the arbitrary and capricious review standard. The Third Circuit
has recognized that discretionary authority may be implied in a
plan's terms even if not granted expressly. See Luby, 944 F.2d
The Third Circuit in Pinto found discretionary authority
conveyed in the exact "satisfactory proof" language used in the
Policy. Considering a provision requiring submission of
satisfactory proof of total disability, the Third Circuit
concluded: "It is undisputed that Reliance Standard had
discretion to interpret the plan." Pinto, 214 F.3d at
379.*fn20 The identical language in the Policy before this
court, therefore, invests Reliance with discretion over benefit
While Reliance has discretion, if its judgment is compromised
by conflicts of interest, the highly deferential standard of
arbitrary and capricious review must be adapted. Conflicts must
be factored into the deference shown to the administrator's
determination. In this case, Woodward and Lothrop paid Reliance
to fund, interpret, and administer its LTD plan. In Pinto, the
Third Circuit concluded that such an arrangement "generally
presents a conflict and thus invites a heightened standard of
review." Pinto, 214 F.3d at 383. Simply by the terms of its
arrangement with Woodward and Lothrop, Reliance has a potential
conflict of interest.
In determining the influence of the potential conflict on the
decision to deny Friess LTD benefits, I must consider the process
by which Reliance reached that decision. Pinto does not impose
on Reliance a duty to conduct a good faith, reasonable
investigation; however, it does invite the conclusion that a
decision based on inadequate information might have been
arbitrary and capricious. Procedural anomalies indicating a
biased review process help the court determine how much to lessen
its deference to the administrator's decision.
Overall, it seems that Reliance may have conducted an
unreasonably lax investigation into Friess' claim. For example,
the record indicates that its effort to reach Dr. Peff, the first
doctor to treat Friess, amounted to a single letter containing a
major error. While Reliance made it clear to Friess that she was
responsible for submitting additional medical information not
already supplied, it may have been reasonable to think that
Reliance had undertaken to contact Dr. Peff on its own. As Dr.
Peff did not respond to the erroneous letter, Reliance may have
lacked adequate medical information on the crucial period of time
immediately following Friess's May 1994 injury.
In addition, Reliance did not undertake an independent medical
review of Friess' condition. While Reliance is not required to
order an independent examination, the failure to examine may
indicate an inattentive process. Also, Reliance did not credit
the Social Security Administration's finding that Friess was
disabled.*fn21 The Court
in Pinto actually observed that Reliance, also a party to the
Pinto case, "places significant trust in the SSA process."
Pinto, 214 F.3d at 393. Finally, Reliance may have used
selectively the statement made by Dr. Beight, Friess' attending
physician. Reliance concludes that Dr. Beight has certified
Friess for sedentary work, yet fails to credit both his inability
to say when she might possibly return to work, and his conclusion
that Friess probably has reached maximum recovery. Procedural
anomalies such as these, Pinto suggests, could push a court to
the "far end of the arbitrary and capricious `range,'" causing
the court to examine the administrative record with great
skepticism. Pinto, 214 F.3d at 393.
Summary judgment must be denied if a reasonable factfinder
could conclude that Reliance's decision was the result of
self-dealing instead of the result of a trustee carefully
exercising its fiduciary duty to Mary Friess. See Pinto, 214
F.3d at 394. Here, there appear to be genuine issues of material
fact as to whether Reliance may have acted arbitrarily and
capriciously under the Pinto standard in making its
determination on the basis of an inadequate record.
On the basis of the evidence already submitted by parties, it
might be possible to conclude that Reliance's conflict of
interest is sufficiently potent to warrant a penetrating review
of the decision to deny Friess benefits. However, I defer my
conclusion to allow the parties to gather evidence on the
conflict of interest and the ways in which the conflict ought to
shape the heightened arbitrary and capricious standard of review
described in Pinto v. Reliance Standard Life Insurance Co.,
214 F.3d 377 (3d Cir. 2000).
Defendant's Motion for Summary Judgment is therefore denied
without prejudice. An appropriate order follows.
AND NOW, this Day of November, 2000, it is ORDERED that
Defendant's Motion for Summary Judgment (Docket Entry No. 9) is
DENIED without prejudice.
It is FURTHER ORDERED that the parties are authorized to take
discovery until January 19, 2001 regarding the potential conflict
of interest according to Pinto v. Reliance Standard Life
Insurance Co., 214 F.3d 377 (3d Cir. 2000). The parties shall
file dispositive motions no later than February 2, 2001. The
parties shall file responses to dispositive motions no later than
February 16, 2001.