Opinion
CV 99-1822-KI
January 4, 2001
Megan E. Glor, SWANSON, THOMAS COON, The American Bank Building, 621 S.W. Morrison Street, Suite 900, Portland, Oregon 97205-3892, Attorney for Plaintiff
Andrew M. Altschul, Robert H. Thomson, STOEL RIVES LLP, 900 S.W. Fifth Avenue, Suite 2600, Portland, Oregon 97204-1268, Attorneys for Defendant
OPINION AND ORDER
This action arose when defendant Legacy Health System Group Long-Term Income Supplement Plan denied plaintiff Catherine Sicilian's claim under a long-term disability policy. Sicilian alleges a claim under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001,et seq. Before the court is defendant's motion for summary judgment (#19) and plaintiff's cross-motion for summary judgment (#23). For the reasons set forth below, I grant plaintiff's motion and deny defendant's motion.
FACTS
Sicilian worked as a nurse midwife for Legacy Health System ("Legacy") when, on May 24, 1996, she suffered a back injury that prevented her from performing her job. One of the benefits Sicilian received as a Legacy employee was participation in the Legacy Health System's Welfare Benefit Plan, Restatement 1995 (the "1995 Welfare Plan"). The 1995 Welfare Plan is composed of several "component plans," including a component plan that provides long-term disability benefits. At the time Sicilian was injured, the component plan that provided the terms and conditions to receive long-term disability benefits was entitled 1995 Long-Term Disability Plan (the "1995 LTD Plan").
In accordance with its own termination and amendment provisions, as well as the termination and amendment provisions of the 1995 Welfare Plan, the 1995 LTD Plan was replaced by the Long-Term Income Supplement Plan (the "LTIS Plan") on August 1, 1996. The LTIS Plan remains in place to this day. Nonetheless, because Sicilian's date of injury and claim for disability occurred before the LTIS Plan was adopted, the plan administrator determined whether Sicilian was disabled — and the benefits to which she was or was not entitled — based on the terms of the 1995 LTD Plan.
The 1995 Welfare Plan states that it and all component plans (except two component plans not at issue in this case) shall be administered by an "Administrative Committee of one or more persons appointed by the chief executive officer of Legacy, who may delegate that function." 1995 Welfare Plan, § 7.01-1. Section 7.02-1 confers upon the Administrative Committee "absolute discretion" to interpret Legacy's plans:
The Committee shall interpret the Benefits Plan, decide any questions about the rights of participants and their beneficiaries and in general administer the Benefits Plan. Any decision by the Committee shall be final and bind all parties. The Committee shall have absolute discretion to carry out its responsibilities under this section.
The 1995 Welfare Plan also permits the Administrative Committee to "delegate all or part of the administrative duties to one or more agents and [to] retain agents or advisors for assistance." 1995 Welfare Plan, § 7.02-2. Pursuant to this provision, the Administrative Committee contracted out some of its administrative duties until January 1, 1998. From the time of Sicilian's injuries until July 1996, the Administrative Committee contracted with Sedgwick James, Inc. ("Sedgwick") to administer its claims. In July 1996, the Administrative Committee changed outside administrators and contracted with OPS Life, which later operated under the name Regence Life and Health Insurance Company. Despite the foregoing, it appears that the Administrative Committee made the key decisions regarding Sicilian's disability status.
To be considered "disabled . . . because of injury or sickness" and entitled to long-term disability ("LTD") benefits under the 1995 LTD Plan:
(1) the employee cannot perform all substantial and material duties of his regular occupation; and
(2) after benefits have been paid for 24 months (from the date of disability), the insured cannot perform the duties of any gainful occupation for which he is reasonably fitted by training, education and experience.
1995 LTD Plan, § II at 5 (emphasis added).
The first 24 months consist of a 180-day elimination period followed by 18 months of disability payments based on the employee's inability to perform his or her regular occupation. Evidently, "short-term income supplement" payments were made to Sicilian during the elimination period.
On May 31, 1996, Sicilian submitted an application for disability benefits because she injured her back on May 24, 1996. Her required 180-day elimination period for LTD benefits was scheduled to end on November 21, 1996. She was asked to update her current medical information so that defendant could confirm that she was still unable to work.
On the form provided by defendant, Sicilian's physician, Jennifer MacNichol, M.D., indicated on September 11, 1996 that Sicilian could return to work if it did not involve lifting more than 10 pounds or when her conditions flared up. Based on such restrictions, and because her job as a nurse midwife requires occasional lifting up to 50 pounds, Sicilian continued to receive LTD payments because she was unable to perform her regular occupation.
Sicilian was asked to document her medical condition two more times during her "regular occupation" disability period. In December 1996, Dr. MacNichol again stated that Sicilian could return to work if it did not involve lifting more than 10 pounds. In March 1997, Dr. MacNichol described Sicilian's limitation as an inability to lift more than 20 pounds and noted that she anticipated that Sicilian could return to work in 1 or 2 months. Dr. MacNichol also noted for the first time, however, that Sicilian was suffering from depression and was being treated with Prozac.
Upon receipt of the March 1997 report from Dr. MacNichol, defendant requested that Dr. MacNichol produce Sicilian's complete medical file from January 1, 1996 to the present (then March 25, 1997) so that it could make a more thorough review of her condition. In May 1997, apparently after reviewing Dr. MacNichol's chart notes, defendant requested that a "Dr. Smith" review the claim because a chart note, dated December 12, 1996, indicated that depression may be Sicilian's "primary problem." Dr. Smith completed the form provided to him by defendant by writing only "[i]nsured is totally disabled from her occupation." Sicilian continued to receive LTD benefits for the remainder of her "regular occupation" disability period.
On February 16, 1998, defendant sent Sicilian's file to be reviewed by Mike Moses, a vocational specialist employed by Employers Rehabilitation Services, Inc. In the cover letter, the claims adjuster asked Moses to review Sicilian's claim "to determine if she is disabled from any occupation or her own occupation."
In a report dated June 16, 1998, Moses described Sicilian's medical diagnosis as "Meniere's Disease and chronic low back pain." Using only medical records from a "Dr. Walker," Moses stated that Sicilian's only limitation, based on the medical diagnosis, was that she could not lift over 20 pounds. Although Moses concluded that Sicilian was permanently precluded from returning to her occupation as a nurse midwife (due to the lifting restriction), he opined that she could work in certain health care occupations that require only a sedentary to light work capacity.
In July 1998, defendant arranged for an independent medical examination ("IME") to be conducted by Marc A. Kirschner, M.D., a neurologist. The IME was conducted on August 6, 1998. In his report, Dr. Kirschner responded to five questions posed by defendant. In response to the question "[i]s the patient disabled from returning to her own occupation [or] any occupation?", Dr. Kirschner answered "yes" and stated that Sicilian's Meniere's disease and back pain "would appear to be disabling." Dr. Kirschner went on to comment that he related Sicilian's back pain to her degenerative disc disease rather than her on-the-job injury. Dr. Kirschner gave the following responses to questions two, three and four:
Defendant contends that it arranged the IME after receiving a report from Sicilian's physician, Kelly F. Scott, M.D., that stated that Sicilian's condition had regressed. The record does not support this alleged causation; but it is likely of no significance.
2. In your medical opinion, is Ms. Sicilian capable of returning to modified work? What restrictions would be appropriate?
It is probably most prudent that she return to modified work. She should not be lifting more than 20 pounds. She should not be stooping or crawling.
3. Can the patient return to regular work activities? If not, do you anticipate her to ever be able to?
Please see my answer to #2. I do not anticipate her to be likely to return to regular work activities unless she can change her life-style and improve her physical conditioning. She is at constant risk for developing exacerbation of her pain syndrome.
4. If there is more than one condition, which condition(s) is disabling her from returning to work?
The condition disabling her for returning to work would appear to be her chronic back discomfort and Meniere's disease. She estimates that both of these are equally contributing to her limitations. I believe that she is probably correct in this.
Defendant asserts that a follow-up telephone call to Dr. Kirschner confirmed his opinion that he does not consider Sicilian totally disabled. As evidence of such call, defendant offers page 83 of the Administrative Record which consists of notes apparently taken by a staff person of defendant during his or her conversation with Dr. Kirschner on August 7, 1998. The notes include the comments "don't think it would be good to be totally disabled," "emotional problems destroyed her not her back injury," and "may be inevitable to be disabled."
Based on the reports from Mike Moses and Dr. Kirschner, defendant sent Sicilian a letter, dated September 4, 1998, in which it explained its conclusion that she did not meet the "any occupation" definition of disabled and, therefore, was no longer considered disabled. As such, defendant notified Sicilian that her disability claim was closed as of the final payment of benefits through August 29, 1998.
On October 6, 1998, Sicilian requested a review of defendant's decision. In addition to her letter requesting review, Sicilian's primary physician, Dr. Scott, and her osteopathic physician, Sharon Stanley, D.O., sent separate letters stating their belief that Sicilian is unable to work in any occupation. The Administrative Committee affirmed the denial of Sicilian's claim for "any occupation" disability benefits in a letter dated December 11, 1998.
LEGAL STANDARD
Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c). The initial burden is on the moving party to point out the absence of any genuine issue of material fact. Once the initial burden is satisfied, the burden shifts to the opponent to demonstrate through the production of probative evidence that there remains an issue of fact to be tried. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). On a motion for summary judgment, the evidence is viewed in the light most favorable to the nonmoving party. Robi v. Reed, 173 F.3d 736, 739 (9th Cir.), cert. denied, 120 S.Ct. 375 (1999).
DISCUSSION
I. Standard of Review
In actions to recover benefits due under an ERISA plan where the plan administrator denied benefits, the court employs a de novo standard of review "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, 109 S.Ct. 948, 956-57 (1989). If the plan vests the administrator with such discretionary authority, a district court may review the administrator's decision only for an abuse of discretion. Id. The term "arbitrary and capricious" also describes this deferential standard of review. Dytrt v. Mountain State Tel. Tel. Co., 921 F.2d 889, 894 (9th Cir. 1990).
It is undisputed that the Administrative Committee, as plan administrator, has complete discretion in interpreting the 1995 LTD Plan and determining whether claimants may recover under that plan. Thus, I should review its decision to deny Sicilian's "any occupation" LTD benefits claim for an abuse of discretion. Although Sicilian concedes, to a certain extent, that this is the appropriate standard of review, she notes that the Administrative Committee was comprised of Legacy employees and that Legacy funded the plan, thus creating an apparent conflict of interest. As such, Sicilian urges me to apply a heightened standard of review.
Defendant disagrees because the legal entity (Legacy) that funds the plan is not the same as the plan administrator making benefits determinations. It argues that the Administrative Committee is as separate an entity from Legacy as an outside insurance company hired by Legacy to administer the plans. That argument, however, fails to take into account the fact that the chief executive officer of Legacy has sole discretion to appoint the members of the Administrative Committee or remove them without cause. As a result, some inherent conflict of interest does exists. With that said, the question remains whether such a conflict alters the standard of review. Based on my reading of McDaniel v. Chevron Corp., 203 F.3d 1099 (9th Cir. 2000), I conclude that it does not.
In McDaniel, the Ninth Circuit explained that, while a "serious" conflict of interest can lead a court to conduct a de novo review, rather than a review under the traditional abuse of discretion standard, an apparent conflict of interest, standing alone, does not affect the ultimate standard of review. Id. at 1108, n. 6. Thus, the presence of a conflict does not open up the possibility of a third tier of review that lies somewhere between the traditional abuse of discretion standard andde novo review. Id. Furthermore, before a court will consider conducting a de novo review, due to the existence of a conflict, the plaintiff must first 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."Id. at 1108 (quoting Atwood v. Newmont Gold Co., 45 F.3d 1317, 1322-23 (9th Cir. 1995)).
In this case, Sicilian has not gone beyond identifying the apparent conflict and, regardless, does not advocate that I conduct a de novo review. Accordingly, I will apply the traditional abuse of discretion standard. Under that standard, an abuse of discretion occurs if decisions are rendered without any explanation, provisions of the plan are construed in a way that conflicts with the plain language, or decisions that rely on clearly erroneous findings of fact. Taft v. Equitable Life Assurance Society, 9 F.3d 1469, 1472-73 (9th Cir. 1993). The abuse of discretion standard does not allow overturning a decision if there is substantial evidence to support the decision, i.e., "relevant evidence that reasonable minds might accept as adequate to support a conclusion even if it is possible to draw two inconsistent conclusions from the evidence." Snow v. Standard Ins. Co., 87 F.3d 327, 332 (9th Cir. 1996).
II. Merits of the Case
Defendant seeks summary judgment on the basis that there is ample evidence within the Administrative Record to support its determination that Sicilian is not "any occupation" disabled. Specifically, it relies on Dr. Kirschner's IME and Mike Moses' vocational assessment. Sicilian argues that those two reports suffer from infirmities that render them useless for determining whether Sicilian qualifies as disabled. In their absence, the opinions from her treating physicians establish that she is, in fact, disabled.
A. Dr. Kirschner's IME
Defendant relies heavily on Dr. Kirschner's statement in his report that "[i]t is probably most prudent that she return to modified work." This statement, however, does not unequivocally say that Sicilian can work and, viewed in the context of Dr. Kirschner's later comment that "don't think it would be good to be totally disabled," reflects a degree of subjectivity. A greater problem lies in the fact that, in answering other questions, Dr. Kirschner opined that "[b]y history, the patient's Meniere's disease and back pain would appear to be disabling" and "[t]he condition disabling her for returning to work would appear to be her chronic back discomfort and Meniere's disease." In short, Dr. Kirschner's conclusions are too contradictory and unclear to constitute substantial evidence that Sicilian is not "any occupation" disabled and it was an abuse of discretion for defendant to rely on them.
B. Moses' Vocational Assessment
Even assuming that a vocational assessment, by itself, would be a sufficient basis to determine whether a claimant is disabled, I conclude that Moses' report was too flawed to serve as substantial evidence that Sicilian is not "any occupation" disabled. In completing his June 16, 1998 analysis, Moses worked under the assumption that Sicilian's only limitation was lifting over 20 pounds. Yet, an evaluation made by Dr. Scott, also on June 16, 1998, restricted Sicilian to only occasional driving, balancing, squatting, kneeling, crawling, climbing stairs, and reaching. Perhaps more importantly, Dr. Scott restricted Sicilian to sitting, standing, and walking for no more than one hour per day and also severely restricted lifting, carrying, pushing, and pulling. AR 537-40. Based on these restrictions, Moses' conclusion that Sicilian could work in various other sedentary and light work occupations lacks any reasonable basis and it was an abuse of discretion for defendant to rely on Moses' report to find Sicilian not "any occupation" disabled.
Dr. Scott's evaluation was faxed by defendant to Moses on June 22, 1998 with the inquiry "[h]ere are the current restrictions — how does this change your report?" The record does not include a response from Moses.
C. Evidence of Sicilian's Disability
Given the opinions of Sicilian's treating physicians that she is unable to perform any occupation, as supported by medical evidence in the record, I find that summary judgment in Sicilian's favor is appropriate.
CONCLUSION
Defendant's motion for summary judgment (#19) is DENIED. Plaintiff's cross-motion for summary judgment (#23) is GRANTED. Plaintiff shall submit a proposed judgment and seek a stipulation from defendant as to the form of the judgment.