Court: District Court, C.D. California; November 29, 2016; Federal District Court
On November 15, 2016, a bench trial was held before Senior U.S. District Judge Ronald S.W. Lew regarding an ERISA disability benefits claim filed by Plaintiff Greg Martin against Aetna Life Insurance Company and Federal Express Corporation's Short Term and Long Term Disability Plans. The claim arose after Aetna denied Martin's application for short-term disability benefits under the FedEx STD Plan.
The court ruled in favor of the Defendants after considering the evidence and arguments presented. The findings of fact established that Martin worked as a Senior Service Agent at FedEx, with responsibilities that included customer assistance, package tracking, report preparation, and data entry. His role required physical capabilities, including the ability to lift 75 lbs and maneuver heavier packages with assistance.
The FedEx STD Plan, self-funded by the company and administered by Aetna, provides benefits at 70% of an employee's pre-disability weekly pay for up to 26 weeks, contingent on the employee proving their disability. The plan defines disability as a medically-determinable impairment preventing the performance of essential job functions, substantiated by significant objective medical findings, which exclude pain as sole proof of disability. Aetna holds discretionary authority to interpret the plan and deny claims when medical evidence is insufficient. Should benefits be denied, Aetna must provide written notice detailing the reasons for denial and the specific plan provisions involved. The LTD Plan takes effect after STD benefits are exhausted, offering up to 60% of basic monthly earnings until the employee turns 65 or can work at least 25 hours per week.
Aetna approved Short-Term Disability (STD) Plan benefits for the Plaintiff from November 7, 2014, to February 14, 2015, based on medical documentation indicating the Plaintiff's inability to perform job duties due to work-related wrist injuries. The Plaintiff's primary care provider, Dr. Michael Thompson, had previously recommended time off work and imposed lifting restrictions following surgeries for joint issues. On October 30, 2014, Dr. Bruno Seeman, an occupational medicine specialist, issued a return-to-work note with restrictions, ultimately projecting maximum medical improvement by December 31, 2014.
However, Aetna denied STD Plan benefits for the period from February 15, 2015, to May 7, 2015. The denial was based on evaluations from Dr. Enass Rickards, who found no significant abnormalities in the Plaintiff's hand and wrist, and Dr. Michael Wheatley, who conducted a peer review and noted a lack of objective clinical documentation supporting the Plaintiff's claims of functional impairment. Aetna concluded that the Plaintiff did not present sufficient evidence to justify his inability to perform essential job functions, specifically lifting up to 75 pounds. Aetna reiterated that subjective reports of pain alone do not constitute proof of disability without corresponding objective findings.
On March 16, 2015, Plaintiff visited Dr. David Daugherty, reporting bilateral hand pain with associated symptoms exacerbated by work-related activities. Physical examination revealed full motion in the elbow, forearm, and wrist, but limited motion in the right thumb. Dr. Daugherty attributed the Plaintiff's thumb osteoarthritis to occupational overuse and prescribed temporary partial disability, recommending a lifting limit of three pounds and avoidance of forceful hand activities. A follow-up on April 13 indicated no significant changes, leading to a recommendation for surgical intervention for left thumb CMC joint arthrosis, while maintaining the same work restrictions.
Subsequently, on April 24, 2015, Dr. Martin Mendelssohn conducted a peer review for Aetna concerning the Plaintiff's claim, noting persistent symptoms but negative electrodiagnostic studies and clinical exams that failed to demonstrate substantial functional impairment. Aetna denied the Plaintiff's appeal on May 27, 2015, concluding that there were insufficient objective findings to support the claim of functional impairment preventing the Plaintiff from performing his job duties.
Under ERISA Section 502, beneficiaries may seek recovery of benefits or clarification of rights. The legal standard for reviewing Aetna's denial hinges on whether the de novo or abuse of discretion standard applies. Generally, ERISA plan denials are reviewed de novo unless the plan grants the administrator discretionary authority, which must be explicitly stated. The Plaintiff contends that de novo review is warranted due to California Insurance Code 10110.6, which invalidates discretionary authority provisions for claims arising after January 1, 2012.
Section 10110.6(a) states that any provision in life or disability insurance policies that grants discretionary authority to the insurer regarding eligibility or interpretation is void if it contradicts California law. Aetna contends that the abuse of discretion standard should apply to its STD Plan, which grants it such authority. However, case law indicates that section 10110.6 negates discretionary authority, necessitating de novo review. The application of this standard is complicated by ERISA preemption issues.
Plaintiff argues that section 10110.6 is protected from ERISA preemption by the Savings Clause, which preserves state laws regulating insurance. Aetna counters that the Deemer Clause of ERISA exempts self-funded plans from state insurance regulations. For a law to be saved from preemption, it must specifically target insurance entities and significantly affect the risk arrangement between insurer and insured. The Ninth Circuit has recognized that prohibiting discretionary clauses qualifies under the Savings Clause. Section 10110.6 meets this criterion as it specifically regulates insurance policy terms and substantially impacts risk pooling. However, the question of whether section 10110.6 applies to self-funded ERISA plans or is preempted by the Deemer Clause remains unresolved, creating further complexity in the court's analysis, highlighted by the Supreme Court's ruling in FMC Corp. v. Holliday.
The Savings Clause preserves section 10110.6 from preemption; however, the Deemer Clause preempts it concerning self-funded ERISA plans, which are immune from state regulations that relate to them. Many courts have upheld the FMC Corp. decision that ERISA supersedes state laws affecting self-funded plans. Despite this precedent, two district courts have ruled that section 10110.6 is not preempted by ERISA, thus allowing for de novo review. In Thomas v. Aetna Life Ins. Co., the court found section 10110.6 applicable to self-funded plans, paralleling its treatment of insured plans, based on the plain language of the statute and its legislative history, which targeted discretionary clauses in self-funded plans. Nevertheless, the current court asserts ERISA preempts section 10110.6 in the context of FedEx’s self-funded plan, distinguishing from the Thomas and Williby decisions which did not adequately consider FMC Corp.'s relevance. The court emphasizes it is not addressing whether section 10110.6 pertains to ERISA plan documents but rather the conflict between section 10110.6 and self-funded ERISA plans. The plaintiff's contention that section 10110.6 nullifies all discretionary clauses is overstated; courts have applied abuse of discretion standards in instances where discretionary clauses exist within both the plan and its Summary Plan Description. In a related case, Constantino v. Aetna Life Ins. Co., the court upheld an abuse of discretion review based on similar discretionary provisions. The current STD Plan explicitly grants Aetna the authority to interpret the plan's provisions, including claimant eligibility.
The Court finds that even if section 10110.6 were to void the discretionary clause, the STD Plan is self-funded, meaning FedEx pays benefits from its own funds. The clause grants discretion to Aetna, and only two non-binding cases have suggested that section 10110.6 voids a self-funded plan’s discretionary clause, which the Court does not accept. It holds that ERISA preempts section 10110.6, thus the discretionary clause remains intact. The Court reviews the denial of Plaintiff's STD Plan benefits from February 15, 2015, to May 7, 2016, under the abuse of discretion standard, akin to the 'arbitrary and capricious' standard. This standard allows the plan administrator's decision to stand if reasonable. Abuse occurs if decisions lack explanation, conflict with plan language, or rely on erroneous facts.
The Court notes a structural conflict of interest does not exist in this case, as Aetna administers claims while FedEx funds the benefits, and Plaintiff did not raise this issue. Aetna’s denial letters adequately informed Plaintiff of the need for 'significant objective findings' to support his claim of functional impairment, citing specific plan provisions. Aetna reviewed Plaintiff's medical documentation thoroughly, clarifying the requirement for significant findings distinct from his reported symptoms.
Aetna determined that Dr. Rickards' restrictions on the Plaintiff (no lifting over 3 pounds and no repetitive typing) lacked support from the medical findings, as both EMG and nerve conduction studies returned normal results. The letter, although not perfectly clear, sufficiently outlined Aetna's policies, definitions of disability, and details regarding the Plaintiff's condition. Unlike a prior case (Booton), Aetna thoroughly reviewed the medical records to assess the validity of the Plaintiff's claim regarding lifting limitations. Aetna noted several normal test results and highlighted that the STD Plan stipulates pain alone, without significant objective findings, does not constitute proof of disability. Furthermore, Aetna allowed the Plaintiff additional time to gather supporting evidence.
In assessing whether Aetna's decision contradicted the plan’s plain language, the court must evaluate if the administrator's interpretation was unreasonable rather than which interpretation is more persuasive. The Plaintiff focused on the 'own occupation' standard but did not provide a clear definition. The plan’s language does not clarify whether the Plaintiff must demonstrate an inability to perform all, none, or some essential job functions. Although his job description required the ability to lift 75 pounds, this was not deemed an essential function. Benefits are payable if the employee cannot perform substantial and material duties of their occupation. Aetna’s analysis of the Plaintiff's subjective complaints against recent medical documentation showed no medical impairment that would prevent lifting 75 pounds. This was consistent with another case where lack of significant abnormalities in medical documentation led to a similar conclusion regarding disability. Aetna's reliance on the STD Plan’s language, which specifies that pain without significant objective findings is not proof of disability, was upheld since the Plaintiff’s reported symptoms did not correlate with any significant functional deficits. Thus, Aetna's decision aligned with the plain language of the STD Plan.
A decision is considered "clearly erroneous" if the reviewing body is firmly convinced that a mistake has occurred. The plaintiff alleges that Aetna disregarded all recommendations from his treating physicians to limit his lifting to under 75 pounds and their consensus that he could not work due to permanent injuries to his thumb and wrist. However, plan administrators are not required to give special weight to treating physicians' opinions. Aetna did not completely overlook these medical findings; during a January 22, 2015 visit, Dr. Rickards noted that while the plaintiff had not improved, he exhibited no deformities and had normal strength and sensation, allowing for modified work duties with a lifting limit of three pounds. A subsequent visit confirmed normal results from an EMG study and indicated he could work with restrictions, without stating he was definitively unable to work or imposing severe lifting restrictions. This situation differs significantly from a previous case where treating physicians clearly stated the plaintiff could not work. Aetna's May 27 letter summarizing these medical visits concluded that the plaintiff did not have significant impairments preventing him from performing job duties. Additionally, Aetna considered conflicting evidence from peer reviews by Dr. Wheatley and Dr. Mendelssohn, which contradicted the plaintiff's claims. Dr. Wheatley highlighted inconsistencies between the treating physician's findings and the plaintiff's self-reported symptoms, concluding that there was no abuse of discretion in how Aetna evaluated the evidence, as it weighed both subjective complaints and objective test results.
The claims administrator's decision to weigh the treating physicians' conclusory statements against those of the plan's doctors was not arbitrary. Aetna's dismissal of the Plaintiff's subjective pain complaints was supported by substantial evidence, including contradictions between the Plaintiff's self-reported pain and objective medical findings, such as normal nerve conduction tests and full range of motion. Despite the Plaintiff's claims of chronic pain syndrome, the court highlighted the necessity of objective evidence to substantiate claims of disability, emphasizing that pain without significant objective findings does not constitute proof of disability under the plan. The Plaintiff's assertions that treating physicians declared he could not lift over 75 pounds misinterpreted the medical records and confused diagnosis with disability. The court referenced previous case law, affirming that reliance on subjective pain reports would undermine the claims administrator's discretion. Ultimately, Aetna did not abuse its discretion in denying short-term disability benefits for the period in question. Even under a de novo review standard, the outcome would remain unchanged, as the burden of proof rests with the claimant to demonstrate disability per the plan's terms.
Plaintiff did not establish a medically determinable physical impairment that would prevent him from lifting packages over 75 pounds. Medical records from visits between November 2014 and April 2015 consistently showed normal range of motion and muscle strength in the wrist, hand, and thumb. Despite some physicians recommending limited use of his wrists and hands, they permitted his return to work, with only Dr. Daugherty indicating a need for temporary partial disability. The court determined that Aetna correctly denied benefits, as the Short-Term Disability (STD) Plan requires objective findings, and pain alone does not constitute evidence of disability.
Regarding admissibility issues, Aetna objected to Dr. Thompson's June 15, 2015 report as it was not included in the administrative record nor submitted in time for appeal. The court ruled that it would not consider this report, as it was irrelevant to Aetna's initial denial of benefits. Furthermore, the court found no exceptional circumstances justifying the report's admission. Additionally, Plaintiff's objection to Tamara K. Turner's Declaration, which quantified STD benefits, was deemed moot because the denial of benefits meant no offsets were owed. Thus, the court upheld both objections and excluded the exhibits from evidence.
Plaintiff did not demonstrate that Aetna abused its discretion in denying short-term disability (STD) benefits from February 15, 2015, to May 7, 2015. Consequently, judgment is ordered in favor of the Defendants, with Aetna identified as the primary defendant regarding the denial of benefits. The Court references Aetna in discussions of all Defendants due to its central role in the case. The discretionary clause in the STD Plan, claimed by Plaintiff to be void under section 10110.6, allows the Claims Paying Administrator to interpret the Plan's provisions with exclusive discretion concerning benefit eligibility. Aetna acknowledges that the claim accrued in March 2015, postdating the January 1, 2012, cutoff for section 10110.6 applicability. This section defines "discretionary authority" as a provision granting insurers the discretion to determine benefits entitlement, potentially leading to a deferential standard of review in court. Previous cases are cited where discretionary clauses were invalidated under section 10110.6, resulting in a de novo standard of review. The Court references ERISA's preemption of state laws regarding employee benefit plans, noting that certain state regulations do not apply to self-funded plans. The Court also rejects Plaintiff's claim of bias against Dr. Mendelssohn, who allegedly used standard language in multiple cases.
Plaintiff contends that Aetna should prioritize his subjective pain complaints, a position the Court has rejected. The Court finds Aetna's reliance on Dr. Mendelssohn does not demonstrate bias or an abuse of discretion. Plaintiff's assertion of multiple MRIs confirming his complaints lacks support in the administrative record. Aetna acknowledges that Dr. Daugherty, Plaintiff’s only treating physician, suggested a temporary partial disability with a lifting restriction of three pounds. However, this does not outweigh evidence from Dr. Rickards, Dr. Seeman, and Dr. Thompson, which fails to link Plaintiff's diagnoses to a substantiated disability. The dispute centers on Plaintiff's entitlement to Long Term Disability (LTD) and offset amounts. The Court determines that Aetna did not abuse its discretion in denying Short Term Disability (STD) benefits, validating the denial for the period from February 15, 2015, to May 7, 2015. Since LTD benefits commence only after the exhaustion of STD benefits, which lasts 26 weeks, the Court will not assess the amount of LTD benefits owed. Additionally, the issue of offset amounts is unnecessary to consider, as Aetna’s denial of benefits for the relevant period was appropriate. STD benefits will be reduced by any amounts Plaintiff receives or is entitled to receive, and specific offset amounts were not included in the administrative record, falling outside Aetna's responsibilities.
