The Ninth Circuit Court of Appeals reversed an order granting summary judgment to an insurer, finding the insurer abused its discretion in denying long term disability (“LTD”) benefits. The court held “some skepticism” was warranted – even if the insurer operated with no structural conflict – due to a potential financial conflict concerning independent physician reviewers. The court remanded the matter to the insurer for a reevaluation of the merits of the claim, including consideration of additional evidence regarding mental limitations resulting from medications.

In Demer v. IBM Corp. LTD Plan, 2016 U.S. App. LEXIS 15788 (Aug. 26, 2016), the plaintiff claimed that multi-level degenerative disc disease and narcotic pain medications rendered him unable to do his job as an Internal Auditor for IBM. MetLife paid LTD benefits under the “own occupation” standard but later denied benefits under the “any occupation” standard, relying in part on the opinion of an independent physician consultant (“IPC”) who disagreed with the physical capacity assessments of the plaintiff’s treating physicians. The plaintiff filed an administrative appeal of the decision, which MetLife denied based in part on two additional IPC reviews.

The plaintiff filed suit and in the course of the litigation conducted discovery which, according to the court, showed the IPCs performed a significant number of claim reviews and earned substantial income performing reviews for MetLife.

On summary judgment, the district court found in favor of MetLife, applying abuse of discretion review with no skepticism. In resolving the conflict issue, the district court relied on declarations from two MetLife employees who described MetLife’s efforts to reduce its structural conflict. The plaintiff objected to this evidence because the employees were not disclosed in MetLife’s Rule 26 disclosures.

The Ninth Circuit did not resolve the plaintiff’s objection to the district court’s consideration of the declarations, because it determined that some skepticism was warranted due to the potential financial conflict of the IPCs upon whom MetLife relied – even if MetLife’s decision was not affected by the structural conflict of interest. The court held it was the plaintiff’s burden to produce evidence of a financial conflict sufficient to warrant a degree of skepticism, which the plaintiff satisfied by offering evidence that the IPCs had done a “substantial number” of reviews and received “significant compensation” from MetLife. The court held MetLife failed to meet its burden to produce evidence negating an inference of financial conflict. However, since the plaintiff failed to develop more powerful evidence to support enhanced skepticism, the court found that the financial conflict “warrants some, but not substantial weight” under Abatie and Montour.

With respect to the merits of the claim, the court noted that implicit in each IPC’s opinion was the conclusion that the plaintiff’s complaints of fatigue and difficulty concentrating were not credible. The court determined that the IPCs had little basis for rejecting the plaintiff’s credibility and never explained why they rejected the plaintiff’s cognitive complaints. Further, the court found there was evidence indicating the plaintiff’s condition did not improve and may have deteriorated over time.

Based on the totality of the circumstances, the court held that MetLife abused its discretion in denying LTD benefits. The court remanded the claim to MetLife for further consideration, however, holding that MetLife may reopen the record to consider additional evidence regarding the plaintiff's claims of mental limitations.

Justice Bybee concurred in the judgment but filed a dissent from Section II.B of the majority’s opinion, criticizing the majority for creating a “new” level of skepticism and for having “taken a mechanism we gave administrators for cleansing their conflicts – hiring independent reviewers – and turned it into a new source of conflicts.”

Click here for the opinion.