Gilbertson v. Allied Signal, Inc.

• Decision Date: 06 May 2003
• Docket Number: No. 01-2324.,01-2324.
• Parties: Louise GILBERTSON, Plaintiff-Appellant, v. ALLIED SIGNAL, INC. and Life Insurance Company of North America, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

328 F.3d 625

Louise GILBERTSON, Plaintiff-Appellant, v. ALLIED SIGNAL, INC. and Life Insurance Company of North America, Defendants-Appellees.

No. 01-2324.

United States Court of Appeals, Tenth Circuit.

May 6, 2003.

COPYRIGHT MATERIAL OMITTED

Michael D. Armstrong, Albuquerque, NM, for Plaintiff-Appellant.

Carol Lisa Smith of Krehbiel, Bannerman & Williams, P.A., Albuquerque, NM, for Defendant-Appellee Allied Signal Inc.; Tracy M. Jenks of Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, NM, for Defendant-Appellee Life Insurance Company of North America.

Before SEYMOUR and McCONNELL, Circuit Judges, and KRIEGER, District Judge.^*

McCONNELL, Circuit Judge.

The question in this case is whether an ERISA plan administrator's denial of disability benefits is entitled to deference when the administrator failed to render a decision within the time limits and the claim was "deemed denied" by operation of law.

BACKGROUND

Louise Gilbertson began working for AlliedSignal as an Administrative Support Coordinator in 1992. In March, 1998, Mrs. Gilbertson consulted her family physician, Dr. Gwen Robinson, complaining of chronic pain in her neck, shoulders, and arms, as well as frequent headaches, sleep disturbance, and difficulty concentrating. Based on these symptoms, and on the discovery of certain "pressure points" in Mrs. Gilbertson's neck, shoulders, arms, and legs, Dr. Robinson rendered a diagnosis of fibromyalgia.¹ Mrs. Gilbertson took short-term disability leave, which lasted through September 30, 1998. On that date, AlliedSignal terminated her employment.

Following her termination, Mrs. Gilbertson promptly applied for long-term disability (LTD) benefits under AlliedSignal's Salaried Employees Pension Plan (the Plan). The Plan is covered by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001 et seq. The Plan names AlliedSignal as the Plan Administrator and provides the Administrator with discretionary authority to administer the plan, interpret its terms, and delegate its authority to third parties. AlliedSignal hired a third party claims administrator, Life Insurance Company of North America (LINA), to administer the plan and to determine eligibility for benefits.

In support of her application for LTD benefits, Mrs. Gilbertson submitted documentation prepared by Dr. Robinson setting forth the diagnosis of fibromyalgia. LINA then requested that Dr. Robinson provide additional information, including any abnormal clinical test results. In her response, Dr. Robinson submitted test results, including blood analysis and urinalysis, all of which were normal, and reaffirmed her diagnosis of fibromyalgia based on trigger points and Mrs. Gilbertson's reported symptoms. Dr. Robinson also provided treatment records, in which Mrs. Gilbertson reported that, though her condition had improved somewhat due to her participation in water aerobics, tai chi, and chiropractic treatments, she remained unable to return to work.

On December 9, 1998, LINA denied Mrs. Gilbertson's application for long term disability benefits on the ground that she had failed to provide adequate objective medical evidence demonstrating that she was disabled according to the Plan's definition.² In the denial letter, LINA explained that, though Mrs. Gilbertson's supporting documentation indicated symptoms of fibromyalgia, it did not adequately address how those symptoms affected her capacity to perform her work. LINA also noted that the documentation did not explain how symptoms of more than fifteen months' duration had suddenly rendered her unable to work and that Dr. Robinson's notes actually indicated some improvement from exercise and other treatments.

The denial letter notified Mrs. Gilbertson of her right to request that LINA review the denial. The letter encouraged Mrs. Gilbertson to submit additional information promptly, because LINA would issue a final decision within either 60 days of receiving a request for review, or 120 days, if LINA specified that special circumstances required the extra time. LINA's explanation of this timeline mirrors a provision in the Plan requiring the administrator to make a final decision within the applicable 60- or 120-day deadline. The Plan provision in turn follows a Department of Labor ERISA regulation that articulates the applicable deadline and provides further that claims not decided within the deadline are "deemed denied" on review:

(1)(i) A decision by an appropriate named fiduciary shall be made promptly, and shall not ordinarily be made later than 60 days after the plan's receipt of a request for review, unless special circumstances... require an extension of time for processing, in which case decision shall be rendered as soon as possible, but not later than 120 days after receipt of a request for review.

...

(4) ... If the decision on review is not furnished within such time, the claim shall be deemed denied on review.

29 C.F.R. § 2560.503-1(h) (1999).³

On January 14, 1999, LINA received Mrs. Gilbertson's request for review. LINA responded on January 28, assuring Mrs. Gilbertson that she would be notified of a final decision within 60 days of LINA's receipt of the request. On February 16, LINA sent a fax to Mrs. Gilbertson extending the deadline for additional submissions of medical information until March 31. The February 16 fax was the last communication Mrs. Gilbertson received from LINA.

Mrs. Gilbertson hired an attorney, who sent a letter to LINA on February 25 notifying LINA of his representation. On March 25, Mrs. Gilbertson's attorney provided LINA with additional medical records from Mrs. Gilbertson's chiropractor, Dr. Bender, and statements from Mrs. Gilbertson's family, friends, and supervisor attesting to her disabled condition. On April 7, one week after the agreed upon deadline for such submissions, Mrs. Gilbertson's attorney provided more material from Dr. Robinson documenting Mrs. Gilbertson's fibromyalgia and explaining how its symptoms prevented her from performing her prior job at AlliedSignal.

LINA apparently took no action on the claim until early May, when the company referred the file to its medical consultant, Dr. Thomas Franz, for review. On May 25, Dr. Franz provided LINA with his Physical Case Review. Dr. Franz agreed that Mrs. Gilbertson's symptoms met the criteria for fibromyalgia, but he found the functional limitations asserted by Mrs. Gilbertson and her doctors to be implausible and inconsistent with her ability to derive therapeutic benefit from aerobics and tai chi. His review recommended that Mrs. Gilbertson be scheduled for an independent medical examination to include functional capability testing. Dr. Franz's report was not communicated to Mrs. Gilbertson or her attorney, nor did they receive any other communication from LINA or AlliedSignal regarding the claim.

On June 1, Mrs. Gilbertson's attorney sent a letter to LINA asking the company to advise whether it would accept or reject the claim. LINA opted to do neither, deciding instead to refer Mrs. Gilbertson for an independent examination. LINA, however, neglected to inform Mrs. Gilbertson or her attorney of this decision, and she therefore had no way of knowing the status of her claim. Finally, on August 20, Mrs. Gilbertson received a certified letter from HealthSouth, an institution hired by LINA to perform the independent medical examination, informing her that she was scheduled for an appointment on September 9. Mrs. Gilbertson canceled the HealthSouth appointment and, treating her claim as having been "deemed denied" by operation of the regulatory deadline for decision on an appeal, filed suit on August 25.

In federal district court, LINA and AlliedSignal moved for summary judgment, arguing that LINA's denial of benefits was entitled to judicial deference under the arbitrary and capricious standard. Mrs. Gilbertson contended that LINA's failure to meet the ERISA deadline should trigger de novo review. The district court acknowledged that LINA had failed to meet the deadline, but nevertheless applied the deferential standard of review. The district court seems to have determined, based on the cases cited by the parties, that where an administrator with discretionary authority renders an initial decision and does not subsequently change its reasoning, the courts should apply a deferential standard even if the appeal is "deemed denied" as a result of delay. The district court also found it important that Mrs. Gilbertson herself had "acted outside the Plan's time limits" in that she asked for extensions of the deadline to submit materials, continued to submit materials past the agreed-upon deadline, and in general "continued to participate in the appeals process." Order Granting Defendants' Motion For Summary Judgment, dated November 11, 2000, at 7, Appellant's App. 86.

The district court therefore reviewed LINA's "deemed denied" decision under the arbitrary and capricious standard. It found substantial evidence in the record supporting the denial and granted summary judgment to LINA and AlliedSignal. Mrs. Gilbertson now appeals the grant of summary judgment, arguing that the proper standard of review in this case is de novo. We agree.

DISCUSSION

I. Standard of Review

Mrs. Gilbertson's complaint arises under 29 U.S.C. § 1132(a), which provides that a beneficiary may bring suit "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." Although ERISA does not explicitly specify the standard of review that district courts should employ in reviewing such claims, the Supreme Court has held that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms...