Disability insurance cases are challenging to litigate. The discovery process is when you can try to learn about the bias of each insurance company.
Why would you want to conduct discovery in an ERISA lawsuit?
Well, there are various reasons why one may move for discovery in a non-ERISA lawsuit but it all essentially comes down to being able to obtain all the evidence you can to prove your case. Unfortunately, many claimants in ERISA lawsuits do not have such a luxury. Instead, the claimant is limited to what was in the administrative record when the administrator made its final decision. So typically evidence of disability beyond the administrative record is simply not allowed. However, there are certain exceptions when it comes to discovery in ERISA lawsuits, one of which is showing that the administrator was biased when it denied the claim. But showing such a bias exists is not always easy given that discovery is generally not allowed in such lawsuits.
So how does one prove that the administrator was biased if discovery into the matter is not allowed? And if discovery is allowed, then what is the scope of such discovery?
On October 10, 2013 an Ohio district court was charged with answering these very questions. In Neubert v. Life Insurance Company of America ("LINA"), the parties had been disputing LINA’S denial of Long Term Disability ("LTD") benefits to Neubert for over four years. After denying Neubert’s claim and being ordered by the court to conduct a full and fair review of LINA’S decision to deny, LINA again denied Neubert benefits. Upon being notified by LINA that LINA would not accept an appeal, Neubert filed an action in the US District Court for the Northern District of Ohio and thereafter moved for limited discovery. LINA of course, filed a response opposing Neubert’s requests. In considering Neubert’s request to be able to do limited discovery relating to various conflict of interest factors, the court gave a nice overview of Sixth Circuit case law from other district courts located in the Sixth Circuit.
When is the plaintiff allowed to conduct discovery to show the administrator was biased?
After the Sixth Circuit case of Wilkins v. Baptist Healthcare Sys., 150 F.3d 609 (6th Cir. 1998) was decided courts in the circuit struggled with two seemingly inconsistent lines of precedent. One line of cases required a plaintiff to do more than merely allege a conflict of interest before discovery was warranted. The other line of cases did not require any threshold showing of conflict of interest before a plaintiff could obtain discovery into that issue. It was not until the well-known decision of Metro Life Ins. V. Glenn, 554 U.S. 105 (2008) that the Supreme Court helped resolve some of the inconsistency (although much of the debate remained unclear). The Glenn decision confirmed that an inherent conflict of interest exists when the plan administrator both evaluates and pays benefits claims. Moreover, this conflict is “but one factor among many that a reviewing judge must take into account.
So the conflict is only a factor… now what?
Courts remained unsettled as to how to treat that factor. Also, as the court in Neubert v. LINA recognized, the answer to the question of when discovery is available to show the extent of the conflict and the scope of such discovery is not exactly crystal clear. Hence, the court reviewed and summarized the approaches to discovery in ERISA cases typically taken by district courts within the Sixth Circuit.
Sometimes a mere allegation of bias is enough:
One approach allows discovery into defendant’s potential bias upon a mere showing of an inherent conflict of interest, i.e. where the claims administrator is also the payor of benefits. Kinsler v. Lincoln Nat. Life Ins. Co., 660 F. Sup. 2d 830 (M.D. Tenn. 2009). See also Cramer v. Appalachian Reg. Healthcare, Inc. No. 5:11-49-KKC, 2012 WL 996583 (E.D. Ky. Mar. 23, 2012); O’Bryan v. Consol Energy, Inc., E.D. KY (2009).
Some courts require more than a mere allegation of bias:
At the other end of the spectrum, other district courts require more than a mere allegation of bias before opening the doors of discovery. In this second group, "plaintiff must allege some facts to support her claim that discovery might lead to relevant evidence" before the court will permit discovery. Donovan v. Hartford Life & Accident Ins. Co. (N.D. Ohio, 2011) see also Geer v. Hartford E.E. Mich. (E.D. Mich. 2009). For this group of courts, a single sentence allegation of bias cannot pry open the door to discovery. One court developed a two-step discovery process in which plaintiff entitled to conduct discovery "limited solely to the issue of whether defendant or the individuals participating in the review of the plaintiffs claim had any financial interest in the outcome of the claim. Clark v. Am. Elec. Power Sys. Long Term Disability Plan, (W.D. Ky. 2012). Once plaintiff has shown a conflict of interest exists at the first step, plaintiff "will be permitted to proceed with additional discovery." Other courts require plaintiff to actively demonstrate the need for discovery if the defendant has procured measures taken to mitigate bias and promote accuracy. Shay v. Sun Life Fin Serv. Co. (S.D. Ohio 2012). Whatever method, for these courts, a mere allegation of bias does not unlock the door to discovery. Whether employing the mere allegation approach or one of the heightened requirement approaches, all district courts typically permit discovery in ERISA cases when plaintiff makes an additional showing of potential bias," beyond the inherent conflict of interest. In Price v. Hartford Life & Accident Ins. the district court of the Eastern District of Michigan deviated from the other approaches. The court ruled that “disputes over the scope of discovery in ERISA cases should be addressed in the context of existing rules of procedure and the cases interpreting them."
When discovery is allowed into the issue, what is the permitted scope?
A small group of district courts allows inquiry into a developing list of areas: (1) incentive, bonus, or reward programs or systems, formal or informal, for an employee involved in reviewing disability claims; (2) contractual connections between the conflicted administrator/payor and the reviewers utilized in plaintiff’s claim; (3) statistical data regarding the number of claims files sent to the reviewers and the number of denials which resulted; (4) statistical data concerning the number of times the reviewers found claimants able to work in at least a sedentary occupation or found that the claimants were not disabled; and (5) documentation of administrative processes designed only to check the accuracy of grants of claims. See Geiger v. Pfizer, Inc., (S.D. Ohio 2010); see also Mullins v. Prudential Ins. Co. of America (W.D. Ky. 2010). The court in Neubert chose to evaluate Neubert’s discovery requests in the context of the general prohibition of discovery in ERISA cases, as well as Rule 26’s field of discovery, as fenced in by the parties’ claims and defenses.