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Deborah Shepherd v. Life Insurance Company of North America

February 3, 2012

DEBORAH SHEPHERD, PLAINTIFF,
v.
LIFE INSURANCE COMPANY OF NORTH AMERICA, A CIGNA COMPANY, DEFENDANT.



The opinion of the court was delivered by: Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

I. INTRODUCTION

Before the Court is Defendant Life Insurance Company of North America's ("LINA") Motion for a Protective Order and to Quash the Subpoena of Dr. David S. Knapp. For the reasons stated herein, the Court denies the Motion in its entirety.

II. BACKGROUND

Plaintiff in this case alleges that Defendant improperly stopped paying her disability benefits under her insurance policy, which she obtained through her employer, Yellow Book.

She questions the reliability of the insurance doctor, Dr. Knapp, whose report was used in Defendant's denial of continued disability benefits. Plaintiff alleges Knapp frequently provides such services for Defendant and other disability insurers, and so may have financial biases.

Further, Plaintiff claims that Defendant, as both payor and claim administrator, had a conflict of interest in its disability decision. Further, she alleges Defendant was specifically biased toward Yellow Book because several of its employees were out on disability at the same time, and that Defendant targeted Yellow Book employees out of financial motives.

Accordingly, Plaintiff seeks information regarding how her particular claim was handled and the financial picture of Defendant's Yellow Book interactions.

The Court has been asked to perform a "de novo review" of Defendant's denial of continued disability benefits to Plaintiff.

III. LEGAL STANDARD

This action is governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002, et seq. ("ERISA").

As the Seventh Circuit and the parties have noted, "de novo review" is somewhat of a misnomer, and the Court's function here is more akin to making an "independent decision" as to whether Plaintiff is entitled, under the terms of the plan she holds with Defendant, to continued disability benefits. Krolnik v. The Prudential Ins. Co. of Am., 570 F.3d 841, 843 (7th Cir. 2009). The term "review" is more appropriate to instances where the policy, which the Seventh Circuit notes is very much like a contract, specifically entitles the insurance company to deference to its decision (an "arbitrary and capricious" standard). Id. In those instances, review (and sometimes discovery) is often limited to the administrative record presented to the insurance company when it rendered its decision. Id. The exception in those arbitrary and capricious cases is when plaintiff shows bias or conflict of interest on the part of the defendant; then, "more cautious review" must be given. Semien v. Life Ins. Co. of North Am., 436 F.3d 805 (2006).

Curtailed discovery is not necessarily the norm in de novo ERISA review cases. While a court may find that limiting discovery to the "administrative" record is proper, because the review is de novo, it may also admit (and hence allow discovery on) "additional evidence necessary to enable it to make an informed and independent judgment." Casey v. Uddeholm Corp., 32 F.3d 1094, 1099 (7th Cir. 1994). Litigation under ERISA by plan participants seeking benefits should be conducted just like contract litigation, for the plan and any insurance policy are contracts. Krolnik, 570 F.3d at 843 (quoting Firestone Tire & Rubber Co. v. Burch, 489 U.S. 101, 112-113 (1989)).

But, as Defendant points out, some courts in this District have found that, in de novo review, since the primary issue is whether the plaintiff qualifies for benefits under the plan, an exploration of the defendants' motives, or whether they followed their own procedures in denying the benefits, is irrelevant. See Walsh v. Long Term Disability Coverage for All Employees Located in the United States of DeVry, Inc., No. 07-1478, slip op. 4 (N.D. Ill. February 6, 2008) ("Walsh I") (citing Diaz v. Prudential Ins. Co. of America, 499 F.3d 640, 643 (7th Cir. 2007); see also Kuznowicz v. Wrigley Sales Co., LLC, No. 11-165, 2011 U.S. Dist. LEXIS 89996 *3-5 (N.D. Ill. August 10, 2011) ...


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