Renowden v. Prudential Insurance Co. of America

          ORDER

          HONORABLE JOHN J. TUCHI UNITED STATES DISTRICT JUDGE

         At issue is Plaintiff Christina Renowden's Motion to Vacate Scheduling Order and Set a Scheduling Conference (Doc. 24, Mot.), to which Defendant Prudential Insurance Company of America (“Prudential”) filed a Response (Doc. 25, Resp.), and Plaintiff filed a Reply (Doc. 34, Reply).

         I. BACKGROUND

         Plaintiff, a former employee of Walgreen Company, was enrolled in an employee insurance plan. (Doc. 1, Compl. ¶ 15.) Defendant was the insurer and claims administrator under the policy. (Compl. ¶ 8.) Plaintiff alleges that she became disabled in 2016 and had to stop working. (Compl. ¶ 17.) Soon after, Plaintiff filed a claim for the Group Life Insurance Premiums Waiver benefit under her policy, seeking life insurance coverage free of premiums due to her disability. (Compl. ¶ 19.) Defendant denied Plaintiff's claim. (Compl. ¶ 25.) Around the same time, Plaintiff filed a long-term disability claim under a group long-term disability policy also insured and administered by Defendant, and that claim was approved. (Compl. ¶¶ 33-35.)

         On September 27, 2018, Plaintiff filed a Complaint seeking review, pursuant to the Employment Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1132(e)(1) and § 1132(f), of the decision to deny her benefits under her Policy's Life Insurance Premiums Waiver benefit. As is the Court's policy, it issued a Rule 16 Scheduling Order in an Action for Review on an Administrative Record ERISA Case. (Doc. 18.) This version of the standard Rule 16 Scheduling Order contemplates the traditional ERISA case, where the dispute focuses on the administrative record and additional discovery is not required. Plaintiff now moves to vacate the Scheduling Order on the basis that “the Court misstate[d] Plaintiff's cause of action as one for the review of an administrative decision” and “because discovery is permitted in this circuit to allow the Court to assess whether . . . any conflict of interest . . . improperly influenced Defendant's decision to deny the claim.” (Mot. at 2.)

         II. LEGAL STANDARD

         In ERISA cases, whether evidence outside the administrative record may be admitted depends on the whether the court reviews the benefits decision under an abuse of discretion or de novo standard. See Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006). “[I]n general, a district court may review only the administrative record when considering whether the plan administrator abused its discretion, but may admit additional evidence on de novo review.” Id. at 970.

         As a default, the Ninth Circuit applies a de novo review, and in order to trigger “the more lenient abuse of discretion, the plan must unambiguously provide discretion to the administrator.” Abatie, 458 F.3d at 963. In deciding whether the plan administrator has discretion, “[t]he essential first step of the analysis . . . is to examine whether the terms of the ERISA plan unambiguously grant discretion to the administrator.” Id. While “[t]here are no ‘magic' words that conjure up discretion . . . the Supreme Court has suggested that a plan grants discretion if the administrator has the ‘power to construe disputed or doubtful terms' in the plan.” Id. (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989)). The Ninth Circuit has held that wording “granting the power to interpret plan terms and to make final benefits determinations” is sufficient to confer discretion on the administrator. Id. But plans “are insufficient to confer discretionary authority on the administrator when they do not grant any power to construe the terms of the plan.” Id. at 964.

         Review under the abuse of discretion standard is limited to the evidence in the administrative record. Id. at 970 (“[I]n general, a district court may review only the administrative record when considering whether the plan administrator abused its discretion”). However, a potential conflict of interest-for example, where the insurer both funds and administers the plan-may be evaluated through evidence outside the administrative record. When a plaintiff alleges a conflict, a “court must decide how much weight to give” it, and in doing so, “may consider evidence beyond that contained in the administrative record . . . to determine whether a conflict of interest exists that would affect the appropriate level of judicial scrutiny.” Id. This extrinsic evidence may be used “to decide the nature, extent, and effect on the decision-making process of any conflict of interest; the decision on the merits, though, must rest on the administrative record once the conflict (if any) has been established.” Id.

         In short, while evidence outside the record may be permitted, its use must be limited to determining the existence and extent of a conflict of interest. Once that determination is made, the court must return to its narrow review of the record alone, and the abuse of discretion standard will allow the court to consider in its analysis the impact of any conflict of interest. Id. at 968 (“A straightforward abuse of discretion analysis allows a court to tailor its review to all the circumstances before it.”) (citing Woo v. Deluxe Corp., 144 F.3d 1157, 1161 (8th Cir. 1998) (“The abuse of discretion standard is inherently flexible, which enables reviewing courts to simply adjust for the circumstances.”)).

         On the other hand, when a plan confers no discretion on the administrator, a court will review the decision de novo. Id. at 969. Under this standard, the court is permitted to examine evidence outside of the administrative record. Id. at 970 (“While under an abuse of discretion standard our review is limited to the record . . . this limitation does not apply to de novo review.”) (quoting Jebian v. Hewlett-Packard Co. Emp. Benefits Org. Income Prot. Plan, 349 F.3d 1098, 1110 (9th Cir. 2003)). Courts are not required to accept extrinsic evidence and should review it only “when circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review.” Jebian, 349 F.3d at 1110 (quoting Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 944 (9th Cir. 1995)). Courts must therefore examine each proffered item of evidence to “determine whether each piece of extrinsic evidence [is] necessary” for an adequate review. Opeta v. Nw Airlines Pension Plan for Contract Emps., 383 F.3d 1211, 1218 (9th Cir. 2007).

         The Ninth Circuit has provided “a non-exhaustive list of exceptional circumstances where introduction of evidence beyond the administrative record could be considered necessary.” Opeta 383 F.3d at 1217. The list, adopted from a Fourth Circuit decision, includes the following circumstances:

claims that require consideration of complex medical questions or issues regarding the credibility of medical experts; the availability of very limited administrative review procedures with little or no evidentiary record; the necessity of evidence regarding interpretation of the terms of the plan rather than specific historical facts; instances where the payor and the administrator are the same entity and the court is concerned about impartiality; claims which would have been insurance contract claims prior to ERISA; and ...