Fessenden v. Reliance Standard Life Insurance Company et al
Filing
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OPINION AND ORDER denying 14 Motion to Conduct Standard Discovery. The Court ORDERS the parties to file a revised Rule 26(f) discovery plan by 12/29/2016. Signed by Magistrate Judge Michael G Gotsch, Sr on 12/15/16. (nal)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
DONALD FESSENDEN,
Plaintiff,
v.
RELIANCE STANDARD LIFE
INSURANCE COMPANY, et al.,
Defendants.
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CAUSE NO. 3:15-CV-370-WCL-CAN
OPINION AND ORDER
On February 1, 2016, Plaintiff filed his Motion to Conduct Standard Discovery Pursuant
to Rule 26 of Federal Rules of Civil Procedure in this case brought pursuant to Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. Defendants filed a
response to Plaintiff’s instant motion to conduct discovery on March 1, 2016. Plaintiff’s instant
motion became ripe on March 11, 2016, when he filed his reply brief.
Once the Court entered its opinion and order denying Plaintiff’s motion to apply the de
novo standard of review in this case, the undersigned ordered the parties to complete
supplemental briefing on the instant motion for discovery. [Doc. No. 30]. On October 20,
2016, Plaintiff timely filed his supplemental brief [Doc. No. 31] along with his proposed
interrogatories [Doc. No. 31-1], his proposed request for production of documents [Doc. No. 312], and a 2007 law review article discussing the partiality of self-interested reviewers in claims
benefits decisions challenged under ERISA [Doc. No. 31-3]. Defendants filed their timely
supplemental brief in response [Doc. No. 32] along with a document entitled “Reliance Standard
Claim Handling Statement of Principles (“the Reliance Principles”) [Doc. No. 32-1]. In light of
the parties’ briefing and the supplemental evidence presented, the Court now denies Plaintiff’s
motion for discovery for the reasons stated below.
I.
RELEVANT BACKGROUND
In its opinion and order dated September 26, 2016, the Court concluded that Defendants
substantially complied with the ERISA regulatory framework in its denial of Plaintiff’s claim for
disability insurance benefits. Accordingly, the Court held that Plaintiff’s ERISA claim before
this Court will be reviewed under the arbitrary and capricious standard typically applied in
ERISA cases where a benefit plan contains a discretionary clause. See Doc. No. 29 at 3 (citing
Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111(2008) (citing Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989))).
Ordinarily in ERISA cases where the arbitrary and capricious standard is applied, the
reviewing court only considers the administrative record, or in other words, evidence before the
claims administrator when the claim at issue was denied. Perlman v. Swiss Bank Corp.
Comprehensive Disability Prot. Plan, 195 F.3d 975, 982 (7th Cir. 1999); see also Krolnik v.
Prudential Ins. Co. of Am., 570 F.3d 841, 843 (7th Cir. 2009). However, the Supreme Court in
Glenn addressed concerns about the effect of structural conflicts of interest where the claims
administrator both evaluates benefits claims and pays any benefits awarded. Glenn, 554 U.S. at
112–18. The Court concluded that such a conflict of interest constitutes “one factor among
many that a reviewing judge must take into account.” Id. at 116.
Here, Reliance Standard Life Insurance Company (“Reliance”) is undisputedly both the
administrator and payor of the long term disability benefits sought by Plaintiff and at issue in this
case. Under the terms of Plaintiff’s disability policy, Plaintiff would have received $1,250,000
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in disability benefit payments had Reliance approved rather than denied his claim. Plaintiff
alleges that Reliance hired Dr. John Brusch and Dr. Michelle Park as record reviewing
physicians, both of whom are regular reviewers in the disability insurance industry, to review
and deny his benefits claim. Additionally, Plaintiff points to rejections by two courts of Dr.
Brusch’s opinions finding claimants not to be disabled. Although not completely clear from
Plaintiff’s motions and subsequent briefs, Plaintiff seems to be suggesting that Dr. Brusch’s and
Dr. Park’s history with and compensation from Reliance create a fair inference that a financial
conflict existed and influenced Reliance’s denial of his claim.
In light of these facts, Plaintiff asks the Court for permission to conduct discovery in
order to determine the extent to which Reliance’s conflict of interest infected his benefits claim.
Specifically, Plaintiff seeks information regarding financial incentives, bias, or motivations that
may be built into Reliance’s claim process that favor denial of legitimate benefits claims.
Plaintiff contends that information involving the claims management practices and financial
motives of Reliance’s employees and agents is relevant to any analysis of the effect of Reliance’s
conflict of interest on his claim. Additionally, Plaintiff indicates that he is “entitled to purs[u]e
discovery to establish the nature of the relationship between Reliance” and Drs. Brusch and Park
so that the Court can “competently assess whether they are truly ‘independent.’” [Doc. No. 31
at 8]. Plaintiff also indicates his intent to conduct a Rule 30(b)(6) deposition of individuals most
knowledgeable about Reliance’s structural conflict of interest and the responses to the written
discovery requests, if allowed by the Court.
Defendants, however, argue that such discovery is inappropriate in this case because
Plaintiff has failed to show with specificity any instance of misconduct in the handling of his
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claim. In addition, Defendants contend that good cause does not exist for the belief that
discovery would reveal any procedural defect in Reliance’s decision on Plaintiff’s claim.
Defendants support their argument with a document entitled “Reliance Standard Claim Handling
Statement of Principles” (“Principles”). 1 [Doc. No. 32-1]. Reliance’s Principles document
outlines Reliance’s expectations for claim examiners, appeal reviewers, third party vendors who
provide independent medical professionals as requested by Reliance, and the independent
medical professionals themselves.
II.
ANALYSIS
Under Glenn, Reliance’s structural conflict of interest as both the administrator and payor
of Plaintiff’s benefits claim is one of many factors that this Court must consider in its deferential
review of Reliance’s benefits denial. See 554 U.S. at 116–17. The mere existence of the
structural conflict also raises the question of whether discovery should be allowed to assist in the
determination as to the extent to which the conflict impacted the review process used to assess
Plaintiff’s benefits claim. See id. However, discovery is not automatic when an insured asserts
that a benefit decision may have been influenced by a conflict of interest. As stated in this
Court’s order dated October 6, 2016, “discovery is normally disfavored in the ERISA context,”
in keeping with the application of the deferential arbitrary and capricious standard. Semien v.
Life Ins. Co. of N. Am., 436 F.3d 805,814 (7th Cir. 2006); see also Barker v. Life Ins. Co. of N.
Am., 265 F.R.D. 389, 393 (S.D. Ind. 2009) (internal citations omitted).
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Reliance’s Principles document includes no date or other indication of its effective date, no context within
Reliance’s claims management process, and no affidavit that might authenticate it. However, Plaintiff has not
objected to the authentication of the Principles document. Therefore, the Court will assume it represents Reliance’s
policies regarding claims management as Defendants suggest.
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Before Glenn, Semien defined a rather strict test for determining whether limited
discovery was justified in the Seventh Circuit. Under Semien, limited discovery was only
warranted in cases where claimants “identif[ied] a specific conflict of interest or instance of
misconduct [and made] a prima facie showing that there [was] good cause to believe limited
discovery [would] reveal a procedural defect in the plan administrator’s determination.”
Semien, 436 F.3d at 815. Glenn brought into question the validity of the Semien framework
without establishing explicit rules for determining when discovery should be allowed. See
Glenn, 554 U.S. at 116 (“Neither do we believe it necessary or desirable for courts to create
special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly
upon the evaluator/payor conflict.”).
Most recently, the Seventh Circuit addressed the status of the Semien standard in
Dennison v. Mony Life Ret. Income Sec. Plan, 710 F.3d 741 (7th Cir. 2013). Summarizing the
effect of Dennison on the Semien standard, the Northern District of Illinois explained:
In Dennison, the Seventh Circuit made clear that the Supreme Court’s
decision in Glenn “suggests a softening, but not a rejection” of the requirement
established in Semien that a plaintiff must make a prima facie showing in order to
be entitled to discovery in a case to be decided under the arbitrary and capricious
standard. 710 F.3d at 747. The Court in Dennison re-affirmed that Semien
remains good law in the Seventh Circuit after Glenn albeit with a “softening” of
the prima facie showing required as a prerequisite to obtaining discovery.
Accordingly, the Seventh Circuit seems willing to see what discovery the district
courts will permit under a “softened” Semien standard before it lays down firm
markers in that regard. Id.
While the Seventh Circuit expressly declined to delineate “the contours of
permissible discovery,” it also implied that there are cases in which discovery
may not be necessary. Id. Therefore, in light of Semien, as “softened” by
Dennison, discovery still is not permitted in the run-of-the-mill case in the
Seventh Circuit, and the two-part test established in Semien remains instructive.
That means that to obtain discovery beyond the claim file in a case governed by
the arbitrary and capricious standard, a plaintiff still must identify a specific
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conflict or instance of misconduct and make a prima facie showing that there is
good cause to believe that limited discovery will reveal a procedural defect.
Semien, 436 F.3d at 813–814. In light of Glenn, however, and given the
softening of the Semien standard heralded by Dennison, a plaintiff’s burden in
making this showing is not onerous.
Warner v. Unum Life Ins. Co. of Am., No. 12 C 2782, 2013 WL 3874060, at *2–3 (N.D. Ill. July
26, 2013). While the Semien burden may not as onerous as it once was, district courts within
the Seventh Circuit have still denied discovery outside the record based on the unique
circumstances of given cases.
For instance, the Eastern District of Wisconsin rejected a plaintiff’s request for discovery
where the plaintiff had sought discovery on both substantive and procedural grounds. Gebert v.
Thrivent Fin. for Lutherans Grp. Disability Income Ins. Plan, No. 13-C-170, 2013 WL 6858531,
at *4 (E.D. Wis. Dec. 30, 2013). As relevant here, the court reported that the plaintiff only
presented evidence suggestive of disability that conflicted with the opinion of the administrator’s
independent medical professional in support of the request for discovery. Id. at *3. The court
found this evidence insufficient to “raise the specter of impropriety” making the case a run-ofthe-mill benefits challenge that failed to satisfy the Semien softened standard necessary to justify
discovery. Id. In particular, the court found the plaintiff’s lack of evidence to show a history
of government fines or historical practice of denying similar claims compelling in denying
discovery. Id.
Similarly, district courts in Illinois have rejected requests for discovery when plaintiffs
failed to satisfy the threshold burden of identifying a specific conflict or instance of misconduct
by the insurer. Weddington v. Aetna Life Ins. Co., No. 15 C 1268, 2015 WL 6407764, at *3
(N.D. Ill. Oct. 21, 2015); see also Dragus v. Reliance Standard Life Ins. Co., No. 15-C-09135,
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2016 WL 3940106, at *2 (N.D. Ill. July 21, 2016); Ryan v. Cargill, Inc., 73 F.3d 994, 1000 (C.D.
Ill. 2014). Even this Court has denied discovery for the plaintiff’s failure to make “a
preliminary showing of misconduct, bias, or conflict of interest that might warrant discovery
beyond the record on which the administrator relied.” Boxell v. Plan for Grp. Ins. of Verizon
Commc’ns, Inc., No. 1:13-CV-89, 2013 WL 5230240, at *5 (N.D. Ind. Sept. 16, 2013) (internal
quotations omitted).
With that said, district courts in the Seventh Circuit have also concluded that discovery in
ERISA cases involving an inherent structural conflict of interest is generally appropriate without
applying the Semien standard, but only at the court’s discretion after reviewing the plaintiff’s
proposed discovery requests to ensure that they were properly tailored in light of the facts of that
case. See Hall v. Life Ins. Co. of N. Am., 265 F.R.D. 356 (N.D. Ind. 2010); but see Barker v.
Life Ins. Co. of N. Am., 265 F.R.D. 389 (S.D. Ind. 2009) (noting that adhering to Semien’s twoprong standard contravenes Glenn because “it requires a claimant—without the benefit of any
discovery—to show that a conflict exists and that the conflict motivated the administrator”).
The Western District of Wisconsin concluded that requiring ERISA plaintiffs to meet the Semien
“good cause” standard before allowing discovery related to inherent structural conflicts of
interest would be too burdensome and then held that plaintiff could qualify for discovery by
identifying federal cases where the court found the defendant carrier’s claims evaluation process
to be tainted. Nemeth v. Andersen Corp. Welfare Plan, No. 14-CV-270-JDP, 2014 WL
5802020, at *3 (W.D. Wis. Nov. 7, 2014).
These assorted outcomes in the district courts do not, however, eliminate the Semien
standard completely. Instead, they shows that district courts have refused to open the doors of
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ERISA discovery without some showing that something besides the administrative record is
necessary to assess the effect of structural conflicts of interest on benefits claims. As such, the
courts have appropriately applied the Semien standard as softened by Glenn. See Dennison, 710
F.3d at 747. A similar, particularized consideration of the unique evidence presented by
Plaintiff in this case leads the Court to find discovery unwarranted.
First, Plaintiff cites Spears v. Liberty Life Assur. Co. of Boston, No. 3:11-CV-1807
(VLB), 2015 WL 1505844, at *32 (D. Conn. Mar. 31, 2015) (finding Dr. Brusch’s report fatally
flawed) and Peterson v. Hartford Life & Acc. Ins. Co., No. 2:11-CV-10932, 2011 WL 6000776,
at *5 (E.D. Mich. Nov. 30, 2011) (finding insurer’s reliance on Dr. Brusch’s report arbitrary and
capricious) in what appears to be an attempt to discredit Dr. Brusch’s opinions related to
Plaintiff’s claim. Plaintiff does not develop any such argument further. Moreover, Defendants
cite six other federal cases where Dr. Brusch’s opinions were affirmed. See Doc. No. 32 at 8
(collecting cases). Such a record may be relevant to the Court’s ultimate decision on the merits
of this case. However, Plaintiff has failed to show even an inference of misconduct by Reliance
in the handling of Plaintiff’s claim with these two citations related to the success of Dr. Brusch’s
opinions in past cases.
Second, Plaintiff implies that Drs. Brusch and Park have served as independent medical
reviewers for Reliance many times and that Reliance’s compensation created a financial
incentive to deny Plaintiff’s claim. The Court agrees that such facts could indeed raise a fair
inference that the financial conflict influenced Reliance’s denial of Plaintiff’s claim. See
Jenkins v. Price Waterhouse Long Term Disability Plan, 564 F.3d 856, 860 n.5 (7th Cir. 2009);
Maiden v. Aetna Life Ins. Co., No. 3:14-CV-901, 2016 WL 81489, at *2 (N.D. Ind. Jan. 6, 2016);
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see also Demer v. IBM Corp. LTD Plan, 835 F.3d 893, 902–03 (9th Cir. 2016). However,
Plaintiff did not have access to Reliance’s Principles document when he suggested this possible
inference based Dr. Brusch’s and Dr. Park’s history with Reliance. Through the Principles,
which document defines the parameters of Reliance’s relationship with its independent medical
professionals, Plaintiff’s inference that financial incentives influenced the decision on his claim
is mitigated.
Specifically, the Principles establish that Reliance does not hire its own medical doctors
for independent reviews, but instead pays a third-party vendor to provide independent medical
reviewers. [Doc. No. 32-1, ¶ 8]. As a result, Reliance did not pay Drs. Brusch or Park creating
a relational distance showing true independence. 2 The Principles further reduce any inference
of undue influence by showing that Reliance chooses its vendors “based upon quality, accuracy,
and timeliness of reports [and not] based upon the outcome of prior reviews nor are the outcomes
of independent reviews tracked.” [Id. at ¶ 10]. Lastly, the Principles reflect Reliance’s
intentional reduction of potential financial bias through its vendor agreement, which requires all
medical professionals maintain active medical practice or academically affiliations so that “at
least a portion of their . . . income is derived from a source unrelated to insurance examinations
or file reviews.” [Id. at ¶ 9]. With no reason to doubt that Reliance deviated from these
Principles in their handling of Plaintiff’s claim, the Court is not persuaded that Reliance’s
relationship with Drs. Brusch and Park create sufficient risk of financial bias to justify discovery
beyond the administrative record.
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The Court accepts Defendants’ assertion that Reliance did not pay Dr. Brusch or Dr. Park based on Defendants’
reference to, and willingness to produce, documentation of third-party vendors to both doctors as included in the
administrative record. See Doc. No. 32 at 8, n.1.
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Third, Reliance’s Principles document demonstrate that its structural conflict of interest
will be a less important factor in the Court’s ERISA review of Plaintiff’s denial of benefits. In
Glenn, the Supreme Court offered guidance to courts assessing the impact of conflicts of interest
in ERISA reviews. The Court stated:
The conflict of interest . . . should prove more important (perhaps of great
importance) where circumstances suggest a higher likelihood that it affected the
benefits decision, including, but not limited to, cases where an insurance company
administrator has a history of biased claims administration. . . . It should prove
less important (perhaps to the vanishing point) where the administrator has taken
active steps to reduce potential bias and to promote accuracy, for example, by
walling off claims administrators from those interested in firm finances, or by
imposing management checks that penalize inaccurate decisionmaking
irrespective of whom the inaccuracy benefits.
Glenn, 554 U.S. at 117. Here, the Principles not only show Reliance’s active steps to eliminate
any bias affecting independent medical professionals, as described above. The Principles also
ensure that internal claim examiner and appeal reviewers (1) are not compensated in any way or
evaluated based on their record of approved or denied claims; (2) have no access to disability
reserve information or the profitability of any of Reliance’s business units; (3) do not report to
and are located separate from the financial department; (4) are reviewed only on promptness and
accuracy in decisionmaking; and (5) must attend specific claims handling training annually.
[Doc. No. 32-1, ¶¶ 1–5]. With these efforts, Reliance has minimized any potentially negative
effect of the inherent conflict of interest that exists in their business structure.
The evidence in the record before this Court, however, does not explicitly address
whether Reliance has exhibited a pattern of biased claims administration despite the Principles.
Discovery into that question would require production of information related to other claimants’
records and to Reliance employees. The value of such production would not outweigh the
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burden that would be imposed on the privacy interests of the other claimants and employees.
Indeed, such production is unlikely to reveal any evidence of misconduct or bias given the
expectations set forth in Reliance’s Principles document. Accordingly, Plaintiff’s request for
discovery here amounts to a fishing expedition for evidence of bias or misconduct where the
record shows no hint that Reliance’s structural conflict of interest affected the decision on
Plaintiff’s benefits claim. Therefore, the remote chance that a conflict of interest affected
Plaintiff’s claim is too attenuated to warrant discovery in this ERISA case where the Court will
be applying the deferential arbitrary and capricious standard.
III.
CONCLUSION
For the reasons discussed above, the Court DENIES Plaintiff’s motion to conduct
standard discovery [Doc. No. 14]. The Court ORDERS the parties to file a revised Rule 26(f)
discovery plan by December 29, 2016.
SO ORDERED.
Dated this 15th of December, 2016.
s/Michael G. Gotsch, Sr.
Michael G. Gotsch, Sr.
United States Magistrate Judge
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