I am going to get back in the saddle too with this little blog, and get caught up in 2017. The things that have kept me away are starting to resolve, and as always I shall try to make the future better than the past.
Happy New Year to all.
However, the Supreme Court in Cigna suggested that "surcharge" was a remedy intended to provide all manner of compensatory damages to a plaintiff at equity and was not, as the Defendant contends, limited to a "make-whole remedy" — "[e]quity courts possessed the power to provide relief in the form of monetary `compensation' for a loss resulting from a trustee's breach of duty, or to prevent the trustee's unjust enrichment." CIGNA Corp. v. Amara, 131 S. Ct. 1866, 1880, 179 L. Ed. 2d 843 (2011) (citation omitted). Indeed, the sources relied on by the Supreme Court also suggest that equity courts awarded compensatory damages to plaintiffs for losses that may have occurred beyond restitution. For example the Restatement (Third) of Trusts, which the Supreme Court relied on, states, "[i]f a breach of trust causes a loss . . . the beneficiaries are entitled to restitution and may have the trustee surcharged for the amount necessary to compensate fully for the consequences of the breach." Restatement (Third) of Trusts § 95 (2012) (emphasis added); see also G. Bogert & G. Bogert, Trusts and Trustees § 862 ("In suits to collect money from a trustee for breach of trust, the direct damages will usually be measured by the difference between the value of the beneficiary's rights to principal and income before and after the breach, but consequential damages may also be awarded, and exemplary or punitive damages may be awarded where malice or fraud is involved.") (emphasis added); John H. Langbein, What ERISA Means by "Equitable": The Supreme Court's Trail of Error in Russell, Mertens, and Great-West, 103 Colum. L. Rev. 1317, 1337 (2003) ("Cases awarding money damages for consequential injury, either to the trust or to the beneficiary, exist in profusion in trust remedy law.").
Therefore, the Court concludes that, as a matter of law, the Plaintiff is entitled under a surcharge theory to consequential damages, exemplary, or punitive damages in limited circumstances where malice or fraud is involved. Cf. McCravy v. Metro. Life Ins. Co., 690 F.3d 176, 181 (4th Cir. 2012) ("We therefore agree with [the plaintiff] that her potential recovery in this case is not limited, as a matter of law, to a premium refund.").
We wrote twenty-three years ago in Horan v. Kaiser Steel Retirement Plan, 947 F.2d 1412 (9th Cir. 1991), that we will uphold a plan administrator’s decision if it is grounded in “any reasonable basis.” Id. at 1417 (internal quotation marks omitted); see also Sznewajs v. U.S. Bancorp Amended & Restated Supplemental Benefits Plan, 572 F.3d 727, 734–35 (9th Cir. 2009). This language in Horan could be read to mean that we should make an “any reasonable basis” determination without looking at all the circumstances of the case. To take a simple example, factors favoring discharge from the hospital might provide reasonable bases if considered in isolation. A patient might be eating well, have proper blood sugar levels, have no infections, and have a supportive family. Those factors, considered in isolation, would support discharge. But if the reason for the patient’s hospitalization is severe congestive heart failure, those factors would not be reasonable bases to support discharge. In the wake of Glenn, we have recognized that this unrealistic reading of the any-reasonable-basis test is not “good law when . . . an administrator operates under a structural conflict of interest.” Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 674 (9th Cir. 2011). It is also not “good law” even when an administrator is not operating under a conflict of interest and we are performing a “straightforward abuse of discretion analysis.” See Abatie, 458 F.3d at 968; cf. Conkright v. Frommert, 559 U.S. 506, 521 (2010) (“Applying a deferential standard of review does not mean that the plan administrator will prevail on the merits. It means only that the plan administrator’s interpretation will not be disturbed if reasonable.” (internal quotation marks omitted)). In all abuse-of-discretion review, whether or not an administrator’s conflict of interest is a factor, a reviewing court should consider “all the circumstances before it,” Abatie, 458 F.3d at 968, in assessing a denial of benefits under an ERISA plan.
United adds that the decision to deny benefits cannot be arbitrary and capricious because five reviewing physicians agreed with it. That reviewing physicians paid by or contracted with the insurer agree with its decision, though, does not prove that the insurer reached a reasoned decision supported by substantial evidence. The physicians’ opinions carry weight only to the extent they provide a fair opinion applying the standard for granting benefits to the facts of the case. Elliott, 473 F.3d at 619. The reviewing physicians did not do that. They misstated or omitted the key fact of Janie’s prior failed outpatient treatment and ignored United’s guideline
that allowed residential rehabilitation where outpatient treatment had not worked in the past. This argument, too, proves too much. If a decision to deny benefits could never be arbitrary and
capricious when backed by the insurer’s reviewing physicians, court review would be for naught. The insurer would invariably prevail so long as the insurer had physicians on its staff willing to confirm its coverage rulings. That also does not make sense.
Kutten urges us to adopt the district court’s rationale, that because the Pre-Existing Condition clause separates “medical treatment” from “prescribed drugs or medicines” with the conjunction “or,” Sun Life intended to exclude all “drugs or medicines” from the phrase “medical treatment.” Kutten argues if “prescribed drugs or medicines” are excluded from the phrase “medical treatment,” then vitamin A supplements must be excluded from the phrase as well because vitamin supplements require even less medical intervention than “prescribed drugs or medicines.” To construe the phrase “medical treatment” to include vitamin supplements but exclude “prescribed drugs or medicines” would create an internal inconsistency in the Pre-Existing Condition clause, and to construe the phrase “medical treatment” as broad enough to encompass both “prescribed drugs or medicines” and vitamin supplements would render the phrase “prescribed drugs or medicines” meaningless.That’s pretty persuasive stuff; one of the most basic rules if you’re interpreting a contract is that you don’t adopt an interpretation which would render one or more words or phrases meaningless – if at all possible every word should have some meaning and some effect.
Consider the statute’s requirement that fiduciaries act “in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter.” [Citation omitted]. This provision makes clear that the duty of prudence trumps the instructions of a plan document such as an instruction to invest exclusively in employer stock even if financial goals demand the contrary. See also §1110(a) (With irrelevant exceptions, “any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility . . . for any . . . duty under this part shall be void as against public policy”). This rule would make little sense if, as petitioners argue, the duty of prudence is defined by the aims of the particular plan as set out in the plan documents, since in that case the duty of prudence could never conflict with a plan document.And this:
[Fifth Third’s] argument fails, however, in light of this Court’s holding that, by contrast to the rule at common law, “trust documents cannot excuse trustees from their duties under ERISA.” Central States, Southeast & Southwest Areas Pension Fund, 472 U. S., at 568; see also 29 U. S. C. §§1104(a)(1)(D), 1110(a).Now, in English: the ERISA statute applies to all ERISA fiduciaries, and they are required to comply with it, and they can’t get around that with some phoney-baloney provision in a plan document (which they themselves usually draft in the first place) providing otherwise. It’s a rather sad commentary that a Supreme Court decision requiring these people to, you know, obey the law seems so earthshaking, but there you go.