Funk v. Cigna Group Insurance
648 F.3d 182
3rd Cir.2011Background
- Funk, Lucent employee, was a participant in Lucent's self-funded Long-Term Disability Plan, administered by CIGNA.
- Plan provides LTD benefits in two phases; phase two requires showing incapacity for any job for which he is or could be qualified, with a 60% pay threshold.
- Plan offsets LTD with Social Security benefits and requires reimbursement of any LTD overpayment.
- CIGNA denied Funk's phase-two LTD benefits after independent reviews and medical evidence; Funk appealed and later Social Security awarded him benefits, creating an overpayment.
- District Court granted Funk summary judgment on benefits and denied CIGNA's overpayment recovery; Third Circuit vacated and remanded in part, reversing on the overpayment issue.
- This appeal centers on whether CIGNA complied with the Plan and whether it could recover the overpaid benefits through an equitable lien on Social Security funds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did CIGNA comply with the Plan in determining phase-two disability? | Funk argues CIGNA failed to assess 60%-salary job alternatives and treated disability inaccurately. | CIGNA reasonably interpreted the Plan and focused on Funk's ability to perform his regular occupation. | Yes, CIGNA's denial was reasonable and consistent with the Plan. |
| Was CIGNA's denial supported by substantial evidence free of legal error? | The evidence supported ongoing functional impairment and the opinions of treating physicians. | Reviews by non-treating physicians and objective testing supported no functional impairment prohibiting work. | Yes, substantial evidence supported denial; district court erred on weighing conflict of interest. |
| Did the district court err by treating plan administrator conflict of interest as controlling? | Conflict of interest should weigh heavily against CIGNA under Glenn. | Conflict is a factor but not decisive; must weigh multiple considerations. | Remand to reevaluate with other factors; no automatic reversal based solely on conflict. |
| Can CIGNA recover the overpaid Social Security offset via an equitable lien by agreement? | No equitable lien since funds were dissipated and not in Funk's possession. | The Plan and Reimbursement Agreements create an equitable lien on Social Security funds as overpayments. | Yes; Plan language and agreements create an equitable lien by agreement on the overpayment. |
Key Cases Cited
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (Supreme Court, 1989) (establishes abuse of discretion standard for ERISA benefits decisions)
- Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105 (Supreme Court, 2008) (conflict of interest as a factor in review, not per se weighty)
- Sereboff v. Mid Atlantic Med. Servs., Inc., 547 U.S. 356 (Supreme Court, 2006) (equitable lien by agreement; identifies fund-specific relief)
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (Supreme Court, 2002) (distinguishes equitable relief vs. legal relief when funds are not in plaintiff's possession)
- Bill Gray Enters., Inc. Emp. Health & Welfare Plan v. Gourley, 248 F.3d 206 (3d Cir. 2001) (principles for reviewing plan interpretations and discretion)