Alcorn v. Parker Hannifin Corp. et al

Filing 25

ORDER GRANTING PLAINTIFF'S MOTION TO PERMIT DISCOVERY (Doc. 20 ). Signed by Judge Timothy S. Black on 8/7/2013. (mr1)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
MELINDA M. ALCORN,
Plaintiff,

Case No. 1:13-cv-119
Judge Timothy S. Black

vs.
PARKER HANNIFIN CORP., et al.,
Defendants.
ORDER GRANTING PLAINTIFF’S MOTION TO PERMIT DISCOVERY
(Doc. 20)
This civil action is before the court on Plaintiff’s Motion to Permit Discovery
(Doc. 20) and the parties’ responsive memoranda (Docs. 23, 24).
I.

BACKGROUND FACTS AND PROCEDURAL POSTURE

Plaintiff is a beneficiary of the Parker Hannifin Corp. Employee Benefit Plan (the
“Plan”), a defendant in this case. (Doc. 21 at ¶ 13). Prior to his death, Plaintiff’s
husband participated in the Plan while employed by Defendant Parker Hannifin Corp.
(“Parker Hannifin”). (Doc. 21 at ¶ 13). The Plan is governed by the Employee
Retirement Income Security Act (“ERISA”).
The Plan included three welfare benefits, of which two are at issue in this case —
the Accidental Death & Dismemberment (“AD&D”) and the Personal Accident Insurance
(“PAI”) policies. (Doc. 21 at ¶ 21). The AD&D and PAI policies were issued by
Defendant Zurich American Insurance Company (“Zurich”). (Doc. 22 at ¶ 3).

On December 13, 2011, Zurich issued a statement to Plaintiff that she was not
entitled to receive benefits. (Doc. 21, Exs. 162-65). In short, Zurich denied benefits due
to its “Intoxication Exclusion,” which states that “A loss will not be a Covered Loss if it
is caused by or results from . . . an Insured’s being intoxicated while operating a motor
vehicle . . . .” (Id.) Subsequently, Plaintiff filed the instant action.
II.

ANALYSIS

The general rule is that the district court only considers “evidence that was first
presented to the administrator” when it made the original decision to deny benefits.
Wilkins v. Baptist Health Care Sys., 150 F.3d 609, 618 (6th Cir. 1998). That evidence is
designated as the “administrative record.” Kalish v. Liberty Mut., 419 F.3d 501, 508 (6th
Cir. 2005). Therefore, generally, discovery is not permitted in an ERISA denial-ofbenefits case. Id.
A. Conflict of Interest
There are exceptions to the no-discovery rule, however. First, there is an
exception when the plan administrator has a conflict of interest. Wilkins, 150 F.3d at 618.
A district court may consider evidence outside the administrative record if “that evidence
is offered in support of a procedural challenge to the administrator’s decision, such as . . .
alleged bias on its part.” Moore v. Lafayette Life Ins. Co., 458 F.3d 416, 430 (2006). The
Sixth Circuit has held that a company has a “conflict of interest” when, as “administrator,
it interprets the plan, deciding what expenses are covered, and as issuer of the policy, it
ultimately pays those expenses.” Peruzzi v. Summa Med. Plan, 137 F.3d 431, 433 (6th
Cir. 1998).
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In Johnson v. Connecticut Gen. Life Ins. Co., 324 Fed. Appx. 459 (6th Cir. 2009),
the Sixth Circuit explained that the district court has “discretion” on whether to allow
discovery in an ERISA case. Id. at 467. The “significance of the conflict” of interest
depends “on the circumstances of each case.” Id. At one end of the spectrum, a “conflict
of interest ‘should prove more important (perhaps of great importance) where
circumstances suggest a higher likelihood that it affected the benefits decision.’” Id. At
the other end, a conflict should prove “less important (perhaps to the vanishing point)
where the administrator has taken active steps to reduce potential bias and to promote
accuracy.” Id.
Plaintiff alleges that this case “raises significant and substantial conflict of interest
issues based upon the self-dealing of Zurich American.” (Doc. 20 at 5). Specifically,
Plaintiff contends that “Zurich American funded the PAI and AD&D benefits, changed
the funding mechanism and while acting as a fiduciary, denominated its policy as the
Plan document, and then modified the exclusions . . . .” (Doc. 20 at 4). Plaintiff’s
Complaint also alleges that Zurich acted as a fiduciary in making “the determination to
deny death benefits” and also acted as issuer of the Plan in modifying the funding of the
Plan. 1 (Doc. 21 at 6, 7).

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Defendants deny the allegation that “Zurich American, in its non-disclosed modification of the
funding of the Parker Hannifin Corp. Employee Benefit Plan, materially limited the availability
of these funds to the beneficiaries and participants without disclosure to Darryl. W. Alcorn or
any affirmative act or Plan amendment by Parker Hannifin.” (Doc. 21 at ¶ 7; Doc. 22 at ¶ 9).
However, Defendants admit that Zurich was designated as the claims fiduciary of the Plan and
that Zurich replaced the prior AD&D and PAI policies of May 1, 2002, with the 2009 policy
which included the “Intoxication Exclusion.” (Doc. 22 at ¶¶ 24, 26; Doc. 21 at ¶¶ 37, 38).
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The Court finds that Plaintiff has made more than a “mere allegation” that a
conflict of interest exists because there is evidence that the administrator of the Plan
“may favor their financial and profit-making interests over the best interests of the plan
participants.” Peruzzi, 137 F.3d at 433.
B. Due Process
A plaintiff is also entitled to ERISA discovery when the plan administrator does
not provide due process. Moore, 458 F.3d at 430. The due process requirements provide
that the plan administrator must state a “full and fair review.” 29 C.F.R. § 2560.5031(h)(2). A full and fair review means that the plan administrator shall provide copies of
“all documents, records, and other information relevant to the claimant’s claim for
benefits.” 29 C.F.R. § 2560.503-1(h)(2)(iii). When an administrator fails to provide
copies of all documents requested by a claimant, it is a violation of 29 C.F.R. § 2560.5031(h)(2)(iii).
Defendants argue that Plaintiff is not entitled to discovery because “she present[s]
only a self-serving conclusion that she has been denied due process but present[s] nothing
to back up that accusation.” (Doc. 23 at 6).
The Court disagrees. On March 12, 2012, Plaintiff requested Parker Hannifin to
provide copies of “any and all Plan Documents, the applicable Summary Plan
Description, and the date on which the actual contents of the policy coverage or
Summary Plan Description was made available to the Plan participants, amongst other
things.” (Doc. 21 at ¶ 57). Defendants acknowledge that “the administrative record . . .
does not appear to show everything Plaintiff’s counsel may have collected.” Further,
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Defendants state that “the documents in the administrative record suggest that ParkerHannifin may have been confused or misunderstood what documents Plaintiff’s counsel
was seeking at the time, or may have accidentally sent versions of plan documents not for
the relevant time periods.” (Doc. 23 at 8). If the Plan did not provide all documents that
were relevant to the claim, it may have violated 29 C.F.R. § 2560.503-1(h)(2)(iii).
Accordingly, Plaintiff has alleged sufficient facts to maintain a due process
violation and is therefore entitled to discovery on the issue.
C. Scope of Discovery
Finally, Defendants argue that Plaintiff’s proposed discovery requests are not
related to the cited procedural challenges. (Doc. 23 at 7).
The Court finds that Plaintiff is entitled to discovery on the procedure of Plan
development, the disclosure of benefits, and the conflict of interest on the part of Zurich,
but nothing more.
III.

CONCLUSION

Accordingly, for the reasons stated here, Plaintiff’s motion to permit discovery
(Doc. 20) is GRANTED.
IT IS SO ORDERED.

Date: 8/7/13

/s/ Timothy S. Black
Timothy S. Black
United States District Judge

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