Legal News
Ninth Circuit Reverses Denial of Disability Benefits Under ERISA Plan Because of Insurer's "Structural Conflict of Interest"
Montour v. Hartford Life & Accident Insurance Company
Monday, September 21, 2009
In the course of overturning a denial of disability benefits under an ERISA plan, a panel of the Ninth Circuit Court of Appeals has demonstrated the sort of actions by an insurer/plan administrator that will be looked upon as suspicious. Montour v. Hartford Life & Accident Insurance Company (September 14, 2009) No. 08-55803.
Robert Montour was an employee of Conexant Systems, inc. for 37 years and participated in a group long term disability plan (Plan) governed by the federal Employee Retirement Income Security Act of 1974 (ERISA). Hartford Insurance both administered and funded the Plan. The Plan gave Hartford discretion to determine eligibility for benefits and construe the terms of the Plan.
Montour took a medical leave for an acute stress disorder and initially received benefits under the Plan. Montour then developed physical disabilities of his back and knee that prevented prolonged sitting or walking as well as any appreciable physical exertion.
After conducting surveillance on Montour, having an investigator interview him, and having the file reviewed by a doctor and a vocational rehabilitation expert, Hartford decided to terminate Montour’s benefits. Montour submitted a vocational appraisal report of his own and Hartford had a second doctor and a vocational specialist review the file, but Hartford then confirmed its decision to terminate benefits.
Montour sued, eventually ending up in a court trial where the judge held for Hartford, concluding that although Hartford had a structural conflict of interest as both the administrator and payer of benefits, it had not abused its discretion in determining that Montour had not demonstrated a disability under the Plan’s definitions.
The Ninth Circuit reversed and ordered Montour’s benefits restored. The appellate court emphasized that although Hartford's discretionary decision is reviewed under the lenient “abuse of discretion” standard, that review has take into account the conflict of interest caused by Hartford’s dual role as both decision maker and payer. A court has to "adjust the level of skepticism” depending on the "facts and circumstances of the case.” The Ninth Circuit rejects the view in some other circuits that a claimant must present evidence of misconduct or that there is a sliding scale. Rather a court must examine the facts in light of the dual role of the administrator
Here, the Ninth Circuit overruled Hartford's decision denying benefits and the District Court's affirmance. The Court found that "Hartford's bias infiltrated the entire administrative decision-making process," which caused the Court to give significant weight to the conflict. The following are the major sources of that skepticism:
- Hartford overstated the extent to which Montour's activities while under surveillance were inconsistent with his claimed disability.
- Hartford used advocacy, including overstatement of the surveillance findings, in communications with doctors from whom Hartford was seeking medical information.
- Of Montour's two treating physicians, Hartford relied more on the doctor who was less familiar with Montour's situation and apparantly more swayed by Hartford's spin of the facts.
- Hartford retained consultants to conduct a "pure paper" review, rather than having Montour actually examined by a doctor. In communicating with the consultants, Hartford's employees seemed to be suggesting the conclusion that Hartford sought.
- Hartford did not account for the contrary decision by the Social Security Administration that Montour was disabled. The Court considered this particularly significant in light of Hartford having required Montour to apply for disability benefits and Hartford having saved a significant amount as a result of dollar for dollar reductions in the plan's benefits for governmental benefits Montour received.
- Hartford did not adequately inform Montour of what further evidence or documents should be submitted to increase the chance of a favorable determination.
Weighing all of the factors, the Ninth Circuit concluded that Hartford's conflict had improperly motivated its denial of benefits. The case provides a good roadmap for claimant's counsel or businesses seeking proper treatment of their employees by an insured plan. Conversely, it sets out a roadmap for insurers seeking to evaluate a claim properly.
