Opinion
No. C 03-05423 TEH.
September 8, 2004
ORDER GRANTING JUDGMENT FOR DEFENDANTS
This matter came before the Court on Monday, August 30, 2004, on (1) Plaintiff's Motion for Judgment under Fed.R.Civ.P. 52(c), and (2) Defendants' Motion for Summary Judgment under Fed.R. CIv. P. 56(b). Having carefully considered the parties' written and oral arguments, and the entire record herein, the Court enters judgment in favor of Defendants under Fed.R.Civ.P. 52(c) for the reasons set forth below.
I. BACKGROUND
John Reilly ("Plaintiff") brings this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 29 U.S.C. § 1001, et seq., seeking to overturn the final determination of Standard Insurance Company ("Standard") that Plaintiff is not entitled to long term disability benefits.
The record shows that Plaintiff suffered from a history of degenerative disc disease and chronic back pain. In June 23, 2000, Plaintiff underwent substantial, multi-level spinal surgery for degenerative joint disease with lumbar stenosis. The following year, on May 21, 2001, Plaintiff joined Clark Construction Company as a construction supervisor. He had progressed well and was able to work without restrictions. He was, however, still receiving periodic prescriptions for pain medication and being treated with therapeutic massage. On July 13, 2001, Plaintiff was rear-ended in an automobile accident in which he suffered injuries to his back and neck. Plaintiff was off work for roughly two weeks until July 27, 2001, then returned to work for several months. When his back condition deteriorated, he stopped working on January 23, 2002, and filed for long term disability benefits under Defendant's Group Long Term Disability Insurance Policy ("Policy"). Plaintiff's Attending Physician's Statement that accompanied his application for benefits states that Plaintiff's primary diagnosis is "Degenerative Disc Disease Lumbar Spine" and explains that Plaintiff has had "progressive symptoms" since his motor vehicle accident. Pavick Decl., Exh. A ("Exh. A") at 00258-59.
Standard, the claims administrator for Plaintiff's policy, denied Plaintiff's application on October 3, 2002, on the ground that Plaintiff is not eligible for long term disability benefits because he falls within the Plan's Preexisting Condition Exclusion. Plaintiff appealed. After considering additional documentation from Plaintiff, and obtaining additional independent review, Standard upheld its denial on December 20, 2002. Thereafter, Plaintiff's claim was referred to Standard's Quality Assurance Unit for an independent review. At the close of this process, Standard reaffirmed its decision to deny benefits by letter of February 18, 2003. Plaintiff subsequently filed this action in December 2003 against Standard, the Clark Construction Group, Inc., and Affiliates Long Term Disability Plan (collectively "Defendants"). Plaintiff and Defendants now both move for a judgment in their favor.
II. STANDARD OF REVIEW
The denial of long term disability benefits is reviewed de novo unless the plan or policy expressly confers upon the plan administrator the discretionary authority to determine benefits, in which case the denial will be reviewed for abuse of discretion. Johnson v. Buckley, 356 F.3d 1067, 1075 (9th Cir. 2004); Ingram v. Martin Marietta Long Term Disability Income Plan for Salaried Employees of Transferred GE Operations, 244 F.3d 1109, 1112-13 (9th Cir. 2001). As Ingram emphasized, "[i]f an insurance company seeking to sell and administer an ERISA plan wants to have discretion in making claims decisions, it should say so. It is not difficult to write, "The plan administrator has discretionary authority to grant or deny benefits under this plan." Ingram, 244 F.3d at 1113.
In this case, the relevant language in the section of the Policy entitled "Allocation of Authority" does not expressly give Standard discretionary authority in making benefit eligibility determinations — indeed, the word "discretion" is never even used. Rather, the language only allocates to Standard the full and exclusive authority to administer claims, including the right to determine entitlement to benefits and the amount of information it may reasonably require to determine entitlement to benefits. Exh. A at 00035. As the Ninth Circuit has squarely held, however, "[a]n allocation of decision-making authority . . . is not, without more, a grant of discretionary authority in making those decision." Ingram, 244 F.3d at 1112-13 (emphasis added); see also Bode v. St. Joseph's Health Systems, 298 F. Supp.2d 918, 920 (C.D. Cal. 2003). Indeed, in Bode, the Court found that the exact language at issue here did not satisfy the standard in Ingram for expressly conferring discretionary authority upon the Administrator. Id. It further found that Ingram, which post-dates the case relied on by Defendants — Bendixen v. Standard Ins. Co., 185 F.3d 939 (9th Cir. 1999) — controls in this case.
Given the above, the Court concludes that a de novo standard of review applies in this case. Bode, 298 F. Supp.2d at 920. When a Court conducts a de novo review of an administrator's denial of long-term disability benefits in an ERISA case, the Court effectively conducts a bench trial upon the record. Kearney v. Standard Ins. Co., 175 F.3d 1084, 1094-95 (9th Cir. 1999). Accordingly, the Court shall proceed under Fed.R.Civ.P. 52(c). Id.
Even where de novo review applies, it is still true that "`[i]n most cases,' only the evidence that was before the plan administrator should be considered.'" Kearney,, 175 F.3d at 1091. Amplification of the administrative record is appropriate, however, "when `circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.'" Friedrich v. Intel Corp., 181 F.3d 1105, 1111 (9th Cir. 1999); Kearney, 175 F.3d at 1091; Mongeluzo v. Baxter Travenol Disability Benefit Plan, 46 F.3d 938, 944 (9th Cir. 1995). As a general rule, a district court "should not take additional evidence merely because someone at a later time comes up with new evidence that was not presented to the plan administrator." Mongeluzo, 46 F.3d at 942; see also Kearney, 175 F.3d at 1091 (district court properly excludes proffered, extra-record evidence where (1) it could have easily been submitted to plan administrator or (2) was not needed to conduct adequate de novo review); cf. Dishman v. UNUM Life Ins. Co. of America, 269 F.3d 974, 985-86 (9th Cir. 2001) (additional evidence proper where it could not have easily been provided to plan administrator because "there was no administrative process to speak of"); Friedrich, 181 F.3d at 1111 (additional evidence proper where plan prevented plaintiff from providing medical evidence to support his claim).
Here, the only extra-record evidence Plaintiff has attempted to submit is a declaration from Mr. Reilly. Plaintiff has not satisfactorily shown, however, that the substance of this declaration could not have been submitted to the plan administrator for consideration or that it is necessary to conduct an adequate de novo review. Accordingly, the Court declines to supplement the record with this declaration.
III. DISCUSSION
Under the Policy's preexisting condition exclusion, a claimant is not eligible for benefits if a preexisting condition "caused or contributed to" to the disability. Exh. A at 00038. A "preexisting condition" is defined to include any physical condition for which the claimant has received medical treatment or services or taken prescribed drugs or medications during the 90-day period just before the insurance becomes effective (in this case April 2, 2001 through June 30, 2001). Id.
Here, the record indicates that after his back surgery in June 2000, Plaintiff's symptoms significantly improved but he was still prescribed pain medication on a regular basis and he obtained a prescription for vicodin on March 8, 2001, shortly before the 90-day period began. According to the Administrative Record, Plaintiff asserted that he did not actually take the medicine during the 90-day period, but only obtained the medication because he was going on a trip to Hawaii in May and wanted to have it available as a precaution. Plaintiff never satisfactorily explained, however, why he needed to refill the prescription on July 15, 2001 if the medication was not used. The assertion that he "lost the 3/01 bottle," see Exh. A. at 00541, lacks credibility. The Record also shows, and it is undisputed, that Plaintiff's doctor at the Santa Rosa Spine Institute recommended on March 15, 2001 that Plaintiff continue with massage therapy and that in fact he obtained several sessions of such therapy during the 90-day preexisting condition period. According to the Administrative Record, Plaintiff asserted that the massage therapy was for stress, rather than his back, but there is no documentation in the Record that would support this assertion, and the Court finds that it is not credible.
Plaintiff tested negative for opiates in a drug test on May 2001. It is undisputed, however, that opiates clear from the system in a few days. Thus, this single test result is not particularly informative one way or the other.
Accordingly, having reviewed the record de novo, the Court finds that Plaintiff received medical services, and that it is more likely than not that he took prescribed pain medication, relating to his degenerative disc disease during the 90-day preexisting condition period, and thus had a "preexisting condition."
Notably, Plaintiff's motion, and opposition to Defendant's motion, does not argue that Plaintiff did not, in fact, receive medical services, or take prescribed medication, relating to his back condition during the 90-day preexisting condition period. Rather, Plaintiff's papers primarily argue that Standard's decision — that the preexisting condition exclusion applies — should be reversed because Standard misinterpreted the preexisting condition clause of the Policy. Specifically, Plaintiff argues as follows:
Under the policy, coverage is excluded for disabilities which are caused or contributed to by a preexisting condition. Defendants are denying coverage by construing the policy to exclude coverage for disabilities caused by sickness or injuries which are caused or contributed to by preexisting conditions. The difference is significant. Under defendants' view, if one were to become disabled as a result of a heart attack at age 60, an insurer could deny coverage on the grounds that the heart attack was caused or contributed to by a slow, life-long buildup of arterial plaque and that the insured was therefore disabled by a `preexisting condition.' Pl.'s Mot. at 5, 8; Pl.'s Opp. at 3, 6 (emphasis in original). The distinction Plaintiff is attempting to draw is not entirely clear since disabilities are typically caused by sickness or injuries of some sort. In any event, there is no indication that Defendants are construing the Policy in any way that is inconsistent with the plain terms of the Policy. Plaintiff is claiming that he is disabled and can no longer work because of back pain caused by an automobile accident. Defendants considered whether Plaintiff's preexisting back condition contributed to Plaintiff's worsening symptoms after the automobile accident and to his claim of disabling back pain. The fact that Plaintiff was in an automobile accident that worsened his degenerative disk disease is not a factor that materially changes the basic analysis under the preexisting condition exclusion.
Plaintiff also makes a secondary argument that the preexisting condition exclusion is inapplicable here because the Policy provides that the exclusion does not apply if the preexisting condition was disclosed in a "medical history statement." Exh. A. at 00038. Plaintiff further argues that this medical history statement is "missing" from the administrative record provided by Defendants. Since, Plaintiff argues, it is the insurer's duty to obtain the evidence necessary to decide a claim, Defendants can not properly deny Plaintiff's claim without determining whether he disclosed his preexisting condition on the "missing" medical history statement.
This argument lacks merit. The Policy only required employees to submit a medical history statement under certain circumstances none of which are applicable here. As such, Plaintiff was not required to submit such a statement in this case. In addition, Plaintiff does not have a copy of such a statement, and there is no other evidence that would support an inference that such a statement was ever submitted to Defendants. Indeed, Plaintiff failed to even address this issue at oral argument. Accordingly, the Court finds that the absence of such a statement in the record is not grounds for reversing Defendants' denial of benefits.
At the hearing on the parties' motions, Plaintiff for the first time argued that Defendant should not have found, as a factual matter, that his preexisting degenerative disk disease "contributed to" his claimed disability, based on the definition of "contributed to" set forth in Fought v. Unum Life Insurance Co. of America, 379 F.3d 997 (10th Cir. 2004). In Fought, the plaintiff had a preexisting condition of coronary heart disease. Because of this condition, the plaintiff underwent surgery. After the surgery, a chain of events ultimately resulted in the plaintiff contracting a staph infection that left her disabled. The Court ruled that plaintiff's coronary heart disease did not "contribute to" her disability, and thus did not justify denial of benefits under the policy's preexisting condition exclusion. The Court held that exclusions must be interpreted narrowly, and therefore there must be more than simple "but for" causation to demonstrate that a preexisting condition "contributed to" a disability:
Indeed, Plaintiff's Motion for Judgment fails to contain any citations to the medical or factual evidence contained in the Administrative Record. The only citations are to the policy itself.
The exclusion cannot merely require that the pre-existing condition be one of a series of factors that contributes to the disabling condition; the disabling condition must be substantially or directly attributable to the preexisting condition. See also Webster's II New Riverside Dictionary 306 (defining contribute to mean `to act as a determining factor'). Ms. Fought's staph infection is not a condition related to her coronary artery disease, even though her unstable angina, which was related to her coronary artery disease, undoubtedly contributed to the need for surgery.Fought, 379 F.3d at ___, 2004 WL 1803364 *12.
The Court agrees that the preexisting condition should be narrowly construed. Even applying the standard set forth in Fought, however, the Court finds that Plaintiff's preexisting degenerative disk disease "contributed to" the diagnosis of degenerative disk disease listed on his disability benefits application. Unlike Fought, where the preexisting condition was simply a "but for" cause of the disability and had no direct connection to the disability, the Court finds that the degenerative disc disease Plaintiff suffered at the time he applied for benefits is substantially or directly attributable to the degenerative disc disease he had during the preexisting condition period.
This is not to say that Plaintiff did not suffer new injuries from the automobile vehicle accident — he clearly did; in particular, he suffered annular tears at the L1-2 and T12-L1 levels. Exh. A at 00509. Plaintiff also emphasizes that the annular tears were at different levels than those operated on in his June 2000 surgery (which were L-2-3, L3-4, L4-5, and L5-S1). He returned to work, however, two weeks after the accident, which indicates that the injuries suffered exclusively from the accident were not as disabling as Plaintiff contends. Indeed, Dr. Dickerman concluded that "[c]onsidering that this patient was only off work from 7/13 through 7/27/2001 and then was able to do his work, that would be consistent with a transient increase in symptomatology . . . His [current] symptom complex is referable to the chronic degenerative disk disease of the lumbar spine." Exh. A. at 00528. In addition, a pre-surgery MRI showed degenerative disc disease at all levels, not just at the levels operated upon. Thus, as Plaintiff's doctor, Dr. Pappas describes it, the automobile accident caused Plaintiff to suffered an acute exacerbation and injury to the L1-L2 motion segment. Exh. A at 00489.
Plaintiff urges the Court to completely reject Dr. Dickerman's report because he did not have an opportunity to respond to the report before Defendants made their final decision to deny benefits. While Plaintiff may not have had an opportunity to respond to Dr. Dickerman's report prior to Defendants' decision denying benefits, he had such an opportunity here and failed to effectively do so. Thus, the Court declines to completely reject Dr. Dickerman's report for the reason urged.
In short, there is no doubt that Plaintiff's preexisting degenerative disk disease was exacerbated when he was rear-ended. The Court concludes, however, that any new injuries from the accident were on an existing pathology — Plaintiffs' preexisting degenerative disc disease — and that this disease was a direct and determining factor in the claimed disability several months later of degenerative disk disease. Accordingly, having reviewed the record de novo, the Court finds that Plaintiff's preexisting condition "contributed to" his claimed disability. Defendants' decision to deny benefits shall therefore be upheld.
The Court notes that Plaintiff asserts that Defendants do not dispute that Plaintiff is disabled and thus he would be entitled to disability benefits if he were not barred by the preexisting condition exclusion. Defendants did not, however, reach the issue of whether Plaintiff is in fact disabled because he was disqualified under the threshold preexisting condition exclusion. Further Defendant indicates that the issue of whether Plaintiff is disabled would likely be disputed. See Defs.' Reply at 7-8.
IV. CONCLUSION
In light of all of the above, and good cause appearing, it is HEREBY ORDERED as follows:
1. Plaintiff's Motion for Judgment under Fed.R.Civ.P. 52(c) is denied.
2. Defendants' Motion for Summary Judgment under Fed.R.Civ.P. 56(b) is construed as a Motion for Judgment under Fed.R.Civ.P. 52(c).
3. Judgment is entered in Defendant's favor under Fed.R.Civ.P. 52(c).
4. The Clerk shall close the case.