Gailey v. Life Insurance Company of North America
MEMORANDUM (Order to follow as separate docket entry) (eo)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
LIFE INSURANCE COMPANY OF
Hon. John E. Jones III
October 17, 2016
Presently before the Court are the parties’ cross motions for summary
judgment. Plaintiff Cheryl Gailey (“Gailey”) filed a Motion for Summary
Judgment on May 23, 2016. (“Gailey’s Motion”) (Doc. 42). Defendant Life
Insurance Company of North America (“Life Insurance”) also filed a Motion for
Summary judgment on May 23, 2016. (“Life Insurance’s Motion”) (Doc. 44).
Gailey asserts two counts against Life Insurance. Count I is an alleged violation of
the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.
§1132(a)(1)(B), seeking the recovery of disability plan benefits. Count II is another
alleged violation of ERISA under § 1133, seeking an award of attorney’s fees for
Life Insurance’s failure to follow the plan’s procedures.
The record of this case is comprised of the Administrative Record submitted
to Life Insurance in support of Gailey’s claim for disability benefits. (Doc. 39). 1
The Court notes that the parties do not appear to dispute any of the facts, but rather
the proper inferences to be derived from them.
Plaintiff Cheryl Gailey began working for LifeCare Management Services in
2004. (Doc. 49, ¶ 1). 2 Gailey was promoted to the position of business office
manager in May 2012. (Id., at ¶ 2). Gailey is forty eight years old and reports
having anxiety and depression issues since she was about twenty years old. (Doc.
39, p. 599).
Defendant Life Insurance Company of North America issued a Group Long
Term Disability Insurance Policy to LifeCare. (the “Plan”) (Doc. 45, ¶ 1). As plan
administrator, LifeCare appointed Life Insurance as the named fiduciary for
deciding claims for benefits under the Plan and for deciding appeals of denied
claims. (Id., at ¶ 2).
The Plan affords benefits to those who qualify as “disabled” under the
When citing to the Administrative Record, the Court will refer to the bates stamp page
LifeCare Management Services changed its name to New LifeCare Management Services at
some point prior to the events that give rise to this action. (Doc. 45, ¶ 2). For purposes of clarity,
the court refers to the company as LifeCare.
“The Employee is considered Disabled if, solely because of Injury or
Sickness, he or she is:
1. unable to perform the material duties of his or her Regular Occupation;
2. unable to earn 80% or more of his or her Indexed Earnings from working
in his or her Regular Occupation.” (Id., at ¶ 7).
The Plan limits disability benefits for mental illnesses and related other
conditions to 24 months of benefits. As office manager, Gailey was eligible for
Long Term Disability benefits under the Plan if she qualified as disabled. (Id., at ¶
Gailey last worked for LifeCare on July 15, 2013, when she reported having
an emotional breakdown and left the office “crying, shaking” and having a panic
attack. (Doc. 39, p. 599). According to Gailey, she has been “unable to return to
work since then.” (Id.). She had previously been approved for short term disability
benefits. (Id., at p. 491). She applied for long term disability benefits under the
Plan on July 29, 2013. (Doc. 49, ¶ 5).
Certified Registered Nurse Practitioner Sandra Abbey (“Abbey”) is Gailey’s
regular therapist. (Id., at ¶ 6). On August 6, 2013, Gailey was admitted to an
outpatient program at a mental health facility called Philhaven on Abbey’s referral.
(Id., at ¶ 7). Gailey received outpatient treatment at Philhaven from August 6 to
October 10, 2013. (Doc. 39, p. 474). In the Philhaven admission documents, Gailey
reportedly told the physician that she had to take two months off from work in
LifeCare in 2012 because she was feeling so depressed. (Id., at p. 464). Gailey’s
therapist at Philhaven, Amy Loser, originally had scheduled Gailey’s return to
work date for September 1, but extended that date and opined that Gailey should be
able to return to work on October 14, 2013. (Id., at p. 472). Gailey’s discharge
instructions from Philhaven indicate diagnoses of generalized anxiety disorder,
mood disorder, and psychosocial and environmental problems. (Id., at p. 474).
Gailey did not return to work after her treatment at Philhaven. (Doc. 45, ¶
18). Her treating Nurse Practitioner, Abbey, opined on October 18, 2013, that
Gailey cannot multitask, has a poor response to stress, and cannot work at present.
(Doc. 39, p. 534).
On November 21, 2013, a Life Insurance representative told Gailey that her
disability claim was being denied, to which Gailey reportedly responded by stating
“that she was going to kill herself using her husband’s gun.” (Id., at p. 44). The
next day, Gaily was admitted to Philhaven for inpatient treatment with diagnoses
of major depressive disorder and generalized anxiety disorder. (Id., at p. 485).
Gailey was discharged four days later on November 26, 2013, with the discharge
summary indicating that she “presented with an appropriate affect” and denied
suicidal ideations. (Id., at p. 492). Gailey received an official letter of the denial of
her claim on November 25, 2013. (Id., at p. 505).
On December 4, 2013, Abbey opined that Gailey “is currently totally
disabled due to her mental illness” and “is unable and will never again be able to
perform the duties of her regular occupation as Office Manager at New Life Care
Management, LLC.” (Id., at p. 495). Abbey went on to say that Gailey “is totally
disabled from performing any duties for any occupation which she is or could
reasonably become qualified based on her education and expertise.” (Id.).
Gailey appealed the denial of benefits to Life Insurance through counsel on
April 3, 2014. (Id., at p. 444). By letter dated June 3, 2014, Life Insurance partially
upheld and partially reversed its earlier denial of Gailey’s disability claim. (Id., at
pp. 201-212). Life Insurance awarded benefits to Gailey for October 14, 2013, the
date she was originally supposed to return to work after outpatient treatment at
Philhaven, to November 26, 2013, the date of Gailey’s discharge from the
Philhaven inpatient program, but denied any benefits thereafter. (Id.).
Gailey appealed Life Insurance’s June 3, 2014 decision on November 26,
2014, arguing that she was entitled to long term disability benefits beyond
November 26, 2013. (Id., at p. 312). In the interim, Gailey consistently had therapy
appointments with Abbey and submitted the treatment notes to Life Insurance for
review. Abbey’s treatment notes are incredibly varied, documenting both Gailey’s
progression towards better coping skills and her regressive episodes. (See generally
id., at pp. 329-420). Further, the Social Security Administration awarded Gailey
monthly disability benefits on October 13, 2014. (Doc. 48, ex. AAA).
Life Insurance retained Genex Services, LLC to assist with the evaluation of
Gailey’s appeal through a peer review. (Doc. 45, ¶ 34). Genex hired Fred Moss, a
board certified psychiatrist, to review Gailey’s medical records and offer a medical
opinion regarding her alleged disability. (Id., at ¶ 35). On December 28, 2014,
Moss opined that:
“[t]here are no objective findings from a psychiatric standpoint that indicates
the claimant is mentally, cognitively, and/or behaviorally impaired as of
11/26/2013 and continuing. While notes reflect the claimant has subjective
complaints that support diagnosis of Major Depressive disorder, the mental
status examination findings indicate the claimant is psychiatrically stable
and there are no impairments behaviorally, mentally, or cognitively. As a
result, there are no work activity restrictions that are medically required due
to a psychiatric condition.” (Doc. 39, p. 309).
On January 9, 2015, Life Insurance denied Gailey’s appeal and found that
she was not disabled as defined by the Plan. (Id., at pp. 203-205). In its denial, Life
Insurance explained that it considered that Gailey was awarded Social Security
Disability benefits, but found that it had more recent information to consider that
warranted a different outcome. (Id., at p. 204). Life Insurance cited to the fact that
there “has been no increase in the level of care, no changes in mental status, and no
additional treatment modalities to indicate” that Gailey was impaired after
November 26, 2013. (Id.). Life Insurance acknowledged that Gailey had been
attending regularly weekly appointments with Abbey for “emotional regulation”,
but ultimately deferred to the opinions of the board certified psychiatrists that
treated Gailey in Philhaven and Moss’s peer review. (Id.).
Gailey filed this action on March 20, 2015, alleging that Life Insurance’s
denial constituted a violation of ERISA. (Doc. 1). The parties have filed cross
motions for summary judgment. (Docs. 42, 44). The motions have been fully
briefed and are therefore ripe for our review. (Docs. 43, 46, 56, 59, 60, 61). For the
reasons that follow, we shall grant Life Insurance’s Motion and deny Gailey’s
STANDARD OF REVIEW
Summary judgment is appropriate if the moving party establishes “that there
is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” FED. R. CIV. P. 56(a). A dispute is “genuine” only if there is a
sufficient evidentiary basis for a reasonable jury to find for the non-moving party,
and a fact is “material” only if it might affect the outcome of the action under the
governing law. See Sovereign Bank v. BJ’s Wholesale Club, Inc., 533 F.3d 162,
172 (3d Cir. 2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986)). A court should view the facts in the light most favorable to the nonmoving party, drawing all reasonable inferences therefrom, and should not
evaluate credibility or weigh the evidence. See Guidotti v. Legal Helpers Debt
Resolution, L.L.C., 716 F.3d 764, 772 (3d Cir. 2013) (citing Reeves v. Sanderson
Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)).
Initially, the moving party bears the burden of demonstrating the absence of
a genuine dispute of material fact, and upon satisfaction of that burden, the nonmovant must go beyond the pleadings, pointing to particular facts that evidence a
genuine dispute for trial. See id. at 773 (citing Celotex Corp. v. Catrett, 477 U.S.
317, 324 (1986)). In advancing their positions, the parties must support their
factual assertions by citing to specific parts of the record or by “showing that the
materials cited do not establish the absence or presence of a genuine dispute, or
that an adverse party cannot produce admissible evidence to support the fact.”
FED. R. Civ. P. 56(c)(1).
A court should not grant summary judgment when there is a disagreement
about the facts or the proper inferences that a factfinder could draw from them.
See Reedy v. Evanson, 615 F.3d 197, 210 (3d Cir. 2010) (citing Peterson v. Lehigh
Valley Dist. Council, 676 F.2d 81, 84 (3d Cir. 1982)). Still, “the mere existence of
some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment.” Layshock ex rel. Layshock v.
Hermitage Sch. Dist., 650 F.3d 205, 211 (3d Cir. 2011) (quoting Anderson, 477
U.S. at 247-48) (internal quotation marks omitted).
Gailey has alleged two counts of ERISA violations against Life Insurance.
Count I alleges that Life Insurance has wrongly withheld long term disability
benefits from Gailey in violation of ERISA § 1132. Count II alleges that Life
Insurance violated the procedural guidelines of ERISA § 1133. The parties have
moved for summary judgment on both counts. We will address each count in turn.
A. Count I- ERISA, 29 U.S.C. §1132(a)(1)(B)
Section 1132(a)(1)(B) of ERISA provides plaintiffs a right of action “to
recover benefits due to him under the terms of his plan.” 29 U.S.C. §
1132(a)(1)(B). To prevail on a claim under § 1132(a)(1)(B), Gailey must
demonstrate that she has “a right to benefits that is legally enforceable against the
plan, and that the plan administrator improperly denied those benefits.” Fleisher v.
Standard Ins. Co., 679 F.3d 116, 120 (3d Cir. 2012) (internal quotations omitted).
Before we can assess whether Life Insurance properly denied Gailey’s application
for long term disability benefits, we must determine what standard of review to
apply to this matter.
The Supreme Court has instructed that courts are to review the denial of
benefits challenged under § 1132(a)(1)(B) “under a de novo standard unless the
benefit plan gives the administrator or fiduciary discretionary authority to
determine eligibility for benefits or to construe the terms of the plan.” Firestone
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). When a plan grants its
administrator the discretion to determine eligibility or to construe the plan terms,
“we review a denial of benefits under an ‘arbitrary and capricious’ standard.”
Orvosh v. Program of Grp. Ins. for Salaried Employees of Volkswagen of Am.,
Inc., 222 F.3d 123, 129 (3d Cir. 2000).
Gailey advocates for a de novo standard of review by conclusively stating
that the Plan does not give Life Insurance discretionary authority in reviewing and
deciding claims. (Doc. 43, p. 7). Gailey responds to Life Insurance’s specific
citation of the grant of discretionary authority in the Plan by simply restating that
there was no discretion afforded. (Doc. 56, p. 9). Contrary to Gailey’s assertions,
the Administrative Record in this case includes an “Appointment of Claim
Fiduciary” contract where LifeCare, as Plan administrator, appointed Life
Insurance as Claim Fiduciary. (Doc. 39, p. 673). This agreement gave Life
Insurance “the authority, in its discretion, to interpret the terms of the Plan,
including the Policies; to decide questions of eligibility for coverage or benefits
under the Plan; and to make any related findings of fact.” (Id.) (emphasis added).
This delegation of discretionary power is exactly what the Supreme Court
contemplated in Firestone, and we find that the proper standard of review for us to
employ is whether Life Insurance’s denial was arbitrary and capricious.
“An administrator's decision is arbitrary and capricious ‘if it is without
reason, unsupported by substantial evidence or erroneous as a matter of law.’”
Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 (3d Cir.2011) (quoting Abnathya v.
Hoffmann–La Roche, Inc., 2 F.3d 40, 45 (3d Cir.1993)) (internal quotation marks
omitted). The arbitrary and capricious standard of review is essentially the same as
the abuse of discretion standard. Rizzo v. Paul Revere Ins. Grp., 925 F. Supp. 302,
310 (D.N.J. 1996), aff'd, 111 F.3d 127 (3d Cir. 1997). Under this standard, the
“scope of review is narrow and ‘the court is not free to substitute its own judgment
for that of the defendants in determining eligibility for plan benefits.’” Abnathya, 2
F.3d at 45 (quoting Lucash v. Strick Corp., 602 F.Supp. 430, 434 (E.D.Pa.1984)).
Gailey asks the Court to employ a “heightened form of the arbitrary and
capricious standard of review,” relying on Pinto v. Reliance Standard Life Ins. Co.,
214 F.3d 377, 378 (3d Cir. 2000) (Doc. 56, p. 18). There, the Third Circuit stated
that where a structural conflict of interest exists, namely “when an insurance
company both funds and administers benefits,” a heightened standard of review is
applicable. Id. There is no dispute that a structural conflict exists here; Life
Insurance has admitted that it both funds and administers benefits. (Doc. 46, p. 22).
However, as Life Insurance correctly pointed out, the Pinto sliding scale of
standards of review was abrogated by the Supreme Court in Metropolitan Life
Insurance Co. v. Glenn, 554 U.S. 105 (2008).
Post-Glenn, the Third Circuit has found that the “‘sliding scale’ approach is
no longer valid.” Estate of Schwing v. The Lilly Health Plan, 562 F.3d 522, 525
(3d Cir. 2009). “Instead, courts reviewing the decisions of ERISA plan
administrators or fiduciaries in civil enforcement actions brought pursuant to 29
U.S.C. § 1132(a)(1)(B) should apply a deferential abuse of discretion standard of
review across the board and consider any conflict of interest as one of several
factors in considering whether the administrator or the fiduciary abused its
Considering the structural conflict of interest at play, all of the evidence
considered by Life Insurance in deciding Gailey’s claim for benefits, the Social
Security Administration’s determination that Gailey is disabled, and the relevant
plan terms and policies, we find that Life Insurance’s denial of Gailey’s claim was
not arbitrary or capricious.
Life Insurance has cited to a multitude of evidence that it considered in
finding that Gailey was not “disabled” under the Plan after November 26, 2013. To
name a few, Life Insurance pointed to the rise of Gailey’s psychological stability
upon her discharge from the inpatient program at Philhaven (Doc. 46, p. 19), a
February 21, 2004 office note from Abbey indicating that Gailey was continuing to
improve (Id., at p. 9), a May 26, 2014 office note from Abbey indicating that
Gailey’s communication skills were improving (Id.), Moss’s peer review
conclusion that Gailey was not disabled (Id., at p. 13), Gailey’s preparation for a
vacation (Id., at p. 11), and her lack of effort in finding other work. (Id.). Further,
Life Insurance cited to the fact that there “has been no increase in the level of care,
no changes in mental status, and no additional treatment modalities to indicate”
that Gailey was impaired after November 26, 2013. (Doc 39, p. 204).
Gailey argues that Life Insurance’s denial was improper because it did not
defer to Abbey or the Social Security Administration’s opinion that Gailey was
disabled. (Doc. 56, pp. 11, 13). However, the Court finds that Life Insurance has
offered reasonable reasons for not deferring to these opinions in its denial of
benefits such that we cannot find that the decision was arbitrary and capricious.
Life Insurance states that it did not defer to Abbey’s conclusion that Gailey was
disabled because Abbey is a Certified Nurse Practitioner, rather than a boardcertified psychiatrist. (Doc. 46, p. 20). Life Insurance had treatment notes from
Gailey’s treaters at Philhaven and retained a board-certified psychiatrist to review
Gailey’s file. (Id). It considered all of this information, as well as Abbey’s
treatment notes. (Id.). Life Insurance was not bound to defer to Gailey’s treating
physician, and has offered a reasonable explanation for why it chose not to. See
Black & Decker Disability Plan v. Nord, 538 U.S. 822, 825 (2003) (ERISA does
not require “plan administrators to credit the opinions of treating physicians over
other evidence relevant to the claimant’s medical condition”).
Life Insurance has similarly offered a reasonable explanation for not
deferring to the Social Security Administration’s finding that Gailey is disabled.
While a finding of disability by the Social Security Administration is undoubtedly
relevant, “a plan administrator is not bound by such ruling, particularly in light of
the different eligibility standards imposed for a finding of ERISA disability versus
SSA disability.” Robinson v. Liberty Life Assur. Co. of Boston, 25 F. Supp. 3d 541,
555 (M.D. Pa. 2014) (Jones, J.). Gailey applied for Social Security on October 13,
2014. (Doc. 48, ex. AAA). Life Insurance received the peer review report from
Moss on December 28, 2014. (Doc. 39, 309). The Social Security Administration
did not have this report, and Life Insurance placed great weight on Moss’ opinion
because he was a board-certified psychiatrist retained by an independent third
party. The peer review report represents new evidence that illuminates how Life
Insurance and the Social Security Administration could reasonably have come to
differing conclusions regarding Gailey’s disability.
Further, Gailey argues that she “lacked the sophistication of Defendant; and
had no information accessible to her, other than the Plan.” (Doc. 56, p. 20). She
also points out that her requests to engage in discovery have been denied by the
Court. (Id.). However, it seems clear that Gailey was able to submit all the
evidence that she wished to Life Insurance in support of her claim and her multiple
appeals. There is nothing to suggest that she was not afforded reasonable
opportunities to be heard and to present her claim under the Plan. Discovery with
this Court was unnecessary; our role is to determine whether Life Insurance abused
its discretion in evaluating Gailey’s claim based on the evidence it had before it at
the time a decision was made. Dandridge v. Raytheon Co., 2010 WL 376598, at *3
(D.N.J. Jan. 26, 2010) (“[t]he Third Circuit has often reiterated that arbitrary and
capricious reviews of benefit determinations should occur on the basis of the
administrative record assembled before the claim administrator”).
To be sure, the “arbitrary and capricious” standard of review is a deferential
standard that is difficult to overcome. In light of the foregoing, we cannot find that
Life Insurance’s denial was “without reason, unsupported by substantial evidence
or erroneous as a matter of law.” Miller, 632 F.3d at 845 (quotation marks
omitted). For that reason, we shall grant Life Insurance’s Motion and deny
Gailey’s Motion with respect to Count I.
B. Count II- ERISA, 29 U.S.C. § 1133
Count II seeks relief under Section 503 of ERISA, 29 U.S.C. § 1133, which
mandates that notice and a reasonable opportunity to be heard be given to a
beneficiary whose claim has been denied under a benefits plan. 29 U.S.C. § 1133.
Gailey grounds her claim in the fact that Life Insurance issued its denial of
Gailey’s appeal 60 days after its filing, in violation of the Plan’s 45 day deadline.
(Doc. 43, p. 12). Gailey acknowledges that Section 503 has no remedial scheme for
violations, but instead argues that an appropriate remedy would be an award of
attorney’s fees and litigation costs. (Id.).
Section 502 of ERISA “provides the private right of action to bring a claim
to recover benefits due,” while Section 503 “sets forth the basic requirements
governing ERISA plans.” Miller v. Am. Airlines, Inc., 632 F.3d 837, 851 (3d Cir.
2011). A violation of Section 503 may be “probative of whether the decision to
deny benefits was arbitrary and capricious,” see Miller, 632 F.3d at 851, but the
general principle is “that an employer’s or plan’s failure to comply with ERISA’s
procedural requirements does not entitle a claimant to a substantive remedy.”
Ashenbaugh v. Crucible Inc., 854 F.2d 1516, 1532 (3d Cir. 1988). Thus, Section
503 “does not create a private right of action.” Blakely v. WSMW Indus., Inc.,
2004 WL 1739717, at *10 (D. Del. July 20, 2004).
The Third Circuit recognized that an exception to this general rule exists,
and a private right of action may be supported upon a showing of “egregious
circumstances.” Ashenbaugh, 854 F.2d at 1532. However, Gailey has only alleged
in conclusory terms that “[f]orcing Gailey to endure and finance two administrative
appeals, and a federal lawsuit” constitute egregious circumstances. (Doc. 56, p.
22). Gailey has not even tried to show how her appeals and lawsuit are linked to a
fifteen day delay in the issuance of her denial such that the violation would be
“egregious.” To be sure, Gailey’s entire argument regarding Count II is found
within just a few conclusory paragraphs. Finding that Gailey does not have a
private right of action under Section 503, we shall grant Life Insurances’ Motion
and deny Gailey’s Motion with respect to Count II.
For the foregoing reasons, we shall grant Defendant’s Motion for Summary
Judgment (Doc. 44) and deny Plaintiff’s Motion for Summary Judgment. (Doc.
42). A separate order shall issue in accordance with this ruling.
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