Herman v. Hartford Life and Accident Insurance Company
Filing
82
ORDER granting 75 Motion for Reconsideration Vacating re 72 Order Denying Motion for Summary Judgment and Granting Hartford's Motion for Summary Judgment. Signed by Judge Marcia G. Cooke on 3/26/2012. (tm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 10-61661-CIV-COOKE/TURNOFF
GLENN HERMAN,
Plaintiff
vs.
HARTFORD LIFE AND ACCIDENT
INSURANCE COMPANY,
Defendant.
______________________________________/
ORDER GRANTING MOTION FOR RECONSIDERATION
THIS MATTER is before me on Defendant’s Motion for Reconsideration of Order
Denying Defendant’s Motion for Summary Judgment. (ECF No. 75). I have reviewed the
record, the arguments and the relevant legal authorities. For the reasons stated below, the
Motion for Reconsideration is granted.
Procedural History
This is an action to recover long-term disability benefits under the Employee Retirement
Income Security Act of 1974, 29 U.S.C. § 1101, et seq. (“ERISA”). Plaintiff Glenn Herman
suffers from an arteriovenous malformation of the brain. On August 18, 2010, Mr. Herman filed
suit against Defendant Hartford Life and Accident Insurance Company (“Hartford”) in state
court. The case was removed to this Court on September 9, 2010, pursuant to 28 U.S.C. §§ 1331
and 1441. In his Complaint, Mr. Herman alleged that Hartford committed bad faith in reducing
his long-term disability (“LTD”) benefits (Count I). Mr. Herman also sought a declaratory
decree establishing that he was entitled to recover certain LTD benefits for his arteriovenous
malformation (Count II). In relying on the evidence available in the record at the time of
summary disposition, I denied Hartford’s Motion for Summary Judgment because I found the
assigned disability date to be arbitrary and capricious. Hartford has filed a Motion for
Reconsideration, asserting that the Court relied upon misstated and misunderstood facts, which
Hartford now attempts to clarify.
Clarified Factual Background
On July 11, 2005, Mr. Herman underwent the first of nine surgeries to remove a portion
of the arteriovenous malformation, and applied for LTD benefits under a disability policy (the
“Policy”) issued by Hartford. On October 20, 2005, Mr. Herman’s neurosurgeon, Dr. Robert
Mericle, completed Mr. Herman’s disability forms. On July 12, 2006, Hartford classified Mr.
Herman’s malformation as a pre-existing condition and denied the LTD benefits claim. As
required by ERISA, Hartford’s denial letter advised Mr. Herman of his right to appeal the
decision within 180 days. Mr. Herman did not appeal the decision and returned to work as a fulltime employee after his first round of surgeries, working 40 hours per week. On April 30 2007,
Mr. Herman was clinically diagnosed with depression. On May 3, 2007, Mr. Herman applied for
short-term disability (“STD”) benefits under the Policy. Hartford approved Mr. Herman’s STD
benefits, assigned Mr. Herman a disability date of April 30, 2007, and began issuing disability
benefits on July 29, 2007. In September 2007, the Social Security Administration awarded Mr.
Herman disability benefits in the lump sum of $9,181.24. On April 14, 2009, Hartford approved
Mr. Herman’s LTD claim for depression at a rate of $661.25 per month. In July 2010, however,
after receiving information about Mr. Herman’s Social Security disability benefits, Hartford
reduced Mr. Herman’s LTD payments to $50.00 per month, which is the minimal amount
allowable under the LTD Policy.
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Mr. Herman claims that Hartford arbitrarily assigned a 2007 disability date for his 2005
disability claim. Hartford argues that reconsideration is proper because the assignment of Mr.
Herman’s 2007 disability date is based upon a his 2007 clinical depression disability, and is
separate and distinct from Mr. Herman’s 2005 malformation disability claim.1 Although the
Complaint states that Mr. Herman’s cause of action arose from the 2007 disability claim,
subsequent pleadings, including Mr. Herman’s statement of claim, integrate injuries from his
2005 diagnosis into the present disability claim, resulting in a misunderstanding of the factual
timeline and confusion of legal issues.
Legal Standards
A court may relieve a party from a final judgment, order, or proceeding for misstate or
excusable neglect, or any other justified reason. Fed. R. Civ. P. 60(b)(1) and (6). To this effect,
a district court should grant a motion for reconsideration when: (1) there is an intervening change
in controlling law; (2) new evidence is available; or (3) there is a need to correct clear error or
prevent manifest injustice. See Sanzone v. Hartford Life and Acc. Ins. Co., 519 F. Supp. 2d 1250,
1255 (S.D. Fla. 2007) (citing Burger King Corp. v. Ashland Equities, Inc., 181 F. Supp. 2d 1366,
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Mr. Herman’s Response in Opposition to the Motion for Reconsideration (ECF No. 76) does
not dispute the factual substance of Hartford’s request for relief. Rather, Mr. Herman’s
Response misstates the relevant facts, misapplies the relevant law, and focuses on irrelevant
issues. Specifically, Mr. Herman contends that the Motion for Reconsideration should be denied
because Hartford relies upon the affidavit of an employee who Mr. Herman was unable to
depose. What Mr. Herman fails to acknowledge is that his inability to depose the employee was
due to his counsel’s failure to abide by the discovery rules and orders of this Court. Discovery in
an ERISA disability case is permissible on a limited basis, with focus on the claim
administrator’s decision-making. See Rosser-Monahan v. Avon Products, Inc., 227 F.R.D. 695,
698 (M.D. Fla. 2004); Lake v. Hartford Life & Acc. Ins. Co., 218 F.R.D. 260, 261 (M.D. Fla.
2003); Cerrito v. Liberty Life Assurance Co. of Boston, 209 F.R.D. 663, 664 (M.D. Fla. 2002);
Conkright v. Frommert, 130 S. Ct. 1640 (2010). Mr. Herman failed to limit the scope of
discovery. Moreover, Mr. Herman informed Hartford of his intent to depose Hartford’s
employees 74 days after the expiration of fact discovery, and 12 days after the close of expert
discovery. Although Hartford filed motions for protective orders, Mr. Herman voluntarily
cancelled the depositions. (See ECF No. 67).
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1369 (S.D. Fla. 2002)). The motion is appropriate where a court has “patently misunderstood a
party, or has made a decision outside of the adversarial issues presented to the Court by the
parties, or has made an error not of reasoning, but of apprehension . . .” Id. at 1255–56.
Summary judgment is appropriate when “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). It is not the trial court’s job to weigh the evidence, but rather to determine
whether there is a genuine issue of fact for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 249–50. However, the summary judgment analysis differs in an ERISA action, where “the
district court sits more as an appellate tribunal than as a trial court.” Curran v. Kemper Nat.
Servs. Inc., No. 04-14097, 2005 WL 894840, at *7 (11th Cir. 2005) (internal quotations omitted).
The court “does not take evidence, but, rather, evaluates the reasonableness of an administrative
determination in light of the record compiled before the plan fiduciary.” Id.
Discussion
An ERISA benefit plan participant may bring a civil action to recover, enforce or clarify
his rights to benefits under the terms of the plan. 28 U.S.C. § 1132(a)(1)(B). The “denial of
benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard of review
unless the benefit plan gives the administrator or fiduciary discretionary authority to determine
eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989); Hunt v. Hawthorne Assoc., Inc., 119 F.3d 888, 912 (11th Cir.
1997). “ERISA provides no standard for reviewing decisions of plan administrators or
fiduciaries.” Williams v. BellSouth Telecomms., Inc., 373 F.3d 1132, 1138 (11th Cir. 2004)
(overruled on other grounds by Doyle v. Liberty Life Assurance Co. of Boston, 542 F.3d 1352,
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1356 (11th Cir. 2008)). In applying the standard set forth in Firestone, the Eleventh Circuit has
articulated a six-step analysis for reviewing an administrator’s benefits decision:
(1) Apply the de novo standard to determine whether the claim administrator’s
benefits-denial decision is “wrong” (i.e., the court disagrees with the
administrator’s decision); if it is not, then end the inquiry and affirm the
decision.
(2) If the administrator’s decision in fact is “de novo wrong,” then determine
whether he was vested with discretion in reviewing claims; if not, end the
judicial inquiry and reverse the decision.
(3) If the administrator’s decision is “de novo wrong” and he was vested with
discretion in reviewing claims, then determine whether “reasonable” grounds
supported it (hence, review his decision under the more deferential arbitrary
and capricious standard).
(4) If no reasonable grounds exist, then end the inquiry and reverse the
administrator’s decision; if reasonable grounds do exist, then determine if he
operated under a conflict of interest.
(5) If there is no conflict, then end the inquiry and affirm the decision.
(6) If there is a conflict of interest, then apply heightened arbitrary and capricious
review to the decision to affirm or deny it.
Id. at 1138; Capone v. Aetna Life Ins. Co., 592 F.3d 1189, 1195 (11th Cir. 2010).2 Under the
terms of the Policy, Tweeter Home Entertainment Group, Inc. (“Tweeter Home”), Mr. Herman’s
employer, is the named plan administrator and Hartford is the named fiduciary. As the fiduciary,
Hartford had full authority to determine Herman’s eligibility for benefits. I must now consider
whether the aggregate evidence, viewed in the light most favorable to Mr. Herman, could
support Hartford’s decision under the deferential ERISA standards set forth above. See Leahy v.
Raytheon Co., 315 F.3d 11, 18 (1st Cir. 2002).
2
The Supreme Court has questioned the sixth step of this analysis. See Metro. Life Ins. Co. v.
Glenn, 554 U.S. 105 (2008). The Eleventh Circuit has recently recognized that the “heightened
arbitrary and capricious standard” is not required by Firestone and was implicitly overruled in
Glenn. See Doyle v. Liberty Life Assurance Co. of Boston, 542 F.3d 1352 (11th Cir. 2008).
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Step One: Was the Fiduciary’s Decision “Wrong”?
A court reviews the denial of ERISA benefits de novo, unless the benefit plan gives the
fiduciary authority to determine eligibility benefits or to construe the terms of the plan.
Firestone, 489 U.S. at 115. As discussed below, Hartford had full discretion and authority to
determine eligibility for benefits and construe the terms and provisions of the LTD policy.
Therefore, I will proceed as if Hartford’s decision was in fact wrong. See Eady v. Am. Cast Iron
Pipe Co., 203 F. App’x 326, 328 (11th Cir. 2006).
Step Two: Did the Fiduciary have Discretion?
Hartford argues that the Policy gives it discretion to reduce Mr. Herman’s monthly
benefits if he receives “other income benefits,” including social security disability payments.
The Policy sets forth the following steps for the calculating long-term benefits: (1) multiply the
pre-disability earnings by the benefit percentage, (2) compare the result with the maximum
disability benefit, and (3) from the lesser amount, deduct other income benefits. Tweeter Home
granted Hartford full discretion and authority to determine eligibility and to interpret the terms of
the Policy. Pursuant to the Policy, Hartford did in fact have discretion to reduce Mr. Herman’s
disability payments by any amount Mr. Herman received from the Social Security
Administration.
Step Three: Do Reasonable Grounds Support the Fiduciary’s Decision?
Hartford’s decision to reduce Mr. Herman’s benefits must be analyzed under the arbitrary
and capricious standard of review, limited to “consideration of the material available to
[Hartford] at the time it made its decision.” Oliver v. Coca Cola Co., 497 F.3d 1181, 1195 (11th
Cir. 2007) (vacated in part on other grounds, 506 F.3d 1316 (11th Cir. 2007) (internal quotations
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omitted)). The review is therefore limited to whether reasonable grounds exist to support
Hartford’s reduction of Mr. Herman’s benefits based on the administrative record.
To determine whether a fiduciary’s decision regarding benefits was arbitrary and
capricious, a court must begin with the language of the plan itself. Oliver, 497 F.3d at 1195.
The Policy allows a plan participant to receive disability benefits if, during an “elimination
period,” the plan participant is unable to work due to accidental bodily injury, sickness,
substance abuse, or pregnancy. (See Group Benefit Plan, ECF No. 1-2). The elimination period
is defined as the first consecutive 90 days of any one period of disability. It is “the period of
time a plan participant must be disabled before benefits become payable”, and the plan
participant is required to provide notice “within the first 30 days of an absence due to the same or
related disability.” (Id.).
Mr. Herman argues that the assigned 2007 disability date was arbitrary and capricious.
The record reflects that Mr. Herman was diagnosed with clinical depression on April 30, 2007,
and that he made a telephonic request for STD benefits on May 3, 2007. Hartford approved Mr.
Herman’s STD benefits on May 4, 2007, and set the disability date as the day of diagnosis.
Based on the 2007 claim, Hartford approved Mr. Herman’s subsequent LTD claim on April 14,
2009. The administrative record establishes reasonable grounds for Hartford’s interpretation and
application of the Policy. The disability date is neither arbitrary nor capricious.
Step Four: Did the Fiduciary Operate Under a Conflict of Interest?
The fourth step of the analysis is to consider whether the fiduciary operated under a
conflict of interest. A conflict of interest may arise where a party is responsible for both
determining eligibility and paying benefits. See Doyle, 511 F.3d at 1359; Williams, 373 F.3d at
1136. In this case, Tweeter Home is responsible for establishing and maintaining the benefits
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plan. Hartford is responsible for determining eligibility and paying claims. The Policy itself
gives Hartford full discretion and authority to determine eligibility and interpret the policy
provisions. Hartford is also responsible for paying benefits to Tweeter Home’s employees.
Under these facts, a structural conflict of interest exists between Hartford’s fiduciary and profitmaking interests, since Hartford is responsible for determining eligibility and paying benefits.
Step Five: Did Hartford’s Conflict of Interest Impact Its Benefits Determination?
The existence of a conflict of interest is not dispositive; rather, a conflict of interest is
simply one factor to be considered. See Firestone, 489 U.S. at 115. Further, the conflict of
interest is to be evaluated on a case-specific basis, and not under a heightened standard of
review. Glenn, 554 U.S. at 116–17; Miller v. Prudential Ins. Co. of Am., 625 F. Supp. 2d. 1256,
1262 (S.D. Fla. 2008). I must therefore determine whether the conflict of interest tainted
Hartford’s decisions regarding the reduction of Mr. Herman’s disability benefits. See Miller, 625
F. Supp. 2d. at 1266. In considering the weight of this factor, a court may give the conflict of
interest low importance when the administrative record lacks evidence of “malice, self dealing, a
parsimonious claims granting history, or other circumstances suggesting a higher likelihood that
the structural conflict affected the benefits decision.” Id.
There is no evidence in the administrative record that the conflict of interest affected
Hartford’s decision to set the disability date and to subsequently reduce benefits. There are
reasonable grounds to support the 2007 disability date. Further, Hartford’s decision to reduce
benefits following Mr. Herman’s receipt of individual Social Security disability benefits is not
arbitrary and capricious. Mr. Herman possessed full knowledge of the Policy provisions before
he enrolled in the Policy, and agreed to reimburse overpayments prior to receiving the disability
benefits. Moreover, Mr. Herman is unable to assert a cause of action based upon his 2005
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disability claim. The law is well-settled that ERISA plaintiffs “must exhaust available
administrative remedies before suing in federal court.” Perrino v. Southern Bell Tel. & Tel. Co.,
209 F. 3d 1309, 1315 (11th Cir. 2000) (citations omitted). By failing to appeal Hartford’s 2005
determination of benefits, Mr. Herman failed to exhaust his administrative remedies as a
jurisdictional prerequisite to filing suit in federal court.
Conclusion
For the foregoing reasons, it is ORDERED and ADJUDGED that Hartford’s Motion for
Reconsideration (ECF No. 75) is GRANTED. The Order Denying Hartford’s Motion for
Summary Judgment (ECF No. 72) is VACATED and summary judgment is GRANTED in favor
of Hartford. This Court shall issue a separate judgment pursuant to Fed. R. Civ. P. 58.
DONE and ORDERED in chambers at Miami, Florida this 26th day of March 2012.
Copies furnished to:
Counsel of Record
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