N.C. Woman Wins Benefits as High Court Denies Cert

By Fred Horlbeck Editor - Lawyers Weekly

The U.S Supreme Court has denied cert in a North Carolina ERISA case, leaving intact a Fourth Circuit decision affirming long-term disability for a woman whose quest for benefits began seven years ago.

The high court's decision, issued Nov. 13, shut the door on an insurance company's argument that the woman's benefits plan set the statute of limitations and started it running before her ERISA claim was denied.

The insurer said her suit was time-barred because she sued in 2004, more than three years after she applied for long-term disability benefits. An accrual provision in her benefits plan said she had only three years to file suit after submitting her proof of claim, the company said.

Not so, the Fourth Circuit said. Even though the plan provided for the statute of limitations to kick in earlier than federal law ordinarily would allow, the ERISA accrual rule trumped the provision, it said.

That finding affirmed the U.S. District Court for the Western District of North Carolina, where the woman first brought suit.

"We agree with the district court that ERISA's remedies framework does not permit a plan to start the clock on a claimant's cause of action before the claimant may file suit," said Fourth Circuit Judge J. Harvie Wilkinson, writing for the majority in White v. Sun Life Assurance Co. of Canada, handed down in April. Judge Henry F. Floyd concurred. Chief Judge William W. Wilkins dissented.

The plaintiff's lawyer, Charlotte attorney Mac Sasser, hailed the outcome, saying the prospective battle in the U.S. Supreme Court had been shaping up as a "David and Goliath situation."

The case attracted the attention of a major insurance industry trade association, the American Council of Life Insurers, which filed an amicus brief with the Supreme Court in support of the defendant's petition for certiorari, he said.

That left Sasser, who had associated a Phoenix, Ariz., law firm in the case, "feeling as if he'd hit Goliath in the eye, and Goliath had now picked up a really big club.

"It was quite remarkable. There were four different briefs filed on the cert issue alone," he said. "So it was exciting. There were a lot of new ideas and outcomes to consider. I've been litigating this case for seven years for this single client, and now the insurance industry was trying to convince the Supreme Court that it had truly national implications.

"In light of that, the denial of certiorari was just a big, big victory, both for my client and for all of the folks similarly situated in at least this circuit, if not the nation," he added.

Sasser said the amount of benefits his client will receive hasn't yet been calculated, but "the actual judgment will take her claim back to day one" May 5, 2000, when she filed her benefits claim.

"She was denied from the very beginning a really horrific, egregious case," Sasser said.

Lawyers for the defendant did not return telephone calls seeking comment prior to publication.

BACKGROUND

According to the Fourth Circuit opinion, the plaintiff worked from 1984 to 2000 at a business owned by her family, through which she received a long-term disability insurance policy from Sun Life Assurance Co. of Canada.

In 1997 she began suffering chronic pain that grew worse. The cause was diagnosed as piriformis syndrome, a neuromuscular disorder, according to the opinion. Years of treatment, including surgery, medicines, and physical therapy, followed, and in February 2000 she resigned. In May 2000, she applied for disability benefits under the policy, with a doctor writing in support of the application and asserting her condition prevented her from working.

On the recommendation of the defendant, a physician-consultant reviewed the plaintiff's medical file but didn't examine the plaintiff or talk with her doctors, the opinion said.

In a report, the consultant expressed skepticism, saying the plaintiff's complaints were "far out of proportion to the pathology described." He quoted a March 20, 2000, letter in which a doctor for the plaintiff said she stopped work "more because of familial problems and work problems than her disability."

The defendant denied her claim.

In an appeal, the plaintiff provided additional medical records and a new letter from a doctor explaining why she could not work. In March 2001, the defendant rejected the appeal. In March 2004, the plaintiff filed suit under the federal Employment Retirement Income Security Act.

The federal district court ruled against the defendant, finding that the accrual provision was contrary to ERISA. Also, it ruled that the defendant had abused its discretion in denying the benefits.

The defendant appealed.

TIMELINESS

The Fourth Circuit said the plaintiff's claim was valid under an ERISA accrual rule developed in federal case law and that the defendant was expecting too much.

"Sun Life asks us to disregard all the usual rules of accrual and to hold that ERISA plans may specify different accrual dates," Judge Wilkinson said.

The court refused to do that. ERISA contains no statute of limitations, and in such a case the court could apply a state limitations period and "treat the time at which the statute begins to run as governed by a uniform federal rule," Wilkinson said.

Under that rule, the statute of limitations would start running when the plaintiff could first file suit meaning after she had submitted her claim and after the defendant had denied it, the court said, citing Rodriguez v. MEBA Pension Trust, 872 F.2d 69 (4th Cir. 1989).

Applying the rule in this case would make the plaintiff's claim timely, the court said.

Considering the defendant's side of the case, Wilkinson noted there is plenty of leeway for setting the terms of a benefits plan under ERISA, but said it is not boundless.

"Parties may establish such accrual provisions only 'in the absence of a controlling statute to the contrary,'" Wilkinson said, citing Order of United Commercial Travelers of America v. Wolfe, 331 U.S. 586 (1947), "and the accrual provision flies in the face of the ERISA statutory framework."

Moreover, the accrual provision posed a threat to ERISA's remedial scheme, the court said.

The act gives claimants a right of action in court after they exhaust internal appeals, but the defendant's notion of accrual "would allow one remedy to undercut the other," Wilkinson said. Benefits providers could drag out the internal appeals process just to short-circuit a claimant's legal action.

"Indeed, a plan that did not reach a final decision until after the statute of limitations had run would deprive a participant of the right to file a civil claim at all," he said.

DECISION ON THE MERITS

The court gave a thumbs-up to the plaintiff's benefits claim, saying that the plaintiff's surgery made it clear that her pain "was no phantom syndrome."

The court reviewed the issue under an abuse of discretion standard, meaning that the insurer's refusal to pay benefits had to be a product of "deliberate, principled" reasoning with substantial evidence to support it.

It wasn't, the court said.

Surgery revealed the plaintiff had a muscle deformity and damage to an adjacent nerve, and the doctors who treated her considered her symptoms serious and said her pain resulted from the syndrome, the court said.

Although the defendant argued that her doctors had conflicting opinions, the court found instead that they worked together "in a manner indicating a single treatment plan." Also, it discounted the March 20, 2000, letter in which one of her doctors suggested work and family problems loomed larger than the disability in her decision to resign. "This one sentence does not cast doubt upon her disability," the court said.

"In sum, none of the material to which [the defendant] points undercuts the account of prolonged disability presented consistently by [the plaintiff's] medical records and her physicians' statements," Judge Wilkinson said.

CERT LITIGATION

Petitioning the Supreme Court, the defendant and the American Council of Life Insurers argued that the Fourth Circuit's decision would broaden a split among circuit courts, contradict Wolfe, and put restrictions on ERISA benefits plans funded by insurance policies.

The issue "is of critical importance because insurance laws in nearly every state require that life, health and disability insurance policies include a provision which specifies that the limitations period commences at the time proof of claim is due under the policy," the ACLI argued in its amicus brief.

It said the decision "would have legal and practical ramifications far beyond the disposition of this particular case."

The council argued that most circuit courts enforce accrual provisions "where reasonable as applied to the particular facts of the case."

The argument was one that hadn't swayed the Fourth Circuit.

Such an approach would provide "no basis for a workable rule," Wilkinson said. "Indeed, a case-by-case approach to contractual accrual provisions creates as many problems as it would solve."

Questions or comments may be directed to fred.horlbeck@nc.lawyersweekly.com.