NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

 FOR THE NINTH CIRCUIT

GREGORY SMITH,

Plaintiff-Appellee,

 v.

RELIANCE STANDARD LIFE

INSURANCE COMPANY,

Defendant-Appellant.

No. 16-15319

D.C. No. 4:15-cv-00022-RCC

MEMORANDUM*

GREGORY SMITH,

Plaintiff-Appellant,

 v.

RELIANCE STANDARD LIFE

INSURANCE COMPANY,

Defendant-Appellee.

No. 16-15413

D.C. No. 4:15-cv-00022-RCC

Appeal from the United States District Court

for the District of Arizona

Raner C. Collins, Chief Judge, Presiding

FILED

APR 04 2017

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

* This disposition is not appropriate for publication and is not precedent

except as provided by Ninth Circuit Rule 36-3.
Page 2 of 5

Argued and Submitted March 16, 2017

San Francisco, California

Before: TALLMAN and WATFORD, Circuit Judges, and GUIROLA,** Chief

District Judge.

 

1. We vacate the district court’s order affirming the denial of Gregory

Smith’s request for short-term disability benefits. In issuing that decision, the

district court appeared to apply the ordinary abuse of discretion standard of review. 

In this case, however, a more searching review of Reliance’s decision to deny

benefits is required by virtue of the fact that Reliance was responsible both for

paying benefits and for administering the claims review process. See Abatie v. Alta

Health & Life Ins. Co., 458 F.3d 955, 965–68 (9th Cir. 2006) (en banc). While this

structural conflict of interest does not alter the standard of review, it is a factor to

be weighed in determining whether a plan administrator abused its discretion. 

Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917, 929 (9th Cir. 2012); Abatie,

458 F.3d at 967. On remand, in determining the level of skepticism to apply to

Reliance’s decision, the district court should take into account the likelihood that

the structural conflict of interest affected Reliance’s decision to deny Smith’s

request for short-term disability benefits, Stephan, 697 F.3d at 929, any record of

** The Honorable Louis Guirola, Jr., Chief United States District Judge

for the Southern District of Mississippi, sitting by designation.
Page 3 of 5

Reliance’s self-dealing, Abatie, 458 F.3d at 968, and the fact that Reliance relied

on a paper review of Smith’s medical records rather than an in-person medical

evaluation, Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 630 (9th

Cir. 2009).

2. We vacate the district court’s award of long-term disability benefits based

solely on Reliance’s failure to issue a denial of the claim within the 90-day limit

imposed by ERISA. 29 C.F.R. § 2650.503-1(f)(1). Reliance’s failure to comply

with ERISA’s procedural requirements cannot on its own justify an award of

benefits under the policy, although it may alter the standard of review. See Gatti v.

Reliance Standard Life Ins. Co., 415 F.3d 978, 984–85 (9th Cir. 2005); McKenzie

v. Gen. Tel. Co. of Cal., 41 F.3d 1310, 1315 (9th Cir. 1994). 

On remand, the district court should determine whether the procedural

violation caused Smith substantive harm such that de novo review of Reliance’s

benefits determination is appropriate. See Gatti, 415 F.3d at 984–85. If Smith did

not suffer substantive harm as a result of the violation, the court should review

Reliance’s denial of long-term disability benefits under the same abuse of

discretion standard that governs its review of the denial of short-term disability

benefits, while according the procedural violation appropriate weight. See Abatie,

458 F.3d at 972.
Page 4 of 5

Smith is incorrect in arguing that Harlick v. Blue Shield of California, 686

F.3d 699 (9th Cir. 2012), supports the district court’s decision. In Harlick, plan

administrators gave one reason for denying the claimant’s claim during the

administrative process, but then asserted a new reason during litigation in federal

court defending that decision. Id. at 705–06, 719. We held that the plan

administrators could not invoke, for the first time in litigation, grounds held in

reserve as the basis for denying benefits. Id. at 719–21. Here, by contrast,

Reliance has never asserted conflicting reasons for denying benefits. Reliance

denied short-term disability benefits on the ground that Smith had a pre-existing

condition. It asserts the same basis for its denial of long-term disability benefits.

While Reliance failed to issue a denial before litigation began, it has not attempted

to invoke a new and different ground for the denial, held in reserve, for the first

time in litigation. 

3. Because the district court committed clear error by failing to determine

whether Reliance’s procedural violation caused Smith substantive harm, we vacate

the court’s denial of reconsideration of its award of long-term disability benefits. 

See Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000).

4. Because we vacate the district court’s award of long-term disability

benefits, we also vacate the court’s award of attorney’s fees.
Page 5 of 5

Each party shall bear its own costs on appeal. 

VACATED and REMANDED.