McCandless v. Countrywide Financial, Incorporated et al

Filing 168

AMENDED OPINION AND ORDER DENYING PLAINTIFFS AND DEFENDANTS MOTIONS FOR JUDGMENT ON THE ADMINISTRATIVE RECORD AND REMANDING THE CASE TO THE PLAN ADMINISTRATOR - Plan Administrator render its decision within 90 days. Signed by District Judge Marianne O. Battani. (KDoa)

UNTIED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

SANDRA MCCANDLESS,
Plaintiff,
CASE NO. 2:08-cv-14195
v.
HON. MARIANNE O. BATTANI
STANDARD INSURANCE COMPANY,
Defendant.
_______________________ __________/

AMENDED OPINION AND ORDER DENYING PLAINTIFF’S AND DEFENDANT’S
MOTIONS FOR JUDGMENT ON THE ADMINISTRATIVE RECORD
AND REMANDING THE CASE TO THE PLAN ADMINISTRATOR

I.

INTRODUCTION

This matter is before the Court on Plaintiff Sandra McCandless’ Motion for Summary
Judgment (Doc. 155) and Defendant Standard Insurance Company’s (“Standard’s”)
Motion for Judgment on the Administrative Record (Doc. 156). McCandless brought
suit under the Employee Retirement Income Security Act (“ERISA”) and seeks review of
Standard’s denial of long term disability benefits. The parties previously filed cross
motions for judgment on the administrative record, and on February 15, 2011, this Court
granted Standard’s motion and denied McCandless’ motion. (Doc. 115.) On appeal,
the Sixth Circuit reversed and remanded for the completion of an independent medical
evaluation (“IME”) and for further consideration of McCandless’ claim. After evaluation
of the IME, Standard denied the claim for a second time. Because McCandless was

denied the opportunity at this stage to offer evidence in rebuttal of the IME, this Court
granted her motion to supplement the administrative record and remanded again to the
plan administrator. (Doc. 148.) After review, Standard denied McCandless’ claim for a
third time. For the reasons that follow, the court DENIES McCandless’ and Standard’s
motions and REMANDS the case to the plan administrator.
II.

STATEMENT OF FACTS
Plaintiff Sandra McCandless worked for Countrywide Home Loans as a manager.

Countrywide provided a Group Long Term Disability Insurance Policy (“the Policy”) for
its employees pursuant to ERISA. Standard administered the Policy, both determining
eligibility for benefits and paying benefits. In February 2005, McCandless went on
medical leave for major depression. In April 2005, McCandless applied for and received
disability benefits for the period covering February 2, 2005, to July 31, 2007, the
maximum time period allowed under the Policy for mental health claims.
Standard notified McCandless in January 2006 that her long-term disability
(“LTD”) benefits for her mental disorder would expire on July 31, 2007, and encouraged
her to submit a claim for disability by a physical condition. In response, McCandless
requested that Standard consider a LTD claim based on her ankylosing spondylitis
(“AS”), an inflammatory disease that causes back pain, progressive stiffness of the
spine, arthritis, and fusing of certain joints. McCandless submitted supporting records
from her treating physician, as well as MRI and x-ray reports. After multiple reviews of
the medical documentation, including reviews by a neurologist and a rheumatologist,
Standard denied McCandless continuation of LTD benefits in March 2008. (AR 00126.)
In the denial letter, Standard emphasized that McCandless’ failure to see a

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rheumatologist significantly contributed to her failure to satisfy the Policy’s “Care of a
Physician” provision, which mandates that claimants receive care from a medical
specialist. (Id.)
After exhausting her administrative remedies, McCandless filed the present suit
in September 2008. The parties filed cross-motions for judgment on the administrative
record, and this Court granted Standard’s motion, affirming the denial of LTD benefits.
McCandless appealed to the Sixth Circuit, which reversed and remanded the matter in
order for Standard to have McCandless evaluated by a rheumatologist. The Sixth
Circuit found that Standard “never told McCandless that she would be ineligible for
benefits if she did not see a rheumatologist.” McCandless v. Standard Ins. Co., 509 F.
App’x 443, 448 (6th Cir. 2012). In addition, Standard “did not exercise its authority
under the Policy to have a rheumatologist conduct an independent medical evaluation
of McCandless.” Id. Thus, the decision was arbitrary and capricious because Standard
knew McCandless suffered from AS and failed to base its decision on an IME from a
rheumatologist. Id. Finally, the Sixth Circuit instructed that the case be remanded to
“the plan administrator for a full and fair review of McCandless’ claim, which presumably
will include a rheumatology evaluation.” Id. at 449.
On April 10, 2013, McCandless was evaluated by Lewis Rosenbaum, M.D., a
rheumatologist hired on behalf of Standard. (AR 00993.) Based on his examination,
Dr. Rosenbaum diagnosed McCandless with chronic pain syndrome secondary to major
depressive disorder; AS limited to fusion of the sacroiliac joints and associated uveitis;
sinus tachycardia; major depressive disorder; alleged history of myopericarditis; and
alleged history of restrictive lung disease. Standard received the IME report on May 9,

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2013. On June 10, 2013, Standard issued its decision denying benefits. (AR 00955.)
Shortly thereafter, McCandless underwent a series of consults with medical specialists,
such as a rheumatologist, pulmonologist, and cardiologist. (See AR 0001438-66.) She
then filed a motion, which the Court granted on October 28, 2013, to open the
administrative record in order to submit this evidence to rebut Dr. Rosenbaum’s IME.
(Doc. 148.) Standard issued another denial on March 3, 2014, stating that many of
these records post-dated the expiration of McCandless’s benefits on July 31, 2007. (AR
0001389.) The parties now seek review of this latest denial and have filed crossmotions for judgment on the administrative record.
III.

STANDARD OF REVIEW

A district court reviews an ERISA plan administrator's denial of benefits de novo,
unless the plan gives the administrator discretionary authority to determine eligibility for
benefits. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Cox v.
Standard Ins. Co., 585 F.3d 295, 299 (6th Cir. 2009). If the plan gives the administrator
discretionary authority, the Court applies the highly deferential “arbitrary and capricious”
standard of review. Cox, 585 F.3d at 299. “When it is possible to offer a reasoned
explanation, based on the evidence, for a particular outcome, that outcome is not
arbitrary or capricious.” Schwalm v. Guardian Life Ins. Co. of Am., 626 F.3d 299, 308
(6th Cir. 2010) (quoting Shields v. Reader's Digest Ass'n, Inc., 331 F.3d 536, 541 (6th
Cir. 2003)). That is, even where a claimant has introduced evidence that might be
sufficient to support a finding of disability, the decision is neither arbitrary nor capricious
if it is the result of a deliberate, principled reasoning process and is supported by
substantial evidence. Id.

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“Deferential review is tempered, however, when an important conflict of interest
consideration requires that benefits decisions be closely scrutinized.” Cox, 585 F.3d at
299. When the plan administrator both determines eligibility for benefits and also pays
those benefits, an inherent conflict of interest arises that must be weighed as a factor in
the court's determination. Id. The existence of such a conflict does not heighten the
standard of review but rather is “one factor among many that a reviewing judge must
take into account.” Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 116 (2008). Here, the
Policy contains language sufficient to grant discretion to Standard. Further, Standard
both grants eligibility for benefits and pays benefits. Therefore, the Court reviews this
case under the highly deferential “arbitrary and capricious” standard, while bearing in
mind that a structural conflict of interest exists.
IV.

DISCUSSION
In accordance with the Court’s previous order, McCandless supplemented the

administrative record with evidence in rebuttal of the IME performed by Dr. Rosenbaum.
McCandless visited rheumatology specialist Bernard Rubin, D.O., on July 2, 2013. His
assessment indicates a diagnosis of AS based on marked kyphosis of the thoracic
spine, flattening of the lower lumbar spine, abnormal Schober’s test, and a markedly
decreased Patrick-Fabere test. (AR 0001442-44.) Dr. Rubin ordered x-rays and
consults with other specialists. The x-rays, dated July 16, 2013, demonstrate that
McCandless’ AS has progressed to the lumbar and thoracic spine. (AR 0001438-40.)
McCandless consulted with pulmonologist Michael Eichenhorn, M.D., on July 17,
2013. Based on his examination and the results of a spirometry test, Dr. Eichenhorn
concluded that McCandless suffers from severe airflow restriction and shortness of

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breath caused by very limited thoracic expansion due to her AS. (AR 0001446-47.)
McCandless also consulted on July 23, 2013, with cardiologist Deirdre Mattina, M.D.,
who observed mild respiratory distress and tachycardia with no ectopy or murmurs.
(AR 0001450-53.) Although Dr. Mattina was concerned about prior evidence of
pericardial effusion, she felt that McCandless’ symptoms were largely attributable to her
restrictive lung disease. (Id.) A second cardiologist, Marc Lahiri, M.D., rendered a
similar opinion. (AR 0001461-62.) In light of these consults, Dr. Rubin opined, “[t]here
is no doubt that she has severe ankylosing spondylitis complicated by cardiac, eye, and
lung abnormalities.” (AR 0001465-66.)
These findings and opinions directly contradict some of Dr. Rosenbaum’s April
20, 2013, IME findings. Specifically, Dr. Rosenbaum doubted progression of AS
beyond the sacroiliac joint, given a preserved lumbar lordosis and a normal Schober’s
test. (AR 01005.) These observations, he wrote, would argue against significant
involvement of the lumbar spine, and AS does not typically “skip over” the lumbar spine
and then become severe in the thoracic and cervical spine. (Id.) However, as noted
above, McCandless’ recent x-rays demonstrate progression of her AS to the lumbar and
thoracic spines, as evidenced by fusion of the bilateral sacroiliac joints, interspinous
calcification, and ossification along the anterior longitudinal ligament. (AR 0001438-40.)
Dr. Rosenbaum was also skeptical of an alleged restrictive pulmonary disorder related
to thoracic cage ankylosis. (AR 01006.) He noted the lack of radiological evidence and
speculated that the limited thoracic expansion on examination may have been caused
by McCandless’ failure to take a deep breath. (Id.) In contrast, Dr. Eichenhorn found a

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very limited thoracic expansion attributable to AS and did not note any intentionally poor
effort on McCandless’ part. (AR 0001447.)
In denying McCandless’ claim in June 2013, Standard primarily relied on Dr.
Rosenbaum’s IME. (See AR 00955-58.) Standard’s March 2014 denial dismissed
much of the newly submitted evidence in a rather conclusory fashion because it postdates the closure of McCandless’ claim by more than a year and therefore “do[es] not
provide evidence of a condition of a severity to cause disability” during the relevant
insured period. (AR 0001390.) However, it is possible that the x-ray evidence and
physician interpretations could shed light on McCandless’ condition prior to the closure
of her claim on July 31, 2007. Standard did not submit this evidence to its medical
experts for consideration of this matter. Nor did Standard provide any rationale in its
decision resolving inconsistencies between the new evidence and the IME or explaining
why it finds the IME more credible than the new evidence. Standard’s briefing before
this Court provides rationale discrediting the new evidence. Such post hoc rationale,
however, is not entitled to deference. See Univ. Hosps. v. Emerson Elec. Co., 202 F.3d
839, 849 n.7 (6th Cir. 2000). According to University Hospitals:
[I]t strikes us as problematic to, on one hand, recognize an administrator's
discretion to interpret a plan by applying a deferential "arbitrary and
capricious" standard of review, yet, on the other hand, allow the
administrator to "shore up" a decision after-the-fact by testifying as to the
"true" basis for the decision after the matter is in litigation, possible
deficiencies in the decision are identified, and an attorney is consulted to
defend the decision by developing creative post hoc arguments that can
survive deferential review. The concerns inherent in this scenario are even
more pronounced where, as here, the administrator has a financial
incentive to deny benefits. To depart from the administrative record in this
fashion would, in our view, invite more terse and conclusory decisions
from plan administrators, leaving room for them -- or, worse yet, federal
judges -- to brainstorm and invent various proposed "rational bases" when
their decisions are challenged in ensuing litigation. At a minimum, if we
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permit such rehabilitation of the administrative record, there no longer is
any reason why we should not apply a more searching de novo review of
the administrator's decision.

Id. (emphasis in original). Additionally, as McCandless argues, it is contradictory that
Standard affords weight to Dr. Rosenbaum’s IME, performed in April 2013, while it
refuses to consider the reports submitted by McCandless, which were also rendered in
2013.
Standard also fails to address in its denials McCandless’ award of Social Security
disability benefits. The Social Security Administration found McCandless to be disabled
as of February 1, 2005, based on a combination of physical and mental impairments.
(Doc. 102, Ex. 1.) While the Sixth Circuit has upheld denials of ERISA benefits
although the claimant had been declared disabled by the Social Security Administration,
failure by an insurer to consider a favorable Social Security decision has been a factor
supporting the finding of an arbitrary and capricious denial. See Cox, 585 F.3d at 30203. Failure to explain adequately the grounds of a decision, including a failure to
address evidence, is grounds for remand. See Shelby County Health Care Corp. v.
Majestic Star Casino, LLC, 581 F.3d 355, 373 (6th Cir. 2009); Caldwell v. Life Ins. Co.
of N. Am., 287 F.3d 1276, 1285-86 (10th Cir. 2002).
“Where a district court determines that the plan administrator erroneously denied
benefits, a district court ‘may either award benefits to the claimant or remand to the plan
administrator.’” Shelby, 581 F.3d at 373 (citing Elliott v. Metro. Life Ins. Co., 473 F.3d
613, 621 (6th Cir. 2006). If the deficiency is the decision-making process, rather than
the claimant being clearly entitled to benefits, the appropriate remedy is remand to the
plan administrator. Elliott, 473 F.3d at 622. Here, the evidence is not so one-sided as
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to entitle McCandless undoubtedly to benefits. Therefore, remand to the plan
administrator for further consideration of the new evidence is warranted and proper.
Lastly, the Policy provisions guarantee that “[t]he person conducting the review
will be someone other than the person who denied the claim and will not be subordinate
to that person. The person conducting review will not give deference to the initial denial
decision.” (AR 00044.) McCandless observed that the same benefits review specialist,
Sandra Johnson, reviewed and prepared the previous two denials – on June 10, 2013,
after the IME, and on March 3, 2014, after submission of new evidence to the
administrative record. (AR 00955-58, 0001389-91.) On remand, Standard must comply
with the terms of the Policy and assign review of the case to a different benefits review
specialist.
IV.

CONCLUSION
Because of the identified defects in the procedural decision-making process, the

Court DENIES both parties’ motions and REMANDS this case to the plan administrator
for further consideration consistent with this opinion and the plan administrator is hereby
ordered to render its decision within 90 days.
IT IS SO ORDERED.
Date: September 19, 2014

s/Marianne O. Battani
MARIANNE O. BATTANI
United States District Judge
CERTIFICATE OF SERVICE

The undersigned certifies that the foregoing Order was served upon counsel of record via the Court's
ECF System to their respective email addresses or First Class U.S. mail to the non-ECF participants on
September 19, 2014.

s/ Kay Doaks
Case Manager

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