Opinion
No. CV-98-4246 GAF (MANx).
December 21, 1999
FINDINGS OF FACT AND CONCLUSIONS OF LAW; ORDER
This matter came on for court trial on November 9, 1999. Ronald Dean appeared for plaintiff Susan Rosenthal ("Rosenthal"), Robert Renner, BARGER WOLEN, LLP, appeared for defendant THE PAUL REVERE LIFE INSURANCE COMPANY ("Paul Revere"), and Robert Dye, EPSTEIN, BECKER GREEN, appeared for defendant THE LONG TERM DISABILITY PLAN OF EPSTEIN, BECKER GREEN ("the Plan").
The parties having agreed to a trial on the administrative record of Paul Revere's denial of Rosenthal's long term disability claim, Kearney v. Standard Insurance Co., 175 F.3d 1084, 1094-1095 (9th Cir. 1999) (en banc), Mongeluzo v. Baxter Travenol Long-Term Disability Benefit Plan, 46 F.3d 938 (9th Cir. 1995), no additional evidence was taken in the case. Oral argument on the administrative record was conducted on November 9, 1999, after which the case was submitted to the Court for decision.
Paul Revere actually went outside the record on the issue of the standard of review, arguing that a "Highlights" document obtained from Rosenthal constituted a plan document. (Paul Revere's Trial Brief, at 14-16.) Therefore, argues Paul Revere, language in the document can be considered in assessing what standard of review to apply in this case. (Id.) Since it is not part of the administrative record, and since there are significant foundational issues relating to the document (e.g., when was it prepared, when and under what circumstances was it given to Plan participants, etc.) the Court will not consider this document in rendering its decision in this case.
FINDINGS OF FACT
Any finding of fact that constitutes a conclusion of law is also hereby adopted as a conclusion of law.
1. Plaintiff Susan Rosenthal was employed from 1984 to January 1995 as a trial attorney with various law firms. (AR 3, 8, 10, 195, 199.) From 1992 to the time of the disability claim which is in issue in this case, she worked as a trial attorney with the firm of Epstein, Becker Green ("EBG"). (AR 10, 11.) It is undisputed that Rosenthal was a participant in the Plan.
"AR" refers to the pages of the administrative record before the Court. Apparently, in discovery, these pages were Bates stamped with the prefix "PRL." The number used by the Court eliminates all preceding "O's." Thus, "PRL 00008" becomes "AR 8."
2. The Plan is an employee welfare benefit plan, established by EBG for the benefit of its employees to insure against income loss due to long term disability. (AR 360.)
3. On or about June 9, 1993, EBG submitted a "Group Insurance Application" to Paul Revere to obtain long term disability coverage. (AR 411-414.) This application contained on its last page a "Notice to Applicants" which included the following language:
"The 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 to make claim determinations. The decision of claims administrator shall not be overturned unless arbitrary and capricious or unless there is no rational basis for a decision."
(AR 414.) The notice also states:
"The application will be attached to and form a part of the policy." (Id.)
4. Defendant Paul Revere issued to EBG the long term disability insurance policy, Number 43549, effective July 1, 1993, the terms of which are at issue in this lawsuit. (AR 360.)
5. On or about July 15, 1993, after the policy was issued EBG submitted an "Acceptance Application for Group Insurance" to Paul Revere. (AR 359.) The document states in pertinent part:
"The Applicant, by signature below of its authorized representative, approves the Group Policy and accepts its terms. It is agreed that this application supersedes any previous application for the Group Policy.
(AR 359.) (Emphasis added.)
B. THE PLAN
6. The disability insurance policy provided benefits to employees who were participants in the Plan and who became disabled within the meaning of the Plan. The plan provides benefits for "total disability from the employee's own occupation." (AR 372.) Furthermore, it contains the following definitional language:
"Totally disabled from the employee's own occupation or total disability from the employee's own occupation means:
. . . .
2. For trial attorneys,
a. Because of injury or sickness, the employee cannot perform the important duties of a trial attorney in the practice of law"
(AR 373.)
7. The Plan does not define the phrase "the important duties of a trial attorney in the practice of law" nor does it contain any other information concerning the nature of these duties. Likewise, the plan definition does not contain any language regarding the number of hours per day or per week that purportedly defines a trial attorney's work. Rather, it speaks solely in terms of whether an illness or injury precludes a trial attorney from performing her important duties, whatever those duties encompass. (AR 360-410 and particularly 372-373.)
8. Thus, under the terms of the Plan, if Rosenthal was unable to "perform the important duties of a trial attorney in the practice of law" (AR 373), she was entitled to disability benefits under the Plan, following a 90 day elimination period (AR 272, 362). C. ROSENTHAL'S MEDICAL WORK HISTORY
During the trial, both parties made several references to a 60 day elimination period. The only reference the Court could find to an elimination period defined it as 90 days.
9. For the ten years before becoming disabled, Rosenthal suffered the effects from sudden and abrupt fluctuations in her blood pressure, moderate to severe essential hypertension and labile blood pressure. (AR 41-42.) Over that period to time, she was placed on twelve different prescription medications to bring and keep her blood pressure under control, with varying results. (Id.) In 1989 she was taken to the emergency room because of severe headaches, with her blood pressure rising to 240/140. (AR 41.)
10. On November 29 or 30, 1994, Rosenthal went to her long-time doctor, Dr. Ginsberg, with complaints of headaches for the previous two days while she had been preparing for trial. (AR 9, 41, 63-65.) During that visit, Dr. Ginsberg measured wildly fluctuating blood pressures of 200/120, 170/98, 190/110 and 180/105 (AR 48, 41, 63). He immediately started her on intravenous medications and after a few hours, her pressure started to stabilize. (AR 63-65.) However, when she got up her pressure dropped to 60/0, she fainted and was immediately hospitalized overnight for observation and testing (AR 63-65).
11. Rosenthal returned to work on December 2, 1994, while monitoring her blood pressure two times per day. (AR 112.) Further, her doctor started her on a new medication, which caused, inter alia, depression, lethargy, fatigue and lack of mental acuity. (Id.)
12. Rosenthal left work on January 5, 1995 and never returned. (AR 5.) When she saw Dr. Ginsberg on February 15, 1995, he noted her high blood pressure and wrote in his notes, "stress exacerbates hypertension" and "No work possible as trial attorney." (AR 48)
13. Dr. Ginsberg referred Rosenthal to Dr. Grifka, a cardiologist, for an examination. (AR 41-43.) Dr. Grifka examined Rosenthal on February 24, 1995, after which he prepared a report. (Id.) The report contained a history of her condition and then a description of Dr. Grifka's impressions:
"1. Essential hypertension: moderate to severe and quite labile.
2. Hypertensive heart disease: as evidenced by left ventricular hyperthrophy and left atrial abnormality on her EKG."
(AR 42-43.) The left ventricular hypertrophy was evidenced by a recent echocardiagram. (AR 42.) Dr. Grifka concluded that her work in pretrial and trial situations precluded her from appropriately managing her medical problem. He wrote,
"I believe that the patient's lifestyle, i.e., working 16 to 20 hours a day in a pretrial or trial situation with inability to watch her diet, exercise and stress level, and to appropriately take her medications appears to preclude appropriate and important management and care of her significant medical problem. One would expect if this cycle of sustained markedly elevated blood pressure continues, the patient will be at high risk for complications from hypertension such as peripheral vascular disease, stroke, renal damage and myocardial infarction." (AR 43).
14. As a trial attorney, Rosenthal was required, on frequent occasion, to work long hours, endure great stress and be both physically and mentally alert. (AR 159-60) Certain of the medications she was required to take for her hypertension interfered with her ability to act as a trial lawyer and prevented her from properly representing her clients. (AR 112)
15. Both of Rosenthal's treating doctors, Ginsberg and Grifka, opined in a non-litigation setting, that Rosenthal should not return to work as a trial attorney as it would place her health at risk. (AR 9, 43, 48.)
D. The Disability Claim
16. On April 24, 1995, Rosenthal submitted a claim for long-term disability benefits under the Plan. (AR 5-13.) In that application, Rosenthal claimed disability on the ground that her hypertension and incipient hypertensive heart disease rendered her unable to perform the important duties of a trial attorney in the practice of law. (See AR 5.) She described her illness as "hypertensive heart disease" and indicated that she had been hospitalized on December 1, 1994. (Id.)
17. In Rosenthal's application she further indicated the following: (1) that she had been hypertensive but had never had heart disease; (2) that she had been treated by Drs. Bernard Ginsberg, George Grifka, and Morris Grabie; (3) that she had worked as a trial attorney for a period of approximately 10 years; (4) and that the essential factors in her job included interacting with others, long term memory, short term memory, working independently, directing the activities of others, making judgments/decisions, abstract/creative thinking, objective evaluation of information and meeting precise standards. (AR 7,12.) Although the form asked her to rank these functions in order of importance, Rosenthal wrote:
I cannot rank your list of job functions in order of importance. I am a professional trial attorney. I need to do a variety of things competently and simultaneously in order to perform my profession. In essence, these factors comprise the practice of law, they are not separable from each other.
(AR 12.) Rosenthal defined these terms in greater detail for the insurance company, and stated that her work week would vary from 40 to 70 hours. (Id.)
18. The disability claim called for a variety of irrelevant information regarding bending, stooping, and lifting to which Rosenthal responded that they were "not applicable." (AR 7.)
19. The form also included an attending physician's statement and an employer's statement. Dr. Ginsberg prepared the attending physician's statement, which included his diagnosis that Rosenthal was suffering from "hypertensive cardiovascular disease" and "labile reactive hypertension." (AR 9.) EBG submitted a statement which indicated that Ms. Rosenthal had practiced at EBG since May 1, 1992, that as of September 1994 she was practicing "exclusively in the business and employment litigation areas" and described her duties as including factual and legal research, preparation of briefs and related documents, participation in all aspects of discovery including taking and defending depositions, general case management, and when assigned, participation in trials. (AR 11.) It was noted that
She has not tried any cases while employed at Epstein, Becker Green, although she was assigned to co-try a case with a senior attorney initially scheduled to begin in November 1994, and presently trailing.
(Id.)
20. Rosenthal indicated that her last day of work was January 5, 1995. (AR 5.)
E. Paul Revere's Evaluation of the Claim
21. Between May 8, 1995, when Paul Revere received Rosenthal's claim (AR 5), and May 22, 1995, Jane Nelson ("Nelson"), Associate Consultant for Paul Revere, requested and obtained Rosenthal's medical records and earnings history. (AR 10, 18, 20, 22, 23, 25, 111, 134.)
22. On June 26, 1995, Nelson referred the case to Dr. Marvin Goldstein, Paul Revere's in-house medical consultant. (AR 172.) In her referral, Nelson inquired whether the information in the claim file (the contents of which are not described) supported a "level of impairment that would preclude [the employee] from performing the important duties of her occ[upation]?" (AR 172.) Rosenthal's occupation was listed as attorney/trial attorney. (Id.)
23. On July 11, 1995, Dr. Goldstein responded as follows:
"Not necessarily — her B.P. [blood pressure] has been labile since 1985, and 10 years later her ECG remains within normal limits and her echo (1/12/95) has only borderline or "mild" changes. Grifka's 2/24/95 consult clearly assumes `working 16 to 20 hours a day . . . one would expect it . . . will be' which is presumptive and prophylactic advice. I believe it is reasonable to assume with close drug monitoring and an 8-9 hour day the claimant's blood pressure can be stabilized, and thus allow her to continue with the `important duties of her occ[upation]'."
(AR 172-173.) (Emphasis added.) Goldstein does not explain how Rosenthal could be expected to perform the normal duties of a trial attorney in an 8 to 9 hour day, and clearly assumes that a trial attorneys' work hours are separate and distinct from the trial attorneys' "important duties."
24. On July 27, 1995, after receiving and reviewing the medical records from her treating physicians, as well as other pertinent documentation, Paul Revere began paying benefits to Rosenthal. (AR 168-169.) These payments continued until the time of Paul Revere's denial decision. However, Paul Revere claimed that it needed additional information to determine her eligibility for benefits and advised her that Paul Revere was arranging to have an independent medical examination ("IME") of Rosenthal. (AR. 168-169, 191.)
25. In the meantime, on July 19, 1995, in a document labeled "Claim Dept. Management Referral," Nelson wrote the following:
"The medical referral raises several key points:
1. The [patient's] B.P. has been labile since 1985. The [patient] managed to work with the labile B.P. and borderline hypertensive condition prior to 1/7/95. What is preventing her from working now with this same condition?
2. Clearly the [patient] had an episode of increased hypertension following 12/94 when she was working 16-20 hrs/day. However, this is not considered "normal" for her occupation. Furthermore, we insure the claimant in her ability to perform the important duties of her occupation on a full-time basis. Full time is considered a 40 hour work week, not 16-20 hrs per day.
3. Although we have yet to receive an amended statement from the [employer] regarding the [patient's] duties, it appears the [patient] was a trial attorney and should have her disability evaluated based on the important duties of this occ[upation]."
(AR 174.) (Emphasis added.) Nelson did not explain how she knew what was normal for a trial attorney, why a 16-20 hour days is not considered "normal" for the occupation of trial attorney, or what significance was to be given to her personal definition of "full time." (Id.)
The Court is uncertain where the 40 hour figure is to be found in the Plan. The administrative record, at AR 363, indicates that "full time" is defined as 30 hours per week.
26. On August 21, 1995, Marvin V. Goldstein, Paul Revere's Associate Medical Director, wrote to Dr. Mark Zatzkis who was initially scheduled to perform the IME. Goldstein wrote:
Enclosed are pertinent medical data from our files for your review. We have highlighted certain notations we thought particularly significant. Given the normal ECG (1995) and the echocardiogram showing only "mild" changes (1/12/95) after a 10 year history of labile hypertension, we are not questioning the diagnosis, but rather would it preclude a normal 8 hour work day?
(AR 180.) When Dr. Zatzkis canceled, Goldstein arranged to have Dr. Jeffrey Helfenstein conduct the IME. (AR 192.) Goldstein reiterated the same request made to Dr. Zatzkis, highlighting the same information and issues. (Id.)
27. On October 5, 1995, Dr. Jeffrey Helfenstein (who specializes in internal medicine and cardiology) conducted an IME of Rosenthal. (AR 198-199.) In his report, Dr. Helfenstein concluded as follows:
"Ms. Rosenthal suffers from difficult to control labile hypertension. Thus far she has shown no signs of its secondary complications. Her symptoms of headache are associated with times of uncontrolled blood pressure. Review of her medical records shows her primary care physician suggests that she increase her exercise schedule. It is my opinion that Ms. Rosenthal is only mildly clinically impaired, and that her clinical condition does not preclude her from working a normal work day.
Although her job as a trial attorney places additional demands upon her emotionally, it has not harmed her physically and is unlikely to do so in the future with proper control of her work schedule."
(AR 198-199.) (Emphasis added.) Dr. Helfenstein did not indicate what he considered a normal day for a trial attorney, although the record makes it clear that he had adopted Nelson's statement in her referral letter, which references a "normal 8 hour work day."
28. After receiving Dr. Helfenstein's report, Nelson again referred the claim file to Dr. Goldstein for review and comments. Nelson posed the following question:
"Please review this file, including the IME. Does the information support a level of impairment that would preclude [employee] from performing the important duties of her occupation on a full time basis? 40 Hr/W 8/Hr day."
(AR 195.)
In his November 14, 1995 response, Dr. Goldstein opined as follows:
"No. The IME is quite specific in denying any significant impairment, and the one-day hospitalization 11/29/94 adds nothing substantive to the clarification of this problem, except to confirm the diagnosis of `labile hypertension'!"
(Id.)
29. On November 22, 1995, Paul Revere issued a denial of Rosenthal's claim in a letter authored by Nelson. (AR 213-214.) This letter stated in pertinent part:
"According to the information contained in our file, you ceased work on January 7, 1995. The medical records received from Dr. Grifka, Dr. Grabie, and Dr. Ginsberg indicate that your blood pressure has been labile since 1985. Your ECG remains within normal limits. You remained working with the labile blood pressure and borderline hypertensive condition prior to January 7, 1995. The January 12, 1995 echo indicates only borderline or mild changes. You also underwent an Independent Medical Exam with Jeffrey Helfenstein, M.D. During the examination your blood pressure was 145/95. Your cardiovascular examination was entirely normal. Your electrocardiogram shows left atrial conduction abnormality, however, it is otherwise within normal limits. Your urinalysis is normal, your renal function test was normal, your electrolytes were normal, your two dimensional cardio echo showed normal atrial and ventricular dimensions. You had normal ventricular wall motion, and normal left ventricular thickness. There was no indication of valvular dysfunction. This report supports that you have labile hypertension. Thus far, you have shown no signs of its secondary complications. Your headache symptom was associated with a time uncontrollable blood pressure. A review of your medical records indicates that your primary care physician suggests that you increase your exercise schedule. The medical records contained in our file indicates that you are only mildly clinically impaired and that your clinical condition does not preclude you from working a normal work day. Full time under the terms of this policy is a 40-hour work week. Given the information obtained in the review of your request for Long Term Disability Benefits, no Long Term Disability Benefits are payable at this time."
(AR 213-214.) This letter also advised Rosenthal of her right (under ERISA) to appeal Paul Revere's denial decision (i.e., for further review of her claim). (AR 214.)
30. In response, Rosenthal's counsel wrote to Paul Revere on December 31, 1995, requesting an appeal of the initial denial. (AR 234-236.) However, neither Rosenthal nor her attorney submitted any additional information that might support Rosenthal's claim for total disability benefits. (AR 300.)
31. Helfenstein, the independent medical examiner, opined that she could return to work in as a trial lawyer, but limited her to a "normal" work day and that there be "proper control of her work schedule." (AR 198-99.)
DISCUSSION OF APPLICABLE LAW
In this section, the Court makes additional findings of fact along with its conclusions of law.
In this case, Rosenthal's rights under the Plan are determined by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001, et seq., and the case law interpreting that Act. In cases brought under ERISA asserting that disability plan benefits have been improperly denied, the Court is typically confronted with both the procedural question of the standard of review and the substantive question of the propriety of a benefits determination. Ordinarily, the Court would start its analysis with the standard of review because that often drives the substantive decision. Often, application of a de novo standard of review will lead to a reversal of a benefits decision that would withstand review under a deferential standard. That is not the case here because the Court concludes that under either standard the administrator erred. Thus, in Section A below, the Court concludes that Paul Revere abused its discretion in denying benefits by construing the definition of "total disability" in a manner inconsistent with the plain language of the Plan. However, because the standard of review may affect the remedy available to Rosenthal (compare Saffle, infra, with Conseco, infra) the Court will address that question Section B of this memorandum.
A. Paul Revere's Abuse of Discretion
Where a plan confers discretion on an administrator to render benefits determinations, the Court must review any such decision deferentially. The United States Supreme Court in Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), held that the standard of review is "abuse of discretion" but did not define that term in the ERISA context. The Ninth Circuit has explained:
The trustees abuse their discretion if they render decisions without any explanation, or construe provisions of the plan in a way that clearly conflicts with the plain language of the plan.Johnson v. Trustees of West. Conf. of Teamsters, 879 F.2d 651, 654 (9th Cir. 1996). If there is an explanation given, and if the decision is consistent with the language of the plan, then even the existence of directly conflicting evidence in the record does not necessarily amount to an abuse of discretion. Taft v. Equitable Life Assur. Soc., 9 F.3d 1469, 1473 (9th Cir. 1993) (conflicting details given by different examining physicians did not preclude administrator from relying on their reports where both concluded that the plan participant was not totally disabled). Thus, if expert testimony is offered to prove that a medical procedure was covered by the Plan, the administrator does not abuse his discretion if he accepts other evidence in the record to the contrary. Eley v. Boeing Co., 945 F.2d 276, 279 (9th Cir. 1991); see also Bolling v. Eli Lilly Co., 990 F.2d 1028, 1029-30 (8th Cir. 1993) ("The [administrator] did not abuse its discretion merely because there was evidence before it that would have supported an opposite decision.") However, these cases do not hold that an administrator may deny a benefits claim where the evidence in support of the claim clearly outweighs any countervailing evidence; a fiduciary who renders a decision "based on clearly erroneous findings of fact" abuses his discretion. Snow v. Standard Ins. Co., 87 F.3d 327, 331 (9th Cir. 1996), quotingAtwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1324 (9th Cir. 1995).
In this case, Paul Revere gave "reasons" for its decision, but those reasons, and the information on which that decision was based, demonstrate that Paul Revere's construction of the plan was erroneous. Under a proper construction of the relevant Plan terms, Rosenthal's claim should have been granted.
1. The Disability Policy
The disability insurance policy provided benefits to employees who were participants in the Plan and who became disabled within the meaning of the Plan. The Plan provides benefits for "total disability from the employee's own occupation." (AR 372.) A trial attorney is totally disabled from her own occupation where, "because of injury or sickness, the employee cannot perform the important duties of a trial attorney in the practice of law." (AR 373) The questions for resolution, therefore, are what are the "important duties" of a trial attorney in the practice of law, and whether Rosenthal was unable to perform those duties because of injury or sickness.
2. The "Important Duties" of a Trial Attorney
The disability plan does not define the "important duties" of a trial attorney. Paul Revere's counsel argued that, therefore, they vary from case to case depending on what the claimant states on her application for benefits. While the Court questions the merit of this argument, it provides no help to Paul Revere in this case. In her application for benefits, Rosenthal explained that she was generally expected to work 40 to 70 hours per week, during which time she was expected to interact with others, work both independently and direct the activities of others, make judgments/decisions, engage in abstract/creative thinking, meet precise standards, and undertake the objective evaluation of information. (AR 7, 12.) Her medical records also demonstrate that, in late 1994 when she was on the verge of trial with a senior attorney in her firm, she was working 16 to 20 hour days. (E.g., AR 43) Thus, from Rosenthal's own statement, the record is clear that the important duties of a trial lawyer include performing to a high level under heavy stress for long hours. A trial attorney, especially an associate in a litigation firm, must be available to work for as long as necessary to meet the demands of a trial — or perhaps some other urgent matter such as a TRO or preliminary injunction hearing. One in Rosenthal's situation simply cannot walk out of her office or the court when her 8 hour day ends.
The Court is well equipped to address this issue. As the Court in Kearney noted, in comparing the ability of insurance company employees and trial judges to deal with this question, "Insurance executives would likely be less familiar with what trial lawyers do, and more in need of such a source, than an experienced trial judge. A district judge would likely know, as this judge's remarks indicated he did, what trial lawyers do, without the assistance of a secondary source such as the Occupational Outlook Handbook. The handbook pages are an apt example of `additional evidence . . . not necessary for adequate review of the benefits decision. . . .'" 175 F.3d at 1091.
3. Paul Revere's Misinterpretation of the Plan
Rosenthal's physicians recognized the true nature of the important duties of her occupation as a trial attorney; Paul Revere's administrator and medical personnel either ignored or failed to understand them. The initial assessment of Rosenthal's claim by Paul Revere's in-house doctor reflected this misunderstanding. Despite Rosenthal's 10 year effort to stabilize her blood pressure, Dr. Goldstein wrote that
I believe it is reasonable to assume with close drug monitoring and an 8-9 hour day the claimant's blood pressure can be stabilized, and thus allow her to continue with the "important duties of her occ."
(AR 173) Nelson argued that 16 to 20 hours a day was not "normal" for the occupation, and that
"we insure the claimant in her ability to perform the important duties of her occupation on a full-time basis. Full-time is considered a 40 hour work week. . . ."
(AR 174). However, the policy's definition of disability for a trial attorney does not use the term "full-time" and could not do so because of the wide variation in the hours worked by trial attorneys. Nelson arbitrarily inserted this limitation into the contract where no such limitation exists. And it impacted on the IME because she requested a determination of whether Rosenthal's high blood pressure would "preclude a normal 8 hour work day?" (AR 180). The IME report prepared by Dr. Helfenstein concluded that Rosenthal's medical condition would not "preclude her from working a normal work day" and would not cause her physical harm in the future "with proper control of her work schedule." (AR 198). Dr. Helfenstein apparently is unaware that the trial judge and not the trial attorneys maintain control of the work schedule.
As noted in Finding of Fact, Paras. 28 and 29, Nelson reiterated this limitation when she asked Dr. Goldstein whether, in view of the IME, Rosenthal would be precluded from performing her important duties "on a full time basis? 40 Hr/W 8/Hr day." (AR 195).
Having decided that Rosenthal could work "full time" and was therefore not disabled, Nelson concluded in a letter to Rosenthal:
[Y]our clinical condition does not preclude you from working a normal work day. Full time under the terms of this policy is a 40-hour work week. Given the information obtained in the review of your request for Long Term Disability Benefits, no Long Term Disability Benefits are payable at this time."
(AR 214) This was an erroneous interpretation of the policy and in effect eliminated the "own occupation" feature from its terms.
Saffle v. Sierra Pacific Power Co. Bargaining Unit Long Term Disability Income Plan, 85 F.3d 455 (9th Cir. 1996) supports this conclusion. In Saffle, the claimant sought long term disability benefits asserting that she was totally disabled from performing the duties of her regular occupation. The plan language defined "totally disabled" as "completely unable to perform each and every duty of [the participant's] regular occupation." Id., at 456. The administrator interpreted the language to permit the payment of benefits only when the participant was "unable to perform a substantial portion of her regular job with accommodations that could have been made." Id. The Court concluded that the administrator's inclusion of the "accommodation" element in the definition of total disability from one's regular occupation was contrary to the plain language of the plan and with its structure. In effect, the administrator conflated the definition of occupational disability with general disability and "collapses the threshold for occupational disability into the standard for general, or permanent disability." Id., at 459. Moreover, the Court observed that, in light of the administrator's erroneous interpretation of the plan, "[i]t gave a wrong standard to the experts, their opinions of non-total disability were based on it, and the Committee denied benefits in light of it." Id.
As in Saffle, the administrator here incorrectly interpreted the Plan, gave that incorrect interpretation to its medical experts, their opinions were based on it, and benefits were denied in light of those conclusions. The actions of Paul Revere therefore constituted an abuse of discretion and must be reversed.
The Court further concludes that, for the reasons set forth below, this case should properly be reviewed on the de novo standard of review, which, a fortiori, leads to the same result.
B. The Standard of Review
A determination of the proper standard of review begins with a determination of whether the plan language conferred discretion on the administrator in making benefits determinations.Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-957 (1989); Mongeluzo v. Baxter Travenol, 46 F.3d 938, 942 (9th Cir. 1995). If the language is ambiguous or uncertain, "[t]he default is that the administrator has no discretion, and the administrator has to show that the plan gives it discretionary authority in order to get any judicial deference to its decision." Kearney, 175 F.3d at 1089 (9th Cir. 1999). Here there is a threshold dispute over what language is to be considered part of the plan for purposes of making this determination.
1. The Policy and the Group Application
The Court has found no language in the body of the policy that contains language which might be construed to confer discretion on the Plan administrator. Thus, Paul Revere refers the Court to the terms of the June 1993 Group Application which included the following language:
Judge Collins, to whom the case was assigned, previously held that a discretionary standard of review should be applied. (Order Re: Defendant Paul Revere Insurance Company's Motion for Partial Summary Judgment, March 3, 1999.) However, Judge Collins' carefully considered and reasoned order was issued prior to theKearney decision, was based on the then-controlling authority of Snow v. Standard Ins. Co., 87 F.3d 327 (9th Cir. 1996), and followed the holding in Snow that was explicitly overruled in the en banc Kearney decision. (Order, at 6-9.) Because she based her ruling on language in the body of the policy which was very similar to the disapproved language in Snow, Judge Collins did not address the import of the language in the group application document. (Id., at 9.) Accordingly, the Court addresses this question anew in this ruling, despite Paul Revere's complaint that the Court should not do so because no motion to reconsider was filed and because Judge Collins' ruling is "the law of the case." The Court believes it has a duty to follow the controlling law whether or not either counsel have properly brought it to the Court's attention. Preaseau v. Prudential Insurance Co., 591 F.2d 74, 79 (9th Cir. 1979).
"The 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 to make claim determinations. The decision of claims administrator shall not be overturned unless arbitrary and capricious or unless there is no rational basis for a decision."
(AR 41, emphasis in original) Because that document also provided that "[t]he application will be attached to and form a part of the policy," (Id.) Paul Revere argues that it is part of the Plan and establishes an abuse of discretion standard.
The Court agrees that, if this language is part of the policy, it does confer discretion on the administrator. The language is much broader than language found to confer discretion in other cases. For example, in Patterson v. Hughes Aircraft Co., 11 F.3d 948, 949 n. 1 (9th Cir. 1993), the Court noted:
The Plan instructs an employee to file a claim with the plan administrator, who will issue a "(w)ritten decision() of approval or denial," including, in the event of a denial, a "clear reference to the Plan provisions upon which the denial is based." The claimant may then request a review of the denial by the insurance company, which, after a "full and fair evaluation," will also issue a written decision that includes "specific reasons for the decision, with reference to Plan provisions on which the decision is based."
See also Bogue v. Ampex Corp., 976 F.2d 1319, 1324 (9th Cir. 1992) ("The determination . . . will be made by Allied-Signal upon consideration of whether the new position . . . has responsibilities similar to those of your current position.");Eley v. Boeing Co., 945 F.2d 276, 278 n. 2 (9th Cir. 1991) ("The Company shall determine the eligibility of a person for benefits under the plan, pursuant to the terms and conditions specified. . . ."); Jones v. Laborers Health Welfare Trust Fund, 906 F.2d 480, 481 (9th Cir. 1990) ("The Board of Trustees shall have power . . . to construe the provisions of this Trust Agreement and the Plan, and any such construction adopted by the Board in good faith shall be binding.") Accordingly, the language of the group application here appears quite clearly to confer discretion in the administrator, the exercise of which should be given deferential review absent some other basis for conducting a de novo review.
2. The Acceptance Application
Rosenthal argues that such "other basis" exists. Rosenthal contends that the "acceptance application" which was signed and submitted in July 1993, and which states that "this application supersedes any previous application for the Group Policy" (AR 359) in effect cancels or negates the prior application thereby extinguishing it as part of the policy of insurance. The meaning of this language, and the possible differences between a group application and an acceptance application, were explored at the trial but without much light being shed on the issue. However, from Paul Revere's position, this language, at best, creates an ambiguity as to the content of the contract, and, at worst, eliminates the only document in the record that would confer discretion on the administrator giving rise to a deferential standard of review. Since ambiguities in documents are to be construed against the drafter, McClure v. Life Ins. Co., 84 F.3d 1129 (9th Cir. 1996), citing Kunin v. Benefit Trust Life Ins. Co., 910 F.2d 534, 539-540 (9th Cir.) (as amended), cert. denied, 498 U.S. 1013, 111 S.Ct. 581, (1990), the Court concludes that the ambiguity should be resolved in favor of Rosenthal and that the second application should be interpreted to supersede, in all respects, the original group application. Thus, the plan is devoid of any language that would confer discretion on the administrator. Moreover, the Court concludes that the conflict of interest doctrine also provides that the proper standard of review in this case is de novo.
3. The Conflict of Interest Doctrine
In cases where the language of an employee benefit plan confers discretion on the plan administrator, the Court need not give full deference to the decision where the administrator acted out of a conflict of interest in administering the plan. Lang v. Standard Ins. Co., 125 F.3d 794 (9th Cir. 1997); Friedrich v. Intel, 181 F.3d 1105, 1109 (9th Cir. 1999).
In Lang, the Court observed that:
The Plan in this case is actually an insurance policy issued and administered by Standard. Given Standard's dual role as both the funding source and the administrator of the Plan, we are faced with an inherent conflict of interest situation, and must take this factor into account. Brown[v. Blue Cross and Blue Shield of Alabama, Inc.], 898 F.2d [1556] at 1561 [11th Cir. 1990] ("Because an insurance company pays out to beneficiaries from its own assets rather than the assets of a trust, its fiduciary role lies in perpetual conflict with its profit-making role as a business.")125 F.3d at 797. Friedrich involved essentially the same situation, except that Intel was self-insured and made payments to disability claimants out of its own assets. Rosenthal argues that these cases preclude the Court from deferring to the administrator because Paul Revere was in the same situation as the administrators in Lang and Friedrich. Paul Revere claims that these cases require a showing of specific facts giving rise to an inference that the potential conflict ripened into an actual conflict that tainted Paul Revere's exercise of discretion.
In Lang, the Court explained its holding in Atwood. Lang noted that the presence of a conflict does not automatically change the standard of review, but does call for careful scrutiny, in the first instance, of the actions of the administrator because "plans such as this one, funded by insurers and also administered by them, are not true trusts. The administrator's decisions in these cases are hence not as easily justified as the decisions of a fiduciary in the case of a true trust." 125 F.3d at 798. Again referring to Atwood, the Court observed:
[W]e held that we must review the decisions of an apparently conflicted employer- or insurer-fiduciary under the traditional abuse of discretion standard unless it appears that the conflict may have influenced the decision. To make such a showing, the affected beneficiary must come forward with "material, probative evidence, beyond the mere fact of the apparent conflict, tending to show that the fiduciary's self interest caused a breach of the administrator's fiduciary obligations to the beneficiary."
Id. Once such a showing is made, the administrator's decision is presumptively void and the burden shifts to the administrator to rebut the presumption with evidence that its actions benefitted the plan as a whole. "If the plan fails to carry its burden, however, our review becomes de novo, `without deference to the administrator's tainted exercise of discretion.'" Id; accordFriedrich, 181 F.3d at 1109-10.
In Friedrich, the Ninth Circuit affirmed the trial court's determination that the record in that case should be reviewed de novo because the administrator's decision was tainted by conflict of interest. The trial court had found that there was insufficient notice of the denial of the claim, that the review procedure was unfair, that there had been inadequate dialogue regarding the claim, and that the administrator had acted "as an adversary `bent on denying his claim' and `oblivious to her fiduciary obligations as administrator of the LTD Plan.'" 181 F.3d at 1110. Thus, the Court must assess the evidence presented to determine whether Rosenthal met her burden in the first instance, and, if so, whether it was sufficiently rebutted by Paul Revere.
In this case, as in Lang, "the Plan is actually an insurance policy issued and administered by" Paul Revere, 125 F.3d at 797. And as noted in Brown, because it "pays out to beneficiaries from its own assets rather than the assets of a trust, [Paul Revere's] fiduciary role lies in perpetual conflict with its profit-making role as a business." 898 F.2d at 1561. Close scrutiny is therefore required.
The record here reveals that Paul Revere's employees Nelson and Goldstein put themselves in an adversarial posture toward claimant from the outset, although their attitude was not revealed to Rosenthal until much later. Goldstein reviewed the medical records that established a 10-year history of uncontrollable high blood pressure and responded in a conclusory fashion to the serious issues raised therein. For example, in response to Dr. Grifka's detailed report regarding Rosenthal's condition, Dr. Goldstein mentioned it by taking a few words out of context and labeling the advice "presumptive and prophylactic." His comments appear superficial and designed only to give Nelson ammunition to deny the claim.
Once she received Goldstein's comments, Nelson wrote to management questioning the claim (AR 174.) She expressed skepticism as to why Rosenthal could not continue working with the condition since she had done so for 10 years, and, as noted in the discussion above, insisted on analyzing the claim in terms of Rosethal's ability to work "full time" even though that is not a phrase that appears in the definition of "totally disabled."
Nelson then sought an IME, but rather than simply provide records and ask for an opinion, Nelson made sure that the doctor understood Paul Revere's position. To that end, she "highlighted certain notations we thought particularly significant." (AR 180) She asked whether Rosenthal would be precluded from working "a normal 8-hour work day" given her "normal ECG" and the "echocardiogram showing only `mild' changes." (Ibid.)
With this as background the IME returned a report that Rosenthal "was only mildly clinically impaired" that her condition "does not preclude her from working a normal day," and that her condition was not likely to harm her "in the future with proper control of her work schedule." (AR 198)
Having gotten what she wanted from Helfenstein, Nelson then forwarded the report to Goldstein who had previously expressed his opinion that Rosenthal was not disabled under the policy. Nelson again asked whether the IME supported a level of impairment "that would preclude [Rosenthal] from the important duties of her occupation on a full time basis? 40HR/W 8/HR day." (AR 195.) Nelson could hardly have been surprised at Goldstein's answer — an emphatic, "No." (Id., emphasis in original) He noted, "The IME is quite specific in denying any significant impairment. . . ." (Id.) Of course, Rosenthal's own doctors never said that she presently suffered significant impairment, but rather that she was showing the first indications of damage and that continued work as a trial attorney prevented proper treatment which placed her at substantial risk for significant long-term damages.
At the hearing, the Court questioned Paul Revere's counsel regarding how much damage would be required by Paul Revere before long-term disability benefits would accrue. Counsel was unable to articulate any principle or basis for making that determination, but did assure the Court that, whatever amount of damage was required was greater than the damage shown by Rosenthal's echocardiogram.
In the Court's view, the internal documentation from the claim file constitutes "material probative evidence, beyond the mere fact of the apparent conflict, to show that [Paul Revere's] self interest caused a breach of the fiduciary's obligations to the beneficiary." Lang 125 F.3d at 798 (quoting Atwood). It reveals Paul Revere's employees in a mode more properly described as adversarial rather than evaluative. This is most notable in Nelson's retention letter to the independent medical examiner, where she clearly communicates her skepticism regarding the claim, along with her incorrect interpretation of the controlling contract term. Had she wanted a truly independent medical examination, to which Rosenthal was entitled, Nelson could have forwarded the medical records and other file materials to Zatzkis without comment. This did not occur.
On the basis of the foregoing, the Court concludes that Rosenthal met her burden of showing material probative evidence that the decision was tainted by conflict of interest, and that showing was not rebutted by evidence from Paul Revere demonstrating that its decision was in the best interests of the plan and all of its beneficiaries. In absence of such a showing, the Court concludes that the proper standard of review is de novo.
C. The Remedy Saffle holds that a determination that a Plan administrator abused its discretion in interpreting the Plan's terms requires that the matter must be remanded for a factual determination consistent with the Court's opinion on plan interpretation. However, the Saffle Court also noted that, where the proper standard of review was de novo, the district court was to make the factual determination under a proper construction of the plan. 85 F.3d at 461, citing Mongeluzo, supra. Canseco v. Const. Laborers Pension Trust, 93 F.3d 600, 609 (9th Cir. 1996), on the other hand, held that even in cases where the proper standard of review was abuse of discretion, Saffle does not require a remand where there no additional factual determinations need to be made. Thus, regardless of the proper standard of review in this case, remand is unnecessary because no additional factual determination need be made.
It is clear to the Court from the evidence of record which is discussed in detail above that Paul Revere erroneously interpreted the Plan and that, under a proper interpretation, Rosenthal was totally disabled at the time that the medical examinations were performed. Moreover, Paul Revere's doctors provide no evidence that might support the decision under a proper construction of the contract. Both Drs. Goldstein and Helfenstein opined that her condition did not put her at risk only so long as she worked a 40 hour week and exercised control over her schedule. But because these conditions are inconsistent with her duties as a trial attorney, the evidence is clear that working the kinds of hours required of a trial attorney would further damage her health. Under these circumstances, Rosenthal was totally disabled as a trial attorney within the meaning of the Plan and there is no need for remand.
29 U.S.C. 1132(a)(1)(B), establishes a cause of action "to recover benefits due to [a plan participant or beneficiary] under the terms of [the] plan, to enforce [the claimant's] rights under the terms of the plan, or to clarify [the claimant's] rights to future benefits under the terms of the plan[.]" This includes benefits not paid through the time of judgment. See Canseco v. Const. Laborers Pension Trust, 93 F.3d 600, 605 (9th Cir. 1996). They should be awarded in this case.
In addition, Rosenthal seeks attorneys fees and costs in this case. In addressing this issue, the Ninth Circuit has held:
The allowance of fees is discretionary based on consideration of these factors, among others: 1) the degree of the opposing party's culpability or bad faith; 2) the ability of the opposing party to satisfy an award of fees; 3) whether an award of fees against the opposing party would deter others from acting under similar circumstances; 4) whether the party requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and 5) the relative merits of the parties' positions. Hummell v. S.E. Rykoff Co., 634 F.2d 446, 453 (9th Cir. 1980). If a plan participant or beneficiary prevails in an action to enforce his rights under the plan, he ordinarily should recover attorney's fees in the absence of special circumstances making an award unjust. Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir. 1984). Although we do not believe the Trust acted in bad faith, we think the relevant factors warrant a fee award to the prevailing party. Appellee has furthered resolution of a significant legal question in bringing this action, and her complete success is indicative of the relative merits of each parties' position. Finding no special circumstances which would make an award unjust, we hold that appellee is entitled to attorney's fees and costs on appeal.Smith v. Retirement Fund Trust, Etc., 857 F.2d 587, 592 (9th Cir. 1988) (emphasis added); accord, Canseco, 93 F.3d at 609.
The Court concludes that a similar situation is presented in this case. The Court finds no evidence of "bad faith" as that term is used in the case law, but does conclude that the other factors are present and finds no special circumstances that would make such an award unjust. Accordingly, the Court concludes that an award of attorney's fees and costs is appropriate in this case.
ORDER
On or before January 10, 2000, Rosenthal is to file and serve an application for attorney's fees and to prepare a judgment to conform to the Court's findings and conclusions. Objections to the attorney's fee application and to the form of judgment, if any, are to be lodged with the Court on or before January 24, 2000. The matters will then be taken under submission.