*12 The KPMG Long-Term Disability Policy states that disability benefits, once commenced, will be paid for the entire period of disability if the insured gives proof upon request of continued “regular attendance of a physician.” (VB 456). The policy defines “physician” as a person who is “licensed to practice medicine and prescribe and administer drugs or to perform surgery.” (VB 451). Liberty maintains that Blankenship should not receive benefits after April 19, 2000, because he was “no longer under the regular care of a physician” at that time. In support of this assertion, Liberty points to Blankenship’s last visit with Dr. Grimm in April 1999. FN5
FN5.Although Liberty acknowledges that Blankenship saw his urologist, Dr. Thomas, in September 1999, it discounts that visit due to later statements by Dr. Thomas expressing reservations about Blankenship’s disability. Def. Trial Br. at 18. Clearly, Dr. Thomas fits the definition of physician under the policy, and as a urologist, his care is relevant to Plaintiff’s disability. The policy provides no support for Liberty’s rationale for discounting the visit, and this Court will consider it for purposes of determining if Blankenship was under the “regular” care of his physicians.
The Ninth Circuit has found that “the primary rationale for the physician’s care requirement is to assure that the claimant is actually disabled, is not malingering, and is not making a fraudulent claim.” Eichacker v. Paul Revere Life Ins. Co.,354 F.3d 1142, 1148 (9th Cir.2004)citing Heller v. Equitable Life Assurance Soc’y of the United States,833 F.2d 1253, 1257 (7th Cir.1987); Russell v. Prudential Ins. Co. of Am.,437 F.2d 602, 607 (5th Cir.1971). The Sixth Circuit identified several factors that inform a Court’s determination of whether a claimant is under the “regular attendance of a physician.” See Rowan v. Unum Life Insurance Co. of Am.,119 F.3d 433, 437 (6th Cir.1997). In addition to the frequency of doctor’s visits, these include “the plaintiff’s condition at the time of her last doctor’s visit, the likelihood that additional doctor visits would have influenced the progression of her disability, whether or not the plaintiff was taking medication or engaging in physical therapy or exercises recommended by her doctor, and the need for a physician to directly monitor such activities in the normal course of treatment.” Id.
As of April 2000, Blankenship had not visited a doctor for six months. However, Blankenship informed Liberty in January 2000 that his condition remained unchanged in that he had the same symptoms with regard to urinary retention, frequency, and bladder spasm-induced incontinence. Moreover, he was continuing on the regimen of medications prescribed by his doctors for his urological condition, including hytrin, ditropan, lisinopril, and aspirin. Blankenship’s treating physician, Dr. Grimm, wrote to Liberty on June 25, 1999 that Blankenship’s “current treatment regime” was to continue “medication management” with a possibility of surgical intervention “if no improvement.” (VB 263). Dr. Grimm wrote that he had last seen Blankenship in April 1999, but did not schedule him for another office visit. Id. It is reasonable that Blankenship, who had been suffering under these symptoms for several years, would curtail his frequent trips to Seattle to visit Dr. Grimm if his status remained essentially unchanged. This Court finds that the circumstances of Plaintiff’s disability were static such that frequent visits with his doctors would not be called for. The fact that Plaintiff remained on a rigorous regimen of prescribed medication also supports our determination that he was under the “regular” care of his physicians. Finally, since Liberty never raised the “regular attendance of a physician” issue in its initial denial letter, the Court is inclined to give latitude to Blankenship here, as he was never provided an opportunity to provide the record with evidence that his level of treatment was “regular” in relation to his condition and circumstances.
*13 Based on Dr. Grimm’s medical functioning evaluations, a complete lack of evidence that Blankenship’s condition had improved since Liberty began paying benefits, Blankenship’s consistent medication regimen, the failure of Liberty to examine Blankenship before terminating his benefits, the failure of Liberty’s hired physicians to address the affect of Blankenship’s condition on his duties at work, and the fairly suspicious behavior of Liberty throughout, this Court determines that Blankenship was still “totally disabled” within the terms of the policy at the time Liberty terminated benefits in April 2000, and Liberty’s termination was therefore improper. We also hold that Liberty is estopped from arguing that Blankenship might have been qualified for another job a year later, as its own improper actions precluded such an investigation at the relevant time.C.Offset for Other Income
In the event this Court determines that Liberty improperly terminated Blankenship’s benefits, Liberty asserts that it is entitled to offset any judgment based on the retirement benefits that KPMG paid out to Blankenship. Because this Court finds that the KPMG policy requires these benefits to be “received” by claimant, and the circumstances in this case do not qualify as a “receipt” of retirement benefits, we find that Liberty is not entitled to reduce the amount of disability benefits owed to Blankenship.
The KPMG policy provides that for employees who become disabled after the age of 60, disability benefits will be payable for up to five years, but not beyond the age of 70. (VB 043). Because Blankenship’s disability arose at the age of 63, he was entitled to receive disability benefits until the age of 68, so long as he remained continuously disabled during that time. However, the policy also allows Liberty to offset the amount of a claimant’s total disability monthly benefit by the amount of “other income benefits” received during that period. These include retirement benefits that “the insured receives under the employer’s retirement plan.” (VB 458). Liberty argues that it is entitled to an offset of $150,477.00 for certain of Blankenship’s “retirement benefits.”
On September 13, 2000, KPMG terminated Blankenship’s employment because his disability claim had been denied and he had not returned to work. (VB 016, 096). In accordance with KPMG practice, at the time of his termination Blankenship became eligible to receive retirement benefits from several KPMG retirement plans. On October 31, 2000, Blankenship received a letter from KPMG outlining his options for receipt of these retirement benefits. (VB 528-32). Although the standard form of payment under these plans was a joint and survivor annuity for the lives of the insured and his spouse, the plans allowed an insured to elect other options. Id.
The KPMG Pension Plan offered two options: 1) the annuity or 2) a “lump sum” payment. (VB 529). If an insured chose the lump sum option, he could either “receive” it, in which case the amount would be taxable, or he could elect to “roll it over into an IRA or other tax qualified vehicle,” in which case it would not be deemed “received” for tax purposes. Id. The KPMG Personal Retirement Account (the “PAR Plan”) offered several more options than the Pension Plan. In addition to the annuity and the lump sum payment or lump sum rollover, it allowed an insured to receive payment in monthly installments or to defer distribution of the account until insured reached the age of 70 1/2. (VB 530).
*14 With the consent of his wife, Blankenship elected to roll over both accounts to an IRA managed by the Vanguard Fiduciary Trust Company (“Vanguard”). As a result, on December 11, 2000, KPMG’s retirement plan administrators transferred $29,291.00 from the KPMG retirement trusts directly to Vanguard, representing the amount in Blankenship’s Pension Plan account. On January 9, 2001, KPMG transferred $761,149.00, the amount of Blankenship’s PAR Plan Account, to Vanguard.
Both parties agree that these plans fall within the definition of “retirement plan” under the policy. FN6 Liberty argues that the distributions from the KPMG Pension Plan and PAR Plan are properly offset against the disability payments because they are “retirement benefits” under the policy. The policy defines “retirement benefits” as “money which is payable under a retirement plan in a lump sum or in the form of periodic payments.” (VB 452). Thus, according to Liberty, because these benefits were “payable” in December 2000 and January 2001, they qualify as a retirement benefit under the policy and are properly offset. Def. Supp. Trial Br. at 4. However, the policy further qualifies that an offset is only proper for the amount of retirement benefits “the insured receives under the employer’s retirement plan.” (VB 495) (emphasis added). Therefore, the propriety of an offset depends on whether the rollover from KPMG to Vanguard constitutes “receipt” by Blankenship such to trigger the offset. We hold that it does not.
FN6.The parties disagree as to whether the portion of Blankenship’s PAR Plan Account attributable to his years as a KPMG partner fit within this definition. However, because we conclude that Liberty is not entitled to any offset from the retirement plans, we do not need to resolve this dispute.
First, it is instructive to examine the context in which the word “receives” appears in the KPMG policy. Blankenship points out that this language is distinct from that relating to Worker’s Compensation or Social Security benefits, which require only that an insured be “eligible” for such benefits in order for an offset to apply. Id. Employers are permitted to offset long-term disability benefits with pension benefits by virtue of a provision in the Older Workers Benefit Protection Act of 1990 (OWBPA), which amended the Age Discrimination in Employment Act (ADEA). 29 U.S.C. § 623(1)(3)(B). This section permits the reduction of long-term disability benefits by pension benefits “for which an individual who has attained the later age of 62 or normal retirement age is eligible.” Id. (emphasis added). Thus, the KPMG policy drafters could have chosen to make an offset contingent upon an insured’s eligibility for retirement benefits. However, as noted above, the KPMG policy distinguished between those benefits for which the insured is “eligible” and those that the insured must actually “receive,” putting retirement benefits in this latter category.
This is not a distinction without a difference, as reference to the tax code illustrates. Under the Tax Code, the transfer from KPMG to the Vanguard IRA did not constitute “receipt” for tax purposes. According to the Tax Code, a disbursal from an employee trust is only taxable if it is “actually distributed” to the beneficiary by the employee trust. I.R.C. § 402(a). A trustee-to-trustee transfer from the employee trust to another IRA account does not qualify as “actually distributed” to the employee. Id. § 402(c).
*15 The plain meaning of the word “receive” also indicates that Blankenship did not receive anything through this transfer. He did not receive the funds as income, nor did he obtain the use and enjoyment of the funds. Although Blankenship has beneficial ownership of the funds in the Vanguard IRA, as well as the rights to obtain those funds and appoint a beneficiary of them, he similarly possessed these rights and benefits when the funds were held by the KPMG plans, and therefore cannot be said to have received anything in the transaction.
The policy behind the ADEA provision also supports our finding that the offset is not appropriate in this case. In a case involving the propriety of offsetting retirement benefits against a long-term disability benefit, the Ninth Circuit considered the policy rationale and legislative history of the ADEA in determining that an offset was not proper. Kalvinskas v. California Inst. Tech.,96 F.3d 1305 (9th Cir.1996). In that case, a disabled employee was effectively coerced into retiring when his employer offset his disability benefits with pension benefits that the employee could only receive by retiring. Id. After a review of its legislative history, the court determined that the “purpose of § 4( l )(3) was to prevent an employee from receiving the windfall of simultaneous payments of long-term disability and pension benefits in full.” Id. at 1309. Because the employee’s disability benefits were offset, the employee was impermissibly forced to retire to receive any income from the employer. Id.
We find the Ninth Circuit’s comments on § 4(1)(3) instructive. The statute giving rise to this provision in the KPMG policy was based on a policy rationale of preventing “double-dipping” by an employee-that is, receiving two independent benefit payments at once. Id. In Kalvinskas, the court found that the policy of avoiding “double-dipping” is not served when a company coerces an employee to retire in order to receive benefits. We find that the policy of avoiding double-dipping is also not served under the circumstances here. Like the employee in Kalvinskas, Blankenship did not choose to retire; however, he was forced into retirement when Liberty improperly terminated his disability payments. As a further result of Liberty’s termination of his disability benefits, Blankenship was required by KPMG to take action regarding the dispensation of his retirement benefits. Even though we now find that Liberty’s termination of disability benefits was improper, had Blankenship actually received his retirement benefits, Liberty arguably would be entitled to reduce any retroactive disability payment by an appropriate amount. However, this is not what happened. Blankenship did not elect to receive his benefits; he rolled them over into an IRA so that he would not be in the impermissible position of “double-dipping.” FN7 Blankenship’s choice accords with the policy of the ADEA regulation that employees not receive a “windfall” of simultaneous disability and pension benefits. Kalvinskas, 96 f.3d at 1309. In sum then, because we find that Blankenship did not “receive” the retirement benefits under the KPMG policy when he elected to roll them into his IRA, Liberty is not entitled to an offset and must pay the full amount of disability benefits otherwise due to Plaintiff.
FN7. Although Blankenship had the option to leave his PAR funds in the KPMG trust, he had no such option with his pension funds. Forced to roll over one of his accounts, it is reasonable that he would also move his PAR funds at the same time. That Plaintiff had an option to leave some of his savings in the KPMG trust does not affect our determination that the rollover is not a “receipt” under the KPMG policy.IV. Conclusion
2. Under the circumstances in this case, Defendant is not entitled to an offset for the retirement benefits Plaintiff rolled over into an IRA.
3. Plaintiff is entitled to and shall have judgment for disability benefits at the rate of $6,093.82 per month, beginning April 20, 2000 and continuing through May 29, 2003.
4. Plaintiff is further entitled to and shall have judgment for interest on each unpaid installment at the applicable interest rate from the first day of the month following the date that the payment was due.
5. Plaintiff shall have and recover his costs of this action, including attorney’s fees.
6. Plaintiff is ORDERED to submit to the Court within 10 days the following:
A. The total amount of benefits, as defined in item 3.
B. The total amount of interest owed, as defined in item 4.
C. The amount requested for attorney’s fees and documentation therefor, together with a costs bill.
IT IS SO ORDERED.
Copr. (C) West 2007 No Claim to Orig. U.S. Govt. Works N.D.Cal.,2004.
Blankenship v. Liberty Life Assur. Co. of Boston
Not Reported in F.Supp.2d, 2004 WL 1878211 (N.D.Cal.)
Motions, Pleadings and Filings (Back to top)
• 2004 WL 2159581 (Trial Motion, Memorandum and Affidavit) Plaintiff’s Memorandum Re: Computation of Benefits Due, Interest, Costs and Attorney’s Fees (Aug. 30, 2004) Original Image of this Document (PDF)
• 2004 WL 2159236 (Trial Motion, Memorandum and Affidavit) Plaintiff’s Supplemental Trial Brief (Jul. 29, 2004) Original Image of this Document (PDF)
• 2004 WL 2159240 (Trial Motion, Memorandum and Affidavit) Liberty Life Assurance Company of Boston’s Response to Plaintiff’s Supplemental Trial Brief (Jul. 26, 2004) Original Image of this Document (PDF)
• 2003 WL 23794480 (Trial Pleading) Liberty Life Assurance Company of Boston’s Answer to Plaintiff’s Complaint (May 28, 2003) Original Image of this Document (PDF)
• 3:03cv01132 (Docket) (Mar. 17, 2003)
• 2001 WL 34660796 (Trial Pleading) Complaint (Mar. 9, 2001) Original Image of this Document (PDF)
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