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Prudential denies long term disability benefits and then objects to releasing information during litigation

Much as disability attorneys would like the Courts to allow them to request production of discovery, this isn’t something that can be assumed as a right. This is especially true in a situation where the attorney has not proven that a procedural defect has occurred.

The case which Cathleen Myers filed in U.S. District court, Eastern Division, Tennessee against the Prudential Insurance Company of America(Prudential) for recovery of long term disability benefits provides another opportunity to look at this issue. Myers had been employed by AAA Auto Club South in Tampa, Florida, and was covered by her employer’s long term disability plan. After she applied for long term disability benefits in August 2004, Prudential approved her claim.

Then in March 2006, Prudential notified her that they are terminating her long term disability benefits. She made all the required administrative appeals to recover her long term disability benefits but was unsuccessful. This led to her suit against Prudential.

Along with other allegations made in her complaint, her long-term disability attorney also alleged the following points:

  • The denial decision was made under a conflict of interest as benefits were to be paid out of Prudential’s own funds.
  • The denial decision was influenced by an entity who was more concerned over its own funds.
  • Prudential Insurance Company violated Employee Retirement Income Security Act (ERISA) by failing to give a full and fair review of the claim.
  • Prudential Insurance Company also failed to fully and properly communicate with Myers and to give reasonable opportunity to produce evidence in support of her claim.

In reply to the above allegations, Prudential admitted its dual role as a plan administrator as well as payer of benefits from its own funds. But it denied the existence of a conflict of interest and any impact from its dual role on the review of her claim for disability benefits.

Procedure Laid Down In ERISA For Long Term Disability Benefits Denial Cases.

  1. Court review of a denial decision is limited to the administrative record on which decision was based.
  2. Conflict of interest exists when a single party is both administrator of plan and payer of benefits.
  3. Discovery requests which supplement the administrative record must follow certain guidelines before they can be approved by the Court.

Myers’ disability attorneys had submitted discovery requests through interrogatories. The purpose of these questions was to determine whether the conflicts of interest crossed certain limits or not. The main question before the Court was whether Myers’ disability attorney was entitled to obtain the type of discovery.

A same issue had already arisen in Bennett v. Union Life Insurance Company of America. In that case, the Court emphasized the defects or irregularities in the long term disability benefits denial procedure. If the same type of defects or irregularities existed in Myers’ case then the Court would allow discovery.

Prudential argued that Myers’ disability attorney had not met the necessary threshold of showing procedural defects or challenge which was essence in the case of Bennett. Therefore Myers was not allowed to proceed with discovery.

Past Disability Discovery Court Decisions Reviewed

Prudential cited four Sixth Circuit Court opinions which it claimed support its submissions.

  • Calvert v. Firstar Finance, Inc.
  • Kalish v. Liberty Mutual / Liberty Life Assurance Co. of Boston
  • Smith v. Continental Casualty Co.
  • Moore v. Lafayette Life Insurance Co.

These decisions were carefully reviewed by the Court. Out of all the above cited cases only one case was related to the issue of proper scope and methodology of discovery in ERISA cases.

In Moore, the Court concluded that discovery was proper at the initial stage for an alleged procedural defect. The Court also found that Kalish and Calvert were highly persuasive for allowing discovery even in absence of any threshold showing irregularities in the claims review process. Rather than supporting Prudential’s arguments these two cases argued against the disability insurance plan’s position.

In the matter of Metropolitan Life Insurance Co. V. Glenn, Supreme Court held that when an insurance Company performs a dual role, then conflict of interest exists, and the Court must take this into consideration while reviewing the denial decision of disability claim.

In the case of Bennett, burden of production was placed on Myers’ disability attorney to bring some evidence to prove that discovery would reveal conflicts of interests in the decision to deny benefits.

How Would The Court Balance These Decisions?

The Court must exercise the power granted it by virtue of the Federal Rule of Civil Procedure to define appropriate parameters of discovery. In ERISA benefit denial cases, matters outside the administrative record were not discoverable in the past as they were considered irrelevant to the issue in such cases.

This changed significantly after Glenn. When a disability attorney’s allegations of a procedural defect in the administrative process can be proven this is no longer the only reason the Court could allow discovery. Now, disability attorneys could seek discovery when a conflict of interest could be proven.

U.S. Courts could now see discovery as necessary whenever an insurance company performed a dual role as plan administrator and as payer of benefits.

Discovery asked for in this case

Myers had forwarded Prudential eight interrogatories, seven requests for production and six requests to admit. Prudential relied on Bennett for its objections that Myers’ ERISA attorney had not met the threshold showing support for the discovery request. But this Court had in at least two cases cited by Prudential effectively abrogated Bennett and allowed discovery even in the absence of meeting the Bennett guidelines.

While the Court was inclined to find that the Myers is entitled to know any type of incentive, bonus and wages which were paid to employees involved in reviewing his disability claims, the Court was disinclined to allow discovery into the personal files and records of Prudential’s employees. The Court also was inclined to allow disclosure of the identity of physicians whose opinions were considered during the review of Myers’s claim. On other hand, the Court put a limitation on discovery by not allowing disclosure of pay records and personal files of the physicians who reviewed Myers claim.

The Court gave Prudential a period of thirty days from the entering of its order to answer or to make objections relating to the discovery request forwarded by Myers’ disability attorney.

This is another decision affirming the right of disability attorneys to seek discovery even when procedural irregularities are only supported by a small amount of evidence. Although some of the cases cited by Prudential appeared to favor the disability insurance company, the presentation made by the experienced team of disability attorneys hired by Myers demonstrated the weakness of Prudential’s arguments in light of the actual cases cited.

This is case is once again and example of the complicated matters involved with litigation of an ERISA long term disability lawsuit.



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