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PEREZ v. COZEN & O'CONNOR DISABILITY COVERAGE

September 20, 2005.

RENEE C. PEREZ, Plaintiff,
v.
COZEN & O'CONNOR GROUP LONG TERM DISABILITY COVERAGE, an employee welfare benefit plan under ERISA, Defendants.



The opinion of the court was delivered by: DANA SABRAW, District Judge

PLAINTIFF'S NOTICE OF NEW DECISION

Plaintiff RENEE C. PEREZ hereby submits this notice of a new decision by the Seventh Circuit Court of Appeals in Diaz v. Prudential Ins. Co. Of America, Case no. 04-2342, 2005 U.S. App LEXIS ___, ___ F3d. ___ (7th Cir. September 20, 2005). A copy of the decision is attached hereto for the Court's convenience, pending it's availability through LEXIS or Westlaw. Plaintiff will provide that citation as soon as it becomes available.

  Diaz is of course the case on which Defendants have argued in support of an alleged reservation of discretion. It is also one of the cases Defendants did not apprise the Court was on appeal. The Seventh Circuit has just rendered it's decision, reversing the district court and concluding the plan's language was not a sufficiently unambiguous grant of discretion to warrant anything but de novo review (Id. at p. 2), and that it therefore required the Seventh Circuit's safe harbor language identified in Herzberger — which it also did not have — to avoid plenary review. In essence, it also disapproved of and overturned Donato and Bali to the extent they were inconsistent with the new decision. Id. at p. 9. While the cases and law of the Ninth Circuit remain binding, rather than that of the Seventh Circuit, Plaintiff is submitting this new decision issued today because the Defendants have so fervently argued it and Donato, which cases Plaintiff has addressed in her opposition, and because both have been overturned to the extent they are inconsistent with the new decision. In the United States Court of Appeals For the Seventh Circuit

 No. 04-2342

 
HUGO DIAZ, Plaintiff-Appellant, v.
PRUDENTIAL INSURANCE COMPANY OF AMERICA,

  Defendant-Appellee.

 
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 03 C 2702 — Charles R. Norgle, Sr., Judge.
ARGUED JANUARY 3, 2005 — DECIDED SEPTEMBER 20, 2005
Before BAUER, EASTERBROOK, and WOOD, Circuit Judges.
  WOOD, Circuit Judge. This case involves Hugo Diaz's pursuit of long-term benefits under his company's group insurance disability plan. Prudential Insurance Company of America, the plan's underwriter, denied Diaz's application, both initially and through several rounds of appeal. Diaz turned to the courts, but the district court concluded that the plan gave the administrator discretionary authority to determine participant eligibility. It therefore reviewed Prudential's decision under the deferential "arbitrary and capricious" standard and concluded that Prudential was entitled to summary judgment. We conclude that deferential review was not appropriate given the language of this plan and thus remand for further proceedings.

  I

  Diaz began working in 1998 as a computer programmer analyst at Bank One in Chicago. As a Bank One employee, he participated in a group disability insurance plan underwritten by Prudential. The plan included a long-term disability component (LTD Plan) that provided benefits to a participant who was unable to perform the essential functions of his or her regular occupation as a result of an injury or illness.

  In 2000, Diaz began experiencing persistent lower back pain and was diagnosed with degenerative disc disease and radiculopathy. For about two years, he underwent a series of non-operative medical treatments that included lumbar epidural steroid injections, physical therapy, and pain medication. Because his condition was not improving and he was in considerable pain, he stopped working on January 31, 2002. On February 4, on the recommendation of his physician, Diaz underwent a lumbar fusion procedure with hardware implantation to correct an annular tear at the lumbosacral joint, or L5-S1. Although post-operative examinations showed that the hardware alignment was satisfactory and there were no neurological deficits in his lower extremities, Diaz continued to report varying levels of pain in his back and legs. At times, Diaz reported that he felt hardware movement in his back, but each time he had this checked out, X-rays revealed that no movement had occurred and that the fusion was consolidating satisfactorily. After months of ineffective physical therapy and pain medication, he decided that he could not return to work.

  Diaz submitted a claim for benefits under the LTD Plan on July 22, 2002, alleging that the back pain had rendered him disabled as of February 4, 2002. He supported his application with several doctors' notes expressing the opinion that Diaz's condition prevented him from sitting for more than fifteen to twenty minutes. Prudential denied the claim on August 27, for the stated reason that Diaz's reported inability to perform his job (which it considered a sedentary one) was not consistent with the medical evidence. Diaz sought reconsideration of the rejection on October 22 and submitted additional medical evidence in support of his claim, but Prudential upheld its negative decision on January 22, 2003. Diaz then filed a second appeal on February 4. This time, Prudential submitted Diaz's medical documentation to its medical consultant, Dr. Gale Brown, for review. Although Dr. Brown did not personally examine Diaz, he opined based on Diaz's medical records that the clinical and diagnostic evidence relating to Diaz's lumbar spine condition did not support Diaz's reports of persistent pain. He concluded that Diaz's condition did not prevent him from performing his job on a full-time basis. Dr. Brown noted, however, that there were non-physical factors that were having an adverse impact on Diaz's ability to engage in gainful employment, including his anxiety over losing his job, depression, and opioid dependency, but Diaz was not seeking benefits on any of those bases. On April 16, 2003, Prudential again upheld its decision denying Diaz benefits.

  Diaz filed this action in district court on April 22, 2003, under § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B), seeking an award of benefits under the LTD Plan. On May 12, 2004, the district court granted summary judgment in favor of Prudential, finding that Prudential's denial of benefits was not arbitrary or capricious. On appeal, Diaz contends that the court should have reviewed Prudential's decision de novo. In the alternative, he asserts that Prudential's decision is unsupportable even under the deferential standard of review and urges this court to award benefits. II

  The Supreme Court has held that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Firestone Tire & Rubber v. Bruch, 489 U.S. 101, 115 (1989). Under Bruch, plenary review is the default standard. We have held that plenary review is required when the plan documents contain no indication of the scope of judicial review, because "it is a natural and modest extension of Bruch, or perhaps merely a spelling out of an implication of it, to construe uncertain language concerning the scope of judicial review as favoring plenary review as well." Herzberger v. Standard Ins. Co., 205 F.3d 327, 330 (7th Cir. 2000). If a plan "is going to reserve a broad, unchanneled discretion to deny claims, [plan participants] should be told this, and told clearly." Id. at 333. To decide whether a plan confers discretion on the administrator, as Bruch and Herzberger use the term, we review the language of the plan de novo as we would review the language of any contract. Ramsey v. Hercules Inc., 77 F.3d 199, 205 (7th Cir. 1996).

  Herzberger holds that the critical question is notice: participants must be able to tell from the plan's language whether the plan is one that reserves ...


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