Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03408/USCOURTS-cand-3_05-cv-03408-4/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.: Employee Benefits

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DONALD DOUGLAS,

Plaintiff,

 v.

HARTFORD LIFE AND ACCIDENT

INSURANCE CO.; WAL-MART STORES,

INC. EMPLOYEE LONG TERM

DISABILITY BENEFITS PLAN; AND DOES

1–50,

Defendants. /

No. C 05-03408 WHA

ORDER DENYING MOTION FOR

SUMMARY JUDGMENT

INTRODUCTION

In this action seeking benefits under a long-term disability policy, defendants Hartford

Life and Accident Insurance Co. and Wal-Mart Stores, Inc. Employee Long Term Disability

Benefits Plan move for summary judgment. Defendants are not entitled to judgment as a matter

of law, even assuming that the Court must review their denial of benefits under an abuse-ofdiscretion standard. The motion therefore is DENIED.

STATEMENT

Wal-Mart Stores, Inc. bought a long-term disability insurance policy from Hartford Life

and Accident Insurance Co. for its employees’ benefit. Insured employees were entitled to

payments under the group plan if they became unable to work due to injury or sickness. 

The policy stated: “INTERPRETATION OF POLICY TERMS AND

CONDITIONS The Hartford has full discretion and authority to determine eligibility for

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benefits and to construe and interpret all terms and provisions of the Group Insurance Policy.” 

After an initial period of benefits, Hartford would continue paying a worker’s benefits so long

as he or she was “prevented from performing the essential duties of any occupation for which

[the employee] is qualified by education, training or experience. Even if the employee stopped

working for Wal-Mart during that latter period, he or she would continue getting benefits “as

long as [the worker was] entitled to benefits” (Administrative R. (hereinafter “AR”) 16, 23)

(emphasis in original). 

Plaintiff Donald Douglas worked as a pharmacist in a Wal-Mart store in Sonoma

County. He was enrolled in the disability-insurance plan. On March 14, 2003, he was traveling

in an automobile when it collided with an oncoming vehicle. His elbow was broken. On

September 12, 2003, Hartford approved his application for long-term disability benefits,

effective on the date of the accident (AR 224, 250, 260–61, 270). 

On March 29, 2004, one of plaintiff’s doctors, Mark Schakel, made this note: “I have

extended . . . disability for another couple of months. . . . The patient in two months’ time will

have repeat x-rays . . . . I plan on returning him to work sometime around that time” (AR 178). 

On June 25, 2004, Hartford learned that plaintiff had quit his job. One of the insurer’s

examiners spoke to plaintiff that day. Her notes from then state “elbow is fine, but arth[ritis] in

knees, symptoms in the hips, needs hips x-rayed, needs to talk to him about that.” On July 20,

2004, Schakel examined plaintiff. The physician noted that the elbow “has occasional pain” but

“overall . . . seems to be doing well. [Plaintiff] has some residual stiffness in his wrist and

occasional pain here as well.” The doctor also stated that there was “no evidence of significant

posttraumatic arthritis.” The plan was for plaintiff “to monitor his symptoms and return” to

Schakel “only if he is having further or worsening problems” (AR 98, 160). 

On July 23, Hartford sought “clarification of Mr. Douglas’s current functionality” from

Schakel. The letter did not inform the physician of plaintiff’s statement that he had arthritis in

his knees and “symptoms in the hips.” There is no evidence that Schakel ever knew of

plaintiff’s knee and hip problems. In the letter, Hartford told the doctor that plaintiff had said

“his elbow was fine and is not his disabling condition.” The insurer asked whether “[plaintiff

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is] able to perform his job as Pharmacist at this time?” Schakel answered simply “yes” as to

whether plaintiff could perform his job. He signed the letter August 11, 2004, and returned it to

Hartford two days later (AR 111, 161–62). Hartford did not make inquiry of Dr. Richard

Powers, whom the record before it showed was also treating plaintiff. 

In a letter dated October 5, 2004, Hartford informed plaintiff that it would not pay

further benefits, effective September 30, 2004. It justified its decision by noting that Schakel

had released plaintiff to work as a pharmacist. Hartford said that the release meant he no longer

met the definition of totally disabled (AR 143–46). 

Plaintiff appealed the decision in a letter dated November 4, 2004. He stated:

I currently have a problem with my hips (particularily [sic] my left

hip). I am experiencing a deep ache and tingling down my leg. 

This situation makes it difficult for me to walk or be on my feet for

longer than a few minutes at a time. I also have bilateral prothsetic

knee replacements that makes movement difficult [sic]. I am

seeing my primary care physician, Dr. Richard Powers, for this

problem

(AR 135). 

In response, Hartford notified plaintiff that it had received his appeal. It did not inform

him of any further action he would need to take to bolster his appeal, nor of any additional

evidence that would help him, such as documentation of disability due to knee and hip problems

prior to August 11, 2004. In a second letter between the appeal and the decision upon it,

Hartford asked plaintiff to provide “the additional medical information from Dr. Powers that

you referenced in your appeal letter,” apparently a reference to documentation of Powers’

diagnosis and treatment of plaintiff’s arthritis (AR 130, 134). 

Twenty days after the date of that second letter, plaintiff saw Powers. The doctor wrote

a letter the same day, December 23, 2004, stating that: 

[plaintiff’s] ability to resume his former work as a pharmacist at

Wal-Mart is severely compromised by the degenerative joint

disease affecting especially now his left hip. Bilateral hip pain

makes it difficult for him to arise from a chair, makes it impossible

for him to stand on his feet for periods of more than a few minutes

. . . and thus he would not be able to carry out the duties of the

pharmacist. ¶ His elbow no longer disables him . . . . His

disabling condition is now his hips

(AR 129). Plaintiff and Hartford did not communicate further until January 24, 2005. 

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On that date, Hartford upheld its decision to end benefits. It stated:

Our 10/4/04 determination [to end benefits] was based on your

3/29/04 office with your physician, Dr. Mark Sackel, in which he

would extend your disability for additional couple months. 

Therefore, as of 6/1/04 you were released to your own occupation

of Pharmacist. . . . [Y]ou were released to your own occupation

on 6/1/04 from your own physician. 

Dr. Sackel . . . responded on 8/10/04 that you could perform work

within your occupation at Wal-Mart . . . . 

As part of your appeal, you have written a letter . . . . Also, you

have provided a Medical Letter from Dr. Richard Powers which

indicates your first visit was 12/23/04 . . . . 

The medical from Dr. Richard Powers, 6 months and 3 months

beyond this period would not support what level of functionality

you had on 6/1/04 or 10/5/05 (actual termination of benefits). 

. . . Dr. Powers himself cannot provide additional medical

evidence or address your condition 6 months or 3 months prior,

since he did not initially see you until 12/23/04

(AR 122–23) (all grammatical and spelling errors in original). 

This letter denying the appeal was infected with error. Hartford’s letter terminating

benefits was written October 5, not October 4. In the earlier letter, Hartford did not base its

decision on the March 29 office visit. It stated instead that it had based its decision “on policy

language” and on Schakel’s decision to clear plaintiff for work. Also contrary to the letter,

Schakel did not release plaintiff for work on June 1, 2004. He released plaintiff for work on

August 11, 2004. Furthermore, the letter from Powers did not indicate that plaintiff’s first visit

with him was December 23, 2004. Plaintiff had listed Powers as being one of his doctors

during the period June 2001 through July 15, 2003 and also in the eighteen months prior to

January 23, 2004. In addition, plaintiff stated on November 4, 2004, that “I am seeing . . . Dr.

Richard Powers[] for this problem [hip and/or knee difficulties].” That was forty-nine days

before the December 23 letter by Powers (AR 135, 200–01, 263). The decision placed

emphasis on the fact that the Powers letter used the present tense rather than the past tense to

describe the disability. It seems clear, as was stated at the hearing, that Powers would have

provided a letter covering both bases had Hartford inquired. 

Plaintiff filed a complaint against defendants August 23, asserting violation of the

Employee Retirement Insurance Security Act (ERISA). See 29 U.S.C. 1132(a)(1)(B). 

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ANALYSIS

Summary judgment is proper where the evidence shows that “there is no genuine issue

as to any material fact and that the moving party is entitled to judgment as a matter of law.” 

FRCP 56(c), (e). A nonmoving party who bears the ultimate burden of proof at trial must

“designate specific facts showing there is a genuine issue for trial.” Celotex Corp. v. Catrett,

477 U.S. 317, 324 (1986). On summary judgment, the “evidence of the non-movant is to be

believed, and all justifiable inferences are to be drawn in his favor.” Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 255 (1986). The parties to the instant action agree that there are no issues

about material facts and that the administrative record is the entire universe of evidence. 

ERISA beneficiaries and participants can bring actions to recover benefits, to enforce

their rights under the plan and to clarify their rights to future benefits. 29 U.S.C. 1132(a)(1)(B). 

The parties agree that the policy here is covered by ERISA. 

1. STANDARD OF REVIEW.

“[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.” Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If the authority is properly conferred, courts

overturn plan decisions only when the administrator or fiduciary abused its discretion. 

McDaniel v. Chevron Corp., 203 F.3d 1099, 1107 (9th Cir. 2000). 

The parties dispute whether Hartford’s decision is subject to de novo or the more

deferential standard. For purposes of this motion only, the Court assumes (without finally

deciding) that the deferential standard applies. A fiduciary abuses its discretion when it renders

decisions without explanation, construes provisions of the plan in a way that conflicts with its

plain language or relies on clearly erroneous findings of fact in making benefit determinations. 

Taft v. Equitable Life Assurance Soc’y, 9 F.3d 1469, 1472–73 (9th Cir. 1993). Deference to the

fiduciary’s decision is required unless it was “so patently arbitrary and unreasonable as to lack

foundation in factual basis and/or authority in governing case or statute law [sic]” or was “not

grounded on any reasonable basis.” If the decision was a good-faith, reasonable interpretation

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of the plan, it must be upheld. Oster v. Barco of Cal. Employees’ Ret. Plan, 869 F.2d 1215,

1218 (9th Cir. 1988).

2. THE MERITS.

Since he ceased being an employee, Douglas would remain eligible for disability

benefits only so long as he was in fact disabled. If there was any interruption of his disability

status, then the plan terminated as to him. Both sides seem in agreement on this. The key issue

is whether his disability status was interrupted in August 2004. 

Hartford sought to justify its decision to deny plaintiff’s appeal by making several

erroneous statements and by advancing several conclusions that were not supported by any

evidence. These included (1) the statement that the “10/4/04 determination was based on your

3/29/04 office visit with your physician . . . in which he would extend your disability for

additional couple months” [sic], (2) that “as of 6/1/04 you were released to your own

occupation of Pharmacist . . . [by] “your own physician,”(3) that “as of 6/1/04 you were

capable of medium-level work” and (4) that Powers “did not initially see you until 12/23/04”

(AR 122–23). All of these statements were wrong. 

Schakel said on March 29, 2004, merely that he planned on “returning [plaintiff] to

work” in about two months. Hartford acts as if this statement was a time bomb that went off

automatically on June 1, ending plaintiff’s eligibility. But Schakel was merely predicting the

future. The doctor noted that, in two months, plaintiff would need a “reevaluation,” suggesting

that a return to work was not a foregone conclusion. Furthermore, the doctor had previously

made an inaccurate predication about when plaintiff would return to work, forecasting on

February 26, 2004, that plaintiff would be able to return to work within six weeks (i.e., by midApril). In addition, Hartford itself sought clarification on July 23 about whether plaintiff was

ready to go back to work, thus implying that it did not know. This fact suggests that the appeal

decision’s rationale based on the March 29 visit was a post hoc rationalization, albeit one that

does not make sense. Furthermore, Hartford stated erroneously in its appeal decision that the

March 29 statement was the basis of its original termination of benefits. In fact, the March 29

statements were never mentioned in the initial termination letter. 

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The appeals decision also erroneously discounts plaintiff’s treatment by Powers. 

Hartford stated that Powers did not treat plaintiff until December 23, 2004. That was not true. 

Powers had seen plaintiff for the first time on July 15, 2003, at the latest, and possibly as early

as June 2001 (AR 200–01). Plaintiff was seeing Powers on November 4, 2004, for his hip and

knee difficulties. Hartford had undisputed evidence of all these facts when it made its appeal

decision. 

When Hartford made the appeals decision, it had reason to suspect that plaintiff was

disabled by his knee and hip problems at the time Schakel released him for work. Defendants

conceded at the hearing that, if plaintiff was disabled by those arthritic conditions when Schakel

released him to work on August 11, benefits should not have been terminated. The evidence

suggesting a second disability were: (1) plaintiff’s statement dated June 25, 2004, that he had

arthritis in his knees, “symptoms in the hips” and needed to have his hip X-rays; (2) plaintiffs’

letter dated November 4, 2004, to Hartford describing both a “deep ache and tingling” in his leg

that made it difficult to walk or to be on his feet “for longer than a few minutes at a time” and

difficulty moving because of “bilateral prothsetic [sic] knee replacements;” and (3) Powers’

letter dated December 23, 2004, stating unequivocally that plaintiff was disabled and could not

work. 

Despite this evidence, Hartford did no further investigation. They did not tell plaintiff

that he would need to prove the disabling nature of his arthritis as of August 11, 2004. They did

not contact Powers for more information, despite knowing that he had been treating plaintiff for

years and therefore might have detailed records supporting or refuting the claim to arthritic

disability in the summer of 2004. It was a breach of Hartford’s fiduciary duty and an abuse of

its discretion to deny the appeal without at least making further investigation. 

This conclusion is required by ERISA regulations. Whenever an ERISA insurance plan

makes an “adverse benefit determination,” it must provide the claimant with a “description of

any additional material or information necessary for the claimant to perfect the claim and an

explanation of why such material or information is necessary,” and must do so “in a manner

calculated to be understood by the claimant.” 29 C.F.R. 2560.503-1(g)(1)(iii). In the instant

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case, Hartford did not obey this regulation. It knew that plaintiff would lose his appeal if he

could not prove that he was disabled by the arthritis during the summer of 2004. But Hartford

kept him in the dark. 

Also, Hartford’s appeal process was not a “full and fair review,” as required by 29

C.F.R. 2560.503-1(h)(1). Although Hartford had a catchall phrase in its termination letter,

claiming to have reviewed plaintiff’s entire file, its list of particular items considered made no

mention of the statement by plaintiff in June that he had knee arthritis, hip “symptoms,” and

needed a hip X-ray. Without clearly considering that statement, the review was neither “full”

nor “fair.” 

Gaither v. Aetna Life Insurance Co., 394 F.3d 792 (10th Cir. 2004), is instructive. 

There, the claimant had been put on leave due to a disabling addiction to painkillers used to

treat cancer pain. The plan denied his application for benefits on the ground that there was

“inadequate documentation of functional disability” during a particular three-month period. 

The Court found that the ERISA fiduciary had been presented with significant evidence that the

plaintiff was disabled during the relevant period, but had failed to follow up with a proper

investigation and had failed to inform the plaintiff clearly of the period during which he had to

prove that he had been disabled. The court held that “An ERISA fiduciary presented with a

claim that a little more evidence may prove valid should seek to get to the truth of the matter. 

Fundamentally, what was missing in [the plaintiff’s] case was a real response to his claim to be

disabled because of narcotics use. . . . [The fiduciary did not give] fair warning that [the

plaintiff] needed to provide evidence of drug use during the earlier period.” Id. at 795, 808–09. 

In the instant action, Hartford did not fulfill its fiduciary duty to investigate plaintiff’s

claim properly. It did not explain to him what he needed to prove in order to get benefits. To

deny plaintiff his benefits without first doing these two things was an abuse of discretion. 

Defendants claim that the evidence of an arthritic condition was not enough to require a

different decision on plaintiff’s benefits. That misses the point. The evidence was enough to

trigger a duty on Hartford’s part to investigate more fully whether or not that arthritic condition

was disabling in August 2004. 

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The Court also notes Hartford’s argument that plaintiff was not entitled to benefits

because he was not under the continuous care of a physician. No such requirement of

continuous care applied to plaintiff’s claim. Any other interpretation would conflict with the

plain terms of the policy. The relevant provisions state: 

Total Disability or Totally Disabled means that: (1) during the

Elimination Period; and (2) for the next 12 months, you are

prevented by: (a) accidental bodily injury; (b) sickness; (c) Mental

Illness; (d) substance abuse; or (e) pregnancy, from performing the

essential duties of your occupation, and are under the continuous

care of a Physician . . . . ¶ After that, you must be so prevented

from performing the essential duties of any occupation for which

you are qualified by education, training or experience

(AR 16) (emphasis in original). At the time that plaintiff was deemed ineligible for benefits,

August 11, 2004, he was beyond the elimination period and the initial twelve months. 

Therefore, only the second quoted paragraph applied to plaintiff. Unlike the rules of the earlier

period, the requirements of the later period did not include being under continuous doctor’s

care. 

CONCLUSION

Defendants abused their discretion by terminating plaintiff benefits without first

conducting a more thorough investigation into his apparent disability due to arthritis in his

knees and hips and/or advising plaintiff of the specific type of information needed to perfect his

claim. Defendants’ motion therefore is DENIED. There are no disputed facts; both sides stand

on the administrative record. Because this order holds that defendants abused their discretion, it

would be a mere formality to require plaintiff to move for summary judgment before remanding

this case. This matter therefore is remanded to the plan fiduciary for further investigation and a

full review, complete with another appeal opportunity if plaintiff’s claim again is denied. 

IT IS SO ORDERED.

Dated: May 22, 2006 WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

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