March 17, 2010
Covering May 1, 2009 to March 15, 2010
This article was prepared for the 2010 Connecticut Bar Association Labor & Employment Section Annual Review of significant developments in litigation under the Employee Retirement Income Security Act, or ERISA. It is intended for attorneys with some familiarity with the area. If you are not lawyer or are new to the area, I have posted other more introductory articles on this website. If you have any questions or comments about the article, I would be happy to hear from you.
Annual Review of ERISA Law
By: Brown Paindiris & Scott, Glastonbury
This year was a quiet year for ERISA litigation. There were no significant Supreme Court cases since May 1, 2009 to the date of this article. The most significant activity in the circuit and district courts was addressing the effect of the 2008 Supreme Court case of Metropolitan Life Insurance Co. v. Glenn, 128 S. Ct. 2343, 171 L. Ed. 2d 299 (2008) regarding the standard of review applied by a court when the entity deciding on benefits is both the decider and the pays the benefits. There were significant cases in the area of retiree health benefits and appropriate relief in these cases, discussed below at 12 . This article summarizes significant Circuit Court and Connecticut District Court ERISA decisions for the period from May 1, 2009 to March 15, 2010.
Standard of Review:
a) The Effect of Glenn v. Metropolitan Life Insurance Co. 
The Supreme Court's 2008 decision, Metropolitan Life Insurance Co. v. Glenn, 128 S. Ct. 2343, 171 L. Ed. 2d 299 (2008) (hereafter, "Glenn") brought more complication, but some uniformity, to the standard of review in cases where the same entity that pays the claim decides the claim. One of the most important issues in ERISA litigation is what standard of review the Court will apply in reviewing a benefit denial made by the plan. The default standard is de novo, where the court essentially acts as a claims examiner making a decision based on the record, with no deference to the decision made by the insurance. When the plan reserved discretion to interpret the terms of the plan (which is almost always the case now), the decision is reviewed on an arbitrary and capricious basis, where the decision is upheld so long as there is a reasonable in the record to uphold the decision. Glenn, 128 S. Ct. at 2348.
Prior to Glenn, the effect of this inherent conflict on the standard of review was not uniform among the circuits. For instance, in the Sixth Circuit, in which the Glenn case originated, the inherent conflict resulted in a sliding scale review, with a less deferential standard of arbitrary and capricious review, depending on the degree to which the conflict affected the decision. In the Second Circuit, however, the inherent conflict was only a factor if the claimant could show that it actually affected the decision. If the claimant did show this, though, the review of the claim was de novo rather than arbitrary and capricious. Sullivan v. LTV Aero. & Defense Co., 82 F.3d 1251, 1256 (2d Cir. N.Y. 1996). The Supreme Court adopted the Sixth Circuit's analysis, and affirmed its decision in the Glenn case.
Courts are still split about how Glenn will affect the standard of review. It has not been popular with some judges. Justice Scalia claimed in his dissent in Glenn that such a multi-factor balancing test was "nothing but de novo review in sheep's clothing: "mindful of being deferential, [the court] should nonetheless consider all the circumstances, weigh them as it thinks best, then divine whether a fiduciary's discretionary decision should be overturned." Glenn at 2356. He stated "this [test] makes each case unique, and hence the outcome of each case unpredictable." 128 S. Ct. at 2356. Judge Posner has pointed out the same potential problem:
That sounds like a balancing test in which unweighted factors mysteriously are weighed. Such a test is not conducive to providing guidance to courts or plan administrators. "Multifactor tests with no weight assigned to any factor are bad enough from the standpoint of providing an objective basis for a judicial decision; multifactor tests when none of the factors is concrete are worse."
Marrs v. Motorola, Inc., 577 F.3d 783, 788 (7th Cir. 2009).
The first Second Circuit case to substantively discuss Glenn was McCauley v. First Unum Life Ins. Co., 551 F.3d 126 (2d Cir. 2008). The only other Second Circuit decision substantively to discuss Glenn is Hobson v. Metro. Life Ins. Co., 574 F.3d 75, 79 (2d Cir. July 29, 2009). There, the Court declined to accord any weight to the inherent conflict because the claimant presented weak evidence of any bias or procedural irregularities.
Connecticut district courts generally agree that Sullivan, providing for de novo review in the event of a conflict, is no longer viable, but there is some disagreement. In Lanoue v. Prudential Ins. Co. of Am., 2009 U.S. Dist. LEXIS 94896 (D. Conn. 2009), Judge Margolis stated the rule of Sullivan that a claimant was entitled to de novo review upon showing a conflict actually influenced a decision, but then stated that after Glenn, the same situation would result in arbitrary and capricious review. Accord. Sisavang Danouvong v. Life Ins. Co. of N. Am., 2009 U.S. Dist. LEXIS 90748 (D. Conn., 2009) (Arterton, J.). Two Connecticut district court decisions implied that even after Glenn, review is de novo if the claimant shows that the inherent conflict actually affected the decision. See, Tritt v. Automatic Data Processing, Inc., 2008 U.S. Dist. LEXIS 98327, *6 (D. Conn. Dec. 1, 2008) (Droney); Bregman v. Hartford Life & Accident Ins. Co., 2008 U.S. Dist. LEXIS 72500, *12 - 13 (D. Conn. Sept. 23, 2008) (Droney). Unfortunately from a claimant's perspective, Judge Margolis' view is probably correct. Both Glenn and McCauley state that even then the claimant shows that a conflict of interest influenced the decision, the review is still arbitrary and capricious:
Following Glenn, a plan under which an administrator both evaluates and pays benefits claims creates the kind of conflict of interest that courts must take into account and weigh as a factor in determining whether there was an abuse of discretion, but does not make de novo review appropriate. See Glenn, 128 S. Ct. at 2348. This is true even where the plaintiff shows that the conflict of interest affected the choice of a reasonable interpretation. See id.
McCauley v. First Unum Life Ins. Co., 551 F.3d 126, 133 (2d Cir. N.Y. 2008).
b) Procedural Irregularities
Under Glenn, a crucial determination in the weight to give to the inherent conflict is whether "circumstances suggest a higher likelihood that [the inherent conflict] affected the benefits decisions." Glenn 128 S. Ct. 2351. Among the factors that the Court stated should lead a court to weigh the inherent conflict heavier against the insurer is if the insurer has a history of biased claims administration. A factor that would reduce the weight "perhaps to the vanishing point" is structural steps to reduce bias and promote accuracy. Id. The courts in Am. Soc'y for Technion-Israel Inst. of Tech., Inc. v. First Reliance Std. Life Ins. Co., 2009 U.S. Dist. LEXIS 82306 (S.D.N.Y. 2009) and Fortune v. Group Long Term Disability Plan, 637 F. Supp. 2d 132, 144 (E.D.N.Y. 2009) both cited this provision in finding that sufficient steps had been taken to avoid bias, and thus the inherent conflict was given no weight.
The issue of burden to show fairness is somewhat unsettled in a practical sense. Few courts would disagree the holding of Cusson v. Liberty Life Assur. Co., 592 F.3d 215, 225 (1st Cir. Mass. 2010) that the burden is on the claimant to show that the procedural irregularities to have inherent conflict play an interest. It is not the insurer's burden to show procedures were fair. In Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 63 4 (9th Cir. 2009) , discussed further below, while not formally shifting the burden to the insurer, the court required a more extensive showing by the insurer that it had been fair: "While Hartford was not required to present evidence demonstrating its efforts to achieve claims administration neutrality, the Supreme Court's decision in MetLife II placed it on notice as to the potential significance of such evidence in defense of a suit by a claimant challenging an adverse benefits determination."
The Glenn court stated specific facts that were present in the Glenn case that properly lead the lower courts to weigh the inherent conflict against the insurer, including the following: MetLife required the claimant to file for Social Security Disability Income, but then ignored social security's benefit determination; MetLife had emphasized a certain medical report that supported its position while deemphasizing reports that were harmful; and had not provided vocational and medical experts with all the relevant evidence.
Circuit courts that have reviewed the procedural irregularities that will allow a less deferential standard of review include the following:
- In Majeski v. Metro. Life Ins. Co., 590 F.3d 478, 482 (7th Cir. 2009) , the court held that the following deficiencies in the independent file review of a long-term disability claim, applying the Glenn standard in weighing the inherent conflict, constituted an arbitrary and capricious claim review:
[I]t remains true that deferential review is not a euphemism for a rubber-stamp. We find it troubling that Dr. Marion's report--the sole basis for MetLife's determination--concludes, erroneously, that Majeski did not submit objective evidence of functional limitations. Dr. Marion does not acknowledge, much less analyze, the significant evidence of functional limitations that Majeski offered. Dr. Marion notes Hardin's conclusion that Majeski could perform medium-level work, but he ignores Hardin's critical qualification that Majeski was nevertheless incapable of typing and sitting. Dr. Marion's statement that Hardin's evaluation "does not document, nor is it reasonable to conclude from it, that the claimant has functional limitations that precluded sedentary work activity requiring sitting, using a computer and telephone" is simply not true. Hardin explicitly says that Majeski cannot sit or type sufficiently to return to her former job as a nurse consultant. And Dr. Marion does not even mention Dr. Weiss's questionnaire (nor is it listed under the documents sent to him for review).
Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 630 (9th Cir. 2009) , the court conducted a searching examination of the handling of the claim in finding that there was sufficient evidence that the inherent conflict affected the decision such that the decision would be reviewed towards the less deferential end of arbitrary and capricious review. Specifically, the Court cited the following facts:
- Even though actions shown on video were consistent with claimed limitations, the insurer stated that video disproved them by taking actions observed over four days and implying that all were done in a single day;
- While the insurer's representatives had observed the claimant walking slowly and stiffly, they stated that there was no evidence of limitations on movement;
- Information presented to reviewing doctors was slanted, and didn't include information helpful to the claimant.
- Weighing opinion of treater who saw the insured twice over a year over the opinion of the treater who saw the claimant every month.
- The nurse reviewer on the appeal was plainly an advocate for the company's position, rather than a neutral.
- Conducting a paper review rather than an IME, particularly when the company did not give the treating or reviewing physicians all the relevant information, including the contrary determination by the social security administration.
- Stating that lack of objective evidence of pain showed absence of pain was unreasonable, but citing relatively mild pain medication and lack of a pain management program could be seen as evidence pain was not disabling.
- Failure to articulate basis for distinguishing the contrary Social Security Administration finding.
- In Raybourne v. Cigna Life Ins. Co. of N.Y., 576 F.3d 444 (7th Cir. 2009) the court overturned the district court's decision on grounds that it did not think the district court had adequately taken into account the Glenn case, which was decided five days before the trial court's decision was entered. The Circuit Court decision did not have any substantive discussion of Glenn.
- In Helfman v. GE Group Life Assur. Co., 573 F.3d 383, 393 (6th Cir. 2009) , the court found that the use of a mix of independent file reviewers and ones employed by the insurer meant that the inherent conflict had to be considered. The court did not require that the file reviewers interview the treaters when the treaters submitted extensive letters that were reviewed. However, the insurer's failure to substantively discuss the treater's opinion that stress prevented the claimant from working, and dismissing the treater's opinion that the claimant couldn't be subject to stress was merely a "prophylactic" factor that should be discounted in the disability determination, and that stress was subjective and so not a legitimate basis for disability, meant that the denial was arbitrary and capricious.
The following district courts in the Second Circuit have discussed these and other procedural factors that should be taken into account in determining the weight to be given to the inherent conflict: Among the procedural irregularities identified in cases after Glenn are the following:
- Denying benefits after benefits have been paid for a substantial period of time without a significant change in the claimant's condition or the applicable standard of disability. Smith v. Novelis, 2009 U.S. Dist. LEXIS 90094 (N.D.N.Y Sept. 29, 2009).
- No financial separation of claims administration and the company's financial interests. The court apparently focused on the fact that the claim administrators were discussing claims reserves, showing that they were considering the effect of the decision on the company's finances. Solomon v. Metro. Life Ins. Co., 628 F. Supp. 2d 519, 529 (S.D.N.Y. 2009).
- Failure to assess functional capacity prior to discontinuing benefits. Maxwell v. Metro. Life Ins. Co., 2009 U.S. Dist. LEXIS 78482 (N.D.N.Y Sept. 1, 2009).
- Failure to consider that the claimant could have been disabled while he was working. Id. (Judge Posner issued a great decision on this point in Hawkins v. First Union Corp. Long-Term Disability Plan, 326 F.3d 914, 918 (7th Cir. 2003)
- Cherry-picking parts of a treater's medical opinions helpful to the insurer while ignoring the harmful parts. Magee v. Metro. Life Ins. Co., 632 F. Supp. 2d 308, 321 (S.D.N.Y. 2009)
- Claims administrators who were told to ignore social security determinations of disability. Solomon v. Metro. Life Ins. Co., 628 F. Supp. 2d 519, 529 (S.D.N.Y. 2009); but see, Kindig v. Anthem Life Ins. Co., 2009 U.S. Dist. LEXIS 27419 (W.D.N.Y. Mar. 30, 2009) (social security determination issued after initial appeal denial, doesn't shift weight significantly).
- Failure of the person deciding the appeal to conduct an independent analysis of the initial decision. Arnone v. CA, Inc., 2009 U.S. Dist. LEXIS 11542 (S.