VanWinkle, Jr. v. Life Insurance Company of North America

Filing 13

OPINION & ORDER: (1) 11 Motion for de novo review DENIED; (2) 11 Motion to Strike portions of administrative record DENIED WITHOUT PREJUDICE; (3) Court will review matter under arbitrary and capricious standard of review. Signed by Judge Karl S. Forester on 5/8/2013. (STB)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON

CIVIL ACTION NO. 12-253-KSF
BOYD VAN WINKLE, JR

v.

PLAINTIFF

OPINION & ORDER

LIFE INSURANCE COMPANY OF NORTH
AMERICA, d/b/a/ Cigna Group Insurance

DEFENDANT

**********

This matter is currently before the Court upon the motion [DE #11] of the plaintiff, Boyd Van
Winkle, Jr., for de novo review of the denial of his application for long-term disability benefits under
an ERISA-governed benefit plan offered by his employer, Kentucky Utilities, and issued and
administered by the defendant, Life Insurance Company of North America, d/b/a/ Cigna Group
Insurance (“LINA”). Also before the Court is Van Winkle’s motion to strike records from LINA’s
proposed administrative record [DE #11]. These matters are ripe for review.
I.

FACTUAL AND PROCEDURAL BACKGROUND
As an employee for Kentucky Utilities (“KU”), Van Winkle was a participant in KU’s

ERISA-governed Benefit Plan. LINA issued a long-term disability (“LTD”) policy (“the Policy”)
to KU to provide benefits under the Plan. LINA is also the administrator of the LTD Plan. Van
Winkle remained insured under the LTD coverage when he became disabled from employment on
October 12, 2010.
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Van Winkle’s short-term disability claim was approved for the maximum duration of six
months because of his inability to perform his heavy duty operation as a technician for KU. Prior
to the end date of these benefits, Van Winkle applied for LTD benefits on March 8, 2011 [AR 113646]. 1 Van Winkle provided LINA with authorizations to obtain his medical records [AR 1135-46].
He also applied for Social Security disability benefits. LINA requested medical information from
Van Winkle’s providers in order to assess his claim. [AR 2271-72, 2290-92]. Despite making
second and third requests to some of Van Winkle’s providers, LINA did not receive the requested
information [AR 2269, 2267]. Although Van Winkle contends that he had provided the necessary
medical records to LINA’s representative, a company called Allsup, LINA contends that it never
received these records. On April 21, 2011, LINA denied Van Winkle’s LTD claim, noting that it
had exhausted all efforts to obtain medical information from his providers and thus had no
information on file to show proof of disability [AR 1125-26].
Van Winkle administratively appealed the denial of LTD benefits on July 27, 2011 [AR 119
et seq]. Included in his appeal were medical records and the opinion of his physician that he was
“totally and permanently disabled” from a number of medical conditions. This appeal was denied
by letter dated September 1, 2011 on the grounds that the records from the Veterans Administration
Hospital (“VA”) were not detailed enough to show how his alleged conditions impaired him from
his job [AR 110-11, 117]. The letter also informed Van Winkle that he was administratively
required to appeal the decision before filing a lawsuit and that he had 180 days to do so [AR 110-11].

1

While LINA is the entity legally responsible for payment of benefits, communications
regarding Van Winkle’s claim for benefits were from “Cigna Group Insurance.” The Court will
use the names LINA and Cigna interchangeably.
2

On February 28, 2012, Van Winkle again appealed the decision to deny his LTD claim [AR
1656 et seq.] This appeal contained additional records from the VA (along with opinions of VA
physicians that Van Winkle was totally disabled), independent psychological testing and opinion
from a psychologist and a vocational expert stating that Van Winkle was disabled, and statements
from Van Winkle’s family and a co-worker about his inability to perform his work. Over the next
few weeks, Van Winkle’s counsel made multiple inquiries about the status of the appeal and was
informed that a “behavioral health” review had been completed; however, it is unclear from the
record if such review had been undertaken at this time [AR 24, 27].
LINA did review Van Winkle’s claim, but apparently not until July 3, 2012 [AR 1655]. On
that day, LINA sent a letter acknowledging that it had received the appeal and that it would now
begin review by referring it to its disability appeals team [AR2236-37]. On July 16, 2012, LINA,
by letter, requested an extension of time to respond to the appeal, asking for an additional 45 days
[AR 2231].
Also on July 16, 2012, Van Winkle commenced this action, on the grounds that his claim was
deemed denied and exhausted by LINA’s failure to make a decision within the time allowed by the
regulations [DE #1-1]. Summons was served on LINA on July 24, 2012. Shortly after receipt of
summons, LINA for the first time forwarded Van Winkle’s records to two doctors: Dr. Marcus
Goldman and Dr. Siva Ayyar, requesting a peer review [AR 1633-42, 1643-47]. Then on September
6, 2012, while this litigation was pending, LINA issued a denial letter, claiming that Van Winkle
could perform his heavy duty job, relying on the peer review reports of Dr. Goldman and Dr. Ayyar
[AR 2226-2229].

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This Court issued its Scheduling Order on October 22, 2012, ordering that the parties file
their memorandum regarding the appropriate standard of review [DE #8]. Additionally, the Court
ordered that the Administrative Record be filed under seal no later than October 30, 2012, and that
Van Winkle shall file any objections and/or motions regarding the administrative record no later than
November 30, 2012. In accordance with this Order, Van Winkle filed his “Motion for De Novo
Review and Motion to Strike Records from LINA’s Proposed Administrative Record” [DE #11].
LINA filed its response to Van Winkle’s motion on December 10, 2012 [DE #12].
II. ANALYSIS
A.

STANDARD OF REVIEW

It is well settled that courts review challenges to benefit determinations under the Employee
Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., “under the de novo standard,
unless the benefit plan gives the plan administrator discretionary authority to determine eligibility
for benefits or to construe the terms of the plan.” University Hospital of Cleveland v. Emerson
Electric, 202 F.3d 839, 845 (6th Cir. 2000)(citing Firestone Tire & Rubber Co. v. Bruch , 489 U.S.
101, 115 (1989). When the benefit plan gives the plan administrator discretion, the decision is to
be reviewed under an arbitrary and capricious standard. Id. There is no dispute in this case that the
plan vests LINA with discretionary authority, and as a result, the default standard of review is the
arbitrary and capricious standard.
The issue in this case, however, is not whether the language in LINA’s certificate of
insurance gives it discretionary authority, but whether LINA loses any discretion that it may have
had because of its alleged failure to exercise its discretion in accordance with the ERISA statute and
regulations. ERISA was enacted by Congress to establish procedural safeguards to ensure that
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fiduciaries such as LINA administer benefit plans “solely in the interest of the participants and
beneficiaries.” 29 U.S.C. §§ 1104(a)(1) and 1001(b). Under ERISA, the Secretary of Labor is given
authority by Congress to enact regulations and set deadlines for the administration of employee
benefit claims. 29 U.S.C.§§ 1133 and 1135. Those rules and regulations are contained in 29 C.F.R.
2560.503-1, titled “Claims procedure.”
Relevant to this case are the regulations requiring a benefits determination on appeal to be
made within a certain time. 29 C.F.R. § 2560.503-1(i)(4). Specifically, decisions on disability claim
appeals must be made within 45 days of submission of a disability appeal, but an administrator may
take up to a maximum of 90 days total if it notifies the claimant within the first 45 days that an
additional 45 days is necessary because of “special circumstances (such as the need to hold a hearing,
if the plan’s procedures provide for a hearing).” 29 C.F.R. 2560.503-1(i)(1) and (i)(3). Furthermore,
the regulations require a plan administrator to notify the claimant, during the requisite time period,
of, inter alia, the “specific reason or reasons for the adverse determination,” and “the specific plan
provision on which the benefit determination is based.” 29 C.F.R. § 2560.503-1(j). Failure to follow
these procedures is governed by 29 C.F.R. 2560.503-1(l), which provides:
(l) Failure to establish and follow reasonable claims procedures. In the case of
the failure of a plan to establish or follow claims procedures consistent with the
requirements of this section, a claimant shall be deemed to have exhausted the
administrative remedies available under the plan and shall be entitled to pursue any
available remedies under section 502(a) of the Act on the basis that the plan has
failed to provide a reasonable claims procedure that would yield a decision on the
merits of the claim.
Here there is no dispute that LINA made no decision on Van Winkle’s claim within 45 days
of submission, and did not notify Van Winkle of any special circumstances requiring a 45-day

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extension during the first 45 days. As a result of these regulations, Van Winkle’s claim was deemed
exhausted 45 days after he filed the appeal on February 28, 2012.
Under these circumstances, Van Winkle contends that LINA’s belated claim “denial” should
not be given any deference. In making this argument, Van Winkle attempts to distinguish the Sixth
Circuit’s holding in Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir. 1988). In Daniel, the plan
administrator failed to render a timely decision; however, the Sixth Circuit held that this failure did
not give rise to a change in the default standard of review, holding that “the standard of review is no
different whether the appeal is actually denied or is deemed denied.” Id. at 267.
Van Winkle contends that this case is no longer binding and is not sound for a number of
reasons. First, Van Winkle argues that Daniel was decided before the Supreme Court’s holding in
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), where it held that the default
standard of review in an ERISA action is de novo. Daniel, however, was decided under its earlier
precedent that the default standard was “arbitrary and capricious.” According to Van Winkle, the
Daniel court’s fallback on an arbitrary and capricious standard of review because it was the default
at the time is not binding on this court in light of the subsequent decision in Bruch, making the
default standard of review de novo. Next, Van Winkle points to a statement by the Sixth Circuit in
University Hospitals of Cleveland v. Emerson Electric Co., 202 F.3d 839, 846 n.4 (6th Cir. 2000),
that “there is undeniable logic in the view that a plan administrator should forfeit deferential-review
by failing to exercise its discretion in a timely manner.” Based on this statement, Van Winkle argues
that the Court should look to the decisions of other federal courts on this topic, holding that de novo
review is appropriate in cases where there is a denial for failure to make a claim decision. See e.g.,
Nichols v. Prudential Life Ins. Cos. of America, 406 F.3d 98, 109 (2nd Cir. 2005); Gritzer v. CBS,
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Inc., 275 F.3d 291, 295-96 (3rd Cir. 2002); Jebian v. Hewlett-Packard Co., 349 F.3d 1098, 1103 (9th
Cir. 2003); Gilbertson v. Allied Signal, Inc., 328 F.3d 625, 631 (10th Cir. 2003).
On the other hand, LINA contends that Daniel remains controlling law. Moreover, LINA
argues that many of the cases from other circuits relied upon by Van Winkle were decided under a
prior version of the regulation, which provided that “[i]f a decision on review is not furnished within
[the permitted] time, the claim shall be deemed denied on review.” 29 C.F.R. § 2650.5031(1)(h)(4)(1999). However, LINA points out that the Department of Labor amended the ERISA
regulation in 2000 to omit the “deemed denied” language and enacted 29 C.F.R. § 2650.503(l),
which provides:
Failure to establish and follow reasonable claims procedures. In the case of the
failure of a plan to establish or follow claims procedures consistent with the
requirements of this section, a claimant shall be deemed to have exhausted the
administrative remedies available under the plan and shall be entitled to pursue any
available remedies under section 502(a) of the Act on the basis that the plan has
failed to provide a reasonable claims procedure that would yield a decision on the
merits of the claim.
29 C.F.R. § 2650.503(l). Under this new regulation, a claim is no longer deemed denied, but rather
deemed exhausted. LINA contends that this change in the regulation undercuts the rationale in the
cases relied upon by Van Winkle.
After careful consideration, the Court agrees with LINA that Daniel remains controlling law.
While University Hospitals of Cleveland did note that “there is undeniable logic in the view that a
plan administrator should forfeit deferential review by failing to exercise its discretion in a timely
manner,”it explicitly chose not to rule on the issue leaving the Daniel holding intact. University
Hospitals of Cleveland, 202 F.3d at 846, n.3 (“we need not decide . . . whether any failure to timely
decide [plaintiff’s administrative appeal] should trigger a less deferential standard of review”).
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While other circuits may disagree, this Court is bound by the Daniel decision that a belated claim
denial does not result in a change in the default standard of review. As a result, the appropriate
standard of review in this case is whether LINA’s decision to deny benefits was arbitrary and
capricious based on the discretion afforded to it in the plan document.
B.

PEER REVIEW REPORTS

Van Winkle contends that the reports of Dr. Goldman and Dr. Ayyar should be stricken from
the record because the Court’s review should be limited to the administrative record that existed at
the time the denial of benefits determination was made. He argues that the denial occurred the fortyfifth day after LINA received the appeal, based on the regulations requiring LINA to act by that date.
On the other hand, LINA argues that Van Winkle’s appeal was not denied until September 6, 2012 after the peer review reports were included in the administrative record. Because the regulations
deemed Van Winkle’s appeal “exhausted” rather than “denied,” LINA argues that it is entitled to
process an administrative appeal after it has been deemed exhausted. According to LINA, it merely
made a procedural error in failing to timely process Van Winkle’s claim, and courts routinely remand
cases like this where there is no evidence of bad faith.
The Court must decide whether the administrative record closed once the appeal was deemed
exhausted (45 days after submission of the appeal), or once LINA issued a final decision (September
6, 2012). This is a close case, and neither side has cited controlling caselaw based on a similar
factual pattern presented here. Here, a remand and reconsideration has essentially occurred. While
the peer review reports were not a part of the record at the time the claim was deemed “exhausted,”
LINA did continue to process the claim and considered the peer review reports before making its
actual denial on September 6, 2012 and before this Court has conducted any review. Thus, this is
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not a case where the Court is being asked to review documents not first presented to administrators
as in Perry v. Simplicity Engineering, 900 F.2d 963, 967 (6th Cir. 1990), where the Sixth Circuit
refused to permit a district court to consider evidence for the first time. Instead, this is a case where
LINA failed to follow the time frame set out in the regulations, but ultimately reached a decision
based, in part, on the peer review reports. While the Court sympathizes with VanWinkle and does
not condone LINA’s delay in decisionmaking, it will allow the peer review reports to remain in the
administrative record at this time. The Court, however, reserves the right to revisit this decision
upon submission of the parties’ briefs on the merits of the decision to deny benefits to Van Winkle.
Accordingly, the Court will deny, without prejudice, Van Winkle’s motion to strike the peer review
reports from the record.
III.

CONCLUSION
For the reasons set forth above, the Court, being fully and sufficiently advised, hereby

ORDERS as follows:
(1)

Van Winkle’s motion for de novo review [DE #11] is DENIED;

(2)

Van Winkle’s motion to strike portions of the administrative record [DE #11] is
DENIED WITHOUT PREJUDICE; and

(3)

the Court will review this matter under the arbitrary and capricious standard of
review.

This May 8, 2013.

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