Brown v. Hartford Life Insurance Compan

FILED
United States Court of Appeals
Tenth Circuit
December 5, 2008
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
FOR THE TENTH CIRCUIT
GERAL R. BROWN,
Plaintiff-Appellant,
v. No. 07-7108
(D.C. No. 6:06-CV-00115-JHP)
HARTFORD LIFE INSURANCE (E.D. Okla.)
COMPANY, a corporation,
Defendant-Appellee.
ORDER AND JUDGMENT *
Before HOLMES, PORFILIO, and ANDERSON, Circuit Judges.
The Hartford Life Insurance Company (Hartford) terminated Geral R.
Brown’s long term disability benefits. He sued Hartford under the Employee
Retirement Income Security Act of 1974, 29 U.S.C. § 1132 (ERISA). The district
court upheld Hartford’s termination of his benefits. He appeals. We reverse and
remand for further proceedings.
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
BACKGROUND
FedEx Freight East, Inc. (FedEx) employed Mr. Brown as a truck driver.
On March 3, 2003, while unloading a FedEx delivery truck, Mr. Brown fell off
the truck bed and sustained serious injuries to his neck, back, left shoulder, left
arm, left wrist, left hand, and left knee. His injuries included a fracture of the
head of the radius in his left elbow, resulting in a surgery that replaced the radius
head with a metal prosthesis. He subsequently developed reflex sympathetic
dystrophy (regional pain syndrome) in the left arm and hand. 1
At the time of Mr. Brown’s injury, FedEx maintained an employee welfare
benefit plan called the “FedEx Freight East, Inc., Group Benefit Plan” (Plan).
Mr. Brown was a beneficiary of the Plan. The Plan included long-term disability
insurance, which was underwritten by Hartford. All disability claims under the
Plan were administered and determined by Hartford.
Mr. Brown submitted a claim for short term disability benefits (STD) to
FedEx. He was approved and received STD for six months, at which time he
became eligible for long term disability benefits (LTD) through the Plan.
1
“[Reflex sympathetic dystrophy (RSD)] is a chronic pain syndrome most
often resulting from trauma to a single extremity. It can also result from diseases,
surgery, or injury affecting other parts of the body. Even a minor injury can
trigger” RSD. Social Security Ruling 03-2p, Titles II and XVI: Evaluating Cases
Involving Reflex Sympathetic Dystrophy Syndrome/Complex Regional Pain
Syndrome, 2003 WL 22399117, at *1 (2003).
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Hartford approved his claim and paid him LTD from September 1, 2003 through
August 31, 2004.
Meanwhile, Hartford had instructed Mr. Brown to apply for Social Security
disability benefits (SSD). On January 22, 2004, it wrote him a letter thanking
him for providing a copy of his Notice of Award of SSD. It offset the monthly
benefit he received from Social Security against the monthly LTD award.
The Plan entitles a participant to benefits if a disability prevents him from
performing the duties of his specific job with FedEx for a period of up to twelve
months after the elimination period. After the end of this twelve-month period,
an employee may continue to receive disability benefits only if the disability
prevents him from performing one or more of the essential duties of any
occupation for which he is qualified by training, education, or experience. At the
end of twelve months, Hartford reviewed Mr. Brown’s claim and determined that
he did not meet the “any occupation” standard. Accordingly, it terminated his
benefits as of August 31, 2004.
Mr. Brown filed an administrative appeal with Hartford. He submitted
additional medical and vocational evidence in support of his LTD claim.
On September 12, 2005, Hartford issued a final decision denying the appeal.
Mr. Brown then filed an action in federal district court for judicial review of
Hartford’s decision.
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The district court determined, first, that the Plan did not give Hartford
discretionary authority to determine eligibility for benefits. It therefore applied
de novo review to the benefits denial. In the course of this de novo review, it
concluded that (1) determinations of the Oklahoma Workers Compensation Court
and the Social Security Administration finding Mr. Brown disabled were not
relevant to its decision; (2) of those physicians and vocational experts who had
examined Mr. Brown’s suitability for employment, only Cheryl Mallon concluded
that he could not perform “any occupation,” and her report offered little reasoning
for its conclusion; and (3) considering the evidence as a whole, Mr. Brown failed
to show that he was incapable of performing the occupations identified by
Hartford.
ANALYSIS
We review the district court’s legal conclusions de novo and its factual
findings under the clearly erroneous standard. Deboard v. Sunshine Mining &
Refining Co., 208 F.3d 1228, 1242 (10th Cir. 2000). The question of the
appropriate standard to be used in judicially reviewing Hartford’s actions as claim
administrator is a legal one that we review de novo. DeGrado v. Jefferson Pilot
Fin. Ins. Co., 451 F.3d 1161, 1167 (10th Cir. 2006). “[A] finding is ‘clearly
erroneous’ when although there is evidence to support it, the reviewing court on
the entire evidence is left with the definite and firm conviction that a mistake has
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been committed.” Anderson v. City of Bessemer, 470 U.S. 564, 573 (1985)
(citation omitted).
The district court determined that Hartford’s decision was subject to
de novo review because the Plan did not give Hartford discretionary authority to
determine eligibility for benefits. See Firestone Tire & Rubber Co. v. Bruch,
489 U.S. 101, 115 (1989) (stating ERISA trust principles require application of
de novo review unless plan provides administrator with discretionary authority to
determine eligibility). We disagree with this conclusion. The Plan provided
Hartford with discretion to interpret its terms and provisions and to determine
eligibility for benefits, as evidenced by this provision:
Who interprets policy terms and conditions?
We have full discretionary authority to determine eligibility for
benefits and to construe and interpret all terms and provisions of the
Group Insurance Policy.
Aplt. App. at 160.
Since the Plan gives Hartford discretionary authority, the district court
should have applied an arbitrary and capricious standard to Hartford’s decision to
deny benefits. Fought v. UNUM Life Ins. Co. of Am., 379 F.3d 997, 1003
(10th Cir. 2004). Its use of a de novo standard of review was thus legally
erroneous. 2 Unless we can determine on de novo review that the denial of
2
In fairness to the district court’s determination, the provision on which
Hartford relied in arguing for discretionary authority in the district court differs
(continued...)
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benefits was appropriate under the arbitrary and capricious standard, we must
reverse and remand for further proceedings.
The arbitrary and capricious standard is a deferential one. Weber v. GE
Group Life Assurance Co., 541 F.3d 1002, 1010 (10th Cir. 2008). Under this
standard, “our review is limited to determining whether the plan administrator’s
interpretation was reasonable and made in good faith.” Fought, 379 F.3d at 1003
(quotation and brackets omitted). It might seem, given this deference, that
Mr. Brown faces an even more difficult hurdle in persuading a court that the
administrator’s decision should be reversed under the arbitrary and capricious
standard than he had on de novo review. But in applying the arbitrary and
capricious standard an additional factor comes into play: Hartford’s conflict of
interest. Because it applied de novo review, the district court did not expressly
consider this factor.
Hartford was both the insurer and administrator of the Plan. The financial
conflict of interest inherent in such a double role must be “weigh[ed] . . . as a
factor in determining the lawfulness of the benefits denial.” Weber, 541 F.3d at
2
(...continued)
from the provision on which it now relies in its argument on appeal. Compare
Aplee. Supp. App., Vol. III, at 822 with Aplee. Br. at 24-25. Given our de novo
review, however, together with the presence of the entire Plan document in the
record and Mr. Brown’s failure to object to the use of a different Plan provision,
we have examined the provision on which Hartford now relies and have
determined that it does grant Hartford discretion, requiring arbitrary and
capricious review.
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1011. The significance of this factor depends on the circumstances of the
particular case. Metro. Life Ins. Co. v. Glenn, 128 S. Ct. 2343, 2346 (2008).
The conflict of interest here may have significance. For example,
Mr. Brown argued to the district court that Hartford improperly refused to
consider the determinations of the Social Security Administration (SSA) and the
Oklahoma Workers’ Compensation Court (OWCC) that he was disabled when
reaching its own determination that he was not. The district court did not
consider whether Hartford’s financial conflict could have had a role in
influencing its decision to ignore the SSA and OWCC’s determinations. Instead,
it stated that the SSA and OWCC use different standards for determining
entitlement to benefits and their determinations therefore could not be given
“authoritative weight.” Aplt. App. at 7, n.2. The district court did not further
mention these determinations, apparently according them no weight at all.
While authority from this circuit generally supports the district court’s
approach, see, e.g., Caldwell v. Life Ins. Co. of N. Am., 287 F.3d 1276, 1284
(10th Cir. 2002) (rejecting administrator’s reliance on Social Security and
workers’ compensation determinations where disability standards differed from
those in private policy), we find more pertinent the Supreme Court’s recent,
specific comments on this issue in Glenn:
[T]he [Sixth Circuit Court of Appeals] found questionable the fact
that MetLife had encouraged Glenn to argue to the Social Security
Administration that she could do no work, received the bulk of the
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benefits of her success in doing so (the remainder going to the
lawyers it recommended), and then ignored the agency’s finding in
concluding that Glenn could in fact do sedentary work. This course
of events was not only an important factor in its own right (because it
suggested procedural unreasonableness), but also would have
justified the court in giving more weight to the conflict (because
MetLife’s seemingly inconsistent positions were both financially
advantageous).
Glenn, 128 S. Ct. at 2352 (citation omitted).
Hartford similarly benefitted financially from the SSA’s determination that
Mr. Brown was unable to do any work and should therefore receive SSD. But
when Mr. Brown brought this determination to Hartford’s attention, it merely
stated:
We also considered the fact that Mr. Brown was approved for Social
Security Disability (SSD) benefits. The SSD decision is based on
specific established rulings, and is not binding on The Hartford, as
we must administer his claim based on our policy language and the
medical documentation available to us.
Aplt. App. at 32.
Hartford’s discussion of this point was conclusory: it provided no specific
discussion of how the rationale for the SSA’s decision, or the evidence the SSA
considered, differed from its own policy criteria or the medical documentation it
considered in rejecting Mr. Brown’s claim. A reviewing court should have
factored the inconsistency created by Hartford’s instructing Mr. Brown to apply
for SSD and reaping the benefits of his successful determination, then summarily
rejecting the evidentiary value of that determination almost without comment,
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into its determination of whether Hartford acted arbitrarily and capriciously in
denying benefits. See Glenn, 128 S. Ct. at 2352.
In the course of our review, we have considered whether the district court’s
decision could be affirmed under the applicable standard of review
notwithstanding its failure to consider evidence of Hartford’s inherent conflict of
interest and Hartford’s summary rejection of the decisions of the SSA and the
OWCC. We think the appropriate course is to remand this case for further
consideration by the district court.
In addition to the factors suggesting a conflict of interest, the evidence
presented to Hartford provides some support for Mr. Brown’s disability claim. A
vocational expert, Cheryl Mallon, concluded that “he is permanently and totally
disabled from earning any wages in any employment for which he is, or could
become physically suited, or reasonably fitted by education, training or
experience.” Aplt. App. at 102. The district court found Ms. Mallon’s report
unconvincing, noting that while it stated that Mr. Brown was unable to perform
the jobs of truck driver and warehouse worker that fit his work profile, it
“evidence[d] no other attempt to identify jobs that were suitable for [him].” Id. at
8. But this reasoning fails to engage with Ms. Mallon’s conclusion that any
gainful employment was categorically excluded. In her report, she stated:
Dr. Pettingell, Mr. Brown’s treating physician, has given permanent
restrictions of no lifting over five pounds, and no repetitive use of
the left upper extremity. These restrictions would severely limit any
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vocational options for retraining. Even sedentary work requires good
bilateral manual dexterity and lifting up to ten pounds occasionally.
Additionally, Mr. Brown continues to experience severe chronic pain
due to the reflex sympathetic dystrophy.
Id. at 102.
The record also contains an opinion from Dr. Richard Hastings, who
concluded that a “psychological overlay and clinical depression” were “becoming
a substantial clinical debility for the patient” and recommended further evaluation
of these factors. Id. at 87. The district court did not discuss these findings.
The district court did rely on a vocational evaluation authored by Rhonda
Blackstock. Ms. Blackstock concluded that Mr. Brown could perform work at the
“sedentary” and “limited light” exertional levels, so long as he was not required
to lift over five pounds or do repetitive work with his left arm. Her evaluation,
however, did not assign any limitation due to severe chronic pain, psychological
overlay, or clinical depression, factors noted by other examiners.
The district court also relied on an Employability Analysis Report
completed by a Hartford employee. This report used a computer-generated
profile to match Mr. Brown with a number of jobs that accounted for his
exertional limitations, but assigned no limitation based on either chronic pain or
psychological factors.
Given the state of the evidence, we cannot say as a matter of law that the
district court’s decision should be affirmed despite the application of an incorrect
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standard of review. Nor can we conclude that Hartford’s decision to deny
benefits was arbitrary and capricious without further consideration and possible
further fact-finding by the district court. Accordingly, on remand, the district
court should re-examine all the evidence in light of the applicable standard of
review. In so doing, it should be careful to appropriately weigh (1) Hartford’s
inherent conflict of interest; (2) Hartford’s summary rejection of the decisions of
the SSA and the OWCC finding Mr. Brown disabled, considering the differing
standards applied by the governmental agencies but also considering any financial
benefit Hartford derived from those determinations; and (3) the opinions of
Cheryl Mallon and Dr. Hastings and Hartford’s reasons for rejecting those
opinions. Finally, the district court should give consideration to whether Hartford
appropriately addressed any non-exertional impairments identified in the record.
The judgment of the district court is REVERSED and the case is
REMANDED for further proceedings in accordance with this order and judgment.
Entered for the Court
Jerome A. Holmes
Circuit Judge
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