Denmark v. Liberty Life Assur. Co. of Boston
| Decision Date | 28 March 2007 |
| Docket Number | No. 05-2877.,05-2877. |
| Citation | 481 F.3d 16 |
| Parties | Diane DENMARK, Plaintiff, Appellant, v. LIBERTY LIFE ASSURANCE COMPANY OF BOSTON, and The Genrad, Inc. Long Term Disability Plan, Through Teradyne, Inc., as Successor Fiduciary, Defendants, Appellees. |
| Court | U.S. Court of Appeals — First Circuit |
Jonathan M. Feigenbaum, with whom Phillips & Angley was on brief, for appellant.
Andrew C. Pickett, with whom Ashley B. Abel, Richard W. Paterniti, and Jackson Lewis LLP were on brief, for appellees.
Before SELYA, LIPEZ, and HOWARD, Circuit Judges.
This seemingly straightforward appeal of a denial of disability benefits presents difficult issues involving our standard of review in cases arising under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461. In fact, the issues are so difficult that this case has generated three opinions. Although I agree with the district court that the insurer's denial of disability benefits was neither arbitrary nor capricious, I believe that our circuit should reexamine in an en banc proceeding the standard of review that applies when an insurer both reviews and pays disability claims, resulting in a structural conflict of interest. Judge Selya concurs in the judgment affirming the decision of the district court, but disagrees with my assessment of the standard of review. Finally, although Judge Howard dissents, believing that the disability benefits denial was arbitrary and capricious under our current standard of review, he joins me in concluding that our circuit should reexamine our standard of review in these structural conflict cases.
Appellant Diane Denmark ("Denmark") is a former participant in a group long term disability insurance plan offered through her employer, GenRad, Inc. ("GenRad"), and its successor in interest, Teradyne, Inc. ("Teradyne"). Appellee Liberty Life Assurance Company ("Liberty"), the plan insurer, denied Denmark's claim for long term disability benefits on August 20, 2002. After exhausting her administrative appeals, Denmark filed suit. On cross-motions for summary judgment, the district court found that the decision to deny benefits was neither arbitrary nor capricious and entered summary judgment for defendants.
On appeal, Denmark argues that this court should subject Liberty's benefits decision to de novo review on several grounds: an improper delegation of discretionary authority, a structural conflict of interest resulting from Liberty's dual responsibility for making benefits determinations and paying claims, and the fact that the entire benefits decision was "infected with conflict." To further complicate matters, the district court employed a heightened standard of review with respect to one medical opinion as a sanction for Liberty's refusal to comply with a discovery order, and we must consider how to deal with that aspect of the court's decision. Finally, Denmark contends that Liberty's benefits decision cannot survive even deferential arbitrary and capricious review.
The facts are undisputed (although the conclusions and inferences to be drawn from them are not). This opinion will recite them here in some detail to facilitate the analysis of the issues raised by the parties. Denmark began working at GenRad on April 2, 1973 as a Group Leader in Manufacturing Inspection. Her job involved inspecting GenRad products and overseeing other inspection personnel.
She was diagnosed with fibromyalgia in 1996 by her primary care physician, Dr. Gregory Malanoski. Fibromyalgia is a chronic disorder characterized by muscle pain and fatigue that can be alleviated, but not cured. Certain drug regimes and physical therapy often help to improve a patient's condition.
Despite her illness, Denmark continued working for several years, including during several periods when her symptoms worsened. On October 3, 2001, she stopped working for health reasons. She has not returned to work.
At the time she left work, Denmark was covered under GenRad's Short Term Disability Benefits Plan ("STD plan") and its Long Term Disability Benefits Plan ("LTD plan"). Liberty served as the claims administrator for the STD plan, providing an initial claims review and a decision for STD claims submitted by GenRad employees. GenRad then reviewed appeals of STD benefit denials and paid meritorious claims. For the LTD plan, Liberty both made benefits determinations and paid for claims out of its own assets. At some point in late 2001, Teradyne acquired GenRad, but Denmark's disability benefits under the two plans remained the same.
GenRad's STD plan defines "disabled" to mean that the claimant is "unable to perform all of the material and substantial duties of [her] occupation on an Active Employment basis because of an Injury or Sickness."
Denmark filed for STD benefits shortly after she stopped working on October 3, 2001. Her claim was reviewed by Nurse Debra Kaye, a Liberty Disability Case Manager. Kaye reviewed medical records provided by Dr. Malanoski, Denmark's primary care physician; Dr. Thomas Goodman, a rheumatologist to whom Dr. Malanoski referred Denmark; and Dr. Terrence Hack, a cardiologist. She also reviewed a description of Denmark's job from GenRad.
Dr. Malanoski, who originally diagnosed Denmark with fibromyalgia in 1996, examined her on October 4, 2001, the day after she stopped working. His notes from that date state that Denmark was "[d]oing poorly: much worse myalgia generally," "[h]eadache, hard to get out of [illegible], general point muscle tenderness." He also listed the nine drugs that Denmark was taking and concluded: "No work until further [follow-up]." In an Attending Physician Statement reporting on that visit, dated November 6, Dr. Malanoski considered Denmark's physical impairment "Class 5 — Severe limitation of functional capacity, incapable of minimum activity." In response to a question asking for the "objective medical findings that support the above restrictions and limitations," he wrote: "diffuse muscle tenderness," "weakness," and "fatigue."
Dr. Malanoski referred Denmark to Dr. Goodman, a rheumatologist who saw her on October 8. Dr. Goodman noted that she experienced "palpitations, sharp (`stinging') pain" and "fatigue/exhaustion/myalgia/insomnia," and was "stiff, tired, exhausted in AM. Needs afternoon nap."
Dr. Terrence Hack, a cardiologist, prescribed many medications to help manage Denmark's angina and high blood pressure. He also provided a report indicating that there were no serious cardiac arrhythmias or other cardiac symptoms that rendered Denmark unable to work.
GenRad's description of Denmark's position listed the physical demands:
After reviewing this information, Nurse Kaye noted in Liberty's claim record on November 14, 2001 that "there is no indication as to what has changed to warrant [restrictions/limitations] provided by [her primary care provider] to justify [stopping work]." She acknowledged that "Clmnt has [history] of fibromyalgia x5 years as diagnosed by her [primary care provider], with episodes of flare in condition," but added that "there is no evidence that clmnt needed to cease occupational functioning & in fact, was able to function in an occupational setting full time, working long hours."
Nurse Kaye requested a peer review from Dr. Clay Miller, an independent physician specializing in physical medicine and rehabilitation. She asked: "Does the accompanying documentation provide objective findings that would indicate a significant change in condition that was evident on or about the date of disability?"
On December 5, Dr. Miller responded that the documentation was insufficient because it did not "provide objective findings that would indicate a significant change in condition that was evident on or about the date of disability." He elaborated: "The documentation provided does not indicate a significant change in the patient's condition about the time of disability 10/03/2001 because there are no objective physical functional deficits documented and the patient had a normal cardiac exercise test 11/09/2001." He also limited the significance of the reports of Dr. Malanoski and Dr. Goodman for the purposes of a disability benefits determination, stating:
[t]he rheumatology exam was positive only for the 18-fibromyalgia tender points. There are no documented objective physical exam findings that support a decrease or significant change in this patient's physical condition. In fact, the patient had a normal cardiac exercise test 11/09/2001. Therefore, the medical records provided do not substantiate that the patient's condition significantly changed about the time of disability 10/03/2001.
The Liberty claim record includes entries on December 6, 2001 that summarize Dr. Miller's peer review: "Dr[.] indicates review of the medical information does not provide objective findings that would indicate a significant change in clmt's condition on or about [date of disability]." The claim record repeatedly notes the lack of objective findings.
In addition to his notes described above, Dr. Goodman, the rheumatologist, submitted a follow-up letter dated December 11, 2001. He stated that Denmark's symptoms of fatigue, exhaustion, myalgia and insomnia had become "quite marked over the last year or so, such that she is unable to perform her usual work as a quality control group leader." Noting that "[t]his work requires her to be on her feet all day," he concluded that "she remains totally disabled in terms of her line of work."2
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