Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-00132/USCOURTS-cand-3_05-cv-00132-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1001 E.R.I.S.A.: Employee Retirement

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

BARBARA L. DAVISON,

Plaintiff,

 v.

THE HARTFORD LIFE AND ACCIDENT

INSURANCE COMPANY, et al.,

Defendants /

No. C-05-0132 MMC

ORDER DENYING PLAINTIFF’S MOTION

RE STANDARD OF REVIEW; VACATING

HEARING

Before the Court is plaintiff Barbara L. Davison’s Motion Re Standard of Review, by

which plaintiff seeks an order to the effect that defendants’ decision denying her claim for

disability benefits is subject to de novo review. Defendants Hartford Life and Accident

Insurance Company and PwC Health and Welfare Benefits Plan have filed opposition, to

which plaintiff has replied. Having read and considered the papers filed in support of and in

opposition to the motion, the Court deems the matter appropriate for decision on the

papers, VACATES the hearing scheduled for September 9, 2005, and rules as follows.

“Depending upon the language of an ERISA plan, a district court reviews a plan

administrator’s decision to deny benefits either de novo or for abuse of discretion.” Ingram

v. Martin Marietta Long Term Disability Income Plan, 244 F. 3d 1109, 1112 (9th Cir. 2001). 

“The de novo standard is appropriate unless the benefit plan gives the administrator or

fiduciary discretionary authority to determine eligibility for benefits or to construe the terms

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of the plan.” Id. (internal quotation and citation omitted). 

Here, the plan includes language that unambiguously provides defendants with

discretion to determine eligibility for benefits and to construe the terms of the plan: “We

have full discretion and authority to determine eligibility for benefits and to construe and

interpret all terms and provisions of the [policy].” (See Boys Decl., filed August 19, 2005,

Ex. A at POL020.) Plaintiff argues, however, that irrespective of the plan language, she is

entitled to de novo review, on the ground that discretionary clauses are illegal under state

law, or, alternatively, that defendants acted under an actual conflict of interest.

A. Enforceability of Discretionary Clauses

In February 2004, the California Department of Insurance (“DOI”) issued a notice in

which it expressed the opinion that discretionary clauses are “objectionable” under

California law and stated that the DOI would, subject to the outcome of an administrative

hearing, revoke approval of certain policies that included discretionary clauses. (See Grey

Decl., filed August 5, 2005, Appendix 1 attached to Ex. 3.) In March 2005, following an

administrative hearing, the DOI revoked its approval of the policies at issue therein. (See

id. Ex. 4.) Although the DOI’s order does not reference the specific policy at issue here,

plaintiff asserts the DOI’s order establishes that discretionary clauses are illegal under

California law and that, as a consequence, plaintiff is entitled to de novo review. The Court

disagrees.

Initially, the Court notes that the Supreme Court has held that a “benefit plan [may]

give[ ] the administrator or fiduciary discretionary authority to determine eligibility for

benefits or to construe the terms of the plan.” See Firestone Tire & Rubber Co. v. Bruch,

489 U.S. 101, 115 (1989). Further, the DOI has explained that its notice “does not effect

policies already sold,” (see Defs.’ Req. for Judicial Notice, filed August 19, 2005, Ex. 2 at

3); thus, the DOI’s notice is inapplicable to the instant policy, which was issued in 1999,

(see Boys Decl. Ex. A at POL004). Further, defendant should be entitled to rely on any

prior approval of the policy by the DOI, as such approval necessitated a finding by the DOI

that said policy did not contain provisions that are “unintelligible, uncertain, ambiguous, or

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Because defendants not only administer but also fund the plan, (see Boys Decl. Ex.

B at AR243), defendants have an “apparent” conflict of interest, see Tremain v. Bell

Industries, Inc., 196 F. 3d 970, 976 (9th Cir. 1999).

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abstruse, or likely to mislead a person to whom the policy is offered, delivered or issued.” 

See Cal. Ins. Code § 10291.5(b)(1).

Accordingly, the Court finds the DOI’s order has no bearing on the standard of

review applicable to the decision at issue herein.

B. Conflict of Interest

Where a claimant offers “material, probative evidence, beyond the mere fact of [an]

apparent conflict, tending to show that the fiduciary’s self-interest caused a breach of the

administrator’s fiduciary obligations to the beneficiary,” a presumption arises that the

administrator breached its fiduciary obligations to the beneficiary. See Hensley v.

Northwest Permanente P.C. Retirement Plan & Trust, 258 F. 3d 986, 995 (9th Cir. 2001).1 

“[M]aterial, probative evidence may consist of inconsistencies in the plan administrator’s

reasons, insufficiency of those reasons, or procedural irregularities in the processing of the

beneficiaries claims.” Nord v. Black & Decker Disability Plan, 356 F. 3d 1008, 1010 (9th

Cir.) (internal quotation and citation omitted), cert. denied, 125 S. Ct. 62 (2004).

Here, plaintiff has not identified an inconsistency in defendants’ reasoning or a

procedural irregularity in the processing of the claim. Rather, plaintiff argues, defendants

erred in their understanding of the medical evidence in the record and in the manner in

which they interpreted the “pre-existing condition” clause in the plan and/or summary plan

description. Although not clearly expressed, plaintiffs appear to assert such conduct

implicates Nord’s reference to an “insufficiency of [the plan administrator’s] reasons.”

That reference, however, must be read in context. In an earlier opinion in the same

case, the Ninth Circuit, in support of its reference to “insufficiency,” cited Tremain v. Bell

Indus., Inc., 196 F. 3d 970 (9th Cir. 1999). See Nord v. Black & Decker Disability Plan, 296

F. 3d 823, 829 (9th Cir. 2002), rev’d on other grounds, Black & Decker Disability Plan v.

Nord, 538 U.S. 822 (2003). In Tremain, the Ninth Circuit found the explanation for the

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denial of benefits to be “troubling.” See Tremain, 196 F. 3d at 977. In particular, the plan

administrator had relied on a definition of “disability” not contained in the plaintiff’s plan,

and, contrary to the record, claimed it had done so inadvertently. See id. Additionally, the

plan administrator found the plaintiff’s “earning capacity had not decreased by fifty percent,”

a prerequisite under the plaintiff’s plan, see id. at 974 n.3, but, as the Ninth Circuit

observed, the plan administrator had failed to state any basis for such finding and evidence

existed showing plaintiff’s earning capacity had, in fact, decreased by “at least” that

amount, see id. In short, the administrator in Tremain failed to set forth any evidentiary

basis for its finding, which failure was particularly noteworthy in light of the plaintiff’s having

offered evidence to the contrary.

Here, by contrast, defendants identified the evidence, in both the initial denial letter,

(see Boys Decl. Ex. B at AR243-AR247), and in the letter affirming the denial, (see id. at

AR030-AR033), that defendants believed supported their finding that plaintiff had a preexisting condition and, further, in the letter affirming the denial, stated why the additional

evidence submitted on appeal by plaintiff was not, in defendants’ view, sufficient to support

her claim for benefits, (see id.). Consequently, the instant case does not involve, as was

the case in Tremain, an administrator who made a decision without identifying any support

therefor and without explaining why it rejected evidence submitted by the claimant.

With respect to defendants’ interpretation of the pre-existing condition provision, the

Court finds that defendants’ interpretation of the provision, although contrary to the

interpretation advocated by plaintiff, does not constitute material evidence of a conflict of

interest. As defendants point out, courts have differed in the manner in which they have

interpreted “pre-existing condition” provisions. See, e.g., Sanders v. CNA Group Life

Assurance Co., 322 F. Supp. 2d 1142, 1149-50 (D. Or. 2004) (holding, where claimant

asserted disability as result of ALS, administrator erred in relying on pre-existing condition

provision, where “neither [claimant] nor his treating physician was aware that [claimant]

suffered from [ALS]” before effective date of policy); Futamura v. UNUM Life Ins. Co., 305

F. Supp. 2d 1181, 1184, 1190-91 (W.D. Wash. 2004) (holding, where claimant asserted

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disability as result of lung cancer, administrator did not err in relying on pre-existing

condition provision, where claimant sought treatment for “chronic cough” before effective

date of policy and such symptom “related to” later lung cancer diagnosis).

In sum, although plaintiff disagrees with defendants’ reasoning, plaintiff has failed to

show that defendants’ reasoning was so deficient as to constitute material evidence of an

actual conflict of interest. Accordingly, plaintiff has failed to show she is entitled to de novo

review of defendants’ decision.

CONCLUSION

For the reasons stated above, plaintiff’s motion is hereby DENIED, and the Court will

review defendants’ denial of plaintiff’s claim for abuse of discretion.

IT IS SO ORDERED.

Dated: September 7, 2005 

MAXINE M. CHESNEY

United States District Judge

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