Gonzales v. UNUM Life Insurance Company of America et al, No. 3:2009cv00468 - Document 59 (S.D. Cal. 2012)
Court Description: ORDER Granting in Part and Denying in Part Plaintiff's 51 Motion; and Granting Defendant's 55 Motion for Summary Judgment on the Standard of Review. Signed by Judge Anthony J. Battaglia on 3/22/2012. (knb)
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Gonzales v. UNUM Life Insurance Company of America et al Doc. 59 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 10 RUBEN GONZALES, Plaintiff, 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CASE NO. 09-CV-0468-AJB (WVG) ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION, AND GRANTING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT ON THE STANDARD OF REVIEW vs. UNUM LIFE INSURANCE COMPANY OF AMERICA, PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY, and STARWOOD HOTELS & RESORTS LONG TERM DISABILITY PLAN & WORKPLACE DISABILITY PLAN, [Doc. Nos. 51 & 55] Defendants. Now before the Court are cross-motions for summary judgment to determine the appropriate standard of review on Plaintiff Ruben Gonzales’ disability insurance claims pursuant to the Employee Retirement Income Security Act (“ERISA”). These motions were fully briefed in March 2011 before they were transferred to the undersigned. The Court found them suitable for decision on the briefs. Civ. Local R. 7.1(d)(1). For the reasons stated below, the Court GRANTS IN PART AND DENIES IN PART Plaintiff’s motion and holds that the de novo standard of review applies to the short-term disability policy, and GRANTS the motion filed by Defendants Unum Life Insurance Company of America, Provident Life and Accident Insurance Company, and Starwood Hotels and Resorts Long Term Disability Plan and Workplace Disability Plan that the abuse of discretion standard applies to the long-term disability policy. -1- 09-CV-0468 Dockets.Justia.com 1 BACKGROUND 2 The parties agree that the de novo standard of review applies to the short-term 3 disability (STD) policy; consequently, the Court describes only those facts pertaining to 4 Gonzales’ claim for long-term disability benefits (LTD).1 The parties have not asked the 5 Court to apply the standard of review to the facts, thus, a truncated version of facts suffices. 6 Gonzales worked as a team manager and leader selling timeshares for Starwood 7 Hotels in Hawaii. He earned $550,000 in 2005 and over $395,000 in 2006. Starwood 8 covered its employees with a group long-term disability policy from Unum Insurance 9 Company. If benefits had been paid, Gonzales would have received a monthly benefit of 10 $21,078.28 for the eighteen months following the expiration of his short-term disability 11 benefits. 12 A. Gonzales’ Claims for Benefits 13 In June 2007, when Gonzales was 67 years old, he had a second heart operation to 14 treat blocked arteries. (Gonzales had been treated for the same problem in 2005, thus, 15 insurers deemed it to be a pre-existing medical condition.) On June 20, Gonzales called 16 Unum, and the agent’s intake form states that the condition was “blocked arteries.” AR Ex. 17 C at 29. Unum acknowledged Gonzales’ claim for benefits, asked his doctors to complete a 18 medical form, and asked Gonzales to provide a written statement. Id. at 89 (referring to 19 STD benefits as “Voluntary Workplace Benefit”). 20 21 On the written form, Gonzales listed his medical condition as “dizziness, anxiety, and fatigue[].” Id. at 95. Unum telephoned Gonzales on June 26, and Gonzales stated that 22 23 24 25 26 27 28 1 As to the short-term disability policy it is sufficient to note that Gonzales bought an individual insurance policy from Provident Life and Accident Insurance Co., which is a subsidiary of Unum’s parent corporation. AR Ex. D at PLACLVB 432-47 (policy issued by “Unum Provident”). The policy provides a $5,000 month benefit for six months. Id. at 434. Gonzales applied for short-term benefits and received them for five months (July 2007 through December 2007). AR Ex. E at 20-21, 216-17, 236-37. Provident later denied and closed Gonzales’ short-term disability claim. Id. at 413. The parties agree that the policy does not grant any discretion to the insurance company. It is entirely silent on the subject. See Ex. D at 432-47. The parties agree that the default standard of review applies and the Court will review de novo the decision to deny Gonzales the sixth and final monthly benefit. To that extent, the Court grants Plaintiff’s motion. The parties expect to settle this issue. -2- 09-CV-0468 1 he did not intend to return to work yet because his doctors were trying to determine “why 2 he continues to be fatigued and have dizziness” after the stent operation.2 AR Ex. C at 86. 3 On July 3, 2007, Unum acknowledged the receipt of Gonzales’ written long-term 4 disability claim and began the initial evaluation. Id. at 98. Unum obtained the relevant 5 medical records from the treating physicians. E.g., id. at 123-24, 131-32, 209-11 (a May 6 2007 physician’s notes “complaints of intermittent dizziness and mild vision blurriness” as 7 well as “marked fatigue”). The records sent to Unum included Dr. Peter Sacks’ diagnosis 8 on July 11, 2007 of very early Parkinson’s Disease.3 Id. at 223-24. Dr. Sacks referred 9 Gonzales to a neurologist to confirm whether his symptoms (paucity of facial expression, 10 dizziness, anxiety, unsteady gait, confusion, and difficulty doing his work) were, in fact, 11 indications that he had Parkinson’s Disease. Id. 12 Parkinson’s Disease is an “age dependent neurodegenerative disorder characterized 13 clinically by resting tremor, rigidity, bradykinesia, gait dysfunction, and postural 14 instability.”4 Robert Campbell, M.D., Campbell’s Psychiatric Dictionary at 728 (9th ed. 15 2009). Patients often suffer cognitive dysfunction including impaired memory and 16 slowness of thought. Id. at 729. In addition, the patient’s “executive functions” are 17 disrupted which negatively impacts the ability to make decisions, to plan and organize, to 18 be flexible in response to changing conditions, and to monitor and inhibit inappropriate 19 2 During that June 26 conversation, Unum stated that one agent would first handle the STD claim, and that if Gonzales was still disabled in November, then Unum would process his LTD claim. Id. at 86. Nonetheless, the administrative record shows that the two insurance 21 companies processed the long-term and short-term claims simultaneously and shared information. AR Ex. E at 209. 20 22 3 Defendants accuse Gonzales of misleading the insurance companies about his medical condition because, in June, he first claimed to be disabled due to his heart condition, but switched horses mid-stream when the insurers relied on the pre-existing condition provision. 24 Defs.’ Mot. at 3-4 & n.3. The Court does not discern any such misconduct; instead, the record shows that Gonzales was not diagnosed with Parkinson’s Disease until July 2007. E.g., 25 AR Ex. E at PLACLVB 188, 191-92, 203. 23 26 4 The Court declines Plaintiff’s request to take judicial notice of the Wikipedia definition of Parkinson’s Disease because the internet is not typically a reliable source of information. 27 See Victaulic Co. v. Tieman, 499 F.3d 227, 236 (3d. Cir. 2007); In re Homestore.com, Inc. Sec. Litig., 347 F. Supp. 2d 769, 782-83 (C.D. Cal. 2004); In re Poirier, 346 B.R. 585, 588 (D. 28 Mass. 2006) (refusing to take judicial notice of changing content on webpage). Although Defendants did not object to the reference, the Court prefers a more credible source. -3- 09-CV-0468 1 action. Id. at 357. “Dementia develops in 20-40% of cases.” Id. at 729. “Depression 2 occurs in 4-70%, with sleep disturbances, loss of self-esteem, anxiety, and suicidal 3 thoughts.” Id. (italics omitted). 4 Gonzales was examined by a neurologist, Dr. Houser, on July 12, 2007. AR Ex. C 5 at 225-228. She confirmed the clinical diagnosis of “mild and very early possible 6 parkinsonism.” Id. at 228-29. Dr. Houser prescribed medications to treat the symptoms, 7 but explained that the “disease could not be diagnosed with any biomarkers or 8 neuroimaging.” Id. at 229. 9 Through the next several months, Unum processed the long-term disability claim 10 and amassed a file exceeding 1,000 pages. See id. at 1-1144. Each of Gonzales’ treating 11 physicians diagnosed Parkinson’s Disease, while Unum maintained there was no evidence 12 of a disability. Id. at 92-93, 225-29 (Dr. Houser), 296-97 (Dr. Sacks), 461 & 660-62 (Dr. 13 Johnson) (noting that Gonzales will be permanently disabled). 14 On January 15, 2008, Unum denied Gonzales’ claim for long-term benefits. AR Ex. 15 C at 739-43. Unum denied the claim based on the opinion by a doctor of internal medicine, 16 who had conducted a paper review of the medical records and spoken to Drs. Sacks and 17 Johnson (Gonzales’ primary care physician). Unum’s expert questioned the accuracy of 18 the neurologist Dr. Houser’s diagnosis. Id. at 740. 19 B. Unum’s Appeal Process 20 Gonzales retained counsel, and on March 31, 2008, appealed the denial of benefits. 21 Id. at 768. Gonzales provided more recent medical reports, but Unum denied the appeal 22 after in-house and independent doctors reviewed the file and rejected the opinions of the 23 treating doctors. E.g., id. at 823-29 (neurologist Dr. Dove diagnoses Parkinson’s Disease 24 as well as anxiety, depression, and mild cognitive impairment in July 2008); id. at 865-7 25 (consultant Dr. Topper, a neurologist); id. at 921-22 (Unum’s in-house Dr. Caruso, a 26 psychiatrist); id. at 955 (Unum denial, dated Oct. 30, 2008). 27 28 Upon receiving Unum’s decision, Gonzales’ counsel requested permission to submit additional information from Randy Stotland, PhD, who had recently tested and assessed -4- 09-CV-0468 1 Gonzales’ brain functions to determine if the disease had impacted his executive functions. 2 Unum agreed to consider the new evidence. A dispute then arose between Gonzales’ 3 counsel and Unum. Unum contended that it needed Dr. Stotland’s raw data while Gonzales 4 requested the names and resumes of the doctors that would review Dr. Stotland’s report as 5 well as an opportunity to respond. The impasse was unresolved. 6 Several months passed until Gonzales filed this suit in March 2009. The first cause 7 of action alleged Defendants violated ERISA. The second cause of action was based upon 8 State law; however, the Court determined that it was preempted by ERISA. Doc. No. 42. 9 In their pending motions, the parties dispute, first, whether the insurance policy 10 should be recognized as a plan document that can grant discretion to the plan administrator, 11 and second, whether Unum forfeited its right to rely on that discretion by failing to make a 12 final determination about Dr. Stotland’s report, which had been submitted after the appeal. 13 DISCUSSION 14 15 A. Principles of Law Although the motions are styled as Rule 56 motions for summary judgment, “[i]n the 16 ERISA context, ‘a motion for summary judgment is merely the conduit to bring the legal 17 question before the district court and the usual tests of summary judgment, such as whether 18 a genuine dispute of material fact exists, do not apply.’” Harlick v. Blue Shield of Cal., 656 19 F.3d 832, 838-39 (9th Cir. 2011) (quoting Nolan v. Heald Coll., 551 F.3d 1148, 1154 (9th 20 Cir. 2009) (internal quotation marks and citation omitted)). 21 Instead, the district court conducts the analysis set forth in Firestone Tire & Rubber 22 Co. v. Bruch, 489 U.S. 101 (1989) to determine whether the default standard of de novo 23 review applies, or instead the more lenient abuse of discretion standard. In Firestone, the 24 United States Supreme Court held that “a denial of benefits challenged under [ERISA] is to 25 be reviewed under a de novo standard unless the benefit plan gives the administrator or 26 fiduciary discretionary authority to determine eligibility for benefits or to construe the 27 terms of the plan.” Id. at 115 (emphasis added). 28 A presumption exists that the plan administrator’s decision will be reviewed under -5- 09-CV-0468 1 the de novo standard. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2 2006) (en banc) (“De novo is the default standard of review.”). In adopting the de novo 3 standard, the Supreme Court was guided by principles of trust law because ERISA was 4 enacted to protect employees and the plan administrators have a fiduciary duty to the 5 beneficiaries. Firestone, 489 U.S. at 111. “If de novo review applies, . . . [t]he court 6 simply proceeds to evaluate whether the plan administrator correctly or incorrectly denied 7 benefits, without reference to whether the administrator operated under a conflict of 8 interest.” Abatie, 458 F.3d at 963. 9 The Firestone decision, however, left the door open for ERISA plans to be written to 10 expressly delegate discretionary authority to the plan administrator and thereby avoid the 11 de novo standard. When a federal court is asked to review a decision by a plan 12 administrator, the language of the instrument determines whether the authority to interpret 13 the disputed terms of the plan and the power to exercise discretion resides with the 14 “trustee,” or in this case, the insurance company. Firestone, 489 U.S. at 111-12. Courts 15 must look to the contract to determine if the employee benefits plan gives discretion to the 16 administrator. Id. at 112-13. The plan administrator bears the burden of proving that the 17 plan documents grant discretionary authority. Thomas v. Or. Fruit Prods. Co., 228 F.3d 18 991, 994 (9th Cir. 2000). If the ERISA plan uses ambiguous language, they are construed 19 in favor of the participant or beneficiary. Id. 20 If the abuse of discretion standard applies, the court will defer to the administrator’s 21 decision unless it is arbitrary, capricious, or made in bad faith. Conkright v, Frommert, 130 22 S. Ct. 1640, 1651 (2010) (the administrator’s discretionary interpretation of the plan “will 23 not be disturbed if reasonable”) (citation and internal quotation marks omitted); Oster v. 24 Barco Cal. Employees’ Retirement Plan, 869 F.2d 1215, 1217 (9th Cir. 1988) (“arbitrary or 25 capricious”) (footnote and citation omitted); Jones v. Laborers Health & Welfare Trust 26 Fund, 906 F.2d 480, 482 (9th Cir. 1990) (administrator abuses discretion by basing 27 decision on clearly erroneous findings of fact). 28 “Discretionary clauses are controversial.” Standard Ins. Co. v. Morrison, 584 F.3d -6- 09-CV-0468 1 837, 840 (9th Cir. 2009). Critics argue they “may result in insurers engaging in 2 inappropriate claim practices and relying on the discretionary clause as a shield.” Id. 3 (citation to law review omitted). Consequently, “for a plan to alter the standard of review 4 from the default of de novo to the more lenient abuse of discretion, the plan must 5 unambiguously provide discretion to the administrator.” Abatie, 458 F.3d at 963 (citing 6 Kearney v. Standard Ins. Co., 175 F.3d 1084, 1089 (9th Cir. 1999) (en banc)). “There are 7 no ‘magic’ words that conjure up discretion on the part of the plan administrator.” Id. 8 (citation omitted). It is sufficient that the ERISA plan grant the administrator the right, 9 duty, and power to determine eligibility for benefits and to construe ambiguous language or 10 interpret plan terms. Id. at 963-64 (collecting cases). It is not sufficient if the plan merely 11 identifies the decision-maker and lists its tasks. Id. at 964. There are different codicils to the abuse of discretion standard. Depending upon the 12 13 facts, the court might give less deference to the plan administrator’s decision, see infra 14 pages 12-14, or conclude that the plan administrator forfeited its right to the lenient abuse 15 of discretion standard. The latter exception is most relevant to the pending motion. Gonzales contends that 16 17 Unum, by its own misconduct in processing the claim, forfeited its right to the abuse of 18 discretion standard. If proven, the Court would review the disability decision de novo. As 19 the Abatie en banc panel explained, “when a decision by an administrator utterly fails to 20 follow applicable procedures, the administrator is not, in fact, exercising discretionary 21 powers under the plan, and its decision should be subject to de novo review.” Abatie, 458 22 F.3d at 959. This occurs when the plan administrator “flagrantly” violates the claims 23 procedure. Id. at 971-72. 24 By comparison, when the administrator mishandles the claim in less serious ways, 25 the abuse of discretion standard will apply, however, the procedural violations “should be 26 factored into the calculus of whether the administrator abused its discretion.” Id. 27 /// 28 /// -7- 09-CV-0468 1 B. Analysis 2 1. The Plan Documents 3 The Court must first determine which documents are part of Starwood’s official 4 “plan.” See Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 75 (1995) (finding 5 specific terms of plan in two documents: the plan constitution and the Summary Plan 6 Description); Cinelli v. Sec. Pac. Corp., 61 F.3d 1437, 1439 (9th Cir. 1995) (concluding 7 that resolution agreement and letters were not formal plan documents). 8 “Every employee benefit plan shall be established and maintained pursuant to a 9 written instrument.” 29 U.S.C. § 1102(1)(1). “The ‘written instrument’ requirement is 10 intended to ensure that participants are on notice of the benefits to which they are entitled 11 and their own obligations under the plan.” Wilson v. Moog Auto., Inc. Pension Plan & 12 Trust for U.A.W. Emps., 193 F.3d 1004, 1008 (8th Cir. 1999) (citations omitted). 13 The regulations also require the employer to provide its employees with a written 14 “summary plan description” (SPD). 29 C.F.R. § 2520.102-3. “The SPD must be accurate, 15 comprehensive, and understandable to the average participants . . . .” ERISA: A 16 Comprehensive Primer § 2.02[A] at 2-4 (Paul Schneider & Brian Pinheiro, eds., 4th ed. 17 2012). The regulations list the specific information that must be included, but in general, 18 the SPD serves as a disclosure document to communicate the plan provisions to 19 participants. Id. at 2-9; AR Ex. A at DEF 103 (defining SPD as “[a] legally required 20 document describing your benefits in detail, how the plan operates, how to file claims, and 21 your rights and responsibilities as a plan participant”). 22 “[A]n employee benefit plan under ERISA can be comprised of more than one 23 document.” Eardman v. Bethlehem Steel Corp. Emp. Welfare Benefit Plans, 607 F. Supp. 24 196, 207 (W.D.N.Y. 1984); Myron v. Trust Co. Bank Long Term Disability Benefit Plan, 25 522 F. Supp. 511, 519 (N.D. Ga. 1981) (“the Court has found no authority that states this 26 written instrument must be one all-inclusive document. Indeed the legislative history 27 indicates that Congress contemplated the possibility of more than one writing constituting 28 an ERISA plan.”). A plan may incorporate other formal or informal documents, such as a -8- 09-CV-0468 1 collective bargaining agreement or a certificate of insurance. E.g., Richardson v. Pension 2 Plan of Bethlehem Steel Corp., 112 F.3d 982, 983 (9th Cir. 1997); Palmiotti v. Metro. Life 3 Ins. Co., 423 F. Supp. 2d 288, 291 (S.D.N.Y. 2006) (finding ERISA plan consisted of three 4 documents: “a Master Policy; an LTD Booklet, which includes the Certificate of 5 Insurance; and an Employee Benefits Handbook,” where the Master Policy also 6 incorporated additional exhibits and amendments). 7 Moreover, “there is no requirement that documents claimed to collectively form the 8 employee benefit plan be formally labeled as such.” Horn v. Berdon, Inc. Defined Benefit 9 Pension Plan, 938 F.2d 125, 127 (9th Cir. 1991). 10 The Court finds that Starwood’s ERISA plan is found in two documents: (1) 11 Starwood’s Summary Plan Description (effective April 1, 2005), AR Ex. A, and (2) the 12 group long-term disability insurance policy issued by Unum (No. 574062001), AR Ex. B. 13 “[I]t is clear that an insurance policy may constitute the ‘written instrument’ of an ERISA 14 plan.” Cinelli, 61 F.3d at 1441. 15 Gonzales argues that Unum’s insurance policy is not part of “the” plan document. 16 By its own terms, Starwood’s SPD states that it is “the plan document,” thus, it alone 17 controls the terms of the ERISA Plan. AR Ex. A at DEF 105. Gonzales argues that the use 18 of the singular “the” means that the SPD is the only document that could grant 19 discretionary authority to the administrator. Because it does not, the default de novo 20 standard of review applies. Pl.’s Mot. at 8-9. 21 The Court is not persuaded by this argument. In a similar case, the Eleventh Circuit 22 faced a SPD document containing two statements that unambiguously “defined itself as 23 ‘the plan.’” Heffner v. Blue Cross & Blue Shield of Ala., Inc., 443 F.3d 1330, 1341-42 24 (11th Cir. 2006). The employee argued the court could not consider other documents. The 25 Eleventh Circuit was “not convinced that those statements are to be taken as literally as the 26 plaintiffs wish. A more logical understanding of them is that they are merely shorthand 27 explanations of ERISA terms meant to be understood by plan participants and 28 beneficiaries. In any event, neither of these statements precludes consideration of other -9- 09-CV-0468 1 plan documents.” Id. at 1343. The Heffner court considered other “formally sanctioned” 2 plan documents because the SPD also stated that there were other documents to be 3 considered. That logic applies to this case because here, as there, the SPD acknowledges 4 that Unum’s insurance policy is relevant. For example, Starwood’s SPD refers to “all plan 5 documents governing the plan” and states that “[t]hese documents may include insurance 6 contracts.” AR Ex. A at 115. It also states that “[t]his plan is insurance carrier 7 administered.” Id. at 116. These passages reveal that Starwood’s ERISA Plan 8 contemplated that it would governed by the long-term disability insurance policy issued by 9 the carrier. 10 The SPD in this case also contains a passage that states “[i]f there is any 11 inconsistency between the SPD and the plan document, the plan document governs.” Id. at 12 113. This self-reference would be hard to reconcile if the SPD and “the” plan document 13 were one and the same. The only reasonable explanation is that Starwood’s SPD 14 recognized that the long-term disability benefits would be funded by an insurance policy, 15 and that the terms of that separate document would control the terms. See CIGNA Corp. v. 16 Amara, 131 S. Ct. 1866, 1878 (2011) (holding that an SPD communicates important 17 information “about” the plan, but when the SPD conflicts with the enforceable plan 18 document, statements in the SPD “do not constitute the terms of the plan”). 19 2. Language in the Plan Documents 20 “To assess the applicable standard of review, the starting point is the wording of the 21 22 plan.” Abatie, 458 F.3d at 962-63 (citing Firestone, 489 U.S. at 111). Starwood’s SPD states that “[t]he plan administrator has the authority to control, 23 interpret and manage the operation and administration of each plan,” and instructs the 24 employees to contact Unum.5 AR Ex. A at 116. It also states that the documents 25 26 5 Gonzales also argues that the SPD is silent on the issue of the administrator’s powers. The Court disagrees as the quoted sentence refers to Unum’s authority to control and interpret 27 the plan. AR Ex. A at 116. While this statement standing alone might not be sufficient to grant an administrator discretion to determine eligibility for benefits, it is relevant language. In any 28 event, silence in one document does not create a conflict with language in another plan document. Jensen v. SIPCO, 38 F.3d 945, 952 (8th Cir. 1994). Gonzales relies on an - 10 - 09-CV-0468 1 “governing the plan” may include insurance policies. Id. at 115. 2 The group insurance policy contains the following paragraph: 3 DISCRETIONARY ACTS 8 In exercising its discretionary powers under the Plan [defined elsewhere as the coverage under the policy], the Plan Administrator, and any designee (which shall include Unum as a claims fiduciary) will have the broadest discretion permissible under ERISA and any other applicable laws, and its decisions will constitute final review of your claim by the Plan. Benefits under this Plan will be paid only if the Plan Administrator or its designee (including Unum), decides in its discretion that the applicant is entitled to them. 9 AR Ex. B at 77. Notably, the term “Plan” in this context refers to the insurance policy. Id. 4 5 6 7 10 at 88 & 80 (defining “Plan”). 11 On this record, Unum has met its burden to show that a plan document – the 12 insurance policy – unambiguously delegates the discretion to determine whether an 13 employee is eligible for long-term disability benefits. Abatie, 458 F.3d at 963-64; Salomaa 14 v. Honda Long Term Disability Plan, 642 F.3d 666, 670 n.8 (9th Cir. 2011); Langois v. 15 Metro. Life Ins. Co., ___ F. Supp. 2d ___, 2011 WL 6304026 at *2 (N.D. Cal. Dec. 16, 16 2011). The SPD supports this grant of authority by authorizing Unum to interpret the 17 ERISA plan. Accordingly, the Court will conduct an abuse of discretion review to 18 determine whether Unum’s denial of long-term disability benefits was unreasonable, 19 illogical, implausible, or without factual support in the record. Salomma, 642 F.3d at 675- 20 76. 21 3. Procedural Errors in the “Second” Appeal 22 As an alternative argument, Gonzales argues Unum is not entitled to rely on the 23 abuse of discretion standard because it did not exercise its discretion. Abatie, 458 F.3d at 24 971-73. Gonzales contends that when Unum told Gonzales’ attorney that it was willing to 25 consider new evidence, a “second” appeal process commenced. See 29 C.F.R. 2650.503- 26 27 unpublished district court decision. That case is distinguishable because the separate document itself stated it was not incorporated into a plan document. Besser v. Prudential Life Ins. Co., 28 2008 WL 4483796 at *1 (D. Haw. Sept. 30, 2008) (quoting exhibit: “The ERISA Statement is not part of the Group Insurance Certificate.”). - 11 - 09-CV-0468 1 1(l); Pl.’s Mot. at 11 (quoting Frequently Asked Questions section of a Department of 2 Labor publication). Unum, however, never ruled on whether Dr. Stotland’s assessments 3 would have changed its decision to deny long-term benefits. Gonzales thus equates his 4 situation to the one in Jebian v. Hewlett-Packard Co. Emp. Benefits Org. Income Prot. 5 Plan, 349 F.3d 1098 (9th Cir. 2003). In that case, the employee appealed the initial denial 6 but the plan administrator never ruled on the appeal. Both the regulations and the plan 7 document required the administrator to reach a final decision on an appeal within a set 8 time. Because the time limit passed without any decision, the Ninth Circuit applied the de 9 novo standard of review. The Court reasoned that where no discretion was actually 10 11 exercised, no deference would be given. Id. at 1103-06. This argument fails because Starwood’s ERISA plan gave a participant only one 12 chance to appeal. See Ex. A at DEF 112 (“If you receive an adverse benefit determination, 13 you may ask for a review.”); cf. Pl.’s Mot. at 11 (Department of Labor discusses plans that 14 provide for “two levels for review on appeal”). Unum’s claims manual states that it may 15 agree to review additional information as a courtesy, but its decision to do so is the 16 opposite of a “wholesale and flagrant violation[] of the procedural requirements of ERISA” 17 that would cause the Court to apply a de novo standard of review. Pl.’s Ex. 4; Abatie, 458 18 F.3d at 971; Gatti v. Reliance Std. Life Ins. Co., 415 F.3d 978 (9th Cir. 2005). 19 4. Other Factors that Impact the Administrator’s Exercise of Discretion 20 That Unum has persuaded the Court that the abuse of discretion standard applies 21 does not end the analysis because the application of the abuse of discretion standard will be 22 impacted by the underlying facts. Saffon v. Wells Fargo & Co. Long Term Disability Plan, 23 522 F.3d 863, 867 (9th Cir. 2008) (that the plan grants “discretionary authority is only the 24 first step in determining the standard by which we review its denial of benefits). The facts 25 have not yet been developed; however, Gonzales has preliminarily identified some factors 26 that the Court might weigh in deciding “how much or how little to credit the plan 27 administrator’s reason for denying coverage.” Abatie, 458 F.3d at 968. 28 First, Unum “both determines whether an employee is eligible and pays benefits out - 12 - 09-CV-0468 1 of its own pocket”; consequently, the Court will “consider that conflict as a factor in 2 determining whether the plan administrator has abused its discretion in denying benefits; 3 and the significance of the factor will depend upon the circumstances of the particular 4 case.” Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 108, 111-14 (2008) (citing Firestone, 5 489 U.S. at 111-15); Salomaa, 642 F.3d at 675; Montour v. Hartford Life & Accident Ins. 6 Co., 588 F.3d 623, 630 (9th Cir. 2009) (“a reviewing court must take into account the 7 administrator’s conflict of interest as a factor in the analysis”); Abatie, 458 F.3d at 959, 965 8 (court’s abuse of discretion review is “tempered by skepticism commensurate with the plan 9 administrator’s conflict of interest” because such “an administrator has an incentive to pay 10 as little in benefits as possible to plan participants because the less money the insurer pays 11 out, the more money it retains in its own coffers”); Prado v. Allied Domecq Spirits & Wine 12 Grp. Disability Income Policy, 800 F. Supp. 2d 1077, 1095-98 (N.D. Cal. 2011). 13 (considering a lack of effort to limit the impact of a profitmaking motive by hiring 14 independent consultants who continue to practice medicine).6 15 Second, Unum relied on a “paper review.” Montour, 588 F.3d at 630-31 (case- 16 specific factors “include the quality and quantity of the medical evidence, whether the plan 17 administrator subjected the claimant to an in-person medical evaluation or relied instead on 18 a paper review of claimant’s existing medical records, whether the administrator provided 19 its independent experts with all of the relevant evidence”). 20 Third, Gonzales requested the names of the doctors who would review Dr. 21 Stotland’s raw data, but Unum refused. Prado, 800 F. Supp. 2d at 1095-98 (considering 22 factors such as the insurer’s “marked hostility” to sharing evidence with employee and 23 refusing to promptly identify the names of its reviewing physicians); AR Ex. A at DEF 24 25 6 A court may consider evidence outside the administrative record to determine whether the administrator was “plagued” by a profit-making conflict of interest. Tremain, 196 F.3d at 26 976-77; Abatie, 458 F.3d at 970. Gonzales suggests Unum has a history of bad faith claims processing. Pl.’s Ex. 10 (California Insurance Commissioner Order); Saffon, 522 F.3d at 868 27 (evidence that administrator has history of parsimoniously granting claims is relevant evidence in determining extent to which the conflict influenced the decision) (citing John H. Langbein, 28 Trust Law as Regulatory Law, 101 Nw. U. L. Rev. 1315 (2007) (evaluating the “Unum Provident scandal” – a deliberate program to deny meritorious disability claims)). - 13 - 09-CV-0468 1 112. (SPD specifies that applicant has right to request “reasonable access” to records and 2 information relevant to his claim and right to the “identification” of any medical expert 3 “whose advice was obtained in connection with the adverse benefit determination, 4 regardless of whether the advice was relied upon in making the decision.”). 5 These are just a sample of the factors that the Court might consider if and when the 6 merits are decided. Thus, while the Court agrees with Defendants that the abuse of 7 discretion standard will apply to Gonzales’ long-term disability claim, the precise 8 boundaries of that rule cannot be determined until the parties present their evidence. Conclusion 9 10 Having reviewed the briefs prepared by counsel and the relevant cases, the Court 11 GRANTS IN PART AND DENIES IN PART Plaintiff’s motion for summary judgment. 12 [# 51] The Court will review the denial of short-term disability benefits using the de novo 13 standard of review. The Court GRANTS Defendants’ motion for summary judgment. 14 [# 55] The Court will apply the abuse of discretion standard to review the decision to deny 15 long-term disability benefits. 16 Within seven days of the filing of this Order, the parties must contact Magistrate 17 Judge William V. Gallo to schedule a status conference. At that conference, the Magistrate 18 Judge will issue a scheduling order so that this case can proceed in an orderly and timely 19 fashion. Civ. Local R. 16.1(d). In addition, if the parties are amenable, the Magistrate 20 Judge may, in his discretion, schedule an early settlement conference. Id. 16.3(a). 21 IT IS SO ORDERED. 22 23 DATED: March 22, 2012 24 25 Hon. Anthony J. Battaglia U.S. District Judge 26 27 28 - 14 - 09-CV-0468
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