• Important ERISA holdings from Hobson v. Metropolitan Life Insurance Company, 574 F.3d 75 (2d Cir. 2009)
  • March 10, 2010 | Authors: Michelle M. Arbitrio; Emily Hayes
  • Law Firm: Wilson Elser Moskowitz Edelman & Dicker LLP - White Plains Office
  • Overview

    In July 2009, the U.S. Court of Appeals for the Second Circuit issued a decision clarifying a number of issues in a case reviewing a denial of ERISA long term disability benefits under an “arbitrary and capricious” standard of review.  This included an explication of  the role of conflict of interest, following the Supreme Court’s decision in Metropolitan Life Insurance Company v. Glenn, which delineated what constitutes substantial evidence and what constitutes a full and fair review.

    Background

    Deborah Hobson (“Hobson”) appealed a decision by The Honorable Alvin K. Hellerstein, U.S.D.J. granting summary judgment to Metropolitan Life Insurance Company (“MetLife”), denying Hobson’s cross-motion for summary judgment, and dismissing the complaint that sought review of a decision denying long term disability benefits.  Hobson allegedly suffered from a number of ailments, including asthma, severe tremors, migraines, depression, ulcerative colitis, skin problems, seizures, thyroid cancer, fibromyalgia, sleep apnea, severe fatigue, heaviness in her arms and legs, herniated discs in her lower back and neck, arthritis, and Decrum’s disease.  She originally applied for benefits soon after stopping work in February 2001.  In November 2001, MetLife approved her claim for short term disability benefits, but denied her claim for long term disability benefits.  The denial was upheld on appeal in March 2002.  In August 2002, Hobson’s claim was approved after she submitted additional information regarding certain of her medical conditions.  The benefits were then terminated in April 2003 and were reinstated in June 2003 when the plaintiff underwent surgery for her colitis.  The benefits were terminated in August 2004, but were reinstated for a closed period of time to November 2004, after the plaintiff’s September 2004 thyroid cancer surgery. 

    The plaintiff appealed again, claiming that she had been diagnosed with Decrum’s disease, a rare chronic condition.  After obtaining peer review reports from specialists, MetLife denied the appeal in May 2005, informing the plaintiff that it would not consider any further appeals and that she had exhausted her administrative remedies.  Despite this, Hobson submitted further information, which was considered by MetLife.  MetLife then informed Hobson in two May 2005 letters that her claim remained denied.

    Hobson filed a lawsuit in the Southern District of New York in August 2005, seeking restoration of her long term disability benefits.  She alleged that she was entitled to de novo review because MetLife was influenced by its conflict of interest as both the evaluator and payer of benefit claims and that MetLife’s decisions were an abuse of discretion.  The court granted MetLife’s motion for summary judgment, and the appeal followed.

    On appeal, Hobson again argued that MetLife’s conflict of interest as both evaluator and payer of benefit claims influenced its decision to deny her claim for benefits.  She claimed that MetLife’s decision was arbitrary and capricious and not supported by substantial evidence, and that MetLife abused its discretion by not affording her a full and fair review of her claim.

    Decision

    In a decision dated July 29, 2009, the Second Circuit affirmed the District Court’s decision.  The decision made several important holdings regarding issues in controversy following the U.S. Supreme Court’s decision in Metro. Life Ins. Co. v. Glenn, 128 S. Ct. 2343 (2008).

    Under Glenn, the plaintiff bears the burden of demonstrating the conflict of interest

    In MetLife v. Glenn, the U.S. Supreme Court held that “a plan under which an administrator both evaluates and pays benefits claims creates the kind of conflict of interest that courts must take into account and weigh as a factor in determining whether there was an abuse of discretion.”  On appeal, Hobson argued that this “conflict of interest” influenced the reasonable interpretation of her benefit claims, and that she was therefore entitled to a de novo standard of review despite the presence of discretionary language in the insurance policy.  The Second Circuit rejected Hobson’s argument, holding that Hobson failed to establish that MetLife was influenced by this type of conflict of interest, and decided not to accord this factor any weight in its review of MetLife’s denial of long term disability benefits.  Following Glenn, the court stated that MetLife had a structural conflict of interest, and that the District Court had erred in failing to “(1) discuss the evidence allegedly showing that MetLife’s conflict of interest influenced its decision making, (2) determine what role MetLife’s conflict of interest may have played in its decision, and (3) give that conflict any weight, as required by Glenn.”

    The court then went through this process, considering the two documents identified by Hobson to determine whether that conflict of interest influenced MetLife’s decision making.  The court determined that the documents did not show conflict of interest, and so the plaintiff was not entitled to a de novo standard of review.  MetLife’s conflict of interest was not entitled to any weight in the court’s review of the benefit denial.

    Importantly, the Second Circuit placed the burden on the plaintiffs to demonstrate that the conflict of interest discussed in Glenn did, in fact, influence the reasonable interpretation of the plaintiff’s benefit claims before any court will even consider the conflict as having any weight.  This is an important explanation of which party bears the burden of proof.

    Arbitrary and capricious standard requires a narrow scope of review

    In addition to finding that Hobson was not entitled to de novo review, the Second Circuit reaffirmed Pagan v. NYNEX Pension Plan,52 F.3d 438 (2d Cir. 1995), holding that under the arbitrary and capricious standard of review, the court maintains a narrow scope of review in determining whether an administrator’s decision to deny ERISA benefits was without reason, unsupported by substantial evidence, or erroneous as a matter of law, and that the court was not entitled to substitute its judgment for the judgment of the insurer. 

    The court then considered individually each of the five denials by MetLife (August 2004, December 2004, March 2005, and two in May 2005), determining that each decision was supported by substantial evidence and was not arbitrary and capricious.

    In so doing, the court made specific mention of the Supreme Court’s decision in Black & Decker Disability Plan v. Nord, 538 U.S. 822, 834 (2003), stating that courts do not require administrators to defer to the opinions of a plaintiff’s treating physicians, and plan administrators also do not need to explain when they credit reliable evidence that conflicts with the opinion of a treating physician.  Specifically, the court ruled that MetLife acted within its discretion in relying on the conclusions of several peer review reports obtained during the course of its claim reviews.  This reliance was reasonable because Hobson’s medical records did not clearly demonstrate that she was disabled, and there was evidence in the medical records that she was not, in fact, disabled.

    Issues

    MetLife afforded plaintiff a full and fair review of her claim

    In addition to arguing that MetLife’s decisions were not supported by the evidence, Hobson argued that she was not given a full and fair review by MetLife as required by Section 503(2) of ERISA.  The court found in MetLife’s favor on each of Hobson’s six arguments, as follows, and in the process provided important guidance to both insurers and practitioners.

    1. MetLife complied with the ERISA notice requirements

    Hobson argued that MetLife had not sufficiently notified her of what additional information was needed to “perfect her claim” pursuant to section 503(1) of ERISA, which requires that a plan administrator provide a claimant with “adequate notice in writing . . . setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant.” 29 U.S.C. § 1133(1).  Further, ERISA regulations require the administrator to provide a claimant with a “description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary . . .” 29 C.F.R. § 2560.503-1(g)(1)(iii).

    The court rejected Hobson’s arguments, stating that MetLife had adequately informed her of the basis for the denials in the decision letters.  The court distinguished earlier cases from District Courts and other circuits, because in those cases administrators had failed to notify claimants of the information necessary to perfect claims and had also failed to provide the specific reasons for the denial of benefits.  The court also noted that Hobson had adequately perfected her claim on earlier occasions, including the three times that MetLife approved her benefits, as support for the court’s finding that MetLife had provided her with adequate notice in its decision letters.

    2. It is reasonable to require objective evidence of functional impairment?

    Hobson argued that it was unreasonable for MetLife to require objective medical evidence to support her disability claim, and that this requirement prevented her from getting a full and fair review of her long term disability benefits claim.  The Second Circuit ruled that it was “not unreasonable for ERISA plan administrators to accord weight to objective evidence that a claimant’s medical ailments are debilitating in order to guard against fraudulent or unsupported claims of disability.”  The court specifically noted that at least some objective evidence should be available, even in claims involving fibromyalgia, such as trigger point findings.  The court found it important that this requirement of objective evidence did not contradict the policy language.

    In making this ruling, the court did not abandon its previous finding in Connors v. Connecticut General Life Ins. Co., 272 F.3d 127, 136 (2d Cir. 2001) that subjective complaints alone may constitute sufficient evidence of disability, and that a plaintiff’s subjective complaints must be considered.  However, this is an important ruling under the arbitrary and capricious standard of review, so long as objective evidence is possible for a claimant’s particular alleged disability.

    3. MetLife properly considered all of the medical evidence

    Hobson argued that she was deprived of a full and fair review because MetLife did not properly consider all of her medical evidence.  She claimed MetLife ignored her non-physical and co-morbid conditions as well as the side effects of her medications.

    The court rejected this argument, noting that MetLife obtained peer reviews from independent psychiatrists, each of whom was provided with all of the medical evidence, and each concluded in detailed reports that she was not disabled.  These reports, which MetLife relied upon, showed that all of her conditions were considered together.

    An important component of the court’s discussion involved the consideration of side effects of medication.  Hobson claimed that the side effects of her medications contributed to her disability, and argued on appeal that MetLife had erred by not considering them.  The court stated that Hobson had failed to meet her burden, as her appeal brief did not explain exactly how the medication side effects prevented her from working, and she did not even submit any medical evidence supporting the argument.  Based on this ruling, it is not sufficient for a plaintiff to merely state that he or she is taking medications and that those medications have certain side effects, but a plaintiff must actually show how the side effects negatively impact the plaintiff’s ability to work.

    4. It was not an abuse of discretion for MetLife to consider reports of independent physicians over reports of Hobson’s physicians

    Hobson argued that MetLife gave too much weight to the opinions of the independent peer review doctors, both by retaining the peer review doctors and by giving more weight to their opinions than the opinions of her treating physicians. 

    The Second Circuit held that it was not an abuse of discretion for MetLife to consider the opinions of its trained and board-certified independent physicians solely because they were selected and presumably compensated by MetLife, as this is quite customary in the industry.  The Second Circuit held further that MetLife is not required to give an opinion from a claimant’s treating physician any special weight, especially in a case where there are contrary independent physician reports.

    5. A plan administrator is not required to order an IME

    Hobson argued that MetLife’s decision not to request that she undergo an Independent Medical Examination (“IME”) was arbitrary and capricious because the subject policy allowed MetLife to obtain an IME.

    The Second Circuit joined the Sixth, Seven, Eighth and Ninth circuits, holding that a plan administrator is not required to order an IME regardless of whether it is permitted under the plan in a given case.  Under the instant plan, the IME was considered a “valuable” tool in six distinct situations, three of which the court found present in Hobson’s case.  However, in the face of sufficient objective evidence supporting the denial of benefits, the court found that MetLife “simply exercised its discretion to decline to pursue one option at its disposal.”

    6. SSA determination is not authoritative, but well-documented explanation of different result is suggested

    Hobson argued that MetLife and the District Court failed to consider her Social Security disability award (“SSDI”).  MetLife had required Hobson to apply for the SSDI benefits, and they were awarded by the Social Security Administration (“SSA”) in May 2003 because of the plaintiff’s colitis and fibromyalgia.

    The court rejected this argument, even though neither the District Court nor MetLife had apparently considered the award in making their determinations.  The court stated that, based on the medical evidence, the plaintiff’s condition had changed between the SSA’s May 2003 award and MetLife’s August 2004 termination of her long term disability benefits, as she had had surgery for her colitis in June 2003, and the SSA’s decision based on her presurgical condition was no longer relevant.

    In finding that MetLife’s failure to consider Hobson’s Social Security disability benefits award in making its long term disability determinations did not render its denial of benefits arbitrary or capricious, the Second Circuit encouraged plan administrators to fully explain their reasons for determining why a disability finding by the SSA did not yield an identical result under the relevant plan.  This suggestion furthers ERISA’s goal of providing claimants with information that can be used to perfect their claims on subsequent appeals.  In short, the Second Circuit held that a plan administrator is allowed to disagree with an SSA assessment of disability, but the plan administrator should have a careful, complete and well-documented explanation of why a differing conclusion was reached.  The plan administrator should not, under any circumstance, ignore the award of SSDI benefits, but an award of SSDI benefits does not automatically entitle a claimant to long term disability benefits from a private insurer.

    Conclusion

    Hobson v. MetLife is important for several reasons.  First, it demonstrates how structural conflict of interest is to be considered following the Glenn decision, including clarification that the plaintiff has the burden of demonstrating that a structural conflict of interest actually impacted the insurer’s claim determination.  Second, Hobson affirms the previously established arbitrary and capricious standard following Glenn.  Third, Hobson provides significant guidance about what constitutes a full and fair review under ERISA, addressing an arbitrary and capricious standard of review and discussing several of the arguments that are often made by plaintiffs in an attempt to show that they were not afforded a full and fair review.