Court orders Citigroup and MetLife to answer discovery request exposing conflict of interest in long-term disability benefit denial

Frequently, a disability attorney finds that additional information is needed before he or she can demonstrate that a conflict of interest has motivated the denial of benefits by an ERISA governed disability insurance company. In order to secure this information, the disability insurance attorney files a Motion to Compel Discovery. In response, the disability insurance company inevitably contests the need to provide this information.

On November 4, 2009, Hanna Zewdu’s disability attorney filed a Motion to Compel and Motion for Sanctions. His client was a participant in a CitiGroup Long-term Disability Plan (CitiGroup). Plan administrator, Metropolitan Life Insurance Company (MetLife), had denied her claim for long-term disability benefits. The motions were entered before the court to gain information that could be used to demonstrate the structural conflict of interest that caused MetLife to deny Zewdu’s application for long-term disability benefits.

On November 5, the judge presiding over the matter referred the case to another judge, Maria-Elena James, to resolve Zewdu’s Motion for Sanctions. This judge denied the motion and ordered the two sides to meet. If they could not work out their differences, then she ordered them to file a joint discovery dispute letter. Zewdu’s disability attorney filed a new Motion for Sanctions on December 7, 2009. Each side filed a separate joint letter of dispute on December 18. MetLife filed an opposition to Zewdu’s Motion for Sanctions on December 24, 2009, and Zewdu’s disability attorney responded on December 31, 2009.

Judge James listened to arguments from both sides on January 28, 2010.

Disability attorney points to structural conflict of interest.

Zewdu’s disability attorney pointed to the fact that MetLife administers and funds her long-term disability plan. This structural conflict of interest could have played a role in the denial of his client’s benefits. Her disability attorney also pointed to procedural irregularities which could have caused MetLife to deny her benefits.

In order to secure the information needed, Zewdu’s disability attorney prepared 21 questions (interrogatories) and made 20 requests for documents. These questions and documents sought information on four issues.

1. Did financial incentives drive key decision-makers to deny claims?
2. Was there a relationship between MetLife’s physician consultant and MetLife?
3. Did training procedures color how MetLife employees approved or disapproved benefits?
4. Did performance evaluations reward employees who disapproved benefits?

MetLife, who Zewdu’s disability attorney had filed the suit against, disputed the propriety of 13 of the questions and all of the document requests. When it came down to proving there was a denial of long-term disability benefits resulting from a structural conflict of interest, Metlife argued that Zewdu’s disability attorney was seeking information that fell outside of the limited scope allowed for proving a structural conflict of interest as such. The disability insurance company went on to claim that Zewdu’s attorney was seeking internal documents and records which were not in CitiGroup’s possession and were not under their control. Citigroup contended the information resided with MetLife.

Court decides upon the legal standard to apply.

As both the administrator and the funder of CitiGroup’s Long-term Disability Plan, MetLife clearly had a structural conflict of interest. This meant the Court had to review Zewdu’s claim under the abuse of discretion standard. In order for the Court’s review to be informed by “the nature, extent, and effect on the decision-making process of any conflict of interest that may appear in the record”, the Court should give more weight to this conflict when “evidence of malice, of self-dealing, or of a parsimonious claims-granting history” can be demonstrated.

In order for the Judge James to do this fairly, she recognized the fact that evidence which MetLife had not included in the administrative record would be necessary. The case law related to the amount of external information a claimant can seek during conflict discovery discusses the following issues:

1. Zewdu’s disability attorney had to claim that a conflict existed or that procedural irregularities had occurred which demonstrated that a conflict of interest had played a role in MetLife’s decision to deny disability benefits.
2. Discovery into financial incentives could be requested on employees or consultants involved in the benefit decision process.
3. Discovery into MetLife’s general approval and termination rates for long-term disability claims was acceptable.
4. Discovery into MetLife’s specific long-term approval and termination rates for long-term disability claims involving Zewdu’s specific medical issue was also acceptable.
5. Discovery into any steps MetLife had established to reduce the bias of decision makers and to promote accurate disability benefit determinations was acceptable.
6. Discovery into any factors or evidence which MetLIfe may have used to make its decision, which Zewdu’s administrative record did not include, was also permissible.

The Court also had to consider additional factors. Requests for discovery needed to be limited to the time frame in which Zewdu’s claim was being processed. Discovery could not create more expense than the potential benefit supported. If MetLife claimed that something requested was already in the administrative record, it was to provide a written response verifying that the information had already been provided as part of the administrative record.

Court determines what discovery to allow.

Five interrogatories sought information about the compensation agreement between MetLife and the physician the disability insurance company retained to review Zewdu’s claim. The questions also sought to find out how many disability claims this doctor had reviewed, granted and denied. The Court determined that discovery into this information was permissible.

Five interrogatories sought information about the compensation agreements between MetLife and other medical professionals who have reviewed Zewdu’s claim. These discovery requests were also approved by the Court.

Two of the interrogatories asked for information that would be duplicated when the compensation agreements were supplied. The Court denied these requests. Also four of the interrogatories asked for total premiums received by MetLife from disability policies in general, and Zewdu specifically, and for the amounts paid out for all disability claims between 2005 – 2008. The Court could see no benefit from ordering MetLife to produce this information.

Zewdu’s disability attorney made one request seeking all the documents contained in the files of either CitiGroup or MetLife that pertained to Zewdu’s claim. The Court approved discovery on all but the request for MetLife’s underwriting file.

Zewdu’s disability attorney made five requests regarding MetLife’s training documents. The disability attorney wanted the Court to be able to consider the documents used to instruct physicians on how to conduct the medical review and materials used to train its medical staff on how to handle disability claims. The Court agreed that this information could be discovered.

Zewdu’s disability attorney also requested any documents that demonstrated the procedure MetLife utilized to evaluate claims during the time that Zewdu’s claim was under review. The Court also supported discovery as to all in-house, MetLife documents, “including claim and procedural manuals, guidelines, bulletins, and memoranda, describing or pertaining to the handling of disability claims in general, and disability claims” involving Zewdu’s particular medical issue.

Another request for production of documents included copies of MetLife’s claims manuals and procedures and any other documents that were used by MetLife to process Zewdu’s claim. This request was also approved by the Court.

Six of the requests to produce documents involved the performance evaluations of the medical professionals MetLife used to handle Zewdu’s case, as well as documentation on the procedures MetLife used to evaluate these employees. Once again the Court found that the request was permissible because the time frame fell within the five year limitation set by Gessling.

One of the requests for production asked MetLife to produce all of the Physician Consultant Review prepared by the physician who reviewed Zewdu’s file from 2005 – 2008. The Court could see no reason why this request would benefit the disability attorney’s case. Nor could it see how Zewdu’s attorney needed to know how MetLife had chosen to hire the physician.

Court tries to determine if CitiGroup can produce the MetLife documents.

CitiGroup argued that even if the Court found production of the documents relevant, CitiGroup did not have possession, custody or control of the requested information. CitiGroup’s attorneys argued that if Zewdu’s disability attorney wanted this information, he would have to use the subpoena process and seek it from MetLife directly under Federal Rule of Civil Procedure 45.

The information available to Judge James made it impossible for her to determine if CitiGroup did, in fact, have the information in its possession, custody, or control. While she could reach solid conclusions on what information CitiGroup would have to provide if it did have this information at its disposal, she could not order CitiGroup to produce it without additional briefing. She ordered each side to limit their briefs to five pages, and reserved her ruling on Zewdu’s Motion for Sanctions until she could review the briefings.

This problem may have been avoided if Zewdu’s disability attorney had brought suit against both CitiGroup and MetLife. As co-defendants, either side could have been ordered to produce the necessary documents and subpoenas may not be necessary. This is the type of case where Metlife can try to keep running but they can’t hide. It will be interesting to see how this case develops.