The Absence Of A Serious Conflict Of Interest Affecting A Plan Administrator's Judgment Results In Affirmance Of Benefits Termination
MARRS v. MOTOROLA, INC. (August 14, 2009)
Years ago, Michael Marrs developed a psychiatric condition that forced him to leave his job at Motorola and go on disability leave. Six years after he started his leave, Motorola amended its disability plan. It imposed a two-year limit on disability benefits resulting from mental, rather than physical, conditions. Marr's benefits were terminated by Motorola two years after the amendment. Marrs brought a class action under ERISA. The district court granted summary judgment to Motorola. Marrs appeals.
In their opinion, Chief Judge Easterbrook and Judges Bauer and Posner affirmed. ERISA limits a plan's ability to amend its terms. It provides that no amendment can adversely affect benefits with respect to periods of disability prior to the date of the amendment. The Court rejected Marrs' interpretation under which a plan could not affect any benefits for a period of disability that began before the amendment, but continues to run. The Court also addressed and rejected Marrs' argument that the Supreme Court's Glenn decision required a different outcome. Normally, the Court stated, if the plan administrator is given discretion to interpret the terms of the plan, a court will only reject its interpretation if it is unreasonable. That discretion exists in Motorola's plan. In Glenn, the Supreme Court addressed the situation when a plan administrator is laboring under a conflict of interest. Here, however, the Court concluded that the record did not establish that the administrator had a serious conflict of interest.
After 23 years on the job, Edward Raybourne went on long-term disability. He was about to have the first of four surgeries on the big toe of his right foot. His disability plan provided payments for 24 months upon a showing that he was unable to perform his regular job. After 24 months, he had to show that he was unable to perform any job in order to continue receiving benefits. After an independent medical examination concluded that Raybourne could return to work, Cigna terminated his long-term disability benefits. Raybourne's treating physician continued to state that he was unable to return to work. After his internal appeals were unsuccessful, Raybourne brought suit under ERISA. The district court granted summary judgment to Cigna, concluding that it had not abused its discretion. Raybourne appeals.
Forge Industrial Staffing, Inc. is an employee staffing company. It has insurance coverage through National Casualty Company (NCC) that insurers it, among other things, from intentionally discriminating against its employees. When several of Forge's former employees brought anti-discrimination charges before the EEOC, NCC agreed to defend Forge but reserved the right to deny coverage later. Given NCC's reservation of rights and the exclusion in the policy of coverage for punitive damages or claims arising from Forge’s intentional or reckless disregard of the law, Forge requested independent counsel. NCC refused. After Forge hired its own counsel, NCC brought a declaratory judgment action to resolve the issue. The district court found no actual conflict and concluded that NCC did not have to pay for Forge’s own counsel. Forge appeals.