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Kalp v. Life Insurance Company of North America

February 4, 2009


The opinion of the court was delivered by: Judge Nora Barry Fischer



Plaintiff Barbara A. Kalp ("Plaintiff" or "Kalp") brought this ERISA action against Defendant Life Insurance Company of North America ("Defendant" or "LINA") alleging that she was wrongfully denied benefits under a long term disability plan (the "Plan") underwritten and administered by Defendant. (Docket No. 1). Presently before the Court is Plaintiff's Motion to Compel filed on January 16, 2009. (Docket No. 19).

Plaintiff seeks an order compelling Defendant to "provide full and complete answers to Plaintiff's First Set of Interrogatories and Requests for Production of Documents." (Docket No. 20). In her interrogatories and requests for production, Plaintiff requests discovery of certain information beyond the administrative claim file, which has been produced in full by Defendant, arguing that she is entitled to such information because Defendant failed to render a decision on her final appeal and that the evidence is relevant to a determination of whether a conflict of interest exists due to Defendant's dual role in both funding and administering benefits under the Plan. (Id. at 1-4). Additionally, Plaintiff seeks more specific responses to certain of Defendant's answers to her interrogatories and identities of "individuals who provided information" to counsel in support of Defendant's answers. (Id. at 4-5). Defendant filed its response on January 27, 2009. (Docket No. 21). Defendant contends that Plaintiff's motion should be denied in all respects, arguing that discovery beyond the administrative claim file is unwarranted and that the answers submitted to Plaintiff are sufficient. (Docket No. 22).


1. Standard of Review in ERISA Denial of Benefits Action

The parties first dispute the applicable standard of review to be applied by this Court in the resolution of this ERISA action. "ERISA does not specify the standard of review that a trial court should apply in an action for wrongful denial of benefits." Post v. Harford Ins. Co., 501 F.3d 154, 160 (3d Cir. 2007). However, the Supreme Court has held that "a denial of benefits challenge 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." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Metropolitan Life Insurance v. Glenn, --- U.S. ---, 128 S.Ct. 2343, 2348 (2008). Thus, when discretionary authority is given to an administrator of a plan, a deferential standard of arbitrary and capriciousness is applied.

It is undisputed that the plan in this case grants Defendant discretionary authority which would typically warrant the deferential standard of review to be applied. However, Plaintiff argues that she is entitled to a heightened standard of review on two separate theories. (Docket No. 20). First, she contends that she is entitled to de novo review because Defendant did not render a decision on her final appeal of the denial of her benefits. Second, she asserts that a heightened arbitrary and capricious standard of review should be applied due to an alleged conflict of interest of Defendant. In response, Defendant maintains that the arbitrary and capricious standard should apply as the circumstances of this case do not warrant the application of a higher standard, citing to the discussion regarding conflicts of interest in the Supreme Court's decision in Glenn. (Docket No. 22). With respect to the instant discovery motion, Plaintiff contends that she is entitled to discover the information and documents that she seeks in her motion even if an arbitrary and capricious standard is applied.

a. Effect of a Failure to Issue a Decision on Standard of Review

In Gritzer v. CBS, Inc., the United States Court of Appeals for the Third Circuit held that "[w]here a trustee fails to act or to exercise his or her discretion, de novo review is appropriate because the trustee has forfeited the privilege to apply his or her discretion; it is the trustee's analysis, not his or her right to use discretion or a mere arbitrary denial, to which a court should defer." Gritzer v. CBS, Inc., 275 F.3d 291, 296 (3d Cir. 2002). District courts have ordered limited discovery in order to determine if de novo review under Gritzer is applicable. See Mazaheri v. Prudential Inc. Co., Civ. A. No. 06-309, 2007 U.S.Dist.LEXIS 11148, at *2-3 (E.D.Pa. Feb. 15, 2007). However, district courts have interpreted Gritzer and its reliance on the Court of Appeals' decision Moench v. Robertson, 62 F.3d 553, 567 (3d Cir. 1995) broadly, finding that de novo review would be applicable only if the benefit plan at issue was never interpreted by the administrator. See Olay v. Motion Control Indus., Civ. A. No. 05-122, 2007 U.S. Dist. LEXIS 36913, at *36-40 (W.D. Pa. May 17, 2007).

In the instant matter, Plaintiff's position is that as Defendant has not rendered a decision on her final appeal, that she is entitled to a de novo review of the record in this case. Defendant has not directly responded to Plaintiff's argument that it has failed to render a decision on her final appeal. Defendant instead contends that a de novo review does not necessarily require the Court to consider evidence outside the administrative record, relying on Luby v. Teamsters Health, Welfare & Pension Trust Funds, 944 F.2d 1176, 1185 (3d Cir. 1991). Therefore, the issue of whether de novo review is the appropriate standard in this action remains reasonably in dispute.

b. Effect of a Conflict of Interest on Standard of Review

In Post v. Harford Ins. Co., the United States Court of Appeals for the Third Circuit adopted a sliding scale approach in addressing an alleged conflict of interest raised in the context of a plaintiff's ERISA denial of benefits claim. Post, 501 F.3d at 161. The Court of Appeals explained that "[t]his approach grants the administrator deference in accordance with the level of conflict. Thus, if the level of conflict is slight, most of the administrator's deference remains intact, and the court applies something similar to traditional arbitrary and capricious review; conversely, if the level of conflict is high, then most of its discretion is stripped away." Id. (citing Doe v. Group Hospitalization & Med. Servs., 3 F.3d 80, 87 (4th Cir.1993)). As the Court of Appeals discussed in Post, [t]he premise of the sliding scale approach is that courts should examine benefit denials on their facts to determine whether the administrator abused its discretion. To apply the approach, courts first consider the evidence that the administrator acted from an improper motive and heighten their level of scrutiny appropriately. Second, they review the merits of the decision and the evidence of impropriety together to determine whether the administrator properly exercised the discretion accorded it. If so, its decision stands; if not, the court steps into the shoes of the administrator and rules on the merits itself. At its best, the sliding scale reduces to making a common-sense decision based on the evidence whether the administrator appropriately exercised its discretion. This theme, rather than getting bogged down in trying to find the perfect point on the sliding scale, should be district courts' touchstone.

Id. at 161-62 (citing Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 391-394 (3d Cir. 2000).

Two types of potential conflicts can be alleged by a plaintiff, a structural conflict or a procedural conflict. "The structural inquiry focuses on the financial incentives created by the way the plan is organized, whereas the procedural inquiry focuses on how the administrator treated the particular claimant." Post, 501 F.3d at 162. A structural conflict arises when an entity "both determines whether an employee is eligible for benefits" and also pays benefits under the plan. Glenn, 128 S.Ct. at 2346. A procedural conflict involves the examination of "the process by which the administrator came to its decision to determine whether there is evidence of bias." Post, 501 F.3d at 165 (citing Pinto, 214 F.3d at 393). The Court of Appeals further explicated that:

[t]his sort of evidence can come in many forms, and a review of the caselaw reveals that we have identified numerous procedural irregularities that can raise suspicion. The following is an illustrative, not exhaustive, list of the irregularities identified: (1) reversal of position without additional medical evidence; (2) self-serving selectivity in the use and interpretation of physicians' reports; (3) disregarding staff recommendations ...

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