In many Employee Retirement Income and Security Act (ERISA) cases, the standard of review applied by a court is often the key factor in determining the outcome of a dispute over disability cases. Such cases often involve conflicting medical opinions and, where the insurer has properly reserved discretionary authority, it almost always wins the battle of the conflicting experts. But the scope of court review can often be equally as important as illustrated in Micha v. Sun Life Assur.Co. of Canada, 2011 U.S.Dist.LEXIS 47394 (S.D.Cal. May 2, 2011), a recent disability benefit case issued by a federal court in California.
In that case, the plaintiff, Dr. John Micha, a gynecologic oncology surgeon, took a leave of absence in early 2006 to undergo a hip replacement. Unfortunately, Micha’s rehabilitation was complicated when he suffered a heart attack. Despite undergoing follow-up treatment which included an angioplasty and stenting, Micha continued to experience a variety of cardiac symptoms and he also developed depression. Nonetheless, after receiving intensive medical care, Micha steadily returned to his normal work activities. However, just as it appeared he was successfully resuming his ability to return to his normal medical practice in early 2007, he suffered a bout of extreme dizziness and fatigue in the course of performing an operation. Thereafter, he ceased performing surgery based on his treating doctor’s recommendations and concern for patient safety.
Although Micha continued to see patients his inability to resume his surgical practice caused him to experience a significant earnings loss and he filed a residual disability claim under the group disability policy covering his practice. The policy provided that it would pay benefits both for total and residual or partial disability. Under the residual disability provisions of the policy, the benefits are prorated in accordance with the earnings loss. Despite the submission of certification of disability by Micha’s doctors, Sun Life denied the claim, primarily based on an assertion that it considered the loss of income as being due to a “life-style choice” rather than any medical restrictions and limitations. Micha sought to appeal that determination and submitted additional medical evidence, however, Sun Life upheld its denial following file reviews by Drs. Paul Sweeney (cardiology), Mark Schroeder (psychiatry) and Alan Neuren (neurology), three doctors who are regularly retained by insurers to review disability benefit claims.
Based on the parties’ agreement that the de novo standard of review was applicable, the parties nonetheless disagreed as to whether additional evidence beyond the claim record could be submitted. The plaintiff sought to introduce evidence on a variety of issues, based on a catalogue of issues on which evidence supplementing the claim record in ERISA cases offered in a frequently cited seminal 4th U.S. Circuit Court of Appeals case, Quesinberry v. Life Insurance Company of North America, 987 F.2d 1017, 1027 (4th Cir. 1993), which suggested that evidence beyond the ERISA claim file could be submitted on the following:
…claims that require consideration of complex medical questions or issues regarding the credibility of medical experts; the availability of very limited administrative review procedures with little or no evidentiary record; the necessity of evidence regarding interpretation of the terms of the plan rather than specific historical facts; instances where the payor and the administrator are the same entity and the court is concerned about impartiality; claims which would have been insurance contract claims prior to ERISA; and circumstances in which there is additional evidence that the claimant could not have presented in the administrative process.
Although the court acknowledged the presence of those issues, the court disallowed most of the evidence the plaintiff sought to admit primarily due to the fact that the court was extremely skeptical about the completeness of Sun Life’s review, pointing to contradictions between the treating doctors’ findings and the reviewing doctors’ conclusions without any explanation as to why a different conclusion was made by the insurer’s consultants. In addition, the court pointed to the reviewing doctors’ suggestions of various tests that could help clarify the issues, but that Sun Life failed to obtain the tests. Consequently, the court found there was sufficient evidence to question the credibility of the medical experts, which, in the court’s opinion, would justify admission of additional evidence in order to conduct an independent de novo evaluation.
The key piece of extra-record evidence the court did permit was a report of an independent medical examination of Micha performed by another insurer. In addition to his group benefits, Micha owned an individual disability policy issued by AXA Equitable. While the court refused to consider the outcome of that claim, the court deemed the examination report obtained by that insurer admissible in this proceeding. The court noted:
The contrast between the detailed analysis of Dr. Chaikin’s IME and the relatively superficial reports of Sun Life’s reviewing physicians provides some insight into what the administrative record might look like had Sun Life done a more thorough job investigating plaintiff’s claim. Therefore, the court finds it appropriate to admit this evidence for consideration as part of its review, if only to underscore the qualitative difference between the results obtained from an IME as opposed to those from an analysis conducted solely on limited paper records.
The lesson here is that in many disability cases, there are other sources of valuable evidence that should not be overlooked. Many disability claimants have concurrent claims for personal injuries, workers’ compensation and Social Security and additional medical evidence is often developed in the course of adjudicating such claims. Another excellent case that considered the admissibility of an independent medical examination performed by another insurer is Paese v. Hartford Life and Accident Insur.Co., 2004 U.S.Dist.LEXIS 6040 (S.D.N.Y. 4/9/2004); aff’d 449 F.3d 435 (2nd Cir. 2006). But in returning to the point made at the outset of this article, in both this case and in Paese, the additional evidence was admitted because the de novo standard of review applied. The scope of review may be expanded in such cases in order to consider additional evidence that would otherwise not be permitted if the standard of review is arbitrary and capricious, putting claimants’ counsel on notice that if such evidence exists, it should be obtained and submitted during the course of the claim. However, the case law is clear that if the evidence is not available until after the claim record is closed, no matter how relevant or probative, the court will not take such evidence into consideration if the standard of review is arbitrary and capricious.
The stark difference between the two standards of review and how they affect the scope of review is irreconcilable with the pro-claimant protectiveness of the Employee Retirement Income Security Act expressed in the statute. Yet courts continue to apply an administrative law paradigm to the adjudication of ERISA cases, assuming that ERISA litigation involves the review of an “administrative record” and forgetting that the analogy to Social Security disability claims adjudication is wholly inapt.
Unlike an administrative proceeding where the initial determination is made by a neutral fact finder presiding over an evidentiary proceeding, ERISA claims are decided by an entity the U.S. Supreme Court recognized to be acting under an inherent conflict of interest in Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008). The pre-litigation appeal mandated in most ERISA claim disputes hardly resembles an evidentiary proceeding, as illustrated by this case where the insurer attempted to sandbag the claimant by having three frequently retained and plainly nonindependent doctors who could not be cross-examined by the plaintiff write reports in an effort to undermine his claim.
Given the importance of employee benefits such as health and disability insurance, the perpetuation of such a system and its questionable justification needs to be carefully re-examined by the Supreme Court and Congress.