Joanne Culley v. Liberty Life Assurance Company of Boston

The Honorable Maurice Cohill, Jr., Senior District Judge for the United States*
District Court for the Western District of Pennsylvania, sitting by designation.
NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 07-3952
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JOANNE CULLEY
v.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON,
Appellant
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On Appeal from the United States District Court
for the District of New Jersey
(No. 05-cv-02279)
District Judge: Honorable Anne E. Thompson
Submitted Under Third Circuit LAR 34.1(a)
November 19, 2008
Before: BARRY and CHAGARES, Circuit Judges, and COHILL, District Judge .*
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(Filed: July 20, 2009)
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OPINION OF THE COURT
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CHAGARES, Circuit Judge.
This is an appeal from the denial of long term disability (“LTD”) benefits. Joanne
Culley claimed she was entitled to LTD benefits pursuant to a group long-term disability

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plan sponsored by John Wiley & Sons (“John Wiley”), and insured and administered by
defendant Liberty Life Assurance Company of Boston (“Liberty”) under a Group
Disability Income Policy (“LTD Policy”). Liberty denied Culley LTD benefits, and, after
exhausting her administrative appeals, Culley filed suit in the District Court. The District
Court reversed the determination of the administrator, and granted Culley summary
judgment. We will affirm.
I.
Because we write solely for the parties, we recite only those facts essential to our
determination.
Culley was formerly employed with John Wiley as an order-processing manager, a
position that primarily involved sitting for eight to nine hours per day, using the telephone
and computer. Liberty, also the claims administrator and insurer of John Wiley’s
statutory short-term disability plan (“STD Plan”), approved and paid Culley short-term
disability benefits after Culley complained of back pain, and received an initial diagnosis
indicating certain spine and disc deformities. Following the STD Plan period, Culley
applied for LTD benefits.
Under the LTD Policy, Liberty is vested with the authority, in its sole discretion, to
construe its terms and to determine benefit eligibility. In addition, pursuant to the terms
of the policy, Liberty’s interpretations and decisions are “conclusive and binding.” In
relevant part, in order to be eligible to receive LTD benefits, a claimant is required to
provide Liberty with proof of continued disability. Under the LTD Policy, “disability”

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means that, during the contractual 180-day elimination period, and for the first twenty-
four month period for which benefits are sought, the Covered Person is unable to perform
all of the “Material and Substantial Duties” of her “Own Occupation,” as a result of injury
or sickness, as those terms are defined in the LTD Policy. Liberty will continue to pay
benefits if the Covered Person provides, at Liberty’s request, proof of, inter alia,
continued disability. Liberty maintains discretion to terminate benefits if the disability
ends.
Liberty approved and paid Culley benefits under the LTD Policy through August
28, 2003. Liberty later reversed its initial decision and discontinued paying Culley LTD
benefits, claiming that she failed to present objective evidence that she remained unable
to perform the duties of her own occupation.
Culley exhausted her administrative appeals, and filed suit against Liberty in the
United States District Court for the District of New Jersey. In the District Court, Culley
and Liberty cross-moved for summary judgment. On September 21, 2007, the District
Court granted Culley’s motion for summary judgment and denied Liberty’s motion. On
appeal, Liberty argues that the District Court erred in applying what it termed an
“elevated heightened arbitrary and capricious standard of review,” and that substantial
evidence in the record supported Liberty’s decision to deny Culley LTD benefits.
The District Court had jurisdiction over this case pursuant to 29 U.S.C. § 1132(e)
and 28 U.S.C. § 1331. We have jurisdiction over the appeal under 28 U.S.C. § 1291. We
exercise plenary review over summary judgment decisions. See Elsmere Park Club, L.P.

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v. Town of Elsmere, 542 F.3d 412, 416 (3d Cir. 2008).
II.
The plan in this case grants Liberty discretion to determine benefits or to construe
the terms of a benefit plan. Appendix (App.) 29, 76. Under Firestone Tire & Rubber Co.
v. Bruch, 489 U.S. 101, 115 (1989), if the ERISA plan gives the administrator such
discretion, a court reviews the administrator’s decision for abuse of discretion. The Court
in Firestone further held that if the administrator or fiduciary having discretion “is
operating under a conflict of interest, that conflict must be weighed as a factor in
determining whether there is an abuse of discretion.” 489 U.S. at 115. The Court
suggested in Firestone that such a conflict exists where the employer both funds the plan
and evaluates the claims. Id.
In our previous jurisprudence, we had instructed the district courts to apply a
“heightened standard of review” or “heightened scrutiny” in such cases. See Pinto v.
Reliance Standard Life Ins. Co., 214 F.3d 377, 383, 387 (3d Cir. 2000). This precedent
provided that, where the administrator was operating under a conflict of interest, the court
would apply a “sliding scale” to give the administrator’s decision less deference as the
severity of the conflict of interest increased. Id. at 393; see Post v. Hartford Ins. Co., 501
F.3d 154, 161 (3d Cir. 2007). Under this standard, “if the level of conflict is slight, most
of the administrator’s deference remains intact, and the court applies something similar to
traditional arbitrary and capricious review; conversely, if the level of conflict is high, then
most of its discretion is stripped away.” Post, 501 F.3d at 161.

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The District Court held that a heightened arbitrary and capricious standard of
review was appropriate because Liberty both funds and administers John Wiley’s LTD
benefits. The District Court explained that the heightened arbitrary and capricious
standard “is a sliding scale, which courts may rachet up depending upon the level of
conflict or bias demonstrated within the record.” Culley v. Liberty Life Assurance Co.,
Civ. No. 05-2279 (AET), 2007 WL 2769649, at *4 (D.N.J. Sept. 21, 2007). The Court
then held that “an elevated arbitrary and capricious standard of review” was warranted
because “Plaintiff has demonstrated several procedural irregularities.” Id. Under this
standard, the District Court held that Liberty did not properly exercise its discretion, and
granted summary judgment in favor of Culley.
Since the District Court decision, however, the Supreme Court provided guidance
as to how courts should approach potential conflicts of interest. See Metro. Life Ins. Co.
v. Glenn, 128 S. Ct. 2343 (2008). In Glenn, the Court held that a conflict of interest
exists under Firestone where, as here, the administrator having discretion is an insurance
company that both evaluates and pays benefits under the plan. Id. at *2349-50. Further,
the Court observed that such a potential conflict of interest should constitute just one
factor in evaluating whether there was an abuse of discretion in the decision-making
process, but should not trigger a change in the standard of review. Id. at *2350-53. Thus,
under Glenn, a plan administrator’s conflict of interest would not give rise to a
“heightened” version of the arbitrary and capricious standard, but would be one of several
factors for the district court to consider in determining whether the administrator abused

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its discretion. Id. at *2351 (“We believe that Firestone means what the word ‘factor’
implies, namely, that when judges review the lawfulness of benefit denials, they will
often take account of several different considerations of which a conflict of interest is
one.”); see Estate of Schwing v. The Lilly Health Plan, 562 F.3d 522, 525-26 (3d Cir.
2009).
We nonetheless conclude that the District Court’s decision survives Glenn. As in
Glenn, the record “says little about [Liberty’s] efforts to assure accurate claims
assessment.” Id. at *2351. Also as in Glenn, the court gave the conflict some weight,
but was clear that it did not find the conflict alone determinative. The District Court
determined that Liberty abused its discretion based on its finding of “several procedural
irregularities,” taken together with the potential structural conflict. Culley, 2007 WL
2769649, at *5. This determination is consistent with the guidance issued by the Court in
Glenn, namely, for “judges to determine lawfulness by taking account of several different,
often case-specific, factors, reaching a result by weighing all together,” and that a conflict
of interest “should prove more important. . . where circumstances suggest a higher
likelihood that it affected the benefits decision.” Glenn, 128 S. Ct. at *2351.
III.
The District Court found four aspects of the review process that appeared irregular.
First, the District Court noted that Liberty classified Culley’s job activity level as
sedentary, based upon an outdated U.S. Department of Labor listing. The District Court
considered this classification a procedural irregularity because Liberty did so despite a

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The District Court found, however, that the characterization of Culley’s job as2
sedentary “is not vital to the disposition of the cross motions for summary judgment” and
did not further address the issue.
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recommendation from its vocational case manager that Liberty should “consider a referral
for a complete [VCM] file review to determine if further investigation, including, but not
limited to, a Labor Market Survey is needed” to classify properly Culley’s job. Nothing
in this determination gives this Court reason to “doubt [Liberty’s] fiduciary neutrality.”
See Post, 501 F.3d at 165. Culley never challenged this classification or description of
her job duties during the administrative appeals process. The sedentary classification,
moreover, is consistent with Culley’s own description of those duties and with the U.S.
Department of Labor classification of Culley’s position. In the absence of contrary
evidence suggesting otherwise, Liberty’s decision not to “consider” additional review of
Culley’s position is not the type of procedural irregularity that would raise suspicion.2
Other aspects of Liberty’s review process cause greater concern. Liberty
terminated Culley’s benefits following a paper review of Culley’s file by Dr. Anthony
Parisi, Liberty Mutual’s Consulting Physician (“LMCP”) . While “ERISA does not
require that plan administrators give the opinions of treating physicians special weight,
courts must still consider the circumstances that surround an administrator ordering a
paper review.” Post, 501 F.3d at 166 (citing Black & Decker Disability Plan v. Nord, 538
U.S. 822, 833-34 (2003)). In his review, Dr. Parisi found that the 2003 MRI confirmed
the diagnosis of Dr. Sharon Worosilo, Culley’s pain management specialist, showing
“moderate cervical spondylosis” and “degenerative disease of her spine.” Dr. Worosilo

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found that, while Culley responded well to the epidural injections to her neck, the
injections proved unsuccessful in alleviating any of Culley’s pain or improving function
in her lumbar region.
Despite these findings, Dr. Parisi concluded that, based upon the evidence
submitted to him, Culley’s impairments supported only “mild restrictions and limitations”
on her ability to perform her job. However, Dr. Parisi also noted that “the details” of
Culley’s compression fractures of the lower thoracic spine were not available to him in
rendering his opinion, and that “the exact level of functionality is unclear.” As such, Dr.
Parisi suggested that “if a more specific evaluation of [Culley’s] functioning is needed, a
period of activity observations could be considered.” Liberty did not undertake further
observation.
Liberty argues that it was under no obligation to surveil Culley. Liberty maintains
that surveillance is an “aggressive tactic” that itself may constitute procedural irregularity
demonstrating bias. See, e.g., Post, 501 F.3d at 167. Liberty is correct that this Court
does not impose an obligation on administrators, as a matter of course, to engage in
surveillance. However, even absent such an obligation, reliance on Dr. Parisi’s
conclusions was unreasonable. Primarily, we note that, at the time of the review, the
overwhelming weight of evidence in Culley’s record counseled in her favor. Liberty
nevertheless relied upon Dr. Parisi’s assessment of Culley’s level of functionality in
denying benefits, despite Dr. Parisi’s own concession that, based upon the records
reviewed, “the exact level of functionality is unclear.” Moreover, Dr. Parisi’s
assessments were based solely on his review of Culley’s lumbar and cervical records;

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Parisi did not address the ailments for which Culley was originally diagnosed, including
post-compression fractures of the thoracic region and advanced osteoporosis, and the
impact of those injuries on her functional capacity.
In addition, in September 2003, after Liberty cancelled Culley’s LTD benefits,
Liberty’s Nurse Case Manager (“NCM”), Christine Piechowiak, reviewed Culley’s
medical records and indicated an inconsistency in the findings of Dr. Parisi and those of
Culley’s treating physician, who suspected herniated nucleus pulposus of the cervical and
lumbar spine. NCM Piechowiak concluded that, if present, a herniated disc “may impede
prolonged standing and prolonged sitting activities.” App. 628. Piechowiak continued,
It is not clear if the R/L for no sitting >20 minutes would be a
reasonable restriction or not, therefore, would recommend either
another LMCP review w/provider contact or peer review w/provider
contact to clarify the diagnostic entity present and then the R/L
associated w/this diagnosis.
Id. The District Court found that Liberty’s decision not to conduct another consultant
review or peer review at this point constituted further evidence of a review process that
“disfavor[ed] the claimant at each crossroads.” Culley, 2007 WL 2769649, at *5
(quotation omitted).
Liberty contends that it was under no obligation to conduct any investigation, peer
review or otherwise. According to Liberty, Culley bears the burden to provide evidence
of continued disability. This Court may not “impose on plan administrators a discrete
burden of explanation when they credit reliable evidence that conflicts with a treating
physician’s evaluation.” Black & Decker, 538 U.S. at 834. Here, however, Liberty’s
NCM suggested that the paper review conducted by Dr. Parisi may not have revealed the

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extent of injury diagnosed by physical examination.
While Liberty may freely rely on its consultants, without giving special deference
to the views of treating physicians, neither may it turn a blind eye to faults in the evidence
supporting its consultants’ opinions. Here, Liberty, operating under a potential conflict of
interest, made decisions that disfavored the claimant at each “crossroads,” and relied on
expert opinions predicated on incomplete medical files. Although a reviewing Court is
not free to substitute its own judgment for that of the administrator, we conclude that
Liberty’s actions in this instance constituted an abuse of discretion.
V.
For the foregoing reasons, we will affirm the judgment of the District Court.

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