JJ Conway
J.J. Conway Law

Years ago, I had an unexpected meeting with a gentleman who worked high up in the benefits department of an automotive manufacturer before ERISA’s enactment. He had an encyclopedic knowledge about the run up to the law’s passage in 1974 and the opposition the law faced. Almost every interest group was against ERISA – the automakers, the unions, most private companies, and even state and local governments. Its passage is something of a legislative miracle. What I remember most about our conversation was his response when I asked him what happened after ERISA passed. He said his company set the lawyers loose to shape the law the way they wanted it interpreted.

Perhaps, it’s not surprising then that ERISA can be a tough law for the very people it was meant to protect. Federal courts routinely cited “policy reasons” for restraint in construing the law’s protections. Courts took the view that employees should be thankful for the benefits they had since ERISA did not actually mandate the providing of any benefits. (ERISA only imposed standards on plans once they offered benefits to employees). To compound matters, the federal courts crafted difficult legal burdens to overturn discretionary decisions by an employee benefit plan. Nowhere were the judicial obstacles more pronounced than in the area of disability income replacement benefits.

Looking back on it now, it is interesting that two cases involving two hardworking and successful employees were able to push past these obstacles and improve the lives of many others trying to secure disability insurance benefits. I had the good fortune to work with these two remarkable women and witness firsthand their resolve in fighting against difficult odds.

The first case involved the claims of Sherry DeLisle, the chief financial officer of a luxury jeweler. Sherry had been seriously injured in an automobile accident that left her occupationally disabled. Despite her physical limitations and concentration difficulties, Sherry was trying to push through her pain and cognitive issues. Her work was complex, and she was having trouble keeping up. She was ultimately fired for non-performance of her job.

Sherry filed a claim for disability benefits and asserted that she was functionally disabled while still working. She argued that her diminished performance was evidence of her disability after years of accolades, bonuses, pay increases, and promotions. Her benefit plan’s insurer denied the claim.

The insurer claimed Sherry had no coverage since she had been terminated by her employer. The case went to full briefing in a federal district court. Sherry won. But the court allowed the insurer to reprocess the claim and decide whether Sherry was, in fact, occupationally disabled, despite her being off work and later being deemed disabled by the Social Security Administration.

Reviewing her claim a second time, the insurer now claimed that Sherry was “not disabled” based on the file reviews of several physicians working for the insurer or under contract with the insurer. Sherry countered with multiple treating physicians, considerable objective evidence showing extensive hardware and spinal repair, cognitive tests, and affidavits. Again, the insurer upheld the denial. Sherry went back to federal court and challenged her disability insurer’s claims practices. Sherry’s case spanned more than seven years before two different trial court judges and the U.S. Court of Appeals for the Sixth Circuit and a full en banc briefing.

When it was over, Sherry’s case established the “evaluation of factors” analysis in ERISA long-term disability cases. DeLisle v. Sun Life Assurance Company of Canada, 558 F.3d 440 (6th Cir. 2009). This was a key development because it established a framework for analyzing these types of claims. A reviewing court would now look at different evidentiary factors and decide whether a participant was entitled to benefits or whether an insurer abused its discretionary decision-making authority. It also helped make sense of the Supreme Court’s ruling in MetLife v. Glenn, 554 U.S. 105 (2008), a case that originated in the Sixth Circuit. See also “Refining Wilkins: A 20-Year Look at the Factors Used in the Sixth Circuit’s Resolution of Disability Claims Under ERISA,” 34 W. Mich. U. Cooley L. Rev. 2018.

Years later, the Sixth Circuit decided Wallace v. Oakwood Healthcare, Inc., 954 F.3d 879 (6th Cir. 2020). Cheryl Wallace, a decades-long nurse and medical volunteer, contracted a serious infectious disease while traveling abroad. Cheryl became seriously ill and was unable to return to work. Her employee plan denied her claim, arguing that she did not exhaust her pre-suit remedies.

A “failure to exhaust” defense was reflexively asserted in nearly every ERISA claim, and its application was uneven at best. Some cases would be dismissed with prejudice for a failure to exhaust. Other cases would be sent back to the plan by the court to allow a participant to exhaust their remedies. The exhaustion doctrine was commonly used as a technical defense to sink an otherwise valid claim by missing a step in the pre-litigation process.

Cheryl challenged the exhaustion doctrine in federal court. She argued that if an insurance company was going to insist that a plan participant exhaust their remedies, it had to write that requirement into its contract. Otherwise, there was nothing to require Cheryl — or any other plan member — to take this step. Interestingly, in the nearly fifty years since ERISA had been around, this issue had not been decided at the appellate level.

Cheryl prevailed with the U.S. Court of Appeals for the Sixth Circuit finding that if a benefit plan did not require exhaustion of remedies, it was no longer required. The reasoning in her case was adopted by the Eighth Circuit Court of Appeals, and there has not been a decision holding otherwise to date.

Neither Sherry DeLisle nor Cheryl Wallace set out to change the law. Rather, they both had a contractual dispute in need of a resolution. Both were provided opportunities to resolve their claims by pursuing early settlements. Somewhere along the way something changed. Their cases stopped being about their own individual claims. They took a broader view, despite the financial hardship. The idea of helping others became more appealing and entered into their approach to litigation.

There are risks to this approach. There are also rewards. And when the decision to go big ends up changing the way things are done, there is a kind of magic that happens. And it is something to behold when a client can experience it, just like Sherry DeLisle and Cheryl Wallace did.

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John Joseph (JJ) Conway is an employee benefits and ERISA attorney and litigator and founder of J.J. Conway Law.

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