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Baty v. Metropolitan Life Insurance Co.

United States District Court, D. Kansas

October 10, 2017

KAREN A. BATY, Plaintiff,



         This matter comes before the Court on Plaintiff's request to engage in discovery outside the administrative record (“Memorandum of Law Regarding Discovery, ” ECF No. 21) and Defendant's Memorandum concerning the same topic (ECF No. 20). Having reviewed the parties' briefing, and portions of the administrative record (ECF Nos. 13-19, sealed), the Court is now prepared to rule. For the reasons set forth below, Plaintiff's request (ECF No. 21) is GRANTED.

         I. Background[1]

         Plaintiff Karen A. Baty initially filed this case in the Sedgwick County District Court[2] against defendant Metropolitan Life Insurance Company (“MetLife”), the issuer and administrator of a long-term disability plan (“Plan”) for Plaintiff's former employer, Textron Credit Union. In late 2013, Plaintiff was diagnosed with breast cancer and underwent a variety of treatments, including surgery and chemotherapy. Although she tried to work through her chemotherapy treatments, she claims she was ultimately unable to perform her job because of cognitive difficulties resulting from her treatments. Textron terminated her employment in November 2014.

         After her termination, Plaintiff applied for long-term disability (“LTD”) benefits, and Defendant denied her claim. She claims Defendant's decision to deny her benefits was arbitrary, capricious, and not supported by substantial evidence. Defendant hired two physicians to review her case, and Plaintiff alleges those physicians used inaccurate and unreasonable review procedures, and based their decision on erroneous facts. Plaintiff brought this case to recover LTD benefits under the employee benefit plan pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132(a)(1)(B).

         Defendant MetLife removed the case to this federal court on August 11, 2017. During the Scheduling Conference held on September 22, 2017, the parties announced they had reached an impasse regarding the appropriateness of discovery outside the administrative record reviewed by MetLife when determining Plaintiff's eligibility for LTD benefits. (See Order, ECF No. 12). In light of the discussions during the scheduling conference, the Court ordered the parties to brief the issue of the scope of discovery. Having had the opportunity to review the parties' written arguments, the Court is now prepared to rule.

         II. Legal Standard

         When deciding whether discovery is appropriate in an ERISA denial of benefits case, the Court must acknowledge the standard by which it reviews the claims administrator's decision. The Supreme Court determined “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.”[3] If the benefits plan gives the administrator discretionary authority, the Court applies an arbitrary and capricious standard of review.[4]The parties' briefs each suggest the Plan granted MetLife, as claim fiduciary, discretionary authority to interpret the Plan. Therefore, the Court weighs the parties' arguments regarding the scope of discovery under the auspices of the arbitrary and capricious standard of review.

         When utilizing the arbitrary and capricious standard to review the administrator's decision, “the district court generally may consider only the arguments and evidence before the administrator at the time it made that decision.”[5] Therefore, the court's review is usually “limited to the administrative record-the materials compiled by the administrator in the course of making his decision, ”[6] and it “is the unusual case in which the district court should permit supplementation of the record.”[7] “The party moving to supplement the record or engage in extra-record discovery bears the burden of showing its propriety.”[8] Courts do not look favorably on attempts to discover or present additional substantive evidence regarding the applicant's disability.[9] But courts have permitted discovery, outside the administrative record, under such “exceptional circumstances” as when a conflict of interest exists or “when there is evidence that a claimant could not have presented in the administrative process.”[10]

         An inherent conflict of interest arises when a claims administrator acts in a dual role as both administrator/evaluator and insurer/payor of a claim.[11] The court reviewing a denial of benefits considers the conflict of interest as a factor in its abuse of discretion analysis, weighing it “more or less heavily depending on the seriousness of the conflict.”[12] Courts generally view the conflict as more important “where circumstances suggest a higher likelihood that it affected the benefits decision” and as less important “where the administrator has taken active steps to reduce potential bias and to promote accuracy.”[13]

         Courts in this District and the Tenth Circuit apply the scope of discovery standard of Fed.R.Civ.P. 26(b) to requests for extra-record discovery related to a dual-role conflict of interest.[14] Under this standard, parties are entitled to discovery regarding matters that are both “relevant to any party's claim or defense and proportional to the needs of the case.”[15] But “neither a claimant nor an administrator should be allowed to use discovery to engage in unnecessarily broad discovery that slows the efficient resolution of an ERISA claim.”[16] The district court must balance its “substantial discretion in handling discovery requests under Rule 26(b), ”[17] with “both the need for a fair and informed resolution of the claim and the need for a speedy, inexpensive, and efficient resolution of the claim.”[18]

         III. Discussion

         The parties agree that Defendant acted in a dual role regarding the LTD Plan: first, as the insurer (the entity that would pay out benefits); and second, as the administrator (the evaluator making the decision whether benefits are payable). Plaintiff contends discovery outside the administrative record is appropriate because “there are red flags within the administrative record that suggest the dual role conflict infected” Defendant's decision (ECF No. 21, at 6). Plaintiff lists examples of these red flags, such as that the reports prepared by Defendant's two Independent Physician Consultants (“IPCs”) utilized the same formats. Additionally, the IPCs contacted Plaintiff's treating doctors with “cold calls” rather than scheduling interviews, which caught the physicians unprepared.

         Plaintiff's most troubling allegation is that both IPC reports contained factual inaccuracies about their interviews with the treating physicians in ways that favored Defendant. Plaintiff seeks discovery into Defendant's use of, and relationship with, its IPCs to determine whether it inappropriately coaches them in their review of claims.

         Defendant disagrees that these examples support discovery outside the administrative record. It contends the administrative record already demonstrates what information and instruction the IPCs were given regarding their investigation of Plaintiff's claim, and no additional discovery is warranted. Additionally, Defendant points out that both Plaintiff's counsel and the treating physicians responded to the IPCs' initial reports with their concerns regarding the factual errors and procedural issues they found in the IPCs' initial reports. As a result of those notifications, the IPCs addressed and considered those concerns, and determined the issues did not change their evaluation of Plaintiff's claim. All of the correspondence surrounding Plaintiff's concerns are contained in the administrative record, and therefore Defendant concludes those alleged inaccuracies are not indicative of any bias on the part of the IPCs.

         But this Court is not so certain. Defendant argues the administrative record demonstrates its referral process and selection of their IPCs (ML00379-ML00383, ECF No. 14, sealed). The Court has reviewed those portions of the record, and the forms do show that Defendant requested consulting physicians which specialize in neuropsychology and oncology, specifically directed the IPCs to contact Plaintiff's medical providers, and directed the IPCs to ask targeted questions of Plaintiff's treating physicians. But this information does not demonstrate, in a more empirical sense, how Defendant selects, trains, or otherwise directs its consultants-and, therefore, how it avoids bias and promotes accuracy in its claims reviews. The short statements showing a request for specific consultants tells nothing about how, or if, the IPCs' methodologies or opinions are reviewed; whether any unique training is provided to consulting physicians; how the ...

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