Lundquist v. Continental Casualty Co.

• Decision Date: 30 September 2005
• Docket Number: No. CV 02-9602FMO.,CV 02-9602FMO.
• Citation: 394 F.Supp.2d 1230
• Parties: Lorene LUNDQUIST, Plaintiff, v. CONTINENTAL CASUALTY COMPANY, et al., Defendants.
• Court: U.S. District Court — Central District of California

394 F.Supp.2d 1230

Lorene LUNDQUIST, Plaintiff, v. CONTINENTAL CASUALTY COMPANY, et al., Defendants.

No. CV 02-9602FMO.

United States District Court, C.D. California.

September 30, 2005.

COPYRIGHT MATERIAL OMITTED

Glenn R. Kantor, Gruber & Kantor, Sherman Oaks, CA, for Plaintiff.

Robert F. Keehn, Galton & Helm, Los Angeles, CA, for Defendants.

ORDER REVERSING ADMINISTRATIVE DETERMINATION RE: ERISA BENEFITS

OLGUIN, United States Magistrate Judge.

INTRODUCTION

This is a claim for the recovery of benefits under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. For the reasons set forth below, the administrative decision to terminate benefits is reversed.

PROCEEDINGS

On December 17, 2002, plaintiff Lorene Lundquist ("plaintiff" or "Lundquist") commenced this action by filing a "Complaint For Breach Of Employee Retirement Income Security Act Of 1974" ("Complaint"), asserting that her disability benefits were improperly terminated in violation of ERISA. In her Complaint, plaintiff named as defendants Continental Casualty Company ("CNA") and Blue Cross of California Disability Plan.¹ Plaintiff requests the following relief: (1) a declaration that she is disabled under the terms of the relevant disability plan and entitled to continued disability benefits; (2) payment of disability benefits due, including all prejudgment and postjudgment interest, from the date her benefits were terminated; (3) attorney fees and costs pursuant to 29 U.S.C. § 1132(g)(1); and (4) any further relief the court deems just and proper.

CNA and WellPoint STD Plan (collectively "defendants") filed their Answer to plaintiff's Complaint ("Answer") on February 12, 2003. In their Answer, defendants denied plaintiff's allegations regarding disability and raised two affirmative defenses, specifically that plaintiff's Complaint fails to state a claim upon which relief may be granted and that plaintiff's alleged injuries, if any, were proximately caused, wholly or in part, by the acts, omissions, negligence, neglect or wrongful acts of parties, persons, entities or corporations other than defendants.

On May 13, 2003, the parties consented to proceed before the undersigned United States Magistrate Judge. Subsequently, on September 17, 2003, the parties stipulated that "the case will be decided by the court based upon the administrative record, which is less than 200 pages, and any supplementation of the record the court deems permissible." (Court's Stipulation and Order Allowing Waiver of Settlement Conference and Setting Briefing Schedule for Trial, filed September 17, 2003, at 2).

Plaintiff filed her "Trial Brief" ("Plaintiff's Trial Brief") on October 23, 2003, and defendants filed their "Opening Trial Brief" ("Defendants' Trial Brief") on October 24, 2003. Thereafter, on November 6, 2003, plaintiff filed a "Response to Defendants' Trial Brief" ("Plaintiff's Response Brief"), and on November 7, 2003, defendants filed a "Responsive Trial Brief" ("Defendants' Response Brief").

On November 18, 2003, the court heard oral arguments from plaintiff and defendants, after which the matter was deemed submitted. (See Court's Minute Order of November 18, 2003).

On March 3, 2004, plaintiff filed a document entitled "Supplemental Authority Re Standard of Review Following Trial" ("Plaintiff's Supplemental Authority"), in which plaintiff requested that the court take judicial notice of an opinion letter and notice issued by the California Department of Insurance ("California DOI"), on February 26 and 27, 2004, respectively, withdrawing approval of disability insurance policies containing discretionary clauses. In response to Plaintiff's Supplemental Authority, the court ordered additional briefing from the parties. (See Court's Order of March 5, 2004, at 1-2).

On March 25, 2004, plaintiff filed her "Supplemental Brief Following Trial" ("Plaintiff's Supplemental Brief"), and on June 16, 2004, defendants filed their "Post-Trial Supplemental Brief" ("Defendants' Supplemental Brief"). Shortly thereafter, on July 16, 2004, plaintiff filed a "Reply Brief In Support of Supplemental Brief Following Trial" ("Plaintiff's Supplemental Reply Brief").

The parties filed various requests for judicial notice from July 16, 2004, through March 31, 2005, relating to the California DOI's revocation of its approval of discretionary clauses in disability insurance policies.

SUMMARY OF FACTS

I. PLAINTIFF'S EMPLOYMENT.

Plaintiff is a 66-year-old woman who began employment with Blue Cross of California ("Blue Cross") on April 14, 1997. (Administrative Record for ERISA Trial ("AR") at 2, 16 & 20). Plaintiff's last day of employment with Blue Cross was on December 7, 2001. (Id. at 19-20, 31, 40, 52, 61, 64, 70, 73 & 125).

During her employment with Blue Cross, plaintiff worked as a Clinical Research Manager in the Grievance and Appeals Department, a department that handles approximately 700 appeals and complaints per month. (AR at 2, 16, 19-20, 22, 28, 31, 40, 59, 61, 64, 67 & 70). In this management position, plaintiff earned an annual salary of approximately $72,185.00 to $75,073.00. (Id. at 16 & 20). Her duties included: data entry; reviewing medical records; handling a case load of approximately 135 cases, each of which had to be closed within 30 days; handling expedited appeals, each of which had to be closed within three days; training new employees; and attending three to five employee management meetings a week, which lasted anywhere from one to four hours. (Id. at 16, 20, 22 & 70).

Plaintiff described her job as stressful due, in part, to a decrease in department size and a hiring freeze that was in place in 2001 and 2002. (AR at 24, 28 & 70). In a letter to defendant CNA, dated April 12, 2002, plaintiff stated:

Since I am one of the managers in [the Grievance and Appeals] department, I have a twofold job. Over the last 18 months the department has decreased in size and all the employees, especially the managers, have assumed an increase in the work load. I added to my work load of trainer of all new hires with a small case load, to a large case load of 135 cases, plus continued as a resource manager to all the employees. These cases have to be reviewed, records requested, re-reviewed and presented to a Medical Director, and closed with a decision within 30 days. There are also expedited appeals that have to be handled and closed within 3 days. This was added on to the 135 cases already being reviewed.

Since I am in management I also attend 3-5 meetings per week, that last anywhere from 1-4 hours. As you can see this is much more than data entry and record review. With changes in the management of the department and a hiring freeze in the last year, the department became very stressful. The case load was 3 times what it was when I hired on with the company.

(Id. at 70).

II. THE PLANS.

Defendant CNA issued group insurance contracts providing short term and long term disability benefits to WellPoint Health Networks, Inc. ("WellPoint"). (AR at 132-61 & 162-97). WellPoint, in turn, used the contracts to establish its Group Short Term Disability Plan ("WellPoint STD Plan"), Policy No. SR-83094619, and Group Long Term Disability Plan, ("WellPoint LTD Plan"), Policy No. SR-83094620, (collectively the "Plans"), which are employee welfare benefit plans funded by CNA and governed by ERISA. (Id.).

The Plans were offered to eligible employees of WellPoint and its subsidiaries, including Blue Cross. (AR at 139 & 165). Plaintiff, as an employee of Blue Cross, was eligible for, and was covered by both the WellPoint STD and LTD Plans. (Id. at 16, 20, 139 & 165).

Pursuant to the Plans, both WellPoint and CNA had "discretionary authority" to "interpret the terms of the Plan[s] and to determine eligibility for and entitlement to benefits in accordance with the Plan[s]." (AR at 158 & 193; see also id. at 147 & 179). As such, WellPoint and CNA acted as plan fiduciaries under the Plans. (Id. at 147, 158, 179 & 193); see also 29 U.S.C. § 1002(21)(A).² Although only WellPoint was named plan administrator under the Plans, (AR at 158 & 193), CNA, in fact, actively participated in the administration of the Plans. Indeed, as set forth in further detail below, it was exclusively CNA that denied plaintiff's claim for benefits, a decision that led to the filing of the Complaint in the instant action. See Gaines, 329 F.Supp.2d at 1211 (insurer was not expressly named as plan administrator in the plan, but "participated in the administration of the plan, having undertaken the sole responsibility for administering claims" and "specifically rejected the claim in this case").

A. The WellPoint STD Plan.

Under the WellPoint STD Plan, "disability" is defined as:

Injury or Sickness [that] causes physical or mental impairment to such a degree of severity that You are:

1. continuously unable to perform the Material and Substantial Duties³ of Your Regular Occupation⁴; and

2. not working for wages in any occupation for which You are or become qualified by education, training or experience. (AR at 149) (italics in original).⁵

If an employee establishes "disability," the WellPoint STD Plan provides short term disability benefits for a maximum period of 26 weeks, subject to a waiting or "elimination" period⁶ of seven days for disability based upon sickness, but no waiting or "elimination" period for disability based upon injury.⁷ (AR at 143-44 & 149). The seven-day elimination period based upon sickness, rather than injury, is applicable in this case. (Id. at 16 & 20).

Under the WellPoint STD Plan, the weekly benefit is calculated based upon the type of plan in which the employee is enrolled, Plan A, B, or C. (AR at 143). Here, plaintiff was covered under Plan C of the WellPoint STD Plan, (id. at 4, 11, 13, 16, 20 & 52 & Plaintiff's Trial Brief at 11), which means that her weekly benefit is calculated as:

70% of Weekly Earnings to a maximum benefit of...