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LASSER v. RELIANCE STANDARD LIFE INSURANCE COMPANY

February 8, 2001

STEPHEN P. LASSER, PLAINTIFF,
v.
RELIANCE STANDARD LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Wolin, District Judge.

REVISED OPINION

On further review, the Court believes its earlier Opinion was sufficiently clear to convey accurately the Court's intent, and that the issues raised were, in fact, not fairly before the Court on the motion and cross-motion. However, to aid the progress of this litigation and to provide guidance to counsel on what are arguably unsettled issues in this area of the law, the Court will grant the motion to clarify or to reconsider.*fn1 The motion and the original motion and cross-motion for summary judgment have been decided upon the written submissions of the parties pursuant to Federal Rule of Civil Procedure 78. The November 8, 2000 Opinion and Order will be vacated and replaced with this Opinion and the Order filed herewith.

The sections on the scope of the record to be considered by the Court at trial in this matter and the nature of that trial (sections 4 and 5) are new. It will be seen infra that the opportunity for further reflection has caused the Court to modify other sections of its Opinion in important respects. The intent of the Court has been to clarify rather than modify. However, to the extent any inconsistencies appear with the prior Opinion, this later Opinion will control in all respects.

BACKGROUND

Except as noted, the following facts are not disputed. Plaintiff, Dr. Stephen P. Lasser, M.D., is an orthopedic surgeon employed by a four-doctor group known as Townsquare Orthopedic Associates. Dr. Lasser brings this case to recover disability benefits alleged to be owed to him by Reliance under a policy of disability insurance his employer maintains as an employee benefit. The policy defines total disability as the beneficiary's inability to perform "the material duties of his/her occupation." It is relevant to note that a partial disability (defined as either the ability to perform all of the material duties of one's occupation on a part-time basis, or less than all of the material duties on a full-time basis) is also considered a total disability for the purposes of an insured's right to receive full benefits under the Reliance policy.

Dr. Lasser has experienced trouble with his heart since the 1980's and underwent coronary bypass surgery in 1986. In 1996, Dr. Lasser suffered a myocardial infarction. At that time, Dr. Lasser's physicians discovered a number of problems with his heart and the earlier bypass. Dr. Robert F. Aldrich, plaintiff's treating physician, prescribed a treatment regimen, which included change of diet, exercise, and drug therapy. Significantly for this matter, Dr. Aldrich also prescribed reduced stress in Dr. Lasser's professional and personal life.

In September of 1996, Dr. Lasser returned to work on a markedly reduced schedule. His patient load was reduced 50%. He was no longer "on-call" at night or on weekends, nor did he perform emergency surgery. He removed himself from participation in the management of the group. His compensation fell from approximately $28,000 per month to approximately $6,000.

In December 1996, Reliance approved Dr. Lasser's application for long-term disability benefits under Townsquare Orthopedic's policy. This approval was based, at least in part, upon Dr. Aldrich's statement on Reliance's Physician's Statement form that Dr. Lasser could return to work on a limited basis only. However, in June 1997, Reliance began to request additional proof of Dr. Lasser's disability. Reliance solicited another statement from Dr. Aldrich. Reliance also retained Dr. William M. Burke, who examined plaintiff and subjected him to a treadmill exercise tolerance test. Reliance reviewed the Department of Labor's Dictionary of Occupational Titles (hereinafter "DOT"), and determined the physical requirements of an orthopedic surgeon.

Reliance terminated Dr. Lasser's benefits by letter dated December 8, 1997. In the letter, Reliance relied primarily upon Dr. Burke's findings that Lasser did not demonstrate "any cardiovascular disability," that his prognosis "is excellent," and that his physical capabilities show the capacity to work "without restriction."

Dr. Lasser sought a review of the benefits termination, and submitted a number of reports from medical experts. These doctors supported the position that occupational stress, as opposed to physical exertion, was dangerous to Dr. Lasser's condition. These reports were also critical of both Dr. Burke's conclusions and his methodology. Reliance sought a second independent opinion from Dr. Karel Raska which was also critical of Dr. Burke. Following receipt of Dr. Raska's report, Reliance claims to have discovered a conflict of interest, in that Dr. Raska is affiliated with the same practice group as one of the medical experts retained by plaintiff. Reliance then sought the opinion of a Dr. Field. The details of these second and third opinions obtained by Reliance will be discussed below. They do not unequivocally support Reliance's position.

In addition to the DOT, Reliance also commissioned a study from a vocational expert to determine whether a doctor who cannot perform emergency surgery and cannot be "on-call" could, nonetheless, perform the material duties of the occupation of an orthopedic surgeon. The vocational expert performed a survey of professionals in the field and concluded that an orthopedic surgeon could practice in this field despite the listed limitations, "however, this type of work setting typically involves special circumstances and these circumstances are available only rarely or occasionally." Following a review of the survey results by an in-house vocational expert, Reliance affirmed the termination of Dr. Lasser's benefits.

Although still operating on a reduced schedule, Dr. Lasser has been taking some "on-call" duty, wearing a pager, and performing emergency surgery. He has testified by affidavit that he is forced to do this by financial hardship following the termination of his benefits by Reliance.

DISCUSSION

1. Summary judgment and the standard of review.

The standard for deciding a motion for summary judgment has been stated many times by this Court and will be addressed only briefly here. Summary judgment shall be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see Hersh v. Allen Prods. Co., 789 F.2d 230, 232 (3d Cir. 1986).

Whether a fact is "material" is determined by the substantive law defining the claims. Id. at 248; United States v. 225 Cartons, 871 F.2d 409, 419 (3d Cir. 1989). Of course, "at the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

The substantive law governing this matter is the Employees Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., pursuant to which this lawsuit is brought. See 29 U.S.C. § 1132(a)(1)(B)(participant or beneficiary may bring suit to recover benefits due under an ERISA-governed benefits plan). In Firestone Tire & Rubber Co. v. Bruch, the United States Supreme Court held that a claim regarding a denial of benefits is reviewed under an arbitrary and capricious standard if "the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989).

The Third Circuit only recently acted to dispel confusion created by certain questions left unanswered by the Supreme Court in Bruch, in a case concerning the same defendant-insurer at bar. See Pinto v. Reliance Standard Life Ins. Co., 214 F.3d 377 (3d Cir. 2000). The policy at issue in Pinto is conceded to be the same as the policy owned by Dr. Lasser's employer with respect to the role of the Plan Administrator. In an earlier, unreported decision, the Court of Appeals held that this policy confers discretion on the fiduciary, thus triggering Bruch's deferential standard of review. Pinto v. Reliance Standard Life Ins. Co., 156 F.3d 1225 (3d Cir. 1998).

In Bruch, the High Court suggested that deference might, however, not be appropriate where the fiduciary had an conflict of interest with respect to the decision of whether to award benefits. 489 U.S. at 115, 109 S.Ct. 948. In Pinto, the Court of Appeals addressed the problem of the inherent conflict, where the fiduciary's decision to award benefits will come at a direct cost to the fiduciary itself. The inherent conflict problem is presented in its classic form where an insurance company both administrates plan benefits and pays those benefits from its own funds. Bruch, having identified the problem, conspicuously failed to offer guidance in evaluating the benefits decisions of such conflicted fiduciaries.

From a variety of solutions employed in various federal circuits, our Third Circuit chose the "sliding scale" approach. This is termed a "heightened arbitrary and capricious standard," 214 F.3d at 392, in which the level of scrutiny of the fiduciary's decision "`is a range not a point . . . [it is] more penetrating the greater is the suspicion of partiality, less penetrating the smaller that suspicion is.'" Id. (quoting Wildbur v. ARCO Chem. Co., 974 F.2d 631, 638 (5th Cir. 1992) (alterations in original)). Acknowledging that bias is unlikely to be revealed by an evidentiary "smoking gun," the Pinto court directs the district courts to examine the facts of the particular case, id. at 392, and to "ratchet upward" the standard of review where those facts suggest the fiduciary was acting in its own self-interest. Id. at 394.

In Pinto, the Court of Appeals found several suggestive features requiring a heightened level of scrutiny. First, the fiduciary reversed its earlier grant of benefits without a significant change in the factual record upon which it had based its earlier decision. Id. at 393. Second, the fiduciary's written decision employed a self-serving selectivity in the evidence it considered. Id. at 394. Third, Reliance failed to follow the recommendation of its own personnel to grant benefits pending further testing, suggesting to the Court of Appeals that the "default position" was to withhold benefits. Id. Pinto teaches that the considerations that guide the essentially sui generis inquiry in one case cannot uncritically be transferred to another case. However, this Court is guided by the kind of factors examined and the weight afforded them by the Court of Appeals to remove the standard of review in that case to "the far end of the arbitrary and capricious range." Id.

The Court will be careful not to permit the question of facts indicating a conflict of interest and the appropriate standard of review to blur its assessment of the ultimate merits of the case. The only question presented by the pending motion and cross-motion is whether a rational factfinder could find for one, the other, or either of the two parties to this action. Deciding the appropriate level of review is merely an antecedent step to this issue, itself an intermediate point on the way to the ultimate resolution of this controversy.

2. Factors favoring heightened arbitrary and capricious review.

The Court is satisfied that the record of this case discloses at least two significant problems with Reliance's handling of Dr. Lasser's claim for benefits. These problems require scrutiny of the fiduciary's decision to be substantially increased. The first concerns Reliance's use of expert medical opinion, and the second concerns the vocational experts' data and conclusion regarding the material tasks of an orthopedic surgeon.

Dr. Lasser attempts to bring his case in line with Pinto by noting that Reliance reversed itself after first granting the benefits. By itself, the Court would attach little weight to this fact. The policy gives Reliance the right periodically to review continued eligibility for benefits. Necessarily, this includes the ability to supplement the medical record. One suggestive fact is undeniable. Kathy Young, R.N., employed by Reliance to review the medical records of disability claimants, substantially revised her assessment of Dr. Lasser in October 1997, based upon his successful performance on an exercise test, and lack of recent symptoms. The Court finds this of limited significance, because Nurse Young was not the final decision maker, and because the distinction between Dr. Lasser's ability to deal with occupational stress and his ability to do physical exercise may have been beyond her level of expertise.

Nurse Young recommended an independent medical examination, which led to Dr. Lasser's visit to Dr. Burke. It is here that the difficulties commence for Reliance's handling of the case. Dr. Burke found that plaintiff was capable of working without restriction, and that plaintiff demonstrated no cardiovascular disability. Dr. Burke's treadmill exercise test showed "excellent exercise tolerance" as related by Reliance. No mention was made either in Reliance's termination letter or in Dr. Burke's report of the issue of occupational stress that featured so prominently in Dr. Aldrich's earlier reports. Indeed, Reliance stated that the attending physician's findings "were not supported by the objective medical findings."

Dr. Aldrich responded with the first of many subsequent criticisms of Dr. Burke's opinion, by letter dated March 25, 1998. The point was not, Dr. Aldrich maintained, that Dr. Lasser could perform well on a treadmill. The relevant point was that stress is a well-known risk factor for precipitating myocardial infarction. Dr. Aldrich stated that the therapeutic goal was to preserve the level of physical function identified by Dr. Burke. Were he to return to a stressful occupation, Dr. Aldrich wrote, "I believe that the risk of myocardial infarction with all of its attendant morbidity and mortality will rise."

Having already rejected Dr. Aldrich's opinion, it is not surprising that Reliance should have declined to reconsider based upon his March 1998 letter. However, the second independent opinion obtained by Reliance, from Dr. Raska, is even more critical of Dr. Burke. The following excerpts from his report are telling:

As part of his independent evaluation by Dr. William Burke, the patient underwent a repeat stress test utilizing a protocol not known to be accepted as conventional to any clinical cardiologist.
Stress regardless of exercise tolerance is a recognized independent risk factor for recurrent ...

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