Plaintiff-Appellee Igor Gunn was an employee of UBS/Paine Webber and a participant in the Paine Webber Long Term Disability Plan. Reliance Standard Life Insurance Company, the insurer of the insurance policy underlying the Plan and the Plan's claim administrator, originally awarded Gunn long-term disability benefits due to multiple sclerosis and severe depression. The Plan had a 24-month limitation that precluded an award of benefits beyond the initial 24-month period for total disability "caused by or contributed to by" mental or nervous disorders. After the initial 24 months, Reliance found Gunn failed to show he was totally disabled. In reviewing the Plan administrator's decision, the district court applied language from a booklet prepared by UBS/Paine Webber that differed from the policy language – it precluded benefits for disability "due to" mental illness. The district court reviewed the administrator's decision, conducted a conflict of interest analysis, and concluded that Reliance's decision to terminate benefits was an abuse of discretion.
Appellate Court Review
A. Summary Plan Document
On appeal, Appellants argued that the district court erred in holding the booklet was a Summary Plan Document ("SPD"). The Disability Plan booklet refers employees to a booklet entitled "Legal and Administrative Overview" booklet (also distributed to plan participants). The Ninth Circuit held that the "Disability Plan" booklet and the "Legal and Administrative Overview" booklet, when read together, substantially comply with the requirements for a summary plan description under 29 U.S.C.§1022(b).
Appellants also argued that the district court erred in applying the language of the "Disability Plan" booklet in light of the disclaimer in that booklet that stated that the SPD "does not determine rights under the LTD Plan, but it is intended only to summarize the important provisions of the LTD Plan." In the event of any inconsistency between the SPD and the policy, the booklet notes "the terms of the Plan Document will govern." Relying on Pisciotta v Teledyne Industries, Inc. 91 F. 3d 1326, 1329 (9th Cir. 1996), the Ninth Circuit held that the disclaimer is enforceable and the district court should have applied the language found in the policy.
Appellants further argued that the language in the Paine Webber "Disability Plan" booklet cannot be applied due to the integration clause in the policy. The policy provides that the entire contract between Paine Webber and Reliance is the Policy, Application and any attached amendments. The Ninth Circuit held that the integration clause precludes application of the language in the "Disability Plan" booklet to the extent that it differs from the language in the policy.
B. Medical Evidence
In reviewing the Plan and medical evidence, the Ninth Circuit held that Appellants' interpretation of the mental illness exclusion (the language of the exclusion required Gunn to show he was totally disabled solely due to his physical condition stemming from multiple sclerosis) was reasonable and did not conflict with other Plan terms. Furthermore, the records from Gunn's treating physicians supported Reliance's finding that Gunn's multiple sclerosis alone was not disabling. Moreover, the Court held that the opinion that multiple sclerosis and severe depression, considered together, resulted in total disability is not sufficient to avoid the policy limitation precluding benefits where mental or nervous disorders caused "or contributed to" the applicant's disability. The records supported a finding that Gunn suffered from severe depressive and anxiety disorders of a psychiatric origin which were independent of his multiple sclerosis. Gunn had a documented history of depressive episodes long before he was diagnosed with multiple sclerosis. The Court held that Reliance's decision to deny benefits was founded on a reasonable factual basis for concluding that Gunn's multiple sclerosis alone was not disabling and that, but for his psychiatric mental and nervous disorders, he would be able to work. Reliance had discretion to weigh the conflicting evidence and did not abuse that discretion in denying benefits.
C. Conflict of Interest
The district court pointed to a letter from Reliance to Gunn in which it specifically referred to a new definition applicable after 24 months, but did not specifically note the Plan's mental illness limitation. This, the district court held, deprived Gunn's physicians of the opportunity to focus on the issue of whether Gunn's disability stemmed from his multiple sclerosis, depression, or both. The Ninth Circuit, however held that there was no language in the letter or questionnaire to Gunn that would suggest to him that Reliance was not interested in receiving information concerning his multiple sclerosis symptoms. The Ninth Circuit disagreed with Gunn's argument that by failing to include the mental illness limitation, Reliance did not comply with the requirements of 29 C.F.R. §2560.503-1(g) (requiring the plan administrator to provide claimant with written or electronic notification of any adverse benefit determination). It held that, even assuming Reliance failed to provide notice under this provision, its failure did not give rise to an inference that Reliance acted in bad faith.
The Ninth Circuit held that Gunn was given a full and fair review. Reliance gave him notice of the mental illness limitation in the initial denial letter, and while represented by counsel, he had the opportunity to present additional records specifically addressing that issue in pursuing his appeal. Thus, the Court held there was no conflict of interest.
While the district court had concluded that Reliance's use of Dr. Hauptman [retained by Reliance on numerous occasions to conduct records reviews] to conduct a records review was evidence of bias, the Ninth Circuit held that Dr. Hauptman's long-term relationship with Reliance was only a factor in weighing the degree of any conflict of interest, which did not mandate a finding that Reliance should have completely disregarded his opinion. The district court held that Reliance's wholehearted acceptance of the opinions of its own physicians (that Gunn's disability was caused 99% by his depression and only 1% by multiple sclerosis) was in spite of all the medical evidence to the contrary offered by Gunn. However, the Ninth Circuit held that the medical evidence regarding whether Gunn met the criteria for disability was not unequivocal (contrary to the district court's implication that is was). The fact that Reliance ultimately accepted the opinions of its reviewing physicians (in regard to whether Gunn's multiple sclerosis symptoms were sufficient in themselves to result in total disability) is not sufficient to show bias.
Ultimately, the Ninth Circuit held that the district court placed undue weight on the circumstances it relied upon as evidence of a conflict of interest. Reliance's decision was reasonable, based on medical evidence in the record, and was not an abuse of discretion. Accordingly, the Ninth Circuit reversed and vacated the judgment entered by the district court, and remanded with instructions to enter judgment in favor of defendants-appellants on the administrative record.
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