Prado v. Allied Domecq Spirits and Wine Group Disability Income Policy

Filing 83

FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by Judge Samuel Conti on 7/22/2011. (sclc1, COURT STAFF) (Filed on 7/22/2011)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court

For the Northern District of California

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ANTONIO PRADO,

)
)
Plaintiff,
)
)
v.
)
)
ALLIED DOMECQ SPIRITS AND WINE
)
GROUP DISABILITY INCOME POLICY,
)
)
Defendant.
)
_________________________________ )
)
LIBERTY LIFE ASSURANCE COMPANY OF )
BOSTON,
)
)
Real Party in Interest. )
I.

Case No. 09-4419 SC
MEMORANDUM OF DECISION,
FINDINGS OF FACT, AND
CONCLUSIONS OF LAW

INTRODUCTION
Plaintiff Antonio Prado ("Prado" or "Plaintiff") commenced

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this action against the Allied Domecq Spirits and Wine Group

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Disability Income Policy ("Allied" or "the Plan"), bringing three

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causes of action: (1) failure to extend disability benefits in

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accordance with the Plan and the Employee Retirement Income

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Security Act of 1974 ("ERISA"), 28 U.S.C. § 1132; (2) violation of

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section 10111.2 of California's Insurance Code; and (3) failure to

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produce records under 29 U.S.C. § 1332(c) and 29 C.F.R. § 2560.503-

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1.

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Life Assurance Company of Boston ("Liberty" or "Defendant").

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Plaintiff and Liberty have now moved for judgment pursuant to Rule

The Real Party in Interest is the Claims Administrator, Liberty

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52 of the Federal Rules of Civil Procedure.

ECF Nos. 40 ("Pl.'s

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Mot."), 49 ("Def.'s Opp'n"), 44 ("Def.'s Mot."), 68 ("Pl.'s

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Opp'n"), 73 ("Def.'s Reply").1

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during which the Court requested both parties submit proposed

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findings of fact and conclusions of law.

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have complied with the Court's request.

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FFCL"), 82 ("Pl.'s FFCL").

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respective submissions, the Court rules as follows.

Trial occurred on June 6, 2011,

ECF No. 77.

The parties

ECF Nos. 81 ("Def.'s

Having read and considered the parties'

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United States District Court

For the Northern District of California

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II.

FINDINGS OF FACT

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A.

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As the Court will discuss infra, abuse-of-discretion review of

Evidence Considered by the Court

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an ERISA claim denial is generally limited to the administrative

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record; that is, the papers the insurer had when it denied the

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claim.

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Prot. Plan, 349 F.3d 1098, 1110 (9th Cir. 2003).

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denial is made by an administrator operating under a conflict of

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interest, the court has discretion to permit discovery beyond the

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administrative record into the nature, extent, and effect of this

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conflict on the administrator's decision-making process.

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Met. Life Ins. Co., 480 F.3d 942, 949-50 (9th Cir. 2007).

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Similarly, if an administrator presents a new reason for its denial

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in its final administrative decision, the claimant is entitled to

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present evidence regarding that denial and to have the district

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court consider it.

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Disability Plan, 522 F.3d 863, 872 (9th Cir. 2008).

Jebian v. Hewlett-Packard Co. Emp. Benefits Org. Income
However, if the

Welch v.

Saffron v. Wells Fargo & Co. Long Term
Evidence

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Plaintiff's Motion was erroneously electronically filed as a
trial brief.
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considered beyond the administrative record "need not satisfy the

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strict rules for the admissibility of evidence in a civil trial,

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and may be considered so long as it is relevant, probative, and

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bears a satisfactory indicia of reliability."

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Indus., Inc., 196 F.3d 970, 978 (9th Cir. 1999).

Tremain v. Bell

On August 2, 2010, the Court determined that Liberty operated

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under a conflict of interest and permitted Plaintiff to conduct

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limited discovery into the "nature, extent, and effect of Liberty's

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conflict of interest on its decision-making process."

United States District Court

For the Northern District of California

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("Aug. 2, 2010 Order").
With this framework in mind, the Court evaluates the

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ECF No. 35

admissibility of evidence submitted by the parties.
1.

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The Claim File

Liberty submits the Claim File ("CF"), which it alleges is the

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complete record on which Liberty based its denial of Plaintiff's

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benefits claim and his subsequent appeal.

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The Claim File consists of 4090 pages of records and one DVD

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containing surveillance video of Plaintiff from September and

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October 2009.

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Claim File; in fact, it contains numerous documents Plaintiff

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submitted to Liberty in support of his claim.
2.

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Gray Decl. Ex C ("CF").2

Plaintiff does not challenge the authenticity of the

The Plan Documents

Liberty submits copies of what it alleges are the Policy and

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the Summary Plan Description; these are the plan documents Liberty

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provided to Plaintiff during the claims process.

McNerney Decl.

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2

Lisa Gray ("Gray"), appeal review consultant for Liberty, filed a
declaration in support of Liberty's Motion. ECF No. 47.
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Exs. A ("Policy"), B ("SPD").3

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has failed to provide the Plan document and disputes whether the

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two produced documents accurately reflect the terms of the Plan.

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Pl.'s Mot. at 23.

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participated in is titled "Hiram Walker & Sons Long-Term Disability

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Plan Number 507," and that Liberty has produced no such plan.

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Plaintiff states: "Without the Plan, who knows whether there is a

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difference between the insurance policy, which Liberty has been

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using as if it were the Plan, and the Plan itself."

United States District Court

For the Northern District of California

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Plaintiff alleges that Defendant

Plaintiff alleges that the Plan which he

Id.

Pl.'s Mot. at

24.
The SPD is clearly identified as the summary plan description

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of "Hiram Walker & Sons Inc. Long Term Disability Plan Number 507."

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SPD at 26.4

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Sons" or "Plan Number 507," and identifies Allied Domecq Spirits

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and Wine as the Plan's sponsor.

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the SPD bear the same policy number: GF3-841-431862-01.

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1; SPD at 3.

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the declaration of Carolyn McNerney ("McNerney"), who identifies

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herself as the current "Assistant Corporate Secretary for Pernod

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Ricard USA," an "affiliated company" that she claims currently

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administers the Plan.

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that [the Policy and the SPD] are true and authentic copies of the

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Group Disability Income Policy issued to Allied Domecq Spirits and

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Wine . . . and the operative Summary Plan Description."

The Policy contains no mention of "Hiram Walker &

Policy at 2.

Both the Policy and
Policy at

To authenticate the Policy and SPD, Liberty submits

Id. ¶ 1.

McNerney states: "I can declare

Id. ¶ 2.

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Carolyn McNerney ("McNerney") filed a declaration in support of
Liberty's Motion. ECF No. 48.
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In this Circuit, the SPD constitutes a plan document that "should
be considered when interpreting an ERISA plan." Bergt v. Ret. Plan
for Pilots Employed by Mark Air, Inc., 293 F.3d 1139, 1143 (9th
Cir. 2002).
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McNerney declares that when Allied purchased Hiram Walker-Gooderham

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& Worts of Canada in 1987, "the Hiram Walker & Sons Long-Term

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Disability Plan Number 507 became known as the Allied Domecq

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Spirits & Wine USA Inc. and Subsidiary & Affiliated Companies Group

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Welfare Insurance Plan for Employees in the US."

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McNerney states that "after a diligent and complete search, no

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other plan documents have been located."

Id. ¶ 4.

Id. ¶ 9.5

In light of the above, the Court finds that the Policy and SPD

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United States District Court

produced during the claim process contain satisfactory indicia of

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For the Northern District of California

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reliability, and accepts the terms provided in the Policy and the

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Summary as the terms of the Plan.
3.

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Other Evidence Submitted by Liberty

Liberty submits the declaration of Paula McGee ("McGee"),

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litigation manager of disability claims for Liberty.

ECF No. 45.

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McGee declares that through her position as litigation manager, she

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is familiar with Liberty's claims and underwriting operations, as

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well as Plaintiff's claim.

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///

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///

Id. ¶ 2.

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In its August 2, 2010 Order, the Court sustained Plaintiff's
objection to a similar declaration by McNerney in which she
attempted to authenticate these plan documents, and permitted
Plaintiff to conduct discovery of the plan documents. Aug. 2, 2010
Order at 13. While Liberty was uncooperative in responding to
Plaintiff's discovery requests, as the Court discusses infra,
Liberty did produce a document that it identified as "Group Income
Disability Policy GF3-841-431862-01" and five amendments to it.
Cogan Decl. Ex. D. ("Exhibit D"). Both the Policy produced during
the claims process and Exhibit D bear the same policy number ("GF3841-431862-01"). The first pages of both documents differ (Exhibit
D is signed by the "secretary" and "president," while the Policy is
not). Id. at 2. Exhibit D includes Allied's application for group
insurance, id. at 40, while the Policy does not. Exhibit D
contains Amendments 1 through 5, Ex. D. at 41-52, while the Policy
produced during the claims process does not. Otherwise, the two
documents appear to be identical.
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4.

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Evidence Submitted by Plaintiff

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Plaintiff submits a declaration of Steven Moon ("Moon"), who

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identifies himself as the work capacity evaluator who performed a

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Functional Capacity Evaluation ("FCE") of Plaintiff on February 25,

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2009.

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Claim File.

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the surveillance footage taken in September and October 2009.

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Plaintiff also submits his own declaration in which he responds to

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this footage.

United States District Court

CF 0583-0592.

Moon's FCE report is included in the
In his declaration, Moon responds to

ECF No. 42.7

Plaintiff also asks the Court to take judicial notice of the

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For the Northern District of California

Moon Decl. ¶¶ 1-2.6

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Bristol Hospital 2008 Annual Report and a motion filed in an

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unrelated action against Liberty in District Court for the Southern

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District of Ohio.

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documents lack the indicia of reliability required under Tremain,

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196 F.3d at 978, and it declines Plaintiff's request.

ECF No. 69.

The Court finds that these

In finding the facts below, the Court relies on the evidence

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above and the facts decided and actually litigated in the prior

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denial-of-benefits action between the parties, Prado v. Allied

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Domecq Spirits and Wine Gr. Disability Income Policy, No. 05-2716,

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2008 WL 191985 (N.D. Cal. Jan. 22, 2008) ("Prado I").

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B.

The Parties

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Plaintiff is a California resident; from February 1987 to

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September 2003, he worked as a production manager for Mumm Napa

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Valley ("Mumm"), a subsidiary of Allied Domecq Spirits and Wine.

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ECF No. 41.

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Liberty objects to the declarations of Moon and Plaintiff. ECF
No. 52. The Court OVERRULES Liberty's objection, finding the
declarations relevant under Saffron, 522 F.3d at 872, as related to
a new reason for denial offered by Liberty in its final
administrative decision.
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Prado I at 1.

As a production manager, Plaintiff managed all

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aspects of winery bottling and warehouse operations, including

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overseeing bottling, quality control, warehousing, specialty

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packaging, procurement, inventory, planning, and scheduling.

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4083.
Liberty insured Plaintiff's long-term disability plan through

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a group disability policy.

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claims administrator.

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C.

United States District Court

Prado I at 1.

Liberty served as the

Id.

The Plan

Plaintiff was a beneficiary of his employer's sponsored long-

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For the Northern District of California

CF

term disability plan.

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Policy, Liberty must pay out a monthly benefit to participants who

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meet the definitions of "disabled" or "partially disabled."

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at 6.

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for the first twenty-four-month period, and a second for the time

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following this period.

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during the first twenty-four months if he "is unable to perform all

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the material and substantial duties of his occupation on an Active

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Employment basis because of an injury or sickness."

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(emphasis added).

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"is unable to perform, with reasonable continuity, all of the

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material and substantial duties of his own or any other occupation

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for which he is or becomes reasonably fitted by training,

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education, experience, age and physical and mental capacity."

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at 5 (emphasis added).

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the "own occupation" and "any occupation" periods.

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Id.

Under the Plan described in the

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Policy

The Policy provides two definitions of "disability" -- one

Policy at 4.

A participant is disabled

Policy at 4

After this period, a person is disabled if he

Id.

The parties and the Court refer to these as

The Policy gives Liberty the authority, "in its sole
discretion, to construe the terms of this policy and to determine

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benefit eligibility hereunder."

Id. at 25.

"Liberty's decisions

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regarding construction of the terms of this policy and benefit

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eligibility shall be conclusive and binding."

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requires that "[p]roof of claim must be given to Liberty."

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27.

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cause of the disability, and the degree of the disability.

The Policy

Id.

Id. at

This proof must cover the date the disability started, the
Id.

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D.

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Plaintiff first injured his back while employed with Mumm in

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1989.

Plaintiff's Injury

CF 1399, 2308.

While on the job, a three-to-four-hundred-

United States District Court

For the Northern District of California

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pound piece of machinery fell on him when a forklift chain became

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loose.

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work as a production manager for Mumm.

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care, physical therapy, and conservative treatment failed to

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improve his chronic pain, Plaintiff sought treatment of a

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neurosurgeon, Dr. Jay Levy ("Dr. Levy"), who performed an L5-S1

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discectomy in 1991.

CF 1399.

Although Plaintiff was injured, he continued to
Id.

After chiropractic

Id.

The discectomy failed to cure Plaintiff's pain; Plaintiff

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developed "internal derangement of his left knee," which was

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treated with steroid injections.

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headaches, dizziness, blurred vision, and blackouts.

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Plaintiff had arthroscopic surgery on his knee in August 1999.

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1345.

While the surgery helped, he still claimed to have knee

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pain.

He also complained of neck pain radiating into the left

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shoulder and down the arm to the ring and little fingers, with

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numbness, weakness, and tingling in the left arm.

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mobility and ability to lift weight were restricted.

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1377.

CF 1294.

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Plaintiff complained of
CF 1400.

CF 1376.

CF

His

CF 1376,

On September 1, 2003, Plaintiff informed Liberty that his back

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pain and headaches had escalated to the point that he could no

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longer continue working.

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stated that a lumbar MRI scan showed L5-S1 disc collapse and a

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cervical MRI scan showed spondylosis.

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Schlatter ("Dr. Schlatter") evaluated Plaintiff on January 19,

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2004.

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experiencing "daily chronic headaches" at a "10 out of 10

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severity."

CF 1469.

Id.

CF 0561.

In October 2003, Dr. Levy

CF 2309.

Dr. Margaret A.

She reported that at the time, Plaintiff was

Dr. Schlatter noted that Plaintiff had "fairly

United States District Court

For the Northern District of California

10

normal range of motion" in his neck and back and a typical gait.

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CF 1470.
Plaintiff filed a disability benefits claim, which Liberty

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received on March 25, 2004.

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denied Plaintiff's claim.

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reason for the denial:

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that you were disabled from the date you stopped working throughout

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the Elimination Period.

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support restrictions and limitations that preclude you from

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performing your occupation from September, 2003, to the present."

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Id.

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further review, Liberty upheld its initial denial.

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CF 2309.

CF 0561.

On June 2, 2004, Liberty

Liberty provided the following

"There is insufficient evidence to show

There is insufficient evidence on file to

Plaintiff appealed the decision and, on August 4, 2004, after
Id.

During the pendency of the appeal, Plaintiff was referred to

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an orthopedic spine surgeon, Dr. James Zucherman ("Dr. Zucherman").

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CF 1852.

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recorded that Plaintiff had reported pain that was intense and

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"made worse by sitting, rising from sitting, leaning forward,

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walking, lying on the back, lying on the stomach, driving, coughing

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or sneezing, and bending forward."

Dr. Zucherman noted normal gait and hip flexion, but

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CF 1852-1854.

Dr. Zucherman

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recommended surgery.

Id.

In January 2005, Dr. Zucherman performed

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a prosthetic disk replacement at L5-S1.

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procedure initially decreased Plaintiff's back pain and allowed for

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normal movement, subsequent visits through the rest of 2005 and

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2006 noted continued complaints of back pain and neck pain.

CF 2309.

While this

Id.

Plaintiff then requested that Liberty reconsider its denial in

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light of the treatment by Dr. Zucherman and other evidence.

CF

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0562.

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reconsider the claim because Plaintiff had already exhausted his

On May 6, 2005, Liberty informed Plaintiff that it would not

United States District Court

For the Northern District of California

Id.

Plaintiff filed suit

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administrative remedies under ERISA.

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against Liberty, seeking review of Liberty's denial of benefits.

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See Prado I (discussed in Part II.E, infra).

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Plaintiff continued treatment with Dr. Zucherman during the

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pendency of Prado I, experiencing continued symptoms in the neck

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and lower back.

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back pain" by Dr. Maria Sheila Tabilon ("Dr. Tabilon") on January

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27, 2006.

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mild bulging discs at C4-5, C5-6, and C6-7.

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2006, Dr. Zucherman reported that MRI scan showed degenerative disk

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changes in the cervical spine with no protrusions, no stenosis, and

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no neuroforaminal stenosis.

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that Plaintiff was totally disabled and unable to work.

CF 2309.

CF 2632.

Plaintiff was treated for his "chronic

An MRI scan performed in February 2006 showed

Id.

CF 1988.

In April

Dr. Zucherman consistently stated
CF 2309.

Plaintiff responded to several Oswestry Low Back Disability

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Questionnaires during his treatment, yielding scores ranging from

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sixty percent to eighty-six percent.

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1773.

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E.g., CF 0739, 0737, 1783,

On January 10, 2006, Plaintiff was evaluated by Dr. Jon
Sigurdson ("Dr. Sigurdson").

CF 1989.

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Dr. Sigurdson noted that

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while Plaintiff "did get benefit and improvement" from Dr.

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Zucherman's surgery, "the neck symptoms and headaches became more

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of a problem and are now bothering him more than the low back."

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1991.

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his headaches, was his 1989 injury.

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had a disability precluding heavy work, and was "temporarily

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totally disabled as far as the neck and arms is concerned."

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He opined that "consideration of vocational rehabilitation and

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ability to return to gainful employment would be premature."

United States District Court

For the Northern District of California

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CF

He concluded that the cause of Plaintiff's pain, including
CF 1993.

He concluded that he

Id.

CF

1994.
On May 15, 2007, the Social Security Administration ("SSA")

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12

held a hearing to determine whether Plaintiff had become disabled

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from any occupation since September 2, 2003.

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Zucherman provided a medical source statement, in which he marked

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that Plaintiff "has not been capable of performing sustained

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SEDENTARY work on a regular and continuing basis."

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reported that Plaintiff must lie down for three hours a day, and

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could sit a total of two hours a day, stand a total of one hour a

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day and walk up to an hour a day.

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limited to under five pounds and not more than an hour a day.

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The presiding Administrative Law Judge ("ALJ") found that Plaintiff

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had been disabled from any occupation since September 2, 2003.

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0548.

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"degenerative disc disease of the cervical and lumbar spine; spinal

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stenosis with radiculopathy of the cervical spine; [and] late

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postoperative lumbar pain."

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Plaintiff's rating of his pain at seven on a one-to-ten scale.

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///

Id.

CF 0548.

Dr.

CF 0034.

He

Lifting and carrying was
Id.

CF

The ALJ identified the following "severe impairments":

Id.

The ALJ accepted as credible

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Id.

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E.

Prado I

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On January 22, 2008, this Court issued summary judgment in

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favor of Plaintiff in his then-pending action against Liberty.

See

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Prado I.

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conflict of interest as an entity that both made benefits

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determinations and paid for them.

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instances in which this conflict appeared to influence Liberty's

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denial decision.

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Plaintiff with guidance as to what information was necessary in

The Court found that Liberty operated under a structural

Id. at 4.

It noted several

Specifically, Liberty had failed to provide

United States District Court

For the Northern District of California

10

order for Plaintiff to perfect his claim.

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to conduct a "meaningful dialogue" with Plaintiff in deciding

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whether to grant or to deny benefits by failing to use reasonable

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diligence to contact Plaintiff's health provider.

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Court found this conflict "is even manifest in the briefs submitted

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to this Court," noting that Liberty had made statements in its

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briefs that contradicted or mischaracterized the administrative

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record.

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denial with discounted deference.

Id. at 8-9.

Id. at 5.

It had failed

Id. at 7.

The

Accordingly, the Court reviewed Liberty's
Id. at 9.

The Court concluded that Liberty abused its discretion in

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20

denying Plaintiff's claim.

21

ignore Plaintiff's subjective pain complaints and instead rely

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solely on objective evidence if evidence of Plaintiff's pain is not

23

available."

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benefits for the twenty-four month "own occupation" period, and it

25

remanded the claim to Liberty to determine if Plaintiff qualified

26

for benefits beyond the first twenty-four months based on the "any

27

occupation" definition of disability.

28

///

Id. at 20.

The Court wrote, "Liberty may not

The Court awarded long-term disability

12

Id. at 21.

1

F.

2

Following remand, Liberty assigned Plaintiff's claim to

3

Elizabeth Kiernan ("Kiernan"), a disability claims technical

4

specialist for Liberty.

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the entire record before this Court in Prado I, as well as workers'

6

compensation records and other medical records produced by

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Plaintiff during Prado I.

At that time, the Claim File consisted of

CF 0007, 3032-4089.

Kiernan sent Plaintiff's counsel a letter on July 9, 2008

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9

Remand

requesting that Plaintiff complete several forms.

On September 15,

United States District Court

For the Northern District of California

10

2008, Plaintiff's counsel returned the completed forms to Kiernan.

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CF 3028.

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Plaintiff stated that he was able to sit, stand, or walk for

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periods of ten to fifteen minutes.

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left the house daily and was able to drive his daughter to school

15

each day, work in his garden, and wash his car.

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that he sometimes would help his wife with grocery shopping by

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carrying "the light things."

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that back pain, neck pain and headaches prevented him from

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performing any gainful employment.

In his responses to an activities questionnaire,

CF 3023.

CR 3024.

He stated that he

Id.

He reported

However, Plaintiff stated

CF 3025.

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On September 15, 2008, Liberty requested additional medical

21

information from Plaintiff's identified providers for the period

22

from June 1, 2005 to present.

23

Plaintiff's counsel notifying him of the request.

24

On September 19, 2008, Plaintiff's counsel responded, and the

25

records sought were added to the Claim File.

26

2346.

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28

Liberty also sent a letter to
CF 3020-3022.

CF 2347-3011, 2316-

Liberty did not request an examination of Plaintiff.

Rather,

Liberty referred the claim file to Dr. C. David Bomar ("Dr. Bomar")

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1

for a paper review of Plaintiff's claim.

2

review on October 28, 2008.

3

that the file did not support "inability to work full time as of

4

2/28/06 to the present."

5

be capable of full-time work so long as it was "restricted to light

6

work with no lifting over roughly 20 pounds occasionally and

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avoidance of more than occasional bending, squatting, stooping or

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kneeling."

9

consistently reported that Plaintiff was totally disabled and

Id.

Dr. Bomar filed his

CF 2308-2313.

Id.

Dr. Bomar concluded

Dr. Bomar found that Plaintiff would

Dr. Bomar noted that while Dr. Zucherman

United States District Court

For the Northern District of California

10

unable to work, "there were a number of Independent Medical

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Evaluations from several orthopedic surgeons and neurosurgeons from

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the late 1990s up to 2006, most of which gave the claimant a light

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work capacity with avoidance of heavy lifting."

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Bomar concluded that while "[s]ome degree of chronic low back pain

15

would not be unexpected," "inability to sit, stand or walk

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frequently would not be expected."

17

CF 2309.

Dr.

CF 2310.

On October 29, 2008, Liberty sent Dr. Zucherman a letter

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asking for additional information, requesting a response by

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November 15, 2008.

20

CF 2306-2307.

Liberty then referred the claim for a transferrable skills

21

analysis.

CF 2233.

Liberty's vocational case manager, Michael

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Patrick Cooper ("Cooper"), reviewed the claim file and conducted a

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labor market survey.

24

background and experience and the physical restrictions and

25

limitations described by Dr. Bonar, Cooper determined that

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Plaintiff was capable of full-time sedentary work and light work

27

capacity, identifying five suitable occupations: winery production

28

supervisor, wholesale wine sales representative, telephonic

CF 2233-2235.

14

Based on Plaintiff's

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customer service representative, office assistant-production plant,

2

and small parts assembly.

3

occupations existed within Plaintiff's local and regional economy.

4

Id.

Id.

Cooper also stated that these

Liberty then referred the claim file for an "independent peer

5
6

review" with Dr. Richard Kaplan ("Dr. Kaplan").

7

Kaplan did not examine Plaintiff personally.

8

December 17, 2008 report, Dr. Kaplan claimed that he had tried on

9

three occasions to contact Dr. Zucherman, but that Dr. Zucherman

CF 2227.

Dr.

In his

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United States District Court

For the Northern District of California

CF 2223.

CF 2215-2230.

did not respond.

These calls were allegedly made on

11

December 18, 2008 at 3:07 a.m. EST, December 19, 2008 at 12:20 p.m.

12

EST, and December 22, 2008 at 9:46 a.m. EST.

13

concluded that after reviewing Plaintiff's medical history: "I

14

cannot identify any restrictions and limitations as of 2/2/06."

15

2225.

16

terms of cervical and lumbar range are essentially based on

17

subjective symptoms of pain with no objective anatomical basis for

18

those findings."

19

the claimant's presentation is essentially that of subjective pain

20

with subjective limitations in spinal range of motion without any

21

anatomical lesion or physiological reason to explain these reported

22

symptoms."

23

perform at the light physical demand level, writing: "a return to

24

some form of gainful employment . . . would not only be possible

CF 2223.8

Dr. Kaplan

Dr. Kaplan stated: "any restrictions which are reported in

Id.

Id.

Dr. Kaplan stated: "as of the present time

Dr. Kaplan concluded that Plaintiff was able to

25
26
27
28

CF

8

Plaintiff notes that Dr. Kaplan dated and signed his report on
December 17, 2008, which is before the dates on which Dr. Kaplan
claims these calls were made and not returned. Plaintiff argues
this is evidence that Dr. Kaplan had "no serious interest in Dr.
Zucherman's opinion," and suggests this "may explain why the
purported phone calls are made at odd times, such as the one
claimed to be made at 3:47 a.m." Pl.'s Mot. at 16-17.
15

1

but would also be highly recommended from a therapeutic

2

perspective."

3

CF 2227.

Kiernan sent Dr. Zucherman a letter on January 13, 2009

4

requesting his response to Dr. Kaplan's report.

5

several extensions of the deadline for Dr. Zucherman to respond,

6

ultimately extending it to February 28, 2009.

7

Zucherman did not respond by this deadline.

8
9

Liberty made

CF 2198.

Dr.

On March 2, 2009, Kiernan sent Plaintiff's counsel a letter
denying Plaintiff's claim for long term disability benefits,

United States District Court

For the Northern District of California

10

finding that Plaintiff did not meet the definition of "disabled"

11

for the "any occupation" period.

12

did not identify Dr. Kaplan, Dr. Bonar, or Cooper by name, but it

13

did state that a board-certified orthopedic surgeon had reviewed

14

Plaintiff's claim and concluded that it did "not support inability

15

to work full time as of 2/28/06 to the present."

16

denial letter noted Dr. Zucherman's failure to respond to Dr.

17

Kaplan's review.

18

manager "has identified occupations in Mr. Prado's local and

19

regional area which are at the light level."

20

CF 2194-2917.

The denial letter

CF 2195.

The

The denial letter noted that a vocational case

CF 2196.

The denial letter informed Plaintiff of the procedure for

21

requesting a review of the denial.

22

appeal should include "an opinion by Dr. Zucherman of the peer

23

review, any office notes, diagnostic test results, hospital

24

records, or any additional information which you feel will support

25

Mr. Prado's claim."

26

It stated that Plaintiff's

CF 2196.

On April 12, 2009, Plaintiff's counsel wrote Kiernan,

27

requesting the Claim File, "all ERISA plan documents," and a number

28

of other documents.

CF 2189-2192.

16

The list of documents sought

1

was extensive, and included twenty-six enumerated requests.

2

Plaintiff sought information on the orthopedic surgeon who reviewed

3

Plaintiff's claim, including "the number of reports prepared by

4

this physician for Liberty Life in each of the past three years,

5

and the number of those reports which were favorable to the

6

granting of or extension of disability benefits, and the number of

7

those reports which were favorable to the ending or termination of

8

disability benefits."

9

"a list of things which you would accept to prove 'objective'

CF 2189.

Plaintiff also sought, inter alia,

United States District Court

For the Northern District of California

10

evidence of impairment due to pain"; "the policies and procedures

11

used by Liberty Life to assess 'self-reported' conditions, 'chronic

12

pain,' 'failed back syndrome,' and residual pain following back

13

surgery"; "all writings and records, whether or not in the claims

14

file, for each 'roundtable' or group conference which discussed the

15

claim of Antonio Prado"; "[a]ll plans or programs offered to

16

Liberty Life claims personnel which require, encourage or permit

17

those claims personnel to purchase or acquire Liberty Mutual

18

stock"; and "[a]ll policies and procedures of Liberty Life which

19

are designed to mitigate the structural conflict of interest of

20

Liberty Life in deciding which ERISA plan beneficiaries are

21

eligible for benefits and the financial interest of Liberty Life as

22

payor of those benefits."

23

CF 2189-2192.

On April 30, 2009, Kiernan sent Plaintiff's counsel a copy of

24

the Claim File and the Policy, which she alleged was "all the

25

information that was received, reviewed, and considered in our

26

evaluation of Mr. Prado's claim."

27

Allied, not Liberty, was the plan administrator, and so Liberty was

28

not under an obligation under ERISA to produce plan documents.

17

CF 2179.

Kiernan claimed that

Id.

1

Kiernan included the curriculum vitae of Dr. Bomar and Dr. Kaplan.

2

Id.

3

and information, writing: "We do not agree with your interpretation

4

of the scope of Liberty's disclosure requirements and we are unable

5

to respond to your extensive requests for information."

6

Kiernan rejected Plaintiff's requests for additional documents

Id.

On July 22, 2009, Plaintiff submitted his appeal; Liberty

7

received it on July 27, 2009.

8

included with his appeal more than fifteen hundred pages of

9

documents.

CF 0548-2176.

CF 0602, 0546-0547.

Plaintiff

The documents included a May 4, 2009

United States District Court

For the Northern District of California

10

letter from Dr. Zucherman; Dr. Zucherman's medical records; medical

11

records from Kaiser Napa; a Functional Capacity Evaluation;

12

workers' compensation records; and the decision in Prado I.

13

Plaintiff also included the ALJ's decision in the SSA proceeding.

14

CF 0548-0555.

15

information, claiming that he was entitled under 29 C.F.R. §

16

2560.503(m)(8)(3) and (b)(5) to documents which "demonstrate[]

17

compliance" with "administrative processes and safeguards designed

18

to ensure and to verify that claim determinations are made in

19

accordance with governing plan documents and that, where

20

appropriate, the plan provisions have been applied consistently

21

with respect to similarly situated claimants."

22

Plaintiff's counsel included a list of ten questions regarding

23

Liberty's claims procedure, such as:

24
25

Plaintiff restated his request for additional

CF 0546.

In the event of a dispute between the opinion
of a treating physician and a consultant hired
by Liberty, do you always accept the view of
the Liberty consultant?

26
. . . .
27
28

What would you consider to be sufficient
"objective" proof of impairment under the
circumstances of this claim?
What is the
18

medical basis of your standard?
Can you
provide some examples of what you would accept,
or what you have accepted in the past, as
sufficient "objective" proof of impairment for
individuals who have the same medical diagnoses
as Mr. Prado?

1
2
3
4

. . . .
5
If you do not have written material which
provides guidance on these questions, then how
does Liberty ensure that similarly situated
claimants are treated alike?

6
7
8

CF 0546-0547.

United States District Court

Dr. Zucherman's May 4, 2009 response to Dr. Kaplan's review

10
For the Northern District of California

9

stated that Plaintiff's "functional capacity is described in the

11

office notes of December 16, 2008, which indicate he can only sit

12

for a few minutes, walk about 1/4 of a mile, and do only very light

13

lifting."

14

based on subjective complaints," but stated, "just because Mr.

15

Prado does not have focal neurologic findings, as Dr. Kaplan

16

reports, it does not mean that he is functionally capable."

17

Dr. Zucherman wrote that while he was not a qualified medical

18

examiner, Plaintiff in December 2008 had Oswestry function score of

19

68, and "[i]n my experience, patients with a score this high are

20

not even able to do light work at full time.

21

with a control over his workstation would be a reasonable

22

expectation, in my mind."

23

CF 0582.

Dr. Zucherman noted that limitations "are

Id.

Part-light work duty

Id.

The Functional Capacity Evaluation ("FCE") was performed by

24

Stephen Moon of Bay Area FCE, LLC on February 25, 2009.

25

It consisted of an eight-hour test "to address this client's

26

current work capacity" and "identify any limitations or

27

accommodations needed."

28

completed only three of the eight hours of scheduled testing "due

Id.

CF 0583.

Moon reported that Plaintiff

19

1

to pain and headache complaints."

Id.

Plaintiff reached the sub-

2

part time ability at the sedentary level.

3

"no comments on his ability to work full time can be made at this

4

time."

5

high amounts of physical effort during testing."

6

that Plaintiff's subjective complaints of pain "appeared to

7

correlate with his observed behaviors during the testing that was

8

able to be completed."

9

inconsistencies with Mr. Prado's perceived abilities and his

Moon concluded that

Id.

Moon also concluded that Plaintiff had "given variable to

Id.

Id.

Moon stated

Moon stated: "There were no obvious

United States District Court

For the Northern District of California

10

observed tolerances and clinical performance during the testing

11

day."

12

Questionnaire on which Plaintiff received a score of 74; Moon

13

stated that this score "represents the equivalent perception of

14

being crippled."

15

subjective reports of pain were "mostly reliable," based on "the

16

overall trend and outcomes of the pain questionnaires, subjective

17

ability log, repetitive motion testing, spinal and hand function

18

sorts, and the general correlation between his subjective

19

complaints and perceptions with his observed signs of discomfort."

20

CR 0592.

21

Id.

The test included an Oswestry Low Back Disability

CF 0587.

Moon concluded that Plaintiff's

Kiernan acknowledged receipt of Plaintiff's appeal and

22

supporting documents in a July 28, 2009 letter.

23

refused Plaintiff's requests for additional documentation,

24

referring to her April 30, 2009 letter.

25

forwarded to Liberty's appeal review unit in Dover, New Hampshire,

26

and assigned to Liberty's appeal review consultant, Lisa Gray

27

("Gray").

CF 0003.

28

20

Id.

CF 0594.

She

The claim was

On August 21, 2009, Plaintiff submitted to Liberty sixty pages

1
2

of additional medical literature, which Liberty added to the Claim

3

File.

CF 0463-0538.
On August 26, 2009, Gray sent Plaintiff's counsel a letter

4

on Plaintiff's appeal.

7

currently waiting for additional information from your office,

8

which is necessary to render full and fair determination" of

9

Plaintiff's appeal.

10

United States District Court

stating that additional time was needed to render a determination

6

For the Northern District of California

5

information needed.

CF 0461-0462.

Id.

The letter stated, "we are

The letter did not identify the

Also on August 26, 2009, Gray contracted with Horsemen

11
12

Investigation ("Horsemen") to perform a surveillance investigation

13

of Plaintiff's activities around his Napa, California home.

14

0542.

15

neurological findings however claimant reports being able (sic) to

16

work due to severe back and neck pain and headaches."

17

"Claimant maintains he is only able to sit/stand for 30 minutes and

18

walk 20 minutes.

19

He maintains he does not pursue any hobbies nor do volunteer work

20

and does not participate in an exercise program."

21

performed the surveillance of Plaintiff's residence on September 4,

22

5, 6, 7, and 10, 2009.

CF

In the investigation referral form, Gray wrote, "No

Id.

States he can sit and drive a car for 30 minutes.

Horsemen

CR 0391-0405.

23

On September 6, 2009, Plaintiff's counsel responded to Gray's

24

August 26, 2009 request for additional information, stating, "I am

25

not aware of any information that has been requested from us, which

26

we have not provided.

27

was a report from Dr. Zucherman, which was included with our

28

submission on July 22."

The only information which Liberty requested

CF 0423.

21

For the third time, Plaintiff's

1

counsel renewed his request for "policies and procedures with

2

regard to how you assess claims where the work impairment is due to

3

pain and therefore subjective in nature."

4

are aware of any tests or measurements which could be done and

5

which would measure the extent of work impairment, please let us

6

know.

7

Functional Capacity Evaluation which we forwarded to you on July

8

22."

9

Id.

He wrote: "If you

From our view, there is nothing which is better than the

Id.
Plaintiff's counsel also renewed his request for information

United States District Court

For the Northern District of California

10

concerning Dr. Kaplan.

11

Kaplan was well-published, "we note that his publications do not

12

indicate any interest at all in the type of medical condition from

13

which Mr. Prado suffers."

14

Kaplan has a relationship to a business called Disability and

15

Occupational Consultants . . . through which he acts as a

16

disability evaluator.

17

been able to locate, and every reference to him in published

18

judicial opinions, refers to him as a defense evaluator -- in other

19

words, he seems to have a demonstrated pro-defense bias."

20

Plaintiff's counsel noted that Dr. Kaplan had rendered an opinion

21

for an insurance carrier in a case involving another one of his

22

clients, writing:

23

forensic practice located back east would be found on multiple

24

files of my solo practice in California must be quite small . . . .

25

Dr. Kaplan must be a very high volume source of defense medical

26

reports."

27

concerns, "we think it fair to ask for the opportunity to comment

28

upon any bias of the consultant who is being used on the appeal,

Id.

Plaintiff's counsel wrote that while Dr.

Plaintiff's counsel also noted that "Dr.

However, every report of his which we have

Id.

"The odds that a doctor with a reasonably sized

Plaintiff's counsel concluded that given these

22

1

and we request that you provide the identity of that consultant so

2

that we have an opportunity to comment upon his or her

3

credentials."

4

Id.

On September 14, 2009, Horsemen reported to Gray on the

5

results of the surveillance.

6

it recorded video of Plaintiff raising the hood of a bronze Chevy

7

truck, "checking his mail," "pulling weeds," "placing five (5)-

8

gallon buckets into the bed of a truck," "moving three (3) trash

9

cans on wheels," "checking fluids in his pickup," as well as other

Horsemen claimed that

United States District Court

For the Northern District of California

10

activities.

11

minutes of video footage of some of these activities, which was

12

added to the Claim File.

13

of Plaintiff during surveillance on September 6, 2009.

14

Horsemen's report stated that on each day Plaintiff was identified,

15

"Mr. Prado showed no visible signs of hesitation or restriction,

16

and did not utilize any discernible means of artificial support."

17

CF 0391, 0395, 0400, 0403.

18

CF 0391-0405.

CF 0391-0424.

Horsemen acquired roughly twenty

Horsemen observed no activity on the part
CF 0399.

On September 21, 2009, Plaintiff commenced this action,

19

claiming that Liberty had failed to make a timely ruling on the

20

pending appeal under 29 C.F.R. § 2560.503-1.

21

received notice of the suit on September 29, 2009, but proceeded to

22

complete its review of the appeal.

23

Compl. ¶ 6.

Liberty

CF 0002.

On September 23, 2009, Gray again wrote Plaintiff's counsel

24

stating that Liberty would need additional time to complete review

25

of Plaintiff's appeal.

26

was necessary because the volume of records received on appeal was

27

so large and because Liberty wanted additional information to

28

clarify Plaintiff's functional capacity and abilities.

CF 0406-0407.

23

Gray claimed this extension

Id.

Gray

1

stated that Liberty had requested a physician who was board

2

certified in physical medicine and rehabilitation to review the

3

claim file, and had asked this physician to contact Dr. Zuckerman

4

to discuss Plaintiff's status.

5

to "inform Dr. Zucherman and his office staff that he will be

6

receiving a call from this reviewing physician in the next two

7

weeks."

8

for additional documentation, and did not identify the reviewing

9

physician by name.

Id.

Id.

Gray asked Plaintiff's counsel

Gray refused Plaintiff's counsel's renewed request

Id.

On October 1, 2009, Gray submitted

United States District Court

For the Northern District of California

10

Plaintiff's claim to the consulting physician for complete review.

11

CF 0002.
On October 5, 2009, Horsemen performed another surveillance of

12
13

Plaintiff's residence.

CF 0374.

While no video was recorded of

14

Plaintiff, Horsemen claimed that Plaintiff rolled two trash cans

15

from the curbside to the back of his residence, drove to Napa

16

Valley Community College, and walked onto the campus and back to

17

his car after utilizing a computer room.

CF 0374-0377.

9

18
19
20
21
22
23
24
25
26
27
28

9

Plaintiff argues that the Court should disregard all of the
surveillance evidence, alleging it was added to the administrative
record after the appeals process. Under 29 C.F.R. § 2560.5031(i)(1) and (i)(3)(i), an administrator has forty-five days to
decide a disability appeal, but may extend this time for an
additional forty-five days if the plan administrator determines
that an extension is required, provides written notice of the
extension, and indicates the special circumstances requiring an
extension of time and the date by which the plan expects to render
the determination on review. Liberty's August 26, 2009 letter -sent less than forty-five days after its July 29, 2009 receipt of
Plaintiff's appeal -- sought to extend Liberty's time to respond an
additional forty-five days to October 26, 2009, but did not
indicate the special circumstances necessitating the extension.
Liberty's September 23, 2009 letter sought to extend Liberty's time
to respond and indicated the special circumstances necessitating
the extension, but was not filed within forty-five days of the
filing of the appeal. As such, both of Liberty's attempts to
extend review were procedurally defective. The Court finds these
procedural defects are not proper grounds to strike evidence from
the Claim File, however. Nor does the Court accept Plaintiff's
24

Dr. Gale Brown, Jr. ("Dr. Brown"), board certified in physical

1
2

medicine and rehabilitation, prepared a report dated October 8,

3

2009.

4

"documentation reviewed," which included all the aforementioned

5

documents, including the SSA Disability report and the video

6

surveillance.

7

Plaintiff's "physical impairments and ability to perform any

8

occupation full time, effective 2/29/06,"10 but "does not address

9

possible impairment related to chronic headaches and hypertension,

CF 0359-0371.

Dr. Brown's report provided a list of

CF 0359.

Dr. Brown stated that her review addressed

United States District Court

For the Northern District of California

10

as these fall beyond my current areas of expertise."

CF 0360.

11

Brown concluded that while partial physical impairment was

12

supported by the documentation, Plaintiff "should have been able to

13

resume full-time sedentary work by 2/29/06."

14

concluded that "[i]nconsistencies noted in Mr. Prado's statements,

15

video surveillance data, and FCE performance raise questions

16

regarding historical credibility and motivation."

17

concluded that "[t]he FCE findings are considered unreliable in

18

assessing Mr. Prado's functional capacity," and that Plaintiff's

19

"reported severity of disability, as noted on Oswestry testing, is

20

inconsistent with his demonstrated capacity on video surveillance."

21

Id.

22

apply to Plaintiff as of February 29, 2006: "Occasional

23

lift/carry/push/pull 10 pounds; No overhead work or repetitive

24

reaching over shoulder level; Occasional stand/walk, 30 minutes per

CF 0360.

Id.

Dr.

Dr. Brown

Dr. Brown

Dr. Brown identified restrictions and limitations that would

25
26
27
28

argument that it should disregard the surveillance video because
Liberty allegedly misrepresented its reason for requesting
additional time.
10

The Court takes judicial notice of the fact that February 29,
2006 is not a valid date, as 2006 was not a leap year.
25

1

session; Brief position change (<1 minute) during periods of

2

prolonged sitting, if needed."

CF 0361.

Dr. Brown claimed to have made multiple attempts to contact

3
4

Dr. Zucherman to obtain his opinion "as to whether Mr. Prado could

5

have resumed full-time sedentary work by 2/29/06," with the first

6

attempt made on September 30, 2009.

7

Brown faxed to Dr. Zucherman a letter asking that he respond to a

8

series of questions.

9

faxed Dr. Brown's letter to Dr. Zucherman a second time, asking him

CF 0383-0384.11

CF 0370.

On October 8, 2009,

On October 20, 2009, Gray

United States District Court

For the Northern District of California

10

to respond by October 30, 2009.

CF 0357-0358.

Gray also wrote

11

Plaintiff's counsel to advise that she needed more time to complete

12

the appeal because she was still waiting for a response from Dr.

13

Zucherman, and that if Dr. Zucherman did not respond by October 30,

14

2009, Liberty would render a determination without it.

15

0358.

16

again, stating that "under ERISA we have a requirement to render

17

our decision within 90 days and it has come to my attention that

18

the deadline will be October 25, 2009; therefore should you wish to

19

provide your opinion to the following questions, please do so by

20

October 25, 2009."

21

Plaintiff's counsel.

CF 0356-

The next day, on October 21, 2009, Gray faxed Dr. Zucherman

CF 0353.

Gray sent a copy of the letter to

Plaintiff's counsel responded to Gray in a letter sent by fax

22
23

on October 25, 2009.

24

the due date to complete the review, but stated, "we cannot obtain

25

a response from Dr. Zucherman in the small amount of time allowed."

26

Id.

27
28

CF 0028.

Plaintiff's counsel disagreed as to

Plaintiff's counsel stated that a number of the questions

11

Plaintiff argues that the fact that this letter was sent on the
same day Dr. Brown turned in her final report suggests Dr. Brown
was not truly interested in incorporating Dr. Zucherman's responses
into her report. Pl.'s Mot. at 20.
26

1

Liberty sought answered were included in prior statements by Dr.

2

Zucherman -- specifically, his January 10, 2006 and April 15, 2006

3

letters, and a February 27, 2007 SSA medical source statement.

4

0029.

CR

5

Plaintiff's counsel also expressed concerns about the

6

objectiveness of Dr. Brown, enclosing a deposition from another

7

case which he claimed "shows this physician is essentially employed

8

full time working for Liberty Mutual."

9

deposition, conducted October 25, 2009, Dr. Brown states that she

CF 0046-0101.

In this

United States District Court

For the Northern District of California

10

has not engaged in direct patient care since December 31, 2002;

11

that she has worked for Liberty since 2000; that she has worked

12

approximately thirty hours per week for Liberty during several of

13

those years; and that she reviewed more than one hundred claims for

14

Liberty in 2005.

15

twenty-five most recent reports done for Liberty by Dr. Brown, with

16

the names of the claimants removed.

17

also included additional medical writing on evaluation of pain.

18

Id.

CF 0049, 0054.

Plaintiff's counsel sought the

CR 0029.

Plaintiff's counsel

19

On October 27, 2009, Liberty upheld its denial of Plaintiff's

20

claim, confirming its earlier determination that Plaintiff was not

21

disabled from performing "any occupation."

22

letter, Gray referenced the findings of Dr. Kaplan and Dr. Brown;

23

Dr. Zucherman's failure to respond to Dr. Brown's questions; the

24

surveillance reports; the Oswestry disability scoring; and the FCE.

25

Id.

26

that Liberty had received the correspondence sent by Plaintiff's

27

counsel and considered this information.

28

that the record demonstrated "[m]ultiple functional inconsistencies

CF 0017-0025.

In the

The SSA decision was not mentioned, although Gray did state

27

CF 0018.

Gray stated

1

and inconsistent pain behaviors . . . raising questions regarding

2

historical credibility and motivation."

CF 0020.

3
4

III. CONCLUSIONS OF LAW

5

A. Legal Standards

6

1.

Rule 52(a)

7

Federal Rule of Civil Procedure 52(a)(1) provides: "In an

8

action tried on the facts without a jury . . ., the court must find

9

the facts specially and state its conclusions of law separately."

United States District Court

For the Northern District of California

10

In a Rule 52 motion, as opposed to a Rule 56 motion for summary

11

judgment, the court does not determine whether there is an issue of

12

material fact, but actually decides whether the plaintiff is

13

disabled under the policy.

14

Ins. Co., 175 F.3d 1084, 1095 (9th Cir. 1999).

15

"evaluate the persuasiveness of conflicting testimony," and make

16

findings of fact.

17

2.

See Kearney v. Standard
The court is to

Id.

ERISA Standard of Review

18

ERISA benefits determinations are to be reviewed de novo

19

unless the language of the plan documents gives the administrator

20

discretionary authority to determine eligibility for benefits or to

21

construe the terms of the plan.

22

U.S. 105, 111-12 (2008).

23

discretionary authority, abuse of discretion is the appropriate

24

standard of review.

25

the funding source for benefits operates under a "structural"

26

conflict of interest.

27

F.3d 955, 965 (9th Cir. 2006).

28

a factor in determining whether there is an abuse of discretion."

Id.

Met. Life Ins. Co. v. Glenn, 554

Where an administrator has retained

A plan administrator that also acts as

Abatie v. Alta Health & Life Ins. Co., 458
Such a conflict "must be weighed as

28

1

Glenn, 554 U.S. at 111-12.

2

that approaches claims-handling unfairly in an ERISA plan may have

3

an incentive to be more unfair than, say, a life insurer or auto-

4

liability insurer, because it cannot be subjected to the punitive

5

damages for bad faith that are the bogeymen of insurance companies

6

in those fields."

7

--- F.3d ---, 2011 WL 2040934, at *7 (9th Cir. May 26, 2011).

8

leads to an abuse-of-discretion standard "tempered by skepticism

9

commensurate with the plan administrator's conflict of interest."

United States District Court

For the Northern District of California

10

This is because "[a]n insurance company

Salomaa v. Honda Long Term Disability Plan, No.
This

Abatie, 458 F.3d at 959.

11

B.

12

This Court has already found that Liberty operates under a

Liberty's Conflict of Interest

13

structural conflict of interest and ruled that the applicable

14

standard of review is "abuse of discretion tempered with skepticism

15

commensurate with Liberty's conflict of interest."

16

Order at 14.

17

interest affected Liberty's decision to deny Plaintiff's claim, and

18

if it did, how much weight the Court should give it.

19

considered all of the evidence, the Court concludes that this

20

conflict had a considerable effect on the decisions Liberty made in

21

denying Plaintiff's claim.

22

Aug. 2, 2010

The Court must determine whether this conflict of

Having

First, the Court notes Liberty's marked hostility to any

23

evidence relating to Liberty's conflict of interest being shared

24

with Plaintiff during the claims process or put before the Court.

25

ERISA regulations provide that "the claims procedures of a plan

26

will not be deemed to provide a claimant with a reasonable

27

opportunity for a full and fair review" unless they provide the

28

claimant access to "all documents, records, and other information

29

1

relevant to the claimant's claim for benefits."

2

2560.503-1(h)(2)(iii).

A document is "relevant" to a claim if it:

(i) Was relied
determination;

3

29 C.F.R. §

upon

in

making

the

benefit

4
(ii) Was submitted, considered, or generated in
the course of making the benefit determination,
without regard to whether such document,
record, or other information was relied upon in
making the benefit determination;

5
6
7

(iii)
Demonstrates
compliance
with
the
administrative
processes
and
safeguards
required pursuant to paragraph (b)(5) of this
section in making the benefit determination;12
or

8
9

United States District Court

For the Northern District of California

10
(iv) In the case of a group health plan or a
plan providing disability benefits, constitutes
a statement of policy or guidance with respect
to the plan concerning the denied treatment
option or benefit for the claimant's diagnosis,
without regard to whether such advice or
statement was relied upon in making the benefit
determination.

11
12
13
14
15

29 C.F.R. § 2560.503-1(m)(8).
Plaintiff and his counsel made multiple attempts during the

16
17

claims process to acquire information relevant to determining the

18

effect of the conflict of interest, such as information on the

19

approval/denial rates of the reviewing doctors and "[a]ll policies

20

and procedures of Liberty Life which are designed to mitigate the

21

structural conflict of interest of Liberty."

22

Liberty summarily rejected these requests, claiming that it had

23

submitted all the information "received, reviewed, and considered"

24

in evaluating Plaintiff's claim, and that it was under no

25

obligation under ERISA to produce additional information.

26
27
28

12

CF 2189-2192.

CF 2179.

Paragraph (b)(5) requires that "claims procedures contain
administrative processes and safeguards designed to ensure and to
verify that benefit claim determinations are made in accordance
with governing plan documents and that, where appropriate, the plan
provisions have been applied consistently with respect to similarly
situated claimants." 29 C.F.R. § 2560.503-1(b)(5).
30

There are two possible conclusions the Court can make from the

1
2

above.

3

and safeguards to ensure claim determinations were made in

4

accordance with plan documents and that similarly situated

5

claimants were treated similarly, and that no statements of policy

6

or guidance existed to guide Liberty's representatives in

7

evaluating Plaintiff's claim.

8

processes, safeguards, and policies, but refused to share them with

9

Plaintiff during the claims process.

United States District Court

For the Northern District of California

10

The first is that Liberty lacked administrative processes

The second is that Liberty had such

Either situation would

violate ERISA regulations.
Liberty's refusal to disclose relevant documents continued

11
12

into this action.

The Court granted Plaintiff leave to conduct

13

limited discovery into the nature, extent, and effect of Liberty's

14

conflict of interest on its decision-making process.

15

Order.

16

under Federal Rule of Civil Procedure 34, but Liberty objected to

17

the requests as vague and ambiguous and "exceed[ing] the scope of

18

permissible discovery in ERISA."

19

Resp.") at 24.13

20

a response not attributed to a specific declarant, that it had

21

"employed a number of measures to insure that its claim

22

determinations are not influenced by financial considerations,"

23

including locating disability case managers in different offices,

24

cities and states than employees who make underwriting and premium

25

decisions.

26

compensation the claims personnel involved in the handling of

Aug. 2, 2010

Plaintiff served on Liberty a request for such documents

Padway Decl. Ex. 2 ("Def.'s

Rather than produce evidence, Liberty stated, in

Id. at 25.

Liberty continued: "at no time has the

27
28

13

Laurence F. Padway ("Padway"), counsel for Plaintiff, filed a
declaration in support of Plaintiff's Motion. ECF No. 43.
31

1

Plaintiff's claim or the appeal of claim determinations been based

2

on or determined according to the number of claims for disability

3

benefits that have been denied or terminated, including

4

plaintiff's."

5

Rule 34 request.

6

Motion is the declaration of McGee, a litigation manager of

7

disability claims for Liberty, who declares that Liberty takes

8

steps "to ensure that a claim decision is not influenced by the

9

company's financial interests," such as geographically separating

Id.

This is an improper response to Plaintiff's

The sole evidence Liberty filed in support of its

United States District Court

For the Northern District of California

10

disability case managers and underwriters and not compensating

11

claims personnel "according to the number of claims for disability

12

benefits that have been denied or terminated" or number of appeal

13

denials.

McGee Decl. ¶¶ 1-4.14

Failure to present extrinsic evidence of an effort to assure

14
15

accurate and unbiased claims assessment, such as "statistics

16

regarding [the administrator's] rate of claims denials or how

17

frequently it contracts with the file reviewers it employ[s]," is a

18

factor according significant weight to the conflict of interest.

19

Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 634 (9th

20

Cir. 2009).

21

an effort to limit the effect of Liberty's conflict of interest.

22

The Court also finds that by refusing to respond to Plaintiff's

23

requests for information, Plaintiff's right to a "full and fair

24

review" under 29 C.F.R. § 2560.503-1 was compromised.

The Court finds that there is very little evidence of

25
26
27
28

14

Liberty offers its response to Plaintiff's Rule 34 request, as
well as the McGee declaration, as evidence that Liberty took steps
to minimize the effect of the conflict of interest. Def.'s Opp'n
at 4. The Court finds Liberty's Rule 34 response to be improper,
and it gives little weight to the statements of McGee, who admits
that she works within Liberty's litigation department and is
familiar with Plaintiff's claim.
32

Another factor is the administrator's "decision to conduct a

1
2

'pure paper' review . . . that is, to hire doctors to review

3

[plaintiff's] files rather than to conduct an in-person medical

4

evaluation of him."

5

Kaplan, and Brown all completed pure paper reviews of Plaintiff's

6

file.

7

because the operative question was whether Plaintiff was disabled

8

as of February 2006, and so an inquiry into his current physical

9

status would be of little value.

Montour, 588 F.3d at 634.

Here, Drs. Bonar,

Liberty alleges that no physical examination was performed

Following this logic, the 2009

United States District Court

For the Northern District of California

10

surveillance video would be of little probative value of whether

11

Plaintiff was disabled in 2006, yet Liberty placed great weight on

12

the surveillance in its final benefits denial.

13

internal logical conflicts within Liberty's argument.

14

As such, there are

Another factor in determining what weight to afford a conflict

15

of interest is a plan administrator's failure to respond to a

16

contrary SSA disability determination.

17

"While ERISA plan administrators are not bound by the SSA's

18

determination, complete disregard for a contrary conclusion without

19

so much as an explanation raises questions about whether an adverse

20

benefits determination was the product of a principled and

21

deliberative reasoning process," and "may indicate a failure to

22

consider relevant evidence."

23

considered the SSA decision in which Plaintiff was found to suffer

24

from a long-term disability, but there is nothing in the Claim File

25

to support this contention.

26

the October 27, 2009 denial letter.

27

states she considered it, but it is not discussed.

Id.

Montour, 588 F.3d at 634.

Liberty claims that it

Gray does not mention it by name in

28

33

In her report, Dr. Brown

guidance as to what sort of evidence Liberty would find acceptable

3

to establish a disability based on Plaintiff's pain.

4

administrator denying benefits in the first instance must "notify

5

the claimant not just of the opportunity for internal agency review

6

of that decision but also of what additional information would be

7

necessary to perfect the claim."

8

(quotation marks omitted).

9

suggested Plaintiff include "an opinion by Dr. Zucherman of the

10

United States District Court

Another factor is Liberty's failure to provide Plaintiff with

2

For the Northern District of California

1

peer review, any office notes, diagnostic test results, hospital

11

records, or any additional information which you feel will support

12

Mr. Prado's claim."

13

clarification as to what evidence Liberty would consider to be

14

credible objective evidence of Plaintiff's pain, and was rebuffed

15

repeatedly.

16

Plaintiff could perfect his claim.

17

more troubling given that the Court found in Prado I that Liberty

18

had "provided no guidance to Plaintiff for what, specifically,

19

Liberty needed in order to make an informed decision on Plaintiff's

20

claim."

21

A plan

Montour, 588 F.3d at 636

In its initial claim denial, Liberty

CF 2196.

Plaintiff asked again and again for

Liberty's responses offered no guidance as to how
Liberty's failures are all the

Prado I at 6.

Yet another factor is Liberty's reliance, at the eleventh

22

hour, on the surveillance footage.

"[A]n administrator that adds,

23

in its final decision, a new reason for denial, a maneuver that has

24

the effect of insulating the rationale from review, contravenes the

25

purpose of ERISA."

26

violation must be weighed ... in deciding whether [the

27

administrator] abused its discretion."

28

initial denial was premised on a lack of evidence of physical

Abatie, 458 F.3d at 974.

34

Id.

"This procedural

While Liberty's

1

impairment, its final decision hinged on the Plaintiff's lack of

2

credibility in light of the surveillance footage.

3

Liberty's last-minute reliance on the surveillance footage did not

4

give Plaintiff an opportunity to respond to this basis for denial.

5

The Court also notes several tactics Liberty used which

6

Plaintiff alleges had the effect of compromising the fairness of

7

the claims process.

8

promptly identify the names of its reviewing physicians; the

9

inconsistencies between the date of Dr. Kaplan's report and the

Furthermore,

Plaintiff points to Liberty's refusal to

United States District Court

For the Northern District of California

10

dates Dr. Kaplan alleges he attempted to contact Dr. Zucherman; the

11

fact that calls to Dr. Zucherman were made at odd hours; and the

12

fact that Liberty claimed an extension of the appeals period was

13

required due to outstanding requests for information when no such

14

outstanding requests existed.

15

be actionable in themselves, they do create the impression that the

16

individuals handling and evaluating Plaintiff's claim on behalf of

17

Liberty were less interested in offering a neutral and fair

18

evaluation of Plaintiff's claim than they were in erecting

19

procedural roadblocks.

20

See Pl.'s Mot.

While these may not

Finally, the Court considers the evidence in the Claim File

21

suggesting that Liberty's reviewing doctors operated under a

22

conflict of interest.

23

Dr. Brown has not treated patients since 2002, and consults for

24

several disability insurers.

25

regularly worked upwards of thirty hours per week evaluating claims

26

for Liberty.

27

Kaplan operated under a conflict of interest.

28

opportunity to add to the Claim File evidence that the medical

CF 0049.

The evidence submitted by Plaintiff suggests

CF 0048.

She has stated that she

Similar evidence suggests Drs. Bomar and

35

Liberty had the

1

examiners they contracted with where shielded from bias, but chose

2

not to do so.

3

The Court concludes that Liberty's conflict of interest had a

4

marked and pervasive effect on its claims determination process.

5

It tempers its abuse-of-discretion review accordingly.

6

C.

Abuse of Discretion

7

When there is a conflict of interest, "a modicum of evidence

8

in the record supporting the administrator's decision will not

9

alone suffice."

Montour, 588 F.3d at 626.

A plan administrator

United States District Court

For the Northern District of California

10

abuses its discretion if its decision is "(1) illogical, (2)

11

implausible, or (3) without support in inferences that may be drawn

12

from the facts in the record."

13

In Salomaa, the Ninth Circuit reversed a plan administrator's

14

denial under this standard because (1) every doctor who examined

15

the plaintiff concluded that he was disabled; (2) the plan

16

administrator demanded objective tests to establish the existence

17

of a condition for which there are no objective tests; (3) the

18

administrator failed to consider an SSA disability award; (4) the

19

reasons for denial shifted as they were refuted, were largely

20

unsupported by the medical file, and only the denial stayed

21

constant; and (5) the plan administrator failed to engage in the

22

required "meaningful dialogue" with plaintiff.

23

Salomaa, 2011 WL 2040934, at *8.

Id.

The Court finds many similarities between the present case and
Dr. Zucherman consistently concluded that Plaintiff was

24

Salomaa.

25

totally disabled.

26

disability precluding heavy work and was "temporarily totally

27

disabled as far as the neck and arms is concerned."

28

doctor who examined Plaintiff around February 28, 2006 determined

Dr. Sigurdson concluded he suffered from a

36

CF 1993.

No

1

that Plaintiff was capable of returning to full-time work.

2

had the opportunity and right under the Plan to examine Plaintiff,

3

but chose not to.

4

Liberty

Second, while Liberty never demanded objective tests of

5

Plaintiff's pain, the reviewing doctors discounted Plaintiff's

6

self-reported pain as "subjective."

7

report that the lack of objective evidence of disability was a

8

major factor in his conclusion that Plaintiff was not disabled, and

9

it is clear that he gave little weight to Plaintiff's subjective

It is clear from Dr. Kaplan's

United States District Court

For the Northern District of California

10

reports of pain.

11

for restrictions, and concluding, "as of the present time the

12

claimant's presentation is essentially that of subjective pain with

13

subjective limitations in spinal range of motion without any

14

anatomical lesion or physiological reason to explain these reported

15

symptoms").

16

that the FCE testing was unreliable.

17

demand objective tests, it placed little weight on Plaintiff's

18

subjective reports, discredited every objective test conducted and

19

submitted by Plaintiff, and refused to identify an objective test

20

that Liberty deemed acceptable.

21

CF 2225 (finding "no objective anatomical basis"

Liberty discounted the Oswestry scores and concluded
Thus, while Liberty did not

Third, Liberty clearly failed to consider the SSA disability

22

award.

23

discussed in Dr. Brown's report.

24

It is not mentioned in the final denial letter, and is not

Fourth, as stated above, Liberty's reasons for denial shifted

25

as they were refuted.

The final reasons for denial are also

26

unsupported by the record.

27

as a smoking gun, but a careful review of the record shows

28

otherwise.

Liberty treats the surveillance footage

As Plaintiff points out, much of the activity Horsemen

37

The activity reported is not inconsistent with Plaintiff's self-

3

reported activity.

4

Plaintiff stated he could sit, stand, or walk for periods of ten to

5

fifteen minutes; that he left his house daily; and that he could

6

drive his daughter to work, tend to his garden, wash his car, and

7

carry light groceries.

8

what is demonstrated in the surveillance video.

9

twenty minutes of surveillance footage -- culled from six days of

10

United States District Court

claimed to have witnessed is not captured in the video footage.

2

For the Northern District of California

1

surveillance -- as evidence that Plaintiff could walk, stand, and

11

sit for periods of thirty minutes or longer.

12

does not show this.

13

person evaluations of Plaintiff noted that his gait and range of

14

motion was normal.

15

Plaintiff did not display "visible signs of hesitation or

16

restriction" is not inconsistent with the record.

17

In the questionnaire submitted in July 2008,

CF 3023-3024.

This level of activity is
Liberty submits

The evidence simply

Furthermore, several doctors who performed in-

E.g., CF 1852-1854, 1470.

Thus, the fact that

That Liberty also premises its final denial on Dr. Zucherman's

18

failure to respond to Dr. Brown's request for information is

19

perplexing.

20

Zucherman's response was critical during the appeal, and it has

21

failed to do so in this action.

22

already in the record.

23

as of February, 2006, Plaintiff was completely disabled.

24

2009, he clarified that he was "not a qualified medical examiner"

25

and that the limitations were "based on subjective complaints," but

26

otherwise confirmed this determination, finding "part-time light

27

duty work with control over his workstation" to be a "reasonable

28

expectation."

Liberty did not explain to Plaintiff why Dr.

Most of the information sought was

Dr. Zucherman had made a determination that

CF 0582.

38

On May 4,

There are other inconsistencies between Liberty's final denial

1
2

and the record.

Dr. Brown clearly states that her report did not

3

address "possible impairment related to chronic headaches and

4

hypertension, as these fall beyond my current area of expertise."

5

CF 0360.

6

headaches were a major cause of his disability.

7

Brown concludes that Plaintiff's activity would be restricted to

8

lifting, carrying, pushing, and pulling weights up to ten pounds,

9

that he could not perform overhead work, and that he would be

But it is clear from the record that Plaintiff's
Similarly, Dr.

United States District Court

For the Northern District of California

10

limited to "occasional walking or standing, for 30 minutes at a

11

time."

12

restrictions Cooper considered when he identified five suitable

13

occupations for Plaintiff that existed within his local and

14

regional economy.

15

capable of lifting up to twenty pounds and would not otherwise be

16

restricted, save for "avoidance of more than occasional bending,

17

squatting, stooping or kneeling."

CF 0361.

These restrictions are inconsistent with the

CF 2233-2235.

Cooper had assumed Plaintiff was

CF 2308-2313.

18

Finally, Liberty clearly failed to engage in meaningful

19

dialogue with Plaintiff by failing to provide guidance on how to

20

perfect his claim, refusing Plaintiff's repeated requests for

21

information, and denying Plaintiff the opportunity to respond to

22

Dr. Brown's analysis of the surveillance video.
On the basis of the above, the Court finds Liberty abused its

23
24

discretion in denying Plaintiff's claim.

25

evidence, the Court finds that Plaintiff is disabled under the "any

26

occupation" standard as of February 28, 2006, and is thus entitled

27

to long-term disability benefits under the Plan.

28

///

39

Having considered the

Plaintiff has filed a separate claim against Liberty for

3

interest due under section 10111.2 of California's Insurance Code.

4

Pl.'s Mot at 25.

5

at a rate of ten percent.

6

argues that section 10111.2 is preempted by ERISA.

7

have found that allowing a plaintiff to proceed with a state law

8

claim under section 10111.2 would effectively impose a mandatory

9

prejudgment interest rate of ten percent on successful ERISA

10

United States District Court

D.

2

For the Northern District of California

1

Plaintiff's Claim under California Insurance Code 10111.2

claims, improperly expanding the scope of ERISA damages and

11

supplementing the ERISA enforcement remedy.

12

Coblentz, Patch and Bass LLP Long Term Disability Ins. Plan, No.

13

10-1855, 2011 WL 2531193, at *6 (N.D. Cal. June 24, 2011);

14

Turnispeed v. Educ. Mgmt. LLC's Emp. Disability Plan, No. 09-3811,

15

2010 WL 140384, at *4 (N.D. Cal. Jan. 13, 2010); Minton v. Deloitte

16

& Touche USA LLP Plan, 631 F. Supp. 2d 1213, 1220 (N.D. Cal. 2009).

17

Accordingly, the Court finds Plaintiff's claim for interest under

18

section 10111.2 to be preempted by ERISA, and finds for Liberty on

19

this claim.

20

E.

21

Plaintiff argues that Liberty failed to provide documents

Section 10111.2 provides for prejudgment interest
Cal. Ins. Code § 10111.2.

Liberty

Many courts

E.g., White v.

Plaintiff's Claim under 29 U.S.C. § 1332(c)

22

during the claims procedure, and thus Liberty must pay 29 U.S.C.

23

1332(c)'s daily statutory penalty for failing to provide documents.

24

Pl.'s Mot at 23.

25

"fails to comply with a request for any information which such

26

administrator is required by this subchapter to furnish to a

27

participant or beneficiary (unless such failure or refusal results

28

from matters reasonably beyond the control of the administrator)"

ERISA provides that any "administrator" who

40

1

may be liable in the court's discretion for an amount up to $100

2

per day from the date of such failure or refusal."

3

1332(c).

4

documents and "relevant" documents under 29 C.F.R. § 2560.503-

5

1(m)(8), and thus should be liable under section 1332(c).

29 U.S.C. §

Plaintiff claims that Liberty failed to produce the Plan

Liberty argues that it served as the "claims administrator,"

6

applies to plan administrators.

9

1332(c) does not extend to "relevant" documents under 29 C.F.R. §

10

United States District Court

and not the "plan administrator," and that section 1332(c) only

8

For the Northern District of California

7

2560.503-1(m)(8), and that it produced all Plan documents during

11

the claims process.

Liberty also argues that section

The Court has determined that by failing to produce "relevant"

12
13

documents during the claims process, Liberty denied Plaintiff a

14

"full and fair review" of his claim.

15

should be subject to the $100-per-day penalty under section 1332(c)

16

for this failure.

17

information required by "this subchapter."

18

As such, it does not extend to documents identified in 29 C.F.R. §

19

2560.503-1.

20

2011 WL 900365, at *2 (N. D. Cal. Mar. 15, 2011) ("While §

21

2560.503–1 does impose requirements on plans with regard to claim

22

procedures, nothing in the statutory or regulatory scheme suggests

23

that an ERISA claimant may bring an action for civil penalties

24

under § 1132(c) for a plan's failure to comply with those

25

requirements.").

26

disclosure duties under section 1132(c) by producing the Policy and

27

SPD, and finds for Liberty on this claim.

28

///

At issue is whether Liberty

By its terms, section 1332(c) is limited to
29 U.S.C. § 1332(c).

See Ramos v. Bank of America, --- F. Supp. 2d ---,

The Court finds that Liberty satisfied its

41

1

F.

Attorneys' Fees

2

Plaintiff additionally seeks attorneys' fees.

Pl.'s FFCL ¶

and costs in civil actions under ERISA.

5

& Co., the Ninth Circuit provided five factors that guide the

6

Court's exercise of discretion in this matter.

7

(9th Cir. 1980).

8

opposing parties' culpability or bad faith; (2) the ability of the

9

opposing parties to satisfy an award of fees; (3) whether an award

10

United States District Court

85.

4

For the Northern District of California

3

29 U.S.C. § 1132(g) allows the Court to award attorneys' fees

of fees against the opposing parties would deter others from acting

11

under similar circumstances; (4) whether the parties requesting

12

fees sought to benefit all participants and beneficiaries of an

13

ERISA plan or to resolve a significant legal question regarding

14

ERISA; and (5) the relative merits of the parties' positions.

15

A proper application of the factors generally results in an award

16

of fees and costs to plaintiffs who succeed on any significant

17

issue in litigation.

18

587, 589 (9th Cir. 1984).

In Hummell v. S.E. Rykoff

634 F.2d 446, 453

These factors include: (1) the degree of the

Id.

Smith v. CMTA-IAM Pension Trust, 746 F.2d

The Court finds that several of these factors favor an award

19
20

of attorneys' fees to Plaintiff -- chiefly, Liberty's actions

21

during the claims process and the current action in failing to

22

produce documents and in mischaracterizing the administrative

23

record border on bad faith.

24

attorneys' fees may deter other claim administrators from engaging

25

in similar behavior.

26

attorneys' fees to Plaintiff to be appropriate.

27

///

28

///

The Court finds that an award of

Accordingly, the Court finds an award of

42

1

IV.

For the forgoing reasons, the Court finds as follows:

2
3

CONCLUSION

•

The Court finds in favor of Plaintiff Antonio Prado and

4

against Defendant Allied Domecq Spirits and Wine Group

5

Disability Income Policy and Real Party in Interest Liberty

6

Life Assurance Company of Boston on Plaintiff's first claim

7

for relief for failure to extend benefits under a long-term

8

disability plan covered by ERISA.

9

back benefits from March 1, 2006 until the date thirty days

Plaintiff is entitled to

United States District Court

For the Northern District of California

10

after the date of this Order.

11

confer on the amount of back benefits and file a stipulation

12

on that amount within fourteen (14) days of the date of this

13

Order.

14

file within fourteen (14) days of the date of this Order a

15

letter brief not to exceed three pages setting forth their

16

position.

17

Order, Liberty shall pay Plaintiff monthly benefits as they

18

come due for so long as he remains disabled and eligible for

19

benefits under the policy.

20

•

The parties are to meet and

If the parties are unable to agree, they shall each

Commencing thirty (30) days after the date of this

The Court finds in favor of Liberty and against Plaintiff on

21

Plaintiff's second claim for relief for interest under

22

California Insurance Code § 10111.2.

23

•

The Court finds in favor of Liberty and against Plaintiff on

24

Plaintiff's third claim for relief for failure to produce

25

records under 29 U.S.C. § 1332(c).

26

•

Plaintiff is entitled to attorneys' fees and costs under 29

27

U.S.C. § 1132(g).

Within thirty (30) days of this Order,

28

Plaintiff shall file a motion for attorneys' fees, supported

43

1

with appropriate evidence.

Liberty shall have fourteen (14)

2

days from to object to Plaintiff's motion or the evidence

3

submitted in support of it.

4

this action after it rules on Plaintiff's motion.

5

Plaintiff fails to file a motion for attornseys' fees within

6

this timeframe, the Court will enter its final judgment in

7

this action and close the case.

The Court will enter judgment in
If

8
9

IT IS SO ORDERED.

United States District Court

For the Northern District of California

10
11
12

Dated: July 22, 2011
UNITED STATES DISTRICT JUDGE

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

44