Montour v. Hartford: Ninth Circuit Hacks Away at Discretionary Standard of Judicial Review
January, 2010
DRI ERISA ReportThe Ninth Circuit took another swipe this fall at the efficiencies and limited review traditionally afforded by the abuse of discretion standard for ERISA cases in the wake of Metropolitan Life Insurance Company v. Glenn, 128 S.Ct. 2343 (2008).
Even before Glenn, the Ninth Circuit had changed the way that cases were evaluated under an abuse of discretion standard in Abatie v. Alta Health & Life Insurance Company, 458 F.3d 955 (9th Cir. 2006).
In September 2009, the court went further than it did in Abatie, and further than the Supreme Court did in Glenn, suggesting a number of things that claims administrators (or insurers) with a structural conflict of interest should do in evaluating claims under ERISA-governed plans that will be reviewed under the abuse of discretion standard. Montour v. Hartford Life & Accident Ins. Co., 2009 WL 3856933 (9th Cir. Sept. 14, 2009) (amended Nov. 19, 2009).
Facts of the Case
The facts of the case were not unusual. The plaintiff, Robert Montour, was a long-time employee of Conexant Systems, Inc., and participated in his employer's group long-term disability insurance plan. Hartford Life and Accident Insurance Company insured the plan and acted as the claims administrator. The terms of the plan clearly granted Hartford the discretionary authority to interpret plan terms and to determine eligibility for benefits.
The plaintiff took a medical leave of absence after developing acute stress disorder. He applied for disability benefits, which Hartford initially paid. While he was receiving benefits, the plaintiff sought treatment for pain in his knee and lower back, and provided that information to Hartford. About two years after first paying benefits, Hartford hired two outside surveillance companies to observe the plaintiff's activities. Hartford also had an investigator interview the plaintiff at his home as part of its ongoing evaluation of his claim.
Hartford hired a consulting physician to review the plaintiff's medical records, the surveillance video and reports, and the personal interview report. The physician concluded, based on this review, that the plaintiff was capable of working full-time with modest restrictions, such as changing positions every thirty to forty-five minutes.
Hartford then had a vocational rehabilitation expert prepare an Employability Analysis Report, in which the expert concluded that the plaintiff was capable of working in a high-level managerial capacity in five different fields.
Based on these evaluations, Hartford terminated the plaintiff's benefits. He appealed, and included in his appeal a vocational appraisal report that concluded he was not capable of employment in any setting, and that also referred to a Social Security Administration determination that he was "totally disabled."
In evaluating the appeal, Hartford employed a second consulting physician to review the plaintiff's records, and hired a second vocational specialist to review the vocational appraisal report. Based on their conclusions, Hartford affirmed the decision to terminate the plaintiff's benefits.
The plaintiff sued. A federal district court held a bench trial on the administrative record, and concluded that while Hartford had a structural conflict of interest, it did not abuse its discretion in determining that the plaintiff had not provided evidence sufficient to show that he was entitled to benefits. The Ninth Circuit, to put it mildly, disagreed.
Standard of ReviewThe court first clarified how the abuse of discretion standard should be applied when courts review benefits denials by administrators with a structural conflict. It repeated statements from the Supreme Court in
Glenn that a structural conflict is one of many factors that a court should weigh in determining whether an administrator abused its discretion. It explained that a court should "adjust the level of skepticism with which it reviews a potentially biased plan administrator's explanation for its decision in accordance with the facts and circumstances of the case."
"If those facts and circumstances indicate the conflict may have tainted the entire administrative decisionmaking process," the Ninth Circuit said, "the court should review the administrator's stated bases for its decision with enhanced skepticism: this is functionally equivalent to assigning greater weight to the conflict of interest as a factor in the overall analysis of whether an abuse of discretion occurred." And so the court evaluated those facts and circumstances for this case.
May Insurer Present Evidence in Light Most Favorable to Itself?The court noted and highlighted several examples of what it found to be Hartford's "overemphasis" of evidence favorable to it. For example, the court found that in its letters to the plaintiff, Hartford "overstates and over-relies" on the surveillance of him. The court also found that Hartford's correspondence with the plaintiff's own physicians was "marred by this overstatement of the surveillance findings, as well as apparent advocacy for the position that Plaintiff was not disabled."
These, with other examples, led the court to conclude that "there is a common theme, both in Hartford's communications with Plaintiff and in the assessments of those professionals Hartford hired to evaluate Plaintiff's condition, of presenting evidence of capability in the best possible light, while failing to subject evidence of capability to the same skepticism and rigorous analysis applied to evidence of disability." This, the court concluded, showed that "Hartford's bias infiltrated the entire administrative decision-making process," so that the court would accord "significant weight" to Hartford's structural conflict.
Is there a possible lesson for conflicted claims administrators here? Must conflicted claims administrators, when corresponding with claimants, independent evaluators, and others, go out of their way to be completely neutral when describing evidence of a claimant's disability or lack of disability? Must conflicted claims administrators advocate for a finding that a claimant is disabled?
Must Insurers Present Extrinsic Evidence of Efforts to Assure Accurate Claims Assessment?
The court identified another factor that it weighed in determining whether Hartford abused its discretion: whether Hartford presented (to the district court, presumably) "extrinsic evidence of any effort on its part to assure accurate claims assessment, such as utilizing procedures to help ensure a neutral review process."
The court noted that this was not required, but went on to say that, after Glenn, Hartford was on notice that such evidence was potentially significant. This could mean that providing such evidence, though not strictly required, is now something that all conflicted claims administrators must do as a practical matter to survive an abuse of discretion review.
Just to make it more interesting, the court noted that the plaintiff also did not present such evidence, but subtly implied that the plaintiff should have or could have done so, and that such evidence would include "statistics regarding Hartford's rate of claims denials or how frequently it contracts with the file reviewers it employed in this case." Of course, one wonders how the plaintiff would obtain this information other than through the discovery process of the case.
From this section, is the lesson to conflicted claims administrators that they now must present evidence of their neutral review process? Even further, must they provide information about their review process if asked in discovery?
Must Conflicted Claims Administrators Obtain an IME?
The court next criticized Hartford's decision only to review the plaintiff's medical records, rather than subjecting him to an in-person medical evaluation. It noted that the disability plan did not require such an examination, but simply gave Hartford the right to request one. The court stated that the choice not to request an IME "raises questions about the thoroughness and accuracy of the benefits determination."
This appeared to be particularly important to the court, given that the plaintiff's primary complaint was pain, and that the claims administrator simply reviewed records of that pain, rather than obtaining an in-person examination to evaluate it. This part of the court's opinion raises the question of whether conflicted claims administrators must now request and conduct independent medical examinations.
Must Claims Administrators Obtain and Analyze The Entire Social Security Disability File?
Finally, and perhaps most troubling, the court evaluated what it described as Hartford's "failure to grapple with the SSA's contrary disability determination." The court focused on two aspects of the Social Security Administration's determination. First, it criticized Hartford's failure in its denial letters to the plaintiff to explain why its decision to deny benefits was different from the SSA's decision to award SSD benefits. It did not explain the differences between the standards that the SSA and Hartford used. And it did not explain the different definitions of "disability" that the SSA and Hartford used.
But second, and most troubling, was the court's discussion of the difference between the SSA's ultimate determination (set forth in the its award letters) and the rest of the plaintiff's Social Security file. The court explained that without other documents, specifically the SSA administrative law judge's opinion or the SSA administrative record on which the decision was based, it would be difficult for Hartford to compare its decision to the SSA decision and explain the difference to the plaintiff. The court went on to say that it was Hartford's obligation to inform the plaintiff that Hartford would need the administrative law judge's opinion and the SSA's administrative record.
What does this mean for conflicted claims administrators? Is there now a requirement that every time a claimant receives a determination from the SSA on a claim for Social Security disability benefits, the claims administrator must ask the claimant to provide the SSA's entire administrative record?
Must the claims administrator then go even further, and evaluate everything that the SSA reviewed, compare its decision with that of the SSA, and explain all of the differences between an SSA award and a denial under an entirely separate disability plan or policy? This decision certainly seems to make that a requirement.
Conclusion: Conflicted Claims Administrators Beware
Conflicted claims administrators certainly have even more to worry about in the Ninth Circuit after
Montour.
There may now be a requirement that in all communications with a claimant they present all facts and evidence, regardless of whether they support an approval of benefits or a denial. Administrators may now have to present extrinsic evidence of their neutral claims-reviewing processes, and those processes might be open to greater discovery than has traditionally been permitted (or relevant). They may now have to request or conduct independent medical examinations. And they may now have to obtain, review, and explain all Social Security decisions that conflict with their decision. In short, the Montour decision places significantly more burdens on conflicted claims administrators than even prior cases did.
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