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Holmstrom v. Metro.Life Ins.Co., 2010 U.S.App.LEXIS 16123 (7th Cir. August 4, 2010)(Issue: Pain). This opinion, written by recent Seventh Circuit appointee David Hamilton, begins with a sentence that essentially lays out all that follows: “This case illustrates the difficult problems presented by claims for disability insurance by people with serious and painful conditions that do not have objectively measurable symptoms.” The plaintiff, Lanette Holmstrom, became disabled in 2000 after developing a painful nerve condition known as complex regional pain syndrome (also known as reflex sympathetic dystrophy). Three surgeries failed to remedy the condition; and Holmstrom was awarded long-term disability benefits by her employer’s insurer, MetLife. For the first two years she was disabled, Holmstrom satisfied MetLife that she was unable to perform her usual occupational duties, and for two years thereafter she received benefits under the more stringent “any occupation” standard of disability contained in the policy. In 2005, however, MetLife terminated Holmstrom’s disability payments following a periodic review. An internal appeal was unsuccessful and Holmstrom then filed suit against MetLife. During the course of that proceeding, MetLife agreed to reconsider the claim and the suit was dismissed. However, the re-review failed to convince MetLife to reconsider and a second round of litigation was commenced. Although Holmstrom was unsuccessful in the district court, she achieved victory in the court of appeals based on the court’s finding that both MetLife and the district court gave “undue weight to the absence of objective measurements for Holmstrom’s impairment.” The court found “ample corroboration that her pain has been genuinely disabling” and also criticized MetLife’s “selective use of evidence” and its “repeating moving of the targets” for the evidence of disability it demanded Holmstrom produce.
After recounting the evidence consisting of clinical findings, three functional capacity evaluations, and the results of psychological testing; and MetLife’s exclusive use of reviewing doctors rather employing a physician to examine Holmstrom and who could then rely on examination findings as the basis for an opinion as to her functionality, the court analyzed the case under a deferential standard of review as required by the benefit plan language. However, the court noted that the arbitrary and capricious standard of review is “not a rubber stamp” and the court will not uphold a determination “when there is an absence of reasoning in the record to support it.” The court also explained in a footnote (n.5) that while the Seventh Circuit has sometimes described the arbitrary and capricious standard as asking the question of whether the claim decision was “downright unreasonable,” it “should not be understood as requiring a plaintiff to show that only a person who had lost complete touch with reality would have denied benefits.” Instead, the phrase should be viewed as a “shorthand” expression applying the standard in a manner that focuses on “procedural regularity, substantive merit, and faithful execution of fiduciary duties.” The court added that an administrator’s conflict of interest is another “key consideration” which arises when the administrator both decides eligibility for benefits and has the obligation to fund the benefit payment. Citing MetLife v. Glenn, the court noted the conflict is "weighed as a factor in determining whether there is an abuse of discretion." 128 S. Ct. at 2350.
Before turning to the arguments the court deemed meritorious, the court briefly dismissed other arguments that had been presented. For example, the court gave little consideration to MetLife’s prior approval and payment of benefits, finding that a periodic review of a claimant’s disability status is warranted. Nor did the court accept the argument that the insurer had to prove the claimant’s condition improved – the court found the previous payment of benefits was just one circumstance to take into consideration and does not “create a presumptive burden for the plan to overcome.” Nor did the court put much stock in MetLife’s prior claims-granting history despite Glenn’s comment that a conflict could be deemed more important in the face of a history of biased claims administration. The court flatly rejected a “batting average” approach and noted that Unum, the company referenced in Glenn, was portrayed as having systemic flaws and misconduct in its claim process based on discovery, investigative journalism and accounts of insider whistleblowers. Hence, without evidence of “systematic bias,” the court found little value in citing MetLife’s past misdeeds.
Despite the failure of those arguments, though, the other arguments Holmstrom asserted hit the mark. First, the court noted that MetLife’s reliance on negative or normal objective test findings did not disprove the presence of CRPS. Moreover, none of the treating and examining physicians ever questioned the CRPS diagnosis and the severity of Holmstrom’s symptoms. Indeed, those doctors validated the severity of Holmstrom’s claimed pain which MetLife never acknowledged. Nor did MetLife ever reference the clinically observable findings associated with CRPS – hyperhidrosis, spasm, and temperature differences – all of which were noted by the principal treating doctor and which are recognized by consensus authority as consistent with CRPS, with the court citing a Social Security publication as authority: SSR 03-2p, 2003 SSR LEXIS 2, printed in 68 Fed. Reg. 59,971 (Oct. 20, 2003).
The court also found the functional capacity evaluations provided significant corroborative evidence. The court reiterated that it has “rejected as arbitrary an administrator's requirement that a claimant prove her condition with objective data where no definitive objective test exists for the condition or its severity.” (citing Hawkins v. First Union Corporation Long-Term Disability Plan, 326 F.3d 914, 918-19 (7th Cir. 2003); Diaz v. Prudential Ins. Co. of America, 499 F.3d 640, 646 (7th Cir. 2007)), (claimant's pursuit of extensive treatment including heavy medication and repeated surgical procedures "supports an inference that his pain, though hard to explain by reference to physical symptoms, was disabling"). However, even in such cases, the court has found it would not be unreasonable for a plan administrator to “require a certain degree of ‘objectivity’ in terms of the measurement of physical limitations as observed in a functional capacity evaluation.” The court determined the quantity and quality of the functional capacity evaluations that were furnished adequately satisfied Holmstrom’s burden. The court reviewed those test results and concluded the FCE testing “provides objective support showing functional limitations amounting to total disability.” A 2007 FCE included the results of 20 different detailed subtests demonstrating that Holmstrom fell short of the minimum requirements necessary to perform sedentary work on the majority of the tests. The court also remarked that when the tests were repeated the following day, they showed consistency and demonstrated “very poor endurance,” which indicated that Holmstrom could not sustain work over consecutive workdays.
The court ruled that while MetLife offered several explanations for rejecting the 2007 FCE, none of the explanations were of substance. For example, a reviewing doctor criticized the report as lacking reliability; however, the court suggested that the professionals who perform FCEs look for exaggeration; and there were no recorded observations that would raise doubts about Holmstrom’s efforts. Indeed, the court focused on the consistency of the test results across “all measured parameters.” The court also found other proffered explanations “sheer speculation” and in a footnote (n.12) remarked: “We, and those who pay for disability insurance, are entitled to rely on the report of the FCE and the professionalism of the examiner instead of such speculation.”
The court likewise overruled MetLife’s challenge that a “valid FCE” had to include “raw data” and “algorithms” for scoring functionality, finding the methodology used was consistent with MetLife’s cited sources and that at oral argument MetLife’s counsel could not explain how a valid FCE would differ from the one that was administered. Although MetLife’s attorney suggested that an FCE performed in 2000 included information that was lacking from the 2007 FCE, the court pointed to clinical measurements of range of motion by the treating doctor that had been documented and communicated by the doctor to MetLife’s consultant. Nor did MetLife ever tell Holmstrom that any specific FCE criteria which she failed to provide were required.
Another factor noted by the court was the Social Security determination that Holmstrom was completely disabled. The standard for Social Security benefits being even more stringent than MetLife’s definition of disability, the court found arbitrary conduct since MetLife insisted that Holmstrom apply for Social Security which would afford the insurer a reduction in benefit payments – thus, MetLife’s failure to consider that determination when it terminated benefits was arbitrary and capricious. Given the discussion of the significance of a Social Security award in the Glenn ruling, the court found “an administrator's failure to consider the determination in making its own benefit decisions suggests arbitrary decision-making.” (citing Glenn, 128 S. Ct. at 2352). The court added:
This is especially so when the Social Security determination was made under a similar or more stringent disability definition, as it was here. In its denial letters, MetLife never stated why it disagreed with the Social Security determination; rather, it stated only that Black & Decker Disability Plan v. Nord, 538 U.S. 822, 123 S. Ct. 1965, 155 L. Ed. 2d 1034 (2003), essentially dissolved any relevance of Social Security determinations in ERISA cases. The discussion of Social Security benefits in Glenn directly rejected this flawed interpretation of Nord.
Yet another issue relevant to the court’s analysis was Holmstrom’s overall medical history. The court pointed out that Holmstrom underwent three surgeries and continues to endure “a heavy regimen of pain medication.” While MetLife claimed the surgeries resolved Holmstrom’s condition, the court found an “utter lack of support for this conclusion.” The court likewise rejected MetLife’s assertion that instead of receiving legitimate treatment for excruciating pain, Holmstrom was engaging in “drug-seeking behavior” pointing out that the record expressly rejected such a conclusion. Hence, while the Social Security determination, the claimant’s surgical treatment history and pain treatment regimen might now always compel an award of benefits, “a plan administrator must address it and provide a reasonable explanation for discounting it.”
The court also examined the evidence relating to Holmstrom’s cognitive impairments and held that MetLife arbitrarily discounted that evidence. Other than suggesting that Holmstrom obtain testing of her neurocognitive status, MetLife made no mention of any specific testing it was seeking. Hence, the court found that the Schubert General Ability Battery of tests was sufficient evidence of cognitive diminution and that the psychologist who administered the testing was sufficiently credentialed. The court explained,
The phrase ‘neurocognitive testing’ did not give Holmstrom fair notice of the additional criteria that MetLife later insisted would need to be met before it would give weight to the results. When an administrator asks for additional information in broad terms, it is too easy to find later a reason to deem what it was given to be insufficient. If the administrator believes that a procedure must have certain characteristics, or that it must be performed by a certain kind of professional, it must provide at least some level of guidance, unless the test sought is so well-known that a claimant or her attorney or other representative can reasonably be expected to know what the administrator expects. MetLife provided no such guidance here.
The court also found Holmstrom’s argument that MetLife improperly relied exclusively on reviewing doctors meritorious. Acknowledging that Black & Decker Disability Plan v. Nord, 538 U.S. 822, 831, 123 S. Ct. 1965, 155 L. Ed. 2d 1034 (2003) stands for the proposition that deference need not be given to the treating doctor, the court also cited that ruling for its holding the proposition that MetLife also could not arbitrarily refuse to credit the treating doctor, and pointed out that “MetLife would be entitled to disagree with Dr. Vant's opinion if there were evidence in the record providing a reasoned basis for doing so.” However, there was no such evidence, and the court remarked, “None of the doctors who concluded that Holmstrom failed to establish disability ever examined her. Every doctor who has actually seen her in the pertinent time period has concluded that she is disabled.” Thus, while an insurer can give weight to a doctor who has performed a record review, the court found “the evidence provided by the doctors who examined her in person is so overwhelming that the reliance on record-review doctors who selectively criticized this evidence is part of a larger pattern of arbitrary and capricious decision-making.” (citing Love v. National City Corp. Welfare Benefits Plan, 574 F.3d 392, 396-397 (7th Cir. 2009) (denial of benefits was arbitrary where "neither [denial] letter explained why the reviewer chose to discredit the evaluations and conclusions of Love's treating physicians" and "every doctor that personally examined Love concluded that she was unable to work")).
The court found the insurer’s exclusive reliance on reviewing doctors “all the more arbitrary” since one of the reviewing doctors had retracted his prior conclusion after receiving further data from the treating doctor and recommended an independent clinical examination – “Yet MetLife ignored this recommendation and instead adopted Dr. Manolakas' original conclusion--the one he retracted after receiving additional information…”
Acknowledging that cases involving pain are difficult to evaluate, when there is no evidence to support the reviewing doctors’ suppositions, the court found those doctors’ conclusions arbitrary.
The court further criticized MetLife because it repeatedly "moved the target." Whenever additional evidence was invited and Holmstrom provided it, MetLife deemed the new evidence insufficient or not in compliance with expectations the insurer had never communicated. The court found “[s]uch conduct frustrates fair claim resolution and is evidence of arbitrary and capricious behavior.” Describing such behavior, the court described how Holmstrom complied with MetLife’s requests “as a reasonable person would understand them. MetLife then rejected the new information for failure to meet new requirements that had not been revealed beforehand.”
Another example given of “moving the target” was MetLife’s decision to discount all medical evidence that post-dated the benefit termination. Although MetLife’s requests for additional information entailed conducting new tests, MetLife found the test results did not relate to the date when benefits were terminated and even discounted its own doctor’s finding by pointing out that while the consultant found current deficits (as of September 2007), the time period in question was August 2005. Such an argument, if accepted, “would mean that MetLife's initial termination of benefits for lack of supporting evidence could never be successfully appealed if the claimant had not already undergone functional testing (that satisfied MetLife's precise but not-yet-unarticulated specifications) before the August 2005 termination decision.” Since that is not the case, MetLife’s rationale was arbitrary and capricious.
Relatedly, MetLife’s selective consideration of evidence resulted in a finding that was “not reasonably consistent with the entire picture” and is a “hallmark” of arbitrary and capricious decisionmaking. Cherry-picking only the evidence that supports a denial while ignoring evidence supporting the plaintiff’s claim that she was totally disabled is arbitrary and improper.
Although the court noted that an examination of the conflict of interest is a relevant factor, the court found a lengthy analysis of the conflict unnecessary since it concluded that this was not a close case and “ample” evidence supported a finding of arbitrary and capricious decisionmaking. However, the court went further and pointed to some factors present in this case that suggest a conflict of interest affected the decision: 1) MetLife’s selective consideration of the evidence “can be a factor suggesting arbitrary administration in its own right, as well as a reason to give more weight to the conflict factor.” 2) MetLife’s disregard of the Social Security award was a factor pointing both to arbitrariness as well as “a sign of a conflict of interest.” 3) The repeated “moving of the target.” The court remarked, “This conduct is also an independent factor in the arbitrary-and-capricious inquiry, but an administrator's constant changing of its demands to avoid awarding benefits can also be good evidence of a conflict of interest at work.”
The court then turned to the appropriate remedy. While acknowledging that the usual remedy where a plan administrator’s decision is deemed arbitrary and capricious is a remand, the court explained the claimant’s status prior to the denial, as well as what would be needed to remedy the defective procedures informs whether to remand or order the payment of benefits. Since Holmstrom’s benefits were terminated after she had already qualified to receive benefits under the any occupation standard of disability, and because the record indicates her condition was either the same or worse since she qualified under that standard, “[r]etroactive reinstatement of benefits is therefore the appropriate remedy.” Another factor is whether the record provides the court “with a firm grasp of the merits of the participant's claim.” Based on the record, therefore, the court expressed “confiden[ce] that Holmstrom has been totally disabled under the plan's "any-occupation" definition. There is nothing more she can provide. A wealth of detailed medical data and consistent, objective functionality testing point only to a finding of total disability. Reinstatement of benefits is the remedy.” The court of appeals left it to the district court to determine an entitlement to fees and prejudgment interest.
Discussion: This is a very lengthy opinion, but one that provides a template for consideration in all cases involving pain as a basis for disability. We have broken down the key points from the decision in checklist fashion as follows:
Meritorious Issues:
1. "Normal" Test Results when there are no tests for condition (Conditions: Reflex sympathetic dystrophy/complex regional pain syndrome, chronic fatigue syndrome, fibromyalgia)
2. Functional Capacity Evaluations (FCEs) – Objective proof of functional limitations; insurer has duty to provide reasonable explanation if disagrees
3. Social Security Determination – Failure to consider/explain may be arbitrary
4. Medical History - Overall medical history significant support
5. Cognitive Impairments – Evidence of cognitive impairment must be considered; insurer has duty to explain what it is seeking
6. Examining Physicians – reliance on reviewing doctors especially arbitrary if IME suggested by consultant; reviewing doctors must have basis for disagreeing with treating doctors
7. The Moving Target – Can’t request evidence generally and then reject submissions as inadequate or not specifically what was requested
8. Selective Consideration of Evidence - no cherry-picking
Meaning of Arbitrary and Capricious – “Downright unreasonable” just a “shorthand” expression which applies the standard in a manner that focuses on “procedural regularity, substantive merit, and faithful execution of fiduciary duties.”
Conflict of Interest - 1) MetLife’s selective consideration of the evidence “can be a factor suggesting arbitrary administration in its own right, as well as a reason to give more weight to the conflict factor.” 2) MetLife’s disregard of the Social Security award was a factor pointing both to arbitrariness as well as “a sign of a conflict of interest.” 3) The repeated “moving of the target.” The court remarked, “This conduct is also an independent factor in the arbitrary-and-capricious inquiry, but an administrator's constant changing of its demands to avoid awarding benefits can also be good evidence of a conflict of interest at work.”
Remedy
1) Status prior to the denial, as well as what would be needed to remedy the defective procedures informs whether to remand or order the payment of benefits. 2) Condition same or worse; 3) Record provides court with firm grasp of the merits of claim; nothing more that can be provided – wealth of detailed medical data and consistent, objective functionality testing.
