United States District Court, D. Alaska
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 ...