care from any health care provider, even if that health care provider is considered “out of network,” although plans that allow for out-of-network health care cost more than those that have restrictive health care provider options. Nutrishare offers long-term, in-home intravenous nutrition services allowing patients to obtain nutrition they need to survive serious illness and infection, but is considered by Cigna to be an out-of-network provider.
Nutrishare claims Cigna retaliates against patients who attempt to use their out-of-network benefits by “making threatening telephone calls to those patients, by directing the patients’ physicians to encourage the patients to switch from out-of-network providers to inferior, in-network providers, and by underpaying and/or failing to pay the patients’ out-of-network providers.” Furthermore, Cigna is accused of denying payment or underpaying for services provided using false pretenses, forcing patients to incur financial liability.
In the lawsuit, Nutrishare gives the example of one patient who was diagnosed with idiopathic gastroparesis, which causes partial paralysis of the stomach. The patient requires daily TPN (total parenteral nutrition) for more than 10 hours a day to ensure she receives enough nutrients and calories to survive. The patient (whose name is not given in court documents) was allegedly directed by Cigna to use an in-network provider for her TPN services, but suffered from central line infections, and was given incorrect or incomplete orders of TPN products and supplies. On the advice of her physician, the patient switched to Nutrishare and has since not suffered any complications. According to the lawsuit, Cigna responded by phoning both the patient and the patient’s physician, making the patient feel threatened.
Additionally, Cigna is accused of not properly paying for services that should be covered for patients who pay extra to use out-of-network services.
“The goal of Cigna’s harassment and failures to pay are clear: Cigna wants to save money by coercing its patients into using only in-network providers, despite the fact that these members pay for PPO plans that permit full access to out-of-network providers and that these patients do not want to switch to a different, inferior provider of TPN services,” the lawsuit alleges. “One of Cigna’s tactics for achieving this goal is to make providing services to Cigna members so unattractive to Nutrishare - because those services will not be paid for - that Nutrishare will have no choice but to turn away Cigna patients in the future.”
Cigna has reportedly agreed to settle the lawsuit, which alleged the company violated the Employee Income Retirement Security Act by intimidating policyholders into using in-network health care providers.
The lawsuit is Nutrishare, Inc., et al v. Connecticut General Life Insurance Company, et al, Case number 2:15-cv-00351.
Insurance Lawsuits Allege ERISA Violations
Los Angeles, CA: A "California ERISA lawsuit has been filed against Blue Shield of California Life and Health Insurance Co., alleging the insurer violated ERISA laws by wrongfully denying necessary medical treatment. The lawsuit joins other lawsuits filed against various insurers alleging they are wrongfully denying hepatitis patients vital treatment.
According to reports, a lawsuit was filed by Aram Homampour, who says his doctor prescribed Harvoni to treat hepatitis C. Hepatitis C is a contagious blood disease that can cause serious liver damage. The Centers for Disease Control and Prevention estimate 15,000 people in the United States die each year from hepatitis C-related liver disease. Harvoni, approved by the US Food and Drug Administration (FDA) in 2014, has about a 95 percent cure rate and comes with very few side effects. The problem, however, is the cost: a 12-week treatment program of Harvoni costs around $99,000.
Lawsuits filed against insurers allege the insurers are wrongfully denying Harvoni treatment to save money. The denials are reportedly given because insurers claim patients’ livers are not sufficiently damaged to warrant treatment with Harvoni.
In his lawsuit, Homampour alleges Blue Shield violated the Employee Retirement Income Security Act (ERISA) because it used internal policies to overrule a doctor’s determination of appropriate medical treatment. Homampour claims Blue Shield is forcing him to live with a serious health problem and related issues until his liver becomes sufficiently damaged enough to approve treatment.
Homampour’s lawsuit seeks class-action status for any patient whose Harvoni claims were denied by Blue Shield for reasons linked to medical necessity or experimental treatments.
A different lawsuit also alleging violations of ERISA linked to Harvoni treatment was filed in July against Anthem Blue Cross, as reported by Gordon Gibb for LawyersandSettlements. According to reports, Marina Sheynberg filed her lawsuit after her Harvoni treatment was denied because the treatment was not deemed medically necessary by the insurer. Sheynberg alleges she was told her test results showed that her liver damage was not significant enough to qualify for coverage of the Harvoni treatment. Sheynberg’s lawsuit also seeks class-action status and an injunction requiring Anthem to reevaluate denied Harvoni claims.
The Blue Shield lawsuit is Homampour v. Blue Shield of California Life and Health Insurance Company, case no 3:15-cv-05003, US District Court of California, Northern District.
California ERISA Lawsuit Results in Settlement Exceeding a Half-Million
The total combined award is $630,000. The US Department of Labor (DOL) brought the California ERISA lawsuit after the Feds were apprised of the situation by the trio of whistleblowers, who brought the lawsuit to the DOL and invited the agency to become involved.
According to court documents, whistleblower Cheryle Ann Robbins was employed as a director of the Cement Masons Southern California Trust Funds, working specifically in the audit and collections department. She noted what she viewed to be an irregularity when some employers were allowed to underpay the fund, a violation of ERISA rules. Robbins complained internally. For her trouble, Robbins and two of her associates were eventually terminated from their positions, or so it was alleged by the DOL.
Defendants in the lawsuit included the following individuals who served as trustees for the Cement Masons Southern California Trust Funds: David Allen, Scott Berg, Frank Crouch, Marcos Enriquez, Fitzgerald Jacobs, Bill Lee, Billy Lujan, Jesse Mendez, Larry Nodland, Enrico Prieto, Phil Salerno and Mac Tarrosa as well as Zenith American Solutions, the service provider involved with management of the trust funds. There were 12 trustees in all, with most contributing toward the $630,000 judgment.
Along with Cheryle Ann Robbins, who is to receive $400,000 as part of the settlement, two other individuals who served as whistleblowers and co-plaintiffs in the ERISA lawsuit will receive compensation according to an order signed by US District Judge John A. Kronstadt. Louise Bansmer is to receive $174,000 and Cory Rice will receive $56,000 in compensation.
“There are no good stories about retirement savings crimes, but this case was particularly galling because three people were all punished for doing the right thing,” Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi said in a statement. “Robbins, Rice and Bansmer suffered serious financial consequences because they stood up for what was right. This resolution ensures that they’ll finally get the compensation they deserve.”
The California ERISA lawsuit is Perez v. Brain et al., Case No. 2:14-cv-03911, in the US District Court for the Central District of California.
Jury Finds for Plaintiff in California Denied Disability Insurance Lawsuit
In a report published by The Press Democrat (2/18/14), it was revealed that plaintiff Cassaundra Ellena was healthy when she was hired as a redevelopment manager by the Community Development Commission of Sonoma County (the Commission). While the 51-year-old plaintiff was diagnosed with Lupus in 2008, there were no outward signs of the disease when she applied to the Commission and was subsequently hired at a salary of $102,000 in 2009. The report indicated Ellena worked for the Commission from 2009 through 2010.
According to the denied ERISA disability report, the plaintiff soon after began exhibiting symptoms consistent with the auto-immune disease, including fever, chest pain and shortness of breath. Her worsening symptoms precluded Ellena from continuing in her job, and she applied for disability benefits according to California Insurance Law.
However, Sonoma County’s long-term disability (LTD) carrier - Standard Insurance Company (Standard Insurance) - denied Ellena’s claim on grounds that the plaintiff’s symptoms were partially alleviated through the use of special medications. The carrier also claimed doctors were of the opinion that Ellena could, indeed, continue working.
Undaunted, Ellena contacted a California denied disability insurance lawyer and litigated in an effort to prove her symptoms as valid and to reverse the carrier’s denial. During a seven-day trial, it was revealed that the professional opinions of medical experts consulted by the disability carrier were not universally shared. To wit, other doctors testified that Ellena was, in fact, debilitated by the disease. Sharing that view was the head of the Lupus Clinic at UC San Francisco.
In their view, jurors determined that Standard’s underwriters focused solely on the information leading to the denial of the claim, and did not take into account the bigger picture. To that end, the jurors found for the plaintiff.
Ellena was awarded a total of $873,000 - less attorney’s fees - which represented the collective sum of her disability payments from the time she first applied for California insurance claim help, through to her 67th birthday. The money was to be paid in a lump sum.
At the time of the California ERISA-denied claim report, it was not known if Standard Insurance planned to appeal. Sonoma County employs a total of 3,000 persons, the majority of whom are represented by Standard for LTD benefits. The case is Ellena v. Standard Insurance Company et al, Case No. 3:2012cv05401, California Northern District Cou
About . TOS . Privacy . Disclaimer . Contact . Advertise . Member Login
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License ©2026 Online Legal Media. All rights reserved.
Visit other Online Legal Media Websites:
