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When an ERISA administrator’s internal appeal process is designed to discourage overturning a denial of benefits, courts should review any denial with a “high degree of skepticism,” a federal judge has ruled. In Dorsey v. Provident Life and Accident Insurance Co., Senior U.S. District Judge Marvin Katz of the Eastern District of Pennsylvania handed down a pair of significant opinions that announce an evidentiary standard for proving that a conflict of interest exists, and, upon finding a conflict, reversing the denial of benefits under the Employee Retirement Income Security Act (ERISA) to a woman who suffers from a severe case of fibromyalgia. In the first six-page opinion, Katz found that a plaintiff has the right to submit deposition testimony to prove that an ERISA administrator should be subjected to a heightened standard of review due to a conflict of interest. Provident’s lawyers, Richard L. McMonagle and Steven J. Schildt of Post & Schell, argued that courts should never consider evidence that goes beyond the record that was before the claims administrator at the time of the benefit determination. But Katz found that the 3rd U.S. Circuit Court of Appeals recently endorsed a plaintiff’s right to present additional evidence to show that a conflict of interest exists. As a result, Katz said, “while a court may not look outside the administrative record when reviewing an administrator’s decision, a court may consider evidence outside the record when evaluating the level of an administrator’s conflict of interest and the appropriate standard of review.” In an 18-page second opinion, Katz considered deposition evidence about Provident’s appeal process and decided that “anomalies” in the process revealed a conflict of interest that required the court to employ a heightened standard of review. The plaintiff in the suit, Cheryl Dorsey, worked as director of sales and marketing at Zurich Payroll Solutions until she became ill in February 1999. Katz’s opinion outlines Dorsey’s failed attempts to secure long-term disability benefits from Provident. Although doctors consistently diagnosed Dorsey as suffering from fibromyalgia — a rheumatological disorder characterized by muscular pain, stiffness and fatigue — Provident’s administrators repeatedly denied the request. Katz found that his first task was to determine the appropriate level of court review. Although Provident’s plan did not include an “express grant of discretionary authority,” Katz found that in practice it did because the policy stated that benefits would be awarded only when Provident is satisfied by the written evidence of “proof of loss.” As a result, Katz found that Provident was entitled to an “arbitrary or capricious” standard of review unless it suffered from a conflict of interest. Provident’s lawyers conceded that Provident was both the funder and administrator of the plan, but said Katz should move only slightly away from a deferential review because there was no evidence that the handling of Dorsey’s claim was affected by the conflict of interest. Katz disagreed, saying Dorsey had shown that “procedural anomalies” in Provident’s appeal process had affected the decision to deny her claim. While different divisions within Provident handled her initial claim and her appeal, Katz found that the same doctor had conducted both reviews. When the doctor reviewed her own work, Katz said, “not surprisingly [she] came to the same conclusion both times.” Katz also found that the appeals consultant on Dorsey’s case did not have the power to reverse the denial of benefits. “These procedural anomalies indicate a less-than-impartial appeal process designed to make it more difficult for an appellant to succeed,” Katz wrote. “With fewer successful appeals, Provident’s profits are greater. Because these anomalies are evidence of a significant conflict of interest, this court places the arbitrary and capricious standard at the far end of the sliding scale and will review Provident’s decision with a high degree of skepticism,” Katz wrote. But Katz found that, even without the more skeptical review, Provident’s denial of benefits was arbitrary and capricious. “Provident’s staff ignored the fact that Dorsey exhibited classic symptoms of fibromyalgia,” Katz wrote. And the review by Provident’s doctor was “unreasonable,” Katz found, because she never examined Dorsey personally and failed to address the evidence that she was disabled. The doctor’s “cursory report,” Katz said, “did not discuss the significance of plaintiff’s irritable bowel syndrome, migraine headaches and major depression — all symptoms that support a diagnosis of fibromyalgia.” Although Provident had no duty to obtain an independent medical exam, Katz found that “the fact that five doctors diagnosed Dorsey with a severe case of fibromyalgia and three concluded she was permanently disabled suggests that Provident’s medical review needed to be more than a half-page summary of selective information.” Katz said he was also skeptical of the conclusions reached by Provident’s vocational rehabilitation consultant because she had concluded that Dorsey had the physical capacity to return to her job, but had never reviewed Dorsey’s actual job description. “Even though Provident was aware that Dorsey’s job required traveling, the vocational consultant never addressed this issue,” Katz wrote. Katz also found that Provident unreasonably relied on a surveillance video that “only captures Dorsey driving her children to school on one occasion and slowly walking across a parking lot.” When viewing all the evidence, Katz found that “every individual or organization that examined or reviewed the plaintiff’s medical information found the plaintiff to be disabled — everyone except those individuals employed by Provident.” As a result, Katz concluded that “Provident’s denial of plaintiff’s benefits is not supported by reason.” Dorsey was represented by attorney John C. Lyons of Lancaster, Pa.

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