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Laura STAMBAUGH, Plaintiff, v. RELIANCE STANDARD LIFE INSURANCE COMPANY, Defendant.
ORDER
Before the Court is Plaintiff Laura Stambaugh's (“Plaintiff”) Motion for Discovery. (Doc. 14.) The motion is fully briefed and, for the reasons set forth herein, is granted.
I. BACKGROUND
Plaintiff was employed by Kingman Healthcare, Inc. as a Medical Technologist for over 15 years. She claims to have become disabled on September 27, 2019. In December 2019, Plaintiff, unrepresented, submitted a claim for long-term disability (“LTD”) benefits to Defendant Reliance Standard Life Insurance Company (“Defendant”). Her claim was supported by her records from her internal medicine doctor, Dr. Palanichamy, who opined that Plaintiff was disabled and unable to perform the tasks of her occupation.
In a December 26, 2019 letter, Defendant advised Plaintiff that she failed to satisfy the definition of Total Disability under its policy. Relying on the opinion of its “clinical consultant,”1 who based his opinion solely on a review of Plaintiff's medical records, Defendant rejected Plaintiff's LTD claim and the opinions of Dr. Palanichamy. The “clinical consultant” opined that the restrictions and limitations provided by Dr. Palanichamy were excessive in light of the lack of severity of symptoms reported by Plaintiff to her treating physician. The denial letter stated that “[t]here was no medical information as of September 27, 2019, to indicate changes in Plaintiff's medical condition that caused her to stop working.” The letter indicated that Plaintiff had stated that her explanation for leaving work was that “[she] wanted time off from work to control her diabetes.”
After the original denial, Plaintiff—still unrepresented—appealed, submitting additional medical records and completing a questionnaire from a second physician, her treating neurologist, Dr. Saperstein. Dr. Saperstein opined that Plaintiff was disabled largely due to diabetic neuropathy. His report identified the restrictions and limitations that prevented her from performing the necessary tasks of a Medical Technologist.
Defendant then retained a medical records review vendor, Medical Consultants Network (“MCN”),2 to hire a doctor to render an opinion, based only on a review of Plaintiff's record, on Plaintiff's claim of disability. The doctor hired by MCN to conduct the review was Dr. Kublaoui, an endocrinologist. Based on Dr. Kublaoui's report, Defendant affirmed the denial of Plaintiff's LTD claim.3 Dr. Kublaoui concluded that although Plaintiff suffers from neuropathy and although he deferred to a neurologist to determine the extent to which the neuropathy may be causing limitations, Plaintiff was not disabled due to her diabetes. Defendant's July 24, 2020 LTD denial letter quotes Dr. Kublaoui's report:
The primary diagnosis is type 2 diabetes [1-3]. The secondary diagnosis is diabetic neuropathy. The patient's diabetes is not well controlled but it is not causing any limitations or symptoms. The patient's neuropathy causes pain and is being treated with medications. I defer to a neurologist to determine the extent to which it may be causing limitations.
(Doc. 14-1 at 4 (emphasis added).)
Dr. Kublaoui states in his report that “[f]rom an endocrine perspective[,] the claimant can work on a full-time basis. There are no restrictions. The patient can perform any work from an endocrine perspective.” (Id. at 5.) Defendant relied on that statement as its basis for denying the claim. Neither Dr. Kublaoui's report nor the final denial documents discussed or mentioned the duties and physical requirements of Plaintiff's occupation as a Medical Technologist.
Defendant's letter denying Plaintiff's claim rejected the opinion of her treating neurologist but did not advise her, an unrepresented applicant, what her application lacked or what was necessary for her to persuade Defendant or its medical records reviewing doctor to approve her application. Although Dr. Kublaoui conceded in his report that he had to defer to a neurologist to determine the extent to which Plaintiff's neuropathy may be causing limitations, Defendant failed to employ a neurologist to address the neuropathy. Plaintiff alleges, and Defendant does not deny, that Defendant did not communicate with or have Dr. Kublaoui communicate with either of Ms. Stambaugh's doctors to obtain their opinions on the issue.
II. DISCUSSION
The first question to be answered when a claimant is seeking discovery outside of the administrative record in an ERISA matter, such as this, is whether Defendant operates under a structural conflict of interest. When an insurer acts as both the plan administrator and the funding source for benefits, it operates under a structural conflict of interest. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 965 (9th Cir. 2006) In its answer to the petition, Defendant denied that it has such a conflict. However, in Defendant's response to this motion, Defendant appears to concede that it has a structural conflict of interest—that it acted as both the funding source and administrator for Plaintiff's LTD benefits. Based on Defendant's apparent concession, the Court will proceed in its ruling as if a structural conflict of interest exits.
When a plan confers discretion on the administrator of the plan, abuse of discretion review applies, even if the administrator has a conflict of interest. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). The existence of a conflict of interest is relevant to how a court conducts abuse of discretion review. Id. In its abuse of discretion review, the Court should “home in on any conflict of interest on the plan fiduciary's part.” Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 122 S.Ct. 2151, 153 L.Ed.2d 375. 384 n.15 (2002). “It is a fair question just how deferential the review can be when the judicial eye is peeled for conflict of interest.” Id.
A district court, considering all the facts and circumstances, must decide how much or how little to credit the plan administrator's reason for denying insurance coverage. “An egregious conflict may weigh more heavily (that is, may cause the [C]ourt to find an abuse of discretion more readily) than a minor, technical conflict might. But in any given case, all the facts and circumstances must be considered.” Abatie, 458 F.3d at at 968. The Abatie court gives several examples of situations where a trial court may weigh a conflict more heavily, including situations where the administrator provides inconsistent reasons for denial, fails adequately to investigate a claim, fails to credit a claimant's reliable evidence, or makes decisions against the weight of evidence in the record. Id. at 968–69. When a court must decide how much weight to give a conflict of interest under the abuse of discretion standard, it may consider evidence outside the record. Id. at 970.
The weight, if any, the Court assigns to the conflict, is dependent on the circumstances of the case. Plaintiff carries the burden of proving that Defendant's conflict may have influenced its decision. Plaintiff cannot meet that burden without extrinsic evidence of bias obtained through discovery. See Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 634 (9th Cir. 2009). Under an abuse of discretion review, to determine the weight to give to any conflict of interest, limited discovery into Defendant's conflict and any other entities/individual's conflicts of interest (reviewing professional, third-party vendor, etc.) that may have influenced Defendant's decision may be allowed.
Supporting the need for additional discovery to address the conflict is the fact that Defendant's actions in administering the claim appear to be inconsistent with an unconflicted fiduciary earnestly acting as an ERISA fiduciary. Plaintiff's claim, supported by the opinion of her treating physician, was denied based on a record review by a non-doctor. Then at the appeal stage, when Plaintiff's treating neurologist opined in his report that she was unable to perform her duties because of her diabetic neuropathy, Defendant hired MCN.4 MCN, in turn, hired a doctor, not a neurologist, who was admittedly unable to address the question of the limitations caused by Plaintiff's neuropathy but nonetheless opined on her disability.
For the Plaintiff to obtain evidence to meet her burden of proving how egregious the conflict was and what effect, if any, the conflict had on the decision to deny the claim, discovery will be necessary. Facts involving the Defendant's processing and investigation of the claim—including the history of the outside expert's opinions for insurance companies, the relationship of Defendant with the outside vendor and outside expert, and the reasons given for the denial of the claim—are relevant to the inquiry.
Defendant objects to the discovery sought by Plaintiff by arguing it is disproportionate to the needs of the case. However, Defendant has not offered evidence of or argument as to the burden or cost of any of the requested discovery. Although the value of the LTD benefits may seem negligible to the Defendant, they are not negligible to the Plaintiff, who purportedly is unemployed. Plaintiff represents, and Defendant has not disputed, that her LTD benefits would amount to $961.27 per month through 2030, totaling approximately $127,000. Without offering evidence of the burden or costs of discovery, Defendant has not met its burden of establishing the disproportionality of the requested discovery. The Court concludes that the requested discovery is not disproportionate to the needs of the case.
Because there is a structural conflict of interest and because the handling of the claim appears to raise red flags about whether the conflict had some influence on the decision to deny the claim, the Court will allow the following discovery:
1. Discovery into financial incentives any employee, who was involved in denying Plaintiff's claim, had in the outcome of Plaintiff's application for LTD benefits.
2. Discovery of data, for the calendar years of 2016 through 2020, pertaining to Defendant's number of approvals and terminations for all LTD claims.
3. Discovery into the number of times, for the calendar years of 2016 through 2020, Defendant hired the following entities/individuals to review a disability claim:
a. Medical Consultant's Network (“MCN”),
b. Mary Gray, R.N.,
c. Bassil Kublaoui, M.D., and
d. Matthew Bolks, MS, CRC.
4. Discovery into the rate or number of times, for the calendar years of 2016 through 2020, a medical professional hired by MCN to review an LTD claim opined (a) the insured/claimant was disabled or (b) the insured/claimant had limitations, which led Defendant to find the insured/claimant was disabled.
5. Discovery into the rate or number of times, for the calendar years of 2016 through 2020, that MCN's Bassil Kublaoui, M.D., opined in any MCN LTD claim that (a) the insured/claimant was disabled or (b) the insured/claimant had limitations, which led Defendant to find the insured/claimant was disabled.
6. Request for production of documents and communications between Defendant and:
a. Mary Gray, R.N., and
b. MCN.
7. Request for production of documents and communications between Defendant and Bassil Kublaoui, M.D., regarding Ms. Stambaugh's claim.
8. Discovery into the total sum of money Defendant paid to MCN for services rendered in reviewing disability claims submitted to Defendant for the calendar years of 2016 through 2020.
9. Discovery into the performance evaluations or annual personnel reviews generated by Defendant for Mary Gray, R.N., and Matthew Bolks, MS, CRC, for the calendar years of 2016 through 2020.
10. Discovery into the steps Defendant took prior to the date of Plaintiff's LTD application to mitigate Defendant's conflict/bias as well as the conflicts/bias of any medical or vocational reviewer involved in the review of LTD claims.
11. Production of all approval letters and correspondence from Defendant to Ms. Stambaugh regarding her Short-Term Disability (STD) claim.
12. Production of all medical and/or vocational reviews obtained by Defendant in processing Ms. Stambaugh's STD claim.
13. Production of all medical and/or vocational reviews obtained by Defendant in processing Ms. Stambaugh's LTD claim.
14. Production of Defendant's policies, procedures, and guidelines for evaluating Ms. Stambaugh's transition from STD to LTD.
15. Production of claims manuals and guidelines Defendant used in its evaluation of Ms. Stambaugh's LTD and STD claims for the calendar year 2020.
16. Production of all matters submitted to, generated by, or considered by Defendant in denying Ms. Stambaugh's claim that are not in the administrative record, whether or not such information was relied upon in making the claim determination.
17. A Rule 30(b)(6) deposition of Defendant's designee who has knowledge of:
a. Defendant's LTD and STD claims process, including processes used to reduce Defendant's conflict of interest and bias along with the bias of any other individual involved in its disability claims process;
b. the reserve set aside in Ms. Stambaugh's LTD claim;
c. Defendant's hiring and training in all respects of ERISA (claims manuals, medical and vocational issues, etc.);
d. Defendant's firing, supervision, and management of employees involved in the disability claims process;
e. Defendant's hiring, management, and firing of third-party vendors used in its disability claims, including MCN.
18. A deposition of Defendant's claims person, Lauren Brantz, who reviewed the claim and issued the final denial. The topics will include: her resume; qualifications; training prior to and with Defendant regarding her and the company's duties under ERISA; her medical knowledge and training; her training and knowledge of vocational issues; her training regarding Defendant's claims processes/guidelines; and, how she has been trained to conduct reviews in disability claims like Ms. Stambaugh's.
19. Interrogatories asking for a list of all factors or evidence considered by Defendant in denying Ms. Stambaugh's LTD claim that is not currently in the administrative record, including, but not limited to, information pertaining to her STD claim.
20. Interrogatories asking for a list of all evidence outside the administrative record that Defendant intends to use to show that the structural conflict of interest did not affect its decision in this case.
Based on the foregoing,
IT IS ORDERED that Plaintiff Laura Stambaugh's Motion for Discovery (Doc. 14) is GRANTED.
FOOTNOTES
1. Plaintiff indicates that the consultant is a nurse and not a medical doctor.
2. Plaintiff alleges that based on its business model, which relies on repeat business from large insurance companies, MCN has a motive to find doctors who will form opinions favorable to the insurance companies.
3. Defendant rejected Plaintiff's two treating physicians’ opinions that she was disabled—opinions which the Social Security Administration's Administrative Law Judge later used to find Plaintiff was disabled.
4. There is nothing inherently wrong with hiring or paying MCN for the review.
Douglas L. Rayes, United States District Judge
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Docket No: No. CV-23-08140-PCT-DLR
Decided: April 22, 2024
Court: United States District Court, D. Arizona.
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