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Sheakalee v. Fortis Benefits Insurance Co.

March 17, 2009

ALBERT SHEAKALEE PLAINTIFF,
v.
FORTIS BENEFITS INSURANCE COMPANY, AND DOES 1THROUGH 50, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Anthony W. Ishii Chief United States District Judge

ORDER ON DEFENDANTS' MOTION TO LIMIT THE RECORD AND IN THE ALTERNATIVE MOTION TO STRIKE PLAINTIFF'S EXPERT DISCLOSURE (Document # 61) AND RELATED CLAIMS

This case comes before the court on Defendant and counterclaimant Union Security Insurance Company's ("USIC")*fn1 motion to limit the record or in the alternative to strike plaintiff and counterdefendant Albert Sheakalee's ("Sheakalee") expert witness disclosure. Sheakalee's complaint requests that the court review USIC's denial of Sheakalee's long term disability benefits under a group long term disability insurance policy ("Policy") issued by USIC.

PROCEDURAL BACKGROUND

On June 9, 2008, Sheakalee filed a first-amended complaint in this court alleging that USIC improperly terminated his long term disability benefits under the Employee Retirement Income Security Act of 1974 ("ERISA"). Sheakalee alleges that he became disabled on or about August 9, 2001, at which point he filed a claim with USIC as required by the Policy. Sheakalee alleges that USIC provided benefits to Sheakalee for approximately two years, until informing him, on or about September 28, 2005, that it reached a final decision to deny any further benefits beyond August 8, 2003.

On December 15, 2007, Sheakalee served a "disclosure of expert witness," naming Dr. Thomas O'Laughlin ("Dr. O'Laughlin") and Dr. Harwinder Singh ("Dr. Singh") as expert witnesses to provide testimony at trial. Dr. O'Laughlin was Sheakalee's treating physician at the time the claim decision was made. Dr. Singh was Sheakalee's treating physician from approximately May 2008 to January 2009.

On February 13, 2009, USIC filed a motion to limit the record or in the alternative, motion to strike Sheakalee's expert witness disclosure. USIC contends that the court cannot consider evidence outside the administrative record. USIC also contends that Sheakalee's expert witness disclosure fails to comply with Rule 26(a)(2)(B) because Plaintiff did not serve a written report.

On February 24, 2009, Plaintiff filed an opposition brief and contends that the court can consider evidence outside the administrative record.

On March 9, 2009, USIC filed a reply.

On March 12, 2009, the court took the matter under submission.

LEGAL STANDARD

Where a plan grants the administrator or fiduciary discretionary authority to determine eligibility for benefits, trust principles make a deferential standard of review appropriate. Metropolitan Life Ins. Co. v. Glenn, -- U.S. --, 128 S.Ct. 2343, 2348 (2008); Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 544 F.3d 1016, 1024 (9th Cir. 2008); Abatie v. Alta Health Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006). The Policy expressly gives USIC, the plan administrator, discretionary authority to determine eligibility for benefits. Thus, an abuse of discretion standard applies in this matter.

If "a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a 'factor in determining whether there is an abuse of discretion."' Glenn, 128 S.Ct. at 2348 (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Nolan v. Heald College, 551 F.3d 1148, 1153 (9th Cir.); Burke, 544 F.3d at 1024. As is the case here, an employer has a conflict of interest when it both funds the plan and evaluates the claims, and the court must take this conflict into account when it reviews the decision to deny benefits. Glenn, 128 S.Ct. at 2348; Firestone, 489 U.S. at 115; Burke, 544 F.3d at 1024. When the court reviews the lawfulness of benefit denials, the court will often "take account of several different considerations of which a conflict of interest is one." Glenn, 128 S.Ct. at 2351. The court is "to temper the abuse of discretion standard with skepticism 'commensurate" with the conflict." Nolan, 551 F.3d at 1153; Abatie, 458 F.3d at 959, 965, 969. The Supreme Court explained as follows:

In such instance, any one factor will act as a tiebreaker when the other factors are closely balanced, the degree of closeness necessary depending upon the tiebreaking factor's inherent or case-specific importance. The conflict of interest at issue here, for example, should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affected the benefits decision, including, but not limited to, cases where an insurance company administrator has a long history of biased claims administration. See Langbein, supra at 1317-1321 (detailing such a history for one large insurer). It should prove less important (perhaps to a vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling of claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decision making irrespective of whom the inaccuracy benefits. See Herzel & Colling, The Chinese Wall and Conflict of Interest in Banks, 34 Bus. Law 73, 114 (1978) (recommending interdepartemental information walls to reduce bank conflicts); Brief for Blue Cross Blue Shield Association at Amicus Curiae 15 (suggesting that insurers have incentives to reward claims processors for their accuracy); cf. generally J. Mashaw, Bureaucratic Justice (1983) (discussing internal controls as a sound method of producing administrative accuracy). Glen, 128 S.Ct. at 2351.

The general rule is that "when applying an abuse of discretion standard to an ERISA plan, the district court's review is limited to the administrative record." Burke, 544 F.3d at 1027-28 (quoting Abatie, 458 F.3d at 970). However, the court may consider evidence outside the administrative record "to decide the nature, extent and effect on the decision-making process of any conflict of interest." Nolan, 551 F.3d at 1153; Burke, 544 F.3d at 1028; Abatie, 458 F.3d at 970. "Similarly, the district court may consider evidence outside the administrative record if it ...


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