Opinion
No. C-03-1132 SC.
August 20, 2004
FINDINGS OF FACT AND CONCLUSIONS OF LAW
I. INTRODUCTION
Plaintiff Vorris Blankenship ("Plaintiff" or "Blankenship") brings this action to recover long-term disability benefits he claims are owed to him under the KMPG Employee Long-term Disability Plan (the "Plan"). Defendants are the Plan itself and the issuers of the Plan, Liberty Life Assurance Company of Boston ("Liberty" or "Defendant"). This matter was briefed for trial on July 26, 2004, at which time the Court requested supplemental briefing on an additional issue. Those submissions now received and reviewed by this Court along with the administrative record and other submissions of all parties, the Court hereby makes the following findings of fact and conclusions of law.
II. FINDINGS OF FACT
Plaintiff Vorris Blankenship joined the accounting firm of KPMG Peat Marwick as a tax partner in 1969. He remained in that position until 1991, when he retired from the partnership and continued to work for KPMG as a Senior Tax Consultant. While still in the employ of KPMG in 1997, Mr. Blankenship was diagnosed with prostate cancer. In August 1997, he began a treatment regimen consisting of six months of hormone blockade therapy, twenty-five external beam radiation treatments, and brachytherapy, which included the implantation of radioactive iodine seeds in his prostate gland
Blankenship continued working for KPMG while he underwent the radiation and brachytherapy. As a result of his treatment, he suffered severe urinary malfunction, requiring a Foley catheter for 5 weeks, followed by a period of self-catheterization. Due to this urinary dysfunction, Blankenship was able to retain only 150 to 250 ccs of urine before experiencing bladder spasms and involuntary leakage of urine, which necessitated full-time use of adult diapers. He also experienced bladder infections due to the self-catheterization. Although Blankenship ceased self-catheterization after 8 or 9 months, he was still unable to urinate voluntarily and continued to experience involuntary bladder spasms and the resultant leakage of urine. Additionally, his treating physician attributed this ongoing condition, in part, to damage to the urethra wall caused by the frequent self-catheterization (VB 376).
Both parties stipulate that the Liberty Claim file is comprised of documents submitted by Plaintiff and Bates labeled VB 166 through VB 474.
In May 1998, Blankenship submitted a claim to Liberty for long-term disability benefits based on the complications arising from the prostate cancer treatments. After conducting an interview with Mr. Blankenship on June 1, 1998, Liberty approved Blankenship's claim and began paying benefits. Liberty's in-house nurse made the following notes in Blankenship's file in July 1998:
Monthly benefits were computed by multiplying the insured's monthly earnings ($11,166.67) by the benefit percentage in the application (66 2/3%) less social security or "other income benefits."
"Claimant is a tax attorney for Peat Marwick. He is very motivated to RTW [return to work] but until he gets his voiding under control he feels he cannot function at work and I agree. Not only would he be sleep deprived but he would be distracted and preoccupied with his urinary problems. However, that may improve over time and a RTW [return to work] would be feasible at that time."
(VB 196). Shortly after granting Blankenship's claim and commencing the payment of benefits, Liberty sent a request for medical records and documentation to Blankenship's treating physician in Seattle, Dr. Grimm. Liberty also enclosed a "Physical Capacities Form" and a "Medical Status Functional Capacities Form" to be completed by Dr. Grimm. On the Physical Capacities Form, dated July 9, 1998, Dr. Grimm quantified Blankenship's physical capacity in an eight hour work day for the activities listed (sitting, lifting, walking, standing, carrying, driving, traveling, typing) at 100%. Dr. Grimm also indicated that Blankenship was "continuously" able to perform "reaching, bending, kneeling, climbing, squatting, twisting." In a space provided for comments, Dr. Grimm wrote that Blankenship's "disability is related to urinary dysfunction — makes it difficult to sustain concentration — requirement for bathroom facilities on an urgent basis limits movement." (VB 406).
On the Mental Status Functional Capacities Form, dated July 8, 1998, Dr. Grimm indicated that Blankenship suffered "moderate" restrictions with regard to "Daily Activities: Occupational/Social," "Personal Habits: Appearance/Behavior," "Constriction of Interests," ability to "Sustain Work Performance," and ability to "Cope with Work Pressure"; "mild" restrictions with regard to "Attention Span" and "Concentration"; and no restrictions with regard to "Interpersonal Relations," "Ability to Think and Reason," "Understand and Carry Out Instructions," "Past/Present Memory," "Insight and Judgment," and "Thought Content." (VB 406). After receiving this report, Liberty made no attempt to terminate Blankenship's benefits.
In January 1999, Liberty requested updated medical information to support Blankenship's claim of continued disability. At that time, Blankenship's treating physician, Dr. Grimm again completed Liberty's "Physical Capacities Form" and "Mental Status Functional Capacities Form." The completed forms, dated January 28, 1999, were received by Liberty on February 12, 1999. Although the forms themselves were identical to those sent Dr. Grimm six months earlier, Dr. Grimm's evaluation of Blankenship's condition is significantly different. On the Physical Capacities Form, Dr. Grimm indicated that his patient was capable of sitting for 80% of an 8-hour day, but only capable of lifting 10%, walking 20%, standing 30%, carrying 10%, driving 20%, traveling 30%, and typing 30%. Additionally, although Blankenship should be capable of reaching "frequently," he was only capable of bending, kneeling, climbing, squatting or twisting "occasionally." Again, Dr. Grimm's comments specified that Blankenship's "physical disability is due to his urinary dysfunction, the time involved each day in dealing with it, and related fatigue caused by sleep interruptions." (VB 289).
Dr. Grimm's January 1999 evaluation of Blankenship's "Mental Status" also show a worsened condition. This form indicates that with respect to "Daily Activities: Occupation/Social" and "Personal Habits: Appearance/Behavior," Blankenship suffered "significant" restrictions. Dr. Grimm also deemed Blankenship's ability to sustain work performance, cope with work pressure or concentrate significantly restricted. Blankenship's degree of restriction was "moderate" as to "Interpersonal Relations," "Constriction of Interests," and "Attention Span." Blankenship was deemed to suffer "mild" restrictions as to his "Insight and Judgment" and "Thought Content," as well as to his abilities to "Think and Reason" and "Understand and Carry Out Instructions." In this second "Mental Status" evaluation received by Liberty, Dr. Grimm found that the only area in which Blankenship suffered no restrictions was in his "Past/Present Memory." At no point in its moving papers does Liberty acknowledge that Blankenship's treating physician indicated that Blankenship's physical disability had further limited his mental and physical capacities from the time Liberty granted Blankenship's initial claim for disability benefits.
In April of 1999, Blankenship saw Dr. James Downey, a colleague of Dr. Grimm. Dr. Grimm's notes from that visit indicate that Dr. Downey recommended new medications and was "somewhat reluctant" to suggest surgical intervention due to Blankenship's "irritative symptoms." (VB 375). Dr. Grimm's handwritten notation on July 1, 1999, following a phone conversation with Blankenship, classifies Blankenship's condition as "essentially unchanged." (VB 375). Upon request from Liberty Dr. Grimm submitted these reports and new Physical Capacities and Mental Status forms dated July 1, 1999, which also show Dr. Grimm's evaluation of Blankenship's capabilities to be unchanged. (VB 265-66).
In December 1999, one of Liberty's in-house nurses Audrey Kosmo, made the following notation in Blankenship's file: "If claimant continues to have limited bladder retention, involuntary bladder spasms, incontinence (leakage); [claimant] will continue to experience SX [symptoms] associated with fatigue and decreased level of functioning." (VB 188). In January 2000, after speaking to Blankenship on the phone, Nurse Kosmo noted that Blankenship had last visited his urologist in September 1999. (VB 189). She also noted that Blankenship had visited another physician, Dale Coco, in approximately August 1999. Id. These notes reveal that Blankenship was taking medications, including "hytrin, ditropan, lisinopril" and that Blankenship was reluctant to undergo surgery because he was told it could worsen his current condition. Id. When Nurse Kosmo inquired whether it was possible that Blankenship could resume work from home, Blankenship told her that it wasn't a "realistic option" since he could not meet clients or conduct those meetings from his home. Id. Following the phone call, Nurse Kosmo's written assessment stated, "Practical prognosis for [claimant] return to gainful employment poor." (VB 189).
In February 2000, Nurse Kosmo contacted Blankenship's urologist, Dr. Karl Thomas. The notes of this conversation reveal that Dr. Thomas believed Blankenship's situation to be a "complex problem." (VB 191). He acknowledged that Blankenship suffered from the "problem" of "almost complete urinary incontinence, using 10-12 Depends/day." Id. However, according to Nurse Kosmo's notes, Dr. Thomas also said that he does not think that Blankenship "should be disabled from urologic indications" and "does not feel comfortable" recommending disability for Blankenship. Id. Dr. Thomas also deferred to Dr. Grimm and Dr. Sweeney in Seattle for additional information. Id.
On March 2000, Liberty asked Peter Nieh, M.D., an "independent consulting urologist" who had never examined Blankenship, to review his medical record. Liberty's stated "Reason for Referral" asked: "Is it reasonable that this patient could return to work with or without employer accommodations and/or with reasonable medical care (i.e., assistive devices such as Foley catheter, Texas Catheter, TUIP, etc.)?" (VB 257). Dr. Nieh based his report on a review of Blankenship's file and a phone conversation with the "attending physician" Dr. Thomas on April 4, 2004. Id. His recommendation stated, "Yes, it is reasonable that this patient could return to work with or without employer accommodations and/or with reasonable medical care." Dr. Nieh's rationale concluded, "Clearly this patient has had a poor result from the radiation therapy. There is a good to excellent chance that the TURP or TUIP [surgical procedures] would improve his urinary symptoms, and he certainly could be no worse than he is now. Even resuming the self-catheterization would also improve his situation to permit return to work." (VB 258).
Following receipt of Dr. Nieh's report on April 6, 2000, Liberty sent a letter (hereinafter, the "Initial Denial") to Blankenship stating that it was discontinuing benefits as of April 19, 2000 because it could find "no objective medical documentation to substantiate continued long-term benefits." (VB 252). The initial denial letter, signed by Senior Case Manager Liz Swirka, refers to Blankenship's treatment under Drs Grimm and Downey, and states that "Dr. Grimm notes you will probably require some surgical intervention such as a TUIP in the future." (VB 253). Next, the initial denial relates that in a February 2000 phone conversation with Liberty, Dr. Thomas indicated that "alternative interventions are available which might improve your symptoms and level of functioning." Id. Finally, the letter informs Blankenship that Dr. Peter Nieh conducted a "peer review" in which he stated that "there is a good to excellent chance that the TUIP (incision of the prostrate [sic]) would improve your urinary symptoms." The letter states:
In conclusion, your current symptoms of urinary retention and bladder spasm induced incontinence are related to a "Bladder Outlet Obstruction." It is confirmed by Dr. Peter Nieh, Dr. Carl Thomas, and Dr. Peter Grimm that there are alternative interventions that would reduce these symptoms. Since there are alternative methods to correct your condition with no objective medical information to substantiate why you should not pursue these avenues, we must deny your claim for disability benefits as of April 19, 2000."
(VB 246). Nowhere does the termination letter assert an improvement of Blankenship's medical condition or a change of symptoms as a basis for the denial of coverage. Nor does the letter argue that Blankenship is no longer disabled because he is not under the regular care of a physician.
Following receipt of the initial denial letter, Blankenship wrote to Liberty on April 26, 2000. Relying on the stated reasons in the termination letter, Blankenship expressed his "surprise" at the "rationale for the termination." (VB 250). As his letter made clear, Blankenship understood this rationale to be his refusal to "undergo risky invasive procedures." Id. In accordance with the Employee Retirement Income Security Act of 1974 ("ERISA"), on June 9, 2000, Blankenship formally appealed Liberty's decision to discontinue benefits. (VB 241). The formal request for appeal observed that Liberty acknowledged his disability in its termination letter, but nevertheless terminated benefits because Blankenship had not "submitted to `alternative methods' to alleviate his disability." Id. Blankenship reminded Liberty that his own physicians had warned him that such alternative procedures carried the risk of worsening his condition, and included documentation of just such a warning by Dr. Grimm. Id. Because his own doctors had advised against the procedures Liberty appeared to require, Blankenship requested that his disability benefits be reinstated. Id.
On June 22, 2000, Liberty acknowledged receipt of the appeal, and advised Blankenship that he would be notified in writing of the "final decision" within 60 days. (VB 240). The Department of Labor has set forth "minimum requirements" for Employee Benefit Plans claims determinations procedures. See 29 C.F.R. § 2560.503-1 et seq. Liberty did not inform Blankenship of the outcome of his appeal within the mandated time period, nor did Liberty request more time in writing. On August 30, 2000, Blankenship wrote again to Liberty. (VB 203). His letter cited to the ERISA regulations governing the time within an appeal must be heard, calculated that Liberty should have responded by August 12, 2000, and informed Liberty that he had not received the required response. Id. Several weeks later, Blankenship received a letter from Liberty purporting to extend its time-period to review his appeal. (VB 202). Although the extension letter was dated August 7, 2000 (within the time-period for extending an appeal under ERISA), it was received in an envelope post-marked September 8, 2000, causing an impression that it had been "backdated." (VB 201). Blankenship immediately notified Liberty of the discrepancy, including copies of the letter and the envelope in which it arrived. (VB 200). Very shortly, Liberty wrote to Blankenship that the letter included an "incorrect date" and had in fact been written on September 7, 2000, not August 7, 2000 as previously indicated. (VB 199). Apart from this correction, this letter did not acknowledge that Liberty was now clearly in violation of ERISA with regard to its review of Blankenship's appeal.
Finally, Liberty sent a letter to Blankenship dated September 29, 2000 (hereinafter, "Final Denial"). This final denial informed Blankenship that Liberty had "completed our review of your request for reconsideration" and "determined that we are unable to alter our decision of April 20, 2000." After quoting from the policy for the definition of "disabled," the final denial states: "As indicated in the letter of April 20, 2000, the basis for the denial was you do not meet the policy's definition of disability as stated above." (VB 178). However, the content of the final denial letter has little in common with the content of the initial denial letter. Where the initial denial focused almost exclusively on the option for "alternative" procedures, the final denial rests on selective statements of Dr. Nieh, Dr. Grimm, and an unnamed "consulting medical examiner" to conclude that "the medical documentation demonstrates no impairment that prevents you from performing your sedentary occupation." (VB 180). The final denial also notes that Blankenship had not been treated by his doctor since April 1999, without explicitly relying on that as an alternative basis for the decision. The penultimate paragraph of the final denial letter discusses Liberty's "obligation to conduct a full and fair review of the appeal," followed immediately by the sentence: "Your administrative rights to review have been exhausted, no further reviews will be conducted by Liberty Life Assurance Company of Boston." (VB 181).
III. CONCLUSIONS OF LAW
The court reviews an ERISA action brought under 29 U.S.C. § 1132(a)(1)(B) to recover benefits under the terms of an employee benefit plan under the "de novo standard of review unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plans." Firestone Tire and Rubber Company v. Bruch, 489 U.S. 101 (1989). The long-term disability policy at issue does not grant the administrator such discretion, and both parties agree that this Court should review the determination of benefits applying a de novo standard of review.
However, the parties disagree about the scope of evidence that the Court should consider. Blankenship maintains that Liberty violated ERISA regulations by conducting a flawed review of his appeal, and therefore urges the Court to limit its review to the rationale given for the initial denial. Pl.'s Trial Brief at 18-22. Blankenship also insists that the Court should consider documentation beyond that contained in the administrative record, including other evidence that Blankenship was never allowed to present. Id. Liberty argues that the de novo review standard simply means that the Court should determine whether Blankenship was disabled within the terms of the policy, based only on the information in the record at the time the determination was made. Def. Trial Brief at 12.
Normally, under a de novo standard of review, the Court limits its review to the documents in the administrative record.Kearney v. Standard Ins. Co., 175 F.3d 1084, (9th Cir. 1995). However, where the circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review, the district court has discretionary authority to look at evidence that was not before the plan administrator. Mongeluzo v. Baxter Travenol Disability Benefit Plan, 46 F.3d 938, 944 (9th Cir. 1990). Where a plaintiff was not given the opportunity to present additional evidence to the administrator because the administrator failed to follow the statutory notice requirement, the district court may properly consider that evidence in making its eligibility determination. Remand to give the administrator an opportunity to consider the new evidence is not necessary.See Vanderklok v. Provident Life Accident Ins. Co., 956 F.2d 610, 617 (6th Cir. 1992).
First, we must determine whether it is necessary to go beyond the administrative record to determine if Blankenship was disabled under the terms of the policy. The Court finds that it should not be limited to the record before Liberty, because Liberty's termination of Blankenship's disability benefits violated ERISA regulations. In accordance with 29 U.S.C. § 1331(1), the Department of Labor promulgated regulations governing the procedural steps that must be followed by a plan in determining whether to terminate or deny benefits. These regulations require a plan administrator to notify a claimant of any adverse benefit determination in a writing which sets forth "in a manner calculated to be understood by the claimant:"
(i) The specific reason or reason for the adverse determination;
(ii) Reference to the specific plan provisions on which determination is based;
(iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary;
(iv) A description of the plan's review procedures and the time limits applicable to such procedures, including a statement of the claimant's right to bring a civil action under section 502(a) of the Act following an adverse benefit determination on review.29 C.F.R. § 2560.503-1(g)(1). When Liberty terminated Blankenship's benefits in April 2000, a reasonable person reading the first denial letter would believe that Liberty's rationale for terminating the benefits was based on claimant's failure to submit to alternative surgical treatments. Based on this letter, and despite Liberty's failure to identify "any additional material or information necessary . . . to perfect the claim," Blankenship appealed the decision with a point-by-point challenge to Liberty's letter. The ERISA regulations require a "full and fair review" of any adverse benefit determination. 29 C.F.R. 2560.503-1(h)(1). This review must be completed and claimant notified "not later than 60 days after receipt of the claimant's request for review." Id. at 2560.503-1(i)(1)(i). The time period may be extended if "special circumstances" require, but "written notice of the extension shall be furnished to the claimant prior to the termination of the initial 60-day period." Id. (emphasis added). Blankenship's notice of appeal was received by Liberty on June 13, 2000. (VB 241). Liberty did not request more time to complete the review until September 8, 2000. Clearly, Liberty violated these regulations through its failure to conduct the review or notify Blankenship that more time would be necessary within 60 days. Moreover, Liberty's final denial, mailed September 29, 2000, relied on several new theories for the denial of benefits, while cutting off any further right to review. (VB 181).
Under ERISA, an administrator's procedural violations do not allow a court to ignore the information relied on by that administrator. Thus, this Court will consider all information upon which Liberty based its denial.
We note, however, that "ERISA and its accompanying regulations were intended to help claimants process their claims efficiently and fairly; they were not intended to be used by the Fund as a smoke screen to shield itself from legitimate claims."Richardson v. Central States, S.E. S.W. Areas Pension Fund, 645 F.2d 660, 665 (8th Cir. 1981). Any deficiency in the administrative record is clearly due to the manifest failure of the insurance company to follow the proper procedures for denial of benefits and provide the proper opportunities for Blankenship to perfect the record and obtain a full and fair review of the denial of benefits. As a result, this Court will not constrain itself to the administrative record in making the determination of whether Blankenship was "totally disabled" under the policy. With it established that review will not necessarily be limited to the administrative record, we turn to the determination of whether Plaintiff was "totally disabled" under the policy at the time Liberty terminated his benefits in April of 2000.
Notwithstanding the Court's determination of the appropriate scope of review, the Court would reach the same conclusion under either the de novo standard or the arbitrary and capricious standard, and whether it considered all evidence, or just the evidence in Liberty's claim file.
In its trial brief, Liberty argues that Plaintiff was not "totally disabled" within the meaning of the policy. In the alternative, Liberty argues that its denial of benefits should not be overturned because "plaintiff was no longer under the regular care of a physician as of April 19, 2000." Def. Trial Brief at 17. We will consider each of these points in turn.
A. Totally Disabled
The KPMG Long-Term Disability Plan defines "totally disabled" as "unable to perform all of the material and substantial duties of his occupation on a full-time basis because of a disability." (VB 453) (emphasis added). To receive benefits for the entire eligible period, the insured must provide to the Company "proof of continued total disability and regular attendance of a physician." (VB 456). The policy also states that such information must be given "upon request." Id.
i. The Nature of Plaintiff's Disability
After Blankenship underwent brachytherapy for his prostate cancer, he experienced a total blockage of the urinary tract. As a result, Blankenship required catheterization in order to urinate. For a five-week period, he was catheterized by a Foley catheter, and thereafter taught to self-catheterize as needed, which he did for nearly nine months. During this time, frequent bladder spasms required Blankenship to self-catheterize 15 to 20 times during each 24-hour period. He experienced repeated bladder infections as a result of the self-catheterization.
Eventually, Blankenship ceased the self-catheterization. However, he remained unable to urinate voluntarily, accumulating only about 200 to 250 cc's of urine in his bladder before suffering involuntary bladder spasms that expelled a portion of the accumulated urine. These spasms necessitated diaper changes between 15 and 20 times each day, causing interruptions to Plaintiff's sleep, daytime fatigue, confusion and inability to concentrate. Throughout the time period at issue, Blankenship has been on a regimen of medication prescribed by his physicians to manage his symptoms. He continues under the care of Dr. Carl Thomas, whom he sees on a yearly basis as instructed.
ii. Change in Condition
Although the burden of demonstrating the existence of the disability rests with the claimant, "one relevant consideration in determining the existence of a disability is whether any significant changes have occurred in the individual's condition since the insurer's initial determination that the covered individual was disabled." Dishman v. Unum Life Ins. Co. of Am., 1997 U.S. Dist. LEXIS 22676 (C.D. Cal. 1997). Liberty determined that Blankenship was "totally disabled" in June 1998, at which time it began paying disability benefits. In July 1998, Liberty's in-house nurse noted:
"Claimant is a tax attorney for Peat Marwick. He is very motivated to RTW [return to work] but until he gets his voiding under control he feels he cannot function at work and I agree. Not only would he be sleep deprived but he would be distracted and preoccupied with his urinary problems. However, that may improve over time and a RTW [return to work] would be feasible at that time."
(VB 196). Liberty continued to monitor Blankenship's condition so that it could reevaluate the case based on any forthcoming improvements. However, Dr. Grimm's evaluation of Blankenship's mental and physical capacities indicate that Blankenship had lessened functionality in January 1999 and July 1999 than he did in July 1998 when Liberty first began paying benefits. Liberty has provided no evidence that Blankenship's condition has improved since June 1998.
iii. Material and Substantial Duties
Rather than demonstrate a "significant improvement" in Plaintiff's condition to show that he is no longer totally disabled, Liberty insists that it denied the claim, "not because there was no objective evidence of a disability (urinary incontinence), but rather because [Blankenship] had not established that the medical condition precluded him from returning to work." Def. Trial Brief at 17. This Court finds that the administrative record provides ample evidence that Blankenship's disability prevented him from performing the duties of his occupation. We also note that Liberty completely neglected to address Plaintiff's actual duties at KPMG or how he could perform these duties despite his acknowledged disability.
Because the KPMG policy requires a determination with respect to a claimant's ability to perform "the material and substantial duties" of his own position, it follows that each disability determination under the policy must necessarily depend on what those "material and substantial duties" are. (VB 489). The record itself is surprisingly silent on Blankenship's actual duties as a Senior Tax Consultant at KPMG, and Liberty never defines Plaintiff's "material and substantial duties" at KPMG. For his part, Blankenship argues that the duties of his position as a Senior Tax Consultant at a reputable accounting firm involved a high level of mental acuity and concentration.
Liberty did not ask either of the two "independent" physicians who reviewed Blankenship's file to evaluate his condition as it related to his duties at KPMG. In fact, it is not clear that either doctor even knew what Blankenship's duties at KPMG were. It is also undisputed that neither physician ever met with, examined, or treated Blankenship, despite the fact that the policy gives Liberty the "right and opportunity" to do so "as often as reasonably required." (VB 468).
As Liberty points out, Dr. Nieh's report concluded that "Yes, it is reasonable that this patient could return to work with or without employer accommodations and/or with reasonable medical care." (VB 258). A full reading of Dr. Nieh's report, however, indicates that Dr. Nieh's conclusion was predicated on Blankenship submitting to an invasive surgery, against which Blankenship's own treating physicians had advised. Dr. Nieh wrote that there was a good to excellent chance that the surgery would improve Blankenship's symptoms, and that Blankenship "certainly could be no worse off than he is now." (VB 258). Dr. Nieh also opined that resuming self-catheterization would allow Blankenship to return to work. (VB 258). However, Dr. Nieh did not mention the risks of self-catheterization, nor Dr. Grimm's opinion that frequent self-catheterization was partially responsible for the damage to Blankenship's urethra. (VB 243).
After Blankenship appealed the first denial of benefits, Liberty engaged Dr. Donald Abbott to review Blankenship's file and write a second report. Like that of Dr. Nieh, Dr. Abbott's report makes no mention of Blankenship's duties at KPMG in concluding that "there is no apparent impairment sufficient enough that would prevent him from having work capacity to do his own occupation at this time." (VB 205). Dr. Abbott supports this assertion with vague statements like: "many people with urinary incontinence frequently work" and "it appears he may well have functional capacity." (VB 206). Unlike Dr. Nieh, however, Dr. Abbott clearly acknowledges that self-catheterization "may be traumatic to his urethra and bladder neck, and therefore may be contraindicated." Id.
The evidence Liberty employs to draw a picture of Blankenship's functioning is selective and misleading. In its trial brief, Liberty recites the results of Dr. Grimm's physical capacities evaluation dated July 1999 as support for Liberty's "determination that plaintiff was no longer disabled under the policy." Def. Trial Brief at 13. Dr. Grimm's evaluations, which were completed at Liberty's behest on forms created by Liberty, quantify Blankenship's level of functioning with regard to both mental and physical capabilities. These forms appear to be generic, containing no indication of which capabilities are most relevant to Blankenship's duties at KPMG. Liberty also makes no mention of how Blankenship's physical capabilities relate to his duties. More importantly, Liberty's trial brief fails to mention the two Mental Status Functional Capacities Forms, dated January and July 1999, which classify most of Blankenship's mental functions as "significantly" or "moderately" restricted due to his disability. In the eyes of this Court, a medical opinion finding that a Senior Tax Consultant has "significant" restrictions on his ability to sustain work performance, cope with work pressure, or concentrate is more helpful in determining whether that patient is able to perform his work duties on a full-time basis than a medical opinion stating that the Senior Tax Consultant is able to "lift" ten percent or "type" thirty percent of an eight hour day.
Though Liberty fails to acknowledge them in its trial brief, the final denial letter did discuss the latter two Mental Status Capacities Forms. However, that letter appears to dismiss the "significant" restrictions on Blankenship's mental capacities because of a lack of evidence that Blankenship underwent treatment or "psychological testing" for "inability to concentrate, decreased attention span, decreased ability to cope, or other complaints . . ." (VB 179). Thus, Liberty is unwilling to rely on the answers provided to its own questions by Blankenship's physician, instead requiring corroborative proof in the form of separate medical treatment for the side-effects caused by the disability. Liberty did not point to any support for this stance in the policy. As the Supreme Court recently observed, "plan administrators, of course, may not arbitrarily refuse to credit claimant's reliable evidence, including the opinions of a treating physician." Black Decker Disability Plan v. Nord, 538 U.S. 822, 834 (2003). Neither did Liberty provide Blankenship any opportunity to otherwise corroborate his symptoms, as the same letter in which this rationale is first raised also deems his right to review "exhausted." (VB 178-181).
In its trial brief, Liberty also relies on a statement made by Dr. Thomas to Liberty's in-house nurse that Dr. Thomas did not believe Blankenship was disabled. There are several problems with this evidence. First, the evidence of this statement is secondhand and based on notes made by Liberty's own nurse after a phone call with Dr. Thomas. If Dr. Thomas believed that his patient was not disabled and told the insurer his opinion, it is difficult to understand why Liberty would not obtain an official opinion in writing. Second, assuming Dr. Thomas's statement was made as recorded, it suffers from the same deficiency as those of Drs Nieh and Abbott — namely, that it fails to address how Blankenship's condition relates to his duties at KPMG. In fact, as Liberty relates it, Dr. Thomas also acknowledged that Blankenship suffered from a urologic condition. (VB 191). Dr. Thomas's subjective opinion that this condition did not render Blankenship "disabled" is insufficient under the policy unless it is the result of a specific finding that Blankenship was able to perform his material and substantial duties on a full-time basis, despite his urologic condition. Finally, Liberty never relied on Dr. Thomas's statement in either the initial denial or final denial letter, depriving Blankenship of any opportunity to ascertain the context of the statement or otherwise rebut it.
This Court's de novo review must determine whether Plaintiff was "totally disabled" as defined by the policy as of April 2000. Because the policy defines "totally disabled" as unable to perform the duties of claimant's occupation on a full-time basis, this Court must make its determination in the context of Blankenship's actual duties at KPMG. Despite Liberty's failure to address these duties, the Court finds sufficient evidence in the administrative record to support a general understanding that Blankenship's duties as a Senior Tax Consultant were intellectual in nature and consisted of client interaction and meetings. Liberty does not deny that Blankenship suffers from bladder dysfunction, nor that this dysfunction causes frequent bladder spasms and leakage which require significant attention. This Court finds that the acknowledged bladder dysfunction, with resultant sleep interruption and emotional degradation, would necessarily have a significant adverse impact on a person's ability to perform sustained intellectual activity and conduct professional client meetings.
Liberty's failure to make any mention of Blankenship's specific duties at KPMG, or how the various medical evaluations relate to those duties, clearly falls short of the standard required by the policy. The administrative record clearly reveals, and Liberty admits, that Blankenship suffers from a disability. This disability was deemed sufficient to render him eligible for benefits in June 1998. Subsequent medical reports show that Blankenship's functionality continued to deteriorate. Liberty requested and received these reports, which show low functioning of mental capacities directly relevant to Blankenship's actual duties. However, Liberty insists that it denied the claim, "not because there was no objective evidence of a disability (urinary incontinence), but rather because [Blankenship] had not established that the medical condition precluded him from returning to work." Def. Trial Brief at 17. The Court finds the evidence directly contrary. On three separate occasions, Blankenship's physician, Dr. Grimm, filled out the forms Liberty sent him. When Blankenship himself was contacted in January 2000, Liberty's own in-house nurse asked him if he thought he could begin to work out of his home, to which he answered that he didn't think it was realistic because he could not take client meetings. (VB 189). After speaking with Blankenship, Liberty's nurse confirmed in the notes her assessment that "practical prognosis for claimant return to gainful employment poor." Id. Nevertheless, Liberty terminated Blankenship's benefits four months later.
In sum, the administrative record shows indisputable evidence that Blankenship suffers from a disabling medical condition. After Liberty first granted disability benefits, Blankenship's physician submitted evaluations showing a worsened condition and significant restrictions on Blankenship's mental capabilities. The independent doctors' reports obtained by Liberty lack any evaluation of Blankenship's disability with respect to his actual duties at KPMG. Finally, nothing in the administrative record addresses how Blankenship could return to work with his acknowledged disability and adequately perform the duties of his specific occupation on a full-time basis. For these reasons, this Court finds that Blankenship was "totally disabled" under the policy as of April 2000.
B. Regular Attendance of a Physician
The KPMG Long-Term Disability Policy states that disability benefits, once commenced, will be paid for the entire period of disability if the insured gives proof upon request of continued "regular attendance of a physician." (VB 456). The policy defines "physician" as a person who is "licensed to practice medicine and prescribe and administer drugs or to perform surgery." (VB 451). Liberty maintains that Blankenship should not receive benefits after April 19, 2000, because he was "no longer under the regular care of a physician" at that time. In support of this assertion, Liberty points to Blankenship's last visit with Dr. Grimm in April 1999.
Although Liberty acknowledges that Blankenship saw his urologist, Dr. Thomas, in September 1999, it discounts that visit due to later statements by Dr. Thomas expressing reservations about Blankenship's disability. Def. Trial Br. at 18. Clearly, Dr. Thomas fits the definition of physician under the policy, and as a urologist, his care is relevant to Plaintiff's disability. The policy provides no support for Liberty's rationale for discounting the visit, and this Court will consider it for purposes of determining if Blankenship was under the "regular" care of his physicians.
The Ninth Circuit has found that "the primary rationale for the physician's care requirement is to assure that the claimant is actually disabled, is not malingering, and is not making a fraudulent claim." Eichacker v. Paul Revere Life Ins. Co., 354 F.3d 1142, 1148 (9th Cir. 2004) citing Heller v. Equitable Life Assurance Soc'y of the United States, 833 F.2d 1253, 1257 (7th Cir. 1987); Russell v. Prudential Ins. Co. of Am., 437 F.2d 602, 607 (5th Cir. 1971). The Sixth Circuit identified several factors that inform a Court's determination of whether a claimant is under the "regular attendance of a physician." See Rowan v. Unum Life Insurance Co. of Am., 119 F. 3d 433, 437 (6th Cir. 1997). In addition to the frequency of doctor's visits, these include "the plaintiff's condition at the time of her last doctor's visit, the likelihood that additional doctor visits would have influenced the progression of her disability, whether or not the plaintiff was taking medication or engaging in physical therapy or exercises recommended by her doctor, and the need for a physician to directly monitor such activities in the normal course of treatment." Id.
As of April 2000, Blankenship had not visited a doctor for six months. However, Blankenship informed Liberty in January 2000 that his condition remained unchanged in that he had the same symptoms with regard to urinary retention, frequency, and bladder spasm-induced incontinence. Moreover, he was continuing on the regimen of medications prescribed by his doctors for his urological condition, including hytrin, ditropan, lisinopril, and aspirin. Blankenship's treating physician, Dr. Grimm, wrote to Liberty on June 25, 1999 that Blankenship's "current treatment regime" was to continue "medication management" with a possibility of surgical intervention "if no improvement." (VB 263). Dr. Grimm wrote that he had last seen Blankenship in April 1999, but did not schedule him for another office visit. Id. It is reasonable that Blankenship, who had been suffering under these symptoms for several years, would curtail his frequent trips to Seattle to visit Dr. Grimm if his status remained essentially unchanged. This Court finds that the circumstances of Plaintiff's disability were static such that frequent visits with his doctors would not be called for. The fact that Plaintiff remained on a rigorous regimen of prescribed medication also supports our determination that he was under the "regular" care of his physicians. Finally, since Liberty never raised the "regular attendance of a physician" issue in its initial denial letter, the Court is inclined to give latitude to Blankenship here, as he was never provided an opportunity to provide the record with evidence that his level of treatment was "regular" in relation to his condition and circumstances.
Based on Dr. Grimm's medical functioning evaluations, a complete lack of evidence that Blankenship's condition had improved since Liberty began paying benefits, Blankenship's consistent medication regimen, the failure of Liberty to examine Blankenship before terminating his benefits, the failure of Liberty's hired physicians to address the affect of Blankenship's condition on his duties at work, and the fairly suspicious behavior of Liberty throughout, this Court determines that Blankenship was still "totally disabled" within the terms of the policy at the time Liberty terminated benefits in April 2000, and Liberty's termination was therefore improper. We also hold that Liberty is estopped from arguing that Blankenship might have been qualified for another job a year later, as its own improper actions precluded such an investigation at the relevant time.
C. Offset for Other Income
In the event this Court determines that Liberty improperly terminated Blankenship's benefits, Liberty asserts that it is entitled to offset any judgment based on the retirement benefits that KPMG paid out to Blankenship. Because this Court finds that the KPMG policy requires these benefits to be "received" by claimant, and the circumstances in this case do not qualify as a "receipt" of retirement benefits, we find that Liberty is not entitled to reduce the amount of disability benefits owed to Blankenship.
The KPMG policy provides that for employees who become disabled after the age of 60, disability benefits will be payable for up to five years, but not beyond the age of 70. (VB 043). Because Blankenship's disability arose at the age of 63, he was entitled to receive disability benefits until the age of 68, so long as he remained continuously disabled during that time. However, the policy also allows Liberty to offset the amount of a claimant's total disability monthly benefit by the amount of "other income benefits" received during that period. These include retirement benefits that "the insured receives under the employer's retirement plan." (VB 458). Liberty argues that it is entitled to an offset of $150,477.00 for certain of Blankenship's "retirement benefits."
On September 13, 2000, KPMG terminated Blankenship's employment because his disability claim had been denied and he had not returned to work. (VB 016, 096). In accordance with KPMG practice, at the time of his termination Blankenship became eligible to receive retirement benefits from several KPMG retirement plans. On October 31, 2000, Blankenship received a letter from KPMG outlining his options for receipt of these retirement benefits. (VB 528-32). Although the standard form of payment under these plans was a joint and survivor annuity for the lives of the insured and his spouse, the plans allowed an insured to elect other options. Id.
The KPMG Pension Plan offered two options: 1) the annuity or 2) a "lump sum" payment. (VB 529). If an insured chose the lump sum option, he could either "receive" it, in which case the amount would be taxable, or he could elect to "roll it over into an IRA or other tax qualified vehicle," in which case it would not be deemed "received" for tax purposes. Id. The KPMG Personal Retirement Account (the "PAR Plan") offered several more options than the Pension Plan. In addition to the annuity and the lump sum payment or lump sum rollover, it allowed an insured to receive payment in monthly installments or to defer distribution of the account until insured reached the age of 70 1/2. (VB 530).
With the consent of his wife, Blankenship elected to roll over both accounts to an IRA managed by the Vanguard Fiduciary Trust Company ("Vanguard"). As a result, on December 11, 2000, KPMG's retirement plan administrators transferred $29,291.00 from the KPMG retirement trusts directly to Vanguard, representing the amount in Blankenship's Pension Plan account. On January 9, 2001, KPMG transferred $761,149.00, the amount of Blankenship's PAR Plan Account, to Vanguard.
Both parties agree that these plans fall within the definition of "retirement plan" under the policy. Liberty argues that the distributions from the KPMG Pension Plan and PAR Plan are properly offset against the disability payments because they are "retirement benefits" under the policy. The policy defines "retirement benefits" as "money which is payable under a retirement plan in a lump sum or in the form of periodic payments." (VB 452). Thus, according to Liberty, because these benefits were "payable" in December 2000 and January 2001, they qualify as a retirement benefit under the policy and are properly offset. Def. Supp. Trial Br. at 4. However, the policy further qualifies that an offset is only proper for the amount of retirement benefits "the insured receives under the employer's retirement plan." (VB 495) (emphasis added). Therefore, the propriety of an offset depends on whether the rollover from KPMG to Vanguard constitutes "receipt" by Blankenship such to trigger the offset. We hold that it does not.
The parties disagree as to whether the portion of Blankenship's PAR Plan Account attributable to his years as a KPMG partner fit within this definition. However, because we conclude that Liberty is not entitled to any offset from the retirement plans, we do not need to resolve this dispute.
First, it is instructive to examine the context in which the word "receives" appears in the KPMG policy. Blankenship points out that this language is distinct from that relating to Worker's Compensation or Social Security benefits, which require only that an insured be "eligible" for such benefits in order for an offset to apply. Id. Employers are permitted to offset long-term disability benefits with pension benefits by virtue of a provision in the Older Workers Benefit Protection Act of 1990 (OWBPA), which amended the Age Discrimination in Employment Act (ADEA). 29 U.S.C. § 623(l)(3)(B). This section permits the reduction of long-term disability benefits by pension benefits "for which an individual who has attained the later age of 62 or normal retirement age is eligible." Id. (emphasis added). Thus, the KPMG policy drafters could have chosen to make an offset contingent upon an insured's eligibility for retirement benefits. However, as noted above, the KPMG policy distinguished between those benefits for which the insured is "eligible" and those that the insured must actually "receive," putting retirement benefits in this latter category.
This is not a distinction without a difference, as reference to the tax code illustrates. Under the Tax Code, the transfer from KPMG to the Vanguard IRA did not constitute "receipt" for tax purposes. According to the Tax Code, a disbursal from an employee trust is only taxable if it is "actually distributed" to the beneficiary by the employee trust. I.R.C. § 402(a). A trustee-to-trustee transfer from the employee trust to another IRA account does not qualify as "actually distributed" to the employee. Id. § 402(c).
The plain meaning of the word "receive" also indicates that Blankenship did not receive anything through this transfer. He did not receive the funds as income, nor did he obtain the use and enjoyment of the funds. Although Blankenship has beneficial ownership of the funds in the Vanguard IRA, as well as the rights to obtain those funds and appoint a beneficiary of them, he similarly possessed these rights and benefits when the funds were held by the KPMG plans, and therefore cannot be said to have received anything in the transaction.
The policy behind the ADEA provision also supports our finding that the offset is not appropriate in this case. In a case involving the propriety of offsetting retirement benefits against a long-term disability benefit, the Ninth Circuit considered the policy rationale and legislative history of the ADEA in determining that an offset was not proper. Kalvinskas v. California Inst. Tech., 96 F. 3d 1305 (9th Cir. 1996). In that case, a disabled employee was effectively coerced into retiring when his employer offset his disability benefits with pension benefits that the employee could only receive by retiring. Id. After a review of its legislative history, the court determined that the "purpose of § 4( l)(3) was to prevent an employee from receiving the windfall of simultaneous payments of long-term disability and pension benefits in full." Id. at 1309. Because the employee's disability benefits were offset, the employee was impermissibly forced to retire to receive any income from the employer. Id.
We find the Ninth Circuit's comments on § 4(l)(3) instructive. The statute giving rise to this provision in the KPMG policy was based on a policy rationale of preventing "double-dipping" by an employee — that is, receiving two independent benefit payments at once. Id. In Kalvinskas, the court found that the policy of avoiding "double-dipping" is not served when a company coerces an employee to retire in order to receive benefits. We find that the policy of avoiding double-dipping is also not served under the circumstances here. Like the employee in Kalvinskas, Blankenship did not choose to retire; however, he was forced into retirement when Liberty improperly terminated his disability payments. As a further result of Liberty's termination of his disability benefits, Blankenship was required by KPMG to take action regarding the dispensation of his retirement benefits. Even though we now find that Liberty's termination of disability benefits was improper, had Blankenship actually received his retirement benefits, Liberty arguably would be entitled to reduce any retroactive disability payment by an appropriate amount. However, this is not what happened. Blankenship did not elect to receive his benefits; he rolled them over into an IRA so that he would not be in the impermissible position of "double-dipping." Blankenship's choice accords with the policy of the ADEA regulation that employees not receive a "windfall" of simultaneous disability and pension benefits.Kalvinskas, 96 f.3d at 1309. In sum then, because we find that Blankenship did not "receive" the retirement benefits under the KPMG policy when he elected to roll them into his IRA, Liberty is not entitled to an offset and must pay the full amount of disability benefits otherwise due to Plaintiff.
Although Blankenship had the option to leave his PAR funds in the KPMG trust, he had no such option with his pension funds. Forced to roll over one of his accounts, it is reasonable that he would also move his PAR funds at the same time. That Plaintiff had an option to leave some of his savings in the KPMG trust does not affect our determination that the rollover is not a "receipt" under the KPMG policy.
IV. CONCLUSION
1. Based on the foregoing, Plaintiff was "totally disabled" according to the KPMG Employee Long-Term Disability Plan as of April 20, 2000.
2. Under the circumstances in this case, Defendant is not entitled to an offset for the retirement benefits Plaintiff rolled over into an IRA.
3. Plaintiff is entitled to and shall have judgment for disability benefits at the rate of $6,093.82 per month, beginning April 20, 2000 and continuing through May 29, 2003.
4. Plaintiff is further entitled to and shall have judgment for interest on each unpaid installment at the applicable interest rate from the first day of the month following the date that the payment was due.
5. Plaintiff shall have and recover his costs of this action, including attorney's fees.
6. Plaintiff is ORDERED to submit to the Court within 10 days the following:
A. The total amount of benefits, as defined in item 3.
B. The total amount of interest owed, as defined in item 4.
C. The amount requested for attorney's fees and documentation therefor, together with a costs bill.
IT IS SO ORDERED.