Garvey V Piper Rudnick LLP Ltd Plan

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Garvey v. Piper Rudnick LLP Long Term Disability Insurance Plan, 2009 U.S.Dist.LEXIS 94694 (N.D.Ill. October 9, 2009)(Issue: Discovery). The United States Court of Appeals for the Seventh Circuit has generally disallowed discovery in ERISA cases subject to the arbitrary and capricious standard of review. According to Semien v. Life Ins. Co. of N. Am., 436 F.3d 805, 814-15 (7th Cir. 2006), limited discovery is available only where a plaintiff is able to "identify a specific conflict of interest or instance of misconduct," and "make a prima facie showing that there is good cause to believe limited discovery will reveal a procedural defect in the plan administrator's determination." Id. at 815. The question before the court in this ruling was whether the Supreme Court's decision in Metropolitan Life Ins. Co. v. Glenn, 128 S.Ct. 2343, 171 L. Ed. 2d 299 (2008) impacts the Seventh's Circuit's general prohibition of discovery. Because Glenn recognized an insurer's inherent conflict when it both administers a claim and funds the payment of benefits, and since Glenn also deemed the conflict a factor to be considered in all cases, the plaintiff argued the Supreme Court's ruling opens the door to discovery. Glenn noted that "[t]he 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." 128 S.Ct. at 2351. Hence, the plaintiff sought to take discovery to see if the insurer (Standard Insurance Company) was affected by its inherent conflict.

The court pointed out that courts within the Seventh Circuit have been divided on the question of whether Glenn impacts the allowable discovery in ERISA cases. Answering in the affirmative, Gessling v. Group Long Term Disability Plan for Employees of Sprint/United Mgmt. Co., No. 1:07-cv-0483-DFH-DML, 2008 U.S. Dist. LEXIS 96623, 2008 WL 5070434 (S.D. Ind. Nov. 26, 2008) and 2009 U.S. Dist. LEXIS 72025, 2009 WL 2390355, at *1 (S.D. Ind. Aug. 3, 2009) deemed discovery appropriate, as did Fischer v. Life Ins. Co. of N. Am., No. 1:08-cv-0396-WTL-TAB, 2009 U.S. Dist. LEXIS 22487, 2009 WL 734705, at *3 (S.D. Ind. Mar. 19, 2009). Those cases allowed discovery of compensation and approval/denial rates of individuals involved in making the claim determinations, along with other related issues. In yet another ruling, Hughes v. CUNA Mutual Group, 257 F.R.D. 176 (S.D. Ind. 2009), the court also found discovery appropriate.

However, other courts within the Seventh Circuit have disallowed discovery. Those cases include Marszalek v. Marszalek & Marszalek Plan, No. 06 C 3558, 2008 U.S. Dist. LEXIS 75319, 2008 WL 4006765 (N.D. Ill. Aug. 26, 2008), which relied on Semien to reject the plaintiff's request for discovery. Huss v. IBM Medical and Dental Plan, No. 07 C 7028, 2009 U.S. Dist. LEXIS 22588, 2009 WL 780048 (N.D. Ill. Mar. 20, 2009) also followed Semien but ordered limited discovery since the plaintiff had "identified a specific conflict of interest . . . and further made a showing that there was good cause to believe limited discovery would reveal a procedural defect in the plan administrator's determination." However, Munson v. C.H. Robinson Co., No. 09 C 495, 2009 U.S. Dist. LEXIS 47704, 2009 WL 1586325, at * 2 (N.D. Ill. June 8, 2009), Kaplan v. Susquehanna Int'l Group, No. 08 C 752, slip op., Doc. 40, at 2 (N.D. Ill. Dec. 18, 2008), and Nash v. Life Ins. Co. of N. Am., No. 09 C 1357, 2009 U.S. Dist. LEXIS 36285, 2009 WL 1181605 (N.D. Ill. Apr. 29, 2009) disallowed discovery without a prima facie showing of a procedural defect in the claim determination; and Anderson v. Hartford Life and Accident Ins. Co., 2:08-cv-471-WTL-WGH, 2009 U.S. Dist. LEXIS 48853 (S.D. Ind. June 10, 2009) also found discovery inappropriate.

The court also examined cases from outside the Seventh Circuit which have mostly allowed discovery in the wake of Glenn, although the court remarked that none of those cases discussed or were bound by Semien. Turning then to the case before it, the court concluded that it was required to follow Semien absent further guidance from the Seventh Circuit. Applying that case, the court found Garvey met his burden of identifying a specific conflict of interest or instance of misconduct. The plaintiff identified the plan's approval of short-term disability benefits which were administered by Standard but paid by Piper Rudnick, but the denial of long-term disability benefits which were insured by Standard as indicating a conflict since the definition of disability was the same under both the short-term and long-term disability plans and there had been no change in Garvey's medical condition. Thus, the court concluded, "evidence that Standard granted benefits to Garvey until its own funds were at risk, despite no change in the definition of disability, suffices as a prima facie showing of good cause to believe that limited discovery will reveal a procedural defect in the plan administrator's determination." *21.

Turning to the scope of allowable discovery, the court found it appropriate to require identification and information relating to compensation provided to Standard's consulting physicians. The court also allowed discovery as to terms of employment of the claim consultants and Standard personnel but rejected plaintiff's efforts to obtain personnel files. In addition, the court allowed discovery as to statistical information relating to benefit approvals/denials/termination rates along with the insurer's policies and procedures. The court also compelled responses to several requests to admit.

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