When it Goes to the Bias of an Insurer’s Consultants, that’s When a claimant who challenges a denial of disability or life insurance benefits by filing a court action under ERISA is generally not able to present evidence to the court that is not in the administrative record. The administrative record consists of all the medical records, documents and other information obtained by and submitted to the plan administrator during the initial stages of the claim and through the appeal process.  Because courts are generally unwilling to consider any evidence which is not in the administrative record, plaintiffs are normally not entitled to legal discovery from the insurance company.

However, courts in the Ninth Circuit have carved out exceptions to the above discovery rule in de novo review cases. “[T]he district court should exercise its discretion to consider evidence outside of the administrative record ‘only when the circumstances clearly establish that additional evidence is necessary to conduct an adequate de novo review of the benefit decision.’”  Opeta v. Nw. Airlines Pension Plan for Contract Emp., 484 F.3d 1211, 1217 (9^th Cir 2007) (emphasis added.).

In a recent decision by the U.S. District Court of Arizona, Coffou v. Life Insurance Company of North America, 2020 WL 1502104 (D. Arizona 2020), the court allowed discovery in an ERISA case relating to the plan administrator’s alleged use of biased experts when it denied a claim for waiver of premium benefits under a life insurance policy.  In Coffou, the Plaintiff, Mary Coffou, filed a lawsuit against Life Insurance Company of North America (“LINA”) after it determined Ms. Coffou did not meet its definition of “disabled” and as a result, denied her a waiver of life insurance policy premiums.  Ms. Coffou alleged that LINA intentionally denied her claim by hiring third-party vendors to supply a biased vocational expert and biased medical experts who had a history of providing findings to support LINA’s denial of claims.

While the court stated that compensating experts for work done is not in itself proof of bias, evidence such as a long-standing relationship or substantial compensation may be important to access an expert’s bias and credibility.  In Coffou, the Court held as follows:

For several reasons, this case meets the exceptional circumstances test set out by Opeta. This is a case in which the carrier has an admitted structural conflict and a history of self-dealing, resulting in its claims practices being subject to an extensive national “market conduct study,” a 2013 Regulatory Settlement Agreement (“RSA”), and continued monitoring.  In addition, Plaintiff’s claims would have been insurance contract claims prior to ERISA.  Further, Plaintiff has pointed out that some of LINA’s experts, Drs. Grattan and Mobo, rendered opinions outside their area of expertise.  And, Plaintiff has indicated that LINA provided its vocational consultant, Glenna Taylor, with the reports and limitations by its own experts, Drs. Mobo and Grattan, but did not provide all the medical records and report that Plaintiff used to support her claim.  Also, LINA did not provide the SSA ALJ’s decision, the SSA claims file, or Plaintiff’s medical, vocational, and lay witness evidence.

LINA’s conduct puts this case outside the garden-variety “structural conflict of interest” scenario.  Rather, LINA’s history and the unchallenged representations of Plaintiff that LINA provided its experts with its other experts’ reports, but not the entire record, raises concerns whether LINA’s structural incentive to minimize benefit payments distorts its obligation to fairly handle benefits claims.  This warrants discovery into LINA’s relationships with its vendors and experts and into whether it was employing vendors and experts who would reliably do LINA’s bidding.

The Court concluded that discovery beyond the administrative record would be helpful to determine the credibility of LINA’s experts.  LINA was ordered to respond to interrogatories relating to its relationship history with the subject third-party vendors and experts used to determine Ms. Coffou’s claim.  Specially, LINA was required to respond to discovery that delved into the number of times it retained the subject third-party vendors and experts and what amount of money was paid to them, as well as the number of times its internal vocational expert has conducted assessments and concluded the claimant could perform work.

As Coffou demonstrates, while discovery in ERISA de novo review cases is limited, under the right circumstances the courts will allow discovery that will expose insurance company bias in the denial of ERISA life and disability insurance claims to protect insureds from having their claims improperly denied.