Dobson v. Hartford Life & Acc. Ins. Co.

518 F.Supp.2d 365

Douglas DOBSON, Plaintiff, v. HARTFORD LIFE & ACCIDENT INSURANCE COMPANY, Defendant.

No. 3:99CV2256 (JBA).

United States District Court, D. Connecticut.

August 29, 2007.

Daniel M. Feinberg, Jeffrey Lewis, Lewis, Feinberg, Renaker & Jackson, Oakland, CA, Mark D. Debofsky, Daley Debofsky & Bryant, Chicago, IL, Victoria de Toledo, Casper & de Toledo, Stamford, CT, for Plaintiff.

RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT [Docs. # # 180, 183]

JANET BOND ARTERTON, District Judge.

Plaintiff Douglas Dobson initially brought this lawsuit against Hartford Life & Accident Insurance Company ("Hartford") under Sections 502(a)(1)(B) and 502(a)(3) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B) and (a)(3), on behalf of a putative class of participants in long-term disability ("LTD") plans for which Hartford served as insurer who were denied interest on allegedly unreasonably withheld, and then retroactively paid, benefits.

The extensive procedural background of this case, including multiple decisions issued by this Court and one issued by the Second Circuit Court of Appeals, is described infra. At the current juncture, the parties have cross moved for summary judgment on plaintiff's remaining § 502(a)(1)(B) claim, which concerns plaintiffs claimed entitlement to interest on his LTD benefits which were allegedly arbitrarily withheld for thirteen months and then retroactively paid without interest in April 1998. See Hartford Mot. [Doc. # 180]; Dobson Mot. [Doc. # 183]. It is undisputed that Dobson's benefits plan ("the Plan") contains no explicit provision for interest to be paid on withheld/delayed benefits, but the parties dispute whether such a provision can be implied by the terms of the Plan such that interest is recoverable as part of the "benefit" of the Plan pursuant to § 502(a)(1)(B). On plaintiffs § 502(a)(3) claim, on which the Court has already entered a Stipulated Judgment [Doe. # 112], plaintiff seeks a declaration of a presumption entitling plan beneficiaries to disgorgement of Hartford's profits on withheld benefits whenever Hartford violates the time limits for deciding claims or appeals specified or incorporated into its ERISA plans and/or violates the time limits set forth in the applicable ERISA regulations. See Pl. Mot. For the reasons that follow, Dobson's Motion will be granted as to his § 502(a)(1)(B) claim and denied as to his § 502(a)(3) claim, and Hartford's Motion will be denied.

I. Factual Background

The following facts are undisputed and are taken from the parties' Joint Statement of Undisputed Facts Re: Cross-Motions for Summary Judgment [Doc. # 184]. Plaintiff Douglas Dobson was employed as an anesthesiologist at the West Central Anesthesiology Group ("West Central") and participated in West Central's long term disability insurance plan ("the Plan"). The `Plan is insured and administered by Hartford and is governed by ERISA. Beginning in 1993, Dobson could no longer work as an anesthesiologist due to obstructive sleep apnea and thus he applied for LTD benefits under the Plan. Hartford initially approved Dobson's claim and began paying him a monthly benefit of $10,000, less tax withholding.

In April 1997, however, Hartford suspended Dobson's benefits, effective March 31, 1997, "due to lack of proof of continuous disability." A series of requests for information, submissions of documentation by Dobson, and internal requests for review/appeal followed. Ultimately, on April 22, 1998, Hartford reinstated Dobson's eligibility for benefits retroactive to the date of their suspension and mailed Dobson a check for 13 months of past-due benefits in a lump sum payment. The payment did not include any interest for any of the 13-month period during which Dobson's benefits had been suspended, although Dobson submitted a demand for such interest in 1997.

The relevant Plan provisions are as follows:

BENEFITS

Article 1. Benefit Payment Due to Disability

You will be paid a monthly disability if:

(1) you become Disabled while insured under this plan;

(2) you are Disabled throughout the Elimination Period;

(3) you remain Disabled beyond the Elimination Period; and

(4) you submit Proof of Loss satisfactory to The Hartford.

Benefits accrue as of the first day after the Elimination Period and are paid monthly. No benefit will be paid for any day on which you are not under the care of a Physician.

The Hartford will cease benefit payment on the first to occur of:

(1) the date you are no longer Disabled;

(2) the date you fail to furnish proof that you are continuously Disabled;

(3) the date you refuse to be examined, if The Hartford requires an examination.

CLAIMS

Claim Forms

When The Hartford receives a Notice of Claim, you will be sent forms for providing The Hartford with Proof of Loss. The Hartford will send these forms within 15 days after receiving a Notice of Claim.

Proof of Loss

Written proof of loss must be sent to The Hartford within 90 days after the start of the period for which The Hartford owes payment. After that, The Hartford may require further written proof that you are still disabled.

The Hartford reserves the right to determine if Proof of Loss is satisfactory.

Time Payment of Claims

If written Proof of Loss is furnished, accrued benefits will be paid at the end of each month that you are Disabled. If payment for a part of a month is due at the end of the claim, it will be paid as soon as written Proof of Loss is received.

Appeal of Claims Denied

If a claim for benefits is wholly or partly denied, you will be furnished with written notification of the decision.

On any denied claim, you or your representative may appeal to The Hartford for a full and fair review. A decision will be made by The Hartford no more than 80 days after receipt of the request, except in special circumstances (such as the need to hold a hearing), but in no case more than 120 days after the request for review is received.

See Joint Stmt. ¶ 23. The Plan section entitled "Calculation of Monthly Benefit Due to Total Disability" begins "[t]o determine the Monthly Benefit The Hartford will pay each month while you are Totally Disabled ...," id. ¶ 24, and "Monthly Benefit" is defined as "a monthly sum payable to you while you are Disabled, subject to the terms of the Plan," id. ¶ 25. The Plan incorporates the time limits set out in the Department of Labor (DOL)'s regulations concerning review of disability benefit claims — prior to 2002, the DOL regulations allowed 90 days for review of initial claims and 60 days for review of appeals; beginning on January 1, 2002, the DOL regulations allowed 45 days for initial claims and 45 days for appeals. See 29 C.F.R. § 2560.503-1(e)(1), (e)(3), (h)(1) (effective through December 31, 2001); 29 C.F.R. § 2560.503-1(f)(3), (f)(4), (i)(4) (effective after January 1, 2002). As quoted above, prior to 2002, the Plan's appeal provision also stated that Hartford was permitted to take "no more than 60 days after receipt of the request [for review,]" except in "special circumstances," where another 60 days were permitted. Additionally, during the relevant time period, Hartford provided a "Conforming Instrument" to every employer or other plan sponsor who purchased Hartford group disability policies and those conforming instruments include the applicable time limits set `Perth in the DOL regulations (and Hartford changed the time limits in the instruments in 2002 to reflect the DOL's changes to its regulations). Id. ¶ 28.

II. Procedural Background

In 2002, this Court granted Hartford's summary judgment motion on plaintiffs § 502(a)(1)(B) claim, finding no basis for a per se unreasonableness claim in the language of the Plan, and thus denying class certification on this claim as moot. The Court denied Hartford's motion as to plaintiff's § 502(a)(3) claim, holding that if Hartford's withholding of plaintiffs benefits was unreasonable and constituted a breach of fiduciary duty, then Hartford was obligated to. disgorge any profits it had earned on investment of the withheld benefits.¹ The Court also denied class certification on this claim on grounds that determining whether Hartford was jutistified in exceeding the time limits in any particular case would "require individualized assessment of the information available to Hartford within the regulation time period, and other claims handling factors." Dobson v. Hartford Fin. Servs., 196 F.Supp.2d 152, 165 (D.Conn.2002).

The Second Circuit vacated the dismissal of plaintiffs § 501(a)(1)(B) claim and the denial of class certification on both claims and remanded the case. Dobson v. Hartford Fin. Servs. Group, Inc., 389 F.3d 386 (2d Cir.2004). Among the issues the Second Circuit directed should be considered on remand were, inter alia, whether the Plan permitted Hartford to delay unreasonably the payment of benefits, whether the Plan permitted Hartford to delay payment of benefits past their due date without interest, whether plaintiff's § 502(a)(1)(B) claim was mooted by this Court requiring disgorgement of Hartford's profits on the withheld payments pursuant to § 502(a)(3), and whether the Plan's requirement that determinations on appeal must be made within 60 days, barring "special circumstances," altered the class certification assessment. Id.

After remand, the parties briefed the class certification issue and the Court concluded that, notwithstanding the provisions in the. DOL regulations and the Plan for certain time limits to be applied for the processing of benefits claims and appeals, because determination of the claims of the putative class would nevertheless require an individualized assessment with respect to each plaintiff, class certification was not appropriate. Dobson v. Hartford Life & Accident Ins. Co., No. 99cv2256 (JBA), 2006 WL 861021 (D.Conn. Mar. 31, 2006). Following the Court's denial of class certification, the parties filed the pending ...