Court: District Court, W.D. Pennsylvania; May 5, 2015; Federal District Court
This memorandum opinion addresses the cross-motions for summary judgment in a case brought under the Employee Retirement Income Security Act (ERISA) by Plaintiff John Songer against Defendant Reliance Standard Life Insurance Company. Songer, a participant and beneficiary of a long-term disability policy, seeks to recover benefits and clarify his rights under the policy. The Court denies the Defendant’s motion for partial summary judgment and grants the Plaintiff’s motion, finding that the denial of long-term disability benefits was arbitrary and capricious due to procedural irregularities.
The case, filed on January 1, 2015, followed the exhaustion of administrative remedies, with the Defendant counterclaiming for a Social Security offset and related fees amounting to $23,968.87. A case management conference on March 13, 2015, established a procedure to address the Social Security Offset issue first, followed by comprehensive summary judgment briefing. Upon receiving the Defendant’s motion for "partial" summary judgment, the Court determined that the motion addressed all relevant issues, leading to the conversion of this motion into a complete one for summary judgment.
The Court indicated its intent to rule on these motions before a scheduled mediation date of May 18, 2015, canceling the need for oral arguments and allowing further rounds of briefing. Ultimately, the Court treated both parties' motions as cross-motions for summary judgment, confirming the comprehensive nature of the provided briefings.
Defendant issued a group long-term disability (LTD) policy number LTD 118592 to SSSI, Inc. (dba Songer Steel Services), the Plaintiff's former employer, which is an ERISA plan that is not self-funded. The policy grants Reliance full authority to approve or deny claims and provides LTD benefits of 60% of covered monthly earnings, capped at $6,000. "Totally disabled" is defined in two phases: for the first 24 months, an insured cannot perform their regular occupation, and after that, cannot perform the duties of any occupation.
Plaintiff, employed as Vice President of Sales from 2003 to 2011, filed a disability claim on January 12, 2012, citing diagnoses of Post-Laminectomy Syndrome, Thoracic/Lumbar Radiculitis, and Lumbago from Dr. Frank Kunkel, who noted moderate mental limitations but did not diagnose depression. The Plaintiff reported spinal stenosis and constant pain as reasons for his inability to work. An undated follow-up statement later included "back pain depression," but did not alter the disability claim to reflect depression as a primary condition.
Medical evidence from Dr. James Kang indicated severe junctional stenosis and incapacitating leg pain, corroborating the findings of Dr. Kunkel without contradiction. Defendant’s nurse reviewer identified Post-Laminectomy Syndrome as the primary diagnosis but noted a history of anxiety and depression stemming from personal tragedies. On June 21, 2012, Defendant awarded Plaintiff Short Term Disability (STD) benefits without specifying that the basis was psychiatric impairment. Although Plaintiff's claims log reflected increasing depression following the deaths of his son and wife, Defendant was not obligated to disclose the basis for the STD award.
On October 4, 2012, the Defendant's nurse reviewer indicated that the records supported a diagnosis of major depressive disorder for the Plaintiff, which was complicated by the death of his son. Subsequently, on November 29, 2012, the Defendant informed the Plaintiff that he met the group policy’s definition of Total Disability and approved his Long Term Disability (LTD) claim, but did not clarify that the award was based on a mental/nervous disability limited to 24 months. Plaintiff believed the award stemmed from his permanent and degenerative back condition, which he thought would keep him totally disabled for nine years.
On September 24, 2013, only ten months after the initial award, the Defendant sent a letter closing Plaintiff's claim. This letter explained that after 24 months, the definition of Total Disability would shift from "Own Occupation" to "Any Occupation," and indicated that the award was based on a mental diagnosis, which had not been previously communicated to Plaintiff. Plaintiff contended that the basis for his disability, his degenerative back condition, had never been rejected, and the first notice he received regarding the mental diagnosis was in the September 2013 letter. The letter stated that benefits were payable due to depression and noted that, without psychiatric impairment, the Plaintiff could potentially work in a sedentary capacity. The letter also provided information on Plaintiff's right to appeal the termination of benefits. Plaintiff was surprised by this shift in classification of his claim and subsequently sought legal counsel to contest the termination of his benefits.
Plaintiff's claim for Social Security Disability benefits was approved around October 1, 2013. While both parties acknowledge the Policy allows Defendant to offset Social Security payments, they dispute the calculation method for this offset. Following the claim approval, on October 23, 2013, Plaintiff's counsel requested documents related to Plaintiff's eligibility for benefits. On October 31, 2013, Defendant informed Plaintiff's counsel of an overpayment of $24,768.87 and requested repayment. Defendant also indicated a claim "re-opening" due to new medical information, asserting Plaintiff had no work capacity due to psychiatric and physical conditions. Plaintiff's counsel sought the documents justifying this re-opening, which were later revealed to include medical records from Dr. Kang dating back to 2010-2011, previously received by Defendant in June 2012.
Additionally, there were two versions of an award letter dated November 29, 2012. Defendant produced a different version for Plaintiff's counsel, claiming that for privacy reasons, the original letter sent to the employer omitted mention of mental or nervous disorders. The parties disagree whether Plaintiff received the version stating that benefits were limited to 24 months for disabilities resulting from mental or nervous disorders. Plaintiff contends he was unaware of this limitation, supported by claims log documentation indicating his leave was due to back pain and his confusion upon learning of the limitation in October 2013.
Notably, Defendant did not have Plaintiff examined by a medical doctor, nor did they perform an Independent Medical Evaluation (IME) during the claim process. It was not until August 18, 2014, that Dr. Lewis reviewed the medical evidence but concluded he could not assess Plaintiff's conditions due to insufficient documentation since 2012, indicating no supported limitations from a physical perspective.
Defendant did not secure medical review of Plaintiff's claim until the appeal stage. Dr. Lewis referenced Dr. Kang’s note from November 17, 2006, indicating resolution of leg pain, but failed to mention Dr. Kang's 2011 findings of severe junctional stenosis and incapacitating leg pain. Although Defendant had signed authorizations from Plaintiff to access medical records, it only sought opinions from Dr. Anthony, Plaintiff's psychiatrist, and did not share the reviewing physician's report with Plaintiff until after the appeal. Following Plaintiff obtaining counsel, Defendant mistakenly contacted him directly. On April 24, 2014, Defendant informed Plaintiff's counsel that long-term disability (LTD) benefits would terminate effective April 12, 2014, citing the policy's definition of "Total Disability" and limitations for mental disorders. Although Plaintiff acknowledged failing to respond to a request for updated medical records, he asserted that he was seeking complete case file information, which Defendant did not provide. Plaintiff argued that sufficient medical evidence existed to establish total disability under the policy. After notice of the right to appeal was given on April 24, 2014, Plaintiff appealed on July 1, 2014, asserting that updated records were unreasonable to provide and questioning the offset calculation for Social Security. On September 26, 2014, Defendant upheld its prior claim decisions. Summary judgment may be granted when there are no genuine issues of material fact, as per legal standards cited.
A genuine issue of material fact exists when evidence allows a reasonable fact finder to favor the non-moving party, as established in Anderson v. Liberty Lobby, Inc. A court must evaluate summary judgment motions by viewing facts favorably for the non-moving party and resolving all doubts in their favor. Under ERISA, denials of benefits are reviewed de novo unless the plan grants discretionary authority to the administrator, in which case an "arbitrary and capricious" standard applies. This standard allows a court to overturn a decision only if it is unreasonable, lacks substantial evidence, or is legally erroneous. Substantial evidence is defined as sufficient for a reasonable person to agree with the decision. Structural conflicts of interest arise when the same entity makes eligibility decisions and pays benefits, which must be considered in assessing whether the administrator abused discretion. Procedural conflicts of interest involve irregularities in the claim denial process. Despite the existence of a conflict of interest, the standard of review remains unchanged but is a relevant factor in determining the arbitrariness of a decision. The discussion notes that irregularities in the claim process can lead to findings of arbitrary and capricious denials, emphasizing the need for fiduciary neutrality in benefits determinations, as seen in Haisley v. Sedgwick Claims Management Services, Inc.
The excerpt outlines the evaluation criteria for assessing whether the denial of Haisley's claim was arbitrary and capricious, emphasizing that one key factor can serve as a tiebreaker when other factors are closely balanced. Chief Judge Conti identified several reasons for finding the claim denial arbitrary, including inconsistent decisions by the claims administrator, the rejection of three treating physicians' opinions, reliance on four non-examining physicians, failure to request an independent medical examination, and ignoring the beneficiary's Social Security disability status. While ERISA does not mandate a medical examination prior to claim denial, not obtaining one may be deemed unreasonable if the impairments in question cannot be adequately assessed through file review. The Third Circuit has noted that inconsistent treatment of similar claims raises suspicion and highlights potential procedural irregularities. The factual background indicates that Haisley's claim focused solely on a back condition, with no mention of a mental disorder in the original application. Dr. Kunkel's Physician Statement identified "Post Laminectomy Syndrome" as the primary diagnosis, and his reference to mental limitations was not substantiated by a formal diagnosis, undermining the defendant's argument that this reference supported Haisley's claim. Furthermore, the absence of mention of Dr. Kunkel's statement regarding mental limitations in the claim review logs raises additional concerns about the thoroughness of the benefits determination.
The Plaintiff identifies several irregularities in the claim processing by the Defendant, which the Court concurs with: 1) The Defendant dismissed all medical opinions regarding the Plaintiff's back condition. 2) No medical examination of the Plaintiff was conducted. 3) The Defendant did not consult with the Plaintiff's treating physician regarding his disability. 4) The Defendant ignored its own medical review that diagnosed the Plaintiff with Post-Laminectomy Syndrome. 5) The Defendant focused solely on the mental/nervous claim, seeking psychiatric opinions without addressing the back condition. Furthermore, the Defendant previously awarded benefits based on the same medical information it later claimed was insufficient to continue benefits. The Court highlights that reversing an award without new medical evidence demonstrates an abuse of discretion. After the Plaintiff obtained legal counsel, the Defendant reopened the claim, citing "additional medical information" that was actually old records. This situation, coupled with other irregularities, led the Court to conclude that the Defendant denied a full and fair review, acting arbitrarily and capriciously. The Defendant improperly recharacterized the claim from a back condition to a mental/nervous disorder to limit benefits to 24 months. The Court noted the complexity of the decision and indicated a financial motivation for the Defendant's actions. Additionally, discrepancies in the November 29, 2012 letters were addressed, with the Plaintiff providing an affidavit asserting that he was not informed his benefits were based on a mental/nervous disorder and believed they were awarded for his back condition until he received a check.
Defendant submitted an affidavit from Mr. Wehrle, a claim examiner, asserting that a letter outlining limitations regarding mental/nervous disorders was sent solely to Plaintiff, citing "privacy reasons" for not sending it to SSSI. The Court, without assessing the credibility of the conflicting affidavits, found Plaintiff's account aligns with the administrative record, noting several inconsistencies: 1) the claimed redacted employer letter was absent from the claims file sent to Plaintiff's counsel; 2) the claim log did not show two separate letters being sent; 3) typically, Defendant sends a cover letter to employers when privacy issues arise; and 4) the redacted letter was addressed to Mr. Songer, not SSSI.
Regarding the Social Security offset calculation, Plaintiff argued that Defendant's approach was arbitrary and capricious. Plaintiff’s pre-disability income was approximately $147,500 annually, and under Defendant's policy, he should receive $7,375 monthly, with a cap of $6,000. After being awarded $2,277 in Social Security disability benefits, Defendant deducted this amount fully from its benefits, resulting in a net payment significantly less than the policy stipulates. The Court concurred with Plaintiff that the policy language only allows the deduction of Social Security benefits before applying the policy cap, leading to a due benefit of $5,098 rather than a lower amount proposed by Defendant.
The Court concluded that Plaintiff deserved a full and fair review of his Long Term Disability claim, which did not occur, rendering Defendant's denial arbitrary and capricious. Consequently, it denied Defendant’s Motion for Summary Judgment, granted Plaintiff's motion, and awarded benefits. Plaintiff had also raised alternative claims for bad faith and breach of contract, which were withdrawn after stipulating to ERISA's jurisdiction. Defendant had filed a counterclaim for a Social Security offset totaling $23,968.87, including interest and attorney's fees. The unique procedural aspects of the case were elaborated in an earlier section of the document.
The parties have compiled extensive factual information, presenting over 24 pages of "concise material facts." The Court has distilled the relevant facts from the administrative record and identified existing factual disputes. A discrepancy of $223,000 exists between mental/nervous benefits and degenerative back benefits, with the Defendant retaining the difference since the SSSI plan is not self-funded. The Policy excludes mental/nervous conditions of organic origin from the definition of a mental/nervous disorder, which is defined as a neurosis or other psychological conditions without demonstrable organic origin (AR-028).
Plaintiff argues that Dr. Kunkel's statement indicates that his mental health issues, linked to chronic pain, have an organic cause, while Defendant contends that Plaintiff's back condition, although contributing to depression, does not qualify as an organic cause. Plaintiff claims Defendant did not investigate his medical history through treating physicians or independent reviews, whereas Defendant asserts it had no obligation to do so and that Plaintiff did not provide additional information.
The Policy states that the Monthly Benefit equals 60% of Covered Monthly Earnings, with a maximum of $6,000 for a maximum of $10,000 in Covered Monthly Earnings (AR-09). A separate letter from the Defendant does not cite Plaintiff's mental impairment as a basis for granting disability. The Plan Administrator, as a fiduciary, must act solely in the interest of participants to provide benefits (29 U.S.C. 1104(a)(1)(A)(i)). Under ERISA, any denied claim must be communicated with specific reasons in an understandable manner, as well as any additional information required for the claimant to perfect the claim (29 U.S.C. 1133(1) and 29 C.F.R. 2560.503-1 (g)(iii)).
