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Black v. Hartford Life Insurance Co.

United States District Court, D. Oregon, Portland Division

June 10, 2019

DAVID BLACK, Plaintiff,
v.
HARTFORD LIFE INSURANCE COMPANY, Defendant.

          Megan E. Glor John C. Shaw Megan E. Glor, Attorneys at Law, P.C., Attorneys for Plaintiff.

          Russell S. Buhite Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Attorneys for Defendant.

          OPINION & ORDER

          MARCO A. HERNÁNDEZ UNITED STATES DISTRICT JUDGE.

         Plaintiff David Black brings this action against Defendant Hartford Life Insurance Company under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (ERISA), challenging the termination of his disability insurance benefits. Both parties move for summary judgment. For the reasons that follow, Plaintiff's motion is granted and Defendant's motion is denied.

         BACKGROUND

         Plaintiff was employed by DMX Music as a Lead Customer Service Representative. Compl. ¶¶ 4-8, ECF 1. Plaintiff was diagnosed with Atypical Parkinson's Disease and obtained long-term disability (LTD) benefits beginning in December of 2005. AR[1] 133, ECF 22. Plaintiff's LTD policy is insured by Defendant Hartford, which is responsible for determining Plaintiff's eligibility for benefits and for paying benefit awards. Compl. at ¶¶ 1, 8; Glor Decl. Ex. B, at 1, ECF 16. Plaintiff was granted an initial twenty-four months of LTD benefits based on his inability to perform material duties of his “own occupation.” AR 304-09. After the twenty-four month period ended, Plaintiff continued to receive benefits under the more stringent “any occupation” standard. AR 263. Plaintiff received LTD benefits for approximately nine years under the “any occupation” standard. AR 144.

         From the outset of Plaintiff's LTD claim, Defendant directed Plaintiff to apply for Social Security Disability Income (“SSDI”) benefits. AR 311-12. Plaintiff applied for SSDI benefits. In 2009, the Social Security Administration (“SSA”) determined that Plaintiff was “unable to perform any work existing in significant numbers in the national economy” and awarded him disability benefits retroactive to February 1, 2006. AR 951. Plaintiff's retroactive SSDI benefits award offset Defendant's prior LTD benefit payments. AR 241, 927. As a result, Plaintiff's monthly LTD payments were roughly cut in half, and Plaintiff paid Defendant $24, 780 out of the SSDI award to cover Defendant's overpayment. Id. In the seven years following the SSA's determination, the nature of Plaintiff's disabling condition was regularly confirmed by physicians and Defendant. AR 66, 80.

         On November 20, 2015, Defendant's Special Investigation Unit (“SIU”) began investigating Plaintiff's LTD claim. AR 617-24. Defendant hired a third-party vendor to conduct surveillance of Plaintiff. AR 660-71. The video surveillance showed Plaintiff walking with a cane, using public transportation, going to the bank, getting his hair cut, and shopping. Id. SIU then scheduled an interview with Plaintiff, which was conducted on March 17, 2016. AR 636- 59. Defendant also hired neurologist Dr. Robert Egan to conduct an independent medical examination of Plaintiff on June 14, 2016. AR 492. Based on his examination and review of Defendant's surveillance footage, Dr. Egan concluded that Plaintiff did not have Atypical Parkinson's Disease. AR 494.

         On August 31, 2016, Defendant wrote a letter to Plaintiff informing him that his LTD benefits claim had been terminated. AR 144-51. Plaintiff appealed the decision, proffering additional medical reports and letters from friends regarding his conditions and limitations. AR 3-4. Defendant denied Plaintiff's appeal. AR 3. Plaintiff then filed this lawsuit alleging that Defendant abused its discretion under ERISA when it decided to terminate his LTD benefits claim. Both Plaintiff and Defendant filed motions for summary judgment.

         STANDARDS

         Traditionally, summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). However,

[t]raditional summary judgment principles have limited application in ERISA cases governed by the abuse of discretion standard. Where, as here, the abuse of discretion standard applies in an ERISA benefits denial case, a motion for summary judgment is, in most respects, merely the conduit to bring the legal question before the district court and the usual tests of summary judgment, such as whether a genuine dispute of material fact exists, do not apply.

Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917, 929-30 (9th Cir. 2012) (citations, quotation marks omitted). In addition, “judicial review of benefits determinations is limited to the administrative record-that is, the record upon which the plan administrator relied in making its benefits decision[.]” Id. at 930 (internal quotation marks omitted). “[W]hen a court must decide how much weight to give a conflict of interest under the abuse of discretion standard[, ] . . . the court may consider evidence outside the [administrative] record.Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006) (en banc). In considering “evidence outside the administrative record to decide the nature, extent, and effect on the decision-making process of any conflict of interest[, ]” id., traditional rules of summary judgment apply, and “summary judgment may only be granted if after viewing the evidence in the light most favorable to the non-moving party, there are no genuine issues of material fact.” Stephan, 697 F.3d at 930 (internal quotation marks omitted). “[T]he decision on the merits, though, must rest on the administrative record once the conflict (if any) has been established, by extrinsic evidence or otherwise.” Abatie, 458 F.3d at 970.

         DISCUSSION

         I. Standard of Review

         A denial of benefits by an ERISA plan administrator is reviewed de novo “unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The grant of discretion must be unambiguous. Abatie, 458 F.3d at 963.

         Here, the LTD policy provides that Defendant

ha[s] full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of the Group Insurance Policy.

         Black Policy 20, ECF 22-5. This language expressly confers discretion on the plan administrator.

         In reviewing for an abuse of discretion, an ERISA plan administrator's decision “will not be disturbed if reasonable.” Conkright v. Frommert, 559 U.S. 506, 521 (2010) (internal quotation marks omitted). This reasonableness standard requires deference to the administrator's benefits decision unless it is “(1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts on the record.” Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 676 (9th Cir. 2011) (internal quotation marks omitted); see also Tapley v. Locals 302 & 612 of Int'l Union of Operating Eng'rs-Emp'rs Constr. Indus. Ret. Plan, 728 F.3d 1134, 1139 (9th Cir. 2013) (courts “equate the abuse of discretion standard with arbitrary and capricious review”).

         Plaintiff does not contest that an abuse of discretion standard is appropriate. However, Plaintiff does argue the Court should heighten its scrutiny because of Defendant's structural conflict of interest.

         When “the insurer acts as both funding source and administrator[, ]” there is a structural conflict of interest that “must be weighed as a factor in determining whether there is an abuse of discretion.” Salomaa, 642 F.3d at 674 (internal quotation marks omitted). However, structural conflicts do not divest the administrator of its delegated discretion. Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 115-16 (2008). Rather, “they weigh more or less heavily as factors in the abuse of discretion calculus.Robertson v. Standard Ins. Co., 139 F.Supp.3d 1190, 1200 (D. Or. 2015); see also Abatie, 458 F.3d at 967 (“We read Firestone to require abuse of discretion review whenever an ERISA plan grants discretion to the plan administrator, but a review informed by the nature, extent, and effect on the decision-making process of any conflict of interest that may appear in the record.”).

         The Ninth Circuit has provided guidance for applying the abuse of discretion standard when there is a structural conflict of interest. See Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 629-30 (9th Cir. 2009). Whether a plan administrator abused its discretion turns on a consideration of “numerous case-specific factors, including the administrator's conflict of interest[.]” Id. at 630. In making that determination, the reviewing court must weigh and balance all of the factors together. Id. Factors that “frequently arise” in ERISA cases include: (1) the quality and quantity of medical evidence; (2) whether the plan administrator subjected the claimant to an in-person medical evaluation or merely relied on a paper review of the claimant's existing medical records; (3) whether the administrator provided its independent experts with all of the relevant evidence; and (4) as applicable, whether the administrator considered a contrary Social Security Administration (“SSA”) disability determination. Id. at 630. The weight assigned to the “conflict factor depends on the facts and circumstances of each particular case.” Id.

         Other factors might include inconsistent reasons for denial or evidence of malice. Salomaa, 642 F.3d at 674. Additionally, a “procedural irregularity” in violation of ERISA regulations “is a matter to be weighed in deciding whether an administrator's decision was an abuse of discretion.” Abatie, 458 F.3d at 972.

         Here, Defendant does not dispute that it plays a dual role as claim administrator and insurer. “Thus, the Court assesses ‘the reasonableness of the plan administrator skeptically[.]'” Williams v. Reliance Standard Life Insurance Co., 164 F.Supp.3d 1230, 1246 (D. Or. 2016) (quoting Salomaa, 642 F.3d at 666).

         II. The Court assigns little weight to Defendant's structural conflict of interest.

         While Hartford acknowledges there is structural conflict of interest, it disputes the extent to which the Court should consider it as a factor in determining whether it abused its discretion in denying Plaintiff's disability benefits. It argues that because it has “walled off” its claims decision-makers, any structural conflict of interest deserves little, if any, weight. Def. Corrected Mot. for Sum. Judg. 35 [hereinafter Def. Mot.], ECF 32. It also argues that its use of third-party vendors does not improperly influence its claims decisions. Id. at 36.[2]

         A. “Walling Off Claims”

         Defendant argues it has reduced any conflict by, among other things, (1) separating its claims and appeals units; (2) not providing “incentives, remuneration, bonuses, awards, achievements, or other recognition in whole or part upon the denial or termination of claims, ” and (3) ensuring that claims and appeals decision-makers are separate business units from the financial and underwriting departments and are not involved in financial decisions. Def. Mot. 45.

         Plaintiff disputes that Defendant has sufficiently minimized the effects of any conflict. In particular, Plaintiff focuses on performance metrics related to the financial impact of investigations and argues that these metrics incentivize claim termination. For example, Plaintiff points to records that investigator Bishop was praised for meeting or exceeding referral volume and for using “highly effective investigative strategies;” that investigator Still failed to meet her goals for referrals and file closings, but was praised for her roundtable participation; and that nurse Allen received an award for delivering outcomes. Glor Decl. Ex. C at 12, E at 4, Ex. G at 5, ECF 43 While the Court is not convinced there is any connection between, for example, “effective investigative strategies, ” participation in roundtables, and claim termination, the Court does agree that certain goals appear to incentivize referring cases for further investigation. See, e.g., Glor Decl. Ex. E at 14 (investigator “made agency referrals on 46% of the matters that she closed, which is above goal”). However, further investigation does not necessarily lead to claim denial and termination.

         Moreover, the Court is not convinced that these metrics alone support the speculation invited by Plaintiff. Read as a whole, the evaluations demonstrate a broad review of employee performance. For example, under the category of “Quality, ” employees are evaluated in part on the strategic use of surveillance resources and the timeliness of medical records requests. Glor Decl. Ex. C at 4. Under the category of “Behaviors, ” employees are evaluated in part on their participation in ongoing trainings and ability to maintain positive working relationships. Id. Under the category of “Results/production, ” employees are evaluated in part on the number of accepted cases and completed investigations. Id. Even the “financial performance” section, described as “expense management/productivity, ” appears to encompass a wide range of goals, which include minimizing waste, processing expense payments in a timely manner, closing investigations ...


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