John Dragus v. Reliance Standard Life Insura ( 2018 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 17-1752
JOHN DRAGUS,
Plaintiff-Appellant,
v.
RELIANCE STANDARD LIFE INSURANCE
COMPANY,
Defendant-Appellee.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 15 C 9135 — Marvin E. Aspen, Judge.
ARGUED NOVEMBER 28, 2017 — DECIDED FEBRUARY 14, 2018
Before BAUER, ROVNER, and SYKES, Circuit Judges.
BAUER, Circuit Judge. Plaintiff-appellant, John Dragus,
brought suit against defendant-appellee, Reliance Standard
Life Insurance Company (“Reliance”), under the Employee
Retirement Income Security Act for denial of long-term
disability (“LTD”) benefits. After the district court denied
2 No. 17-1752
Dragus’ request for discovery outside the claim file record,
both parties moved for summary judgment. Before the court
ruled, Dragus filed a motion to supplement the claim record
with a fully favorable Social Security Disability Insurance
(“SSDI”) decision. The district court denied the motion to
supplement and granted summary judgment in favor of
Reliance. Dragus now appeals.
I. BACKGROUND
Dragus worked as an Internet Sales Manager for
SMG/McCormick Place (“SMG”), a private venue-management
firm that manages events at Chicago’s McCormick Place and
Navy Pier. As an Internet Sales Manager, Dragus managed and
coordinated all information technology and telecommunication
needs for individual vendors at conventions and meetings.
Dragus experienced severe neck pain for several years
leading up to his claim for LTD benefits. In 2011, he underwent
a three-level cervical spine fusion, but the surgery failed to
resolve his pain and Dragus struggled to meet the demands of
his job. Over the next two years, Dragus underwent numerous
treatments to deal with the pain through physical therapy,
steroid injections, and a rhizotomoy—a surgical procedure that
severs nerve roots in the spinal cord through the use of an
electrified probe. Physicians also prescribed Norco, a pain
medication, which caused memory impairment and hand
tremors.
In June 2013, when all of these treatments failed, Dragus
went on short-term disability to participate in a two-month,
full-time pain management program. After completing the
program, Dragus returned to work full-time. Within two
No. 17-1752 3
months of his return, the pain issues returned, resulting in
excessive absences from work. On February 7, 2014, SMG
reprimanded him and informed him that any future absences
would require a physician’s excuse.
On April 4, 2014, Reliance received Dragus’ LTD benefits
claim. The Group Policy describes the coverage provided as
follows:
INSURING CLAUSE: We will pay a Monthly
Benefit if an Insured:
1) Is Totally Disabled as the result of a
Sickness of Injury covered by this Pol-
icy;
2) Is under the regular care of a Physi-
cian;
3) Has completed the Elimination Period;
and
4) Submits satisfactory proof of Total
Disability to us.
The Group Policy confers discretionary authority on
Reliance to determine eligibility for benefits and to interpret
the provisions of the Group Policy. Reliance also serves as the
claims review fiduciary. Dragus submitted an Attending
Physician’s Statement and notes from his treating psychiatrist
with his LTD claim. At Reliance’s request, Dragus also applied
for SSDI benefits.
A Vocational Rehabilitation Specialist used Dragus’ job
description, received from SMG, to identify Dragus’ regular
4 No. 17-1752
occupation under positions from the Department of Labor’s
Dictionary of Occupational Titles (“DOT”). Ultimately, the
specialist determined that Dragus’ regular occupation was a
combination of Customer-Equipment Engineer, Telephone and
Telegraph, and Telecommunications Specialist. The Customer-
Equipment Engineer position is a light duty position and the
Telecommunications Specialist position is a sedentary position.
Due to Dragus’ history of narcotic dependent chronic pain,
as well as depression and anxiety, a registered nurse who
reviewed the medical records suggested that Reliance retain a
psychiatrist and an occupational medicine specialist. Reliance
retained the services of Professional Disability Associates, a
third-party vendor, for independent physicians to review and
discuss Dragus’ medical records. These two physicians
certified they did not accept compensation dependent upon a
specific outcome of their review.
After review and discussion with the psychiatrist, the
occupational medicine specialist noted restrictions mainly for
preventive measures, but overall opined that Dragus retained
the physical capability to function at the light level of physical
activity for a full day of work. Furthermore, the specialist
noted that the cervical spine MRI did not support the self-
reported neck pain, and the medical records did not substanti-
ate any nerve compression or impingement causing the pain.
After review and discussion with the occupational medicine
specialist, the psychiatrist concluded that the records sup-
ported anxiety and pain disorder, however, neither diagnosis
affected Dragus’ functional capacity, as the severity of his
anxiety was mild. To support this finding, the psychiatrist
No. 17-1752 5
pointed to Dragus’ global assessment of functioning (“GAF”)
scores. A GAF score between 61 and 70 indicate some mild
symptoms.1 Dragus had a score of 65 from testing in March
2013, and 70 from testing in May 2014.
Based on these reports, Reliance denied Dragus’ application
on September 29, 2014. The denial letter stated that, “the
available medical records and information in [his] claim did do
not support a physical or mental condition that was at a level
of severity which would have rendered [him] unable to
perform the material duties of [his] Regular Occupation on a
Full-time basis.” Reliance further noted that, due to the chronic
nature of his claimed neck and shoulder pain, during which
time he successfully worked full-time at SMG, “it is expected
that the medical records would document an acute change or
significant deterioration in [his] physical or mental status on or
around” the date he stopped working. However, the medical
records failed to support this sort of change.
On March 6, 2015, through counsel, Dragus requested
reconsideration. To review the denial, Reliance obtained two
additional medical opinions from Network Medical Review
Company, a second third-party vendor. Again, Reliance sought
independent review from a psychiatrist and occupational
medicine specialist, as suggested by Reliance’s clinical team.
Both physicians certified they did not accept compensation
dependent upon a specific outcome of their review.
1
Global Assessment of Functioning (GAF) Scale, RATTLER/FIREBIRD ASS’N,
http://www.rattler-firebird.org/va/gafchart.php (last modified June 3, 2010,
6:28 UTC).
6 No. 17-1752
After review of the records, the psychiatrist opined that,
despite his history of depression and anxiety, Dragus did not
have limitations or restrictions in his daily activities. The
psychiatrist further opined that the records did not indicate
mental status problems impacting his ability to work.
After review of the records, the occupational medicine
specialist noted that the cognitive complaints were secondary
to pain and emotional factors rather than underlying cognitive
loss. The specialist opined that the medical records did not
provide clinical data to substantiate the severity of Dragus’
complaints. The specialist also noted that Dragus’ medical
records indicated an ability to walk three miles and only mild
tenderness to palpation and limitation in cervical range of
motion. Therefore, the specialist opined that Dragus had the
ability to work full-time at a light level on a consistent basis,
subject to the following restrictions: sitting up to seven hours
continuously and eight hours total per an eight hour work day;
standing and walking four hours continuously and seven to
eight hours total per an eight-hour workday; climbing unre-
stricted; lifting and carrying up to 50 pounds of force occasion-
ally and up to 25 pounds frequently; pushing and pulling up
to 75 pounds occasionally; and turning head and extending
neck only occasionally.
On April 22, 2015, Reliance provided Dragus with the
reports and afforded Dragus an opportunity to comment on
the opinions. Dragus responded with his objections, and
Reliance forwarded this correspondence to the specialist. Upon
review, the specialist determined that the correspondence did
not change his medical opinion.
No. 17-1752 7
In response to Dragus’ objections, Reliance obtained a labor
market survey on June 24, 2015, to determine whether Dragus’
regular occupation could be performed within the restrictions
and limitations identified by the second reviewing occupa-
tional medicine specialist. This survey received responses from
ten identified positions across the nation, equivalent to Dragus’
regular occupation. The survey ultimately concluded that five
of these positions could be performed with the physical
restrictions identified.
On August 19, 2015, Dragus sent another correspondence
contesting the survey and provided a treating physician’s
opinion that Dragus’ psychiatric symptoms and pain limited
his ability to work. Reliance forwarded this to the two review-
ing physicians, who both subsequently opined that their
conclusions remained the same.
On September 18, 2015, Reliance affirmed its final determi-
nation to deny LTD benefits, pointing to a lack of evidence that
the symptoms prevented him from performing material duties.
A. Procedural History
Dragus commenced a civil action in the Northern District
of Illinois under § 502(a)(1)(B) of ERISA (29 U.S.C.
§ 1132(a)(1)(B)) after exhausting administrative review of
Reliance’s determination. The parties agreed that the arbitrary
and capricious standard of review applied based on the Group
Policy’s terms. Dragus requested additional discovery outside
the administrative record provided by Reliance. The district
court denied this request, and both parties subsequently filed
for summary judgment.
8 No. 17-1752
While these motions were pending, Dragus received a fully
favorable notice of decision from his SSDI benefits claim.
Dragus moved to supplement the record with the SSDI
decision. The district court denied the motion to supplement
and granted summary judgment in favor of Reliance. The
district court reached several conclusions including: (1) that
Reliance’s initial claim decision was untimely, but any penalty
to Reliance was waived because Dragus waited for that
untimely decision and filed a subsequent appeal prior to filing
suit; (2) that although Reliance failed to invoke its authority
under the policy to have Dragus examined by a physician of its
choosing, Reliance’s utilization of file review physicians
certified in Occupational or Preventive Medicine possess
“appropriate training and experience in the field of medicine
involved in the medical judgment” to assess Dragus’ medical
evidence; (3) that Reliance appropriately defined Dragus’
occupation by combining two occupations found in the DOT;
and, as a result, (4) that Reliance’s decision to deny Dragus’
LTD application was not arbitrary and capricious. Dragus now
appeals three issues: (1) that Reliance’s failure to render a
timely decision under 29 C.F.R. § 2560.503-1(f)(3) compels
de novo review; (2) that Reliance’s decision was arbitrary and
capricious; and (3) that the district court improperly denied
Dragus’ motion to supplement the record with the favorable
SSDI decision.
II. DISCUSSION
Summary judgment should be granted if there is “no
genuine issue as to any material fact.”Fritcher v. Health Care
Serv. Corp., 301 F.3d 811, 815 (7th Cir. 2002) (quoting Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986)). “We review a grant of
No. 17-1752 9
summary judgment de novo, viewing all facts and drawing all
reasonable inferences” in favor of the non-movant. Militello v.
Cent. States, Se. & Sw. Areas Pension Fund, 360 F.3d 681, 685 (7th
Cir. 2004).
To lower the standard of review for a denial of benefits
challenged under 29 U.S.C. § 1132(a)(1)(B) from de novo to
arbitrary and capricious, “the plan should clearly and unequiv-
ocally state that it grants discretionary authority to the admin-
istrator.” Perugini-Christen v. Homestead Mortg. Co., 287 F.3d
624, 626 (7th Cir. 2002). Here, both parties agree the policy
grants discretionary review to Reliance. Thus, the arbitrary and
capricious standard of review applies.
A. Untimeliness of Administrative Decision
First, we turn to whether Reliance’s failure to render a
timely decision compels de novo review. 29 C.F.R. § 2560.503-
1(b) imposes a penalty of the loss of discretionary authority on
plan administrators for failing to maintain reasonable claims
procedures. We agree with Dragus that Reliance failed to
render a timely decision according to the regulations set forth
in 29 C.F.R. § 2560.503-1(f)(3). However, as set forth in § 503-
1(l)(2)(i), “if the plan fails to strictly adhere to all the require-
ments of this section with respect to a claim, the claimant is
deemed to have exhausted the administrative remedies
available under the plan.” It is at this point in the claims
process that “the claimant is entitled to pursue any available
remedies under section 502(a) of the Act on the basis that the
plan has failed to provide a reasonable claims procedure that
would yield a decision on the merits of the claim.” Id.
10 No. 17-1752
If Dragus wanted to pursue available remedies for Reli-
ance’s untimely denial, he should have done so when the issue
arose. Dragus argues that ERISA claims should not require the
help of a lawyer; this argument is moot because Dragus was
represented by counsel no later than March 6, 2015, when he
submitted a request for reconsideration. It was at this time that
Dragus should have argued untimeliness. Instead, he pursued
administrative review through an appeal, effectively waiving
this argument. Thus, we find the remedies under § 503.1(l)(2)(i)
inapplicable and de novo review shall not be applied.
B. Arbitrary and Capricious
Because we find de novo review inapplicable, we next turn
to whether Reliance’s denial of Dragus’ claim for LTD benefits
was arbitrary and capricious. Under the arbitrary and capri-
cious standard, we will uphold the district court’s decision so
“long as (1) it is possible to offer a reasoned explanation, based
on the evidence, for a particular outcome, (2) the decision is
based on a reasonable explanation of relevant plan documents,
or (3) the administrator has based its decision on a consider-
ation of the relevant factors that encompass the important
aspects of the problem.” Cerentano v. UMWA Health & Ret.
Funds, 735 F.3d 976, 981 (7th Cir. 2013) (quoting Tompkins v.
Cent. Laborers’ Pension Fund, 712 F.3d 995, 999 (7th Cir. 2013)).
In the case of a denial, “ERISA requires that specific reasons for
denial be communicated to the claimant and that the claimant
be afforded an opportunity for ‘full and fair review’ by the
administrator.” Halpin v. W.W. Grainger, Inc., 962 F.2d 685, 688
(7th Cir. 1992) (quoting 29 U.S.C. § 1133(2)). A plan administra-
tor’s decision will not be overturned “absent special circum-
No. 17-1752 11
stances such as fraud or bad faith, if ‘it is possible to offer a
reasoned explanation, based on the evidence, for a particular
outcome.’” Exbom v. Cent. States, Se. & Sw. Areas Health &
Welfare Fund, 900 F.2d 1138, 1142 (7th Cir. 1990) (quoting
Pokratz v. Jones Dairy Farm, 771 F.2d 206, 209 (7th Cir. 1985)).
“In conducting this review, we remain cognizant of the conflict
of interest that exists when the administrator has both the
discretionary authority to determine eligibility for benefits and
the obligation to pay benefits when due.” Jenkins v. Price
Waterhouse Long Term Disability Plan, 564 F.3d 856, 861 (7th Cir.
2009). In analyzing such a case, as presented here, “the stan-
dard of review remains the same, but the conflict of interest is
‘weighed as a factor in determining whether there is an abuse
of discretion.’” Id. (quoting Metro. Life Ins. v. Glenn, 554 U.S.
105, 115 (2008)).
Reliance retained four independent physicians to review
and take into consideration Dragus’ medical records, com-
plaints, and medication regiment. Each physician used this
information to provide thoughtful opinions pertaining to
Dragus’ medical history, treatment, correlation of his soma-
tized symptoms, mental health conditions, and cognitive
complaints. Each physician also certified he was not compen-
sated for a specific outcome. And, each physician rendered the
same opinion based on his personal thorough, unbiased
investigation.
Furthermore, Reliance afforded Dragus more claim review
process than the Department of Labor requires under 29 C.F.R.
§ 2560.503-1. Reliance provided Dragus copies of the independ-
ent medical opinions and the vocational labor market survey.
12 No. 17-1752
Reliance also afforded Dragus the opportunity to engage in
dialogue throughout the process, allowing him to rebut the
opinions and the survey, with additional consideration from
the reviewing physicians, before making its final decision.
Additionally, the conflict of interest present in this case
does not assist Dragus in finding Reliance’s decision arbitrary
and capricious. The Supreme Court has directed us that a
conflict of interest should “act as a tiebreaker when the other
factors are closely balanced.” Glenn, 554 U.S. at 117. We find
this case in no need of such a tiebreaker. Even if such a tie-
breaker were needed, Reliance took appropriate precautions to
eliminate the conflict of interest. Reliance obtained two
separate third party vendors to secure independent physicians
with relevant medical specialties to review Dragus’ claim. For
the original claim, Reliance referred the file to Professional
Disability Associates for dual independent physician reviews.
Reliance requested physicians specialized in psychiatry and
occupational medicine according to the opinion of a registered
nurse who reviewed the medical records. The nurse substanti-
ated this opinion noting the history of narcotic-dependent
chronic pain, depression, and anxiety from which Dragus
suffered. Upon Dragus’ appeal from the initial denial, Reliance
contacted Network Medical Review Company for two addi-
tional independent opinions from a psychiatrist and occupa-
tional medicine physician, the relevant fields as determined by
Reliance’s clinical team.
All four physicians took into consideration Dragus’
complaints, medication regimen, medical history, treatment,
correlation of his somatized symptoms, mental health condi-
tions, and cognitive complaints. And, all four physicians made
No. 17-1752 13
the same overarching conclusion: that Dragus had the func-
tional capacity to perform the duties of a full-time light duty
occupation. Additionally, each physician certified that they
were not compensated based on the outcome of their review.
With the conflict of interest appropriately eliminated by
Reliance, no contention of bad faith or fraud, and a well-
reasoned decision supported by the evidence, we find Reli-
ance’s decision was not arbitrary and capricious.
C. Supplementing the Record with SSDI Decision
Finally, we turn to whether the district court improperly
denied Dragus’ motion to supplement the record with the SSDI
decision. “We have allowed parties to take discovery and
present new evidence in ERISA cases subject to de novo judicial
decisions, … but never where the question is whether a
decision is … arbitrary and capricious.” Perlman v. Swiss Bank
Corp. Comprehensive Disability Protection Plan, 195 F.3d 975, 982
(7th Cir. 1999) (internal citations omitted). Because this case is
subject to the deferential arbitrary and capricious standard and
not de novo review, we find that the district court did not err in
denying to supplement the record.
III. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s
findings.