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Nichols v. Reliance Standard Life Insurance Co.

United States District Court, S.D. Mississippi.

June 29, 2018

Juanita Nichols, Plaintiff,
Reliance Standard Life Insurance Co., Defendant.

          Before Carlton W. Reeves, District Judge. [*]



         Few Americans can retire on their savings alone.[1] Instead, many participate in an employee benefits plan, which can provide financial security in case of disability or retirement.[2]

         The insurers that manage these plans often have conflicting missions of deciding who qualifies for benefits and ensuring those decisions do not undermine their own bottom line.[3]

         “When guarding the henhouse, ” as one expert on employee benefits plans said, “some foxes are bound to go rogue.”[4] Last decade, for example, courts discovered that one insurer “engaged in a deliberate program of bad faith denial of meritorious benefit claims.”[5] Despite the discovery of such wrongdoing, scholars say government officials continue to “abdicat[e] their duty to supervise” insurers.[6]

         This case is about Reliance Standard Insurance Company, one of the country's largest disability insurers.[7] The question the Court must address is whether Reliance's denial of disability benefits to Juanita Nichols was an abuse of discretion. The answer to that question reveals a decades-long pattern of arbitrary claim denials and other misdeeds, a pattern the Court must take into account when assessing Reliance's actions in this case.


         Undisputed Facts

         Juanita Nichols is 62 years old.[8] She says she has spent her life doing “one thing and one thing only, ”[9] namely, working as a Hazard Analysis and Critical Control Points Coordinator at Peco Foods' chicken processing factory in Sebastopol, Mississippi.[10] Nichols' duties as Coordinator required her to “spend a minimum of twenty percent [of] her work day in processing areas.”[11] Temperatures at the factory were kept at 8 degrees above freezing.[12] In 2016, Nichols was diagnosed with a host of circulatory system disorders including Raynaud's disease, [13] a condition that causes arteries to become “unduly reactive and enter spasm” when cold.[14] Doctors concluded that exposure to the cold could give Nichols serious circulatory problems, including gangrene.[15] Nichols was prescribed a treatment regimen that included “avoiding . . . working in an environment where there is exposure to the cold.”[16] As a result, Nichols had to stop working at Peco.[17]

         Nichols applied for long-term disability benefits through the insurance plan Peco had with Reliance.[18] Under that plan, Nichols qualified for benefits if “as a result of an Injury or Sickness [she] cannot perform the material duties of [her] Regular Occupation.”[19] The plan defines “regular occupation” as “the occupation [a claimant] is routinely performing” at the time of disability onset.[20] To determine what that occupation is, Reliance says it “look[s] at [a claimant's] occupation as it is normally performed in the national economy, and not the unique duties performed for a specific employer or specific locale.”[21]

         Reliance admits that Nichols' medical conditions prevent her from working in cold temperatures, and therefore prevent her from performing her current duties “in a factory where the temperatures are kept at 40 degrees.”[22] However, one of Reliance's vocational experts determined that Nichols' occupation as it was performed in the national economy was “sanitarian, ” an occupation with duties that do not require exposure to cold temperatures.[23] Based on this determination, Reliance denied Nichols' application for disability benefits.[24]

         Nichols asked Reliance to reconsider that denial, saying it raised the question of “whether your review procedures include blatantly ignoring the evidence on-hand” about her occupational duties.[25] Reliance says it “again consulted” its vocational experts, who reached the same conclusion as before: “[a]ny exposure to cold temperatures would be job-site specific, ” rather than a duty of her “regular occupation” as “[s]anitarian.”[26] On that basis, Reliance denied Nichols' ap-peal.[27] Nichols promptly filed this lawsuit against Reliance to challenge her denial under the Employee Retirement Income Security Act (also known as “ERISA”).[28] The Act's purpose is, in part, to “protect” workers “by establishing standards of conduct” for those who manage their benefit plans.[29] The Act allows employees to “recover benefits due” under a covered plan, [30] like Pecos' plan with Reliance.[31]

         Under that plan, Reliance had the right to both determine benefit eligibility and interpret the plan's terms.[32] Therefore, the Supreme Court says Nichols can only recover benefits under the Act if Reliance abused its discretion in denying her benefits.[33] Nichols claims Reliance abused that discretion by, among other things, “having erroneously concluded” that she could “perform the essential duties of her occupation.”[34]

         In the Fifth Circuit, an insurer “abuses its discretion when the decision is not based on evidence, even if disputable, that clearly supports the basis for its denial.”[35] The Supreme Court has held that such abuse of discretion review must “take account of . . . several different, often case-specific, factors, reaching a result by weighing all [factors] together.”[36] Furthermore, “a conflict of interest . . . must be weighed as a factor in determining whether there is an abuse of discretion.”[37]

         Given this “combination-of-factors method of review, ” the Fifth Circuit says that reviewing courts must not only check if an insurer “based its decision on substantial evidence, ” but “must [also] consider other factors, ” such as an insurer's “conflict of interest” and how the insurer “treat[ed]” any government determination about a claimant's disability.[38]


         Abuse of Discretion Analysis

         The record does not reflect any government determination about Nichols' disability.[39] Therefore, two factors are relevant to the Court's abuse of discretion analysis: whether Reliance's denial was supported by substantial evidence, and whether Reliance has a conflict of interest.


         Did Reliance Base its Denial on Substantial Evidence?


         The Supreme Court says evidence is “substantial” when a “reasonable mind might accept” it to “support a conclu-sion.”[40] Substantial evidence is thus a specific “quantity” of evidence.[41] The precise quantity is unclear, but it is more than the amount necessary to have a “suspicion” something is true.[42] A decision is supported by substantial evidence only when it is “justified by a fair estimate” of “the record as a whole.”[43]

         Reliance denied Nichols' application because an occupational review by one of its vocational specialists, Jody Barach, determined that exposure to cold temperatures was not among the “material duties” of Nichols' “regular occupation.”[44] This conclusion is not based on a fair estimate of the record evidence.

         Reliance's policy with Peco states that Nichols' “regular occupation” is defined by its duties as they are “normally performed in the national economy, ” rather than “the unique duties performed for a specific employer or specific locale.”[45] Reliance admits that this definition of “regular occupation” is “close if not identical to the Fifth Circuit's interpretation of the term in House v. Am. United Life Ins. Co.”[46] In that case, the Fifth Circuit held that an employee's “regular occupation” is defined by its duties as they are performed “in the general economy.”[47] To determine what those occupational duties are, the Fifth Circuit says insurers must review the “specific duties of the employee's job, as described by the employer”; these specific duties are “relevant” because they “well illustrate” occupational duties.[48]

         Nichols' specific job duties, as described by her employer, fell into three categories. Duties in the first required her to educate other employees in proper sanitary practice; such duties included “train[ing] quality assurance employees” in sanitary procedures.[49] Duties in the second category required Nichols to inspect meat products; such duties included “[p]hysically inspect[ing]” processed chicken for “bones, ” “feathers, ” “infection, ” “fat levels, ” and “bruising in excess.”[50] Duties in the final category required Nichols to package and export meat products; such duties include “packaging and labeling products, ” and “provid[ing] all paperwork required for the export of product.”[51] Thus, wherever Nichols' job was performed in the national economy, it would require her to perform sanitary-training duties, meat inspection duties, and meat packaging duties.

         Common sense says that an occupation involving inspection and packaging of meat products would require exposure to refrigeration and low temperatures. This common sense is reflected here. The plant where Nichols worked was kept near freezing.[52] It is also reflected in the Dictionary of Occupational Titles, the source Reliance used to define the duties of Nichols' regular occupation. While no single Title covers all three categories of Nichols' job duties, those that include meat inspection and meat packaging duties appear to require work in refrigerated environments.[53] Indeed, the Title that best captures Nichols' meat inspection and packaging duties - with duties like “[e]xamin[ing] carcasses to determine condition of meat” and putting “information” on “inspection tag[s], ” “[s]tamps, ” and “date tags” to prepare “meat cuts” for “shipping . . . and . . . delivery” - has cold temperatures built into its name: “Cooler Room Worker (Meat Products).”[54]

         In concluding that Nichols was able to perform the duties of her regular occupation, Barach's “occupation review” ignored both common sense and the record evidence.[55] That re- view is two pages long, and contains barely 100 words actually written by Barach.[56] Most of the review is copy-and-pasted text from the Dictionary of Occupational Titles and a doctor's review of Nichols' medical records.[57] Barach references no other sources, not even the official description of Nichols' job duties as written by her employer.[58]

         Barach cites no evidence to support the determination that Nichols was “employed as a Sanitarian, ” with duties identical to those within the “Sanitarian (Any Industry)” Title.[59] Furthermore, that Title only captures one category of Nichols' core job duties, those involving sanitation training.[60] It does not include any meat inspection duties; instead, it merely has a vague duty to “[i]nspec[t] products . . . for conformity to federal and state sanitation laws and plant standards.”[61] Most importantly, the Title includes no packaging duties, let alone any meat packaging duties.

         There is no justification for fitting the square peg of Nichols' job into the round hole of “Sanitarian (Any Industry).” As many courts have recognized, it is “unreasonable” for a vocational expert to define occupational duties by relying exclusively on a single Dictionary Title “that does not refer” to important job duties.[62] If no Dictionary Title covered Nichols' core job duties, Barach should have done what vocational experts often do: “blend [duties] of two different . . . Titles.”[63] If that had happened, Barach would have incorporated the duties of a Title that involved exposure to cold temperatures.

         True, Barach's conclusion about Nichols' occupation echoes that of another of Reliance's vocational specialists, Matthew Bolks, who conducted the occupational determination used to justify the initial, pre-appeal denial of Nichols' application.[64]However, Bolks' review suffers from the same fatal flaws as Barach's. It consists entirely of conclusory statements and boilerplate language pulled from the Dictionary of Occupational Titles, and it cites no support for the claim that Nichols' occupational duties were identical to those of “Sanitarian (Any Industry).”[65] Bolks' cursory review does not support a conclusion that Nichols could perform the material duties of her occupation.

         In sum, Reliance's denial of Nichols' was unsupported by any evidence, let alone substantial evidence.


         Does Reliance Have a Conflict of Interest?


         Under its plan with Nichols' employer, Reliance both evaluates and pays benefits claims.[66] It “potentially benefits from every denied claim, ” and therefore is operating under a conflict of interest, as Reliance itself admits.[67] The Supreme Court has held that, when an insurer is “operating under a conflict of interest, ” that conflict “must be weighed as a factor in determining whether there is an abuse of discretion.”[68] The question is how much weight the Court should give Reliance's conflict of interest.

         As the Fifth Circuit has noted, the Supreme Court “avoided enunciating a precise standard for evaluation of the impact” of a conflict of interest in an abuse of discretion review.[69]However, the Supreme Court has stated that a conflict of interest “should prove more important” when “circumstances suggest a higher likelihood that it affected the benefits decision.”[70] Such circumstances include when there is evidence that an insurer has a “history of biased claims administration.”[71] Chief Justice Roberts has written that this evidence “can take many forms, ” and “may be shown by a pattern or practice of unreasonably denying meritorious claims.”[72]

         As an example of such a showing, the Chief Justice has cited a review of federal cases conducted by the United States District Court for the District of Massachusetts in Radford Trust v. First Unum Life Ins. Co. of Am., which “reveal[ed] a disturbing pattern of erroneous and arbitrary benefits denials, bad faith contract misinterpretations, and other unscrupulous tactics.”[73] That review found 35 judicial opinions in the prior decade that criticized or reversed disability benefits decision by First Unum, including 19 opinions reversing a decision as an abuse of discretion or as arbitrary and capricious.[74]

         The Radford Trust case review approach rejects, as the Fifth Circuit does, a “batting average” approach that merely “com-pare[s] the number of federal decisions reversing denials of benefits to the number of decisions affirming denials.”[75] This is because any claims administrator is bound to make some wrong decisions. They are not, however, bound to engage in arbitrary denials, bad faith acts, and unscrupulous tactics.

         Of course, as the Fifth Circuit has held, it is not enough for a case review to recite mere conclusory statements in prior judicial opinions that an insurer has a history of biased claims administration.[76] Furthermore, if a review discovers an insurer has taken “active steps to reduce potential bias and to promote accuracy” to end a pattern of wrongdoing, a court cannot find that insurer to have a history of biased claims ad-ministration.[77] In short, to establish such a history, a case review must find - as it did in Radford Trust - a significant number of cases that, when viewed together, describe an unmitigated pattern of arbitrary and wrongful decisions.

         This Court has conducted a cumbersome review of judicial opinions addressing Reliance's behavior in disability cases.[78]That review found over 100 opinions in the last 21 years criticizing Reliance's disability decisions, including over 60 opinions reversing a decision as an abuse of discretion or as arbitrary and capricious.[79] These opinions are often scathing. Judges describe the behavior underlying Reliance's claims administration as “arbitrary, ” “blind, ” “conclusory, ” “extreme, ” “flawed, ” “fraught, ” “illogical, ” “inadequate, ” “inappropriate, ” “incomplete, ” “indifferent, ” “lax, ” “misguided, ” “opportunisti[c], ” “precursory, ” “questionable, ” “remarkable, ” “selective, ” “self-serving, ” “skewed, ” “tainted, ” ”troubling, ” “unfair, ” “unreasonable, ” and “unreliable.”[80]

         These opinions reveal that Reliance takes a range of extraordinary steps to deny claims for disability benefits. Reliance makes “unreasonable” interpretations of benefit plan language, going so far as to “misconstru[e] the concept of occupational disability.”[81] Reliance “selectively interpret[s]” evidence so it can “opportunistically deny [a] claim” for “self-serving reasons, ”[82] creating a “skewed administrative record discounting all of the substantial evidence of . . . disability.”[83]Reliance's denials are “overwhelmingly outweighed by evidence to the contrary, ” “fraught with procedural irregularities, ” and “blind or indifferent.”[84] Those denials “rel[y] upon mere assumptions” and “demonstrate a pattern of arbitrary and capricious decision making.”[85] Reliance uses “obfuscation and delay tactics, ” “fail[s] to engage in ongoing communications with [claimants] to keep [them] informed of the process, ” makes “misstatement[s]” to claimants, “miscalculate[s] the amount owed, ” and generally exhibits behavior that “reeks of bad faith.”[86] Reliance “regularly retain[s]” experts with “an incentive to [make] outcomes in [their] favor, ” and uses expert reports that “betray a palpable bias in favor of rejecting the claim.”[87] Despite being “[put] on notice of this bias issue” by “prior judicial criticism, ” Reliance still tells courts that “it does not choose . . . third-party contractor[s] based on the outcomes.”[88] Courts often conclude that Reliance's denials are “greatly impacted” by “self-interest, ” making it “clear that Reliance put[s] its own financial interest above its fiduciary duty.”[89]

         Courts reviewing Reliance's behavior have long highlighted the specific wrong alleged by Nichols: the arbitrary determination of a claimant's occupation. Reliance's occupational determination methodology has been derided as “extreme, ” “far too blunt, ” “troubling, ” and “unreasonable.”[90] Reliance's experts make occupational determinations “without regard to the importance of [job] duties.”[91] Their reports “fai[l] to engage in any meaningful analysis of . . . material job duties, ”[92]and “offe[r] little information . . . other than [a] bare conclusion [that] is not substantial evidence.”[93]

         Reliance may be justified in its use of the Department of Labor's Dictionary of Occupational Titles, which the Fifth Circuit says “represents extensive fact gathering and detailed data analysis” about the “material duties” of various occupations.[94] However, the way Reliance uses the Dictionary has been deeply criticized by courts. Reliance has been admonished for “reflexively using” the Dictionary while having “clearly ignored the actual duties of [a claimant's] job.”[95] Reliance “assume[s] the tasks listed in the selected [Dictionary] classifications defin[e a claimant's] material duties, ” despite the “disparity” between a classification “and the reality of [claimant's] regular occupation.”[96] In doing so, Reliance will “incorrectly bas[e] its denial [on] the wrong [Dictionary] job description.”[97] In the words of one court, “Reliance, by applying its own extreme interpretation of the term regular occupation and focusing its evaluation on the job title rather than the actual characteristics of plaintiff's occupation . . . interpret[s] the plan in a manner inconsistent with its plain words.”[98]

         Courts have singled out the vocational expert involved in Nichols' appeal, Jody Barach, for using a particularly cursory methodology.[99] Barach creates “paper-reviews reports” instead of assessing claimants in person.[100] These reports are typically “two page[s]” that amount to “a copied bulleted list of job responsibilities, ” “copied portions” of medical reports, and “conclusory remarks” regarding occupational classification.[101] Barach's reports may “refer to a [claimant's] position by the wrong title, ” “reject [a claimant's] description of [their] job duties, ” and omit “which duties were material duties.”[102]Reliance's tendency to give “greater weight” to Barach's findings when they support a denial has led at least one court to allow bias-related discovery.[103] Courts say Barach's methodology “effectively undercut[s a claimant's] ability to make her case” for benefits.”[104] Despite these findings, Reliance has continued to use Barach's reports to deny claims across the country.[105]

         Reliance's wrongful claims-related behavior is not a localized problem. Courts in every federal circuit have repeatedly criticized the insurer's claims management practices.[106] Even the Supreme Court has cited a finding that “Reliance's decision to deny [a claimant] long-term disability benefits was not based on substantial evidence.”[107]

         Furthermore, despite discussing its conflict of interest in its briefing, Reliance has submitted no evidence that it has taken steps to mitigate that conflict.[108] As one court has previously found, Reliance “has not demonstrated that it took any other procedural safeguards such as walling off claims administrators or imposing management checks.”[109] Whatever safeguards Reliance has imposed (if any) have not been enough, as judges have continued to criticize Reliance's claims practices well into the present.[110]

         In sum, the judicial record establishes an unmitigated pattern of arbitrary and wrongful behavior by Reliance. The insurer indisputably has a history of biased claims administration.


         Did Reliance Abuse its Discretion by Denying Nichols Benefits?


         The fact that Reliance's decision to deny Nichols benefits was devoid of evidentiary support is enough to prove that the decision was an abuse of discretion. Reliance's long past of biased and wrongful claims denials in defiance of countless judicial warnings - a past marked by the same faulty occupation determination process that drove Nichols' denial - simply underscores this conclusion.[111] To be clear, “[t]he mere fact” that a conflict of interest exists “does not necessarily tip a close case in a plan member's favor.”[112] However, on the record before the Court, this case is far from close.

         Reliance's motion for summary judgment is therefore DENIED, and its decision to deny Nichols benefits is REVERSED.



         The Employee Retirement Income Security Act allows Nichols to “recover accrued benefits, ” “obtain a declaratory judgment that she is entitled to [future] benefits, ” and receive an “award of attorney's fees.”[113] Nichols has requested all three of these remedies.[114]

         The Fifth Circuit says a court should “award benefits” under the Act to a claimant “where the record establishes that the plan administrator's denial of the claim was an abuse of discretion.”[115] Such is the case here. Further, there is good reason why remand in this case is unwise.[116] As one court cautioned, “remand simply would afford Reliance the chance . . . to dig up new evidence to support a different reason for denying [a] claim.”[117] Nichols is entitled to an award for past benefits and an order requiring Reliance to pay her benefits in the future.

         Regarding an attorney's fee award, the Fifth Circuit says a court must address the following “nuclei of concerns” in deciding ...

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