Rehearing and Rehearing En Banc Denied July 8, 1999.
NANGLE, Senior District Judge.
Janice M. Barnhart appeals the district court's
Janice Barnhart was employed by Boatmen's Bank as a return items clerk in Kansas City from August 1989 until her alleged disability date of February 1995. On December 1, 1990, Barnhart became covered by a retirement plan with disability benefits administered by UNUM. The
The Policy states, "[I]n making any benefit determination under this policy, the Company shall have the discretionary authority both to determine an employee's eligibility for benefits and to construe the terms of this policy." Ad. 1. The Policy defines disability as:
Barnhart submitted various doctors' reports substantiating her pain. Her treating physician, Dr. Carlos Palmeri, noted that she had pain while performing normal activities and could not make lifting movements. He stated Barnhart attended physical therapy and that she might not be able to return to work. Def.'s Mot. Summ.J.Ex. A at 181. Dr. Frank Holladay, a consulting physician, concluded that plaintiff had cervical spondylosis
Julie Firfer, an employee nurse at UNUM, reviewed all the medical information and concluded that Barnhart was capable of performing a sedentary job based on the medical evidence. UNUM sent its registered benefits representative, Shirley Beltz, to Barnhart's home to evaluate her. Beltz stated Barnhart demonstrated good range of motion and had no problems walking. Barnhart reported doing numerous activities around her home, including fixing breakfast, washing dishes, unpacking, and driving. Beltz also reported that plaintiff stated that her pain, which is always present, is controlled by medication. After reviewing Beltz's report, Firfer concluded that Barnhart's description of symptoms did not correlate with her level of activity and did not show that she was incapable of performing sedentary work. Ad. 3. UNUM determined plaintiff was not disabled within the policy's definition of disability, and on August 18, 1995, it denied plaintiff's request for benefits, finding that it had no objective medical evidence to support a finding that she was unable to perform a sedentary occupation. Ad. 4. Barnhart timely requested review of the denial of benefits. Palmeri wrote UNUM that Barnhart needed "a different kind of work where she wouldn't have to bend her neck." Def.'s Mot.Summ.J.Ex. A at 126.
UNUM affirmed its earlier denial of benefits and then forwarded Barnhart's file to its quality review division in October 1995 and requested more medical information from Barnhart. UNUM asked Palmeri for more complete information and to
UNUM's Independent Medical Examinations Coordinator, Jan Eisenberg, selected Mr. Russell Eisele, a physical therapist, and Dr. Robert Rondinelli, M.D., Ph. D., to make independent evaluations of Barnhart. Eisele found that Barnhart could perform sedentary light work on a part-time basis and noted that Barnhart had slightly decreased trunk and cervical mobility, decreased trunk strength and subjective complaints of pain. Ad. 5. Rondinelli, using the United States Department of Labor guidelines, also found that Barnhart was capable of sedentary to light work. His diagnosis was cervical osteoarthritis, probable lumbosacral osteoarthritis, cachexia,
On May 21, 1997, plaintiff filed a complaint in the district court asserting a claim under ERISA, 29 U.S.C. § 1132, for improper denial of the claim, alleging that she was entitled to benefits under the terms of the policy and the proof she submitted. Ad. 1. UNUM denied the allegations and filed a motion for summary judgment, claiming that its finding was reasonable and that Barnhart was not disabled as defined by the policy based upon the undisputed facts. To oppose the motion, plaintiff charged that UNUM breached its fiduciary duty and attached an affidavit by Barnhart relating to her physical condition and a Social Security Disability Administration determination of disability letter. The district court, using a deferential standard of review, granted UNUM's motion for summary judgment on June 10, 1998, holding that UNUM had produced uncontroverted evidence that its decision was not arbitrary and capricious. The court also found that plaintiff had not produced any evidence that UNUM's decision was extraordinarily imprudent, extremely unreasonable, or unsupported by substantial evidence. The court refused to consider the affidavit and the Social Security letter because these items were not before the UNUM administrator when the disability determination was made.
On June 17, 1998, plaintiff filed a "Motion for New Trial," claiming that the court improperly failed to consider the affidavit, the Social Security letter, and overlooked UNUM's fiduciary role as a trustee to act in the plaintiff's best interests in reviewing her claim. Because of this Court's decision in Woo v. Deluxe Corp., 144 F.3d 1157 (8th Cir.1998) (adopting a sliding scale standard of review for conflicted fiduciaries), the district court, in considering Barnhart's motion, asked the parties to brief the standard of review outlined in Woo. After considering the parties' arguments,
Barnhart appeals the order for summary judgment claiming that the district court erred by failing to properly consider UNUM's breach of its fiduciary duties to plaintiff, failing to consider the affidavit and Social Security disability determination, and failing to consider persisting material issues of fact. Barnhart appeals the denial of the "Motion for New Trial," claiming that the court erred by declining to take testimony to flesh out conflicts of interest. UNUM argues that the court improperly invoked the sliding scale, but that under any standard, it should prevail.
The Court reviews de novo the district court's grant of summary judgment, viewing the record in the light most favorable to the nonmoving party. Woo, 144 F.3d at 1160. Similarly, this Court reviews de novo the district court's determination of the appropriate standard of review under ERISA. Id. The Court finds that the district court properly employed the arbitrary and capricious standard of review in granting summary judgment, but improperly used a sliding scale standard of review in considering the so-called "Motion for New Trial."
The Supreme Court enunciated the appropriate standard of judicial review of benefit determinations by fiduciaries or plan administrators in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111, 109 S.Ct. 948, 954, 103 L.Ed.2d 80 (1989). Using principles of trust law, the Court held that a denial of benefits challenged under § 1132(a)(1)(B) should 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, in which case a deferential standard is to be used. Firestone, 489 U.S. at 115, 109 S.Ct. at 956. The parties agree that the Plan grants discretionary authority to UNUM to make benefits determinations and to interpret the policy. Consequently, the Eighth Circuit uses an abuse of discretion standard. Layes v. Mead Corp., 132 F.3d 1246, 1250 (8th Cir. 1998).
When the benefit plan, however, grants discretion to an administrator or fiduciary operating under a conflict of interest, "that conflict must be weighed as a `facto[r] in determining whether there is an abuse of discretion.'" Firestone, 489 U.S. at 115, 109 S.Ct. at 956 (quoting Restatement (Second) of Torts § 187 cmt. d (1959)). The parties additionally agree that the insurer is also the plan administrator. Thus, UNUM will have a direct financial benefit when it denies a claim. Such a conflict of interest may trigger a less deferential standard of review. Woo, 144 F.3d at 1161; see also Bedrick v. Travelers Ins. Co., 93 F.3d 149, 152 (4th Cir.1996) ("Inasmuch as the law is highly suspect of `fiduciaries' having a personal interest in the subject of their trust, the `abuse of discretion' standard is not applied in as deferential a manner to such plans."). This Court held in Woo that the degree of deference to accord such a decision will be decreased on a sliding scale in proportion to the extent of conflict present, recognizing the arbitrary and capricious standard is inherently flexible. Woo, 144 F.3d at 1161 (citing Chambers v. Family Health Plan Corp., 100 F.3d 818, 827 (10th Cir.1996) (adopting the sliding scale approach to meet the requirements of Firestone to resolve conflicts of interest with a fiduciary)).
Woo also pointed out that not every funding conflict of interest warranted heightened review. Woo, 144 F.3d at 1161 n. 2 (giving as an example the use of retrospective premiums to offset underwriting losses). This Court further elaborated this principle in Farley v. Arkansas Blue Cross and Blue Shield, 147 F.3d 774
Woo utilizes a two part gateway requirement to obtain a less deferential review: the plaintiff must present "material, probative evidence demonstrating that (1) a palpable conflict of interest or a serious procedural irregularity existed, which (2) caused a serious breach of the plan administrator's fiduciary duty to her." Woo, 144 F.3d at 1160. Woo met this two part requirement by showing that the plan administrator had a financial conflict of interest,
In this case, the parties agree that the financial conflict is present, and UNUM offers no ameliorating circumstances to show why this is not a palpable conflict as described in the first prong of Woo. Assuming the first prong of Woo is met, Barnhart must show how this conflict caused a serious breach of the plan administrator's fiduciary duty to her, thereby satisfying the second prong. In its order considering plaintiff's "Motion for New Trial," the district court "assume[d] the administrator had a conflict of interest because the plan administrator was also the plan insurer. Therefore a less deferential standard of review or `sliding scale' should be applied to the administrator's decision." The district court erred by failing to consider the second prong of Woo; instead, it used an analysis more akin to those circuits who presume bias whenever a direct financial interest is shown (see footnote 7). We therefore proceed to the second prong of Woo to complete the analysis.
The second prong requires demonstrating how a conflict of interest or serious procedural irregularity caused a serious breach of the administrator's fiduciary duty.
Barnhart additionally charges that UNUM breached its fiduciary duty by failing to act in the sole interest of Barnhart and by acting as an adversary by investigating Barnhart, thus failing in its duty of loyalty. Barnhart fails to appreciate that UNUM's fiduciary obligations extend to everyone who is covered by the policy. Fiduciary obligations extend primarily to the plan as it relates to all beneficiaries, not just to individual claimants. See Massachusetts Mutual Life Ins. v. Russell, 473 U.S. 134, 142, 105 S.Ct. 3085, 3090, 87 L.Ed.2d 96 (1985) (reasoning that the fiduciary duty of ERISA provisions are primarily concerned with protecting the integrity of the plan, which in turn protects
Plaintiff also claims the existence of a number of procedural irregularities, including "secret" processing of the claim by UNUM's quality review division, deliberate disregard of the attending physician's opinion, and the use of biased medical examiners. These allegations are unsupported by the evidence. UNUM has produced a detailed compendium describing who was involved in the review process and the results of the reviewers' decisions. Any remaining "secrets" were subject to properly conducted discovery. Also, unlike Woo, UNUM employed outside examiners as well as in-house evaluators, and plaintiff has shown no bias in these examiners other than the fact that they disagreed with her own physicians. The mere assertion of apparent procedural irregularities, without more, does not give rise to heightened review. Layes, 132 F.3d at 1250.
While the Court acknowledges that plaintiff met the first prong of Woo by showing UNUM's financial bias, plaintiff has failed to meet the second prong of Woo. Consequently, the Court finds that the arbitrary and capricious standard of review is the correct standard to review the administrator's decision. The district court's error in determining the correct standard of review in its order regarding the "Motion for New Trial" is harmless because it used a more stringent standard of review than required. The district court not only used the less deferential sliding scale, but as UNUM points out, it "slid" the scale considerably, to a point of minimal deference, according UNUM the same minimal deference as Woo, where the court found "egregious" conduct. Nevertheless, the district court still found that the record "contain[ed] substantial evidence bordering on a preponderance" to uphold the administrator's decision. Woo, 144 F.3d at 1162. We agree. Because of plaintiff's lack of supporting evidence, the
The district court also correctly found in its order granting summary judgment that the Social Security benefits letter and plaintiff's affidavit were not before the administrator at the time of the benefits determination and should not have been considered by the court. Layes, 132 F.3d at 1251; cf. Brown v. Seitz Foods, Inc. Disability Benefit Plan, 140 F.3d 1198, 1200-01 (8th Cir.1998) (allowing limited discovery for the purpose of determining the appropriate standard of review does not violate the general prohibition on admitting evidence outside the administrative record).
Finding the district court properly granted summary judgment under the arbitrary and capricious standard of review and finding that its denial of the "Motion for New Trial" based on an analysis of the record under a more stringent, albeit incorrect, standard is also correct, we hereby affirm.