A recently published case out of the Central District of California serves as a reminder to claims and plan administrators of the importance of keeping up with the ever changing laws governing ERISA, and that when administrators take all of the appropriate steps to protect the interest of the claimant, a decision to deny benefits will more than likely be upheld.
In Salz v. Standard Insurance Co., the Central District of California affirmed the denial of long term disability benefits to the claimant who requested benefits due to a back and neck condition and chronic pain. The claimant appealed the denial to the Ninth Circuit who then remanded the case back to the Central District of California instructing the district court to apply the structural conflicts framework set forth in Montour v. Hartford Life & Accident Insurance,1 a case decided after the district court's findings for Standard. In doing so, the district court was to consider the "non-exhaustive facts and circumstances" identified by the Ninth Circuit as (1) Standard's failure to analyze the distinctions between the Social Security award; and (2) Standard's failure to reasonably consider Plaintiff's actual job duties. In a carefully crafted and detailed analysis, the district court summarized the current status of case law governing ERISA's conflict issues, and applied the Montour factors to the facts of this case. Ultimately, the district court reached the same conclusion as it did earlier finding that Standard did not improperly deny the claimant his long term disability benefits.
In Montour, the Ninth Circuit instructed the courts that when reviewing the administrative record for abuse of discretion the courts must determine whether an inherent conflict of interest exists, and consider whether there was a reasonable basis for the decision by reviewing other case-specific factors, including: (1) the quantity and quality of medical evidence; (2) whether the claimant underwent an in-person medical evaluation or relied instead on a paper review of the existing medical records; (3) whether the administrator provided its independent experts with all the relevant evidence; and (4) whether the administrator considered a contrary social security disability determination. Under the Montour factors, the Ninth Circuit was critical of Standard's treatment and explanation of the claimant's Social Security disability award and instructed the district court to conduct a further review of Standard's explanation.
In Montour, the Ninth Circuit held that a "complete disregard for a contrary [SSA] conclusion without so much as an explanation raises questions of whether an adverse benefits determination was 'the product of a principled and deliberative reasoning process.'" On remand, the district court reviewed Standard's consideration of the claimant's award for social security disability benefits, and concluded that while Standard did not completely disregard the Social Security award, it did not exhaustively explain the distinctions between the Social Security award and its own conclusions to deny benefits. The district court concluded that under Montour, Standard should have expanded upon the distinctions between the Social Security award and benefits under the Plan, rather than limiting its comments to the rules and standards for evaluating a claim under ERISA versus a determination of disability under the Social Security Act. Nevertheless, in a favorable decision for administrators, the district court held that if the denial of benefits was reversed on this basis alone, "the Court would essentially be holding that a plan administrator always abuses its discretion when it fails to give a detailed explanation of the distinctions between Social Security awards and rights to benefits under private disability plans. Neither Montour nor any other case that the Court is aware of can be understood to establish that rule."
The Ninth Circuit was also critical of Standard's analysis of the claimant's actual duties and whether Standard properly applied the definition of sedentary occupation. On remand, the district court was critical of the Ninth Circuit's position that Standard should have analyzed in a reasoned and deliberative fashion the claimant's actual duties before determining the material duties. The district court reached the same conclusion as it had earlier that the job description which was provided to Standard and agreed as accurate by the claimant set forth the claimant's duties. The district court did not construe the Ninth Circuit's criticism as requiring Standard to determine the manner of how the claimant actually performs the duties. The district court also concluded that Standard appropriately applied the definitions in the Dictionary of Occupational Titles ("DOT") for what constitutes a sedentary position. The Ninth Circuit was critical that Standard found the claimant's occupation to be sedentary but that he had "maximum self-regulated flexibility in position change." The district court concluded that Standard did not act unreasonably in this finding because the classification of sedentary is a strength rating, and by labeling a job position as sedentary does not mean that the employee is required to always sit in order to perform his duties. Therefore, despite the Ninth Circuit's concerns, the district court concluded that Standard did not act unreasonably in finding that the claimant in a sedentary position could change his position as needed in order to avoid discomfort.
After applying Montour, and the non-exhaustive facts and circumstances set forth by the Ninth Circuit, the district court reached the same conclusion that Standard did not abuse its discretion by denying the claimant his long term disability benefits. While Standard prevailed in this case, it nevertheless serves as a good reminder that even under an abuse of discretion standard the administrator is not afforded unfettered protection for its decisions, and that courts and judges can differ on weighing the record as to whether an insurance company or administrator acted in a reasonable manner. The practical effect of this case is to ensure as administrators that the claimant receives a detailed explanation for all aspects of the claim, including a detailed analysis of why the claimant is entitled to Social Security disability benefits but not benefits under the terms of the Plan.
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This decision may be cited now as persuasive non-precedential authority. The decision may be modified by further proceedings in the district court or on appeal.
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1 Montour v. Hartford Life & Accident Insurance Co., 588 F.3d 623 (9th Cir. 2009)