United States District Court, D. Oregon, Portland Division
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
A. HERNÁNDEZ UNITED STATES DISTRICT JUDGE.
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.
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 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.
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.
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.
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.
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).
[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
Standard of Review
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.
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.
Policy 20, ECF 22-5. This language expressly confers
discretion on the plan administrator.
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
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.
“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.”).
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.
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
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).
The Court assigns little weight to Defendant's structural
conflict of interest.
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.
“Walling Off Claims”
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.
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.
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