Shepherd v. Life Insurance Company of North America

Filing 26

MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 2/3/2012:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

DEBORAH SHEPHERD,
Plaintiff,
Case No. 11 C 3846
v.
LIFE INSURANCE COMPANY OF
NORTH AMERICA, a Cigna
Company,

Hon. Harry D. Leinenweber

Defendant.

MEMORANDUM OPINION AND ORDER
I.

INTRODUCTION

Before the Court is Defendant Life Insurance Company of North
America’s (“LINA”) Motion for a Protective Order and to Quash the
Subpoena of Dr. David S. Knapp.

For the reasons stated herein, the

Court denies the Motion in its entirety.
II.

BACKGROUND

Plaintiff in this case alleges that Defendant improperly
stopped paying her disability benefits under her insurance policy,
which she obtained through her employer, Yellow Book.
She questions the reliability of the insurance doctor, Dr.
Knapp, whose report was used in Defendant’s denial of continued
disability benefits.

Plaintiff alleges Knapp frequently provides

such services for Defendant and other disability insurers, and so
may have financial biases.

Further, Plaintiff claims that Defendant, as both payor and
claim administrator, had a conflict of interest in its disability
decision.

Further, she alleges Defendant was specifically biased

toward Yellow Book because several of its employees were out on
disability at the same time, and that Defendant targeted Yellow
Book employees out of financial motives.
Accordingly, Plaintiff seeks information regarding how her
particular

claim

was

handled

and

the

financial

picture

of

Defendant’s Yellow Book interactions.
The Court has been asked to perform a “de novo review” of
Defendant’s denial of continued disability benefits to Plaintiff.
III.

LEGAL STANDARD

This action is governed by the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1002, et seq. (“ERISA”).
As the Seventh Circuit and the parties have noted, “de novo
review” is somewhat of a misnomer, and the Court’s function here is
more akin

to

making

an

“independent decision”

as

to

whether

Plaintiff is entitled, under the terms of the plan she holds with
Defendant, to continued disability benefits.

Krolnik v. The

Prudential Ins. Co. of Am., 570 F.3d 841, 843 (7th Cir. 2009).

The

term “review” is more appropriate to instances where the policy,
which the Seventh Circuit notes is very much like a contract,
specifically entitles the insurance company to deference to its
decision (an “arbitrary and capricious” standard).
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Id.

In those

instances, review (and sometimes discovery) is often limited to the
administrative record presented to the insurance company when it
rendered its decision.

Id.

The exception in those arbitrary and

capricious cases is when plaintiff shows bias or conflict of
interest on the part of the defendant; then, “more cautious review”
must be given.

Semien v. Life Ins. Co. of North Am., 436 F.3d 805

(2006).
Curtailed discovery is not necessarily the norm in de novo
ERISA review cases. While a court may find that limiting discovery
to the “administrative” record is proper, because the review is de
novo, it may also admit (and hence allow discovery on) “additional
evidence necessary to enable it to make an informed and independent
judgment.”
1994).

Casey v. Uddeholm Corp., 32 F.3d 1094, 1099 (7th Cir.

Litigation

under

ERISA

by

plan

participants

seeking

benefits should be conducted just like contract litigation, for the
plan and any insurance policy are contracts.

Krolnik, 570 F.3d at

843 (quoting Firestone Tire & Rubber Co. v. Burch, 489 U.S. 101,
112-113 (1989)).
But, as Defendant points out, some courts in this District
have found that, in de novo review, since the primary issue is
whether the plaintiff qualifies for benefits under the plan, an
exploration of the defendants’ motives, or whether they followed
their own procedures in denying the benefits, is irrelevant.

See

Walsh v. Long Term Disability Coverage for All Employees Located in
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the United States of DeVry, Inc., No. 07-1478, slip op. 4 (N.D.
Ill. February 6, 2008) (“Walsh I”) (citing Diaz v. Prudential Ins.
Co. of America, 499 F.3d 640, 643 (7th Cir. 2007); see also
Kuznowicz v. Wrigley Sales Co., LLC, No. 11-165, 2011 U.S. Dist.
LEXIS 89996 *3-5 (N.D. Ill. August 10, 2011) (allowing extra
discovery on matters related to the medical evidence and whether
plaintiff qualified under the plan, but denying depositions of
insurance company employees).
The

cornerstone

for

Walsh

and

Kuznowicz

is

Diaz,

which

reversed a summary judgment motion in a de novo ERISA benefits
case.

Diaz, 499 F.3d 640.

Diaz, in discussing what was necessary

for summary judgment, noted that “the question before the district
court was not whether Prudential gave Diaz a full and fair hearing
or undertook a selective review of the evidence; rather, it was the
ultimate question whether Diaz was entitled to the benefits he
sought under the plan.”

Id. at 643.

“What happened before the

plan administrator or ERISA fiduciary is irrelevant.”
Before

Diaz,

at

least

one

District

Court

had

Id.
found

it

appropriate in a de novo ERISA case to allow discovery on whether
“the determination was[,] for lack of a better term[,] ‘tainted.’”
Marantz v. Life Ins. Co. of N.Y., No. 06-3051 Tr. of Proceedings 23 (N.D. Ill. October 30, 2006).

Judge Milton Shadur allowed the

depositions of an insurance company doctor, the insurance company’s
claims manager and a hired vocational expert in order to assess the
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credibility of the doctor’s finding and to see if the insurance
company had met is obligation to weigh the evidence “for and
against.”

See Id. at 1-4; see also Marantz, Pl.’s Motion to

Compel, September 13, 2006, ECF No. 24; see also Marantz, Def.’s
Resp., October 2, 2006, ECF No. 27.
Lastly, Patton v. MFS/Sun Life Financial Distributors spoke
specifically to the district court’s discovery discretion in de
novo ERISA cases.
“[T]he district court may wish to consider . . .
whether the plan administrator faced a conflict of
interest and, as Sun Life notes, whether the parties had
a chance to present their evidence in the ERISA
administrative proceeding. . . . But no factor is
necessarily determinative in any particular case. The
district court must take the relevant factors into
consideration and provide a reasonable explanation for
its decision; so long as it does so, its decision will be
affirmed. Reversals will be rare.”
Patton v. MFS/Sun Life Financial Distributors, 480 F.3d 478, 491
(7th Cir 2007).
As

to

doctors

who

give

reports

used

in

disability

determinations, several courts have found exploration of their
motives relevant, even in de novo review cases.

Cf. Krolnik, 570

F.3d at 844 (noting “at trial Krolnik would be free to offer
medical evidence of his own and cross-examine the physicians who
produced the reports that underlie [the] decision.”) (emphasis
added);

see

also

Walsh

I,

07-1478,

slip

op.

4

(N.D.

Ill.

February 6, 2008) (writing, “The court finds that evidence of Dr.

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Foye’s possible bias in drafting his report is both relevant and
necessary to the court’s informed and independent consideration of
Walsh’s claim.”) (emphasis in original); see also Walsh v. Long
Term Disability Coverage for All Employees Located in United States
of DeVry, Inc., 601 F.Supp.2d 1035, 1048 (“Walsh II”) (writing “The
court

will

consider

Dr.

Foye’s

financial

relationship

with

Prudential (he was paid over $137,000 by Prudential in 2005 alone)
a factor in evaluating the reliability of Dr. Foye’s report).
IV.

ANALYSIS

The first question to address is whether Diaz forecloses on
discovery of a defendant insurance company’s motives or whether the
decision to explore that topic remains within the sound discretion
of the Court. The Court believes Diaz, in conjunction with Patton,
at

the

very

least

leaves

the

issue

unsettled

and

does

not

definitively foreclose the Court’s discretion in this area.
First, Diaz was a ruling reversing summary judgment, not
specifically a ruling regarding the allowable scope of discovery.
Second, much of the language the parties cite in Diaz was geared
toward focusing the district court on its ultimate task.

As Diaz

itself notes “Normally, we would not belabor the question of the
proper approach toward a motion for summary judgment . . . but for
a time there was some confusion in this case about what the
district court was being asked to do.”

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Diaz, 499 F.3d at 643.

Lastly, and perhaps most importantly, Diaz cites to Patton.
Patton’s clear indication that conflict-of-interest matters will
sometimes be an appropriate area of inquiry in de novo ERISA cases
indicates, at minimum, that the discovery issue is not settled law
definitively foreclosing this Court’s discretion.
The next question to address is whether the materials sought
by Plaintiff are relevant.
has

an

inherent

Plaintiff has alleged that Defendant

conflict

administrator and the payor.

of

interest

as

both

the

claim

This is a conflict of interest, but

alone does not tip the scale; nearly all insurance companies fit
that description.
received

Plaintiff, however, further claims to have

information

that

the

insurance

company

specifically

targeted her employer’s group of employees to terminate benefits
because there were a number of company employees on disability at
the same time.
At least at the discovery stage, this is enough to raise a
question regarding the why and how of Defendant’s decision in
addition to the ultimate question of whether the decision was the
correct one.

As Krolnik made clear, de novo ERISA cases are like

ordinary contract cases.

While good or bad faith in honoring a

contract

ultimate

is

seldom

the

question,

it

can

often

be

potentially relevant as part of the ultimate inquiry into whether
the contract was honored.

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Therefore,

the

interrogatories

Court

regarding

finds
LINA’s

the

requested

alleged

biases

items

and

potentially

relevant.
The Court must also address the Defendant’s claim of undue
burden. Interestingly, Defendant does not argue that the volume of
materials and detail requested is, in itself, unduly burdensome.
Rather, it argues that because the material sought is irrelevant,
it is per se unduly burdensome.

Def.’s Memo, 9; Def.’s Reply, 7.

Because the Court has found the items potentially relevant that
argument fails.
Therefore, because the Court believes the items requested are
potentially relevant, it finds them necessary to make an informed
and

independent

judgment

of

their

relevance

to

the

ultimate

question in this case.
Likewise, the Court finds the materials requested regarding
the

financial

relevant.

biases

of

Dr.

Knapp

and

Intracorp

potentially

The Plaintiff has alleged, essentially, that Dr. Knapp

is the Defendant’s hired gun, as well as the hired gun of several
other insurers.

Plaintiff cites several cases in which Dr. Knapp

has served as an insurer’s expert.

Knapp’s potential bias is

relevant to evaluating the credibility of his report regarding
Plaintiff, a report this Court will have to consider in reaching a
determination regarding disability.

Several other courts have

found it a potentially relevant area of inquiry; we do too.

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Therefore, because the Court believes the items requested are
potentially relevant to whether Dr. Knapp has any financial bias,
it finds those items relating to his possible bias, as well as the
items sought in the subpoena, necessary to make an informed and
independent judgment of their relevance to the ultimate question in
this case.
V.

CONCLUSION

For the reasons stated herein, the Defendant’s Motion for a
Protective Order and to Quash the Subpoena of Dr. Knapp is denied.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
DATE: 2/3/2012

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