Noga v. Fulton Fin. Corp. Emp. Benefit Plan

• Decision Date: 26 November 2021
• Docket Number: No. 19-3855,19-3855
• Citation: 19 F.4th 264
• Parties: Leo NOGA v. FULTON FINANCIAL CORPORATION EMPLOYEE BENEFIT PLAN; Reliance Standard Life Insurance Company Reliance Standard Life Insurance Company, Appellant
• Court: U.S. Court of Appeals — Third Circuit

19 F.4th 264

Leo NOGA

v.FULTON FINANCIAL CORPORATION EMPLOYEE BENEFIT PLAN; Reliance Standard Life Insurance Company Reliance Standard Life Insurance Company, Appellant

No. 19-3855

United States Court of Appeals, Third Circuit.

Argued: January 12, 2021

Filed: November 26, 2021

Joshua Bachrach [ARGUED], Wilson Elser Moskowitz Edelman & Dicker, 2001 Market Street, Two Commerce Square, Suite 3100, Philadelphia, PA 19103, Counsel for Appellant

Tybe A. Brett [ARGUED], Feinstein Doyle Payne & Kravec, 429 Fourth Avenue, Law & Finance Building, Suite 1300, Pittsburgh, PA 15219, Counsel for Appellee

Before: AMBRO, KRAUSE, and PHIPPS, Circuit Judges

OPINION OF THE COURT

PHIPPS, Circuit Judge

In this suit under the Employee Retirement Income Security Act, see 29 U.S.C. § 1132(a)(1)(B), a plan participant claims that an insurance-company fiduciary wrongfully terminated his benefits. The participant enrolled in his former employer's welfare benefit plan, which provided long-term disability and life insurance benefits through group insurance policies. When his health deteriorated to the point that he could no longer do his job, the participant claimed benefits under both policies.

The insurance company, which funded and administered those policies, initially determined that the participant was totally disabled and authorized benefits under both policies. Its in-house medical professionals reaffirmed that conclusion for about two years. But then, with no recent change to the participant's medical condition, the insurance company used a third-party vendor to select and retain an outside physician to evaluate the participant. After an in-person examination, that physician concluded that the participant was not totally disabled, and on that basis, the insurance company terminated benefits under both policies.

The participant administratively appealed, and the cycle repeated. The insurance company's in-house medical professionals once again found the participant to be totally disabled, and the insurance company reinstated benefits. But it then used the same third-party vendor to arrange for a reevaluation of that assessment. This time, two outside medical professionals performed paper reviews of the file. Both made findings against total disability. Citing those reports along with the prior report from the other outside physician retained by the third-party vendor, the insurance company terminated the participant's benefits – again.

Those multiple requests for additional outside medical reviews were irregular in their timing and prompting. To explain the requests made on administrative appeal – which were also irregular in their scope – the insurance company submitted an affidavit from one of its analysts. But in evaluating the parties' cross-motions for summary judgment, the District Court did not consider that affidavit. Instead, it analyzed the participant's claim based on the administrative record, which the insurance company had filed. On that record, the District Court concluded that the termination of benefits was arbitrary and capricious, and it ordered their retroactive reinstatement.

In reviewing that order de novo , see Viera v. Life Ins. Co. of N. Am. , 642 F.3d 407, 413 (3d Cir. 2011), we will affirm. A combination of structural and procedural factors compels that conclusion. The insurance company performed two functions that are in financial tension with each other: it determined eligibility for benefits, and it funded benefits. That creates a structural conflict of interest, which, by itself, is not a breach of fiduciary duty. But here, based on only the administrative record – not the proffered supplemental affidavit, which was properly excluded – the insurance company also deviated significantly from its normal eligibility-review processes, primarily through its anomalous requests for outside reevaluation of the participant. Those procedural irregularities aligned closely with the insurance company's structural conflict of interest, so much so that the financial incentives at the core of the insurance company's structural conflict influenced its fiduciary decision-making. For these reasons, as elaborated below, the insurance company abused its discretion in terminating the participant's benefits, and the District Court properly ordered their retroactive reinstatement.

I. BACKGROUND

A. Leo Noga and the Insurance Policies Administered and Funded by Reliance Standard.

Leo Noga began working as a financial advisor for Fulton Financial Corporation in 2009. As an employee, he elected to participate in the long-term disability and life insurance benefits that Fulton Financial offered through group insurance policies with Reliance Standard Life Insurance Company. See generally 29 U.S.C. § 1002(7) (defining "participant" to include employees or former employees who are eligible to receive a benefit of any type from the employer's employee benefit plan). Those policies qualify as benefit plans subject to ERISA. See generally id. §§ 1002(1) (defining "employee welfare benefit plan"), 1003(a) (subjecting employee benefit plans to ERISA).

Both policies grant discretionary authority to Reliance Standard to determine eligibility for benefits. See Reliance Standard Long Term Disability Policy at 6.0 (App. 92) ("Reliance Standard Life Insurance Company ... has the discretionary authority to interpret the Plan and the insurance policy and to determine eligibility for benefits."); Reliance Standard Life Insurance Policy at 11.0 (App. 1756) (same); see also Luby v. Teamsters Health, Welfare, & Pension Tr. Funds , 944 F.2d 1176, 1180 (3d Cir. 1991) ("Whether a plan administrator's exercise of power is mandatory or discretionary depends upon the terms of the plan."). Due to that discretionary authority, Reliance Standard is a fiduciary with respect to those plans. See Metro. Life Ins. Co. v. Glenn , 554 U.S. 105, 111, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008) (explaining that a benefit determination is a fiduciary act); see also 29 U.S.C. § 1002(21) (identifying persons who qualify as ERISA fiduciaries). But Reliance Standard also funded the long-term disability and life insurance policies and paid for benefits under those policies.

B. Noga's Benefit Claims and Reliance Standard's Initial Approval of Those Claims.

In 2014, after working over five years for Fulton Financial, Noga began experiencing pain and numbness in his feet and legs. His symptoms progressed over the next several months, and he started having difficulty standing, walking, and driving. By early 2015, he could no longer work as a financial advisor for Fulton Financial. After appointments with various specialists, Noga was eventually diagnosed with neurogenic muscular atrophy and diabetic polyneuropathy.

At that point, Noga applied for benefits under the long-term disability insurance policy with Reliance Standard. That policy provides benefits for employees who are "Totally Disabled," defined as those who "cannot perform the material duties of his/her Regular Occupation." Reliance Standard Long Term Disability Policy at 2.1, 9.0 (App. 88, 96). In support of his claim, Noga submitted records from numerous treating physicians, including his primary care physician, a physiatrist, two neurologists, a neurosurgeon, a rheumatologist, and an orthopedic surgeon.

Reliance Standard assigned an in-house registered nurse to review Noga's medical records. That nurse certified that Noga was "precluded from stand[ing] and walk[ing] on greater than an occasional basis" and that he "lack[ed] consistent work function." Reliance Standard Claim Notes (July 23, 2015) (App. 201). And, in August 2015, Reliance Standard approved Noga's claim for long-term disability benefits, finding that he was totally disabled under the policy.

With that favorable disability-benefits determination, Noga then sought an extension of his life insurance and a waiver of his premiums through a complementary provision in Fulton Financial's group life insurance policy with Reliance Standard. That provision required Reliance Standard to extend an employee's life insurance and waive any premiums owed "during a period of Total Disability." Reliance Standard Life Insurance Policy at 9.0 (App. 1754).

Following a separate review process, Reliance Standard approved Noga's life insurance claim in January 2016.

C. Reliance Standard's Periodic Reevaluation of Noga's Disability Between October 2015 and September 2017.

Over the next two years, Reliance Standard periodically reviewed Noga's updated medical records to assess his ongoing eligibility for long-term disability and life insurance benefits. Noga's physicians continually reaffirmed his diagnoses of neurogenic muscular atrophy and diabetic polyneuropathy – conditions that his endocrinologist described as "permanent" and "irreversible." Letter from Endocrinologist to Primary Care Physician (Aug. 11, 2016) (App. 903). But beginning in mid-2016 and continuing into 2017, Noga indicated during appointments with his primary care physician and his physiatrist that his legs were improving and feeling stronger, that he could walk up to one mile in the pool each day, and that he no longer needed leg braces while walking, though he still sometimes used a cane. During that same period, however, Noga also reported that he continued to feel pain and numbness in his feet and legs, struggled to walk and balance, and suffered from chronic fatigue.

As it received updated medical records, Reliance Standard assigned its own registered nurses to review them. Four different nurses – on six separate occasions between October 2015 and September 2017 – recertified Noga's eligibility for benefits.

D. Reliance Standard's October 2017 Decision to Conduct an Independent Medical Examination and Its Later Termination of Noga's Benefits.

In October 2017 – despite having recertified Noga's benefits less than a month prior – Reliance Standard requested that Noga undergo an independent medical examination, which is...