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Sheryl Heim v. Life Insurance Company of

April 26, 2012


The opinion of the court was delivered by: Ditter, J.


Purusant to ERISA, Sheryl Heim prevailed over the Life Insurance Company of North America ("LINA") on her claim for payment of long-term disability benefits. She now seeks attorneys' fees. The award of fees is at my discretion and involves my balancing and weighing the following factors: (1) LINA's culpability or bad faith; (2) LINA's ability to satisfy an award of attorneys' fees; (3) the deterrent effect of an award of attorneys' fees; (4) the benefit conferred on members of the pension plan as a whole; and (5) the relative merits of the parties' position. See Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir. 1983). I consider each factor in turn.

1. LINA's Culpability or Bad Faith

"A losing party may be culpable . . . without having acted with an ulterior motive. In a civil context, culpable conduct is commonly understood to mean conduct that is 'blameable; censurable; . . . at fault; involving the breach of a legal duty or the commission of a fault. . . . Such conduct normally involves something more than simple negligence. . . . [On the other hand, it] implies that the act or conduct spoken of is reprehensible or wrong, but not that it involves malice or a guilty purpose.'" McPherson v. Employees' Pension Plan of Am. Re-Insurance Co., 33 F.3d 253, 256-257 (3d Cir. 1994) (alterations in original)(quoting Black's Law Dictionary (6th ed. 1990)). Thus, "culpability is less than bad faith and more than mere negligence." Addis v. Ltd. Long-Term Disability Program, No. 05-357, 2006 U.S. Dist. LEXIS 57856, *3 (E.D. Pa. Aug. 3, 2006).

LINA argues that an award of fees is not appropriate here because the court did not find bad faith and because it "appears" LINA was at most negligent, which is insufficient to support fees. Negligence is not the only alternative to bad faith -- indifference to repeated error may trigger a fee award. As Heim points out, I found that LINA improperly failed to consider Heim's treating physician's opinion that she was disabled; improperly required objective evidence when the plan did not set forth such a requirement; failed to provide an IME when it was requested and then relied on non-examining doctors even where plaintiff's disabilities were not subject to objective testing; and failed to review the full range of Heim's job requirements or relate those requirements to her diagnoses.

I find that LINA's conduct was culpable and weighs in favor of an award of fees. See e.g., DuPerry v. Life Ins. Co. of N. Am., 632 F.3d 860, 877 (4th Cir. 2011) (upholding award of attorneys' fees where district court found LINA demonstrated culpability "in its dismissal of [plaintiff's] subjective complaints without meaningful inquiry"); Haisley v. Sedgwick Claims Mgmt. Servs., No. 08-1463, 2011 U.S. Dist. LEXIS 111826, *14-15 (W.D. Pa. Sept. 29, 2011) (finding culpability in defendant's conduct where it denied plaintiff's claim based solely on reports of non-examining medical consultants, failed to request an IME, and ignored award of social security disability benefits); Brown v. Cont'l Cas. Co., No. 99-6124, 2005 U.S. Dist. LEXIS 16681, *4-5 (E.D. Pa. Aug. 11, 2005) (finding defendant was culpable where it insisted plaintiff was not disabled "because she had not provided 'medical evidence' of her disability -- apparently meaning objective test results or concrete physical findings -- despite the fact that fibromyalgia, by definition, may offer no such evidence [and] the plan did not require it").

2. LINA's Ability to Satisfy an Award

LINA does not dispute its ability to pay a fee award and courts in this district have found LINA is capable of paying such an award. See e.g., Matson v. AXA Equitable Life Ins. Co., No. 10-5361, 2011 U.S. Dist. LEXIS 105477,*10 (E.D. Pa. Sept. 15, 2011).

3. Deterrent Effect

Heim argues that an award of fees will encourage attorneys to represent clients who are wrongfully denied benefits and that fees should be granted so that Heim's award of benefits is not reduced by the cost of having to retain counsel to obtain her disability payment. See e.g., Beauvais v. Citizens Fin. Group, Inc., 418 F. Supp. 2d 22, 33 (D.R.I. 2006) (finding an award of attorney's fees was necessary to make plaintiff whole because it "would be a pyrrhic victory, indeed, if [plaintiff] were awarded the benefits that were improperly denied but was required to pay, from the benefits, the attorney's fees incurred in pursuing the appeal").

LINA argues that an award of fees in this case will not have a deterrent effect because "it believed it made the right decision." It argues that an award of fees "cannot change LINA's contractual and fiduciary obligations to act in a way it believes is appropriate and fair." Persistence that one's cause is appropriate and fair, however noble a virtue, crumbles into culpability when shown time after time to be inappropriate and unfair.

Here, LINA did not act appropriately and other courts have awarded fees in the hope of deterring LINA, and other insurance companies, from ignoring subjective complaints and insisting on objective medical evidence where the policy did not require it. See e.g., DuPerry, 632 F.3d at 877 (upholding award of attorneys' fees against LINA and finding "awarding attorneys' fees may produce a deterrent effect by encouraging plan administrators to inquire more meaningfully into disability claims that rely on subjective complaints of pain"); Glunt, 2012 U.S. Dist. LEXIS 35710 at *8-10 (awarding fees where LINA ignored plaintiff's doctors' assessments of her restrictions and failed to consider the tasks of her job when determining if she could perform the duties of her occupation because it may "deter plan administrators from wrongfully denying benefits and selectively considering evidence in the medical record"); Music v. Prudential Ins. Co. of Am., 05-cv-1223, 2007 U.S. Dist. LEXIS 77771, *8-9 (M.D. Pa. Oct. 19, 2007) (finding deterrent effect where "Prudential gave unreasonable weight to the opinions of physicians who did not physically examine [plaintiff], and it arbitrarily limited claims to disorders that involved only 'objectively verified symptoms'" because a "fee award would deter Prudential from such conduct in the future"). But see, Matson v. AXA Equitable Life Ins. Co., No. 10-5361, 2011 U.S. Dist. LEXIS 105477, *21, 29-30 (E.D. Pa. Sept. 15, 2011) (declining to award fees even though the court found LINA was wrong where it "merely sought to poke holes in the evidence [plaintiff] introduced without marshaling any of its own" because LINA was not required to conduct an IME or "to accept without investigation the disability determination of a claimant's doctor").

LINA's continued improper denials of legitimate claims in the face of numerous adverse rulings and awards of attorney's fees does not justify a finding that fees cannot have a deterrent effect. Indeed, at some point sticking to your position no matter what the law says becomes culpable conduct.

LINA also argues there is no potential for deterrence because since "the benefits at issue here are modest [$29,668.32], it would have been much simpler for LINA to simply pay the benefits rather than fight and pay counsel to litigate the claim." This argument ignores, however, the economic benefit to LINA when legitimate claims are denied and the participants do not appeal the denial. It also ignores the cost of attorney's fees which are otherwise borne by the plaintiff who was forced to hire counsel to receive the benefits to which she ...

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