Does an insurer’s litigation history dating back 10 years justify overbroad discovery in an ERISA case? It might… (See below for a strategy to combat this from occurring in your cases).

Also, in each case you should reassess whether or not to argue for the arbitrary and capricious standard. Consider the adverse effects of pushing for application of the abuse of discretion standard… versus stipulating to the de novo standard. This can help limit discovery.

This new case highlights these concerns…

Here’s the case of Black v. Hartford Life Ins. Co., 2018 WL 3872113 (D. Or. August 14, 2018).

FACTS. Plaintiff sought and received ERISA-governed disability benefits for nine years as a result of “Atypical Parkinson’s Disease.” An Independent Medical Exam, which relied in part on surveillance video concluded Plaintiff did not have Atypical Parkinson’s, and Hartford terminated benefits. The abuse of discretion standard of review could apply to the case. Hartford operated under a conflict of interest because it served as both the claims administrator and insurer.

Plaintiff brought suit and sought broad discovery regarding: (1) financial relationships between insurer and vendors; (2) performance evaluations of key employees of insurer.

DISTRICT COURT HELD: Discovery GRANTED.

  1. “District courts are generally limited to the administrative record unless a so-called structural conflict of interest exists.” Op. at 4.
  2. “[W]hether to permit ‘conflict’ discovery is well within the discretion of the Court….” Op. at 6.
  3. In this case, Hartford operated under a conflict of interest because it is the claims administrator and insures the claim. Op. at 6.
  4. “[I]n other ERISA cases within the Ninth Circuit, Hartford has used [certain investigator vendors] to conduct biased investigations.” Op. at 6. Remarkably: the Court cited cases that went back 10 years, 6 years and 4 years ago.
  5. “Given that Hartford operates under a conflict of interest and has a history of biased claims administration, the Court exercises its discretion to allow Plaintiff to obtain the discovery he seeks.” Op. at 6-7.
  6. The Court allowed discovery of vendor agreements because the Court “is particularly persuaded by the fact that Hartford has used the same vendors in this case as were used in [the 2012 and 2014 cases].” Op. at 7.
  7. “Hartford’s performance reviews ‘may reveal a structural incentive for individual claims adjustors to deny disability claims.’” Op. at 7.

KEY TAKE AWAYS to Limit Overbroad Discovery:

In discovery motions, most courts consider only the case at hand, and will not accept arguments tainting the insurer that rely on ten year old court rulings against the insurer in other cases.

  1. In discovery battles, consider agreeing to de novo review (which all but eliminates discovery) versus the abuse of discretion standard which allows the court greater discretion to order overbroad discovery. Where, as here, the district court reviews de novo the denial of benefits, that review is limited to the administrative record unless “circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.” Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 944 (9th Cir. 1995) (quoting Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1025 (4th Cir. 1993)).
  2. For future discovery battles, create a list now of court decisions upholding your insurer claims decisions. Each insurer should develop a “case win list” that can be made as an exhibit and submitted to the court to combat Plaintiff’s briefing cherry-picking adverse decisions.

You already know that in ERISA life, health and disability claim determinations, “‘[i]n most cases…the district court should only look at the evidence that was before the plan administrator at the time of the determination.’”  (There are many exceptions.)

Sometimes during the later lawsuit, the claimant may seek to supplement the administrative record. For example, you might expect motions to supplement the record when the Social Security Administration issues a disability determination after the ERISA claim administrator initially denies the claim.

So, how do you oppose motions to supplement the record when under de novo review?

And…are there situations in which you might agree to de novo review (rather than discretionary review)?  YES.

According to this new case: “an administrator’s obligation to ask for extrinsic evidence under an abuse of discretion standard of review does not necessarily exist under a de novo standard of review, and the court declines to apply such a requirement on de novo review….” (Emph. added.)

Here’s the case of Reetz v. Hartford Life and Accident Ins. Co., 2017 WL 5176705, ___F.Supp.2d ___ (W.D. WA November 8, 2017)(Court denied Plaintiff’s motion to supplement record with Social Security Administration disability determination. “[A]n administrator’s obligation to ask for extrinsic evidence under an abuse of discretion standard of review does not necessarily exist under a de novo standard of review, and the court declines to apply such a requirement on de novo review….”) (Emph. added). (Kudos to my partner Stephania Denton on a very nice win.)

FACTS: Reetz sought ERISA governed disability benefits; Hartford advised Reetz she must apply to the Social Security Administration (SSA) for disability benefits. Reetz’s SSA application was initially denied, and she appealed. While the SSDI appeal was pending, Hartford denied the ERISA disability claim. Two (2) months later SSA granted Reetz’s SSDI disability claim; Hartford later denied Reetz’s appeal of the claim denial.

ISSUE: Whether the Court should allow supplementation of the administrative record with the Social Security Administration Disability determination?

DISTRICT COURT HELD:  Motion to Supplement Record DENIED.

  • Under Ninth Circuit precedent “‘[i]n most cases…the district court should only look at the evidence that was before the plan administrator at the time of the determination.’”  Op. at 4.
  • “Evidence outside of the administrative record is considered ‘only when circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.’”  Op. at 4-5.
  • Those “certain limited circumstances” when the record can be supplemented include:
    •  claims involving complex medical questions,
    •  credibility of experts,
    •  claims involving little or no administrative record,
    •  the need to interpret plan terms,
    •  instances when payor and administrator are the same entity and the court is concerned about impartiality,
    •  when the claimant could not produce the evidence during the administrative process.  Op. at 5.
  • The Court determined that Reetz “could have presented the SSA decision and the hearing evidence during her appeal of the Hartford denial.” Op. at 5.
  •  Reetz argued that Hartford “should have asked for the information.” But the Court noted “an administrator’s obligation to ask for extrinsic evidence under an abuse of discretion standard of review does not necessarily exist under a de novo standard of review, and the court declines to apply such a requirement on de novo review….”  Op. at 7-8.

 

You already know that plans that contain “discretionary language” should enjoy a more deferential review by the trial court.

But when the plan administrator decides and funds the benefit decision, courts view this as a “structural conflict” and impose additional expectations on the claims process.

Sometimes de novo review isn’t all bad.

Here’s the recent case Inciong v. Fort Dearborn Life Insurance Company, __ Fed. Appx. __, 2014 WL 1599513 (9th Cir. April 22, 2014)(Court affirms benefit denial, under de novo standard of review, even though there was no Independent Medical Exam).

This opinion also has some other “pearls” regarding vocational assessments and consideration of Social Security Administration decisions.

FACTS: Inciong received disability benefits under an ERISA-governed plan for fifteen (15) years. Then, Fort Dearborn obtained evidence that Inciong’s condition had improved, and terminated benefits. The trial court reviewed the termination of benefits under de novo review, and affirmed the termination because Inciong failed to “provide sufficient objective and quantifiable evidence to support his claim of total disability.” The policy did not specifically mention a requirement of “objective, quantifiable evidence of disability.”  Inciong appealed.

NINTH CIRCUIT HELD:

  1. Fort Dearborn presented evidence that Inciong’s “level of activity ha[d] actually improved over time.” Op. at 3.
  2. Inciong claimed he was disabled because no one would hire him after being out of the workforce for 15 years.  But the policy’s definition of disability “does not require a showing that Inciong would in fact be hired for a specific job; it only requires a showing that jobs exist that Inciong was qualified for and capable of doing.” Op. at 4.
  3. IME Required? When a court performs de novo review, an Independent Medical Exam is not required.  (When a court reviews a decision under the arbitrary and capricious standard, and the plan has a structural conflict, then a court may question the “thoroughness and accuracy of a benefit decision” if the plan relied only on a “pure paper review.”) Op. at 5.
  4. Failing to explain away the Social Security decision not a problem. “Fort Dearborn terminated benefits fifteen years after initially granting them, based on evidence that Inciong’s condition had improved. There is no evidence that the Social Security Administration has conducted a recent review of its determination. Op. at 5.