Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02716/USCOURTS-cand-3_05-cv-02716-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1132 E.R.I.S.A.

---

United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ANTONIO PRADO,

Plaintiff,

 v.

ALLIED DOMECQ SPIRITS AND WINE

GROUP DISABILITY INCOME POLICY,

Defendant. 

LIBERTY MUTUAL INSURANCE, LIBERTY

LIFE ASSURANCE COMPANY OF BOSTON

Real Party In Interest. ___________________________________

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. C-05-2716 SC

ORDER REGARDING THE

STANDARD OF REVIEW 

I. INTRODUCTION

Plaintiff Antonio Prado ("Plaintiff" or "Prado") brought this

suit against the Allied Domecq Spirits and Wine Group Disability

Income Policy ("Defendant" or the "Plan") alleging a failure to

extend disability benefits in accordance with Plan and ERISA

regulations, 28 U.S.C. § 1132. The Real Party in Interest,

Liberty Mutual Insurance ("Liberty Mutual"), is the Plan

administrator.

Presently before the Court are opposing motions to determine

the appropriate standard of review. Plaintiff seeks a de novo

standard whereas Defendant seeks an abuse of discretion standard. 

For the reasons stated herein, the Court hereby DENIES 

Plaintiff's motion and GRANTS Defendant's motion. The Court

therefore will use an abuse of discretion standard in evaluating

Plaintiff's claims. 

Case 3:05-cv-02716-SC Document 37 Filed 11/22/06 Page 1 of 5
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 2

II. BACKGROUND

Plaintiff worked as a production manager for Mumm Napa Valley

from February, 1987 to September, 2003. McGee Decl. at Ex. B.

299. He is a beneficiary of his employer's sponsored long-term

disability plan. Id. at 11. In 2003, Plaintiff informed Liberty

Mutual that pain from a work-related injury had escalated to the

point that he could no longer continue working. Id. at 8. He

then filed a disability benefits claim, which was acknowledged. 

Id. at 296. After reviewing his claim, Liberty Mutual denied

long-term benefits. Id. at 243-46. Plaintiff appealed the

decision and after further review, Liberty Mutual upheld its

initial denial. Id. at 190-93. Plaintiff then requested that

Liberty Mutual reconsider its denial in light of new medical

information showing Plaintiff had undergone back surgery. Id. at

18. Liberty Mutual informed Plaintiff on May 6, 2005 that it

would not reconsider the claim because Plaintiff had already

exhausted his administrative remedies under ERISA. Id. at 17. 

Plaintiff filed the present action on July 1, 2005. Docket No. 1.

 

III. DISCUSSION

The Ninth Circuit recently clarified the available standards

of review in ERISA cases. "When a plan confers discretion, abuse

of discretion review applies; when it does not, de novo review

applies." Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955,

965 (9th Cir. 2006). While there are "no 'magic' words that

conjure up discretion on the part of the plan administrator . . .

[t]he Supreme Court has suggested that a plan grants discretion if

Case 3:05-cv-02716-SC Document 37 Filed 11/22/06 Page 2 of 5
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 3

the administrator has the 'power to construe disputed or doubtful

terms' in the plan." Id. at 963, quoting Firestone Tire and

Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989). The Ninth Circuit

stated that "plan wording-granting the power to interpret plan

terms and to make final benefits determinations-confers discretion

on the plan administrator." Id. Specifically, a plan giving the

administrator "the full, final, conclusive and binding power to

construe and interpret the policy under the plan . . . [and] to

make claims determinations" grants discretion. Grosz-Salomon v.

Paul Revere Life Ins. Co., 237 F.3d 1154, 1159 (9th Cir. 2001). 

Defendant's disability policy contains the following clause:

Interpretation of the Policy

Liberty shall possess the authority, in its sole discretion,

to construe the terms of this policy and to determine benefit

eligibility hereunder. Liberty's decisions regarding

construction of the terms of this policy and benefit

eligibility shall be conclusive and binding. McGee Decl.,

Ex. A, P-025.

Importantly, the Plan grants Liberty Mutual "sole discretion, to

construe the terms of this policy." Id. As a result, the

language of the Interpretation clause meets the criteria for the

abuse of discretion standard of review. That is not the end of

the analysis, however, because there are "some situations in which

procedural irregularities are so substantial as to alter the

standard of review." Abatie, 458 F.3d at 971. 

The Ninth Circuit has instructed that a de novo review is

appropriate in response to flagrant procedural violations. Id. 

This occurs "[w]hen an administrator engages in wholesale and

flagrant violations of the procedural requirements of ERISA, and

thus acts in utter disregard of the underlying purpose of the plan

Case 3:05-cv-02716-SC Document 37 Filed 11/22/06 Page 3 of 5
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 4

as well." Id. De novo review is also used "when an administrator

fails to exercise discretion." Id. at 972. Yet, "a procedural

irregularity in processing an ERISA claim does not usually justify

de novo review." Id.; see Gatti v. Reliance Standard Life Ins.

Co., 415 F.3d 978, 985 (9th Cir. 2005) (concluding that the

district court had erred by allowing “de novo review any time a

benefits administrator violates the procedural requirements in

ERISA's regulations, no matter how small or inconsequential the

violation”). 

Plaintiff asserts that de novo review is appropriate for

three reasons. First, Plaintiff alleges that the documents in the

administrative record are not sufficient to establish whether the

plan confers discretion to Liberty Mutual. Pl.'s Mot. at 2-3. 

The record contains a copy of the Group Disability Income Policy

sponsored by Allied Domecq Spirits and Wine. See McGee Decl. at

Ex. A. "It is clear that an insurance policy may constitute the

'written instrument' of an ERISA plan." Cinelli v. Sec. Pac.

Corp., 61 F.3d 1437, 1441 (9th Cir. 1995). Thus, the insurance

policy on record qualifies as a document sufficient to establish

Liberty Mutual's discretion under the plan. Second, Plaintiff

asserts that de novo review should apply because the letter

denying Plaintiff's claim failed to state adequate reasons for the

denial. Pl.'s Mot. at 3-5. Defendant asserts that its letter

complies with ERISA regulations. Def.'s Mot. at 14. The

ambiguities in the letter are not "so flagrant as to alter the

substantive relationship between the employer and employee." 

Gatti, 415 F.3d at 985. Third, Plaintiff alleges that Liberty

Case 3:05-cv-02716-SC Document 37 Filed 11/22/06 Page 4 of 5
United States District Court

For the Northern District of California

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 5

Mutual failed to consider documents submitted after the denial of

appeal, but before the final deadline had passed. Pl.'s Mot. at

5-7. This potential procedural irregularity does not rise to the

level necessary to require a de novo review. See Abatie, 458 F.3d

at 972 (explaining that the existence of ordinary procedural

errors is not enough to alter the standard of review).

As discussed, Defendant has established that the Plan grants

Liberty Mutual discretion to interpret Plan terms and make

benefits determinations. As a result, the Court must use an abuse

of discretion standard of review unless substantial irregularities

exist. Plaintiff has failed to show flagrant violations

sufficient to require a de novo standard of review.

IV. CONCLUSION

For the reasons described herein, the Court DENIES

Plaintiff's motion and GRANTS Defendant's motion regarding the

appropriate standard of review. The Court will use an abuse of

discretion standard of review for this ERISA action.

IT IS SO ORDERED.

Dated: November 22, 2006

 

UNITED STATES DISTRICT JUDGE

Case 3:05-cv-02716-SC Document 37 Filed 11/22/06 Page 5 of 5