Opinion ID: 3028801
Heading Depth: 3
Heading Rank: 1

Heading: STD Benefits

Text: When a claims fiduciary has discretionary authority to determine eligibility for benefits, we employ an arbitrary and capricious standard of review in reviewing a denial by that fiduciary of a request for benefits under an ERISA-regulated plan. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Under the arbitrary and capricious standard, we may overturn a fiduciary’s decision “only if it is without reason, unsupported by substantial evidence or erroneous as a matter of law.” McLeod v. Hartford Life and Acc. Ins. Co., 372 F.3d 618, 623 (3d Cir. 2004). Where the entity with discretionary authority to determine eligibility for benefits is also the entity that will be paying the benefits, we 10 recognize this structural conflict of interest by employing a “heightened” arbitrary and capricious standard of review. Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377, 392. We have adopted a “sliding scale” approach under which arbitrary and capricious review is a range, not a point, and our review is more or less probing depending on the degree of conflict present. Id. at 392-93. Nonetheless, the ultimate burden to establish that the claim determination was improper remains with the beneficiary. Id. at 392. In determining the degree of the conflict, we look not only to the ultimate decision, but also to the process by which the result was achieved. Id. at 393. The District Court correctly summarized this law, but it did not determine where within the range of arbitrary and capricious review Gambino’s case fell. Indeed, the District Court never explicitly discussed Liberty’s degree of conflict. Thus, when it determined that Liberty’s determination was “arbitrary and capricious,” it did not specify the level of scrutiny that Liberty had faced. This was error. The correct standard of review in this case is a deferential one, only slightly heightened by Liberty’s structural conflict. Liberty made repeated attempts to supplement Gambino’s file with the medical information it needed. Moreover, once it obtained some information, it reopened his file. The District Court intimates that evidence of a heightened conflict might be present because “Liberty seized upon any possible basis to ignore the ample and strong evidence of psychiatric disability.” 2005 WL 4839146, at  n.11. Strict application of an insurer’s policies, without more, is not evidence of a heightened conflict; 11 if lack of sufficient documentation relating to the two-week elimination period is an adequate basis for denial under the STD policy, then a denial on that basis cannot be evidence of a heightened conflict. Moreover, by engaging in de novo factfinding, the District Court committed clear error which infected its review of the case. In Lasser v. Reliance Standard Life Ins. Co., we held that “de novo factfinding is improper in reviewing a claims administrator’s decision under the arbitrary and capricious standard of review.” 344 F.3d 381, 385 n.3 (3d Cir. 2003). The District Court’s factual findings are a pastiche of evidence drawn from the administrative record and testimony provided at the bench trial. The District Court relied on trial testimony to make findings regarding, inter alia, Gambino’s panic attack at work, visit to Dr. Arnouk, termination from IKON, attempts to work in 2002, and continued psychiatric care. 2005 WL 4839146, at . M ore surprisingly, the District Court found it relevant to comment upon Gambino’s demeanor at trial, which “showed aberrant agitation and highly unusual affect.” It is clear that the District Court did not base its decision on the record that was before Liberty when Liberty denied the claim. Moreover, Gambino had the burden of establishing disability.2 2 Neither was Liberty obligated to inquire into Gambino’s work-related duties. The District Court relied on Quinn v. Blue Cross and Blue Shield Ass’n, 161 F.3d 472 (7th Cir. 1998), to suggest that an insurer’s failure to make such an inquiry is per se arbitrary and capricious. Quinn supports no such conclusion. In Quinn, the insurer made an affirmative determination that the beneficiary could perform her duties, even though the insurer did not know what those duties were. 161 F.3d at 476. The Seventh Circuit found such action by the insurer to be arbitrary and capricious. Gambino’s case is quite different. Liberty found 12 The District Court erred by collecting information which Liberty did not have in the record before it and by deciding the case on that expanded record. We will therefore vacate the District Court’s award of STD benefits and remand this case for further proceedings – i.e., a largely deferential review of the administrative record that was before Liberty when it made its decision.