Ruppert v. Atlas Air Inc.

          ORDER

          H. RUSSEL HOLLAND UNITED STATES DISTRICT JUDGE.

         This is an ERISA action, in which plaintiff Thomas Ruppert seeks judicial review of an adverse decision by defendant Hartford Life and Accident Insurance Co. Plaintiff has timely filed his opening brief, ^[1] to which defendant has responded.^[2] Oral argument was not requested and is not deemed necessary.

         Facts

         Plaintiff was employed by Atlas Air Inc. as a pilot from 1999 to 2018.^[3] Atlas Air is the sponsor and plan administrator of the Atlas Long Term Disability Plan, which provides Long Term Disability (LTD) benefits to its pilots and air crew pursuant to a group policy of insurance issued by defendant. Defendant is the claims administrator of the Plan.

         Defendant determined that plaintiff became disabled on June 1, 2018, ^[4] and on September 21, 2018, plaintiff's claim for LTD benefits was approved.^[5] Plaintiff was advised that his LTD benefits were “intended to supplement income you may receive as a result of your disability or retirement” and that “any other income benefits you receive may reduce your LTD benefits.”^[6] Plaintiff was further advised that “[o]ther income can include, but is not limited to, any Social Security benefits you or your family receives[.]”^[7] Plaintiff was also advised that defendant's “records indicate you may qualify for Social Security Disability (SSD) benefits. Your LTD policy requires you to apply for SSD benefits. . . .”^[8]

         On September 25, 2018, plaintiff was advised that he was entitled to Social Security Retirement benefits of $2, 461 per month, beginning in July 2018.^[9] Plaintiff provided this information to defendant in October 2018.^[10]

         On November 6, 2018, defendant informed plaintiff that his Social Security Retirement benefits were “Other Income Benefits” under the Plan and thus his monthly LTD benefits of $10, 000 would be reduced by $2, 461.50, beginning on July 1, 2018.^[11]

         Plaintiff appealed this decision, arguing that Social Security Retirement benefits were not “Other Income Benefits” under the Plan.^[12] On April 29, 2019, defendant denied plaintiff's appeal, having “determined the offset for Social Security Retirement (SSR) benefits is appropriate under the terms of the” Plan.^[13]

         On May 28, 2019, plaintiff commenced this action, in which he seeks review of defendant's final determination.

         Standard of Review

         “District courts review a decision to deny or terminate benefits under an ERISA plan ‘under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.'” Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978, 981 (9th Cir. 2005) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). Here, the Plan gave defendant the “full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of the Policy.”^[14] Thus, the court reviews defendant's determination that an offset for Social Security Retirement benefits was appropriate under the Plan for an abuse of discretion.

         Plaintiff's contention that the court should review defendant's determination under the de novo standard is simply wrong. In the Ninth Circuit, “‘[w]here an ERISA Plan grants discretionary authority to determine eligibility for benefits or to construe the terms of the plan, a plan administrator's interpretation of a plan is reviewed for abuse of discretion.'” O'Rourke v. N. Calif. Electrical Workers Pension Plan, 934 F.3d 993, 998 (9th Cir. 2019) (quoting Lehman v. Nelson, 862 F.3d 1203, 1216 (9th Cir. 2017)).

         “Under” the abuse of discretion “standard, [defendant's] interpretation of Plan language is entitled to a high level of deference and will not be disturbed unless it is ‘not grounded on any reasonable basis.'” Tapley v. Locals 302 and 612 of Int'l Union of Operating Engineers-Employers Const. Industry Retirement Plan, 728 F.3d 1134, 1139 (9th Cir. 2013) (quoting Oster v. Barco of Cal. Emps.' Ret. Plan, 869 F.2d 1215, 1218 (9th Cir. 1988)). “The analysis is not based on ‘whose interpretation of the plan documents is most persuasive, but whether the [administrator's] interpretation is unreasonable.'” Moyle v. Liberty Mut. Retirement Ben. Plan, 823 F.3d 948, 958 (9th Cir. 2016) (quoting Canseco v. Constr. Laborers Pension Tr., 93 F.3d 600, 606 (9th Cir. 1996)). “When reviewing interpretive challenges for abuse of discretion, the [c]ourt closely reads contested terms and ‘appl[ies] contract principles derived from state law [, ] . . . guided by the policies expressed in ERISA and other federal labor laws.'” Tapley, 723 F.3d at 1139 (quoting Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 982, 985 (9th Cir. 1997)). Defendant will have abused its discretion if it “construe[d] provisions of [the P]lan in a way that clearly conflicts with the plain language of the Plan, render[ed] nugatory other provisions of the Plan, or lack[ed] any rational nexus to the primary purpose” of the Plan[.]” Id. (internal citations omitted).

         “The manner in which a reviewing court applies the abuse of discretion standard . . . depends on whether the administrator has a conflicting interest.” Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 629 (9th Cir. 2009). “In the absence of a conflict, judicial review of a plan administrator's benefits determination involves a straightforward application of the abuse of discretion standard.” Id. But, if the plan administrator is operating under a conflict of interest, the court “must take into account the administrator's conflict of interest as a factor in the analysis.” Id. at 630. Here, defendant's “dual role as plan administrator, authorized to determine the amount of benefits owed, and insurer, responsible for paying such benefits, creates a structural conflict of interest.” Stephan v. Unum Life Ins. Co. of America, 697 F.3d 917, 929 (9th Cir. 2012).

         “The level of skepticism with which a court views a conflicted administrator's decision may be low if a structural conflict of interest is unaccompanied, for example, by any evidence of malice, of self-dealing, or of a parsimonious claims-granting history.” Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 968 (9th Cir. 2006). But, the court may view a conflicted administrator's decision with a great deal of skepticism if, for example, there is evidence that

the administrator provide[d] inconsistent reasons for denial, fail[ed] adequately to investigate a claim or ask[ed] the plaintiff for necessary evidence, fail[ed] to credit a claimant's reliable evidence, or has repeatedly denied benefits to deserving participants by interpreting plan terms incorrectly or by making decisions against the weight of evidence in the record.

Id. at 968-69 (internal citations omitted).

         Defendant argues that the court should view its decision with a low level of skepticism and offers evidence in the form of a declaration from its Director of Group Insurance Claims, Adam Garcia, in support. Garcia avers that defendant “maintains a separate appeals unit for the consideration of claims that have been denied by the claims department on its initial review” and that “the individual responsible for the appeal reviews the claim, and all evidence, without affording deference to the initial adverse benefit determination.”^[15] Garcia further avers that defendant “does not provide Ability Analysts, or Appeals Specialists with incentives, remuneration, bonuses, awards, achievements, or other recognition based in whole or in part upon the denial or termination of claims”^[16] and that defendant's “claims decision-makers are paid fixed salaries and performance bonuses that are wholly unrelated to the number of claims paid or claims denied.”^[17] Garcia further avers that defendant's “Ability Analysts and Appeals Specialists are evaluated on the quality and accuracy of their claims decisions in accordance with the applicable plan/policy documents. Hartford does not discourage its claim decision-makers from paying claims that are entitled to payment pursuant to the applicable plan provisions.”^[18] Finally, Garcia avers that defendant's “claims department[] and appeals unit are completely separate business units from the financial and underwriting departments.”^[19] Defendant argues that Garcia's averments are evidence that it has taken steps to ensure that its structural conflict does not affect its claims decisions and thus the court should afford the conflict of interest little, if any, weight.

         Plaintiff however argues that Garcia's declaration is irrelevant because the de novo standard of review applies here, but as explained above, the abuse of discretion standard applies here. To the extent that Garcia's declaration is relevant, plaintiff argues that other courts have rejected defendant's assertion of unbiased claims handling. But the cases to which plaintiff cites do not support his argument. In Kouns v. Hartford Life and Accident Insurance Co., 780 F.Supp.2d 578, 585 (N.D. Ohio 2011), there was “no evidence . . . showing that the [structural] conflict affected Hartford's decision” but because “the effects of such a conflict are exceedingly difficult-if not impossible-to prove, ” the court “weigh[ed] this conflict as a factor against Hartford. . . .” Moreover, the court found Hartford had abused its discretion in terminating Kouns' LTD benefits, not because of any interpretation of plan language, but rather because of Hartford's treatment of evidence in the record such as a medical opinion, an employability analysis, and the fact that the Social Security Administration had found Kouns disabled. Id. at 585-90. In Gaeth v. Hartford Life Insurance Company, 538 F.3d 524, 527 (6th Cir. 2008), the other case cited by plaintiff, the court did not even discuss a conflict of interest and the issue before the court of appeals was whether the district court's award of attorney fees to Gaeth was proper “even though it did not find that Gaeth [was] still entitled to disability benefits under the plan.”

         Here, the evidence before the court shows that defendant has taken steps to prevent its structural conflict of interest from affecting its benefits decisions and there is no evidence that defendant has repeatedly denied benefits by interpreting plan terms incorrectly or otherwise engaged in self-dealing. Thus, the court will view defendant's final determination that the Social Security Retirement benefits offset was proper with a low level of skepticism.

         Discussion

         The Plan provides that monthly LTD Benefits are calculated as follows:

1) multiply Your Monthly Income Loss by the Benefit Percentage;

2) compare the result with the Maximum Benefit; and

3) from the lesser amount, deduct Other Income Bene-fits.^[20]

The Plan defines “Other Income Benefits” as follows:

         Other Income Benefits means the amount of any benefit for loss of income, provided to You or Your family, as a result of the period of Disability for which You are claiming benefits under The Policy. This includes any such benefits for which You or Your family are eligible or that are paid to You or Your family, or to a third party on Your behalf, pursuant to any:

1) temporary, permanent disability, or impairment benefits under a Workers' Compensation Law, the Jones Act, occupational disease law, similar law, or substitutes or exchanges for such benefits;

2) governmental law or program that provides disability or unemployment benefits as a result of Your job with Your Employer;

3) plan or arrangement of coverage, whether insured or not, which is received from Your Employer as a result of employment by or association with Your Employer or which is the result of membership in or association with ...