Opinion
Civil Action No. 03-0759 Section "R" (5).
October 27, 2004
ORDER AND REASONS
This is an action for review of the denial of long-term disability benefits by the administrator of an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1054, et seq. The matter was set for a bench trial on September 13, 2004. By agreement of the parties, the Court resolves this case based on the administrative record submitted in connection with Hartford's motion for summary judgment and all of the parties' briefs submitted in connection with the motion. For the following reasons, the Court REMANDS the action to the administrator for a determination of benefits.
I. BACKGROUND
Gilbert Goldman is a 56 year-old former employee of Baroid, a division of Halliburton. On March 23, 2001, Goldman injured his head, arm and neck while he worked as a mud engineer on an offshore drilling rig. Goldman underwent a cervical fusion and did not return to work after his accident. In March of 2003, Goldman applied for long-term disability benefits under the Halliburton long-term disability insurance plan. Hartford Life and Accident Insurance Company is the claims administrator and insurer of the plan. (R. at H-0786.) Hartford denied Goldman's application for long-term disability benefits. On February 3, 2003, Goldman sued Hartford for long-term disability benefits in state court. Hartford removed the action to this court and moved for summary judgment. The parties agreed that the Court would resolve the matter based on the briefs and administrative record submitted in connection with Hartford's summary judgment motion.
II. ERISA REVIEW
Under ERISA, a claims administrator must make two determinations to decide whether an employee is entitled to benefits under a long-term disability plan. Schadler v. Anthem Life Ins. Co., 147 F.3d 388, 394 (5th Cir. 1998) (citing Pierre v. Conn. Gen. Life Ins., 932 F.2d 1552, 1557 (5th Cir. 1991)). 1557). The administrator must first determine the facts underlying the claim for benefits. Id. (citing Pierre, 932 F.2d at 1562). The administrator must then determine whether those facts constitute a claim to be honored under the terms of the plan. Id. If the administrator denies benefits to the participant, section 1132 of ERISA provides that the employee may bring suit in federal district court "to recover benefits due to him under the terms of the plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a) (1) (B). With these basic principles in mind, the Court reviews Hartford's decision.
A. Review: Hartford's Findings of Fact
(1) Standard of Review
The Court reviews a claims administrator's determination of the facts underlying a claim for benefits for an abuse of discretion. Schadler, 147 F.3d at 395 (citing Pierre, 932 F.2d at 1562). The Court notes at the outset that Hartford, the administrator, also insures the plan. Administrators who act as plan insurers operate under a conflict of interest because they have a financial stake in the outcome of the benefits determination. Vega v. Nat'l Life Ins. Svs., Inc., 188 F.3d 287, 295 (5th Cir. 1999). See also Lain v. UNUM Life Ins. Co. of Am., 279 F.3d 337, 343 (5th Cir. 2002) (recognizing conflict of interest when claims administrator was also the insurer); Gooden v. Provident Life and Acc. Ins. Co., 250 F.3d 329, 333 (5th Cir. 2001) (same); Sweatman v. Commercial Union Ins. Co., 39 F.3d 594, 599 (5th Cir. 1994) (same); Duhon v. Texaco, Inc., 15 F.3d 1302, 1305 (5th Cir. 1994) (same). The Court reviews a conflicted claims administrator's determination for abuse of discretion, but the Court will consider the administrator's conflict as a factor in the determination. Vega, 188 F.3d at 297. "The greater the evidence of a conflict on the part of the administrator, the less deferential [the] abuse of discretion standard will be." Id. Accordingly, the Court will review Hartford's findings with a lesser degree of deference than otherwise would be appropriate.
To decide whether Hartford abused its discretion, the Court must determine if Hartford acted arbitrarily and capriciously when it reached its conclusion as to the facts. Johnson v. Sun Life Assurance Co., 2000 WL 33225469, No. Civ. A. 98-990-A, at *9 (M.D. La. 2000). An arbitrary decision "is one made without a rational connection between the known facts and the decision or between the found facts and the evidence." Id. A decision is not an "abuse of discretion if a reasonable person could have reached a similar decision, given the evidence before him." McCall v. Burlington Northern/Santa Fe Co., 237 F.3d 506, 512 (5th Cir. 2000) (citing Cash v. Wal-Mart Group Health Plan, 107 F.3d 637, 641 (8th Cir. 1997)). Moreover, the Court should review Hartford's factual findings regarding the eligibility of a claimant based on the evidence before the administrator. Schadler, 147 F.3d at 395 (citing Wildbur v. ARCO Chem. Co., 974 F.2d 631, 639 (5th Cir.), modified on other grounds, 979 F.2d 1013 (5th Cir. 1992)). Thus, the Court is confined to the administrative record. For the following reasons, the Court finds that, based on the record before it, Hartford abused its discretion in determining the facts underlying Goldman's claim.
(2) Analysis Goldman's Initial Application for Benefits
On April 8, 2003, Hartford denied Goldman's application for benefits on the grounds that he was not a covered employee. (R. at H-0330-0332.) In the denial letter, Hartford stated that it considered all of the "papers" in Goldman's claim file when it made its determination, which included a "benefit screen" from Halliburton, a telephone call from Halliburton, and an "eligibility notification" from Halliburton, as well as employee and employer statement forms. ( Id. at H-0331.) Hartford informed Goldman that his claim was denied because Halliburton had informed Hartford that effective January 15, 2001, Goldman was a "Day Rate Consultant," which was a "temporary" position that did not entitle him to disability benefits. Hartford acknowledged that Goldman had paid long-term disability benefit premiums until after his accident. However, Hartford said that Halliburton maintained that this was "inadvertent," because as a "temporary employee," Goldman was actually in Halliburton's "Level I" classification, which renders him ineligible for long-term disability benefits. The Court finds that Hartford's denial of Goldman's claim was an abuse of discretion because a reasonable person could not have reached a similar decision given the evidence before him.
Hartford's long-term disability plan covers engineers who are "active employees," defined as regular full-time or part-time employees or "seasonal" employees. ( Id. at H-0844.) An employee is full-time at 30 hours a week, and part-time at 20 hours a week. ( Id.) Hartford rejected Goldman's claim because he was a "temporary" employee, a classification not defined or excluded in the long-term dsability policy, when the contemporaneous evidence did not support its conclusion.
The "eligibility notification" that Hartford received from Halliburton was an e-mail dated the same day that the claim was denied. ( Id. at H-0334.) The e-mail was from Barbara Benoit, Halliburton's Case Coordinator for long-term disability administration. The e-mail informed Hartford that employees in Halliburton's "HR" department said that Goldman went from a full-time employee to a "temporary" Day Rate Consultant who is not eligible for benefits, effective January 15, 2001. ( Id.) The e-mail relayed no Halliburton records. The problem with Hartford's reliance on this information is that there was not a single business record from Halliburton that supported this statement, and Halliburton's contemporaneous records indicated that Goldman was part-time and covered by the long-term disability policy until after his accident.
Hartford received Goldman's application for long-term disability benefits on March 18, 2003. In his employee statement, Goldman said that he was employed as an engineer in the Baroid Drilling Fluids Division of Halliburton and became disabled beginning March 24, 2001 as a result of injuries he received on-the-job on March 23, 2001. ( Id. at H-0685-0688.) The employer statement portion of the disability application form, which was signed by Benoit, reported that Goldman was hired on May 1, 2000 and became insured under the long-term disability plan on June 1, 2000. ( Id. at H-0683-0684.) It reported that Goldman's last day of work was March 23, 2001 and that he was terminated on August 15, 2001. ( Id.) The form reflects that he was entitled to "salary continuation," but no amount was stated. ( Id.) Benoit did not provide any information in response to the form's inquiries as to Goldman's "last permanent job," his "regularly scheduled work week," or his salary or wage rate immediately before he stopped working. ( Id.) Hartford's records contained another version of a part of this form which was completed by W.E. Wilson, ASQC, and dated March 10, 2003. It reported that Goldman received a "basic salary of $2,400 a month." ( Id. at H-0763.) Hartford's records also reflect that in response to a salary inquiry from Hartford, Benoit responded that Goldman's "comp + salary" as of 10/00 was $57,600. ( Id. at H-0659.)
The "Benefit Screen" that Hartford referred to in its denial letter was a Halliburton record that showed that Goldman had long-term disability coverage from January 1, 2001 though April 30, 2001 (after the date of his accident) at coverage Option II, which was 60% of pay. This screen reported that the reason for the expiration of coverage was Goldman's separation from service. ( Id. at H-0766.) A second benefit screen reported on Goldman's employment status as of January 16, 2003, and it reflected that Goldman became a part-time employee (not a "temporary" employee) effective January 15, 2001 and that he became a Benefit Level I employee effective April 4, 2001, after the date of his accident. ( Id. at H-0764.) The screen reflects that Goldman had been "temporary" during the year of 1999.
As to the phone calls Hartford relied on, its records reflect that its claims examiner, Wendy Jones, was told by Halliburton on April 8, 2003 that Goldman's status changed to "part-time" (not "temporary") on January 15, 2003 [ sic]. ( Id. at H-0779.) Another phone call that day from Halliburton, which supposedly explained why its coverage screen showed that Goldman was covered through April 30, 2001, reported that the second screen showed that Goldman went to "temporary status on 1-15-03 [ sic]," when he was reclassified to a Level I. ( Id. At H-0780.) The benefit screen Halliburton referred to in its second phone call actually shows that Goldman became "part-time," not temporary, on January 15, 2001. ( Id. at H-0764.) The same screen also shows that he was not classified as a Level I until April 4, 2001, after his accident. ( Id.) Thus, Halliburton's business records before the claims administrator failed to support its assertion that Goldman was ineligible for benefits and indicated exactly the opposite.
Nor was there a single contemporaneous document in the record that identified Goldman as "temporary," "Level I" or a "Day-Rate Consultant" on the date of his accident or that documented that he changed employment status to "temporary" effective January 15, 2001. Moreover, there was no such document that explained the difference between part-time and temporary employees or that even stated what a Day-Rate Consultant was. The records that existed before Goldman filed his claim in 2003, which was two years after his accident, showed that he paid premiums for long-term disability and medical coverage. They reflected that he was considered a covered employee until April 2001 and that he did not become a benefit Level I employee until April 4, 2001, which was after the date of his accident. Furthermore, the records existing at the time he applied for benefits also showed that his employment status changed to part-time, not temporary, on January 15, 2001. It was only after Goldman filed his claim that Haliburton declared that he was not covered on the date of his accident, which Hartford unquestioningly accepted. As the insurer of the plan, it was obviously in Hartford's financial interest to do so. Hartford relied on after-the-fact emails or oral advice from Haliburton personnel, which was contradicted both by the records Halliburton referred to support their assertions, as well as the documents they sought to clarify their assertions. In addition, Halliburton's after-the-fact information referred to Goldman as "part-time" in the same breath as it referred to him as "temporary." Although there is evidence in the record that Goldman experienced a change in employment status effective January 15, 2001, there was a distinct lack of evidence that the change was to a "temporary" position as opposed to a part-time position or that he was not covered under the plan.
Goldman's Appeal
Goldman appealed Hartford's denial of his application for benefits on April 15, 2003. ( Id. at H-0224-0226.) In support of his appeal, Goldman submitted his 2001 payroll records, which reflected deductions for long-term disability, medical, and dental premiums through his last paycheck dated April 13, 2001. ( Id. at H-0227-0232.) He also submitted his income tax returns for 1999, 2000, and 2001. ( Id. at H-0233-0237.) His 2001 tax return showed that he earned $28,180.00, which represented his earnings from Baroid for the first quarter of 2001, after which he was unable to work. ( Id. at H-0237.) Lastly, Goldman provided a response to a request for admissions from a lawsuit in which Baroid admitted Goldman was a Baroid employee on the date of his accident. ( Id. at H-0238.) In addition to this information, Hartford obtained a job description from Haliburton ( Id. at H-0218-0219), as well as an email with a description of Halliburton's "benefit levels" ( Id. at H-0097.). Hartford denied Goldman's appeal on July 17, 2003. ( Id. at H-0006-0007.) In the denial letter, Hartford stated that Goldman was entitled to an independent review of the claims administrator's decision. Nevertheless, it concluded that "the documentation on file, taken as a whole," supported the denial. ( Id. at H-0006.) The appeals specialist cited no additional evidence in support of her conclusion and stated again that Goldman was a temporary, Level I employee as of January 15, 2001, which made him ineligible for long-term disability benefits. This decision was likewise an abuse of discretion.
Goldman's payroll records from January 2001 through April 2001 showed that he paid premiums for long-term disability, medical, and dental coverage. Further, Goldman was paid $6,390.00 for the first two weeks of January 2001, when Hartford concedes that he was a full-time employee. ( Id. at H-0227.) His payroll records reflect that he was paid $7,240.00 for the next two weeks when he was supposed to be "temporary." ( Id. at H-0228.) Unless Haliburton was paying Goldman more than $181.00 per hour, which is highly unlikely, he had to have worked at least twenty hours a week during this pay period, which is supportive of Goldman's assertion that he was at least a part-time employee after January 15, 2001. Similarly, he was paid $7,000 during the period ending March 31, 2001, when he did not work after March 23, 2001. ( Id. at H-0231.) For the first quarter of 2001 (through April 15, 2001), Haliburton paid Goldman $29,320.00. ( Id. at H-0227-0232.) Goldman's payroll records, which reflected significant earnings and premiums deducted for long-term disability benefits, bolstered his case for long-term disability eligibility.
Hartford now argues for the first time that the type of Goldman's earnings changed after his January 12, 2001 paycheck. The record dated January 12, 2001 shows that Goldman earned "regular pay" of $1,200.00; "Bonus-A" of $1,995.00; and "SS pay" of $3,195.00. ( Id. at H-0107.) After the January 12, 2001 paycheck, Goldman no longer received "regular pay." ( Id. at H-108-0112.) Instead, all of his pay was in the form of "Bonus-A," "Bonus-B," "S Pay," "SS pay," and "Haliburton QIP." ( Id.) The amounts attributed to these categories fluctuated from paycheck to paycheck. There is nothing in the administrative record, however, that explains what "S pay," "SS pay," or "Haliburton QIP" is or why these types of earning meant that Goldman was "temporary" and not part-time. Under the long-term disability policy, an employee is full-time at thirty hours a week and part-time at twenty hours a week. ( Id. at H-0844.)
Hartford also attempts to rely on a notation of a communication from Halliburton received after the appeals decision, which stated that Goldman's pay stubs were coded as not eligible for benefits. ( See id. at H-0004.) Not only was this information not before the administrator when it decided the appeal, but also the only documents in the record that could be pay stubs do not support this statement. Instead, they show that Halliburton deducted insurance premiums from Goldman's paycheck. ( See id. at H-0227-0232.)
The Court finds that the administrator's decision on appeal was not reasonably supported by the record and was an abuse of discretion. The Court's finding is consistent with Fifth Circuit decisions holding that the administrator abused its discretion when the evidence supporting the administrator's conclusion is seriously lacking in quantity and/or quality. See Vega, 188 F.3d at 301-02 (finding an abuse of discretion when very little evidence supported a finding and that evidence was ambiguous); Bellaire Gen. Hosp. v. Blue Cross Blue Shield of Michigan, 97 F.3d 822, 832 (5th Cir. 1996) (finding an abuse of discretion when, inter alia, the insurer claimed that "ample evidence" supported the denial, but that evidence was contradicted by other facts in the record); Salley v. E.I. duPont de Nemours Co., 966 F.2d 1011, 1015 (5th Cir. 1992) (administrator abused its discretion when it denied benefits after reviewing only records from plaintiff's first hospital admission and not her second and third admissions); Roig v. The Limited Long Term Disability Prog., 2000 WL 1146522, at *14 (E.D. La. Aug. 4, 2000) (administrator's denial of benefits was abuse of discretion because substantial evidence did not exist to rebut the opinion of the plaintiff's physician that the plaintiff was disabled).
B. Review: Policy Interpretation
The Court reviews the administrator's interpretation of the terms of the plan de novo unless the plan vests discretionary authority in the administrator to construe the terms of the plan. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); see also Schadler, 147 F.3d at 394. When the plan vests discretionary authority in the administrator, "courts review the decision under the more deferential abuse of discretion standard." Schadler, 147 F.3d at 394. Because Hartford has discretionary authority to construe the terms of the plan, the Court should review its interpretation of the plan terms under the more deferential abuse of discretion standard. ( See R. at H-0803 (expressly stating that "[f]inal interpretation of all provisions and coverages will be governed by the Group Insurance Policy on file with The Hartford at its home office"), id. at H-0827 (stating that "The Hartford reserves the right to determine if your proof of loss is satisfactory").)
In this case, Hartford did not make a determination of whether Goldman was disabled under terms of the plan. It simply determined that he was not covered. The Court has found that this fact finding was an abuse of discretion. Accordingly, the Court remands Goldman's claim to Hartford for a determination as to whether Goldman, as a covered employee, is disabled under the plan, and if so, to what benefits Goldman is entitled. See Schadler, 147 F.3d at 398 (remanding to the administrator because the administrator denied that coverage ever existed and therefore had no occasion to exercise its discretion to interpret the terms of the plan).