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September 19, 2000


The opinion of the court was delivered by: Stanley S. Brotman, United States District Judge.

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.


A. The Plan
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 benefits.
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 of Dr. 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 ¶ 21)
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)
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.


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 389.
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 ...

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