Opinion
Civ. File No. 02-1282 (PAM/JSM)
April 4, 2003
MEMORANDUM AND ORDER
This matter is before the Court on cross-Motions for Summary Judgment. For the reasons that follow, the Court denies Defendant's Motion and grants Plaintiff's Motion. Defendant also brings a Motion to Strike the affidavit of Plaintiff that was submitted in response to Defendant's Motion. Plaintiff concedes that some of the exhibits to her affidavit are not part of the administrative record below and are therefore improper. Although an affidavit is not the preferred manner of responding to a motion for summary judgment, the Court will accept the affidavit as Plaintiff's opposition papers, but will disregard any attachments to that affidavit that are not part of the administrative record.
BACKGROUND
Plaintiff Jean Haberman-Hall claims that the decision of Defendant Continental Assurance Company ("CAC") to deny her long-term disability benefits was arbitrary and capricious and thus violates the Employee Retirement and Income Security Act, 29 U.S.C. § 1132 et seq. ("ERISA").
The caption of the Complaint shows an entity called Continental Casualty Company as the Defendant in this matter, and Defendant's Answer also refers to Defendant as Continental Casualty Company. However, the summary judgment papers of both parties refer to Defendant as Continental Assurance Company.
Haberman-Hall worked as a legal secretary for CNA Financial Corporation. While employed by CNA, she paid for and received long-term disability insurance coverage. That coverage was provided by CAC. During her employment, Haberman-Hall was involved in two automobile accidents. These accidents injured her spine and eventually caused her to cease working in February 2000. Shortly thereafter, she underwent back surgery. She did not return to work after the surgery, and claims that she is unable to do so because she continues to experience severe and debilitating neck and back pain.
CAC provided Haberman-Hall with short-term disability benefits from February 9, 2000, until February 8, 2002. CAC then informed Haberman-Hall that it would pay her long-term disability benefits pending a review of her ability to return to work. In September 2001, CAC decided that Haberman-Hall was not disabled under the meaning of the policy and informed her that her benefits would cease in February 2002. In relevant part, the policy defines long-term disability as "continuously unable to engage in any occupation for which You are or become qualified by education, training or experience." (Mohs Aff. Ex. E at 7 (emphasis in original).) The policy also requires that an applicant for long-term disability benefits not be working for wages at any occupation. (Id.) In contrast, the short-term disability benefits Haberman-Hall received required only that she be disabled from performing the duties of her own occupation. (Id.) Because CAC believed that Haberman-Hall was capable of working at some occupation, it terminated her long-term disability benefits effective February 8, 2002.
Although not controlling, it is interesting to note that Haberman-Hall applied for, and received, Social Security Disability Insurance benefits ("SSDI") during the time CAC was reviewing her file. To receive SSDI, the Social Security Administration must find that a claimant "is unable to engage in any substantial gainful activity." 42 U.S.C. § 1382c(a)(3)(A).
Haberman-Hall appealed the decision to CAC's appeals committee. The committee denied her appeal on March 29, 2002. Haberman-Hall then instituted this lawsuit, and the parties now cross-move for summary judgment.
DISCUSSION A. Standard of Review
Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The Court must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enter. Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996). However, as the United States Supreme Court has stated, "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). Where, as here, the parties agree that there are no disputes as to any material facts, summary judgment is appropriate.
B. Merits
In the first instance, the Court must determine whether the disability plan at issue vested CAC with the "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). If CAC does not have such discretionary authority, the Court must review the denial of benefits de novo. Id. If, however, the plan gives CAC discretionary authority and there is no evidence of a conflict of interest, the Court's review is limited to determining whether the challenged denial was an abuse of discretion. Id. In this case, CAC contends that the plan gave CAC discretionary authority and that there is no conflict of interest, making abuse-of-discretion review appropriate.
There is no dispute that the plan gives CAC discretionary authority. Therefore, as the Eighth Circuit has made clear, "in the absence of bad faith or conflict of interest, [the Court] may overturn a decision of the plan administrator only if it is `without reason, unsupported by substantial evidence or erroneous as a matter of law.'" Donaho v. FMC Corp., 74 F.3d 894, 900 (8th Cir. 1996) (quoting Abnathya v. Hoffman-La Roche, Inc., 2 F.3d 40, 45 (3d Cir. 1993)). Haberman-Hall asks the Court to find that CAC had a conflict of interest in its administration of the plan and to apply a less deferential standard of review. Woo v. Deluxe Corp., 144 F.3d 1157, 1160 (8th Cir. 1998). To receive the benefit of the less-deferential standard, Haberman-Hall "must present material, probative evidence demonstrating that (1) a palpable conflict of interest or a serious procedural irregularity existed, which (2) caused a serious breach of the plan administrator's fiduciary duty to her." Id. According to Haberman-Hall, because CAC both funds and administrates the plan, it has a financial interest in denying benefits and thus has a conflict of interest that mandates less-deferential review. See id. at 1161 (finding conflict of interest where, inter alia, plan administrator received direct financial benefit from denying benefits). When a conflict is found, the Court should apply a "sliding scale" approach where "the evidence supporting the plan administrator's decision must increase in proportion to the seriousness of the conflict or procedural irregularity." Id. at 1162.
CAC contends that the less-deferential standard of review is not appropriate. CAC does not dispute that it both funds and administrates the plan at issue, but argues that this situation does not give rise to a presumption of a conflict absent more evidence that the decision reached was connected to the fact that CAC funds and administers the plan. (Def.'s Supp. Mem. at 10.) CAC also argues that Haberman-Hall has failed to meet her burden to come forward with substantial, probative evidence establishing a connection between the conflict and the decision reached.
Initially, it would appear that an insurance company that both funds and administers a plan is operating under a per se conflict of interest, because the company has an incentive to deny claims in order to make money. See, e.g., Yochum v. Barnett Banks, Inc. Severance Pay Plan, 234 F.3d 541, 544 (11th Cir. 2000) (holding that it is a per se conflict to both fund and administrate plan). However, the Eighth Circuit has cautioned that evidence of mitigation of the conflict can overcome what might otherwise be a per se conflict. See Woo, 144 F.3d at 1161 n. 2. According to that court, an apparent funding conflict may be mitigated by, for example, an insurer limiting the potential loss with a retrospective premium. Id. In this case, there is no evidence that CAC used retrospective premiums or any other means to mitigate the conflict between its funding of and administration of the plan.
Moreover, Haberman-Hall has some evidence of a procedural irregularity that adds credence to her claims of a conflict of interest and a connection between that conflict and the decision in her case. She notes that CAC did not conduct an independent medical examination nor did CAC have a physician review her file. Instead, a vocational case manager reviewed the file and determined that Haberman-Hall was not disabled. See id. at 1161 (noting that failure to conduct independent medical exam for claimant with uncommon disease was evidence that administrator failed to use proper judgment in evaluating claim for benefits). Whether or not the failure to conduct an independent medical exam is evidence of a procedural irregularity, in the absence of evidence of mitigation CAC's funding conflict supports the use of a less-deferential standard of review. However, even if CAC had no conflict of interest, the undisputed evidence establishes that CAC abused its discretion in denying benefits to Haberman-Hall.
The evidence in the record that Haberman-Hall can return to work is evidence generated by CAC. Her physicians all note that Haberman-Hall experiences a great deal of pain and that the pain increases as she attempts to perform mundane tasks. Her treating physician does not waiver in his opinion that her pain prevents her from working. While CAC is not bound to treat this opinion as presumptive evidence that Haberman-Hall is disabled, CAC must give some weight to the opinion. The record shows that CAC almost completely disregarded the opinion. Indeed, CAC does not acknowledge the limitations imposed by the pain Haberman-Hall experiences, but only discusses the actual physical limitations imposed by her injuries and subsequent surgeries. This failure to take into account Haberman-Hall's subjective complaints of pain is an abuse of discretion, especially in light of the fact that CAC chose not to have her examined by an independent physician, who could have tested her complaints of pain. Instead, CAC relied solely on a paper record, which is poor evidence of the pain a person experiences.
Further, CAC's vocational assessment for Haberman-Hall is suspect. The functional capacities evaluation performed in January 2001 limited her to no more than 2.5 hours of sitting and 2.5 hours of standing during each work day, for a total of 5 hours. The evaluation also reports that Haberman-Hall experiences increased pain when she holds her arms in front of her body. Despite these restrictions, the vocational expert found that Haberman-Hall could perform the duties of a receptionist, which requires nearly full-time sitting. The expert did not discuss the final three hours of the workday, when presumably Haberman-Hall must be lying down or walking. There are no notes indicating that a receptionist is allowed to lie down or walk for extended periods of time every workday. In addition, the vocational expert found that Haberman-Hall could be a legal secretary, the very position CAC concedes she can no longer perform. The vocational expert did not explain how Haberman-Hall could perform the duties of a legal secretary when holding her arms in front of her body, as she would have to do to type, causes her pain.
CAC should not have relied so heavily on this vocational assessment. At CAC's request, Haberman-Hall's physician at United Pain Center, Dr. John Knutson, reviewed the functional capacities evaluation on which the vocational assessment relies. He unequivocally told CAC that because of her limitations Haberman-Hall could not perform her previous duties or any duties that required sitting for more than 2.5 hours. (Apr. 4, 2001, letter from Dr. Knutson to Susan Wolfe, R.N.) In his estimation, Haberman-Hall was unable to return to her job. The vocational assessment clearly did not take this opinion into account when it suggested that Haberman-Hall could perform the duties of a legal secretary.
Finally, it appears that CAC applied too strict of a standard to Haberman-Hall's application. The policy provides that a claimant is disabled if she is unable to work. In the letter affirming the denial of benefits, CAC stated that "the evidence does not support your inability to perform low level activities and does not preclude you from performing every day life activities." (Mar. 29, 2002, letter from Doris Gloss, R.N.) Whether Haberman-Hall is able to perform life activities is not relevant to whether she can perform the duties of a full-time occupation.
In sum, the evidence supports Haberman-Hall's contention that she is unable to work. The evidence also shows that she is diligently pursuing physical therapy in the hopes that she may one day be able to return to work. When that day comes, CAC will be justified in terminating her disability benefits. Until then, or until her condition improves significantly, CAC's decision to deny her long-term disability benefits should be reversed.
CONCLUSION
For the foregoing reasons, and upon all the files, record, and proceedings herein, the Court concludes that Defendant abused its discretion when it denied Plaintiff long-term disability benefits. Accordingly, IT IS HEREBY ORDERED that:
1. Defendant's Motion to Strike (Clerk Doc. No. 25) is DENIED;
2. Defendant's Motion for Summary Judgment (Clerk Doc. No. 19) is DENIED; and
3. Plaintiff's Motion for Summary Judgment (Clerk Doc. No. 17) is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.