Nieves v. Prudential – Prudential Failed to Provide a Full and Fair Review

Case Name: Eduardo Nieves v. Prudential Insurance Company of America

Court: U.S. District Court for the Northern District of Arizona

Date of Decision: January 17, 2017

Type of Claim: On April 14, 2015, Plaintiff filed a claim for short term disability (“STD”) benefits under the Plan with Defendant Prudential, the Plan administrator. Prudential issued a letter denying Plaintiff’s claim because he did not have coverage under the Plan at the time of his disability, which Prudential found to be March 11, 2015. On September 2, 2015, Plaintiff appealed the decision and filed a new claim for long term disability (“LTD”) benefits.

Insurance Company: Prudential Insurance Company of America

Claimant’s Employer: Comtech Telecommunications Corporation

Claimant’s Occupation / Job Position: Plaintiff worked as a “Technician III” and made repairs on satellite communications equipment. Plaintiff alleges that his job required the continual use of his hands and constant sitting, standing, climbing, and crouching.

Other Interesting Notes Concerning Plaintiff’s Separation From Employment: Plaintiff continued to work full-time for Comtech with the aid of pain-relieving shots and medication. On March 10, 2015, he was terminated as part of a Reduction in Force (“RIF”). Plaintiff alleges that he learned of the RIF on March 9, 2015. Plaintiff immediately spoke with his “boss’s boss,” Brian Rogge, and asked whether he would be laid off as part of the RIF. If so, he asked permission to file for disability instead. Plaintiff asserts that Mr. Rogge assured him: “you’re good,” which led Plaintiff to believe he would not be laid off and should not file for disability. Plaintiff was terminated the next day. At his termination meeting, Plaintiff again asked to file for disability and asked Comtech Human Resources staff for the paperwork to make a claim. Staff did not provide Plaintiff with the paperwork, and he was escorted from the building.

Disabilities: In 2007, Plaintiff suffered from severe headaches and required spinal surgery to correct the problem. According to Plaintiff, the performing surgeon “was clear the surgery didn’t permanently ‘fix’ the problem, and that [Plaintiff] should expect his symptoms to re-occur.” In 2011, Plaintiff began suffering severe back and arm pain related to his spinal condition. Plaintiff asserts that he went on light duty work in 2011 at his physician’s request. His work restrictions included limits on “sitting, standing and lifting.”

Procedural History and Basis For Denial / Termination of Benefits: On November 20, 2015, Prudential issued Plaintiff two letters: one rejecting his appeal of the STD benefits claim, and a second denying the LTD benefits claim. On January 19, 2016, Plaintiff appealed a second time, this time submitting 290 pages of his medical records in addition to the appeal paperwork. Prudential denied the second appeal in a letter dated February 25, 2016, concluding again that Plaintiff was not covered on the March 11, 2015 date of his alleged disability. Prudential’s letter acknowledged that Prudential did not conduct a review of Plaintiff’s submitted medical records. Id. Prudential stated that such a review was unnecessary “because [Plaintiff’s] claim was being denied for a lack of coverage.” On March 22, 2016, Plaintiff filed a civil action seeking to recover benefits under the Plan.

Standard of Review: Plaintiff argues that the appropriate standard of review is de novo because the Plan does not contain an unambiguous grant of discretion. Plaintiff concedes that “there is a purported grant of discretion in” the Summary Plan Description (“SPD”), but argues that this grant is insufficient “because the discretionary language is contained only in the SPD” and “is not binding, unless it is incorporated into the Plan.”

The Court agrees. Statements in the SPD “do not themselves constitute the terms of the plan.” See Cigna Corp. v. Amara, 563 U.S. 421, 438 (2011). The SPD is a statutorily-required document provided by the administrator of any employee benefit plan to participants and beneficiaries of that plan, and is intended to “be written in a manner calculated to be understood by the average plan participant.” 29 U.S.C. § 1022(a). The SPD contains information “about the plan,” but is not itself “part of the plan.” Amara, 563 U.S. at 436. The SPD cannot override or supplement the terms of other plan documents. Prichard, 783 F.3d at 1170. “[W]here – as here – a [SPD] is not incorporated in the plan document, and is ‘absent from documents listed in [the] plan’s integration clause,’ a grant of discretion in the [SPD] plainly cannot be considered a term of the Plan.”

The Court finds that Prudential has failed to meet its burden of showing an unambiguous grant of discretion. See Prichard, 783 F.3d at 1169. Accordingly, the Court will review Prudential’s denial of Plaintiff’s claim de novo.

Issues: (1) Prudential denied STD and LTD benefits because Plaintiff was not covered under the Plan. The parties agree that Plaintiff was covered through the date of his termination, March 10, 2015. Prudential argues that Plaintiff’s claim is not covered by the Plan because he was not disabled until March 11, 2015, the day after he had been terminated. The question to be decided by the Court is whether Plaintiff’s disability claim arose on March 11, 2015, after he was no longer covered by the Plan, or whether it arose before that date while Plaintiff was covered.

[Note: The parties appear to agree that if Plaintiff was disabled before coverage lapsed on March 10, 2015, he would be permitted to file a claim up to 270 days after the date his disability arose. Prudential does not argue that Plaintiff’s claim is untimely if, as Plaintiff alleges, he became disabled before March 10, 2015.]

(2) Prudential argues that Plaintiff was not disabled because he was able to perform the material and substantial duties of his regular occupation and he did not have a 20% or greater loss in his monthly earnings due to sickness or injury, as required by the Plan. Prudential notes that Plaintiff worked up until the date of his termination through the RIF, and reviews various parts of the medical records in the administrative record to show Plaintiff was able to work.

Holdings: (1) Prudential’s primary argument appears to be that Plaintiff could not have been disabled before March 11, 2015, and therefore could not have had a disability claim before that date, because he was working full time for Comtech. Although this argument has superficial appeal, many cases have recognized that disability is not disproved by the mere fact that the claimant found a way to continue working. See, e.g., Hawkins v. First Union Corporation Long-Term Disability Plan, 326 F.3d 914, 918 (7th Cir. 2003) (there is no “logical incompatibility between working full time and being disabled from working full time” as “a desperate person might force himself to work despite an illness that everyone agreed was totally disabling”); Wilcox v. Sullivan, 917 F.2d 272, 277 (6th Cir. 1990) (a claimant “should not be penalized because he had the courage and determination to continue working despite his disabling condition”); General American Life Ins. Co. v. Yarbrough, 360 F.2d 562, 566 (8th Cir. 1966) (“the mere fact that the insured performs certain labor, when common care and prudence require otherwise, does not of itself demonstrate a lack of total disability”).

What is more, the Court’s task at this point is not to decide whether Plaintiff was actually disabled before March 11, 2015. Prudential denied benefits on the basis that Plaintiff was not covered by the Plan when his claim arose. Thus, the question is not whether Plaintiff had a valid disability claim, but when his disability claim (whether valid or invalid) arose.

Plaintiff offers evidence that he attempted to file for disability before March 11, 2015. He provides a declaration submitted to Prudential during the administrative appeals process. The declaration states that “in early 2015 I informed my superiors that I was planning to go on disability in August of 2015[,]” and that on March 10, 2015, when “I was told I was being laid off[,] I told one of the HR people, Tom Blackwell, that I wanted to file for disability instead.” Plaintiff alleges that he tried to file a claim for disability, but that Comtech personnel would not provide him with the necessary paperwork and he was escorted from the work site. Plaintiff also cites an email exchange between Comtech Director of Human Resources, Audrey Bethea, and Plaintiff’s attorney. AR 826. In her email, sent on March 17, 2015, Ms. Bethea acknowledges that Plaintiff “had mentioned during the exit interview that he wanted to apply for disability.” Id. These two pieces of evidence confirm that Plaintiff attempted to file for disability before his coverage lapsed, and nothing in the administrative record suggests otherwise.

Given this evidence, the Court concludes that Plaintiff’s claim for disability, whether valid or invalid, arose before he was terminated. Prudential erred when it found that Plaintiff’s claim arose after his coverage had lapsed.

(2) The problem with this position is that Prudential never took it before this litigation. “The general rule . . . is that a court will not allow an ERISA plan administrator to assert a reason for denial of benefits that it had not given during the administrative process.”
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Prudential, like Blue Shield, denied Plaintiff’s claim solely on the basis that it was not covered under the Plan. Under Harlick, Prudential cannot assert a different reason for denying the claim – that Plaintiff was not disabled. Prudential, like Blue Shield, failed to provide a “full and fair review” of Plaintiff’s claim and now seeks remand to conduct such a review. But under Harlick, Prudential cannot assert a reason for denial that it previously “held in reserve” for another round of review. See 29 U.S.C. §1133; Harlick, 686 F.3d at 720-21.
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The Court must follow controlling Ninth Circuit precedent, and therefore holds that, by failing to assert during the administrative process that Plaintiff was not disabled under the Plan, Prudential has forfeited its ability to assert that defense in this litigation. See Harlick, 686 F.3d at 721. Because Plaintiff’s claim was covered by the Plan at the time it arose, and Prudential is foreclosed from asserting that Plaintiff was not medically disabled, the Court concludes that Plaintiff is entitled to judgment in this case.