Summary
holding that Cal. Ins. Code § 10291.5 falls within ERISA's preemptive scope as it clearly relates to an employee benefit plan
Summary of this case from McCurdy v. Metropolitan Life Insurance CompanyOpinion
No. CIV-S-03-1230 FCD PAN.
October 21, 2004
MEMORANDUM AND ORDER
This matter is before the court on cross-motions for summary judgment filed by defendant, Unum Life Insurance Co. of America ("Unum" or "defendant"), and plaintiff, Patricia Hansen ("Hansen" or "plaintiff"), pursuant to Federal Rule of Civil Procedure 56. The court heard oral argument from parties' counsel on July 30, 2004.
FACTUAL AND PROCEDURAL HISTORY
This litigation arises out of Unum's denial of Hansen's claim for long-term disability benefits in March of 2002.Hansen served as a Senior Staff Coordinator for United Behavioral Health ("UBH"), in which capacity Hansen was responsible for screening, interviewing, and recommending candidates to hiring managers. (Plaintiff's Response to Defendant's Statement of Undisputed Facts ("Pl's. Resp.") ¶ 13, 14.) Hansen conducted much of her work on the telephone and through e-mail. (Pl's. Resp. ¶ 17.)
UBH provided its employees, including Hansen, with long-term disability insurance through defendant, Unum. (Pl's. Resp. ¶ 1, 2.) Under the terms of the disability plan (the "Plan") an employee qualified as "disabled" if he or she was "limited from performing the material and substantial duties of [his/her] regular occupation due to [his/her] sickness or injury; and ha[s] a 20% or more loss in [his/her] indexed monthly earnings due to the same sickness or injury." (Pl's. Resp. ¶ 4.) However, a claimant who met this definition of 'disabled' was not automatically entitled to benefits. The Plan contained further restrictions on benefit eligibility, including, inter alia, a clause limiting coverage for sickness or injury primarily based on self-reported symptoms; a requirement that the disability be continuous for 180 days prior to the commencement of benefit payments; and a clause affording Unum the "broadest discretion" in making benefit eligibility determinations. (Pl's. Resp. ¶ 9, 10, 12.)
On September 1, 2000, Hansen claims to have experienced "hissing in her left ear, dizziness, extreme nausea, and general misery," impairing her ability to work effectively at her job. (Pl's. Resp. ¶ 18, 19.) Four days later, on September 5, 2000, Hansen saw her family practitioner, Dr. Robert Marvan ("Dr. Marvan), who diagnosed her with Meniere's disease and depression. (Pl's. Resp. ¶ 26, 27.) Meniere's disease is characterized by "attacks of vertigo [which] appear suddenly, last from a few to 24 hours, and subside gradually. The attacks are associated with nausea and vomiting." (Pl's. Mem. of P A at 2, citingThe Merk Manual, 17th Ed., 1999, p. 678.) Additionally, a person inflicted with Meniere's disease may have a "recurrent feeling of fullness or pressure in [one] affected ear; hearing in that ear tends to fluctuate but progressively worsens over the years." (Id.)
Dr. Marvan referred Hansen to an ear, nose, and throat specialist, Dr. Abraham Hsieh ("Dr. Hsieh"). Although Dr. Hsieh opined that Hansen's medical history seemed consistent with Meniere's disease, a head, neck, and neurological exam yielded normal results. (Pl's. Resp. ¶ 28, 29.) Dr. Hsieh's consultation report states, "Meniere's disease (L) — improving." (Pl's. Resp. ¶ 29.)
The parties dispute the proper interpretation of Dr. Hsieh's notes on the consultation report. However, the court understands Dr. Hsieh's report to conclude that Hansen's Meniere's symptoms were improving at the time of his examination.
On June 4, 2001, neurologist Allen Bott ("Dr. Bott") examined Hansen. (Pl's. Resp. ¶ 30, 31.) Dr. Bott's consultation report states that Hansen had "some mid- to high- frequency sensorineural hearing loss," and concludes that Hansen "appears to have Meniere's disease affecting her left ear." (UACL 410, attached as Ex. H to Decl. of Van Deventer.) Dr. Bott also notes that the Prozac prescribed by Dr. Marvan "significantly" improved Hansen's anxiety, and "mildly" improved her other symptoms of depression. (UACL 409, attached as Ex. H to Decl. Of Van Deventer.) Dr. Bott recommended an increase in Hansen's dosage of Prozac, as well as caloric and tilt-table tests. (UACL 411, attached as Ex. H to Decl. of Van Deventer.) In a follow-up appointment on July 23, 2001, Dr. Bott told Hansen that her symptoms were related to her depression. (Pl's. Resp. ¶ 35.)
As a result of Hansen's health problems, from October of 2000 until July of 2001, she was allowed to work from home three days per week. (Pl's. Resp. ¶ 20.) However, convinced her symptoms were impairing her ability to perform her job, in July of 2001 Hansen requested that Dr. Marvan place her on disability. (Pl's. Resp. ¶ 22.) Despite Dr. Bott's objection, Dr. Marvan complied. (Pl's. Resp. ¶ 36.) Hansen's last day of work at UBH was June 30, 2001. (Pl's. Resp. ¶ 11.)
On August 31, 2001, Unum contacted Dr. Marvan regarding Hansen's condition. (Pl's. Resp. ¶ 37.) Dr. Marvan told Unum he did not refer Hansen to a psychological counselor after diagnosing her with depression because of Dr. Bott's belief that Hansen's condition would best be treated with medication. (Pl's. Resp. ¶ 38.) Indicating the medication would take some time to work, Dr. Marvan told Unum that October 15, 2001 would be a good target date for Hansen's return to work. (Id.)
Although it is unclear from the record why Unum contacted Dr. Marvan prior to Hansen filing her initial disability claim in December of 2001, the court assumes Unum anticipated that Hansen would submit a claim before the end of her 180-day elimination period.
In December of 2001, Hansen submitted a claim to Unum for long-term disability benefits dating back to June 30, 2001. (Pl's. Resp. ¶ 24, 25.) Later that month, Hansen saw therapist Mark Foster, Ph.D. ("Dr. Foster"). (Pl's. Resp. ¶ 42.) Hansen's intake form and Dr. Foster's notes both indicate her visit concerned Hansen's relationship issues with her ex-husband. (UACL 381, 387, attached as Ex. J to Decl. Of Van Deventer.) In addition, Dr. Foster's evaluation notes reference their discussion of the symptoms Hansen's previous physicians diagnosed as Meniere's disease, or a variant thereof. (Pl's. Resp. ¶ 42.)
In February of 2002, Hansen informed Unum that the episodes of extreme dizziness she experienced, which led in part to her Meniere's diagnosis, were constant and chronic. (Pl's. Resp. ¶ 52.) However, Meniere's disease is characterized by episodic debilitating dizziness, not constant impairment. (Pl's. Resp. ¶ 53.)
In January and February of 2002, nurses employed by Unum, Angela Sanberg, RN, and Joanne Girard, RN, reviewed Hansen's medical file and determined that there was insufficient documentation of Meniere's disease. (Pl's. Resp. ¶ 54, 55.) The nurses also concluded that Hansen's lifestyle was inconsistent with a person frequently experiencing Meniere's attacks. (Pl's. Resp. ¶ 55.) Specifically, the nurses noted that, during the period Hansen was off work, she went on a short vacation to Hawaii with her husband, engaged in "vigorous" and "regular" exercise, purchased a new home and moved from San Francisco to Sacramento, and cared for a new kitten and puppy. (Pl's. Resp. ¶ 44, 45, 46, 50, 66.)
Dr. Alan Neuren ("Dr. Neuren"), an employee of Unum, further reviewed Hansen's file, concurring with the nurses' conclusions. (Pl's. Resp. ¶ 56, 57.) Dr. Neuren's found that it was unlikely Hansen was experiencing symptoms at the degree or frequency reported, despite the nurses' conclusion that there was a lack of documentation in Hansen's file of how frequent she experienced the Meniere's symptoms. (Pl's. Resp. ¶ 55, 57.)
Hansen's file was also reviewed by Paul Burgos ("Burgos"), a Psychiatric Department employee of Unum, and George Dominiak ("Dominiak"), the Medical Director of Psychiatry for Unum, who agreed that there was little objective evidence to support a diagnosis of depression. (Pl's. Resp. ¶ 59, 60, 61.) Burgos focused on the fact that there was a lack of cognitive testing, though Hansen did provide records of such testing in April of 2002. (Pl's. Resp. ¶ 61, 74.)
On March 22, 2002, Unum denied Hansen's claim for long-term disability benefits. (Pl's. Resp. ¶ 62.) Hansen appealed Unum's claim determination on May 15, 2002. (Pl's. Resp. ¶ 67.) In support of her appeal, Hansen submitted a psychological evaluation from William McGunnigle, Ph.D. ("Dr. McGunnigle"), as well as medical records from Dr. Molly Baker ("Dr. Baker") and Dr. Kevin McKennan ("Dr. McKennan"), her doctors from April of 2002 through June of 2002 and May of 2002 through July of 2002, respectively. (Pl's. Resp. ¶ 69, 70, 71.) Dr. McGunnigle found that Hansen's IQ was in the superior range, but her working memory was in the low/average range. (Pl's. Resp. ¶ 74, 75.) Taken together with Hansen's disorder and poor reaction to stress, Dr. McGunnigle concluded that Hansen would need "accommodations regarding her capacity to remember and manipulate visually and orally presented information associated with short-term memory tasks." (Pl's. Resp. ¶ 75.)
Karen Van Deventer, a Senior Appeals Specialist for Unum, upheld the claim determination on June 10, 2002, stating that during the 180-day elimination period, Hansen's lifestyle was inconsistent with her claimed functional impairment. (Pl's. Resp. ¶ 68.) Hansen filed a second appeal. (Pl's. Resp. ¶ 72.) In conjunction with the second appeal, on October 15, 2002, Dr. Neuren again reviewed Hansen's file, finding a lack of evidence to support the Meniere's disability claim. (Pl's. Resp. ¶ 73.)
As noted, supra, the policy contained a requirement that a claimant's disability be continuous for 180 days in order to qualify for long-term disability benefits.
Dr. Neuren's recommendation to deny Hansen's claim resulted from his conclusion that her medical records lacked objective findings of Meniere's symptoms, including any type of vestibular disturbance, attacks of vertigo, or progressive low frequency hearing loss. (Pl's. Resp. ¶ 73.) Dr. Michael Kearns ("Dr. Kearns), who examined Hansen on April 24, 2002, noted "though she has a verbal diagnosis of Meniere's disease, [Hansen's] symptoms are suggestive of at least something else going on." (UACL 71, attached as Ex. T to Decl. of Van Deventer.) Additionally, Dr. Kearns noted that Hansen "complain[s] significantly of some cognitive problems, all of which are not classic for Meniere's disease." (UACL 71, attached as Ex. T to Decl. of Van Deventer.)
Unum also performed a psychiatric evaluation of all of Hansen's medical records. (Pl's. Resp. ¶ 74.) Steven Van De Mark, Ph.D. ("Dr. Van De Mark") reviewed Dr. McGunnigle's testing and found that the test scores were not in the impaired range. (Pl's. Resp. ¶ 75.) On October 31, 2002, Unum upheld its earlier determination that Hansen was not eligible for long-term disability benefits. (Pl's. Resp. ¶ 76.)
On January 28, 2003, Hansen filed a final appeal which was once again reviewed by Dr. Neuren, who reaffirmed his prior conclusions. (Pl's. Resp. ¶ 77.) The appeal was denied. (Pl's. Resp. ¶ 79.)
On June 9, 2003, Hansen brought a suit for breach of contract, fraud, breach of the covenant of good faith and fair dealing, and declaratory and injunctive relief under ERISA and state law. (Pl's. Compl. ¶ 17-24.) On April 9, 2004, Unum filed a motion for summary judgment. One week later, Hansen filed a cross motion for summary judgment. In response to a letter opinion by the California Insurance Commissioner, brought to the court's attention by Hansen, the court asked the parties for supplemental briefing on whether discretionary clauses are invalid under California law and whether such law is preempted by ERISA.
STANDARD
Summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970).
Under summary judgment practice, the moving party
[A]lways bears the initial responsibility of informing the district court of the basis of its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the 'pleadings, depositions, answers to interrogatories, and admissions on file.'" Id. at 324. Indeed, summary judgment should be entered, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 323. In such a circumstance, summary judgment should be granted, "so long as whatever is before the district court demonstrates that the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id.
If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986); First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-289 (1968).
In attempting to establish the existence of this factual dispute, the opposing party may not rely upon the denials of its pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed.R.Civ.P. 56(e). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party, Id. at 251-52.
A party may not create a genuine issue of fact by submitting a declaration that contradicts prior sworn testimony. Foster v. Arcata Assoc., Inc., 772 F.2d 1453, 1462 (9th Cir. 1985), cert. denied, 475 U.S. 1048 (1986).
In the endeavor to establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." First Nat'l Bank, 391 U.S. at 289. Thus, the "purpose of summary judgment is to 'pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita, 475 U.S. at 587 (quoting Rule 56(e) advisory committee's note on 1963 amendments).
In resolving the summary judgment motion, the court examines the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. Rule 56(c); SEC v. Seaboard Corp., 677 F.2d 1301, 1305-06 (9th Cir. 1982). The evidence of the opposing party is to be believed, Anderson, 477 U.S. at 255, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Id. Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898 (9th Cir. 1987).
Finally, to demonstrate a genuine issue, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 586-87.
ANALYSIS
Plaintiff has filed suit under section 502(a) of the Employee Retirement Income Security Act ("ERISA") to recover benefits allegedly due under an employer-provided disability insurance policy underwritten by Unum. Before reaching the merits of parties' motions, the court must determine the appropriate standard of review to apply to Unum's denial of benefits determination.
Section 502(a) provides:
"A civil action may be brought by a participant or beneficiary to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B).
ERISA governs all "employee welfare benefit plans," defined as:
Any plan, fund or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) . . . benefits in the event of sickness, accident, disability. . . . 29 U.S.C. § 1002(1) (emphasis added).
I. Standard of Review
ERISA is silent as to the standard of review courts should apply to denial of benefit claims under section 502(a). However, in Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989), the Supreme Court determined that courts should apply de novo review to such claims, "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115. In reaching this conclusion, the Court relied on the common law of trusts, which ERISA's text and legislative history indicate should be used as a guide in interpreting ERISA's provisions. Id. at 110. The Court explained that, under traditional trust principles, a deferential standard of review is appropriate when the trust expressly affords the trustee discretion in the exercise of his powers. However, where the trust affords no discretion, courts traditionally applied de novo review. Id. at 112-113. The Court reasoned that it would be inconsistent with ERISA's stated purpose "to promote the interest of employees and their beneficiaries in employment benefit plans" to adopt a standard of review that affords lesser protections to employees than existed prior to ERISA's adoption. Id. at 113. Nonetheless, the Court stressed that "[n]either general principles of trust law nor a concern for impartial decisionmaking . . . forecloses parties from agreeing upon a narrower standard of review." Id. at 115.
Not surprisingly, many group insurance plan contracts now include a provision expressly granting the insurer discretion to interpret the plan's terms and determine eligibility for benefits. The Unum group disability insurance policy at issue here ("Unum Policy" or "Policy") contains such a "discretionary clause." Specifically, the clause provides:
In exercising discretionary authority under the Plan, the Plan Administrator and any designee (which shall include Unum as claims fiduciary) will have the broadest discretion permissible under ERISA and any other applicable laws, and its decision 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. (Def.'s SUF ¶ 9, 10, 12.)
Parties do not dispute that the above-described language affords Unum discretion to determine eligibility for benefits, as contemplated inFirestone. Thus, it appears a rather obvious conclusion that the court should apply abuse of discretion review to Unum's denial of benefits in this case. However, plaintiff contends that the appropriate standard of review is de novo because the discretionary clause in the policy is invalid under California's common law of contract and California Insurance Code 10291.5.
In support, plaintiff cites a recently issued legal opinion by the Chief Counsel for the California Insurance Commissioner, which casts doubt on the validity of discretionary clauses under California law. On February 26, 2004, in an letter opinion to a plaintiff in a similar action before the United States District Court for the Northern District of California, the Chief Counsel explained that it was the opinion of the Department of Insurance ("DOI") that "all such discretionary clauses in disability insurance contracts violate California law and deprive insureds of protections to which they are entitled." (February 26, 2004 Letter Opinion per CIC 12921.9: Discretionary Clauses ("Letter Opinion") at 1.) Specifically, the Letter Opinion concludes that discretionary clauses render the contract "unintelligible, uncertain, ambiguous, abstruse and likely to mislead" in violation of Cal. Ins. Code § 10291.5(b)(1) because the clauses negate operative terms of the contract and may cause insureds to believe a denial of benefits is unreviewable. (Letter Opinion at 1.) In addition, under Cal. Ins. Code § 10291.5(b)(13), insureds may not be deprived of the protections of California Insurance law, including "the covenant of good faith and fair dealing, principles of contract interpretation . . . or the law of adhesion contracts. . . ." (Letter Opinion at 2.) Finally, the Letter Opinion notes that, in the context of ERISA-governed plans, the presence of a discretionary clause "has the legal effect of limiting judicial review of a denial of benefits to a review for abuse of discretion." (Letter Opinion at 2.)
Concurrently with the issuance of the Letter Opinion, DOI issued a Notice to Withdraw Approval of all disability insurance forms known to contain discretionary clauses, pursuant to its authority under Cal. Ins. Code §§ 10291.5(f) and 12957. (February 27, 2004 DOI Notice To Withdraw Approval and Order for Information ("Withdrawal of Approval").) The Unum Policy in this case was among those identified in the Withdrawal of Approval. However, under Cal. Ins. Code § 10291.5(f), withdraw of approval operates prospectively only. (Withdrawal of Approval at 2.) As such, the Notice of Withdraw of Approval does not affect the outcome of this case.
Because the Unum Policy expressly grants defendant discretionary authority, the standard of review in this case hinges on whether such a clause is valid under California law. If the clause is valid, the court must apply an "arbitrary and capricious standard." If, on the other hand, the clause is invalid, the court will apply de novo review, in accordance with the Firestone decision. Firestone, 489 U.S. at 115 (holding that courts should apply de novo review unless the plan gives the insurer discretionary authority).
However, prior to reaching this issue, the court must resolve two preliminary objections raised by defendant. First, defendant asserts that any claims plaintiff raises under Cal. Ins. Code § 10291.5 cannot proceed because that section does not create a private right of action to invalidate a provision of a group disability insurance contract previously approved by the Insurance Commissioner. Second, defendant argues that plaintiffs contract law claims and section 10291.5 claims (to the extent cognizable) are preempted by ERISA.
A. Court Authority to Invalidate Provision of a Contract Previously Approved under section 10291.5.
Whether a regulatory statute creates a private right of action depends on legislative intent. Moradi-Shalal v. Fireman's Fund Ins. Companies, 46 Cal. 3d 287, 292, 304-305 (1988), Crusader Ins. Co. v. Scottsdale Ins. Co., 54 Cal. App. 4th 121, 131, 135 (1997). In determining legislative intent, "[w]e first examine the words themselves because the statutory language is generally the most reliable indicator of legislative intent. The words of the statute should be given their ordinary and usual meaning and should be construed in their statutory context." Hassan v. Mercy American River Hospital, 31 Cal.4th 709, 715-716 (2003) (citations omitted).
The court's task of interpreting § 10291.5 is complicated by § 10270.95, which renders many of § 10291.5's provisions inapplicable to group disability insurance plans, such as the Unum policy at issue here. Read in concert with § 10270.95, § 10291.5(b) prohibits the Insurance Commissioner from approving a group disability insurance policy if the commissioner finds that the policy (1) contains any provision "which is unintelligible, uncertain, ambiguous, or abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued;" or (2) fails to conform in any respect with any California law." Cal. Ins. Code § 10291.5(b)(1) (13).
§ 10270.95 excludes most of the enumerated circumstances in subdivision (b) from group disability insurance plans as defined. Only 10291.5(b)(1) and (13) apply to group disability plans.
In support of its position that § 10291.5 does not afford a private right of action, defendant cites a recent decision from the Northern District of California, Firestone v. Acuson, 2004 WL 1498165 (N.D. Cal. 2004). In Acuson, the plaintiff, who was covered under an employer-provided long-term disability insurance policy, filed an initial disability claim for "depression, sluggishness, lack of focus/concentration, anxiety." Id. at 1043-44. The claim was approved; however, the insurer limited coverage to 24 months pursuant to a provision in the policy restricting coverage for "mental disabilities" to 24 months. Id. at 1045. After exhausting his administrative appeals, the plaintiff filed suit under ERISA seeking reversal of the insurer's decision to deny benefits. Like here, the insurance policy contained a provision granting the insurer discretion to construe terms of the policy and determine benefit eligibility. Id. at 1044. The plaintiff asserted that the discretionary clause was illegal under Cal. Ins. Code § 10291.5 because the insurer's discretionary authority to determine eligibility for benefits rendered the insurance contract "fraudulent and unsound."Id. at 1059-1060. Relying heavily on the Ninth Circuit decision Peterson v. American Life and Health Ins. Co., 48 F.3d 404 (9th Cir. 1993), the court found that "section 10291.5 does not confer upon beneficiaries such as [plaintiff] the right to 'reform the nature of his policy and obtain benefits for which he never bargained by engaging courts to second-guess the Commissioner's approval of the policy." Acuson, 326 F. Supp.2d at 1050. Again relying on Peterson, the court found that "[o]nce the Commissioner has approved a plan, 'an otherwise valid policy is a binding contract and governs the obligations of the parties until the Commissioner revokes his approval.'" Id. (citing Peterson, 48 F.3d at 410.)
The Peterson Court based its conclusions primarily on § 10291.5(k), which provides that "[a]ny such policy issued by an insurer to an insured on a form approved by the commissioner . . . shall, as between the insurer and the insured, or any person claiming under the policy, be conclusively presumed to comply with, and conform with, this section." Cal. Ins. Code § 10291.5(k). The Peterson court reasoned that the California legislature included an apparently exhaustive list of exemptions for group disability insurance policies in § 10270.95 and omitted § 10291.5(k). Peterson, 48 F.3d at 410. Thus, the court concluded, if the California legislature intended for courts to second guess the Commissioner's approval of various policies, it would have included § 10291.5(k) within the list of exemptions contained in section 10270.95. Id.
However, a review of the legislative history of § 10291.5 and § 10270.95 reveals that the California legislature did precisely that shortly after Peterson was decided. In fact, it appears that the legislature never intended for § 10291.5(k) to apply to group disability insurance policies, but that it was inadvertently made applicable due to a cross referencing error that occurred when the legislature enacted a comprehensive overhaul of the insurance code relating to disability insurance in 1993.
Prior to the 1993 amendments to § 10291.5, the language now contained in subsection (k) appeared in subsection (i). In 1993, the California legislature amended § 10291.5, inserting two new provisions in the middle of the statute, resulting in a renumbering of its subsections. Stats. 1993, c. 1209 (S.B. 590) § 7; Stats. 1993, c. 1210 (A.B. 1100) § 6. As a result, subsection (i) became subsection (k). Id.
However, § 10270.95, which exempted group disability insurance from subsection (i), was not amended to reflect that subsection's new position at subsection(k). As a result of this inadvertence, for the two year period during which Peterson was decided, subsection (k) did apply to group disability insurance policies.
Peterson was decided on February 15, 1995. Later that year, the California legislature amended § 10270.95, correcting the cross-referencing error and clarifying that subdivision (k) of § 12091.5 was inapplicable to group disability insurance plans. See Cal. Ins. Code § 10270.95; Stats. 1995, c. 94 (S.B. 915), § 1.
The fact that the legislature not only included the exemption in the earlier version of the statute, but passed subsequent legislation specifically to ensure group plans were exempted from the "conclusive presumption" provision, suggests that the legislature did not intend for group disability insurance policies to be "conclusively presumed" to comply with § 12091.5's provisions. To hold that insureds have no right to challenge a group policy's compliance with § 10291.5 would render meaningless the legislature's concerted action to ensure no conclusive presumption applies to such policies. See Hassan v. Mercy American River Hospital, 31 Cal.4th at 715-716 ("[C]anons [of statutory interpretation] generally preclude judicial construction that renders part of the statute 'meaningless or inoperative.').
Accordingly, this court finds that an insured may maintain a private right of action to invalidate provisions of group disability insurance policy as violative of § 10291.5.
B. ERISA Preemption
Having determined that plaintiff can seek to invalidate terms of the contract under Cal. Ins. Code § 10291.5, the court next must determine whether such a remedy is preempted by ERISA.
ERISA preempts all laws that "relate to" an employee benefit plan. 29 U.S.C. § 1144(a). The Supreme Court has noted that "[t]he preemption clause is conspicuous for its breadth." FMC Corp. v. Holliday, 498 U.S. 52, 58 (1990). "[T]he express preemption provisions of ERISA are deliberately expansive, and designed to 'establish pension plan regulation as exclusively a federal concern.'" Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46 (1987) (citing Allesi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)).
However, a law is saved from preemption if it "regulates insurance." 29 U.S.C. § 1144(b)(2)(A). In Kentucky Assoc. of Health Plans, Inc. v. Miller, the Supreme Court recently revised and clarified the standard for determining whether a law falls within ERISA's 'savings clause.' 538 U.S. 329, 341-42 (2003) (citation omitted). The Court held that, "for a state law to be deemed a 'law which regulates insurance' under § 1144(b)(2)(A), it must satisfy two requirements. First the state law must be specifically directed toward entities engaged in insurance. Second, . . . the state law must substantially affect the risk pooling arrangement between the insurer and the insured." Kentucky Assoc. of Health Plans, Inc. v. Miller, 538 U.S. 329, 341-42 (2003) (citation omitted).
Initially, the court finds that ERISA clearly preempts any claim by plaintiff that the policy violates California's common law of contract.Pilot Life, 481 U.S. at 51; Security Life Ins. Co. of America v. Meyling, 146 F.3d 1184 (9th Cir. 1998) ("California's general laws of contract interpretation, even when directed at the insurance industry, are not laws that regulate insurance and are not saved from ERISA preemption."); Serrato v. John Hancock Life Ins. Co., 31 F.3d 882 (9th Cir. 1994); Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 494 (9th Cir. 1988) ("California's common law of contract interpretation is not 'specifically directed toward the [insurance] industry.").
As for plaintiff's claim that the discretionary clause violates Cal. Ins. Code § 10291.5, the court finds that the statute falls within ERISA's preemptive scope as it clearly relates to an employee benefit plan. Thus the remaining question is whether it is saved from preemption under 29 U.S.C. § 1144(b)(2)(A). Pilot Life, 481 U.S. at 51; Security Life Ins. Co. of America v. Meyling, 146 F.3d 1184 (9th Cir. 1998).
Under the first prong of the test announced in Miller, a law is "specifically directed toward entities engaged in insurance" if it targets insurers with respect to their insurance practices or imposes a condition "on the right to engage in the business of insurance." Kentucky Assoc. of Health Plans, Inc., 538 U.S. at 334, 338. However, as noted supra, courts have been quick to point out that laws of general applicability, including general laws of contract interpretation, are not laws "specifically directed toward entities engaged in insurance."
In Security Life Ins. Co. of America v. Meyling, the Ninth Circuit addressed whether three California Insurance Code provisions, which afforded insurers a right of rescission for misrepresentations by an insured on an insurance application, were preempted by ERISA. Meyling, 146 F.3d at 1189. Relying on a long line of cases holding that general rules of state contract law are preempted by ERISA, the court found that the code sections at issue were not saved from preemption merely because they were codified in the Insurance code. Id. at 1188. The court explained that "California's general laws of contract interpretation, even when directed at the insurance industry, are not laws that regulate insurance and are not saved from ERISA preemption." Id. at 1188.
Admittedly, Meyling was decided before Miller and based its holding on the since-overruled standard governing ERISA's savings clause. Prior to Miller, courts applied a two-part test, first looking at whether the law fits a "common-sense understanding of insurance regulation" and then analyzing the law under the three McCarron-Ferguson factors: " First, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry." Serrato v. John Hancock Life Insur. Co., 31 F.3d 882, 885 (9th Cir. 1994) (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48-49 (1987)) (italics in original). Nonetheless, recognizing the "similarities between the [old and new] approaches," the Ninth Circuit has noted that "it is well worth considering the substantial body of case law applying the older tests." Elliot v. Fortis Benefits Insurance Co., 337 F.3d 1138, 1143 (9th Cir. 2003.) Meyling predicated its decision in large part on the well-settled principle that statutes which codify general contract principles in the insurance context, do not "regulate insurance."Meyling, 146 F.3d 1184. Consequently, the court finds Meyling to be instructive in resolving the preemption issue.
Like the statutes at issue in Meyling, § 10291.5 creates a right of action which is rooted in the common law of contracts. At its core, a private action under § 10291.5 affords insureds a remedy to reform contracts with terms which are "unintelligible, uncertain, ambiguous, or abstruse or likely to mislead" or which otherwise "violate any law of the state." Cal. Ins. Code § 10291.5(b)(1) (13). This remedy is not limited to the insurance context: in all contracts, reformation is a remedy in cases of, inter alia, misrepresentation, concealment, or mistake. See Rest. 2d of Contracts § 166 (1981). In addition, it is a common rule of contract construction that ambiguities in the contract are resolved against the drafter. 16 Richard A. Lord, Williston on Contracts § 49:15 (4th ed.) ("Unclear or ambiguous policy provisions will be construed liberally in favor of the insured, and strictly against the insurer that drafted the policy and thus chose the language, thereby causing the ambiguity to exist.")
The statute before the court illustrates the enormity of the loophole a contrary holding would create. Cal. Ins. Code § 10291.5(b)(13) provides that the "Insurance Commissioner shall not approve any disability policy for insurance or delivery in this state . . . (13) [i]f it fails to conform in any respect with any law of this state." The Letter Opinion specifically notes that, by virtue of this subsection, California insureds are entitled to all the protections of California law, including "the covenant of good faith and fair dealing, the principles of contract interpretation such as the rule of reasonable interpretation or the law of adhesion contracts under which ambiguities are resolved in favor of the insured." (Letter Opinion at 2.) Many of the protections mentioned, specifically the covenant of good faith and fair dealing and general principles of contract interpretation have been held expressly preempted by ERISA. See e.g., Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 494 (9th Cir. 1988) (holding that "California's common law of contract interpretation is not a law that 'regulates insurance,' and therefore is not saved from preemption."); Dytrt v. Mountain States Tel. Tel. Co., 921 F.2d 889, 897 (9th Cir. 1990) (holding that ERISA preempts common law theories of breach of contract implied-in-fact, as well as state claims for breach of implied covenants of good faith and fair dealing); Serrato v. John Hancock Life Ins. Co., 31 F.3d 882, 884 (holding that state law requiring insurers to pay benefits to employees with "vested" rights preempted by ERISA). To hold that a statute such as Cal Ins. Code 10291.5(b)(13) "regulates insurance" would permit the legislature to avoid the broad preemptive force of ERISA merely by codifying any generally applicable law within the Insurance code. Consequently, like the insurance code provisions held preempted inMeyling, § 10291.5 is not "specifically directed toward entities engaged in insurance."
The court does not address whether the state legislature, by statute, or the insurance commissioner, under the authority granted him under the insurance code, may expressly prohibit insurance companies from including discretionary clauses in disability insurance policies sold in this state. The court merely holds that a private action for reformation under § 10291.5(b) is preempted by ERISA.
Because ERISA precludes plaintiff from maintaining a private right of action under 10291.5, the court finds that the applicable standard of review in this case is abuse of discretion.
II. Merits
Applying the abuse of discretion standard of review, the sole issue before the court is whether Unum abused its discretion in denying Hansen's disability claim. In determining whether an abuse of discretion occurred, courts "generally limit [their] review to the record before the plan administrator when making the benefits determination." Alford v. DCH Found Group Long-Term Disability Plan, 311 F.3d 955, 957 (9th Cir. 2002).
The abuse of discretion standard accords Plan administrators considerable deference. Oster v. Barco v. California Employees Retirement Plan, 869 F.2d 1215, 1218 (9th Cir. 1988). ERISA plan administrators "abuse their discretion if they render decisions without any explanation, or construe provisions of the plan in a way that conflicts with the plain language of the plan." Taft v. Equitable Life Ins. Co., 9 F.3d 1469, 1472 (9th Cir. 1998). Additionally, an abuse of discretion may be found where a plan administrator "relies on clearly erroneous finding of fact in making benefit determinations." Id. at 1473. Notably, it is not an abuse of discretion for an administrator to render a decision based on contradictory evidence in the record. Bendixen v. Standard Ins. Co., 185 F.3d 939, 944 (9th Cir. 1999).
In ERISA cases, even a decision "directly contrary to the evidence in the record" does not necessarily constitute an abuse of discretion. Taft, 9 F.3d at 1472, citing, inter alia, Eley v. Boeing Co. 945 F.2d 276, 279 (9th Cir. 1991) (not an abuse of discretion to deny benefits despite expert evidence showing that a certain procedure was diagnostic and therefore was covered by the plan). Also notably, a plan administrator's disagreement with a treating physician does not constitute an abuse of discretion. Black Decker Disability Plan v. Nord, 538 U.S. 822, 123 S.Ct. 1965 (2003). Accordingly, the court reviews Unum's claim determination, both procedurally and substantively, solely for an abuse of discretion.
A. Unum's Determination Procedure
First, Hansen argues that Unum abused its discretion by relying solely on the opinions of non-examining medical professionals. See Pl.'s Mem. of P A at 17-18. Specifically, Hansen contends that it was an abuse of discretion to rely on Dr. Neurem's non-examining medical opinions. According to Hansen, the degree of her disability, and the compounding symptoms such as dizziness, nausea, memory problems, and depression, "could not be evaluated by [Dr. Neurem] at the other end of the country." (Pl.'s Mem. of P A at 18.)
To support this contention, Hansen relies solely on Godfrey v. Bellsouth Telecommunications, Inc., 89 F.3d 755 (11th Cir. 1996) (holding that an insurer's rejection of clear medical evidence submitted by claimant, and failure to either seek treatment notes of her doctor or examine claimant themselves constitutes abuse of discretion). Notably, the Godfrey court concluded that the plan administrators had a conflict of interest, and thus its decision was entitled to considerably less deference. Godfrey, 89 F.3d at 758, citing Brown v. Blue Cross and Blue Shield of Alabama, 898 F.2d 1556, 1559 (11th Cir. 1990). Since plaintiff has not alleged a conflict of interest exists in the matter at hand, the standard for finding abuse of discretion is not diminished, as it was inGodfrey.
Additionally, unlike in Godfrey, Unum's physicians did not reject "clear medical evidence." In fact, since there was a lack of objective, conclusive medical evidence, Unum contacted Hansen's treating physician, consulted registered nurses, medical doctors, psychologists and psychiatrists on several occasions. Unum did not rely solely on either Dr. Neurem's or nurse Girard's opinions, as Hansen suggests, but in fact relied on numerous professional opinions from various medical fields.
Hansen also contends that Unum exhibited "willful disregard" by failing to "consider important aspects of the evidence." (Pl.'s Mem. of P A at 19.) Specifically, Hansen contends that Unum abused its discretion by failing to consider the favorable ALJ decision in Hansen's Social Security case. However, the Supreme Court held in Black Decker, supra, 538 U.S. at 833, that Social Security determinations are decided under different criteria than determinations under ERISA:
In determining entitlement to Social Security benefits, the adjudicator measures the claimant's condition against a uniform set of federal criteria. 'The validity of a claim to benefits under an ERISA plan,' on the other hand, 'is likely to turn,' in large part, 'on the interpretation of terms in the plan at issue.' (Quoting Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101 (1989).)
In addition, unlike in ERISA cases, the Administrative Law Judge ("ALJ") in a Social Security case is required to give deference to the opinion of the treating physician. Black Decker, 538 U.S. at 833. Consequently, here, the ALJ's decision is not determinative of Hansen's claim for long term disability benefits under the Plan because, in rendering the decision as to Hansen's Social Security benefits, the ALJ considered different criteria and accorded greater weight to the opinions of Hansen's treating physician, than is required under ERISA. Madden v. ITT Long Term Disability Plan, 914 F.2d 1279, 1285 (9th Cir. 1990) directly confronted this issue, holding that it was not arbitrary and capricious to deny benefits to claimant without considering a finding by the Social Security Administration that claimant was totally disabled. Therefore, Unum did not abuse its discretion in failing to consider, or decide in accord with, Hansen's favorable ALJ decision.
Hansen's next claim, that Unum failed to consider the conclusions and findings of Dr. McGunnigle, is wholly unsupported by the evidence. (Pl.'s Mem. of P A at 19.) Furthermore, Dr. McGunnigle's April 2002 report had mixed results, since it concluded, in part, that Hansen's psychological test results were not in the impaired range. (Defs.' SUF ¶ 74.)
Similarly, Hansen provides no evidence to support her contention that Unum failed to consider both the treating record and the subjective information she provided. Id. The fact that Unum found this evidence inconclusive or unsupportive of a finding that Hansen was totally disabled throughout the elimination period does not constitute an abuse of discretion.
Finally, Hansen argues that Unum abused its discretion by ignoring the "vocational implications of [Hansen]'s condition as they related to . . . whether she could perform her regular occupation." Id. However, the evidence illustrates that Unum took several steps to determine the scope and physical requirements of Hansen's job. Specifically, Unum contacted Hansen's employer to determine her specific job duties, utilized a vocational rehabilitation consultant to determine the occupational requirements of a recruiter in the national economy, and contacted Hansen herself to obtain further information about her job. Subsequently, the administrator analyzed the evidence, in light of Hansen's job requirements, and determined that it did not support a finding of total disability. Hansen's suggestion that Unum's determination procedure, or its ultimate decision, constitutes an abuse of discretion is unfounded.
B. Unum's Basis for Denial
Second, Hansen contends that Unum abused its discretion because it had "no cognizable, substantial basis for denial." (Pl.'s Mem. of P A at 17.) However, Unum points to evidence in the administrative record that supports its conclusion that Hansen was not continuously totally disabled during the elimination period.
In particular, Hansen claims that she has disabling Meniere's disease, but Unum notes that Meniere's disease is episodic, and that "there is no such thing as chronic Meniere's disease." (Defs.' Mem. of P A at 18.) Further, Unum points to the fact that although Hansen claims her symptoms have been incessant since September of 2000, she continued in her occupation for nearly a year, until July of 2001. (Defs.' Mem. of P A at 19.) During this period, Hansen's supervisor informed her she was performing her job duties well, as she was a high producer recruiting for high level positions.
In reviewing Hansen's claim, Unum also concluded that "[Hansen]'s exhibited activity level is inconsistent with her disability claims." (Defs.' Mem. of P A at 19.) Among other activities Hansen is capable of doing, Unum cites Hansen's routine exercise, vacation to Hawaii, driving her car and running errands, moving to a new city and into a new house, and buying a puppy and kitten as evidence inconsistent with her claims of constant Meniere's symptoms and the need to rest and sleep throughout the day. (Defs.' Mem. of P A at 19.) Therefore, Unum had an evidentiary basis for concluding that Hansen's activity level during the elimination period reflected that she was not "disabled" under the Plan, and could have performed her regular sedentary occupation.
After reviewing Hansen's medical records, Unum concluded that the evidence did not support a finding of total disability during the elimination period. The physicians who examined and treated Hansen diagnosed her with a variant of Meniere's disease, as well as hearing loss at high frequencies, and depression for which she was prescribed anti-depressants. Unum reviewed multiple medical evaluations, concluding that they lacked sufficient evidence that Hansen suffered either debilitating Meniere's attacks or severely disabling depression.
In addition, Unum relied on the fact that Dr. Bott strongly disagreed with Hansen's decision to stop working in July of 2001. (See Pl's. Response to Defs.' SUF ¶ 36.) After evaluating Hansen, Dr. Bott concluded that Hansen's symptoms did not prevent her from working and could be resolved by an increase in anti-depressants. Accordingly, Unum's administrator decided that the evidence "pointed to mild manageable symptoms", not a total disability. (Defs.' Mem. of P A at 19.) Since Unum's basis for denying Hansen's disability claim has evidentiary support, Unum's decision does not constitute an abuse of discretion.
CONCLUSION
For the foregoing reasons, plaintiff's motion for summary judgment is DENIED and defendant's motion for summary judgment is GRANTED. The clerk is instructed to close the file.
IT IS SO ORDERED.