Dobson v. Hartford Financial Servs.

• Decision Date: 08 March 2002
• Docket Number: No. 3:99CV2256 (JBA).,3:99CV2256 (JBA).
• Citation: 196 F.Supp.2d 152
• Parties: Douglas DOBSON v. HARTFORD FINANCIAL SERVS., et al.
• Court: U.S. District Court — District of Connecticut

Page 152

196 F.Supp.2d 152

Douglas DOBSON v. HARTFORD FINANCIAL SERVS., et al.

No. 3:99CV2256 (JBA).

United States District Court, D. Connecticut.

March 8, 2002.

Victoria De Toledo, Casper & de Toledo, Stamford, CT, Daniel M. Feinberg, Jeffrey Lewis, Sigman, Lewis & Feinberg, Oakland, CA, Mark D. DeBofsky, DeBofsky & DeBofsky, Chicago, IL, for Plaintiff.

Vaughn Finn, Shipman & Goodwin, Hartford, CT, Rick H. Rosenblum, Thomas E. Sanders, Akin, Gump, Strauss, Hauer & Feld, San Antonio, TX, for Defendants.

MEMORANDUM OF DECISION ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

[Doc. ## 47, 53, 57, 75]

ARTERTON, District Judge.

I. Introduction

Plaintiff Douglas Dobson is a disabled anesthesiologist whose monthly long term disability ("LTD") payments of $10,000 per month were withheld for over a year while defendant Hartford Life and Accident Insurance Company ("Hartford") claimed to be seeking additional proof of his continued disability. Dobson claims that Hartford improperly denied him and the purported class members interest owed to them under the terms of the LTD plan on retroactive benefits payments, in violation of ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), and claims that Hartford failed to inform him or the putative class members of the existence of an "ex gratia" practice of paying such interest on request and under certain circumstances, in breach of Hartford's fiduciary duty, in violation of ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3). Plaintiff also asserts a class and individual § 502(a)(3) breach of fiduciary duty claim based on Hartford's refusal to pay accrued interest for wrongfully withheld benefits, seeking such interest or disgorgement of Hartford's profits on such withheld sums. Plaintiff has moved for class certification [Doc. # 53] and for summary judgment on the class claims [Doc. # 47]. Hartford has cross-moved for summary judgment on plaintiff's claims for interest under § 502(a)(1)(B) and § 502(a)(3) [Doc. # 57] and on the § 502(a)(3) class claim alleging unlawful non-disclosure of the ex gratia payment policy [Doc. # 75].

Oral argument on the cross-motions was held on January 7, 2002. The next day, the Supreme Court issued its opinion in Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002), and the day following, the Second Circuit decided Dunnigan v. Metropolitan Life Ins. Co., 277 F.3d 223 (2d Cir.2002). The Court invited supplemental briefing on the impact of these two decisions, which indisputably altered the landscape for plaintiff's ERISA claims. The question for this Court, however, is the scope and extent of these changes.

Plaintiff claims that Dunnigan now compels summary judgment in his favor on his claims under § 502(a)(1)(B) or alternatively for the § 502(a)(3) claim for interest. Defendant, in turn, argues that Dunnigan's holding is no longer good law in light of Knudson. For the reasons discussed below, the Court agrees with both parties in part and disagrees in part. Defendant's motions for summary judgment are granted as to the class claims under § 502(a)(1)(B) and § 502(a)(3), and the ex gratia practice claim under § 502(a)(3), and denied as to the § 502(a)(3) claim for individual relief for breach of fiduciary duty. Plaintiff's motion for summary judgment is denied, and the motion for class certification is denied as moot.

II. Factual background

Dr. Dobson was employed as an anesthesiologist with West Central Anesthesiology Group, Ltd. until he became disabled in 1993 due to obstructive sleep apnea which led to excessive daytime somnolence. Dobson is a participant in West Central's long term disability plan ("the Plan"), which provides disability benefits through an insurance policy issued by Hartford.

Hartford originally approved plaintiff's claim for LTD benefits, and began paying him a monthly benefit of $10,000, less tax withholding, in 1993. However, on April 7, 1997, Hartford informed plaintiff that his benefits would be terminated effective March 31, 1997 due to lack of proof of continuous disability. Plaintiff was invited to submit additional documentation supporting his claim of continued disability, and was informed that the file would be closed if Hartford did not receive the requested information within the next thirty days.¹

Although plaintiff did submit additional information, both he and his doctor, David Murdy, asserted that because plaintiff's disability resulted from craniofacial abnormalities which would not be expected to change favorably over time, additional clinical testing was unnecessary. Hartford, however, maintained that because Dr. Murdy's diagnosis relied on testing performed prior to the date of onset of disability, the documentation was inadequate and a current examination and diagnosis was required.²

Hartford did not, however, deny plaintiff's claim for benefits outright. Instead, it claimed to have "suspended" benefits, and refused plaintiff's request for documentation supporting the termination of benefits, taking the position that because the claim was not actually denied, plaintiff was not yet entitled to review the claim file documents.³ On October 3, 1997, Hartford determined that plaintiff's proof of loss was insufficient, and finally informed plaintiff of his right to appeal that determination.⁴ Plaintiff requested review of the denial pursuant to ERISA § 503 and Department of Labor regulations, and requested that Hartford reinstate his LTD benefits pending the outcome of the review process because those benefits were his family's primary source of income. Hartford refused to do so.

During the fall of 1997, plaintiff was seen by Dr. Guillermo doPico, at the Sleep Disorders Clinic at the University of Wisconsin. Dr. doPico diagnosed plaintiff as disabled for performance of his occupation as an anesthesiologist due to excessive daytime somnolence, and noted that "[a]lthough the cause of his excessive daytime somnolence may be just obstructive sleep apnea, which is actually quite significant and worse than in 1993, I feel that it is actually multifactorial. . . . In my opinion, the pathogenesis of his sleep disorder is very complex. It does include obstructive sleep apnea, sleep paralysis, altered sleep hygiene, phase shifting, and perhaps `idiopathic hypersomnia.'"⁵ Despite this conclusion from Dr. doPico, Hartford did not reinstate benefits, but instead requested the actual test results for review;⁶ requested a second opinion from a Dr. Corson based on his independent review of Dobson's medical history and recent test results;⁷ and on November 24, 1997, denied plaintiff's claim again based on Dr. Corson's statement that Dobson had not undergone "an evaluation by a board certified sleep specialist at an accredited sleep center," and therefore the proof of loss was insufficient.⁸ Plaintiff was again informed of his rights to appeal under ERISA.⁹

On January 8, 1998, plaintiff's counsel wrote to Ms. Curtis, a Hartford Claim Examiner, informing her that Dr. Corson was incorrect: there is no board certification of sleep specialists recognized by the American Board of Medical Specialties, and the University of Wisconsin is an accredited sleep center. In addition, Dr. doPico wrote independently to Ms. Curtis to express his indignation at the cursory — and incorrect — conclusions reached by Dr. Corson.¹⁰ On May 8, 1998, Hartford wrote to plaintiff informing him that it had concluded the appeal in his favor and that his benefits would be reinstated effective April 1, 1997. Hartford provided no explanation for the change in its position. On April 22, 1998, plaintiff was paid twelve months of retroactive benefits, plus the currently due payment for April 1998, in a lump-sum payment of $130,000, less tax withholding, without interest.

Bruce Luddy, a Hartford Manager whose duties include managing the staff that handles LTD claim appeals, stated in his deposition that while as a general practice Hartford does not pay interest on retroactive benefits, Hartford does have an informal practice of paying interest on certain retroactive LTD benefits payments, which it refers to as "ex gratia" payments.¹¹ These payments are made under benefit code 786. This code is used to "allow for an outflow of money that has no other ledger location in Hartford's records."¹² There is no written policy that governs Hartford's determination to make interest payments, and the Plan documents contain no reference to any such policy or practice.¹³ Under this "policy," Hartford considers specific requests for interest and makes a payment if it determines that the circumstances of the claims handling warrant such a payment.¹⁴ Bruce Luddy further explained in his affidavit that:

In situations where a claimant, their representative, or a third-party such as the Plan Sponsor, makes a claim for the payment of interest, Hartford reviews the participant's claim file and Hartford's handling of the claim to make a determination as to whether to settle the dispute. There are other factors, unrelated to the actual LTD claim that Hartford may consider in making its business decision. For example, there are instances where the request for an "ex gratia" payment might be made by the Plan Sponsor, Plan Administrator, or the insurance broker who services the account in question. In those situations, Hartford may weigh the business relationships involved in determining whether to make an "ex gratia" payment.

Hartford does not have any written policies or guidelines regarding "ex gratia" interest payments nor does any one corporate officer or director make all such decisions. Instead, in each instance, Hartford weighs the relative costs and benefits involved in resolving the dispute, and in some circumstances an "ex gratia" interest payment may be made. In each instance where an "ex gratia" payment of interest is made, Hartford does not admit liability for the payment of such interest. Further, Hartford generally obtains...