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January 2015

Gordon & Rees Los Angeles Team Wins Trial in ERISA Long-Term Disability Case

Gordon & Rees partner Ronald Alberts and senior counsel Jessica Wolff of the Los Angeles Life Health and Disability Group won a bench trial in an ERISA long-term disability case. The Plaintiff filed an action for long-term disability (“LTD”) benefits against Aetna Life Insurance Company (the claim administrator and insurer of the LTD plan) and ADP TotalSource, Inc. (Plaintiff’s employer and the LTD plan administrator). The court held a trial on the administrative record on March 4, 2014 and later issued a well-reasoned order affirming Aetna’s denial of LTD benefits and granted judgment in favor of Defendants on December 29, 2014.

In sum, the court concluded that Plaintiff did not carry his burden of proving that he was unable to perform the material duties of his own occupation: “Hodjati failed to establish that he suffers from any disability that prevents him from performing the material duties of his occupation. Indeed, time and time again, Dr. Baer noted that Hodjati’s neurologic exam was within normal limits. . . . Thus, Hodjati’s own treating physician – the doctor most exposed to and familiar with the claimant – did not find evidence of significant neurological impairment.”

The court’s order also addressed two issues that are of particular importance in ERISA cases: The admission of evidence outside of the administrative record and the applicable standard of review in light of a recently enacted California insurance code provision.

In regard to the standard of review issue, the court held that California Insurance Code Section 10110.6 voided the grant of discretion in the summary plan description (“SPD”) and the policy, and applied a de novo standard of review. The court distinguished the decision in Orzechowski where the Plan itself, rather than simply the SPD contained discretionary language. The court noted that the particular language in the SPD “explains Aetna’s discretionary authority is based on the ‘terms of the insurance contracts issued for the benefit options under the Plan’ (A.R. 646).” Specifically, the SPD states: “The insurance carrier has the full discretionary authority to interpret, construe and administer the terms of such policies and its decisions are final and binding on all parties. Neither ADP TotalSource nor the Employee Welfare Benefits Committee guarantees the payment of any benefit described in an insurance or HMO coverage contract and you must look solely to the insurance carrier or HMO for the payment of benefits.”

In regard to the admissibility of the two pieces of evidence received after Aetna closed its appeal, the Court admitted Dr. Horne’s report dated June 21, 2012, but denied admission of the MRI report dated March 29, 2013. The court reasoned that Dr. Horne completed her report before the appeal closed, and Aetna advised that its decision stood even after examining Dr. Horne’s report. “In contrast, Aetna did not consider the MRI, which occurred nine months after the appeal closed.” Specifically, the court found two independent grounds for admitting Dr. Horne’s report: (1) It “sheds light on a complex medical question – the scope and ramifications of indeterminate and nebulous neurologic problem [sic]”; and (2) [B]ecause the report’s findings contrast sharply with the other medical reports conducted at the time, it questions the reliability of Hodjati’s other doctors.”

Alberts and Wolff, as well as the client, are pleased with the outcome and welcome the court’s well-reasoned opinion regarding the extrinsic evidence and standard of review issues that are still evolving in the California District Courts.

Ronald K. Alberts