Click Here Despite the applicability of the arbitrary and capricious standard of review, the court granted in substantial part the plaintiff’s motion to compel discovery. Although the court acknowledged that in the Seventh Circuit, the scope of a court’s review of an ERISA benefit denial under a deferential standard of review is limited to the “administrative” record, “[i]n ‘exceptional cases,’ however, limited discovery beyond the claim file may be permitted when ‘a prima facie showing of impropriety has been made. . . .'” Semien v. Life Ins. Co. of America, 436 F.3d 805, 814-15 (7th Cir. 2006). Recently, the Seventh Circuit announced a “softening” of the threshold showing that must be made before discovery is allowed. Dennison v. MONY Life Retirement Income Security Plan for Retirees, 710 F.3d 741, 747 (7th Cir. 2013). However, Dennison failed to delineate what that softening entails. Under Semien, a plaintiff seeking discovery “must identify a specific conflict of interest or instance of misconduct.” Id. at 815. Moreover, the plaintiff “must 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. Although Dennison indicates that standard is no longer appropriate, the court of appeals refused to abrogate Semien; and the law remains that discovery is still not permitted in the “run-of-the-mill” case. Nevertheless, the court found the showing required is “not onerous,” and further determined that the plaintiff made that showing in this case.

The court specifically pointed to Unum’s disregard of a functional capacity evaluation, its reliance on file-review physicians, and its history of biased claims administration. Although the court acknowledged that Unum’s settlement with the U.S. Department of Labor and state insurance regulators was several years ago, the court found:

Without determining when Unum should be liberated from the cloud of its previous conduct, Unum has enough of a documented “history of biased claims administration,” Glenn, 554 U.S. at 117, that it was working to correct in close enough temporal proximity to its consideration of Warner’s benefits claim in 2011 to warrant scrutiny in this case on the conflict of interest issue. In addition, Warner has raised legitimate issues with Unum’s decision not to give much weight to the functional capacity evaluation submitted by her physical therapist in December 2011 and its reliance on physician file reviews only, in a case in which the medical reasons for Warner’s symptoms were somewhat of a moving target, to justify discovery beyond the claims file under the “softened” Semien standard.

The court also focused on Unum’s cursory treatment of physical therapy records despite the plaintiff’s extensive treatment and was also troubled by the Unum reviewing doctor’s failure to speak with the treating doctor after identifying the importance of doing so. And the court was especially disturbed by Unum’s reliance on a withdrawn diagnosis, citing Unum’s concession of error and pointing out:

The physical therapist did not make that mistake [or relying on a mis-diagnosis]; he correctly noted Warner’s actual diagnoses in his report. While Unum has withdrawn that argument, the Court notes, parenthetically, that one of the premises of that argument — that a physical therapist’s mistake as to one of his patient’s diagnoses is a good reason to reject therapist’s entire functional capacity evaluation — remains suspect. Unum also argues that it discounted the physical therapist’s evaluation because his assessment of Warner’s pain upon movement of her extremities conflicted with the assessment of another treater, Dr. Bobbrey. Id. These arguments advanced by Unum in support of its benefits determination lend weight to Warner’s contention that Unum’s reliance on file reviews only in a case like this, with shifting or conflicting diagnoses and assessments of a Claimant’s subjectively reported symptoms, may indicate a conflict-induced bias against fibromyalgia claims. While the Court expresses no opinion on the ultimate merits of Warner’s claim, these are relevant considerations under Semien in the context of deciding the scope of permissible discovery.

Based on the foregoing, the court concluded that the plaintiff met the required threshold showing.

Turning to the scope of permissible discovery, plaintiff sought – (1) the professional qualifications of Unum’s reviewing doctors — Dr. James Folkening, Dr. Susan Council and Dr. Laina Rodela; (2) the compensation these doctors received from Unum between 2007 and 2011; (3) the performance evaluations for those doctors from 2007 to 2011; (4) the number of claims reviewed by those doctors between 2007 and 2011 that resulted in Unum’s denial of benefits; (5) the bonus structure and financial incentives in place for employees handling Unum’s claims, appeals staff, and in-house medical and vocational staff; (6) the financial performance of the Policy; and (7) Unum’s claims administration procedures, guidelines, and materials in effect at the time Warner’s claim was denied. Pl’s Br. [Dkt.#39], at 4. Unum agreed to produce some of the material but objected to the rest, leading the court to conclude that compensation and bonus information is discoverable “based on Warner’s theory that it may reveal circumstantial evidence of structural bias.” The court ordered production of that information for a five-year period, along with performance evaluations for that same period. However, the court denied discovery of information concerning other claim reviews/statistics as misleading; nor would the court approve discovery of an alternative suggested by the plaintiff – producing reports authored immediately before and after the reports authored in this case. Finally, the court ordered production of communications between Unum’s benefit analysts and its legal departments, finding the documents relate to plan administration and do not constitute legal advice.

This is an expanded discussion of a prior blog. For further information contact Martina Sherman ([email protected]) or Mark DeBofsky ([email protected]

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