Galloway v. Lincoln National Life Insurance Company, No. 2:2009cv01479 - Document 35 (W.D. Wash. 2010)
Court Description: ORDER granting 17 Estate's Motion to supplement the administrative record ; denying 19 Estate's Motion for Summary Judgment, by Judge James L. Robart.(MD)
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Galloway v. Lincoln National Life Insurance Company Doc. 35 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 RYAN GALLOWAY, et al., CASE NO. C09-1479JLR Plaintiffs, 11 12 v. 13 LINCOLN NATIONAL LIFE INSURANCE CO., ORDER DENYING MOTION FOR SUMMARY JUDGMENT AND GRANTING MOTION TO SUPPLEMENT 14 Defendant. 15 I. INTRODUCTION 16 This matter comes before the court on Plaintiffs Ryan Galloway and Janice M. 17 Belceto’s (“the Estate”) motion for summary judgment that the Employee Retirement 18 Income Security Act (“ERISA”) does not apply (Dkt. # 19), and motion to supplement 19 the administrative record (Dkt. # 17). Having reviewed the motions, as well as all papers 20 filed in support and opposition, and deeming oral argument unnecessary, the court 21 22 ORDER- 1 Dockets.Justia.com 1 DENIES the motion for summary judgment (Dkt. # 19), and GRANTS the motion to 2 supplement (Dkt. # 17). 3 4 II. BACKGROUND From 2000 to 2008, Kenneth Galloway (“Mr. Galloway”) worked as a machinist 5 for Turbine Engine Components Technologies Corporation (“TECT”). (True Decl. 6 (Administrative Record (“Admin. Rec.”)) at 197.) On January 1, 2002, Defendant 7 Lincoln National Life Insurance Co. (“Lincoln National”) issued a group life insurance 8 policy (“Voluntary Policy”) to TECT. (Id. at 11.) Because it was a voluntary life 9 insurance policy, employees of TECT who elected coverage were required to pay the 10 entire cost of the premiums. (See Blackburn Decl. (Dkt. # 25) Ex. 1 (Summary Plan 11 Description (“SPD”)) at 23.) 12 On October 14, 2004, Mr. Galloway, a TECT employee at the time, enrolled in the 13 Voluntary Policy, electing coverage of $100,000. (Admin. Rec. at 174.) The Voluntary 14 Policy contains a provision ensuring continued coverage, without payment of premiums, 15 if a participant becomes totally disabled. The Extension of Death Benefits section of the 16 Voluntary Policy provides, in relevant part: 17 Any Personal Life Insurance on your life will be continued, without payment of premiums; if while you are insured: 18 (1) you become Totally Disabled before you reach age 60; and 19 (2) you submit proof of your disability which is received by the Company: 20 21 (a) within 12 months after your Total Disability begins; or 22 (b) as soon as reasonably possible after that. ORDER- 2 1 2 Upon receipt of such proof, the Company will refund all premiums paid for your coverage from the date Total Disability began. 3 (Id. at 20.) Under the Voluntary Policy, total disability “(1) means you are unable, due to 4 sickness or injury, to perform the material and substantial duties of any employment or 5 occupation for which you are or become qualified by reason of education, training, or 6 experience; and (2) must continue for at least 180 days.” (Id.) 7 In January 2008, Mr. Galloway stopped working at TECT due to achilles 8 tendonitis. (See id. at 169.) Seven months later, in July 2008, Mr. Galloway requested 9 that Lincoln National grant him waiver from paying premiums on the Voluntary Policy 10 due to total disability from achilles tendonitis. (Mot. at 2.) That August, Mr. Galloway 11 failed to pay the Voluntary Policy premium. (Am. Compl.1 (Dkt. #23) ¶ V.) On August 12 27, 2008, Lincoln National denied Mr. Galloway’s waiver request, determining—based 13 on the results of a “vocational assessment” undertaken by Lincoln National—that Mr. 14 Galloway was not totally disabled as that term is defined in the Voluntary Policy. 15 (Admin. Rec. at 169-70.) Soon after, Mr. Galloway died. (Id. at 166-67.) 16 Pursuant to Lincoln National’s review procedures (see id. at 32-33), the Estate 17 appealed the denial of waiver decision (id. at 164) and requested payment of the 18 $100,000 death benefit under the Voluntary Policy (Mot. at 2). In a letter dated January 19 20 21 1 The original complaint was amended to include the named beneficiary of the Voluntary Policy, Janice M. Belceto. (See Mot. to Am. Compl. (Dkt. # 16).) Otherwise, the amended 22 complaint is the same as the original. ORDER- 3 1 12, 2009, Lincoln National upheld its denial of waiver decision and denied payment of 2 death benefits under the Voluntary Policy. (Admin. Rec. at 107.) 3 The Estate then filed a second appeal. (Id. at 88.) In a letter dated April 29, 2009, 4 Lincoln National again denied payment of death benefits and notified the Estate that it 5 had exhausted all rights to appeal. (Id. at 80-81.) 6 On September 10, 2009, the Estate brought suit against Lincoln National in 7 Snohomish County Superior Court, claiming that Mr. Galloway’s death benefits under 8 the Voluntary Policy were unreasonably denied under RCW 48.30.015(1). (Am. Compl. 9 ¶ VII.) In addition to payment of the $100,000 under the Voluntary Policy, the Galloway 10 Estate requested an additional $300,000 in punitive damages under RCW 48.30.015(2), 11 as well as reasonable attorney fees and expert witness fees under RCW 48.30.015(3). (Id. 12 ¶ X.) 13 In its answer, Lincoln National raised ERISA preemption as an affirmative 14 defense. (Answer (Dkt. # 29) ¶ XII.1-2.) On October 16, 2009, Lincoln National 15 removed the lawsuit to federal court (Dkt. # 1). 16 III. ANALYSIS 17 A. Motion for Summary Judgment 18 The Estate now moves for summary judgment that ERISA does not apply on the 19 ground that the Voluntary Policy is exempt from ERISA coverage under the Department 20 of Labor’s “safe harbor” regulation, 29 C.F.R. § 2510.3-1(j). This regulation provides 21 that a group insurance plan offered to employees is within the safe harbor regulation and 22 thus exempt from ERISA coverage when: ORDER- 4 1 (1) No contributions are made by an employer or employee organization; 2 (2) Participation in the program is completely voluntary for employees or members; 3 4 5 (3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and 6 7 8 (4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs. 9 29 C.F.R. § 2510.3-1(j). All four provisions must be met before a plan is considered 10 exempt from ERISA. The Estate contends that all four provisions are met here: TECT 11 made no contributions to the Voluntary Policy; participation in the Voluntary Policy was 12 voluntary; TECT never endorsed, or even recommended, the Voluntary Policy to 13 employees like Mr. Galloway; and there is no indication that TECT profited in any way 14 from Mr. Galloway’s Voluntary Policy with Lincoln National. (See Mot. at 4-6; see also 15 Reply (Dkt. # 30) at 6-11.) Relying on the Summary Plan Description (“SPD”) for the 16 TECT Employee Benefits Plan (“Plan”), Lincoln National responds that the first 17 provision is not met in this case because TECT contributes to the Plan described in the 18 SPD and the Voluntary Policy is merely one component of the Plan. (See Resp. (Dkt. # 19 24) at 7.) Lincoln National also responds that the third provision is not met because 20 TECT endorsed the Voluntary Policy by including it in the SPD and by undertaking 21 22 ORDER- 5 1 certain administrative duties. (Id. at 9-10.) Thus, only the first and third provisions of 2 the safe harbor are in dispute. 3 4 1. Summary Judgment Standard Summary judgment is appropriate “if the pleadings, the discovery and disclosure 5 materials on file, and any affidavits show that there is no genuine issue as to any material 6 fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c); 7 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Galen v. County of Los Angeles, 477 8 F.3d 652, 658 (9th Cir. 2007). The moving party bears the initial burden of showing that 9 there is no material factual dispute and that he or she is entitled to prevail as a matter of 10 law. Celotex, 477 U.S. at 323. If the moving party meets this burden, the nonmoving 11 party must go beyond the pleadings and identify specific facts which show a genuine 12 issue for trial. Cline v. Indus. Maint. Eng’g. & Contracting Co., 200 F.3d 1223, 1229 13 (9th Cir. 2000). 14 15 2. ERISA Preemption ERISA broadly preempts state law that relates to “any employee benefit plan” as 16 described in the statute. 29 U.S.C. § 1144(a); see Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 17 41, 47-48 (1987). For an employee benefit plan to come within ERISA’s sphere of 18 influence, it must be “established or maintained” by an employer. See 29 U.S.C. § 19 1002(1). Department of Labor regulations set out a “safe harbor” provision explaining 20 when an employer may be involved with an employee welfare benefit plan without 21 having “established or maintained” it. See 40 Fed. Reg. 34,526 (Aug. 15, 1975); 29 22 C.F.R. § 2510.3-1(j). It is only when all four of the safe harbor provisions are satisfied ORDER- 6 1 that an employer is not considered to have “established or maintained” the program or 2 plan, thereby falling outside ERISA’s rubric. See Stuart v. UNUM Life Ins. Co. of Am., 3 217 F.3d 1145, 1149 (9th Cir. 2000). Because the claim of ERISA preemption is an 4 affirmative defense, however, the burden is on the defendant to establish that the safe 5 harbor regulation is inapplicable. See Zavora v. Paul Revere Life Ins. Co., 145 F.3d 6 1118, 1119 n.2 (9th Cir. 1998) (citing Kanne v. Conn. Gen. Life Ins. Co., 867 F.2d 489, 7 492 n.4 (9th Cir. 1988)). Thus, although the Estate is the moving party, Lincoln National 8 has the burden of showing that one or more of the safe harbor provisions have not been 9 met. 10 11 3. Court’s Consideration of the Summary Plan Description As an initial matter, the Estate requests that the court not consider the SPD in 12 ruling on its motion for summary judgment. (Reply at 5.) In making this request, the 13 Estate argues that Lincoln National should not be allowed to rely on documents that were 14 not previously disclosed and which are not part of the administrative record provided to 15 the Estate in accordance with the discovery plan contained in the Joint Status Report 16 (“JSR”) (Dkt # 11). (Id. at 5.) The Estate relies on Federal Rule of Civil Procedure 17 37(c)(1), which provides: “If a party fails to provide information or identify a witness as 18 required by [Rule 26(a) governing initial disclosures], the party is not allowed to use that 19 information or witness to supply evidence on a motion, at a hearing, or at a trial, unless 20 the failure was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1). 21 According to the Estate, Lincoln National’s late disclosure is not “harmless,” as the 22 ORDER- 7 1 Estate relied exclusively on the administrative record in bringing its motion for summary 2 judgment and the discovery deadline has now passed. (Reply at 5.) 3 This argument, however, is without merit. First, Lincoln National disclosed the 4 SPD on May 24, 2010. (See Blackburn Decl.) The discovery cut-off date was May 25, 5 2010. Thus, the SPD was timely disclosed. Moreover, the Estate filed its motion for 6 summary judgment on April 21, 2010, a month before the discovery cut-off date; the 7 Estate thus had ample time to request production of the SPD—or any other evidence 8 pertaining to the issue of ERISA preemption—under Federal Rule of Civil Procedure 34. 9 See Fed. R. Civ. P. 34(a)-(b). Rather, the Estate chose not to conduct discovery on the 10 preemption issue, relying instead on the administrative record. 11 Finally, the Estate first argued that ERISA does not apply in its April 21, 2010 12 motion for summary judgment—after Lincoln National submitted initial disclosures, 13 including the administrative record. Thus, prior to the Estate’s filing of the motion for 14 summary judgment, Lincoln National was not on notice that documents showing that the 15 Voluntary Policy was governed by ERISA were relevant.2 Having introduced a new 16 17 18 19 20 21 22 2 The Estate contends that the JSR, filed on February 2, 2010, and an e-mail from Simon H. Forgette, attorney for the Estate, to Robert Radcliff, attorney for Lincoln National, sent on February 1, 2010, (Dkt. # 31-2), made it clear to Lincoln National that the Estate was opposing the application of ERISA in this case. (Reply at 3.) However, the JSR clearly states: “The [c]ourt has jurisdiction over this action pursuant to 28 U.S.C. § 1331 as this matter arises under the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”).” (JSR at 1.) It also states that “[t]his case involves a dispute over life insurance benefits under an ERISA plan . . . .” (Id.) And while the JSR, and the e-mail of February 1, 2010, both mention that the Estate disagrees with Lincoln National over the “extent” of ERISA preemption (see JSR at 2; Forgette Decl. (Dkt. # 31-2) Ex. 1 at 1), the court finds this language insufficient to put Lincoln National on notice that the Estate intended to assert the safe harbor provision of ERISA. ORDER- 8 1 theory in its motion for summary judgment, the Estate may not object to Lincoln National 2 submitting the now-relevant SPD in response to this motion. Accordingly, the court will 3 consider the SPD in analyzing the safe harbor exemption. 4 5 4. Applicability of the Safe Harbor Exemption In light of the SPD, Lincoln National has met its burden of showing that the third 6 provision of the safe harbor regulation is not met because, as plan administrator, TECT 7 endorsed the Voluntary Policy. The Ninth Circuit has held that being administrator of a 8 plan “endorses” it within the meaning of the safe harbor regulation. In Kanne, for 9 example, the court held that the defendant insurance company met its burden of showing 10 that the third provision of the safe harbor regulation was not met. Kanne, 867 F.2d at 11 493. The court reasoned as follows: 12 13 14 15 16 17 18 19 20 21 The plan brochure submitted by [the insurance company] as an exhibit at trial describes the plan as an ERISA plan, evidencing the intent of [the employer] to create an ERISA plan. It is clear that, at a minimum, [the employer] does not merely advertise the group insurance, but rather, as administrator of the plan, ‘endorses’ it within the meaning of 29 C.F.R. § 2510.3-1(j)(3). Id. The Ninth Circuit has repeatedly cited Kanne on this issue. See, e.g., Stuart, 217 F.3d at 1149; Zavora, 145 F.3d at 1120; Crull v. Gem Ins. Co., 58 F.3d 1386, 1389 (9th Cir. 1995). In Zavora, for example, the Ninth Circuit held that an employer, named as plan administrator under a summary plan description, “endorsed” the plan within the meaning of the safe harbor regulation even though the employer was “administrator in name only.” Zavora, 145 F.3d at 1120. The court reasoned that “endorsement may occur 22 ORDER- 9 1 even if [the employer] does not operate the plan” because “Kanne suggests that a plan 2 administrator necessarily endorses a plan.” Id. 3 Here, the SPD expressly provides: 4 [TECT] is the ‘plan administrator’ and has the responsibility and discretionary authority for interpreting the terms of the Plan, and for determining eligibility for participation in the insured and self-insured programs. The plan administrator will resolve all disputes with respect to the interpretation of the Plan in accordance with the claim and appeal procedures for the Plan. If you have any general questions regarding the Plan . . . contact the Human Resources Director of [TECT].3 5 6 7 8 (SPD at 44.) Moreover, the SPD defines the Plan to include all the benefits described in 9 the SPD, including the Voluntary Policy. (See SPD at 5-6.) For example, the Voluntary 10 Policy is listed in the SPD alongside all the other benefits available to eligible TECT 11 employees. (See id.) The SPD also lists the Voluntary Policy in its Life Insurance 12 Programs section. (See id. at 23.) Thus, because the SPD names TECT as administrator 13 of the Plan and because the Plan includes the Voluntary Policy, TECT endorsed the 14 Voluntary Policy within the meaning of the safe harbor’s third provision. 15 The Estate does not address TECT’s status as plan administrator. Instead, the 16 Estate contends that Kanne does not govern here because in Kanne the plan brochure 17 described the plan as “an ERISA plan,” whereas no such language exists in TECT’s SPD; 18 and thus, a reasonable employee would conclude that the Voluntary Policy is not 19 20 21 3 Under the SPD, TECT is the administrator of the Plan; however, as plan administrator, TECT grants discretionary authority to Lincoln National to act as plan fiduciary for the 22 Voluntary Policy. (See SPD at 34, 44.) ORDER- 10 1 included in the portion of the Plan governed by ERISA. (Reply at 8.) This argument is 2 unavailing. 3 First, the Plan is “an ERISA plan” even if the SPD does not expressly describe it 4 as such. An ERISA employee welfare benefit plan is a plan, fund, or program 5 “established or maintained by an employer” to provide benefits in the event of illness, 6 disability, or certain other conditions. See 29 U.S.C. § 1002(1)(A). Here, the SPD states: 7 “[TECT] maintain[s] the TECT Employee Benefits Plan to provide health care and other 8 welfare benefits for our eligible employees.” (SPD at 5.) The SPD also specifically 9 mentions ERISA: “As a participant in the Plan, you are entitled to certain rights and 10 protections under [ERISA].” (Id. at 40.) The SPD then lists certain ERISA rights and 11 protections—including steps claimants can take to enforce their ERISA rights. (Id. at 4012 42.) Finally, under the heading “Type of Plan” in the General Information section, the 13 SPD states: “The Employee Benefits Plan is a welfare benefit plan.” (Id. at 48.) Thus, 14 the SPD establishes the Plan as an ERISA plan. 15 Moreover, TECT endorsed the Voluntary Policy within the meaning of the safe 16 harbor regulation because a reasonable employee would conclude that TECT made the 17 Voluntary Policy appear to be part and parcel of the Plan. In Johnson v. Watts Regulator 18 Co., 63 F.3d 1129, 1135 (1st Cir. 1995), the First Circuit held: 19 20 21 22 [A]n employer will be said to have endorsed a program within the purview of the Secretary’s safe harbor regulation if, in light of all the surrounding facts and circumstances, an objectively reasonable employee would conclude on the basis of the employer’s actions that the employer had not merely facilitated the program’s availability but had exercised control over it or made it appear to be part and parcel of the company’s own benefit package. ORDER- 11 1 (emphasis added). As stated above, TECT included the Voluntary Policy in its SPD as 2 “part and parcel” with all of its benefit plans. (See SPD at 5-6, 23.) The SPD further 3 directs TECT employees to complete and file election forms with TECT’s human 4 resources department to participate in the Voluntary Policy. (Id. at 8.) In addition, TECT 5 human resource managers explain all benefits available under the Plan—including the 6 Voluntary Policy— to new employees. (Blackburn Decl. at 2.) And while employees 7 pay the entire cost of coverage for the Voluntary Policy (see SPD at 23), in the section 8 entitled “Who Pays the Costs?” the SPD states: “You and the Company share the cost of 9 participating in the Plan” (id. at 23(emphasis added)). Thus, based on this evidence, a 10 reasonable employee would conclude that TECT made the Voluntary Policy appear to be 11 part and parcel of the Plan. 12 TECT, as administrator of the Plan, endorsed the Voluntary Policy within the 13 meaning of the safe harbor regulation. TECT also endorsed the Voluntary Policy because 14 a reasonable employee would conclude that TECT made the Voluntary Policy appear to 15 be part and parcel of the Plan. Because Lincoln National has met its burden of showing 16 that the third provision of the safe harbor regulation is not met, it is unnecessary for the 17 court to address the disputed first provision. The court therefore denies the Estate’s 18 motion for summary judgment that ERISA does not apply. 19 B. Motion to Supplement the Administrative Record 20 The Estate also moves to supplement the administrative record with the 21 declaration of Dr. Robert T. Fraser, Ph.D. (“Fraser Declaration”) (Dkt. # 17-2)—a 22 ORDER- 12 1 “vocational assessment” expert—on the ground that the Fraser Declaration will assist the 2 court in determining whether Lincoln National abused its discretion in denying Mr. 3 Galloway’s claim. (Mot. at 5.) The Estate also contends that the Fraser Declaration will 4 assist the court in determining the proper standard of review. (Id. at 7-9.) 5 6 1. Governing Law In the ERISA context, a district court “sits more as an appellate tribunal than as a 7 trial court,” and it “evaluates the reasonableness of an administrative determination in 8 light of the record compiled before the plan fiduciary.” Denmark v. Liberty Life 9 Assurance Co., 481 F.3d 16, 21 (1st Cir. 2007) (quoting Leahy v. Raytheon Co., 315 F.3d 10 11, 18 (1st Cir. 2002)). A district court reviews ERISA benefits denials de novo “unless 11 the benefit plan gives the administrator or fiduciary discretionary authority to determine 12 eligibility for benefits”; if the plan does grant such discretionary authority, courts review 13 the administrator’s decision for abuse of discretion. Firestone Tire & Rubber Co. v. 14 Bruch, 489 U.S. 101, 115 (1989). “[I]n general, a district court may review only the 15 administrative record when considering whether the plan administrator abused its 16 discretion.” Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 968 (9th Cir. 2006). 17 However, “an insurer that acts as both the plan administrator and the funding source for 18 benefits operates under what may be termed a structural conflict of interest,” id.; and 19 “that conflict [of interest] must be weighed as ‘a facto[r] in determining whether there is 20 an abuse of discretion,’” Snow v. Standard Ins. Co., 87 F.3d 327, 330 (9th Cir. 1996) 21 (quoting Firestone, 489 U.S. at 115). 22 ORDER- 13 1 2 2. Substantial Procedural Violations Here, the SPD grants Lincoln National discretionary authority. (See SPD at 34, 3 44.) Therefore, the court finds that the proper standard of review in this case is abuse of 4 discretion. The Fraser Declaration does not alter the standard of review from abuse of 5 discretion to de novo because it does not present evidence of procedural irregularities so 6 substantial as to alter the standard of review. 7 The Ninth Circuit has held that “[w]hen an administrator engages in wholesale and 8 flagrant violations of the procedural requirements of ERISA . . . we review de novo the 9 administrator’s decision to deny benefits.” Abatie, 458 F.3d at 971. Moreover, a plan 10 administrator’s decision is entitled to deference only when the administrator exercises 11 discretion that the plan grants as a matter of contract. Firestone, 489 U.S. at 111. Thus, 12 in general, district courts review de novo a claim for benefits when an administrator fails 13 to exercise discretion. Abatie, 458 F.3d at 972. 14 But here, Lincoln National did exercise discretion. ERISA claims procedure 15 regulations provide, in relevant part: 16 17 [T]he plan administrator shall provide a claimant with a written . . . notification of any adverse benefit determination. The determination shall set forth – 18 (i) The specific reason or reasons for the adverse determination; 19 (ii) Reference to the specific plan provisions on which the determination is based; (iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; 20 21 22 ORDER- 14 1 (iv) A description of the plan’s review procedures and the time limits applicable to such procedures . . . . 2 29 C.F.R. § 2560.503-1(g). Lincoln National followed these procedures in this case. 3 (See Admin. Rec. at 78-81, 107-10, 169-71.) Lincoln National reviewed Mr. Galloway’s 4 medical records and autopsy report to determine that Mr. Galloway’s condition did not 5 preclude him from working in other, sedentary occupations. (Id. at 79-81, 108-09, 170.) 6 Lincoln National referenced the Voluntary Policy’s definition of “totally disabled” and 7 explained why Mr. Galloway did not fit this definition. (Id. at 78-79, 107-08, 169.) 8 Lincoln National also described the type of information that could be helpful to the Estate 9 in support of its case. (Id. at 110, 171.) And, Lincoln National explained the Voluntary 10 Policy’s review procedures, and the time limits of those procedures, to the Estate. (Id. at 11 109, 171.) Thus, by following ERISA claim procedures, Lincoln National exercised 12 discretion in deciding Mr. Galloway’s benefits claim. 13 While the Estate contends that Lincoln National failed to exercise discretion by 14 failing to conduct a “vocational assessment” of Mr. Galloway’s ability to perform 15 sedentary work—relying instead on medical records to determine that Mr. Galloway 16 could perform such work (see Mot. at 8-9)—this contention actually goes to whether 17 Lincoln National abused its discretion by conducting an improper vocational assessment 18 and does not go to whether Lincoln National failed to exercise discretion completely. 19 Here, the Fraser Declaration does not present evidence of any procedural 20 violations so substantial as to alter the standard of review, and the administrative record 21 22 ORDER- 15 1 shows that Lincoln National exercised discretion in making its decision. Thus, the 2 standard of review remains abuse of discretion. 3 4 3. Full development of the administrative record While the Fraser Declaration fails to provide evidence of procedural violations so 5 substantial as to alter the standard of review, the Fraser Declaration does provide 6 evidence that Lincoln National’s failure to conduct a proper vocational assessment 7 prevented the full development of the administrative record. (See Fraser Decl. at 2-13.) 8 The Ninth Circuit has recognized that 9 10 11 [e]ven when procedural irregularities are smaller, and abuse of discretion applies, the [c]ourt may take additional evidence when the irregularities have prevented full development of the administrative record. In that way, the court may, in essence, recreate what the administrative record would have been had the procedure been correct. 12 Abatie, 458 F.3d at 973. In this case, the Fraser Declaration includes evidence that, in 13 determining that Mr. Galloway’s condition did not preclude him from performing other 14 available sedentary occupations, Lincoln National failed to properly assess whether Mr. 15 Galloway could actually sit for an eight-hour period. (Fraser Decl. at 7-8, 10-11.) 16 Lincoln National specifically failed to address Mr. Galloway’s self-reported 17 Rehabilitation Survey form (Admin. Rec. at 125-128) in which Mr. Galloway noted 18 problems with sitting for more than an hour, lifting more than 10 pounds, and having re19 aggravated an existing back injury. (Id.) By failing to address relevant information 20 contained in the administrative record, Lincoln National’s “vocational assessment” was 21 incomplete and the administrative record was therefore not fully developed. The court 22 will consider the Fraser Declaration for the purpose of assessing the effect of this failure. ORDER- 16 1 2 4. Conflict of Interest The Fraser Declaration also assists the court in weighing Lincoln National’s 3 structural conflict of interest as a factor in its abuse of discretion review. 4 The Ninth Circuit, in Abatie, recognized that “weighing a conflict of interest as a 5 factor in abuse of discretion review requires a case-by-case balance” and that “[a]n 6 egregious conflict may weigh more heavily (that is, may cause the court to find an abuse 7 of discretion more readily) than a minor, technical conflict might.” Abatie, 458 F.3d at 8 968. For example, “[w]here evidence of inconsistent reasons for denial, failure to 9 adequately investigate or request necessary information, or repeated wrongful denials 10 exists, the conflict will be weighted more heavily and less deference accorded the 11 administrator’s decision.” Bartholomew v. UNUM Life Ins. Co., 579 F. Supp.2d 1339, 12 1341 (W.D. Wash. 2008) (citing Saffon v. Wells Fargo & Co. Long Term Disability Plan, 13 522 F.3d 863 (9th Cir. 2008)). Moreover, a district court 14 15 16 may, in its discretion, consider evidence outside the administrative record to decide the nature, extent, and effect on the decision-making process of any conflict of interest; the decision on the merits, though, must rest on the administrative record once the conflict (if any) has been established, by extrinsic evidence or otherwise. 17 Abatie, 458 F.3d at 970. Here, the Fraser Declaration assists the court in deciding the 18 nature, extent, and effect of Lincoln National’s conflict of interest on its decision-making 19 process. The Fraser Declaration provides evidence that Lincoln National failed to 20 adequately investigate Mr. Galloway’s ability to perform sedentary work and failed to 21 credit Mr. Galloway’s statement that he could sit for no more than one hour. (Fraser 22 Decl. at 2, 6-7.) The Fraser Declaration also provides expert opinion that Lincoln ORDER- 17 1 National’s “vocational assessment” of Mr. Galloway was “unreasonabl[e]” by 2 employment assessment standards. (Id. at 10-11.) Thus, because abuse of discretion 3 review—with conflict weighed as a factor—in an ERISA benefits denial case amounts to 4 “a credibility determination about the insurance company’s or plan administrator’s reason 5 for denying coverage under a particular plan and a particular set of medical and other 6 records,” Abatie, 458 F.3d at 969, the Fraser Declaration assists the court in deciding the 7 level of skepticism with which to view Lincoln National’s decision. The court will 8 therefore consider the Fraser Declaration for this purpose. 9 10 IV. CONCLUSION For the foregoing reasons, the court DENIES the Estate’s motion for summary 11 judgment (Dkt. # 19), and GRANTS the Estate’s motion to supplement the administrative 12 record (Dkt. 17) for the limited purposes discussed above. 13 Dated this 2nd day of July, 2010. 14 A 15 16 JAMES L. ROBART United States District Judge 17 18 19 20 21 22 ORDER- 18
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