Stout v. Hartford Life & Accident Ins.

Citations: 58 F. Supp. 3d 1020; 2013 WL 4608129; 2013 U.S. Dist. LEXIS 122932Docket: No. C 11-6186 CW

Court: District Court, N.D. California; August 28, 2013; Federal District Court

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The court issued an order denying the defendants' motion for judgment and granting in part the plaintiff's cross-motion for judgment regarding Kathleen Stout's claims for disability benefits under ERISA. The defendants, Hartford Life and Accident Insurance Company and Amazon.com Holding, Inc. Long Term Disability Plan, sought judgment against Stout's claims but were denied. The court remanded Stout's claim to the plan administrator to assess her eligibility for benefits based on the "any occupation" standard.

The parties agreed that the documents submitted with Stout's motion constituted the administrative record for the case. Stout was employed by Amazon.com as a senior technical program manager beginning in 2008 but stopped working in March 2009 due to worsening symptoms, including fatigue and cognitive disturbances. She received short-term disability benefits shortly after ceasing work. Diagnosed initially with possible systemic lupus erythematosus or Sjogren’s syndrome by Dr. John Yuen, her condition was confirmed as likely Sjogren’s syndrome after further testing in Palo Alto.

Despite ongoing treatment, including medication and cognitive behavioral therapy, Stout continued to experience debilitating fatigue and cognitive impairment, significantly affecting her ability to work. Her treatment history also included evaluations for obstructive sleep apnea. Throughout this period, she reported persistent physical and mental health challenges to her healthcare providers.

Dr. Whalen's reports indicate that the Plaintiff consistently reported similar symptoms over several months. In August 2010, the Plaintiff underwent cognitive testing by Dr. Peter Karzmark at Stanford, which assessed areas such as concentration, memory, problem-solving, language, and personality. Although the Plaintiff demonstrated above-average academic abilities, her overall test performance fell to the 30th percentile for her demographic. Dr. Karzmark concluded that the Plaintiff's cognitive functioning had modestly declined, attributing some cognitive limitations to Sjogren’s disease and depression.

In September 2010, the Plaintiff began treatment with Dr. Eliza Chakravarty, who noted ongoing physical symptoms, including fatigue and muscle aches, and referred her to a neurologist, Dr. Elias Aboujaude. Reports from Dr. Aboujaude indicated that the Plaintiff continued to experience fatigue, cognitive difficulties, and coordination issues through February 2011.

The Plaintiff was insured under Hartford’s Group Policy No. GLT675334, which provides long-term disability (LTD) benefits to Amazon employees. Hartford has full discretion in determining eligibility for benefits. The policy outlines two standards for disability: the "own occupation" standard for the first two years, where an employee is disabled if they cannot perform essential duties of their own job, and the "any occupation" standard thereafter, requiring the employee to be unable to perform any job for which they are qualified and that pays more than their benefits.

The Plaintiff initiated her LTD claim in July 2009, following her diagnosis from Dr. Yuen, prompting Hartford to investigate by interviewing her and requesting medical records, including a report from Dr. Yuen summarizing her diagnosis.

Plaintiff was recommended to limit her daily activities to five hours of sitting, one hour of standing, and one hour of walking. Hartford preliminarily approved her long-term disability (LTD) claim on September 23, 2009, agreeing to pay benefits until September 30, 2009, contingent upon receiving additional information, including a report from her new rheumatologist, Dr. Thornburn. Dr. Thornburn’s report, received on October 8, 2009, indicated ongoing issues such as fatigue, musculoskeletal pain, and cognitive difficulties, reiterating the same activity limitations. Hartford subsequently requested a detailed "Behavioral Functional Evaluation" from Dr. Thornburn, which she completed by October 30, 2009, noting Plaintiff's fear of making mistakes and difficulty with short deadlines.

In early 2010, Hartford commissioned surveillance of Plaintiff, which yielded minimal observation time, primarily noting her outings to the grocery store and dentist. During a July 2010 interview, Plaintiff acknowledged the footage accurately represented her capabilities but mentioned non-physical limitations like focus issues. In September 2010, Hartford nurse Marylou Watson reviewed Plaintiff's case and found insufficient clinical evidence supporting her claims of fatigue and lack of functionality. Following this, she sent the surveillance footage to Drs. Thai, Whalen, and Thornburn for evaluation. Dr. Thai did not respond, while Dr. Whalen stated Plaintiff was unable to work. Dr. Thornburn acknowledged Plaintiff's potential for sedentary work but noted a decline in her cognitive abilities since spring 2009.

In December 2010, Hartford engaged neuropsychologist Dr. Joseph Ricker for an independent medical review. After discussions with Drs. Whalen and Thornburn and reviewing previous cognitive assessments, Dr. Ricker concluded that, despite some below-average neuropsychological abilities, most of Plaintiff's performance was within normal limits, indicating no significant cognitive or emotional impairment.

In January 2011, Dr. Ricker provided a report to Hartford, which led to Hartford terminating Plaintiff’s long-term disability (LTD) benefits on January 18, 2011, citing discrepancies between her reported limitations and her activities, as well as medical documentation. Hartford concluded that she could perform "sedentary work." Subsequently, on January 31, 2011, Plaintiff was informed that the Social Security Administration (SSA) approved her disability claim, filed over two years earlier, with Hartford having assisted her in this process. In February 2011, the law firm advising her on the SSA claim warned that Hartford might claim a portion of her SSA benefits due to prior LTD payments. Plaintiff was later advised to use her SSA benefits to reimburse Hartford.

On March 2011, Plaintiff expressed her intention to reimburse Hartford and queried whether their reimbursement requests implied acknowledgment of her disability under the policy and if they would review her SSA records, but there is no record of Hartford’s response. On July 14, 2011, Plaintiff appealed Hartford's termination decision, submitting declarations from family and friends along with new medical documentation. Notably, Dr. Chakravarty's letter from June 29, 2011, indicated ongoing health issues with limited improvement, and expressed surprise at Hartford not contacting her regarding Plaintiff's condition prior to the benefits termination. Plaintiff also included results from a Work Tolerance Screening/Functional Capacity Evaluation in May 2011, which indicated her inability to perform demanding work due to limitations stemming from Sjogren’s disease. Additionally, she submitted a neuropsychological evaluation from Dr. Ronald Ruff in June 2011, which reviewed her medical history and Dr. Karzmark's earlier assessment.

Ms. Stout's July 2011 report indicated she could not return to her previous job or be competitively employed due to her physical and psychiatric conditions. Following her appeal, Hartford engaged two experts for review. Rheumatologist Dr. Brian Peck's August 2011 report found insufficient support for Ms. Stout's claimed physical symptoms, suggesting she could perform "light work" but was otherwise capable of full-time work activities. Dr. Peck based his conclusions on her medical records and a conversation with her former rheumatologist, Dr. Thornburn, but did not consult Dr. Chakravarty.

Neuropsychologist Dr. Milton Jay submitted a report in August 2011 stating that there was inadequate evidence of severe depression or cognitive disorders that would prevent Ms. Stout from sustaining full-time work. He emphasized that her abilities included system design and data analysis, noting that previous assessments of her cognitive skills were unexpectedly low but should not hinder her return to work. Dr. Jay also referenced Dr. Whalen's assessment that Ms. Stout's depression was mild and unlikely to significantly impair her functionality.

After reviewing the experts’ reports and other materials, Hartford upheld its decision to terminate Ms. Stout's benefits, issuing a final denial letter on September 12, 2011. Ms. Stout subsequently filed a lawsuit three months later.

In legal terms, the court will evaluate the cross-motions for judgment as a bench trial, assessing the evidence's persuasiveness. The review of the plan administrator’s denial of ERISA benefits depends on the plan's terms; absent contrary language, a de novo standard applies. However, if the plan grants discretionary authority to the administrator, the decision is reviewed for abuse of discretion, which requires substantial evidence supporting the administrator's decision. Additionally, if the plan administrator is also the funder, the court will scrutinize the decision with greater skepticism due to potential conflicts of interest.

Abuse of discretion review in cases involving a conflicted plan administrator requires a heightened level of skepticism, particularly when evidence of malice, self-dealing, or a history of denying claims is present. In Abatie v. Alta Health & Life Ins. Co., the Ninth Circuit indicated that a low level of skepticism may be appropriate in the absence of such evidence, while inconsistencies in denial reasons, inadequate claim investigations, and a history of incorrect interpretations of plan terms justify a more substantial scrutiny of the administrator's decisions. The Supreme Court in Metropolitan Life Insurance Co. v. Glenn affirmed that a conflict of interest should be a significant factor in determining abuse of discretion.

In the case involving Hartford, which serves as both the policy administrator and the funding source, a structural conflict of interest was evident, influencing its decision-making process. The Ninth Circuit's Montour case identified indicators of bias that necessitate careful consideration of conflicts of interest, including the lack of neutral review procedures, reliance on a "pure paper" review, and failure to consider contrary disability determinations from the Social Security Administration (SSA). Hartford’s review process exhibited these deficiencies: it provided no evidence of efforts to ensure accurate claims assessments, did not implement checks to prevent financial bias, and based its termination decision solely on paper reviews without in-person evaluations or consultations with the claimant's treating physician. These shortcomings raise concerns about the thoroughness and impartiality of Hartford's benefits determination, as noted by the Supreme Court regarding the necessity for access to all relevant evidence when relying on independent experts.

Hartford inadequately addressed the SSA’s determination that the Plaintiff was disabled, failing to compare the SSA’s medical findings with its own despite acknowledging differing definitions of disability. The Montour court emphasized that a proper acknowledgment would require a thorough analysis of the medical evidence relied upon by both parties. Although ERISA administrators are not bound by SSA decisions, Hartford's disregard for the SSA's conclusion, especially after the Plaintiff requested a review and offered access to her SSA file, raises concerns about the integrity of its decision-making process. Hartford had previously encouraged the Plaintiff to pursue her claim with the SSA, benefiting financially from the offset against her retroactive award, yet later dismissed the SSA’s findings in determining she could perform sedentary work. The Supreme Court in Glenn highlighted that such inconsistencies in the insurer’s positions could indicate procedural unreasonableness and justify greater scrutiny of potential conflicts of interest. Despite differences in the evidence considered compared to the Montour case, Hartford's failure to adequately explain its departure from the SSA's findings and reliance on minimally considered surveillance footage further indicates bias. The Plaintiff is seeking review of Hartford’s termination of benefits under § 502(a)(1)(B) of ERISA, which allows participants to recover benefits owed under their plan. Hartford’s termination decision was based on the "own occupation" standard and primarily on the opinions of three experts who did not examine the Plaintiff and dismissed her treating physicians' opinions without justification, indicating an abuse of discretion.

In Caplan v. CNA Financial Corp., the court found an abuse of discretion by the plan administrator due to the inadequate evaluation of evidence regarding the plaintiff's ability to perform occupational duties. Dr. Ricker, who assessed the plaintiff, focused solely on cognitive impairments without considering physical symptoms, explicitly stating he could not address physical limitations. His conclusions were primarily based on an August 2010 cognitive evaluation, yet he failed to reconcile his interpretations with those of Dr. Karzmark, who administered the evaluation and noted the plaintiff performed at the 30th percentile compared to her demographic peers. Dr. Ricker's assertion that most results were "within normal limits" contradicted Dr. Karzmark’s findings of below-average performance in multiple areas. 

Dr. Jay, another neuropsychologist for Hartford, acknowledged unexpectedly low cognitive scores for the plaintiff but concluded she was not completely unable to work, despite not reviewing the raw data from the cognitive evaluation. This lack of access to complete information was significant, as it undermined the reliability of Dr. Jay's conclusions, which contradicted findings from Drs. Karzmark and Ruff who had direct interaction with the plaintiff.

Dr. Peck, Hartford’s third expert, also relied on incomplete information, failing to examine the plaintiff or consult her treating rheumatologist, Dr. Chakravarty. His report, which did not address relevant letters from Dr. Chakravarty, primarily summarized other doctors' analyses and inadequately covered the plaintiff's health in a brief manner. Dr. Peck's conclusions differed from those of the plaintiff's treating physicians without any justification for the divergence, which raises issues under precedent that requires plan administrators to avoid arbitrarily disregarding treating physicians' opinions.

Hartford's expert reports exhibit significant deficiencies: they evaluate Plaintiff's physical and cognitive symptoms in isolation, neglecting their cumulative impact on her job performance. The evaluations stemmed from a review of medical records instead of in-person examinations. Additionally, the reports fail to adequately challenge Plaintiff's WTS/FCE results or address the findings from her treating physicians and the SSA. Consequently, Hartford's reliance on these flawed reports demonstrates an abuse of discretion in denying Plaintiff's long-term disability (LTD) benefits under the “own occupation” standard.

The excerpt also notes that Plaintiff's argument for LTD benefits under the “any occupation” standard is insufficient for two reasons. First, the administrative record (AR) lacks adequate information to assess her eligibility under this standard, as her medical evidence primarily addresses her ability to perform her specific job, not other roles she may qualify for. Second, if the AR were sufficient, the court would still lack the authority to assess eligibility under the “any occupation” standard if the plan administrator abused its discretion under a different standard. As established by the Ninth Circuit, courts can only reinstate benefits under the same standard if an administrator abuses discretion in its termination.

Thus, since Hartford terminated Plaintiff's claim under the “own occupation” standard without evaluating her potential eligibility for the “any occupation” standard, her claim must be remanded for further assessment. The court granted Plaintiff's motion for judgment regarding her “own occupation” claim and denied her “any occupation” claim. Defendants’ cross-motion for judgment was denied, and their evidentiary objections were rendered moot as they were not considered by the court.

Plaintiff is found eligible for long-term disability (LTD) benefits under the "own occupation" standard for the first twenty-four months of her claim. The Court orders Defendants to pay any unpaid benefits with prejudgment interest, calculated by Hartford. A stipulated judgment form must be filed within twenty-one days; if disputes arise regarding the amount, the parties can seek court intervention. Plaintiff's claim for additional benefits is remanded to Hartford to assess her disability under the "any occupation" standard, as no decision has been made yet. This case will be closed after judgment, and any future challenges to Hartford’s decision will require a new complaint. The Court highlights disorganization in the administrative record (AR), with many documents being incomplete or unlabeled. Despite this, the Court will rely on the provided record. The definition of "light work" from the Department of Labor is recognized, as it was not provided by the parties. Hartford's expert, Dr. Peck, attempted but failed to contact Dr. Chakravarty, which does not excuse Hartford from a thorough review of the claim. Prejudgment interest will be calculated based on the weekly average 1-year Treasury yield prior to judgment, as per 28 U.S.C. 1961(a).