Papadopoulos v. Hartford Life Ins. Co.

Citations: 379 F. Supp. 2d 117; 2005 WL 1705522Docket: CIV.A. 03-12010NMG

Court: District Court, D. Massachusetts; July 19, 2005; Federal District Court

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Pericles Papadopoulos claims that his long-term disability benefits were improperly terminated by Hartford Life Insurance Company in this ERISA dispute. He seeks to amend his complaint while both parties file for summary judgment. Fidelity Investments offers a long-term disability benefits plan, administered by Hartford, which grants full discretion to Hartford regarding eligibility and interpretation of the plan. 

Eligibility for benefits hinges on the definition of "Totally Disabled," which requires an inability to perform one's own occupation for the first 24 months following a 90-day elimination period, after which the claimant must be unable to perform any work for which they could qualify based on training or experience. Papadopoulos, a former Fidelity software engineer, ceased working on December 23, 1997, citing "cervical radiculopathy." He applied for long-term benefits on May 20, 1998, claiming total disability due to various symptoms.

Hartford reviewed medical records from Papadopoulos’s treating physicians, including neurologist Dr. Albert Ackil, who diagnosed him with cervical radiculopathy and restricted him from heavy lifting and prolonged computer use, concluding he was totally disabled. In contrast, chiropractor Gregory Perron, who treated Papadopoulos prior, stated he reached maximum medical improvement and could perform an eight-hour workday with some lifting capabilities. On September 15, 1998, Hartford approved Papadopoulos's claim for benefits.

Papadopoulos became eligible for benefits on November 25, 1997, with the Any Occupation Period starting on November 25, 1999. In early 1999, Hartford began investigating his eligibility for benefits during this upcoming period, hiring Aragon Investigations, Inc. for surveillance, which revealed Papadopoulos engaging in normal activities. Hartford also commissioned Dr. William Fishbaugh for an independent medical evaluation; however, a Functional Capacities Evaluation was not conducted due to objections from Papadopoulos's physician. Following Dr. Fishbaugh's examination and review of Papadopoulos's medical records, he initially deemed Papadopoulos totally disabled due to migraines.

On March 7, 2000, Hartford sought an interview with Papadopoulos, warning that refusal could lead to benefit termination. After Papadopoulos declined an interview on May 1, 2000, Dr. Fishbaugh reviewed the surveillance video and reversed his earlier opinion, stating Papadopoulos was not totally disabled and could work full-time. Consequently, Hartford terminated Papadopoulos's benefits on July 21, 2000, citing insufficient medical documentation and his refusal to be examined.

Papadopoulos appealed the termination on August 30, 2000, noting that the Social Security Administration had approved him for benefits after a three-year review, and speculated that the surveillance video might show his twin brother. Hartford continued attempts to interview him but was unsuccessful. On December 20, 2000, Hartford sought another review from Dr. George Kazda, who concluded that Papadopoulos could perform sedentary work with restrictions inconsistent with the surveillance footage. Hartford denied Papadopoulos's appeal on January 29, 2001, based on the opinions of Dr. Fishbaugh and Dr. Kazda, along with his refusal to be interviewed and the surveillance video.

Additionally, during the investigation, it was revealed that Papadopoulos had received social security disability benefits amounting to $12,298, prompting Hartford to assert that he had been overpaid by $20,500, though the calculation method for this figure remains unclear.

On September 8, 1999, Pericles Papadopoulos and The Hartford Life Insurance Company entered a "Reimbursement Agreement" wherein Papadopoulos acknowledged owing $13,101.45 to Hartford. The agreement allowed Hartford to withhold $585.77 from his monthly long-term disability (LTD) benefits of $2,638.75 for reimbursement, with the condition that any remaining balance would be paid upon the termination of benefits for any reason, including recovery or death. Following a notification on March 22, 2000, regarding an increase in Papadopoulos's social security benefits, Hartford stated he owed an additional $140. By the end of the benefit period, the overpayment was reduced to $6,798, which remains unpaid; Papadopoulos argues that the agreement was "nullified."

Papadopoulos initiated legal action on October 16, 2003, for wrongful termination of benefits under ERISA, later amending the complaint on March 30, 2004, to include a breach of fiduciary duty claim, which was subsequently dismissed. Hartford responded on April 29, 2004, with an answer and counterclaims for equitable restitution of the $6,798 and breach of contract. Hartford filed a motion for summary judgment on November 29, 2004, while Papadopoulos sought to supplement the record and reassert the breach of fiduciary duty claim.

The standard for summary judgment requires the moving party to demonstrate no genuine issue of material fact exists, thus entitling them to judgment as a matter of law. A material fact is one that could impact the outcome under relevant law, and genuine issues are defined as those where a reasonable jury could favor the non-moving party. If the moving party meets this burden, the responsibility shifts to the non-moving party to present specific facts showing a triable issue. The court must view the record favorably toward the non-moving party, and if no genuine issues are found, summary judgment may be granted.

A district court conducts a de novo review of ERISA claims under 29 U.S.C. § 1132 unless the benefits plan grants discretionary authority to the administrator regarding eligibility or plan interpretation. If such authority is clearly granted, the administrator's decisions receive deference and are only overturned if deemed "arbitrary, capricious or an abuse of discretion." In this case, the Plan conferred discretionary authority to Hartford, making the arbitrary and capricious standard presumptively applicable. 

The plaintiff argues for de novo review based on alleged "bad faith" by the defendant and a delay in decision-making beyond the 120-day limit set by ERISA. However, the court clarifies that there is no exception to the arbitrary and capricious standard for bad faith, and evidence of bad faith only serves to illustrate that a decision was arbitrary and capricious. Furthermore, the cited case Jebian is not binding in the First Circuit, where "substantial compliance" with deadlines is deemed sufficient. Although Hartford's decision was delayed, this was considered inconsequential due to circumstances partly attributable to the plaintiff's lack of cooperation during the appeal process. Consequently, the arbitrary and capricious standard remains applicable, allowing Hartford's decision to be upheld if it was within its authority, reasoned, and supported by substantial evidence.

Substantial evidence, defined as evidence "reasonably sufficient to support a conclusion," is a key standard in reviewing decisions to terminate benefits under ERISA. The district court assesses whether the evidence, viewed favorably for the non-moving party, supports a rational conclusion that the plan administrator acted arbitrarily in denying the claim. If the plan administrator's decision is reasonable, it will stand. There is a presumption that the review record is limited to what was available to the administrator at the time of the decision. A motion to add documents to the review record was denied because the plaintiff did not justify their relevance or how they could indicate that Hartford's decision was arbitrary, especially since most documents did not exist during Hartford's review process.

Hartford argues for summary judgment based on substantial evidence supporting its decision to terminate benefits, asserting that its conclusion regarding the plaintiff's ability to work was not arbitrary. The decision was based on the opinions of Dr. Fishbaugh, the plaintiff's refusal to be interviewed, Dr. Kazda's opinion, and surveillance evidence. The plaintiff counters with claims of bad faith, alleging that Hartford concealed Dr. Fishbaugh's initial report and coerced a change in his opinion, as well as criticizing Hartford for scheduling a Functional Capacity Evaluation and referring the case for potential insurance fraud investigation. The plaintiff's arguments are largely deemed irrelevant to the core issue of whether Hartford's decision was arbitrary or capricious.

Allegations against Hartford do not indicate bad faith and are largely unrelated to the termination of benefits. The cancellation of the Functional Capacity Evaluation was not a reason cited for termination, and there is no evidence that it influenced Hartford's decision. The referral to the IFB, which addresses suspected fraud, does not impact the legitimacy of the termination. The assertion that defense counsel's opposition to the plaintiff's motion to amend constitutes bad faith is deemed without merit. The plaintiff's claim that Hartford coerced Dr. Fishbaugh into changing his conclusion lacks evidential support, as the initial report is part of the judicial record and available to the plaintiff. Instead, Dr. Fishbaugh’s altered conclusion was based on new evidence, specifically a videotape provided by Hartford, which was legitimate.

Hartford's decision relied on the opinions of Drs. Fishbaugh and Kazda, who concluded that the plaintiff was not totally disabled and could perform sedentary work. Both doctors reviewed medical records and the videotape, with no evidence of bias or inaccuracies in their conclusions. Conflicting opinions from the plaintiff's treating physicians are valid but do not necessitate special weight over those of the other doctors. The Court defers to the plan administrator's resolution in cases of conflicting medical evidence, as supported by precedents.

Hartford also cited the plaintiff's refusal to be interviewed as a basis for terminating benefits, which is clearly stated in the Plan. The plaintiff was warned of the potential consequences of such refusal, which further undermines his credibility regarding his condition. Lastly, the videotape evidence indicated that the plaintiff could perform daily activities and was not totally disabled, solidifying Hartford's decision.

Hartford's decision to terminate benefits was supported by substantial evidence, including a videotape showing the plaintiff leaving his home, driving his car, and handling his trash, with no indication of his twin brother's involvement. Despite the plaintiff's suggestion that the individual could be his brother, Hartford's investigation confirmed the identity as the plaintiff. The plaintiff's refusal to be interviewed further undermined his position, as he seemed to prefer maintaining plausible deniability regarding the video's content. Thus, Hartford's termination of benefits was deemed reasonable and not arbitrary or capricious, leading to the granting of Hartford's motion for summary judgment on Count I and the denial of the plaintiff's motion.

In relation to Hartford's counterclaims for breach of contract and equitable reimbursement due to overpayments linked to the plaintiff's social security award, the breach of contract claim was substantiated by the Reimbursement Agreement. The plaintiff acknowledged owing money to Hartford, agreeing to a repayment schedule that stipulated immediate payment if benefits ended. The plaintiff's arguments against the enforcement of the Agreement—claiming lack of consideration and asserting that benefit termination nullified the Agreement—were found to be without merit. The Agreement explicitly allowed for the termination of benefits and immediate repayment in such cases. Consequently, the plaintiff breached the Agreement by failing to repay the outstanding amount, resulting in the granting of Hartford's motion for summary judgment on the breach of contract counterclaim.

Hartford seeks equitable restitution for overpaid funds as an alternative to breach of contract damages, relying on 29 U.S.C. 1132(a)(3) under ERISA, which allows for equitable relief but not legal entitlement. The claim hinges on the distinction between legal and equitable restitution, where equitable restitution requires tracing the overpayments to specific funds in the defendant’s possession. Hartford aims to impose a constructive trust on the overpaid amount but has not identified specific funds belonging to Papadopoulos, leading to unresolved factual issues. Additionally, any constructive trust would be based on the actual overpayment amount rather than a negotiated figure of $6,798, which may not represent what is owed in good conscience. Hartford's request for an accounting to trace the funds is noted, but the court declines to expand the case since a breach of contract claim offers a sufficient legal remedy; therefore, Hartford is denied summary judgment on the equitable restitution counterclaim.

Regarding the plaintiff's motion to amend the complaint to include a breach of fiduciary duty claim against Hartford, Hartford opposes it on grounds of undue prejudice and futility, arguing that a claim under 29 U.S.C. 1132(a)(1) cannot coexist with a claim under 1132(a)(3). The court agrees that since the plaintiff has a claim under 1132(a)(1), any new claim under 1132(a)(3) would be legally futile. However, the court acknowledges the possibility that the plaintiff may intend to assert a claim under 1132(a)(2), which allows for fiduciary duty claims. Nevertheless, the plaintiff's motion lacks substantial evidence to support the amendment, particularly after a summary judgment motion has been filed, leading to a denial of the motion.

Plaintiff is granted the opportunity to re-file a Motion for Leave to Amend to include a breach of fiduciary duty claim, provided he specifies the statutory basis for the claim and demonstrates substantial evidence to support it. The court’s orders include: denial of plaintiff's Motion to Supplement the Record for Judicial Review, Motion for Oral Argument, Motion to Determine Appropriate Judicial Standard of Review, and Motion for Summary Judgment. Conversely, the defendant's Motion for Summary Judgment is granted concerning Count I of the complaint and Count II of the counterclaim, resulting in partial judgment for Hartford on Count II (breach of contract). The plaintiff’s Motion for Leave to Amend is denied but may be re-filed within 21 days. Additionally, it is noted that any future filings must adhere to local rules, including the requirement for double-spacing in memoranda.