Well-intentioned policymakers enacted the Employee Retirement Income Security Act of 1974 (“ERISA”) over forty years ago to provide for the protection of participants’ employee benefits in part by establishing a uniform set of rules to ensure efficient proceedings.  One of these notable rules limits the scope of permissible evidence for actions commenced under ERISA section 502(a)(1)(B).  This scope of evidence further depends on whether the reviewing federal court employs an abuse of discretion, or de novo, standard of review.  Because discovery can be an expensive and time consuming process, insurers and claims administrators often take the position that discovery is irrelevant and not permitted under ERISA.  As the cases below show, although limited, discovery is not forbidden in de novo review cases and ERISA claimants should actively seek discovery, taking care to clearly explain why the discovery sought is necessary to a de novo review.

Recently-enacted section 10110.6 of the California Insurance Code and subsequent cases have ushered in a new era where de novo review has become the de jure standard for ERISA cases filed in California.  Briefly, California Insurance Code section 10110.6 holds that any policy or agreement for “disability insurance coverage” offered, issued or renewed after January 1, 2012 to “any California resident” conferring discretionary authority upon the insurer or claim administrator shall have those discretionary provisions stricken.  For further discussion of this issue, see our article The Death of the Abuse of Discretion Standard of Review in ERISA Disability Cases in California.

Generally, a court reviewing a disability insurance denial de novo “simply proceeds to evaluate whether the plan administrator correctly or incorrectly denied benefits.”  Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006).  This consists of an independent review of whether the Administrative Record, or claim file developed during the appeal, supports a finding of disability, without deference to the insurer’s decision.  Subsequently, after complying with their duties under Section 503 of ERISA to turn over the Administrative Record, insurers often adopt the position that discovery beyond the Administrative Record is inappropriate, because the inquiry is whether the insurer reached the correct decision based on the Administrative Record, so extrinsic evidence is irrelevant under Federal Rule of Civil Procedure 26(b)(1).  However, this blanket statement is untrue.

In many cases where a district court reviews the denial decision de novo “additional evidence is not necessary for adequate review of the benefits decision, [and] the district court should only look at the evidence that was before the plan administrator … at the time of the determination.” Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 944 (9th Cir.1995).  However, courts have allowed relevant discovery under beyond the administrative record in “certain limited circumstances.”  Opeta v. Northwest Airlines Pension Plan, 484 F.3d 1211, 1217 (9th Cir. 2007).  Opeta and its progeny proffered a non-exhaustive list of exceptional circumstances where extrinsic evidence may be relevant, including resolving complex medical questions, issues regarding the credibility of medical experts, the availability of very limited administrative review procedures with little or no evidentiary record; the necessity of evidence regarding interpretation of the terms of the plan rather than specific historical facts; instances where the payor and the administrator are the same entity and the court is concerned about impartiality; claims which would have been insurance contract claims prior to ERISA; and circumstances in which there is additional evidence that the claimant could not have presented in the administrative process.  As reflected by Knopp v. Life Insurance. Co. of North America, 2009 WL 5215395 (N.D. Cal. Dec. 28, 2009) and other cases, courts have extended Opeta to mean that if evidence is admissible, it is also discoverable.

Indeed, Waggener v. Unum Life Insurance Co. of America, 238 F. Supp. 2d 1179 (S.D. Cal. 2002) held that district courts have discretion to consider evidence outside the record when conducting a de novo review of an ERISA benefits decision, and should exercise its authority to consider additional evidence when the circumstances clearly establish the necessity of that evidence to an adequate de novo review of the decision.  See also Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 969 (9th Cir. 2006) (permitting consideration of new evidence in conjunction with de novo review of a denial of benefits); Mongeluzo v. Baxter Travenol Long Term Disability Benefit Plan, 46 F.3d 938, 944 (9th Cir.1995) (holding a district court has discretion to allow extrinsic evidence “‘only when circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review’”) (internal quotation marks omitted).

Numerous courts have permitted ERISA claimants to conduct discovery similar to the discovery propounded by Mr. Lawrence, even when applying the de novo standard of review.  Specifically, courts have allowed discovery designed to ascertain whether the vendors and/or medical reviewers hired by an insurer were biased, and whether the claims administrator’s inherent conflict of interest influenced its decision, or choice of medical reviewers in any way.  For example in Anderson v. Sun Life Assurance Co. of Canada, 2012 U.S. Dist. LEXIS 158689 (D. Ariz. Nov. 2, 2012), the district court ruled that “discovery into the potential bias of the medical reviewers utilized by Sun Life is appropriate,” as well as discovery into “Defendant Sun Life’s alleged conflict of interest and how that conflict may have affected the handling of Plaintiff’s claim.”  In Brice v. Life Insurance Co. of North America, 2011 U.S. Dist. LEXIS 77525 (N.D. Cal. July 18, 2011), the district court allowed discovery with respect to the possible bias of a physical therapist hired by the insurer.

Similarly, in Gonda v. Permanente Medical Group, Inc., 300 F.R.D. 609 (N.D. Cal. 2014), the district court, reviewing the a disability denial decision de novo, permitted the plaintiff to conduct discovery regarding the number of benefit claims in which an independent medical evaluator performed professional services, the amount of compensation paid to the evaluator for professional services in the evaluation of disability benefits claims over several years and all documents and information considered by PsyBar (the third party vendor that retained the evaluator) in the selection of this evaluator to review Dr. Gonda’s benefits claim or any facts or medical records pertaining to Dr. Gonda’s claim.  See also Rutherford v. Scene 7 Inc. Long Term Disability Plan, 2008 U.S. Dist. LEXIS 55351 (N.D. Cal. Jul. 18, 2008) (allowing the plaintiff to take the deposition of a medical examiner who concluded plaintiff exhibited “symptom magnification” to evaluate his credibility); Deldebbio v. Walgreens Co., 2012 U.S. Dist. LEXIS 28795 (N.D. Cal. Mar. 5, 2012) (allowed PMK deposition of person with knowledge of the relationship between the administrator and the Plan, as well as a written deposition of the reviewing physicians).

These cases show claimants that limited discovery is available under a de novo review case.