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Moran v. Life Insurance Company of North America

United States District Court, M.D. Pennsylvania

August 27, 2014

KELLEY A. MORAN, Plaintiff,
v.
LIFE INSURANCE COMPANY OF NORTH AMERICA and MISERICORDIA. UNIVERSITY, Defendants.

MEMORANDUM

A. RICHARD CAPUTO, District Judge.

In Plaintiff's Motion for Limited Discovery (Doc. 32), I am called upon to decide whether Plaintiff is entitled to discovery beyond the administrative record. Because the denial of benefits at issue in this case is subject to de novo review, Plaintiff's motion will be granted and she will be permitted to engage in discovery beyond the administrative record.

Background

Plaintiff, a tenured professor at Misericordia University ("Misericordia"), applied for this death benefit for her husband, Stephen Niemas ("Mr. Niemas"). The application disclosed that Mr. Niemas had "Hodgkins" which was "under care" at the time of the application. While there was never any notice of approval or disapproval for sixteen (16) months, premiums covering Mr. Niemas were deducted from Plaintiff's pay. Mr. Niemas died, and when Plaintiff sought the death benefit proceeds, the claim was denied by Life Insurance Company of North America ("LINA"), the provider and administrator of the Plan pursuant to which Misericordia provided life insurance benefits to eligible employees and their spouses. In denying the claim, LINA asserted that Mr. Niemas' application was never forwarded to it by Misericordia for processing. Rather, LINA maintains that the first time it received the application was at the time Misericordia forwarded it with proof of loss after Mr. Niemas' death. As such, the application never went through the medical underwriting process, and Mr. Niemas never provided evidence of insurability. Misericordia, though, claims that the application was faxed to LINA. However, Misericordia failed to complete its portion of the application.

On March 15, 2013, Plaintiff filed the Amended Complaint in this action against LINA and Misericordia. Plaintiff asserts a claim against LINA for the failure, denial, and refusal to pay death benefits under an ERISA governed employee benefit plan. ( Am. Compl., ¶¶ 2, 4, 29-35.) Plaintiff also asserts a claim against Misericordia for "breach of contractual and fiduciary duties to properly enroll Plaintiff's deceased husband in the employer life insurance plan provided to [her]." ( Id. at ¶¶ 3, 36-39.)

Now, Plaintiff seeks limited discovery from LINA and Misericordia. With respect to LINA, Plaintiff seeks: (1) to depose on oral examination Jared Cox ("Mr. Cox"), a LINA Life Claims Specialist, and such other corporate designee(s) with knowledge of the policies and procedures regarding the administration and/or processing of applications for voluntary life insurance benefits originating from Misericordia; and (2) to depose a corporate designee with knowledge of the method and procedure by which the application "as it related to [Plaintiff's] inclusion in the group occurred and if different from the process regarding Niemas, said designee shall speak to the policies or reasons for the disparate treatment." (Doc. 32, Proposed Order.) As to Misericordia, Plaintiff requests: (1) to depose on oral examination Cara Humphreys ("Ms. Humphreys"), Misericordia's Benefits Manager, or such other corporate designee(s) with knowledge as to the policies and procedures regarding the preparation and submission of applications for employee benefits at Misericordia; and (2) production of all documents relating to fax transmissions sent from Misericordia to LINA during June 2008. ( Id. ) LINA and Misericordia both oppose Plaintiff's request for discovery beyond the administrative record.

Discussion

Pursuant to the Employee Retirement Income Security Act ("ERISA"), a person denied benefits under an employee benefit plan may challenge that denial in federal court. See 29 U.S.C. § 1132(a)(1)(B). According to the Supreme Court, "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." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). On de novo review, "the role of the court is to determine whether the administrator... made a correct decision.'" Viera v. Life Ins. Co. of North America, 642 F.3d 407, 413 (3d Cir. 2011) (quoting Hoover v. Provident Life & Accident Ins. Co., 290 F.3d 801, 808-09 (6th Cir. 2002)). Conversely, where the challenged plan grants discretionary authority to the plan administrator, the applicable standard of review is "arbitrary and capricious." Id. [1] When the arbitrary and capricious standard applies, a court may overturn an administrator's decision only when it is "without reason, unsupported by substantial evidence or erroneous as a matter of law." Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011) (quoting Abnathya v. Hoffmann-La Roche, Inc., 2 F.3d 40, 45 (3d Cir. 1993)). As a result, although the scope of discovery under the Federal Rules of Civil Procedure is "any nonprivileged matter that is relevant to any party's claim or defense..." Fed.R.Civ.P. 26(b)(1), "[t]he general rule in ERISA benefit determination challenges is that the court is limited to reviewing the record available to the plan administrator at the time the benefits determination was made." Charles v. UPS Nat'l Long Term Disability Plan, No. 12-6223, 2013 WL 6080163, at *1 (E.D. Pa. Nov. 19, 2013) (citations omitted).

Here, LINA asserts that "discovery is improper regardless of the standard of review" applied in this case. (Doc. 34, 3-8.) Additionally, LINA, as well as Misericordia, maintain that the denial of benefits in this action is subject to arbitrary and capricious review.

LINA's contention notwithstanding, the standard of review applied in ERISA denial of benefits cases impacts the scope of permissible discovery. As expressed recently by the United States District Court for the Western District of Pennsylvania:

The standard of review will materially impact the scope of information that may be considered by the Court. In an abuse of discretion review, the Court is generally limited to the administrative record. By contrast, in a de novo review a Court has discretion to consider supplemental evidence, even if it was not presented to the administrator.

Atkins v. UPMC Healthcare Benefits Trust, No. 13-520, 2013 WL 6587170, at *2 (W.D. Pa. Dec. 16, 2013) (citations omitted); see also Mullica v. Minnesota Life Ins. Co., No. 11-4034, 2013 WL 5429295, at *1 (E.D. Pa. Sept. 27, 2013) ("The scope of discovery in an ERISA case necessarily turns on the applicable standard of review employed by the courts."). When the de novo standard of review applies, the Third Circuit has stated that a court reviewing a benefits decision can consider "any supplemental evidence" submitted by the parties. Viera, 642 F.3d at 418; see also Palma v. Harleysville Life Ins. Co., No. 12-2337, 2013 WL 6840512, at *6 (D.N.J. Dec. 23, 2013); Urgon v. Lincoln Nat'l Life Ins. Co., No. 13-4731, 2013 WL 6054809, at *3 (D.N.J. Nov. 15, 2013); Laslavic v. Principal Life Ins. Co., No. 11-684, 2013 WL 254450, at *9 (W.D. Pa. Jan. 23, 2013) ("a court reviewing a benefits decision de novo has discretion to consider any supplemental evidence' presented by the parties.").

Conversely, when a benefits decision is reviewed for abuse of discretion, courts "review various procedural factors underlying the administrator's decision-making process, as well as structural concerns regarding how the particular ERISA plan was funded, to determine if the conclusion was arbitrary and capricious." Miller v. American Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011) (citation and alteration omitted). As such, "[t]he general rule is that a court's review is limited to the administrative record, and discovery is correspondingly limited." Cipriani v. Liberty Life Assurance Co., No. 12-1335, 2014 WL 2115121, at *2 (M.D. Pa. May 21, 2014) (citing Kosiba v. Merck & Co., 384 F.3d 58, 67 n.5 (3d Cir. 2004)). Nevertheless, "[a]n exception to that general rule is that a court may consider evidence of potential biases and conflicts of interest that is not found in the administrator's record.'" Cipriani, 2014 WL 2115121, at *2 (quoting Kosiba, 384 F.3d at 67 n.5). Grounds of potential bias include circumstances of structural or procedural conflicts. See id. "[S]tructural conflicts' relate to financial incentives inherent in a plan's design, such as where the same entity both funds and administers a benefits plan." Sivalingam v. Unum Provident Corp., 735 F.Supp.2d 189, 195 (E.D. Pa. 2010) (citing Post v. Hartford Ins. Co., 501 F.3d 154, 162 (3d Cir. 2007)); see also Miller, 632 F.3d at 845 ("the structural inquiry focuses on the financial incentives created by the way the plan is organized."). In comparison, the procedural inquiry "focuses on how the administrator treated the particular claimant" in order to determine "whether, in this claimant's case, the administrator has given the court reason to doubt its fiduciary neutrality." Miller, 632 F.3d at 845.

Because the propriety of Plaintiff's discovery requests depends upon the standard of review to be applied, resolution of Plaintiff's motion requires consideration of whether the Plan grants LINA "discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone, 489 U.S. at 115, 109 S.Ct. 948. "Whether a plan administrator's exercise of power is mandatory or discretionary depends upon the terms of the plan.'" Viera, 642 F.3d at 418 (quoting Luby v. Teamsters Health, Welfare, & Pension Trust Funds, 944 F.2d 1176, 1180 (3d Cir. 1991)). A grant of discretionary power can be express or implied and does not depend on "magic words." Id. But, an ambiguous plan is to be construed in favor of the insured. Id. "The plan ...


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