Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-00797/USCOURTS-cand-4_05-cv-00797-1/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1145 E.R.I.S.A.

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

NOT FOR CITATION

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ALI J. FARHAT,

Plaintiff, No. C 05-0797 PJH

v. ORDER GRANTING DEFENDANTS’ 

MOTION FOR DISCRETIONARY 

STANDARD OF REVIEW; DENYING

PLAINTIFF’S REQUEST FOR

HARTFORD LIFE AND ACCIDENT DISCOVERY

INSURANCE COMPANY, 

PRICEWATERHOUSECOOPERS [REDACTED]

HEALTH AND WELFARE

BENEFIT PLAN,

Defendants.

_______________________________/

INTRODUCTION

This is a case brought pursuant to the Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C. § 1001, et seq., challenging defendants’ denial of payment of longterm disability (“LTD”) benefits. Plaintiff Ali Farhat (“Farhat”) was employed by

Pricewaterhouse Coopers’ (“PWC”) tax department for nearly twenty years. Farhat was

insured under the PWC Plan, an ERISA plan, issued by Hartford Life (“Hartford”). Farhat

began receiving short-term disability benefits on April 21, 2003. Thereafter, he applied for,

but was denied LTD benefits. He challenges that denial in this case. Defendants’ motion for

a discretionary standard of review and plaintiff’s request for discovery are currently before the

court. 

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1Pursuant to this court’s sealing order, this portionof the instant order has been redacted

and is not made part of the public record. See Civil L.R. 79-5.

2There appears to be some dispute regarding the basis for Farhat’s LTD claim. Hartford

contends that itwas based ona back injuryand back surgery, and that Farhat informed Hartford

that he was no longer disabled from depression. Hartford further argues, that at the time of

Farhat’s LTD claim, he was not being treated for disabling HIV (and that if he was, he did not

notify Hartford of that fact). Farhat, however, contends thatit was based onthe back condition in

addition to HIV-related conditions, including cognitive difficulties and depression. 

3Documents labeled FN 0001- FN 020 were attached to the Administrative Record in this

case. Like defendants, the court refers to those documents by “FN.”

2

BACKGROUND1

A. Farhat’s Medical History and Physicians

[REDACTED]

B. Farhat’s Benefits Application History

Farhat received short-term disability benefits from April 23, 2003 until October 22,

2003, based on depression and anxiety. In support of his short-term benefits application,

Farhat submitted statements from treating physician Dr. Higgins, and Dr. Shuster, the

psychologist whom he had been seeing. 

In March 2004, after Farhat’s short-term benefits expired, Farhat applied for long-term

disability benefits (“LTD”).2 With his LTD application, Farhat submitted statements from Dr.

Smith, the orthopedic surgeon, and his treating physician, Dr. Higgins. On his application,

Farhat listed only Drs. Higgins, his HIV-treating physician, and Smith, his orthopedic surgeon,

and other hospitals that had treated him for his back condition. A.R. 547. He did not list his

psychologist, Dr. Shuster, as he had on the prior short-term benefits application. Farhat noted

“terrific pain – sedated” as the condition that prevented him from working. A.R. 203. 

On March 16, 2004, Hartford apparently contacted Farhat to clarify his condition. FN

016-17.3 Farhat allegedly told Hartford claims examiner, Sarah Gagliardi, that he was “trying

to work through [the] major depression.” Id. Farhat stated that he “didn’t think” the depression

would prevent him from returning to work. Id. Farhat further stated that he was optimistic that

he would return to work, “but his doctor [was] not.” Id.

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The next day, on March 17, 2004, Hartford notified Farhat that it had received his LTD

application. A.R. 553. It also noted that it had requested Farhat’s medical records from the

hospitals treating his back injury, and from Dr. Smith, Dr. Higgins, and Dr. Shuster. Id. On

April 21, 2004, Dr. Shuster, Farhat’s former psychologist, submitted her treatment notes to

Hartford at its request. A.R. 161-71.

On May 4, 2004, Hartford approved LTD benefits from October 22, 2003, the

expiration date of Farhat’s short-term benefits, until April 4, 2004. Hartford, however, denied

benefits beyond April 4, 2004, noting that Farhat failed to provide sufficient proof of loss to

support a disability beyond that date. A.R. 418-419. In conjunction with its denial, Hartford

noted that:

The most recent medical information that we have on file is the Attending

Physician’s Statement of Disability completed by Dr. Taylor Smith, dated March

4, 2004. Dr. Smith indicates that you underwent surgery for a herniated disc on

February 4, 2004. Dr. Smith indicated on the form that your condition was

recovered, and that your restrictions would only last through April 4, 2004. As

such, your LTD benefits are approved through April 4, 2004. At this time we find

that you have failed to provide Proof of Loss, as required by the policy, to

support that you remained disabled beyond April 4, 2004. As such, benefits

beyond April 4, 2004 have been denied and your LTD has been closed.

Id. at 418.

Hartford further advised Farhat that if he did 

remain disabled beyond April 4, 2004, [an enclosed] Attending Physician’s

Statement of Disability must be completed by the physician who is currently

treating you for your disabling condition. If you’d like this information

considered, we must receive it as soon as possible.

Id. at 419.

On November 4, 2004, Farhat submitted an appeal of Hartford’s denial, and requested

an extension of time to supplement the appeal, which Hartford granted. A.R. 109-110. In that

appeal, Farhat’s attorneys attached the June 18, 2003 Attending Physician Statement of

Disability from Dr. Higgins in support of Farhat’s LTD claim. In that statement, Dr. Higgins

opined that Farhat was unable to work due to lack of focus, memory loss, and perseveration

associated with HIV. Farhat contended in his appeal that nothing had changed since Dr.

Higgins’ completion of the statement, and that Hartford appeared to have ignored the

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evidence in conjunction with its denial of Farhat’s LTD application.

Meanwhile, as noted above, in November and December 2004, Farhat underwent

cognitive testing by Dr. Horstman, a board-certified neuropsychologist. Dr. Horstman

administered the Wechsler Adult Intelligence Scale (“WAIS”) on Farhat. The results revealed

mental slowing as a result of Farhat’s HIV infection. Additionally, the tests showed that Farhat

had some psychomotor slowing. Dr. Horstman concluded that Farhat had suffered permanent

brain damage as a result of the infection, and that “the idea, let alone reality, of meeting the

demand characteristics of [Farhat’s] customary and normal work duties in a timely fashion has

been, and will remain, outside of the boundaries of his functional capacity.” A.R. 375. Dr.

Horstman further opined that Farhat’s disability was not due to depression or anxiety. Rather,

the depression and anxiety Farhat experienced were related to the cognitive deficits caused

by the HIV infection.

On January 3, 2005, Farhat submitted his appeal supplement. The supplement

included a forty-page opinion letter from Dr. Horstman, the neuropsychologist, explaining why

Farhat was unable to work. Additionally, Farhat included the December 2004 letter from his

treating physician, Dr. Higgins, stating that Farhat

has continued loss of cognitive function, problem solving, memory, etc. Mr.

Farhat now suffers from HIV dementia complicated by chronic and severe

depression. I feel that Mr. Farhat continues to remain completely disabled.

A.R. 333. Farhat also submitted his own declaration, which detailed the effects that HIV had

had on his ability to work. A.R. 119-123.

In his supplemental appeal, Farhat argued that he had been unable to perform the

requirements of his job as tax director since April 22, 2003, the inception of his short-term

benefits. He argued that in considering his LTD application, Hartford had evidence before it

from Dr. Higgins, his treating physician, that as of June 18, 2003, Farhat was unable to work. 

Farhat asserted that

[d]espite having this information Hartford failed to request an updated APS from

Mr. Farhat’s treating physician [Dr. Higgins]. Rather, Hartford contacted Mr.

Farhat’s therapist [Dr. Shuster] and concluded that because Mr. Farhat was not

seeing her at the time, there was no evidence that he was disabled due to

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depression.

A.R. 80. Accordingly, Farhat argued that Hartford, in conjunction with his LTD application,

improperly failed “to consider whether Mr. Farhat was disabled by his primary medical

condition and related impairments – HIV-related cognitive difficulties.” Id.

On January 4, 2005, Hartford informed Farhat that it would “begin the appeal process”

and acknowledged that under ERISA, it had forty-five days to make its decision. Hartford,

however, did not deny Farhat’s appeal until March 8, 2005, sixty-three days later. In its denial

letter, Hartford concluded that “Mr. Farhat’s physicians ha[d] not submitted documentation of

ongoing treatment for a condition that [sic] would prevent him from working.” A.R. 41. In

support, Hartford noted:

In order to make a determination of disability status, information is required from

Mr. Farhat’s attending physicians to assess his ability to perform the essential

functions of any occupation. Addressing the question of disability requires a

concise understanding of his occupational functioning. It is not sufficient for Mr.

Farhat’s physicians to merely list symptoms as though they inherently imply a

certain level of functional impairment or to certify disability without providing

medical evidence supporting his or her opinion.

Id. Hartford concluded that the December 2004 letter from Farhat’s treating physician, Dr.

Higgins, did “not document any medical treatments, test results or exam findings that would

substantiate Mr. Farhat’s ongoing disability beyond April 4, 2004.” A.R. 42. Hartford

asserted that “[w]hile this is Dr. Higgins’ opinion, there is no medical information to support

these statements.” Id.

Hartford concluded that “the documentation in Mr. Farhat’s file, taken as a whole, [did]

not indicate that his condition would prevent him from performing his occupation.” Id.

Farhat filed his complaint in this case on February 24, 2005. On August 4, 2005,

defendants Hartford and PWC filed the instant motion for determination of the standard of

review of Hartford’s denial and in opposition to Farhat’s anticipated request for discovery. 

Farhat filed an opposition, defendants filed a reply, and Farhat filed a surreply and motion for

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4Although the court ordinarily does not consider surreplies, the court GRANTS plaintiff’s

motionfor leave to file the surreply and has considered it in conjunction with the instant motions.

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leave to file a surreply.4

DISCUSSION

There are four issues before the court with respect to defendants’ motion for a

discretionary standard of review: 

(1) whether the PWC plan documents confer discretion on Hartford;

(2) whether Hartford’s alleged untimeliness in deciding Farhat’s request for review

precludes a discretionary standard of review;

(3) whether California law invalidates discretionary review clauses; and

(4) whether Hartford’s alleged conflict of interest precludes a discretionary standard

of review.

I. The PWC Plan Conferred Discretion on Hartford

“When a plan administrator’s denial of benefits is challenged under ERISA, the default

rule holds that the court review the administrator’s denial de novo, ‘unless the benefit plan

gives the administrator or fiduciary discretionary authority to determine eligibility for benefits

or to construe the terms of the plan.’” Abatie v. Alta Health & Life Ins. Co., 421 F.3d 1053,

1059 (9th Cir. 2005) (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115

(1989)).

The standard of review depends on whether the “plan documents unambiguously say in

sum or substance that the Plan Administrator or fiduciary has authority, power, or discretion to

determine eligibility or to construe terms of the Plan.” Abatie, 421 F.3d at 1059 (quoting

Sandy v. Reliance Sandard Life Ins. Co., 222 F.3d 1202, 1207 (9th Cir. 2000)). “Although

the plan must effectively grant the administrator discretion in interpreting the plan or

determining eligibility, there is no requirement that the word ‘discretion’ be used.” Id.

Here, Farhat contends that Hartford has not pointed to any plan document in which

PWC grants discretion to Hartford, and that, for that reason, de novo review is appropriate. 

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Farhat, however, is mistaken. It is clear that PWC’s plan grants such discretion to Hartford. 

The summary plan description provides:

[PWC] is the Plan Administrator and has full responsibility, discretion, and

authority to determine the Plan. Hartford Life . . ., the insurer and claim fiduciary,

has been delegated full responsibility and authority to interpret all provisions of

the Plan, which relate to the amount or eligibility for benefits under the Plan and

to adjudicate claims according to its interpretation of the Plan. Hartford Life’s

interpretation will be final, including handling of all appeals related to claims

determinations.

A.R. 286.

This provision more clearly conveys discretion on Hartford than a similar provision in

which the Ninth Circuit held that it was “readily evident” that an employer’s plan granted such

discretion. See Abatie, 421 F.3d at 1059. In Abatie, the Ninth Circuit held that similar plan

language granting “responsibility for full and final” determinations as to eligibility conferred

discretion under the plan. Id.

Accordingly, this court concludes that Hartford had discretion under the plan according

to the plan’s language.

II. Hartford’s Untimeliness in Deciding Farhat’s Appeal does not Result in a De

Novo Standard of Review

Farhat also argues that Hartford’s benefit decision was untimely, based on ERISA

regulations, thereby creating a “deemed denial” for which no deference may be afforded, thus

requiring a de novo standard of review.

ERISA requires plans to provide participants with the opportunity for full and fair review

of the denial in accordance with regulations promulgated by the Secretary of Labor. See 29

U.S.C. § 1133(2). Farhat argues that Hartford’s failure to comply with the timeliness

regulation precludes discretionary review. 

Farhat’s argument has, however, been foreclosed by the Ninth Circuit in Gatti v.

Reliance Standard Life Ins. Co., and his attempts to distinguish Gatti are unpersuasive. 415

F.3d 978, 981 (9th Cir. 2005). The claimant in Gatti argued that the insurer’s failure to timely

review his appeal prevented the district court from applying a discretionary standard of review

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as afforded by the plan in that case. Id. In Gatti, the applicable regulations provided the

administrator with a sixty-day time limit for making a decision on review. Id. (citing 29 C.F.R.

§ 2560.503-1(h)). If a decision had not been made within that time limit, then the claim was

“deemed denied on review.” Id. The district court in Gatti held that the insurer’s decision

should be reviewed under a de novo standard because “the termination of Gatti’s benefits

was not an act of discretion because Gatti’s claim was ‘deemed denied’ when [the insurer]

violated the time deadlines for processing administrative appeals established in the ERISA

regulations.” Id. at 981.

The Ninth Circuit reversed. It rejected the argument that “once a benefits administrator

. . . violated the regulation’s time limitation, the ‘deemed denied’ language operate[d] to cut

off the administrator’s discretion, making de novo review appopriate.” Id. at 983. Instead, the

court “read the ‘deemed denied’ language to provide beneficiaries with a ‘final decision’ from

which to appeal if the administrator has not made a decision within the timelines established

by the regulation.” Id. As support for its interpretation that the ‘deemed denied’ language

“allow[ed] claimants to seek judicial review, rather than to cut off an administrator’s discretion,”

the court noted subsequent amendments to the applicable regulation. Id. at 983-84. The

court noted that the amended regulation omitted the ‘deemed denied’ language, and replaced

it with ‘deemed to have exhausted’ language. Id. The court inferred that one of the agency’s

purposes for the amendment was to assure that claimants have the ability to take their claims

to court without undue delay – as opposed to changing the standard of review. Id. at 984.

Here, both parties agree that the applicable regulations are those in effect for claims

filed after January 1, 2002 – the amended regulation that the Ninth Circuit noted in support of

its decision in Gatti. Under the current regulations, Hartford was required to decide Farhat’s

request for review in 45 days. See 29 C.F.R. § 2560.503-1(i)(3)(I). Moreover, as noted

above, the current regulations replace the ‘deemed denied’ language, and provide in pertinent

part:

A claimant shall be deemed to have exhausted the administrative remedies

under the plan and shall be entitled to pursue any available remedies under

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5Defendants’objections to the unpublishedcasesand authoritiesattachedto theKennedyWilkins declaration submitted by Farhat are SUSTAINED. 

9

section 502(a) of the Act on the basis that the plan has failed to provide a

reasonable claims procedure that would yield a decision on the merits of the

claim.

29 C.F.R. § 2650.503-1(l) (2002). 

Farhat argues that the fact that the amended regulation actually applies here provides

a basis for distinguishing his case from Gatti. Farhat further dismisses the Ninth Circuit’s

reasoning in Gatti as dicta.

This court, however, concludes that Gatti is controlling and applicable to this case. In

Gatti, the Ninth Circuit explicitly utilized the language in the regulation applicable here as

support for its holding that the standard of review was not altered by the insurer’s failure to

comply with the deadlines set forth in the regulation. Id. at 983-84. Moreover, the Gatti court

went even further. It held that generally, “procedural violations of ERISA do not alter the

standard of review unless those violations are so flagrant as to alter the substantive

relationship between the employer and employee, thereby causing the beneficiary substantive

harm.” Id. at 985. Farhat has shown no such violations or substantive harm.

For these reasons, the court rejects Farhat’s arguments on this issue.

III. California’s DOI Notice does not Alter the Discretionary Standard of Review5

Farhat also argues that the plan’s discretionary clause is unenforceable, and that this

court must apply a de novo standard of review based on a February 27, 2004 notice issued

by the California Department of Insurance (“DOI notice”). In that notice, the DOI withdrew its

approval of discretionary clauses in disability insurance policies that “purport to confer on the

insurer discretionary authority to determine eligibility for benefits and to interpret the terms and

provisions of the policy.” See Exh. 1. 

Farhat and the defendants agree that the DOI notice applies prospectively only. If this

is the case, then defendants are correct that the February 27, 2004 DOI notice does not affect

Farhat’s case because the PWC Plan at issue here was effective on July 1, 1999.

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However, the court need not reach this issue. As the Central District recently noted in

Lundquist v. Continental Casualty Co., “[v]irtually every court that has addressed the

California DOI’s Notice and its impact on the standard of review in ERISA cases has rejected

the argument that the Notice entitles plaintiffs to a de novo standard of review.” 2005 WL

2482547 at *15 (C.D. Cal. Sept. 30, 2005); see also Moskowite v. Evern Capital Corp., 2005

WL 1910941 at *5 (N.D. Cal. 2005); Williston v. Norwood Promotional Products, Inc., 2005

WL 1877136 at *6-7 (C.D. Cal. 2005); Davison v. Hartford Life and Accident Ins. Co., 2005

WL 807045 at *1 (N.D. Cal. 2005); Mitchell v. Aetna Life Ins. Co., 359 F.Supp.2d 880, 888-

89 (C.D. Cal. 2005); Toth v. Automobile Club of California LTD, 2005 WL 1877150 at *23-

27 (C.D. Cal. 2005); Horn v. Provident Life & Accident Ins. Co., 351 F.Supp.2d 954 (N.D.

Cal. 2004); Firestone v. Acuson Corp. LTD, 326 F.Supp.2d 1040, 1049-51 (N.D. Cal. 2004). 

The reasoning behind such a conclusion is persuasive. The United States Supreme

Court has approved of the use of discretionary clauses in insurance policies, noting that “a

denial of benefits [ERISA] 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, 489 U.S. at 115.

Accordingly, the court concludes that the DOI notice did not alter the standard of review

to be applied in this case, and need not reach the preemption issues raised by defendants. 

IV. A De Novo Standard of Review is not Required as a Result of Hartford’s

Alleged Conflict of Interest

Farhat argues that the record contains evidence that Hartford’s decision was tainted by

a financial conflict of interest. Specifically, Farhat claims that this evidence falls into five

categories: (1) that Hartford failed to administer Farhat’s claim in accordance with the terms

of the plan; (2) that Hartford failed to provide a proper notice of the claim denial; (3) that

Hartford gave inconsistent reasons for its claim denial; (4) that Hartford ignored the medical

evidence; and (5) that Hartford administered Farhat’s claim as an adversary.

The discretionary standard of review is affected only when there is a serious conflict of

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interest. Abatie, 421 F.3d at 1061 (citing Jordan v. Northrop Grumman Corp. Welfare

Benefit Plan, 370 F.3d 869, 876 (9th Cir. 2004)). While an insurer’s “dual role as

administrator and funding source gives rise to an apparent conflict of interest,” it “does not

automatically remove the deference normally accorded to ERISA administrators.” Id. (citing

Lang v. Long-Term Disability Plan, 125 F.3d 794, 797 (9th Cir. 1997)).

“To prove that a serious conflict of interest exists, and to override a plan’s

unambiguous conferral of discretion to the plan administrator, the plaintiff must provide

material, probative evidence, beyond the mere fact of the apparent conflict, tending to show

that the fiduciary’s self-interest caused a breach of its fiduciary obligations to the beneficiary.” 

Id. “If the plaintiff satisfies this burden, de novo review is appropriate if the administrator fails

to produce evidence to show that the conflict of interest did not affect the decision to deny

benefits.” Id.

Although Farhat has raised five arguments in support of his claim that there was a

serious conflict of interest, these can be distilled into essentially three arguments:

(1) that Hartford improperly ignored documents in his appeal that Farhat continued

to be treated for HIV and that his cognitive impairments were not susceptible to

any treatment; and 

(2) that Hartford improperly rejected his treating physician, Dr. Higgins’ opinion that

he was disabled; and 

(3) Hartford’s reasons for his denials were inconsistent.

A. Hartford Allegedly Ignored Evidence

Farhat contends that Hartford improperly ignored documents in his appeal that he

continued to be treated for HIV and that his cognitive impairments are not susceptible to any

treatment. Farhat claims that this was in contradiction to the plan’s requirement that Hartford

“take into account all comments, documents, records, and other information submitted by the

insured relating to the claim.” 

Specifically, Farhat argues that Hartford ignored Dr. Higgins’ charts and lab notes and

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6 Farhat also claims that Hartford failed to decide his appeal within the time period set

forth by the plan. Farhat does not, however, explain what that time period is.

Farhat also contends that Hartford’s denial letter set forth the incorrect definition of disability.

However, this does not appear to the court to be the case.

12

his statements regarding Farhat’s disability. Farhat also argues that Hartford ignored

neuropsychologist, Dr. Horstman’s forty-one page report in its entirety. Farhat notes that

neuropsychological testing is an accepted method of assessing an individual’s cognitive

impairments. Farhat contends that Hartford’s failure to mention Dr. Horstman’s letter

“demonstrates that Hartford was simply fishing for any pretext to deny Farhat’s claim” and was

evidence of its lack of objectivity. 

Hartford counters that there was no mention of Farhat’s disabling HIV anywhere in the

record until Farhat’s administrative appeal of Hartford’s denial in January 2005. With respect

to Dr. Higgins’ reports, defendants contend that they did not ignore the reports. Instead, they

dispute the content and import of Dr. Higgins’ pre-December 2004 reports. They contend that

Higgins’ reports do not state that Farhat was unable to work as a result of disabling HIV. 

With respect to Dr. Horstman, it is undisputed that defendants did not mention the fortyone page report in their denial of Farhat’s appeal. However, defendants contend that the fact

that they did not mention the letter does not mean that they ignored it. They further note that

Horstman’s letter was prepared over a year after Farhat stopped working, and that he

evaluated Farhat for the first time on November 24, 2004. 

The court concludes that Farhat has not presented sufficient material, probative

evidence that Hartford violated its internal procedures in its treatment of Dr. Higgins’ and

Horstman’s opinions and reports. It is true that “a plan administrator’s failure to follow its

internal procedures for denying benefit claims is evidence that the administrator acted

because of a conflict of interest.” Hensley v. Northwest Permanente, 258 F.3d 986, 996 (9th

Cir. 2001) (citing Friedrich Intel Corp., 181 F.3d 1105, 1109 (9th Cir. 1999) (concluding that

there were procedural irregularities in initial claims process and unfair appeals process)).6

However, Hartford’s plan required that it “take into account” the various medical opinions. It

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did not require that it specifically refute Dr. Horstman’s letter. This case is unlike those in

which the Ninth Circuit has found a conflict of interest based on a plan administrator’s failure to

follow its internal policies. See Friedrich, 181 F.3d at 1110 (concluding that Intel failed to

provide a full and fair appeals process where it did not provide the claimant with notice that he

must apply for benefits and the criteria for benefits determinations before denying him LTD

benefits).

Nor can this court conclude that Hartford’s treatment of Dr. Higgins’ opinions and

reports was in contravention of Ninth Circuit law. The record clearly establishes that Hartford

did not ignore Higgins’ opinions. Instead, it disagreed with Farhat’s characterization of his

opinions, and also rejected Higgins’ opinions. This issue is addressed below.

However, as noted, there is no dispute that Hartford failed to even acknowledge Dr.

Horstman’s December 2004 letter in its March 2005 denial of Farhat’s appeal. This presents

a closer call for the court. “[A] plan administrator’s failure to discuss non-dispositive evidence

does not constitute material, probative evidence the fiduciary’s self-interest has led to a

breach of its fiduciary obligations.” Abatie, 421 F.3d at 1062. “[W]hen an administrator

arbitrarily refuses to credit a claimant’s reliable evidence, heightened review may be called

for, but only if the administrator’s decision as a whole is without a reasonable basis.” Id. at

1064 (citing Jordan, 370 F.3d at 879). The “necessary predicate to launch such an inquiry is

to ask whether the piece of evidence at issue is highly reliable, and even if it were, the

decision’s failure to mention that evidence must be arbitrary, all of which led to a decision that

was without a reasonable basis.” Id.

Here, Dr. Horstman’s report can not be characterized as non-dispositive. To the

contrary, the report detailed a battery of tests that Dr. Horstman administered to Farhat, and a

well-documented, well-supported conclusion that Farhat was unable to work based on his HIVrelated conditions.

Nevertheless, Ninth Circuit law is extremely deferential to the decisions of plan

administrators. The court has held that “where an ERISA administrator states that it

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considered the record ‘as a whole,’ [the court] must assume that it did so, in the absence of

clear and convincing evidence to the contrary.” Id. at 1063 (emphasis added). Here, Hartford

indeed stated in its March 2005 denial letter that “the documentation in Mr. Farhat’s file, taken

as a whole, does not indicate that his condition would prevent him from performing his

occupation.” A.R. 42. Farhat has not presented clear and convincing evidence demonstrating

that Hartford did not consider the record as a whole.

Accordingly, Farhat has failed to meet his burden to show a conflict of interest on this

ground.

B. Hartford’s Alleged Improper Rejection of Evidence

Farhat also contends that Hartford improperly rejected Dr. Higgins’ opinions “out of

hand.” Farhat argues that this was contrary to Ninth Circuit law and the plan’s provision that

Hartford will “consult with a medical professional having the appropriate training and

experience in the field of medicine involved in the medical judgment.” 

Farhat argues that Hartford failed to explain how Dr. Higgins’ December 2004 opinion

was not sufficient “medical information.” He contends that the claim record clearly documents

that as early as June 2003, Dr. Higgins, was of the opinion that he was disabled due to

decreased cognitive functioning. According to Farhat, it was not, as Hartford implies, a newly

fabricated diagnosis. Farhat notes that while Hartford characterized Farhat’s short-term

disability and initial period of long-term disability as being based on “depression,” Dr.

Higgins’ June 2003 report stated that Farhat was impaired due to “no focused attention ability,

memory loss, and perseveration.” 

Farhat asserts that the fact that he later became disabled by an intervening back injury

did not change the fact that he was previously disabled by his HIV-related conditions. Farhat

argues that once he recovered from his back injury, his HIV-related impairments remained. 

According to Farhat, Hartford’s choice to, in essence, assume that Farhat’s HIV had been

cured by spinal surgery is probative evidence of the influence of its conflict of interest.

Hartford counters that Dr. Higgins’ pre- 2004 records do not state that Farhat’s HIV is

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7Farhat addresses these statements in his surreply. He argues that Hartford’s decision

to base its denial on hearsayis improper and provides further evidence of its conflict of interest.

Farhat further argues that a review of the statements reveals that they actually support Farhat’s

claimthathesufferedfromHIV-relatedcognitive impairmentsduring his entire period of disability.

The court is notpersuaded byFarhat’sargument. First, there is sufficient record evidence

– aside from this September 2003 conversation–thatsupportsHartford’s decision. Second, the

court is able to draw its own conclusions regarding the appropriate characterization of Dr.

Higgins’ conversations with the Hartford associate. According to the record, on September 12,

2003, Dr. Higgins stated:

[Farhat] is mostly limited by his depression/anxiety, and that the physical side

effects associated with HIV are not limiting, but psych [sic] prevents him from

following thru [sic] on things, gets agitated and tangential in his thought process.

FN 020.

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disabling. Instead, they argue that his records establish that Farhat’s HIV was stable and that

Farhat was not being treated for any HIV-induced impairment. Hartford also relies on a

conversation it claims to have had with Dr. Higgins in September 2003 in which Dr. Higgins

allegedly stated that Farhat was mostly limited by his depression and anxiety, and that the

physical symptoms of the HIV were not limiting. FN 020.7

Hartford contends that Dr. Higgins’ December 2004 letter was conclusory, and not

supported by his prior medical records. Moreover, Hartford argues that a diagnosis alone

does not equate to a disability.

As noted, there is clearly a dispute among the parties regarding the content and import

of Dr. Higgins’ pre-December 2004 opinions and records. However, Farhat has not

demonstrated by sufficient material evidence that this dispute indicates a conflict of interest. 

Such disputes are inevitable among parties in these types of cases. Moreover, review of the

record does not indicate that the dispute was unreasonable, or sufficient to alter the standard

of review in this case.

Unlike social security cases, the law is clear that in ERISA cases, plan administrators

are not required to accord any special deference to the opinions of a claimant’s treating

physician – in this case, Dr. Higgins. Black & Decker Disability Plan v. Nord, 538 U.S. 822,

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829-831 (2003) (rejecting Ninth Circuit holding that plan administrator must articulate specific

reasons for rejecting a treating physician’s opinion); Jordan, 370 F.3d at 878-79. “Nor does

[ERISA] impose a heightened burden of explanation on administrators when they reject a

treating physician’s opinion.” Id. Instead, a treating physician’s opinion “can be rejected on

the basis of reliable evidence with no discrete burden of explanation.” Id.

For these reasons, the court rejects Farhat’s arguments for a heightened standard of

review on these grounds as well.

C. Hartford’s Alleged Inconsistency

Farhat also contends that Hartford’s statement in its March 3, 2005 denial of his claim

that his “physicians have not submitted documentation of ongoing treatment for a condition

which would prevent [Farhat] from working,” A.R. 41, was inconsistent with Hartford’s prior

recognition that Farhat had been consistently treated by Dr. Higgins. Farhat also claims that

Hartford’s requests for information were inconsistent with its later admonition that it needed

additional information. 

“[I]nconsistencies in a plan’s handling of a benefits claim has been held to constitute

evidence that the administrator’s decision was tainted by self-interest.” Hensley, 258 F.3d at

996 (finding plaintiff proffered sufficient evidence where plan administrator offered differing

and inconsistent reasons for denial of benefits). However, where on appeal, an insurer

“merely offer[s] additional reason[s] for denying benefits,” there is no such conflict. Abatie,

421 F.3d at 1061. The Ninth Circuit has “never held that an ERISA administrator’s assertion

of a supplemental reason for denying a claim subsequent to the initial denial is sufficient

evidence to demonstrate that a plan administrator has breached its fiduciary duties to the

beneficiary.” Id. A plan administrator can “not be expected to articulate all the reasons for

denial until the administrative record [is] complete.” Id. “There is no rule that an ERISA

administrator, after failing ro raise a denial reason in the initial benefit determination, is

estopped from invoking that reason for denial upon appeal.” Id. For these reasons, the Ninth

Circuit held “that an ERISA administrator’s articulation of a new reason for denying a claim on

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appeal after initial benefit determination has been rendered is permissible and does not

constitute material, probative evidence that the administrator’s conflict of interest manifested

itself into an actual breach of fiduciary duty.” Id. at 1062. 

The court need not engage in any in-depth analysis on this issue. That is because the

statements that Farhat claims are inconsistent are not inconsistent at all. First, Hartford may

recognize Dr. Higgins as Farhat’s treating physician, yet simultaneously conclude that Dr.

Higgins’ opinions do not support a claim of disability. Moreover, there is no inconsistency in

fact in Hartford’s requests for information.

In conclusion, the court determines that Farhat has not demonstrated a sufficient

conflict of interest or entitlement to a heightened standard of review on any of the grounds. 

For these reasons, the court will apply a discretionary standard of review in considering

Farhat’s claims for relief.

V. Farhat’s Request for Discovery

Farhat also requests discovery on the conflict of interest issue. In Taft v. Equitable Life

Assurance Soc., 9 F.3d 1469 (9th Cir. 1993), the Ninth Circuit stated that “the abuse of

discretion standard permits the district court to ‘review only the evidence presented to the

[plan] trustees.’” Id. at 1471. A majority of courts of appeal have taken the same position. 

See, e.g., Hall v. Unum Life Ins. Co. of America, 300 F.3d 1197, 1201 (10th Cir. 2002)

(citing cases); Miller v. United Welfare Fund, 72 F.3d 1066, 1071 (2nd Cir. 1995) (same).

The Ninth Circuit’s decision in Tremain v. Bell Industries, relied on by Farhat, is not to

the contrary. 196 F.3d 970 (9th Cir. 1999). In Tremain, the court considered evidence

offered by the plaintiff/claimant from outside the record in determining whether a conflict of

interest existed such that a heightened standard of review was appropriate. Id. at 977. The

Ninth Circuit held it was permissible for the court to consider evidence from outside the

record, consisting of W-2 statements, an employment agreement, and deposition testimony,

in determining the threshold issue regarding whether a conflict of interest existed. Id. at 975,

977. The court, however, did not hold that the plaintiff was entitled to discovery to determine

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8 Where the standard of review is de novo, most circuits allow the admission of

additional evidence – beyond what is contained in the administrative record – in limited

circumstances. See Hall, 300 F.3d at 1201-02 (citing cases). 

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whether such evidence existed. Id. 

The Tremain court held, in addition, that once the standard of review has been

determined to be de novo, the district court could consider evidence outside the

administrative record “when that evidence ‘is necessary to conduct an adequate de novo

review of the benefits decision.’” Id. at 978 (quoting Mongeluzo v. Baxter Travenol Long

Term Disability Benefit Plan, 46 F.3d 938, 943-44 (9th Cir. 1995) (extra evidence allowed

where plan administrator had incorrectly interpreted plan)).8 

In the present motion, Farhat argues that he should be given the opportunity to conduct

discovery to uncover evidence showing that Hartford’s alleged conflict of interest caused a

breach of fiduciary duty. He contends that since evidence from outside the administrative

record is admissible to establish defendants’ conflict of interest, he should be allowed

reasonable discovery to gather such evidence.

The Ninth Circuit has not addressed the question whether a claimant may conduct

discovery for the purpose of obtaining evidence to support a claim of conflict of interest. This

court, however, recently addressed the very issue in its October 19, 2005 order denying the

plaintiff’s request for discovery in another ERISA case, Litt v. Paul Revere Life Ins. Co., C 04-

0561 PJH. This court’s October 19, 2005 order comprehensively discussed the relevant case

law on point, as reiterated in part below.

In two cases from district courts within the Ninth Circuit – Medford v. Metropolitan Life

Ins. Co., 244 F. Supp. 2d 1120 (D. Nev. 2003); and Waggener v. Unum Life Ins. Co. of

America, 238 F. Supp. 2d 1179 (S.D. Cal. 2002) – the courts allowed discovery. In Medford,

defendants moved for a stay of discovery, arguing that discovery is not permitted in suits

alleging claims under ERISA. Defendants also claimed that the court was required to review

the decision under an abuse of discretion standard, as the plan at issue vested the plan

administrators with full discretion. Medford, 244 F. Supp. 2d at 1124. The plaintiff argued that

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 The district court alsoacknowledgedthatwhenthe reviewis for abuse of discretion, such

review is limited to the evidence in the record. Id. at 1182.

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discovery should be allowed in order to determine which standard of review to impose. Id.

The court agreed with defendants that a district court is strictly limited to evidence in the

administrative record when reviewing a plan under an abuse of discretion standard. Id. at

1128 (citing Taft, 9 F.3d 1472). The court noted, however, that under Tremain, the district

court is not limited to the administrative record when considering evidence of a conflict of

interest “to determine the correct standard of review,” but has discretion to consider evidence

outside the record. Id. The court cited Mongeluzo, a case holding that evidence outside the

record may be considered as part of a de novo review of a benefits decision, for the

proposition that “the court should consider what additional evidence is required ‘to enable the

full exercise of informed and independent judgment.’” Id. (citing Mongeluzo, 46 F.3d at 943). 

The court also stated that when determining the scope of discovery, a court should

balance the goals of maintaining low premium costs “with the demands of reaching an

informed and independent review of the benefits decision.” Id. at 1129. Ultimately, the court

allowed the plaintiff limited discovery on issues related to what standard of review should be

applied and whether there was a conflict of interest affecting the benefits determination. Id. 

In Waggener, the administrator moved for a protective order precluding the

employee/beneficiary from conducting any discovery outside the administrative record. Both

parties had agreed that the district judge would review the administrator’s decision de novo. 

The plaintiff argued that the court should consider evidence outside the administrative record,

particularly the issue of whether the administrator’s decision was biased because the

administrator was also the insurer. The plaintiff had propounded wide-ranging discovery

requests. 

The court first noted that under Ninth Circuit authority, the district court has discretion to

consider evidence outside the record when conducting a de novo review of a benefits

decision. Waggener, 238 F.Supp. 2d at 1183 (citing Mongeluzo, 46 F.3d at 943-44).9 The

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court also listed some of the “exceptional circumstances” that might give rise to the need for

additional evidence, such as 

claims that require consideration of complex medical questions or issues

regarding the credibility of medical experts; the availability of very limited

administrative review procedures with little or no evidentiary record; the

necessity of evidence regarding interpretation of the terms of the plan rather

than specific historical facts; instances where the payor and the administrator 

are the same entity and the court is concerned about impartiality; claims which

would have been insurance contract claims prior to ERISA; and circumstances

in which there is additional evidence that the claimant could not have presented

in the administrative process.

Id. (quoting Quesinberry v. Life Ins. Co. of North America, 987 F.2d 1017, 1027 (4th Cir.

1993)). 

The court reviewed the plaintiff’s discovery requests, and concluded that some of the

information sought was discoverable. However, the court made clear that its ruling was based

solely on the fact that the review was to be de novo, stating that where a district court is

reviewing the record for abuse of discretion, “it may be appropriate for the court to prohibit

discovery and instead simply assume that a conflict exists warranting some heightened

standard of review of the administrator’s decision.” Id. at 1184-85 (citing Palmer v. Univ.

Med. Group, 973 F. Supp. 1179 (D.Or. 1997), where the court did not allow discovery in a

typical denial-of-benefits case.)

Here, as in the Litt case previously before this court, defendants contend that the

showing of conflict of interest must be based on the administrative record itself, and that

Farhat should not be permitted to embark on a “fishing expedition” in his effort to create a

serious conflict based on evidence from outside the record. Defendants contend that the

district court’s decision in Medford is not persuasive, and rely instead on Newman v.

Standard Ins. Co., 997 F.Supp. 1276 (C.D. Cal. 1998).

As this court discussed in Litt, in Newman, the district court first considered whether the

appropriate standard of review should be abuse of discretion or de novo. The plan at issue

granted discretionary authority to the insurer, but the court noted that it was faced with an

inherent conflict of interest because the insurer was both the administrator and the funding

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source. Applying the burden-shifting analysis originally set forth by the Ninth Circuit in Atwood

v. Newmont Gold Co., Inc, the court found that the plaintiff had not met her burden of providing

material, probative evidence beyond the mere fact of the apparent conflict. Newman, 997

F.Supp. at 1279-80 (citing Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317, 1322 (9th Cir.

1995) (if benefit plan gives discretion to an administrator who is operating under an

“apparent” conflict of interest – which exists when the policy is issued by, and the plan is

administered by the same entity – “that conflict must be weighed as a factor in determining

whether there is an abuse of discretion”)). 

The court then addressed the issue of what evidence the court might consider in

making that review. The court first observed, citing Taft, that in abuse of discretion cases,

evidence outside the administrative record is completely inadmissible, and stated that

consequently it would admit no evidence from outside the administrative record for deciding

the merits of the plaintiff’s claim. The court then considered the plaintiff’s argument that she

was entitled to discovery on the issue of whether the administrator’s decision was tainted by

its apparent conflict of interest as both administrator and funding source for the plan. The

court conceded that this argument made “a certain amount of logical sense,” but also found

“immense practical problems associated with this position.” Id. at 1280. 

The court concluded that allowing discovery every time a plaintiff asserted conflict of

interest would impose on every ERISA case “far-reaching, open-ended, nearly limitless

discovery,” and that this outcome would “fly in the face of the purpose of ERISA” – to allow

workers and beneficiaries to resolve disputes over benefits inexpensively and expeditiously. 

Id. at 1281. The court also noted that Lang, the case most heavily relied on by the plaintiff, did

not support the request for discovery, as the material probative evidence in that case –

namely, the inconsistency in the administrator’s explanations of the reasons for the denial of

benefits – came from the administrative record itself. Id. The court concluded that the plaintiff

was not entitled to take discovery on the issue of whether the insurer’s determination was

tainted by self-interest. Id. 

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In Litt, this court also discussed the court’s decision in Brown v. Hartford Life and

Accident Ins. Co., in which the district court did not allow discovery. 2004 WL 2254550 (N.D.

Cal. 2004). In Brown, the plaintiff moved for leave to conduct discovery in order to determine

whether an actual conflict of interest existed. The court adopted the reasoning in Newman,

noting that allowing this type of discovery would undermine the primary goal of ERISA – “to

provide a method for workers and beneficiaries to resolve disputes over benefits

inexpensively and expeditiously” – because it would “involve far-reaching, open-ended, nearly

limitless discovery.” 2004 WL 2254550 at *5 (quoting Newman, 997 F. Supp. at 1280

(internal citations omitted)). The court found Newman more consistent with the goals of

ERISA than the decision in Medford. Id. at *6. The court denied plaintiff’s motion for

discovery. 

Similar to this court’s decision in Litt, the court finds that Farhat’s request for leave to

propound discovery to obtain evidence on the issue of conflict of interest should likewise be

DENIED. There is no Ninth Circuit authority for the proposition that, where the standard of

review is abuse of discretion, a claimant/plaintiff can conduct discovery for the purpose of

obtaining information to attempt to show a serious conflict of interest resulting in a breach of

fiduciary duty. 

Farhat has not cited any authority for the proposition that there is some automatic

entitlement to discovery in order to establish that a plaintiff is entitled to de novo review, where

the plaintiff has made no showing that a conflict exists, beyond the “apparent conflict” between

the insurer’s role as insurer and as claims administrator. Nor has Farhat made a

particularized showing as to what discovery is necessary and likely to be found.

The court also finds that the district courts’ decision in Medford and Waggener are less

persuasive than those in Newman and Brown. As noted above, Waggener held that extrinsic

evidence could be considered to ascertain whether a conflict existed in a situation where the

parties had agreed that the review would be de novo. Thus, Waggener is not applicable in

the present case.

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Medford provides no authority for its conclusion that “there is sufficient language in the

plans to suggest an apparent conflict such that plaintiff should be able to pursue discovery on

this issue.” 244 F.Supp. 2d at 1128. In addition, the sole authority cited by the Medford court

in support of the propositions that where there is an apparent conflict of interest, “the court

must undertake an immediate inquiry to determine whether the conflict of interest affected the

decision” (suggesting some sort of imperative to act sua sponte), is Regula v. Delta FamilyCare Disability Survivorship Plan, 266 F.3d 1130, 1145 (9th Cir. 2001). However, Regula

was overruled on other grounds by Black & Decker v. Nord, 538 U.S. 822 (2003), and was

then vacated by the Ninth Circuit. See Regula v. Delta Family-Care Disability Survivorship

Plan, 354 F.3d 1133 (9th Cir. 2004). 

The Medford court states further that “[w]hen looking for evidence of conflict of interest

to determine the correct standard of review . . . the district court should consider what

additional evidence is required ‘to enable the full exercise of informed and independent

judgment,’” and cites Regula, 266 F.3d at 1147, which in turn cited Mongeluzo, 46 F.3d at

943. However, Mongeluzo involved a case of de novo review, and addressed the use of

extrinsic evidence in such a case, not the right to discovery of new evidence. 

Again, as this court concluded in Litt, the court finds that the court’s decisions in

Newman and Brown come closer to providing an analysis applicable to this case. The

Newman court emphasized the “practical problems” inherent in the argument that an ERISA

plaintiff is always entitled to discovery on the issue of conflict of interest – specifically, that

allowing such discovery would impose on every ERISA case far-reaching and nearly limitless

discovery, which would “fly in the face of the purposes of ERISA.” Although Newman is a preTremain case, its holding with regard to discovery was not invalidated by Tremain’s ruling that

the district court can consider evidence from outside the record on the question whether the

administrator’s conflict of interest affected its benefits decision. As noted, Tremain held only

that such evidence is admissible, not that a plaintiff is automatically entitled to seek such

evidence in discovery.

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For these reasons, the court DENIES Farhat’s request for discovery.

CONCLUSION

For the reasons set forth above, the court GRANTS defendants’ motion in support of a

discretionary standard of review. The court DENIES Farhat’s request for discovery.

This order fully adjudicates the matters listed at nos. 14, 19 of the clerk’s docket for this

case.

IT IS SO ORDERED. 

Dated: November 15, 2005

______________________________

PHYLLIS J. HAMILTON

United States District Judge

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