Hall v. Unum Life Ins. Co. of America, No. 01-1237.

• Decision Date: 20 August 2002
• Docket Number: No. 01-1237.
• Parties: Russann H. HALL, Plaintiff-Appellee, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

300 F.3d 1197

Russann H. HALL, Plaintiff-Appellee, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant-Appellant.

No. 01-1237.

United States Court of Appeals, Tenth Circuit.

August 20, 2002.

COPYRIGHT MATERIAL OMITTED

Marcy G. Glenn (Jack M. Englert, Jr., Megan C. Bertron, and Michael S. Beaver with her on the briefs) of Holland & Hart, L.L.P., Denver, CO, for Defendant-Appellant.

Bradley A. Levin of Roberts, Levin & Patterson, P.C., Denver, CO, for Plaintiff-Appellee.

Before LUCERO, HOLLOWAY, and MURPHY, Circuit Judges.

LUCERO, Circuit Judge.

UNUM Life Insurance Company of America ("UNUM") appeals the district court's judgment for plaintiff Russann H. Hall. Hall filed suit against UNUM under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461, because it terminated her disability benefits. UNUM's principal argument is that the district court improperly considered evidence outside of the administrative record relied upon by UNUM when it terminated Hall's benefits. We have jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

I

In 1993, Hall injured her left shoulder in a bicycle accident. At the time, she was a Regional Vice President of Sales for Nova Information Systems, Incorporated ("Nova"), and she was a participant in Nova's group long-term disability insurance plan. Under that plan, she was entitled to benefits from UNUM if she was disabled and unable to perform "the material duties of [her] regular occupation." (1 Appellant's App. at 60.) Hall's injury required multiple surgeries in 1993 and 1994, and she was unable to permanently return to her job at Nova. In January 1994, UNUM concluded that Hall was disabled and approved the payment of long-term disability benefits to her. In the summer of 1995, a UNUM employee reviewed Hall's claim file and began to investigate whether Hall remained disabled within the terms of the UNUM policy. UNUM offered Hall a lump-sum payment to resolve all claims under the policy, an offer that Hall refused. The company then proceeded to reevaluate Hall's medical condition and whether that condition prevented her from pursuing her occupation; the reevaluation included surreptitious video surveillance of Hall. Based on this reevaluation, UNUM concluded that Hall was no longer disabled because the restrictions on her physical activities did not prevent her from undertaking work as a vice-president of sales. On April 24, 1996, UNUM terminated disability payments to Hall, and her subsequent internal appeal was denied in November 1996.

After the termination of disability payments, Hall worked for a short time for another corporation as a sales manager but was terminated from that job in 1998. Throughout 1997, Hall received additional medical treatment due to continuing pain in her left shoulder. A physician diagnosed her condition as "thoracic outlet syndrome," a condition in which the nerves to the arm are constricted. In 1998, Hall underwent two additional surgeries in an attempt to treat the thoracic outlet syndrome. Hall informed UNUM of the additional medical treatment in June 1997 when she sought to have the termination of disability payments reconsidered, but UNUM was never subsequently informed of the additional surgeries.

Hall filed suit against UNUM in August 1997, alleging that UNUM had violated ERISA by improperly terminating her disability payments. UNUM moved for judgment on the administrative record in September 1998, arguing in part that the court was limited to considering the materials compiled by UNUM in the course of its management and termination of Hall's disability claims. The district court characterized this as a motion for summary judgment and denied it on August 24, 1999, ruling that it would consider evidence beyond the administrative record. A bench trial was held August 28-30, 2000. The district court entered findings, conclusions, and an order in December 2000, determining that UNUM had breached its duty to Hall under ERISA. The court held that UNUM owed Hall past-due benefit payments and that Hall was entitled to mandatory injunctive relief for future benefits "so long as her disability continues."¹ (1 Appellant's App. at 74.) In supplemental findings, conclusions, and an order for judgment, the district court ordered that UNUM pay pre-judgment interest and attorney's fees to Hall.

UNUM timely appeals, arguing that the district court erred in allowing admission of evidence outside the administrative record and awarding Hall attorney fees. Our review is limited to those issues, and thus, we are not asked to address the district court's disability decision on the merits.

II

ERISA provides a detailed and comprehensive set of federal regulations governing the provision of benefits to employees by employers, including disability benefits. ERISA specifically gives a plan beneficiary the right to federal court review of benefit denials and terminations. See 29 U.S.C. § 1132(a). However, the statute does "not establish the standard of review for such decisions." Chambers v. Family Health Plan Corp., 100 F.3d 818, 824-25 (10th Cir.1996).

In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court established the basic framework for determining the standard of review in ERISA cases that challenge the denial or termination of benefits.² The Court 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 of the plan." Firestone, 489 U.S. at 115, 109 S.Ct. 948. If discretionary authority exists then the proper standard of review is abuse of discretion. Id. UNUM does not challenge the district court's determination that the de novo standard applies to judicial review of its decision.

However, Firestone left open the issue of what evidence may be considered by a federal court in an action under § 1132(a)(1)(B) when de novo review is required. This Circuit, along with the majority of other federal courts of appeals, has held that in reviewing a plan administrator's decision for abuse of discretion, the federal courts are limited to the "administrative record" — the materials compiled by the administrator in the course of making his decision. Sandoval v. Aetna Life & Cas. Ins. Co., 967 F.2d 377, 380-81 (10th Cir.1992); Woolsey v. Marion Labs., Inc., 934 F.2d 1452, 1460 (10th Cir.1991); see also Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2d Cir.1995) (compiling cases and stating that "[m]ost circuits have declared that, in reviewing decisions of plan fiduciaries under the arbitrary and capricious standard, district courts may consider only the evidence that the fiduciaries themselves considered").

However, this Circuit has never considered the proper evidentiary scope of review in de novo ERISA cases, and the courts of appeals are split on this issue. One circuit prohibits the introduction of evidence outside the administrative record in de novo cases. Perry v. Simplicity Eng'g, 900 F.2d 963, 966-67 (6th Cir.1990). The Sixth Circuit's reasoning in Perry was that

[n]othing in the legislative history [of ERISA] suggests that Congress intended that federal district courts would function as substitute plan administrators, a role they would inevitably assume if they received and considered evidence not presented to administrators concerning an employee's entitlement to benefits. Such a procedure would frustrate the goal of prompt resolution of claims by the fiduciary under the ERISA scheme.

Id. at 966. The court added that de novo review, in and of itself, did not imply that the reviewing court necessarily had to take additional evidence. Id. But see VanderKlok v. Provident Life & Accident Ins. Co., 956 F.2d 610, 617 (6th Cir.1992) (allowing the admission of additional evidence in a de novo case because the plan administrator failed to follow proper procedures in terminating benefits).

The opposite position has been taken by the Eleventh Circuit, which has held that when conducting a de novo review, any party may be free to submit additional evidence outside the administrative record. Moon v. Am. Home Assurance Co., 888 F.2d 86, 89 (11th Cir.1989). The Moon court reasoned that, prior to ERISA, parties would have been able to submit additional evidence. Id. As a result, restricting parties to the administrative record would "afford less protection to employees and their beneficiaries than they enjoyed before ERISA was enacted," a conclusion that, according to the Moon court, would run counter to the Supreme Court's holding in Firestone, which was based in part on preserving pre-ERISA levels of protection for employees. Id. (quoting Firestone, 489 U.S. at 113-14, 109 S.Ct. 948).

Most circuits have adopted rules somewhere in between these extremes, allowing the admission of additional evidence in de novo cases in limited circumstances. See, e.g., DeFelice v. Am. Int'l Life Assurance Co. of N.Y., 112 F.3d 61, 65-67 (2d Cir. 1997) (allowing the use of extra evidence if the plan administrator has a conflict of interest); Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 943-44 (9th Cir.1995) (allowing the use of extra evidence where the plan administrator incorrectly interpreted the plan); Casey v. Uddeholm Corp., 32 F.3d 1094, 1098-99 (7th Cir.1994) (allowing a district court to consider additional evidence where the plan administrator has made no factfinding himself); S. Farm Bureau Life Ins. Co. v. Moore, 993 F.2d 98, 101-02 (5th Cir.1993) (allowing the admission of extra evidence with regards to plan interpretation by the administrator, but not with regards to the finding of historical facts by the administrator); Donatelli v. Home Ins. Co., 992 F.2d 763, 765 (8th Cir.1993) (leaving the question of whether to admit extra evidence to the...