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Duncan v. Minnesota Life Insurance Co.

United States District Court, S.D. Ohio, Western Division, Dayton

January 5, 2018

CHARLIE DUNCAN, Executor of the Estate of Paul W. McVay, et al., Plaintiffs,

          Thomas M. Rose, District Judge


          Sharon L. Ovington United States Magistrate Judge

         Plaintiffs bring this ERISA[1] case seeking a declaration that establishes they are entitled to receive accidental death benefits under an insurance policy (the Policy) issued by Defendant Minnesota Life Insurance Company. Plaintiffs allege that the Policy is “entirely underwritten and administered by Defendant Minnesota Life.” (Doc. #16, PageID #439). In 2010, the insured under the Policy, Paul W. McVay, died while he was a patient in a health-care facility. The Policy names McVay's sister, Plaintiff Janet Freel, as beneficiary. Plaintiff Charlie Duncan is Executor of McVay's Estate.

         Minnesota Life denied Plaintiffs' claim for benefits under the Policy based on its conclusion that McVay's death was not accidental. Plaintiffs assert that Minnesota Life acted arbitrarily and capriciously by denying Plaintiffs' application for benefits. In support of these claims, Plaintiffs' Amended Complaint alleges, in part:

[Minnesota Life] labored under a conflict of interest in that it simultaneously occupied the roles of drafting plan terms, interpreting those terms to its advantage, deciding all benefit claims and funding the plan, such that its decision to deny accidental death benefits arising from the death of Mr. McVay inured to its financial advantage. In so acting to decide the McVay benefit claim in face of these conflicts of interest, [Minnesota Life] breached fiduciary duties owed to plan beneficiaries, including Mr. McVay and by representation, Plaintiffs.

(Doc. #11, PageID #64, ¶32).

         Plaintiffs presently seek an Order permitting them to conduct discovery directed at Minnesota Life concerning its conflict of interest and its medical director's (Dr. Gretchen M. Bosacker's) possible conflict. They reason that conflict-of-interest discovery is warranted and proper given Minnesota Life's sole responsibility to decide claims and appeals while simultaneously bearing the sole financial risk for payment of all benefits. They also seek discovery concerning other alleged procedural defects in the denial of Plaintiffs' benefits application. One procedural defect they identify is that Minnesota Life “blatantly ignored the evidence of Mr. McVay's treating physician, the postmortem examination, and the death certificate itself.” (Doc. #16, PageID #445).

         The parties appear to agree that, in general, discovery beyond the administrative record in an ERISA case is not permissible because judicial review is limited to the administrative record. This is correct, as a normative discovery rule. See Wilkins v. Baptist Healthcare Sys., Inc., 150 F.3d 609, 619 (6th Cir. 1998); see also Calvert v. Firstar Fin., Inc., 409 F.3d 286, 293 n.2 (6th Cir. 2005); Williams v. USAble Life, 3:12cv400, 2013 WL 3387806, at *1 (S.D. Ohio 2013) (Rose, D.J.). “An exception is recognized, however, when evidence outside the record ‘is offered in support of a procedural challenge to the administrator's decision, such as an alleged lack of due process afforded by the administrator or alleged bias on its part.'” Johnson v. Connecticut Gen. Life Ins. Co., 324 F. App'x 459, 466 (6th Cir. 2009) (quoting, in part, Wilkins, 150 F.3d at 619 (Gilman, J., concurring)); see Williams, 2013 WL 3387806, at *1.

         Dueling roles can create a conflict of interest for a plan administrator: “Often the entity that administers the plan, such as an employer or an insurance company, both determines whether an employee is eligible for benefits and pays benefits out of its own pocket.” Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 108 (2008). “The [administrator's] fiduciary interest may counsel in favor of granting a borderline claim while its immediate financial interest counsels to the contrary.” Id. at 112.

         When, as in the present case, the plan administrator is an insurance company that both processes benefit claims and pays or declines to pay benefits, a conflict of interest exists for ERISA purposes. Id. at 114; see Johnson, 324 F. App'x at 465. Why might such a conflict be significant? ERISA's beneficiary-favorable language provides the answer:

ERISA imposes higher-than-marketplace quality standards on insurers. It sets forth a special standard of care upon a plan administrator, namely, that the administrator “discharge [its] duties” in respect to discretionary claims processing “solely in the interests of the participants and beneficiaries” of the plan; § 1104(a)(1); it simultaneously underscores the particular importance of accurate claims processing by insisting that administrators “provide a ‘full and fair review' of claim denials, ”…; and it supplements marketplace and regulatory control with judicial review of individual claim denials, see § 1132(a)(1)(B).

Glenn, 554 U.S. at 115 (quoting, in part, Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113 (1989)).

         Courts must consider a plan administrator's possible conflict of interest as a factor in determining whether it acted arbitrarily or capriciously in denying a claim for benefits.[2] Id. at 114-15; see Calvert, 409 F.3d at 292 (“we must take into consideration the fact that Liberty is acting under a potential conflict of interest….”). Additional factors might arise. Glenn, 554 U.S. at 116 (“conflicts are but one factor among many that a reviewing judge must take into account.”).

         In the present case, at this point, application of discovery rules would seem straightforward: Plaintiffs have identified Minnesota Life's possible conflict of interest in its dueling roles as plan administrator or claim reviewer and payor; a conflict of interest “must” be considered when reviewing the plan administrator's decision, Glenn, 554 U.S. at 116; see Calvert, 409 F.3d at 292; and, consequently, information regarding Minnesota Life's possible conflict is relevant and discoverable. See Fed. R. Civ. P. ...

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