Court Finds Irregularities in Procter & Gamble Disability Insurance Benefit Denial
In ERISA cases filed in a district court asking for judicial review of a plan administrator’s denial of benefits, the court is generally limited to considering only the administrative record that was before the plan administrator. The case of Robert Stallings v. The Proctor & Gamble Disability, Committee, et al., is an example of how plaintiffs with cases filed in a District Court that is under the jurisdiction of the U.S. Court of Appeals for the Eighth Circuit may obtain discovery of evidence outside the administrative record.
Key Take-Aways from the Case:
- Discovery may be granted if the plaintiff can show good cause for obtaining evidence that is outside the administrative record.
- Good cause is shown when there is a conflict of interest since the same entity determines benefits eligibility and pays those benefits out of its own pocket.
- Good cause is shown when the plaintiff shows an irregularity in that the plan administrator acted dishonestly, either from an improper motive or in a failure to use sound judgment when reaching the decision to deny benefits.
Summary of the Facts
The case began in 2013 when Defendants (Proctor & Gamble) agreed that Plaintiff was “totally disabled” due to his diagnoses of depressive disorder, chronic back pain, and chronic neck pain and awarded him benefits. In 2016, Defendants reviewed the Plaintiff’s medical records and again found him to be totally disabled.
On July 24, 2019, Defendants changed their minds and notified Plaintiff by letter that they no longer found him to be totally disabled, only partially disabled. Therefore, he no longer qualified for Plan disability benefits.
Plaintiff filed an administrative appeal, which was denied. He then filed this ERISA lawsuit in the United States District Court for the Eastern District of Missouri, Southeastern Division.
In his lawsuit, Plaintiff alleged that Defendants: 1) wrongfully denied him benefits, and 2) breached their fiduciary duty to him. These allegations were based on the two reasons Defendant gave Plaintiff for the denial of benefits:
1) Lack of “objective” medical evidence to support his claim.
2) Plaintiff failed to have a functional capacity evaluation (FCE).
After filing his lawsuit, Plaintiff made a motion for discovery. Discovery is rarely allowed in an ERISA lawsuit for wrongful denial of benefits. Generally, the Court is limited to its review based only on the administrative record that was before the Plan Administrator when the decision was made to deny benefits.
In this case, the District Court granted Plaintiff’s discovery motion for two reasons:
1) Defendants’ denial of benefits was based on procedural irregularities.
2) Defendants had a clear conflict of interest.
In granting the Plaintiff’s discovery motion, the Court held that “limited discovery is needed to ascertain the potential extent of any procedural irregularities and/or a conflict of interest because without such discovery, the ‘administrative record [is] [in]sufficient to permit a fair evaluation of the decision.’”
What is the Standard for Allowing Discovery in ERISA Lawsuits?
Generally, discovery is not allowed in judicial review of an ERISA lawsuit. The Court is limited to the evidence that was before the administrator and does not allow for discovery outside the administrative record.
The Court may allow discovery if the plaintiff demonstrates good cause. Examples of good cause include:
- The administrative record is insufficient to establish a conflict of interest. A conflict of interest exists if the same entity determines eligibility for benefits and then is responsible for paying those benefits out of its own pocket.
- The administrative record is insufficient to show a procedural error. Examples of this include where the plan administrator acted “dishonestly, from improper motive, or failed to use sound judgment in reaching its decision.”
If plaintiffs can demonstrate good cause, their discovery motion will be granted.
Did the Plan Administrator Have a Conflict of Interest?
Defendants conceded they had a conflict of interest since they were both the insurer who paid Plaintiff benefits and the Plan Administrator who determined whether Plaintiff qualified for benefits. But Defendants then argued that they had “taken steps to ensure any conflict of interest does not impact the benefit determination process.”
The Court found that this mere statement was not enough. There was nothing in the record that confirmed that policy was followed in Plaintiff’s case.
The Court granted Plaintiff’s discovery request, finding that “Plaintiff should be allowed to conduct limited discovery to determine whether such policies, procedures, and practices do actually exist and, if so, to what extent, if any, they interfered with the fair review of Plaintiff’s claim for benefits.”
Were There Procedural Irregularities in the Plan Administrator’s Review of Plaintiff’s Claim?
Legal precedent allows for discovery when warranted in ERISA cases “where the plan administrator, in the exercise of its power, acted dishonestly, from improper motive, or failed to use sound judgment in the reaching of its decision.” The Court noted that the existing administrative record showed that:
- Defendants may have disregarded favorable medical records and evidence regarding Plaintiff’s disabled status and relied only on reports that supported the denial of benefits.
- Defendants’ decision to deny benefits in July 2019 was inconsistent with its decision to approve benefits in 2013 and 2016. This appeared to be an unlawful application of the Plan provisions.
- Defendants canceled the FCE while Plaintiff was waiting for cardiology clearance for the exam. This may have been unreasonable under ERISA law.
- Defendants failed to explain why alternate FCE providers were disallowed.
The Court also granted the motion for discovery on this issue, finding that “the existing evidence raises questions as to whether the Committee used ‘sound judgment’ in their determination.”
This case was not handled by our office, but it may provide helpful information to claimants as they pursue compensation under their employer’s disability benefits policy. If you need assistance with your claim, no matter what stage you are at with it, contact our disability lawyers at Dell Disability Lawyers for a free consultation.
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