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Fessenden v. Reliance Standard Life Insurance Co.

United States District Court, N.D. Indiana, South Bend Division

December 15, 2016

DONALD FESSENDEN, Plaintiff,
v.
RELIANCE STANDARD LIFE INSURANCE COMPANY, et al., Defendants.

          OPINION AND ORDER

          MICHAEL G. GOTSCH, SR. UNITED STATES MAGISTRATE JUDGE

         On February 1, 2016, Plaintiff filed his Motion to Conduct Standard Discovery Pursuant to Rule 26 of Federal Rules of Civil Procedure in this case brought pursuant to Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. Defendants filed a response to Plaintiff's instant motion to conduct discovery on March 1, 2016. Plaintiff's instant motion became ripe on March 11, 2016, when he filed his reply brief.

         Once the Court entered its opinion and order denying Plaintiff's motion to apply the de novo standard of review in this case, the undersigned ordered the parties to complete supplemental briefing on the instant motion for discovery. [Doc. No. 30]. On October 20, 2016, Plaintiff timely filed his supplemental brief [Doc. No. 31] along with his proposed interrogatories [Doc. No. 31-1], his proposed request for production of documents [Doc. No. 31-2], and a 2007 law review article discussing the partiality of self-interested reviewers in claims benefits decisions challenged under ERISA [Doc. No. 31-3]. Defendants filed their timely supplemental brief in response [Doc. No. 32] along with a document entitled “Reliance Standard Claim Handling Statement of Principles (“the Reliance Principles”) [Doc. No. 32-1]. In light of the parties' briefing and the supplemental evidence presented, the Court now denies Plaintiff's motion for discovery for the reasons stated below.

         I. Relevant Background

         In its opinion and order dated September 26, 2016, the Court concluded that Defendants substantially complied with the ERISA regulatory framework in its denial of Plaintiff's claim for disability insurance benefits. Accordingly, the Court held that Plaintiff's ERISA claim before this Court will be reviewed under the arbitrary and capricious standard typically applied in ERISA cases where a benefit plan contains a discretionary clause. See Doc. No. 29 at 3 (citing Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111(2008) (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989))).

         Ordinarily in ERISA cases where the arbitrary and capricious standard is applied, the reviewing court only considers the administrative record, or in other words, evidence before the claims administrator when the claim at issue was denied. Perlman v. Swiss Bank Corp. Comprehensive Disability Prot. Plan, 195 F.3d 975, 982 (7th Cir. 1999); see also Krolnik v. Prudential Ins. Co. of Am., 570 F.3d 841, 843 (7th Cir. 2009). However, the Supreme Court in Glenn addressed concerns about the effect of structural conflicts of interest where the claims administrator both evaluates benefits claims and pays any benefits awarded. Glenn, 554 U.S. at 112-18. The Court concluded that such a conflict of interest constitutes “one factor among many that a reviewing judge must take into account.” Id. at 116.

         Here, Reliance Standard Life Insurance Company (“Reliance”) is undisputedly both the administrator and payor of the long term disability benefits sought by Plaintiff and at issue in this case. Under the terms of Plaintiff's disability policy, Plaintiff would have received $1, 250, 000 in disability benefit payments had Reliance approved rather than denied his claim. Plaintiff alleges that Reliance hired Dr. John Brusch and Dr. Michelle Park as record reviewing physicians, both of whom are regular reviewers in the disability insurance industry, to review and deny his benefits claim. Additionally, Plaintiff points to rejections by two courts of Dr. Brusch's opinions finding claimants not to be disabled. Although not completely clear from Plaintiff's motions and subsequent briefs, Plaintiff seems to be suggesting that Dr. Brusch's and Dr. Park's history with and compensation from Reliance create a fair inference that a financial conflict existed and influenced Reliance's denial of his claim.

         In light of these facts, Plaintiff asks the Court for permission to conduct discovery in order to determine the extent to which Reliance's conflict of interest infected his benefits claim. Specifically, Plaintiff seeks information regarding financial incentives, bias, or motivations that may be built into Reliance's claim process that favor denial of legitimate benefits claims. Plaintiff contends that information involving the claims management practices and financial motives of Reliance's employees and agents is relevant to any analysis of the effect of Reliance's conflict of interest on his claim. Additionally, Plaintiff indicates that he is “entitled to purs[u]e discovery to establish the nature of the relationship between Reliance” and Drs. Brusch and Park so that the Court can “competently assess whether they are truly ‘independent.'” [Doc. No. 31 at 8]. Plaintiff also indicates his intent to conduct a Rule 30(b)(6) deposition of individuals most knowledgeable about Reliance's structural conflict of interest and the responses to the written discovery requests, if allowed by the Court.

         Defendants, however, argue that such discovery is inappropriate in this case because Plaintiff has failed to show with specificity any instance of misconduct in the handling of his claim. In addition, Defendants contend that good cause does not exist for the belief that discovery would reveal any procedural defect in Reliance's decision on Plaintiff's claim. Defendants support their argument with a document entitled “Reliance Standard Claim Handling Statement of Principles” (“Principles”).[1] [Doc. No. 32-1]. Reliance's Principles document outlines Reliance's expectations for claim examiners, appeal reviewers, third party vendors who provide independent medical professionals as requested by Reliance, and the independent medical professionals themselves.

         II. Analysis

         Under Glenn, Reliance's structural conflict of interest as both the administrator and payor of Plaintiff's benefits claim is one of many factors that this Court must consider in its deferential review of Reliance's benefits denial. See 554 U.S. at 116-17. The mere existence of the structural conflict also raises the question of whether discovery should be allowed to assist in the determination as to the extent to which the conflict impacted the review process used to assess Plaintiff's benefits claim. See Id. However, discovery is not automatic when an insured asserts that a benefit decision may have been influenced by a conflict of interest. As stated in this Court's order dated October 6, 2016, “discovery is normally disfavored in the ERISA context, ” in keeping with the application of the deferential arbitrary and capricious standard. Semien v. Life Ins. Co. of N. Am., 436 F.3d 805, 814 (7th Cir. 2006); see also Barker v. Life Ins. Co. of N. Am., 265 F.R.D. 389, 393 (S.D. Ind. 2009) (internal citations omitted).

         Before Glenn, Semien defined a rather strict test for determining whether limited discovery was justified in the Seventh Circuit. Under Semien, limited discovery was only warranted in cases where claimants “identif[ied] a specific conflict of interest or instance of misconduct [and made] a prima facie showing that there [was] good cause to believe limited discovery [would] reveal a procedural defect in the plan administrator's determination.” Semien, 436 F.3d at 815. Glenn brought into question the validity of the Semien framework without establishing explicit rules for determining when discovery should be allowed. See Glenn, 554 U.S. at 116 (“Neither do we believe it necessary or desirable for courts to create special burden-of-proof rules, or other special procedural or evidentiary rules, focused narrowly upon the evaluator/payor conflict.”).

         Most recently, the Seventh Circuit addressed the status of the Semien standard in Dennison v. Mony Life Ret. Income Sec. Plan, 710 F.3d 741 (7th Cir. 2013). Summarizing the effect of Dennison on the Semien standard, the Northern District of Illinois explained:

In Dennison, the Seventh Circuit made clear that the Supreme Court's decision in Glenn “suggests a softening, but not a rejection” of the requirement established in Semien that a plaintiff must make a prima facie showing in order to be entitled to discovery in a case to be decided under the arbitrary and capricious standard. 710 F.3d at 747. The Court in Dennison re-affirmed that Semien remains good law in the Seventh Circuit after Glenn albeit with a “softening” of the prima facie showing required as a prerequisite to obtaining discovery. Accordingly, the Seventh Circuit seems willing to ...

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