A recent court ruling from Pennsylvania involving ERISA Discovery permitted depositions to be taken in an ERISA disability insurance case, but applied a rationale that raises concerns about a misuse of administrative law procedures that attorneys and disability insurance claimants should be aware of.
Congress authorized claimants seeking employee benefits due under ERISA to bring a ³civil action² to recover benefits due or obtain appropriate equitable relief. 29 U.S.C. § 1132(a). The Federal Rules of Civil Procedure contemplate only one form of civil action; and civil actions are to be adjudicated utilizing the procedures specified by the civil procedure Rules and by the Federal Rules of Evidence. Yet federal courts have denied ERISA benefit claimants the right to take discovery normally permitted in civil actions, the right to trial by jury, and even, in most cases, the right to a trial in open court involving the examination and cross-examination of witnesses. Mark DeBofsky's article explores how the courts developed a quasi-administrative law regime governing ERISA benefit disputes despite Supreme Court rulings defining the contours of what a ³civil action² should consist of. The article further examines how ERISA cases are litigated and the scope of ERISA adjudications. Questions as to whether the current regime for litigating ERISA cases violates claimants¹ Constitutional due process rights are also raised, along with a discussion as to whether remands of ERISA cases violate the finality rule of Article III of the U.S.
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.
On July 26, 2013, Magistrate Judge Jeffrey Gilbert issued a ruling in Warner v. Unum Life Ins.Co. of America, No. 12 C 2782 Click Here (N.D.Ill.) granting plaintiff's motion to compel discovery in an ERISA action governed by the arbitrary and capricious standard of review. DeBofsky, Sherman & Casciari attorney Martina Sherman successfully argued that limiting discovery to the so-called administrative record, or the claim record assembled by the insurance company during the course of the claim, was too restrictive. Instead, the court permitted exploration of Unum's potential conflict of interest based on evidence suggesting that Unum may not have objectively assessed Debra Warner's claim for disability benefits. In particular, the court questioned why the insurer disregarded testing performed by a physical therapist. Consequently, the court permitted Warner to obtain compensation information and performance appraisals of Unum personnel in order to determine whether financial incentives may have biased their assessment of the evidence. However, the court refused to permit discovery of statistical information regarding approval/denial rates or a sampling of prior reports because it deemed such evidence potentially misleading. The court also found that communications between Unum claims personnel and the insurer's legal staff during the course of the claim appeal could not be withheld from production under an assertion of attorney-client privilege.