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Fanelli v. Continental Casualty Co.

September 13, 2006

CLAUDE FANELLI, M.D., PLAINTIFF,
v.
CONTINENTAL CASUALTY COMPANY, DEFENDANT.



The opinion of the court was delivered by: Judge Sylvia H. Rambo

MEMORANDUM

Before the court are Plaintiff Claude Fanelli's Motion for Summary Judgment (Doc. 17), Defendant Continental Casualty Company's (hereinafter "Continental") Motion for Summary Judgment (Doc. 20), and Defendant's Motion to Strike Supplemental Exhibit filed by Plaintiff in Support of His Motion for Summary Judgment (Doc. 34). The parties have briefed the issues and the matters are ripe for disposition. For the following reasons, the court will deny Plaintiff's summary judgment motion and grant in part and deny in part Defendant's summary judgment motion. The court will grant Defendant's motion to strike.

I. Background

The issue before the court arises out of a dispute over what long term disability benefits Plaintiff is entitled to in connection with an insurance policy issued by Defendant. The following facts are undisputed except where noted.

In 1999, Plaintiff was employed as a full-time interventional cardiologist by Moffitt Heart & Vascular (formerly Moffitt Pease & Lim Associates) in Wormleysburg, Pennsylvania. In connection with his employment, Plaintiff was a participant in a group long term disability income protection plan (hereinafter "the Plan") that was insured by Defendant Continental. The Plan provides a maximum monthly benefit of $10,000, subject to cost of living adjustments and benefit deductions as provided for in the Plan.

During Plaintiff's employment, in April 1999, Plaintiff was diagnosed with cervical spondylosis with myelopathy and radiculopathy, tremor, and muscle weakness. The initial diagnosis was subsequently changed to Parkinson's Disease. As a result, Plaintiff was unable to perform all of the functions that had previously been standard aspects of his job, and assumed different, more limited duties, effective June 29, 2000. Plaintiff became a general cardiologist working for an hourly rate on a limited basis, including office visits, consultations, and test interpretations. Plaintiff has been disabled as defined by the terms of the Plan since June 29, 2000, and has been entitled to long term disability benefits since December 26, 2000.

Plaintiff began receiving the long term disability benefits from Defendant on December 26, 2000. On March 11, 2005, Defendant advised Plaintiff that it had overpaid his benefits since January 1, 2002. Defendant subsequently withheld Plaintiff's benefit payments in order to recoup the amount it had overpaid. Defendant maintains that as of April 2006 it had fully recouped the overpayment and began making payments to Plaintiff once again, in May 2006.

On January 19, 2006, Plaintiff filed a complaint, alleging violations of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), 29 U.S.C. §§ 1001 et seq. Plaintiff seeks benefits under an employee welfare benefit plan, injunctive relief,*fn1 and attorneys' fees and costs. On June 1, 2006 both parties filed motions for summary judgment, which are presently before the court. In addition, on June 19, 2006, Defendant filed a motion to strike a supplemental exhibit filed by Plaintiff in support of his motion for summary judgment, on the grounds that the exhibit was not contained in the administrative record previously reviewed by Continental.

II. Legal Standard -- Summary Judgment

Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that 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." Fed. R. Civ. P. 56(c); accord Saldana v. Kmart Corp., 260 F.3d 228, 231-32 (3d Cir. 2001). A factual dispute is "material" if it might affect the outcome of the suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is "genuine" only if there is a sufficient evidentiary basis that would allow a reasonable fact-finder to return a verdict for the non-moving party. Id. at 249. The court must resolve all doubts as to the existence of a genuine issue of material fact in favor of the non-moving party. Saldana, 260 F.3d at 232; see also Reeder v. Sybron Transition Corp., 142 F.R.D. 607, 609 (M.D. Pa. 1992).

Once the moving party has shown that there is an absence of evidence to support the claims of the non-moving party, the non-moving party may not simply sit back and rest on the allegations in its complaint. See Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). Instead, it must "go beyond the pleadings and by [its] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, and designate specific facts showing that there is a genuine issue for trial." Id. (internal quotations omitted); see also Saldana, 260 F.3d at 232 (citations omitted). Summary judgment should be granted where a party "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 at trial." Celotex, 477 U.S. at 322-23. " 'Such affirmative evidence -- regardless of whether it is direct or circumstantial -- must amount to more than a scintilla, but may amount to less (in the evaluation of the court) than a preponderance.' " Saldana, 260 F.3d at 232 (quoting Williams v. Borough of West Chester, 891 F.2d 458, 460-61 (3d Cir. 1989)).

The standards governing the court's consideration of Federal Rule 56(c) cross-motions are the same as those governing motions for summary judgment, although the court must construe the motions independently, viewing the evidence presented by each moving party in the light most favorable to the non-movant. Raymond Proffitt Found. v. U.S. Envtl. Prot. Agency, 930 F. Supp. 1088, 1096 (E.D. Pa. 1996).

III. Discussion

A. Defendant's Motion to Strike

As a threshold matter, the court will grant Defendant's motion to strike the supplemental exhibit (Pl.'s Ex. O) filed by Plaintiff, because the authority in this circuit clearly establishes that the court's review is limited to the administrative record. As the parties acknowledge, the arbitrary and capricious standard of review applies to the court's review of a denial of ERISA benefits. Kosiba v. Merck & Co., 384 F.3d 58, 67 n.5 (3d Cir. 2004). Under that standard, the court reviews the "evidence that was before the administrator when he made the decision being reviewed" -- the administrative record. Id.; Mitchell v. Eastman Kodak Co., 113 F.3d 433, 440 (3d Cir. 1997). The court may, as Plaintiff points out, consider evidence outside the record regarding potential biases and conflicts of interest when determining whether the arbitrary and capricious or a higher standard is appropriate.

Kosiba, 384 F.3d at 67 n.5. However, when reviewing the plan administrator's decision itself, under either the regular or a heightened arbitrary and capricious standard, the court's review is confined to the administrative record, which may not be supplemented during litigation. Id. Although the court may consider the supplemental exhibit when identifying the appropriate standard of review, the court finds that it does not contribute to the court's analysis of the factors relevant to that inquiry. Accordingly, the court will grant Defendant's motion to strike Plaintiff's supplemental exhibit and will not consider Plaintiff's Exhibit O when reviewing the plan administrator's benefits determination.

B. Standard of Review

Because Plaintiff challenges a denial of benefits under ERISA, 29 U.S.C. § 1132(a), the court must first identify the applicable standard of review. Claims arising from a denial of benefits under ERISA, like the instant one, are 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." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). When the Plan affords such discretionary authority, the arbitrary and capricious standard of review applies and the court may overturn a benefits denial "only if it is 'without reason, unsupported by substantial evidence or erroneous as a matter of law.' " Abnathya v. Hoffman-La Roche, Inc., 2 F.3d 40, 45 (3d Cir. 1993) (quoting Adamo v. Anchor Hocking Corp., 720 F. Supp. 491, 500 (W.D. Pa. 1989)).

However, "when an insurance company both funds and administers benefits, it is generally acting under a conflict that warrants a heightened form of the arbitrary and capricious standard of review." Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 378 (3d Cir. 2000). The parties agree that the heightened standard of review applies here because Continental insures the Plan and has discretion to determine eligibility for benefits. The parties differ though, in their assessments of how heightened that standard should be.

The heightened standard uses a fact-specific, sliding scale approach that "intensif[ies] the degree of scrutiny to match the degree of the conflict." Id. at 379, 392. It involves deference, but not absolute deference; thus, the court "look[s] not only at the result -- whether it is supported by reason -- but at the process by which the result was achieved." Id. at 393. Pinto identified a non-exclusive list of "potentially relevant" factors to consider, including the sophistication of the parties, the information accessible to the parties, the exact financial arrangement between the insurer and the company, and the current status of the fiduciary (e.g. whether it is stable or in a state of dissolution). Pinto, 214 F.3d at 392 (emphasis added); Kosiba v. Merck & Co., 384 F.3d 58, 64 (3d Cir. 2004). Accordingly, a conflict of interest is simply one factor within the standard, Pinto, 214 F.3d at 393, but not the only relevant consideration, Kosiba, 382 F.3d at 65.

In addition, the Pinto court identified procedural anomalies that contributed to its finding that a heightened arbitrary and capricious standard was appropriate, id. at 394, which has also become a factor considered by reviewing courts. See, e.g., Kosiba, 384 F.3d at 66 (considering "demonstrated procedural irregularity, bias, or unfairness in the review of the claimant's application for benefits"); Stratton v. E.I. Dupont De Nemours & Co., 363 F.3d 250, 256 (3d Cir. 2004) (acknowledging failure to ...


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