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Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 05-1364

___________

Joeffre Kolosky, *

*

Appellee, *

* Appeal from the United States

v. * District Court for the

* District of Minnesota.

UNUM Life Insurance Company * [UNPUBLISHED]

of America, *

*

Appellant. *

___________

Submitted: May 10, 2006

Filed: May 22, 2006

___________

Before WOLLMAN, MURPHY, and COLLOTON, Circuit Judges.

___________

PER CURIAM.

UNUM Life Insurance Co. of America (UNUM) appeals from the district

court’s order denying UNUM summary judgment and granting Joeffre Kolosky partial

summary judgment on his claim alleging wrongful denial of long-term disability

(LTD) benefits under the Employee Retirement Income Security Act (ERISA), 29

U.S.C. § 1132(a)(1)(B). We reverse in part and remand the case to the district court

for further proceedings consistent with this opinion.

Kolosky was terminated from his employment with Fairview Hospital and

Healthcare Services (Fairview) on January 28, 2000. While employed by Fairview,

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he had LTD coverage under a policy issued by UNUM (the policy). Alleging

disability from depression, Kolosky sought LTD benefits under the policy. UNUM,

the plan administrator, denied Kolosky’s claim. Kolosky brought this action under

section 1132(a)(1)(B), and thereafter the parties filed cross-motions for summary

judgment.

The district court held that UNUM’s dual role as both insurer and plan

administrator created a palpable conflict of interest and that UNUM’s reliance on the

opinions of in-house medical professionals over those of Kolosky’s treating

physicians was both a serious procedural irregularity and a serious breach of a

fiduciary duty in UNUM’s discretionary decision-making role. The district court

therefore concluded that UNUM’s denial of Kolosky’s request for LTD benefits was

not entitled to the deferential abuse-of-discretion review ordinarily afforded a plan

administrator with discretionary authority. See Pralutsky v. Met. Life Ins. Co., 435

F.3d 833, 837 (8th Cir. 2006) (where plan reserves discretionary authority to plan

administrator, courts ordinarily review administrator’s benefits decision deferentially,

considering whether administrator abused its discretion); Woo v. Deluxe Corp., 144

F.3d 1157, 1160 (8th Cir. 1998) (less deferential review than abuse-of-discretion

review applies where claimant presents material, probative evidence demonstrating

that (1) palpable conflict of interest or serious procedural irregularity existed, which

(2) caused serious breach of plan administrator’s fiduciary duty). Applying the less

deferential review standard set forth in Woo, 144 F.3d at 1162 (requiring that denial

of benefits be supported by “substantial evidence bordering on a preponderance”), the

district court determined that UNUM’s decision was not sufficiently supported by the

evidence and that as a matter of law Kolosky was entitled to LTD benefits for a period

of twenty-four months. The district court granted partial summary judgment for

Kolosky and awarded him damages in the amount of $14,400.

On appeal, UNUM contends that (1) the less deferential review standard should

not have been applied; and (2) even under the less deferential standard, its decision

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should be upheld because (a) substantial evidence in the administrative record showed

that Kolosky was not continuously disabled through the elimination period, and (b)

Kolosky’s coverage had lapsed upon his termination from employment with Fairview.

Notwithstanding his failure to file a cross-appeal, Kolosky contends that he should

receive LTD benefits for more than twenty-four months. 

We review de novo both the district court’s grant of summary judgment and its

determination of the appropriate standard for reviewing UNUM’s benefits-eligibility

decision. See Phillips-Foster v. UNUM Life Ins. Co., 302 F.3d 785, 794 (8th Cir.

2002). We conclude that the district court erred in applying the less deferential

standard of review.

Assuming that Kolosky satisfied the first prong of the Woo test, he failed to

satisfy the second prong of the Woo test because he made no showing of a causal

connection between the presumed conflict of interest and UNUM’s benefits-eligibility

decision. See Farfalla v. Mutual of Omaha Ins. Co., 324 F.3d 971, 973 (8th Cir. 2003)

(defendant had palpable conflict of interest as insurer and plan administrator, but

evidence did not establish that conflict affected its eligibility decision and therefore

less deferential review was not warranted); Barnhart v. UNUM Life Ins. Co., 179 F.3d

583, 589 & n.9 (8th Cir. 1999) (second prong of Woo test “presents a considerable

hurdle for plaintiffs”; claimant required to show “connection” between plan

administrator’s “financial interest” and its “ultimate decision”).

Moreover, to the extent the district court reasoned that UNUM’s reliance upon

the opinions of in-house physicians over treating physicians constituted a procedural

irregularity, we find its analysis wanting. “In determining whether procedural

irregularities occurred, we consider whether the plan administrator’s decision was

made without reflection or judgment, such that it was the product of an arbitrary

decision or the plan administrator’s whim.” Parkman v. Prudential Ins. Co., 439 F.3d

767, 772 n.5 (8th Cir. 2006) (per curiam) (internal quotation marks omitted).

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Examples of such procedural irregularities include instances in which “the plan trustee

does not inquire into the relevant circumstances at issue; [or] where the trustee never

offers a written decision, so that the applicant and the court cannot properly review

the basis for the decision.” Buttram v. Cent. States, Se. & Sw. Areas Health &

Welfare Fund, 76 F.3d 896, 900 (8th Cir. 1996). More generally, such a procedural

irregularity may be found where the conduct was so egregious “that the court has a

total lack of faith in the integrity of the decision making process.” Id. In Woo, 144

F.3d at 1161, we found that a procedural irregularity occurred when the plan

administrator, confronted with medical evidence and two treating physicians’ opinions

indicating in retrospect that the claimant had been disabled by a rare and previously

undiagnosed disease, nevertheless determined that the claimant was not disabled even

though the plan administrator had not had a medical expert on the disease review the

claim. Given those circumstances, we found a failure to use proper judgment, which,

combined with a financial conflict of interest, established “egregious conduct.” Id.

at 1162. By contrast, in the case at bar, UNUM turned to its in-house physicians to

review and assess Kolosky’s medical records and treating physicians’ reports, which

undisputedly contained some inconsistencies and contradictions regarding whether

Kolosky actually suffered from depression within the relevant time frame. The fact

that UNUM thereafter decided that Kolosky was not disabled based upon the

reviewing physicians’ opinions does not suggest that the decision was made without

reflection or judgment or that it was the product of arbitrariness or whim.

Accordingly, the district court erred in failing to apply the abuse-of-discretion

standard in reviewing UNUM’s LTD benefits decision. 

We reverse the district court’s rulings on the parties’ cross-motions for

summary judgment regarding UNUM’s decision to deny Kolosky LTD benefits under

the policy. We remand the case to the district court solely to review anew UNUM’s

LTD benefits decision under an abuse-of-discretion standard.

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