The Ninth Circuit Court of Appeals vacated the Central District (California) Court's ruling that an ERISA claims administrator and insurer properly terminated a beneficiary's long-term disability ("LTD") benefits. The Court of Appeals ordered remand to review the claim administrator's decision for a potential conflict of interest under Abatie v. Alta Health & Life Ins. Co., 485 F.3d 955 (9th Cir. 2006) (en banc). The Court of Appeals instructed the district court that, on remand, the parties should be permitted to submit evidence outside the administrative record. The district court should consider the course of dealing between the plan and beneficiary and determine the degree of deference, if any, to give the plan's decision regarding permanent disability.
Graciela Saffon had a history of cervical spine degeneration. When her condition was aggravated by a car accident in 2001, she quit her desk job at Wells Fargo and applied for disability benefits under the Wells Fargo & Co. Long Term Disability Plan (the "Plan"). Metropolitan Life Insurance Company ("MetLife") served as the Plan insurer and claims administrator. MetLife paid Saffon short-term and long-term disability benefits according to the Plan terms.
After paying Saffon LTD benefits for one year, MetLife terminated Saffon's benefits, advising she no longer met the definition of disability under her Plan. Saffon's administrative appeal was denied. She then filed an action against the Plan seeking payment of withheld benefits, attorney's fees, and a declaration she was disabled.
A bench trial was held on the administrative record. The district court found MetLife had discretionary authority to interpret the Plan and did not abuse its discretion when it denied Saffon's LTD benefits. Saffon appealed.
The Court of Appeals agreed with the district court that MetLife was a Plan fiduciary with discretionary authority to administer the Plan. However, the Court of Appeals noted the degree of deference that court's accord claim administrators' decisions can vary significantly. A fiduciary's conflict of interest is weighed as a factor in determining whether there is an abuse of discretion. MetLife had a conflict of interest because of its dual role as the Plan administrator and insurer.
The district court had failed to "take MetLife's conflict of interest into account, apparently because Saffon didn't produce material, probative evidence of the conflict. Atwood v. Newmont Gold Co., 45 F.3d 1317, 1323 (9th Cir. 1995)."
Atwood was Ninth Circuit law at the time the district court reached its decision, but it was later overruled by Abatie, supra, 485 F.3d 955. Under Abatie, "a reviewing court must always consider the inherent conflict that exists when a plan administrator both administers the plan and funds it...We weigh such a conflict more or less heavily depending on what other evidence is available. We view the conflict with a low level of skepticism if there's no evidence of malice, or self-dealing, or of a parsimonious claims-granting history…But we may weigh the conflict more heavily if there's evidence that the administrator has given inconsistent reasons for denial, has failed to adequately investigate a claim or ask the Saffon for necessary evidence or has repeatedly denied benefits to deserving participations by interpreting plan terms incorrectly."
The Court of Appeals cited ERISA regulations that require a meaningful dialogue between claims administrator and beneficiary. It found MetLife failed to "explain in a manner calculated to be understood by claimant" what Saffon needed to do to perfect her claim. Further, MetLife's letter terminating Saffon's LTD benefits did not explain why the information provided was insufficient to establish disability. MetLife's appeal denial letter stated it had not been provided with a "Functional Capacity Evaluation ["FCE"] that would objectively measure and document [Saffon's] current level of functional ability." This was the first time MetLife advised Saffon it sought this kind of evidence.
The Court of Appeals held that to the extent MetLife required a FCE or other such objective testing, it "was required to say so at a time when Saffon had a fair chance to present evidence on this point." MetLife's presentation of "a new reason [for denying benefits] at the last minute bears on whether denial of the claim was the result of an impartial evaluation or was colored by MetLife's conflict of interest."
The Court of Appeals vacated the district court's ruling and ordered remand. The Court of Appeals offered guidance to the district court on remand to avoid unnecessary disputes. On remand, Saffon must be permitted to present evidence on the results of the FCE or other objective evidence of her functional capacity and MetLife can present contrary evidence. The district court must consider MetLife's course of dealing with Saffon and her physicians. The district court must also decide the amount of deference, if any, given to MetLife's decision in determining whether Saffon is permanently disabled. The Court of Appeals concluded it might be unnecessary for the district court to determine the degree of deference for MetLife's decision, because the admission of significant new evidence will require de novo review.
Click here for opinion.
This opinion is not final. It may be withdrawn from publication, modified on rehearing or the United States Supreme Court may grant review. Should any of these events take place, the opinion would be unavailable for use as authority in other cases.
| 
