Opinion
CIVIL ACTION NO. 02-CV-1842
October 2, 2003
MEMORANDUM
Presently before the Court is Defendants' Motion for Summary Judgement (Doc. 6), Plaintiffs Opposition thereto (Doc. 8) and Defendants' Reply Brief (Doc. 9). For the following reasons Defendants' motion will be denied.
FACTUAL BACKGROUND
The following facts are not disputed. Plaintiff, Catherine Higgins, was employed by Montgomery Hospital as a nurse auditor. In March 1997, Plaintiff was diagnosed with fibromyalgia. As a result, Plaintiff made claims for short and long term disability benefits under her employer's benefit plan. The plan is funded and administered by Defendant UNUM Life Insurance ("UNUM" or "Defendant"). Plaintiff was granted short then long term disability benefits. Her long term benefits began in September 1997 and were terminated in December 2001. During the majority of the disability period in question, Plaintiff was employed on a part-time basis and received partial benefits. However, at the time of termination she was receiving full disability benefits.
Plaintiff first sought treatment with Dr. Ravi Bhalla, M.D. who diagnosed her with fibromyalgia and chronic fatigue. Dr. Bhalla concluded Plaintiff was unable to work. In December 1997 at the request of Defendant UNUM, Plaintiff was examined by Dr. Benjamin Harris, M.D. Dr. Harris confirmed the fibromyalgia diagnose of Dr. Bhalla, but concluded Plaintiff could perform sedentary work similar to her position as a nurse auditor. Dr. Bhalla confirmed Plaintiffs ability to work around February 1998. Dr. Daniel Nordon, M.D. also determined that Plaintiff could work part-time with some modifications in May of 1998. In June 1999, he again concluded Plaintiff could work part-time after conducting a functional abilities analysis. Doctor Nordon also confirmed Plaintiffs ability to work up to 20 hours around January 2000.
In August of 2000, a functional capacity evaluation of Plaintiff was performed at the request of the Defendants. The evaluator determined that Plaintiff could work one to four hours a day up to three (3) days a week in a sedentary position. The Defendants requested Dr. Barry Gebron, D.O., Defendants' in-house physician, to review the findings of the evaluator. Dr. Gebron concluded that the results were questionable in light of the evaluator's use of subjective rather than objective testing procedures and recommended retesting the Plaintiff. This apparently never occurred.
According to Plaintiff, her condition worsened and she ceased working in August 2000 and began receiving full disability benefits. In November 2000 Plaintiff began volunteering in the medical offices of Dr. Andre Garabedian, her primary care physician. In November 2001, Defendant UNUM spoke with Plaintiff in reference to her work status. Plaintiff informed Defendant she was not earning any income. Whether Plaintiff informed Defendant UNUM at that time that she was volunteering for Dr. Garabedian is in dispute. On November 28 and 30, 2001, Defendants' surveillance unit videotaped certain of Plaintiffs activities in Dr. Garabedian's medical office. Plaintiff characterizes her activities as voluntary and non-compensated. Defendants termed it working. In December 2001, Defendants contacted Plaintiff at Dr. Garabedian' s office and Plaintiff admitted to volunteering at the office since November 2000. Defendant UNUM's claim adjuster directed Plaintiff to provide proof of disability by December 19, 2001, but Defendants terminated Plaintiffs benefits on December 11, 2001, before she had an opportunity to provide proof of disability. Plaintiff sought and was granted a review of her claim. Plaintiffs appeal was denied in March 2002. Plaintiff filed the instant suit in April 2002, stating a claim pursuant to the Employee Retirement Income Security Act ("ERISA"), alleging Defendants failure to provide long term disability benefits from December 2001 to the present breaches their contractual and fiduciary duties under the Plan. On May 25, 2002, Plaintiff received an award of social security disability benefits from the Social Security Administration (the "Administration"). The Administration determined that Plaintiff was totally disabled from her fibromyalgia condition. Defendants move for summary judgement pursuant to Rule 56 of the Federal Rules of Civil Procedure.
In Plaintiffs affidavit, she contends that "between January and October, 2001, [she] notified defendant's various claims handlers several times that [she] was performing volunteer services at Dr. Garabedian's office." See Pl. Affidavit at 1.
The social security award (the "award") is mentioned but plays no part in my decision because it is subsequent to the termination of benefits by the Defendants and at this time, the award is not part of the administrative record.
LEGAL STANDARD
To be successful on a Fed.R.Civ.P. 56 motion for summary judgement, a party must prove that, in considering the "pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,. . . there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See Fed.R.Civ.P. 56(c). An issue is "material" if the dispute may affect the outcome of the suit under the governing law and is "genuine" if a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Summary judgment should be granted ". . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). If, in response to a properly supported motion for summary judgment, an adverse party merely rests upon the allegations or denials in their pleading, and fails to set forth specific, properly supported facts, summary judgment may be entered against her. See Fed.R.Civ.P. 56(e).
Of course, a court must draw all reasonable inferences in favor of the party against whom judgment is sought. See American Flint Glass Workers. AFL-CIO v. Beaumont Glass Company, 62 F.3d 574, 578 (3d Cir. 1995).
DISCUSSION
A. ERISA Standard of Review
First, the Court must determine what standard should be applied in reviewing Defendants' decision to terminate Plaintiffs disability benefits. In determining the appropriate standard of review under ERISA, the United States Supreme Court in Firestone Tire Co. v. Bruch, 489 U.S. 101, 109, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), rejected the universal application of the arbitrary and capricious standard when reviewing an ERISA administrator's decision regarding benefit eligibility. Rather, the Firestone Court held that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. (emphasis added). The language of the plan will inform the court whether such discretionary authority was given to the administrator or fiduciary. Id. Where discretion has been given to the administrator or fiduciary, their decisions are reviewed under an "abuse of discretion" or "arbitrary and capricious" standard. See Mitchell v. Eastman Kodak Co, 113 F.3d 433, 437 (3d Cir. 1997). It is not disputed by the parties that the Plan gives the administrator discretion triggering the arbitrary and capricious standard for the review of Defendant UNUM's denial of benefits to the Plaintiff.
However, where an employer purchases a disability plan from an insurance company, and the insurance company is responsible for funding and interpreting the plan, the Court of Appeals for the Third Circuit has determined that a "sliding scale" approach must be utilized to determine the amount of deference a court should give to the insurance company's decisions. See Pinto v. Reliance Standard Life Ins. Co, 214 F.3d 377, 379 (3d Cir. 2000). This approach is necessitated by the inherent conflict created when a company is both charged with interpreting whether to honor claims under the plan, and responsible for incurring the fiscal impact of the decision. See Pinto, 214 F.3d at 388. When so conflicted, "insurance carriers have an active incentive to deny close claims in order to keep costs down and keep themselves competitive so that companies will choose to use them as their insurers. . . ." See id, Therefore, in reviewing decisions of "conflicted" insurers, a court should apply a "heightened arbitrary and capricious" standard. See Pinto, 214 F.3d at 392. Under a heightened standard a court is to consider whether the result is supported by reason but also the process by which the result was achieved. Id. at 393. In reviewing the administrator's decision, a court may show deference but the greater the evidence of a conflict the less deference a court needs to give. Id. at 392. Relevant factors in determining deference may include the sophistication of the parties, the information accessible to the parties, the nature of the financial arrangement between the insurer and the company, and the current status of the fiduciary. Id. at 392.
Initially, Defendants argue the heightened standard of review underPinto, does not apply as there is no evidence that the process was irregular or that procedural irregularities exist that may support an inference of conflict. Defendants argue that this Court should apply the arbitrary and capricious standard of review because the plan at issue contains a provision that expressly grants discretionary authority. The plan requires that "proof of a continuing claim must be given to Defendant UNUM if requested, and the plan allows Defendants to have claimants examined, from time to time, by physicians or vocational experts. See Def. Brief at 11. Defendants contend that its claim decision does not involve a conflict of interest or an appearance of conflict of interest.
In response, Plaintiff argues that there is an inherent conflict of interest with the administration of this claim, and the heightened standard of review should apply. See Pl. Opposition at 4-5. In this case, it is clear to this Court that Defendant UNUM is operating under a conflict of interest as both the administrator and insurer of the plan. Therefore, under Pinto, this Court must apply the heightened standard of review.
B. Defendants' Motion for Summary Judgment
Under the heightened arbitrary and capricious standard, the court need not give complete deference to the administrator's decision to deny benefits. See Pinto, 214 F.3d at 393. The court must "look not only at the result — whether it is supported by reasons — but at the process by which the result was achieved. Id. The court may consider all evidence available to Reliance during the entire claim process. See Mitchell, 113 F.3d at 440.
Applying the heightened arbitrary and capricious standard, the Third Circuit has suggested the presence of certain factors may indicate that less deference to the administrator's decision is warranted. See Pinto, 214 F.3d at 393. Specifically, the administrator's decision — making process may not be entitled to deference if it reverses an earlier decision without receiving any additional medical information. Id. Additionally, the court need not accept the decision if the administer uses a self-serving approach to the evidence that selectively relies upon the evidence that supports a denial of benefits, but rejects the evidence that supports the granting of benefits. Id. There is evidence in the record that Defendant UNUM reversed its decision to pay Plaintiff long-term benefits without additional medical examination and used a self-serving approached to reach its decision.
In seeking summary judgement, Defendants argue that it reached a reasonable conclusion about Plaintiffs work capacity for the following reasons: (1) "Plaintiff had worked part-time approximately 20 hours a week up [sic] until May 19, 2000." See Def. Brief at 17; (2) "[Plaintiffs] treating physicians consistently permitted her to work on a part-time basis" and she received partial benefits from Defendant UNUM.See Def. Brief at 17 and Pl. Opposition at 1; (3) In August 2000, Plaintiff was instructed by her physician to cease working due to her condition worsening. See Def. Brief at 17; (4) Plaintiff traveled to Texas in August 2000 to take care of her ill mother. See Def. Brief at 17; (5) The surveillance tapes taken on November 28, 2001 and November 30, 2001, showed the Plaintiff working for Dr. Garabedian's office eight hours a day. See Def. Brief at 17; (6) the surveillance tapes were reviewed by Defendant UNUM's physicians and vocational consultant, and the physician's review confirmed that Plaintiff had the physical capacity to perform occupations requiring light physical demands. Id. "The vocational consultant [also] confirmed that Plaintiff could return to her occupation as a registered nurse within the capacity outlined by the physician's review." Id.
In opposition to summary judgement, Plaintiff contends denial of her benefits was arbitrary and capricious as there was no evidence that Plaintiff could work a full time or part-time position after August 2000. Further, Plaintiff alleges Defendants directed Plaintiff to provide evidence in support of her continuing to receive benefits, but terminated Plaintiffs benefits before she had an opportunity to do so. Plaintiff also contends that Defendants relied on a provision which is not part of the Plan which was in effect when Plaintiffs disability arose. Plaintiff argues that "her ability to perform volunteer services at her own pace and on her own schedule can hardly be equated with the ability to hold a job where she would not be free to come and go as she pleases." See Pl. Opposition at 7.
Plaintiff argues that Defendant UNUM did not reserve the right to amend the 1997 plan and this amendment subjects Defendants' decision to ade novo review. In Defendants' reply Brief, Defendant UNUM contends that the termination letter cited the amended plan language, but the amended language was not relied upon in terminating Plaintiffs claim. The original 1997 Plan contained a provision permitting benefits beyond 36 months only if you are unable to perform the duties of any gainful occupation for which you are reasonably fitted by education, training, or experience. The amended 1999 plan permitted benefits after 24 months of payments only if an individual is unable to perform the duties of any gainful occupation for which he is reasonably fitted by education, training, or experience. In denying Defendants' motion for summary judgment, I do not rely upon the aforesaid differences in the plans.
Defendant UNUM reversed its medically supported decision to pay Plaintiff long-term benefits without receiving any additional medical information based upon the examination of Plaintiff. The process that Defendant UNUM used to make its decision was flawed, because it based its decision on Dr. Reeder's medical report and Richard Byard's vocational report. UNUM's experts relied solely upon the viewing of a videotape of Plaintiff and their characterization of Plaintiff s activity as work.
Clearly, Defendant UNUM used a self-serving approached to reach its decision. The justification for termination of Plaintiff is stated in the Defendants' reply brief as follows:
Surveillance taken of the plaintiff on November 28, 2001 and November 30, 2001 established that she was working for Dr. Garabedian eight hours a day. . . .On December 11, 2001 UNUM contacted the plaintiff while she was working at Dr. Garabedian's office. During the course of the conversation, the plaintiff claimed that she was only a volunteer, was not being paid, and that she was only working two to four hours a time, despite the surveillance tape showing plaintiff working eight-hour days. . . .
This evidence was reviewed by UNUM's physicians and vocational consultants. The physician's review confirmed that plaintiff had the physical capacity to perform occupations requiring light physical demands. Further, the vocational consultant confirmed that plaintiff could return to her occupation as a registered nurse within the capacity outlined in the physician's review. UNUM then denied her appeal of the benefits termination on the grounds that her observed functional capacity did not support an impairment and that she was capable of performing her own occupation. In addition, plaintiff was capable of working at least part-time but chose not to.See Def. Reply Brief at 2.
There is no evidence in the administrative record to support the factual premise urged by Defendant UNUM that Plaintiff was observed working eight hours a day in the office of Dr. Garabedian. The videotapes relied upon by Defendants and their experts disclose only limited activity by Plaintiff on the days in question. Indeed the limited activity of Plaintiff was approximately twenty-four minutes on November 28 and eighteen minutes on November 30. The videotapes throw no light on whether Plaintiff worked during the rest of the time she was on Dr. Garabedian's premise or whether she merely rested or performed activities on her own pace and schedule. Thus, the videotapes do not support the assertion by Defendants that Plaintiff was observed working eight hours per day. Moreover, the termination process is flawed, where as here Defendant UNUM rushed to a decision without permitting Plaintiff an adequate opportunity to submit evidence of her continuing disability. Therefore, a factfinder may conclude that the decision reached by Defendants, based solely upon the unsupported opinions of Dr. Reeder and Richard Byard, was arbitrary and capricious.
This Court is not in a position to determine on the limited record before it whether Plaintiff is capable of performing the duties of any gainful occupation for which she is reasonably fitted by education, training, or experience. There are genuine issues of material fact as to whether Plaintiff is capable of working even on a part-time schedule and also whether Defendants acted arbitrarily and capriciously. Accordingly, Defendants are not entitled to summary judgment. An appropriate order has been filed of record.