The opinion of the court was delivered by: Stanley S. Brotman, United States District Judge.
OPINION ON DEFENDANT'S MOTION FOR SUMMARY
JUDGMENT AND PLAINTIFF'S CROSS MOTION FOR
Presently before this Court, pursuant to the Employee
Retirement Income Security Act of 1974 (hereinafter "ERISA"),
29 U.S.C. § 1132(e)(1), as well as 28 U.S.C. § 1446(a) (removal
statute) and 28 U.S.C. § 1331 (federal question jurisdiction), is
the Motion for Summary Judgment by Defendant Metropolitan Life
Insurance Company (hereinafter "MetLife"), Plaintiff Lynne
O'Sullivan's ("O'Sullivan") Opposition of Defendant's Motion for
Summary Judgment and Cross Motion for Summary Judgment,
Defendant's Opposition to Plaintiff's Cross Motion for Summary
Judgment, Plaintiff's letter-brief in lieu of a formal reply
brief, and Defendant's letter-brief in response. Both parties'
letter-briefs specifically argue their positions in light of Pinto
v. Reliance Std. Ins. Co., 214 F.3d 377 (3d Cir. 2000), decided
after initial pleadings were filed. Pursuant to Fed.R.Civ.Proc.
78, these motions are decided without oral argument. For the
reasons stated below, Defendant's Motion for Summary Judgment and
Plaintiff's Cross Motion for Summary Judgment will be denied.
I. FACTUAL AND PROCEDURAL BACKGROUND
MetLife acts as the claim fiduciary for the employee benefits
plan offered to Medaphis employees. (See Daniels Aff. at ¶ 2) It
processes all claims for payment of benefits under the plan, and
makes payment of any benefits that may be due to a beneficiary in
accordance with the terms of the plan. (See id.) MetLife is
thereby both the insurance provider and plan administrator. Under
the terms of the plan, it has specific discretionary authority to
interpret plan terms and to determine eligibility for plan
benefits. The plan provides that:
In carrying out their respective responsibilities under the
Plan, the Plan administrator and other Plan fiduciaries shall
have discretionary authority to interpret the terms of the
Plan and determine eligibility for and entitlement to Plan
benefits in accordance with the terms of the Plan. Any
interpretation or determination made pursuant to such
discretionary authority shall be given full force and effect,
unless it can be shown that the interpretation or
determination was arbitrary and capricious.
(See Daniels Aff. at Exh. A)
In reference to the LTD benefits policy, the Plan contains a
"Pre-Existing Condition Limitation" provision, which states: "This
plan does not provide benefits for any Disability that is caused
by, contributed to by, or resulting from a Pre- Existing
Condition, unless the Disability begins after you have been
covered under This Plan for 12 months in a row." (See Daniels
Aff. at Exh. A) A "Pre-Existing Condition" is defined in the
Plan's provisions as "a Sickness or Injury for which you received
medical Advice or Treatment during the 90 day period immediately
prior to your effective date of Personal Benefits." (See Daniels
Aff. at Exh. A) If a plan participant has a disability that
begins within 12 months of employment and that disability is a
pre-existing condition, that participant is ineligible for LTD
B. O'Sullivan's Disability Claim and MetLife's Decision
On or about August 31, 1997, or Labor Day weekend
1997,*fn1 O'Sullivan claims that she suffered an injury to her
thoracic spine after attempting to lift a pickup truck bed. (See
Compl. at ¶ 2; see also, O'Sullivan Aff. at ¶¶ 2-3) On September
4, 1997, she visited her family doctor at Sunset Road Medical
Associates ("SRMA") because her pain, resulting from the incident,
had worsened. (See Compl. at ¶ 2, O'Sullivan Aff. at ¶ 4) Since
this doctor's visit, O'Sullivan has been examined by several
physicians, who have diagnosed her condition as thoracic stretch
injury, intercostal neuritis which developed into reflex
sympathetic dystrophy (RSD). (See Compl. ¶ 2) Because of this
injury, O'Sullivan claims that she is disabled and unable to work.
(See O'Sullivan Aff. at ¶¶ 6 & 10)
On September 29, 1997, O'Sullivan submitted a Statement of
Claim ("claim form") seeking STD and LTD benefits under the plan
policy. (See Daniels Aff. at ¶ 6, O'Sullivan Aff. at ¶ 14) The
claim form, signed by O'Sullivan, states that her treatment for
her disability began September 4, 1997, and that she was first
disabled by her injury on September 11, 1997. (See Daniels Aff.
at Exh. B, Affidavit of Kristin L. Wynne at Exh. B) The signature
Albert Talone, of SRMA, is on the "Attending Physician's
Statement" portion of the claim form. Under the heading,
"Diagnoses/Analysis," is written "low back pain, DJD,
osteoporosis." (See id.)
O'Sullivan and her treating physicians submitted numerous
documents to MetLife in consideration of her disability claims.
(See Daniels Aff. at ¶ 8 & Exhs. C-E, Wynne Aff. at Exh. B)
These documents include, but are not limited to, various
physicians' reports, medical office notes, and x-ray reports.
(See Wynne Aff. at Exh. B)
MetLife denied O'Sullivan's LTD claim in a letter dated
October 27, 1998 from Renay Bryant, STD/LTD Case Manager.*fn2
(See O'Sullivan Aff. at 62, Wynne Aff. at B) The proffered reason
for denying O'Sullivan's LTD claim was that her condition causing
her to be disabled was a pre-existing condition.*fn3 (See id.)
On November 25, 1998, O'Sullivan requested an appeal of
MetLife's decision denying her claim through her attorney. (See
Wynne Aff. at Exh. B) She also submitted two additional
physicians' reports along with her appeal.
On December 7, 1998, in a letter from Guyton Daniels, Unit
Manager at MetLife, MetLife again denied O'Sullivan's claim.
Pre-existing condition was the sole reason for the denial of
O'Sullivan's LTD claim. (See Wynne Aff. at Exh. B) The
determination that her condition was pre-existing made O'Sullivan
ineligible for LTD benefits. Because she was ineligible, MetLife
did not perform an investigation as to whether O'Sullivan would
meet the definition of "disabled" under the terms of the plan.
On December 17, 1998, O'Sullivan filed a complaint against
MetLife in the Superior Court, Burlington County, New Jersey for
wrongfully denying LTD payments under the provisions of the
employee welfare benefit plan. (See Compl. at ¶¶ 5-6) MetLife
filed a Notice of Removal to the United States District Court,
District of New Jersey. The Court construes O'Sullivan's claim as
a denial of employee benefits governed by ERISA.*fn4
O'Sullivan does not dispute that she was treated for back
pain in November 1996, during the pre-existing period. (See
O'Sullivan Aff. at ¶ 19) O'Sullivan contends, however, that the
back pain for which she received treatment in November 1996 is a
different condition from the one she now suffers. O'Sullivan
claims that in 1996, she was treated for lower back pain, near the
belt line, and received medication with no follow-up treatment.
The present condition that O'Sullivan alleges renders her disabled
is described by O'Sullivan and various physicians' reports as
mid-thoracic tenderness, thoracic stretch injury, and/or
mid-thoracic pain.*fn5 (See Daniels Aff. Exhs C & D, Wynne
Aff. at Exh. B) O'Sullivan asserts that the current pain arises
from her mid-back, left shoulder blade, and upper
rib area, not the lower back area. (See O'Sullivan Aff. at
O'Sullivan represents and MetLife does not dispute that while
her claim was pending, no one at MetLife asked O'Sullivan
questions regarding previous injuries, and had never requested
that she provide any information regarding a possible pre-existing
injury. (See O'Sullivan Aff. at 15 & 18) MetLife did not request
that O'Sullivan undergo an independent medical exam. (See Daniels
Dep. T96.18-.21) Nor has MetLife ever performed an internal or
independent medical review of O'Sullivan's records. (See Daniels
Dep. T96.13-.21, 97.13-.19, 103.4-.11)
II. STANDARD FOR SUMMARY JUDGMENT
Fed.R.Civ.P. 56 provides that summary judgment may be
granted only when materials of record "show that there is no
genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law." Serbin v. Bora Corp.,
96 F.3d 66, 69 n. 2 (3d Cir. 1996). In deciding whether there is a
disputed issue of material fact, the court must grant all
reasonable inferences from the evidence to the non-moving party.
The threshold inquiry is whether there are "any genuine factual
issues that properly can be resolved only by a finder of fact
because they may reasonably be resolved in favor of either party."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).
Supreme Court decisions mandate that a summary judgment
motion must be granted unless the party opposing the motion
"provides evidence `such that a reasonable jury could return a
verdict for the nonmoving party.'" Lawrence v. National
Westminster Bank New Jersey, 98 F.3d 61, 65 (3d Cir. 1996)
(quoting Anderson, 477 U.S. at 248). Once the moving party has
carried its burden of establishing the absence of a genuine issue
of material fact, "its opponent must do more than simply show that
there is some metaphysical doubt as to material facts."
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
586 (1986). The non- moving party must "make a showing sufficient
to establish the existence of [every] element essential to that
party's case, and on which that party will bear the burden of
proof at trial." Serbin, 96 F.3d at 69 n. 2 (quoting Celotex Corp.
v. Catrett, 477 U.S. 317, 322 (1986)); see also Quiroga v. Hasbro,
Inc., 934 F.2d 497, 500 (3d Cir. 1991) (declaring that non-movant
may not "rest upon mere allegations, general denials, or . . .
vague statements"). Thus, if the non-movant's evidence is merely
"colorable" or is "not significantly probative," the court may
grant summary judgment. Anderson, 477 U.S. at 249-50.
III. STANDARD OF REVIEW IN A DENIAL OF BENEFITS CLAIM
Ordinarily, a court applies a de novo standard of review to a
plan administrator's denial of ERISA benefits. See _Firestone
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948,
956-57, 103 L.Ed.2d 80 (1989), Abnathya v. Hoffmann- LaRoche,
Inc., 2 F.3d 40, 44-45 (3d Cir. 1993). Where the plan grants the
administrator discretionary authority to construe the terms of the
plan or to determine eligibility for benefits, however, the courts
may reverse the denial of benefits only if the administrator's
decision was "arbitrary and capricious." See Firestone, 489 U.S.
at 115, Orvosh v. Program of Group Ins. For Salaried Employees of
Volkswagen of America, 2000 WL 1036466 at *4 (3d Cir. July 28,
2000). The "arbitrary and capricious" standard is essentially the
same as the "abuse of discretion" standard. Abnathya, 2 F.3d at
45, n. 4. The "arbitrary and capricious" or "abuse of discretion"
standards of review apply whether the administrator's decision was
based on the interpretation of the plan or on factual
determinations. Mitchell v. Eastman Kodak Co., 113 F.3d 433, 438
(3d Cir. 1997).
Where an insurance company both determines eligibility for
benefits and pays benefits out of its own funds, the law within
this Circuit is to review the denial of benefits under
"heightened" arbitrary and capricious review. Pinto v. Reliance
Std. Life Ins. Co., 214 F.3d 377, 378 (3d Cir. 2000). Heightened
arbitrary and capricious review adheres to the Supreme Court
mandate that where a benefit plan grants discretion to the
administrator who is operating under a conflict of interest, that
conflict must be weighed as a "factor" in determining whether
there is an abuse of discretion. See Firestone 489 U.S. at 115.
Under Pinto, a conflict of interest is assumed where insurance
companies both determine eligibility for benefits and pay out
those benefits from their own funds because there exists "an
active incentive to deny close claims in order to keep costs down
and keep themselves competitive so that companies will choose to
use them as insurers. . . ." 214 F.3d at 388. Such "potential
self- dealing warrants that fiduciary insurer's decisions be
closely inspected." Id. at 387-88. Applying a more highly
deferential standard of review, particularly in these cases where
"smoking gun" direct evidence of purposeful bias is rare, would
allow benefits decisions to be virtually immunized. See id. at
In Pinto, the Third Circuit explicitly adopted the "sliding
scale approach" of arbitrary and capricious review, allowing "each
case to be examined on its facts." See id. at 392. Under this
approach, the degree of judicial scrutiny intensifies to match the
degree of conflict. Id. at 379 & 392. District courts are
directed to "consider the nature and degree of apparent conflicts"
when determining whether a plan administrator may have abused its
discretion in rendering a benefits decision. See id. at 393.
In Pinto, the defendant insurer had concluded that the
plaintiff was not totally disabled by a cardiac condition and thus
denied her claim for LTD benefits. The district court had granted
summary judgment in favor of the insurer on the grounds that the
insurer's decision was discretionary and not arbitrary and
capricious. See id. at 382. On appeal, the Third Circuit did not
dispute that under the arbitrary and capricious standard, the
insurer's decision would likely pass judicial review. Rather, the
Third Circuit determined that a different standard of ...