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Montour v. Hartford Life & Accident Insurance Co.

September 14, 2009; see amended opinion filed November 19, 2009

ROBERT MONTOUR, AN INDIVIDUAL; TINA MONTOUR, AN INDIVIDUAL, PLAINTIFFS-APPELLANTS,
v.
HARTFORD LIFE & ACCIDENT INSURANCE COMPANY, A CONNECTICUT CORPORATION, DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Central District of California Dale S. Fischer, District Judge, Presiding. D.C. No. 2:07-cv-05215-DSF-RZ

The opinion of the court was delivered by: Clifton, Circuit Judge

FOR PUBLICATION

OPINION

Argued and Submitted June 1, 2009 -- Pasadena, California

Before: William A. Fletcher, Richard R. Clifton and Milan D. Smith, Jr., Circuit Judges.

This case presents the question of how a district court should apply the abuse of discretion standard when reviewing a decision by the administrator of an employee benefits plan governed by the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. §§ 1001-1461, when that administrator has a conflict of interest. We conclude that a reviewing court must take into account the conflict and that this necessarily entails a more complex application of the abuse of discretion standard. Specifically, a modicum of evidence in the record supporting the administrator's decision will not alone suffice in the face of such a conflict, since this more traditional application of the abuse of discretion standard allows no room for weighing the extent to which the administrator's decision may have been motivated by improper considerations.

Robert Montour appeals the district court's order granting summary judgment in favor of Hartford Life and Accident Insurance Company in his action challenging Hartford's decision to terminate his long-term disability benefits as an abuse of its discretion. We reverse and, applying the proper standard of review to the facts of this case, conclude that Hartford abused its discretion because its conflict of interest too heavily influenced its termination decision. Accordingly, we remand to the district court for an order reinstating Montour's long-term disability benefits.

I. Background

As an employee of Conexant Systems, Inc. for approximately thirty-seven years, Montour participated in his employer's group long-term disability insurance plan, which is a welfare benefit plan governed by ERISA. Hartford is both the insurer and the administrator of the Plan. The Plan grants Hartford, as the administrator, discretionary authority to interpret Plan terms and to determine eligibility for benefits,*fn1 and it places the burden of proving both initial and ongoing disability on the claimant.

In July 2003 Montour took a medical leave of absence from his position as a telecommunications manager after developing symptoms of acute stress disorder. At the time, he was fifty-five years old. In January 2004, following a period of 180 days during which no benefits were payable under the Plan, Hartford accepted Montour's application for benefits under the Plan and began paying him disability benefits.

At the outset of his psychiatric illness, Montour consulted several times with his primary care physician, Dr. Samuel Park. In September 2003 he began regular psychotherapy sessions with a psychiatrist. His last documented psychotherapy session took place in April 2005.

Meanwhile, in June 2004 Montour consulted Dr. Kenneth Kengla, an orthopedic surgeon, about pain in his right knee and his lower back. Dr. Kengla diagnosed Montour with degenerative changes in both regions and notified Hartford in September 2004 that Montour was at that time also suffering from physical disability that prevented him from returning to the labor force. In October 2004 Dr. Kengla performed arthroscopic surgery on Montour's right knee. The subject of Montour's back condition did not come up again during their consultations until April 2005. Subsequently, Montour consulted Dr. Kengla about his back pain during appointments in December 2005 and May 2006.

Dr. Kengla consistently maintained to Hartford that Mon-tour remained physically disabled and unable to work in any job as a result of his back and knee impairments. Specifically, he listed the following restrictions on Montour's physical activities: 1) "no sitting for more than 15-20 min[utes] at a time"; 2) "no prolonged walking"; 3) "no standing greater than 15 min[utes] at a time"; 4) "no lifting or carrying greater than 10 [pounds;]" 4) "no work at or above shoulder level"; 5) "no moderate pushing activities"; 6) "no moderate pulling activities"; and 7) "no driving greater than 30 min[utes] at a time."

In November and December 2005 Hartford hired two outside companies to conduct surveillance on Montour over the course of four nonconsecutive days. Video footage from this surveillance depicted Montour driving his car to perform occasional errands, such as picking up his grandchildren from school, going to the pharmacy, and getting a haircut. He was observed once bending at the waist to reach into his car.

In March 2006 a Hartford investigator conducted a personal interview with Montour at his home, during which Montour listed a "bad back, [an] arthritic right knee, and sleep apnea" as the "disabling medical condition(s)" preventing him from returning to work. He also described an inability to concentrate, which he attributed to the medication he must take to treat his "constant pain." The investigator observed that Mon-tour remained alert and responsive during the entire four-anda-half hour interview, although he called the investigator by the wrong name about two hours into the interview. Montour acknowledged that the surveillance video footage accurately depicted his level of functionality. He was physically able to complete the interview, but he demonstrated signs of pain in front of the investigator, such as moaning when he stood up or twisted, walking around his house stiffly with a slight limp, and complaining of back pain three times during the final two hours.

In May 2006 a Hartford nurse case manager submitted letters to Dr. Kengla and Dr. Park surmising that Montour was capable of performing "sedentary to light" work and soliciting their agreement. Dr. Park signed and returned the letter, which signified that he either agreed or found "no contraindications to this work capacity level." Dr. Kengla, on the other hand, indicated that he disagreed with Hartford's conclusions, citing Montour's persistent orthopedic symptoms and physical restrictions.

In July 2006 Hartford hired a consulting physician, Dr. Gale Brown, to conduct a file review. Dr. Brown analyzed Montour's medical records for the 2003-2006 period, including X-rays and MRIs of Montour's lower back taken in June 2004 and May 2006, Montour's pharmacy records for the 2004-2006 period, Hartford's surveillance video and accompanying reports, and the personal interview report. He also spoke with Dr. Kengla on the phone. Dr. Brown concluded that medical evidence supported the existence of a lower back condition called "degenerative spondylostenosis/DDD" but that Dr. Kengla's offered restrictions were excessive for this "mild to moderate" condition and understated Montour's demonstrated and admitted physical abilities. Dr. Brown acknowledged that medical evidence supported Montour's chronic pain but found that Montour was nevertheless capable of working full-time with modest restrictions, such as changing positions every thirty to forty-five minutes.

Hartford next enlisted a vocational rehabilitation expert to compile an Employability Analysis Report, which evaluated Montour's experience, qualifications, and the physical restrictions identified by Dr. Brown. That expert concluded that Montour was capable of working in a high-level managerial capacity in five different fields.

In August 2006 Hartford informed Montour of its decision to terminate his benefits in light of its conclusion that he no longer met the policy's definition of disability. Montour appealed this decision internally and included a vocational appraisal report by Gene Bruno. The Bruno report concluded that Montour was "not employable in any setting" and that Hartford's decision was based on numerous mistakes, including a ...


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