Opinion
Case No.: CV 98-4246-ABC (MANx).
March 3, 1999
ORDER RE: DEFENDANT PAUL REVERE INSURANCE COMPANY'S MOTION FOR PARTIAL SUMMARY JUDGMENT
Defendant Paul Revere Life Insurance Company's ("Defendant Paul Revere") motion for partial summary judgment pursuant to Fed.R.Civ.P. 56(c) was taken under submission by this Court on November 18, 1998. After reviewing the materials submitted by the parties and the case file, it is hereby ORDERED that Defendant's motion for partial summary judgment is GRANTED.
I. Factual and Procedural Background
Susan Rosenthal ("Plaintiff") seeks to recover long-term disability benefits allegedly owed to her by Defendants, the Long-term disability plan of Epstein, Becker Green, P.C., ("Defendant Plan" or "Plan") and Paul Revere Life Insurance Company ("Defendant Paul Revere"). Plaintiff worked as a trial attorney and litigator for the law firm of Epstein, Becker Green, P.C., ("Epstein") at its Los Angeles, California office since 1992. Paragraph 5 of Plaintiff's complaint indicates that she has been suffering from high blood pressure, labile hypertension and vascular headaches since the mid-to-late 1980's. Plf.'s Compl. at 2. On November 29, 1994, after two days of severe headaches, Plaintiff visited her doctor. Id. During that visit, her doctor checked her blood pressure. Id. After he obtained readings of 170/98, 190/110 and 180/105, he treated Plaintiff with medication and had her lie still for two hours. Id. When she got up, Plaintiff's blood pressure dropped to 60/0 and she was immediately hospitalized. Id. In paragraph 8 of her complaint, Plaintiff claims that following treatment by her doctor, she was not able to bring her blood-pressure under substantial control and her doctor recommended that she not continue working because it would put her at high risk for complications from hypertension. Id. at 3. Accordingly, Plaintiff stopped working on January 6, 1995 and applied for long term disability benefits on April 24, 1995, following the required 90-day waiting period.Id.
Under the Defendant Plan, covered persons are entitled to benefits when "because of injury or sickness, [they] cannot perform the important duties of a trial attorney in the practice of law." Defendant Plan had Rosenthal examined by their doctor, who indicated that her condition would not harm her if her work schedule was controlled (i.e., modified to control her stress and work hours). Following this examination, Defendant Plan denied Plaintiff's claim for disability benefits. Plaintiff then appealed the denial and retained an attorney to represent her in the matter. In conjunction with the representation, her attorney requested the documents upon which the denial was based and was never given a response other than the documents had been "previously provided." Plaintiff also inquired as to whether Defendant Plan's insurer, Defendant Paul Revere considered her an "attorney" or "trial attorney." This question was never answered by either Defendant, although on February 21, 1997, Defendant Paul Revere indicated that it considered her able to perform either occupation. On March 30, 1998, an Administrative Law Judge for the Social Security Administration determined that Plaintiff was disabled from her regular occupation.
Plaintiff filed a lawsuit against Defendants on May 28, 1998 under 29 U.S.C. §§ 1132(a), (e) and (f), §§ 502(a), (e) and (f) of the Employee Retirement Income Security Act of 1974 ("ERISA"). Defendant Paul Revere filed its Answer on July 6, 1998 and Defendant Plan filed its Answer on September 28, 1998. On October 26, 1998 Defendant Paul Revere filed the instant motion for Partial Summary Judgment on two issues. First, Defendant Paul Revere asks for summary judgment regarding the standard of review of the decision to deny Plaintiff's claim for disability benefits. Specifically, Defendant Paul Revere argues that the correct standard of review is abuse of discretion. Next, Defendant Paul Revere asserts that the scope of admissible evidence should be ruled as limited to the administrative record at the time of the decision to deny benefits. Plaintiff filed her opposition on November 9, 1998. Defendant filed its reply on November 18, 1998.
II. Discussion
A. StandardIt is the burden of the party who moves for summary judgment to establish that there is "no genuine issue of material fact, and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); British Airways Bd. v. Boeing Co., 585 F.2d 946, 951 (9th Cir. 1978), cert. denied, 440 U.S. 981 (1979). If the moving party has the burden of proof at trial, the moving party must make a showing sufficient for the court to hold that no reasonable trier of fact could find other than for the moving party. Calderone v. United States, 799 F.2d 254, 259 (6th Cir. 1986) (quoting W. Schwarzer, Summary Judgment Under the Federal Rules: Defining Genuine Issues of Material Fact, 99 F.R.D. 465, 487-88 (1984)).
Once the moving party satisfies the initial burden, "an adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings . . . [T]he adverse party's response . . ., must set forth specific facts showing that there is a genuine issue for trial." Fed R. Civ. P. 56(e) (emphasis added). A "genuine issue" of material fact exists only when the nonmoving party makes a sufficient showing to establish an essential element to that party's case, and on which that party would bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317 at 322-23 (1986). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which a reasonable jury could reasonably find for plaintiff." Anderson, 477 U.S. at 252. The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor. Id. at 248; Griffeth v. Utah Power Light Co., 226 F.2d 661, 669 (9th Cir. 1955).
B. Analysis
1. Standard of Review
A denial of ERISA benefits is reviewed under a de novo standard "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Snow v. Standard Ins. Co., 87 F.3d 327, 330 (9th Cir. 1996). When a plan fiduciary has discretionary authority, the proper standard of review for ERISA claims is abuse of discretion. Snow, 87 F.3d at 330 (citations omitted).
The term "abuse of discretion" is interchangeable with the term "arbitrary and capricious." Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1321 n. 1 (9th Cir. 1995).
Whether a benefit plan confers to an administrator or fiduciary the discretion to determine eligibility for benefits or to construe the terms of the plan depends on the language of the plan itself. See Firestone, 489 U.S. at 111 (analogizing ERISA to the law of trusts, and noting that "`[w]hen trustees are in existence, and capable of acting a court of equity will not interfere to control them in the exercise of a discretion vested in them by the instrument under which they act.'" (emphasis in original) (quoting Nichols v. Eaton, 91 U.S. 716, 724-25 (1875)). The Ninth Circuit has further observed that "a plan does confer discretion when it `includes even one important discretionary element, and the power to apply that element is unambiguously retained by its administrator.'" Snow, 87 F.3d at 330 (citing Boque v. Ampex Corp., 976 F.2d 1319, 1325 (9th Cir. 1992).
The Court first notes that Defendant Paul Revere is a fiduciary pursuant to 29 C.F.R. Section 2560.503-1(g) which provides that when benefits under an employee benefit plan are provided or administered by an insurance company, the insurance company is the fiduciary of the plan. Therefore, the Court must determine whether the Defendant Plan vests Defendant Paul Revere with discretionary authority to determine eligibility for benefits or to construe the terms of the Plan.
Defendant Paul Revere argues that the language found in the Plan documents provides it with sufficient discretionary power to mandate an abuse of discretion standard. First, Defendant Paul Revere points to the Application for Paul Revere's Group Policy which provides that "[t]he Paul Revere Life Insurance Company, as claims administrator, has the full, final, binding and exclusive discretion to determine eligibility for benefits and to interpret the policy under the plan as may be necessary in order to make claims determinations." Ex. A to Def.'s Mot. for Part. Summ. J., PRL000414. Next, Defendant Paul Revere indicates that the language in the Group Policy contains language identical to the language found to be sufficient to require the "abuse of discretion" standard in Snow. The Group Policy reserves the right for Paul Revere to require written proof of financial loss and indicates that "payment of benefits may be contingent upon receipt of satisfactory proof of financial loss." Id. at PRL 000402. In Snow, the policy at issue also required satisfactory written proof of the claimed loss, to which the court indicated that they saw "no relevant difference between that and plans which declare that the plan administrator will determine eligibility." Snow, 87 F.3d at 330.
In response, Plaintiff contends that although the policy indicates that Paul Revere may require "satisfactory proof" of financial loss, which is not at issue here, the policy does not require Plaintiff to provide "satisfactory proof of disability." Plf.'s Opp. at 6. Plaintiff points to the recent 9th Circuit decision, Kearney v. Standard Insurance Company, which suggested that absent the authority to determine what a plan considers to be "satisfactory proof," the requirement of "satisfactory proof" may not be enough to show discretionary authority. Kearney, 114 F.3d 597, 605 (9th Cir. 1998),vacated and granted en banc review, 152 F.3d 1098 (9th Cir. 1998). The reasoning articulated by the court is based on a distinction between plans which require a subjective (discretionary) versus objective (non-discretionary) showing of "satisfactory proof." Id. The former results in the grant of discretion sufficient to warrant the abuse of discretion standard. Id. Plaintiff also lists several decisions (mostly outside this Circuit) where the courts found that discretion existed in one aspect of a plan, but not in another. Further, Plaintiff argues that the language providing discretion must be found in the plan documents and that the application is not a plan document.
See, e.g. IBEW v. Southern California Edison Company, 880 F.2d 104, (9th Cir. 1989); Masalla v. Blue Cross, 936 F.2d 98 (2nd Cir 1991); Haley v. Paul Revere, 77 f.3d (4th Cir. 1996); Lake v. Metropolitan Life, 73 F.3d 1372 (1996); Petrilli v. Drechsel, 910 F.2d 1441 (7th Cir. 1990); Kirwan v. Marriott Corp., 10 F.3d 784 (11th Cir. 1994).
Plaintiff is correct in the observation that in the present case there is no issue regarding proof of financial loss. However, in the recent Ninth Circuit decision Snow v. Standard Ins. Co., there also was not an issue regarding proof of financial loss. As in the present case, the plaintiff in Snow was denied disability benefits because the defendant's doctors found that plaintiff was able to work.Snow, 87 F.3d at 327. Additionally, the plan language at issue required "satisfactory written proof of the claimed loss," similar to the "satisfactory proof of financial loss" mandated by the Defendant Plan. Id. at 330. Nonetheless, the Ninth Circuit found that the plan conferred sufficient discretionary authority and affirmed the district court's finding that the abuse of discretion standard applies.
The Court must follow the Ninth Circuit's determination inSnow that there is "no relevant difference between [plans that require written satisfactory proof of the claimed loss] and plans which declare that the plan administrator will determine eligibility." Id. at 330. As the Ninth Circuit noted in Snow, "both require the administrator to decide whether the person has become eligible as a result of presentation of satisfactory proof to that effect." Id. Plaintiff's reliance on cases where courts have found that discretion in one part of a plan does not necessarily grant discretion to other areas of the plan is of no consequence. Those cases do not involve the determination of whether the requirement of a showing of "satisfactory proof of loss" confers sufficient discretion to apply the abuse of discretion standard. Snow examined this exact issue and the Ninth Circuit found that abuse of discretion applies. Plaintiff's argument that the discretionary language only applies to determinations of financial loss as opposed to determinations of disability does not distinguish this case from Snow, since that same distinction existed and was not credited by the Ninth Circuit in Snow. Snow, 87 F.3d at 3. Further, becauseKearney has been vacated, that case cannot carry any weight in the decision here.
For example, one case Plaintiff cites recognized discretionary authority in the determination of whether charges were unreasonable, but not as to whether they were reasonable and customary. IBEW v. Southern California Edison Company, 880 F.2d 104, 108 (9th Cir. 1989). Another case states that discretionary authority to determine scope of coverage does not confer discretion to decide claims. Masalla v. Blue Cross, 936 F.2d 98 (2nd Cir. 1991). In Petrelli v. Drechsel, the Seventh Circuit found that discretion to determine whether a plaintiff found "suitable long term employment" did not confer discretion to determine if plaintiff suffered a layoff. Petrelli v. Drechsel, 910 F.2d 1441 (7th Cir. 1990). As indicated above, these case, and the other cases Plaintiff cites (see fn. 2, supra), do not answer the issue presented here.
Therefore, the Court finds that discretion is conferred upon Defendant Paul Revere in the Group Policy. Because the language found in the Group Policy confers discretion upon Defendant Paul Revere, it is unnecessary for the Court to probe other documents, such as the application, before finding that the appropriate standard to apply in this case is abuse of discretion. Accordingly, Plaintiff's contention that there is an issue of material fact as to whether the application is a plan document does not influence the Court's analysis.
2. Evidence Subject to Review
The parties agree that if the proper level of review is abuse of discretion, then the parties must limit their evidence to the plan's administrative record. Taft v. Equitable Life Assurance Soc'y., 9 F.3d 14469, 1471-72 (9th Cir. 1993). Plaintiff does not assert that there was a conflict of interest. Rather, she argues that even if the abuse of discretion standard applies, without additional evidence the Court cannot determine whether the insurance company's decision was affected by a conflict of interest. An exception to this rule exists if there is a conflict of interest. If the court determines that there is a conflict of interest, the court may conduct a de novo review or decrease deference in its review for abuse of discretion. Lang v. Standard Ins. Co., 125 F.3d 794 (9th Cir. 1997).
Plaintiff raises an issue recently examined in this District. In Newman v. Standard Insurance Co., the plaintiff requested the court to allow discovery beyond the administrative record regarding a potential conflict in defendant's decision to deny plaintiff benefits. Newman v. Standard Insurance Co., 997 F.Supp. 1276, 1280 (C.D. Cal. 1998). The court refused because of practical and policy considerations in ERISA cases. The court reasoned that if this sort of discovery were allowed in ERISA cases, it would result in "far-reaching, open-ended, nearly limitless discovery" and extensive litigation regarding the motivation of the decision-maker. Id. The court indicated that such an outcome would be contrary to ERISA's purpose of providing a method for the inexpensive and expedient resolution of benefit claims. Id. at 1281 (quoting Taft v. Equitable Life Assurance Soc'y, 9 F. 3d 1469, 1472 (9th Cir. 1993). Further, the Ninth Circuit has previously limited the scope of discovery for conflict of interest to the administrative record. Id. (citingLang, 125 F.3d 794 (9th Cir. 1997); see also Hensley v. Northwest Permanente P.C. Retirement Plan and Trust, 5 F.Supp.2d 887, 892 (D. Or. 1998) (noting that the only guidance that the Ninth Circuit has given regarding the scope of discovery for determining conflict of interest is examination of the administrative record). The Court agrees with the logic articulated in Newman and denies the request to extend the scope of evidence in this case.
Thus, the appropriate scope of review for this case is the administrative record.
III. Conclusion
For the reasons stated above, Defendant has showed that there is no genuine issue of material fact regarding the standard and scope of evidence applicable to this case. Therefore, Defendant's motion for partial summary judgment is GRANTED.