Webster v. ITT-Hartford CV-97-373-JD 11/02/98 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Katherine A. Webster

v. Civil No. 97-373-JD

ITT-Hartford Life and Annuity Insurance Co.

O R D E R

Defendant, ITT-Hartford Life and Annuity Insurance, moves

for summary judgment (document no. 6) asserting that Katherine

Webster's state law claims are preempted by the Employee

Retirement Income Security Act ("ERISA"),

, et

seq., and that her long-term disability benefits were properly

terminated. Ms. Webster objects, contending that her state law

claims are exempted from ERISA preemption and that Hartford

improperly terminated her benefits under ERISA. For the reasons

that follow, summary judgment is granted in favor of Hartford.

Standard of Review

Summary judgment is appropriate only if the "pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the initial burden of informing

the court of the basis for the motion. See Celotex Corp. v.

Catrett,

(1986) . If the moving party meets

its threshold obligation, the nonmoving party must establish

specific facts, with appropriate record references, showing that

there is a genuine dispute of material fact as to each issue for

which the nonmoving party bears the burden of proof at trial.

See id.; Anderson v. Liberty Lobby, Inc.,

(1986). For summary judgment analysis, the court construes the

record in the light most favorable to the nonmoving party and

indulges all reasonable factual inferences in its favor. See

Pilgrim v. Trustees of Tufts College,

(1st Cir.

1997). Thus, summary judgment should be granted when there is no

dispute as to any material fact and the moving party is entitled

to judgment as a matter of law. See Citv of Hope National

Medical Center v. Healthplus, Inc., No. 98-1038,

(1st Cir. Sept. 11, 1998).

Background

Ms. Webster was employed by Mary Hitchcock Memorial Hospital

as an operating room nurse in April of 1993 when she was injured

in a skiing accident. Ms. Webster injured both knees in the

accident and underwent arthroscopic surgery which revealed damage

2 to ligaments in both knees. Ms. Webster had reconstructive

surgery for her left anterior cruciate ligament in July and for

her right cruciate ligament in October of 1993.

As a Hitchcock employee, Ms. Webster was insured for short

and long term disability benefits through a group policy with

Hartford. Because of her injury, Ms. Webster was unable to work

and began to receive short-term benefits in April 1993. In

August 1993, Ms. Webster applied for and was granted long-term

benefits to begin in October.

Dr. Shirreffs, Ms. Webster's treating orthopedic surgeon,

completed disability forms in support of her applications for

benefits. In November of 1993, Dr. Shirreffs indicated that he

expected Ms. Webster to be able to return to work as an operating

room nurse in four to six months. In a form completed in January

of 1994, Dr. Shirreffs indicated that Ms. Webster was capable of

doing light work but not her job as an operating room nurse. He

found that she was not disabled from all other jobs.

Ms. Webster returned to her nursing job on a part-time basis

in March of 1994. While she worked part-time, she continued to

receive benefits in a reduced amount. In June of 1994, Dr.

Shirreffs indicated that Ms. Webster would reguire several more

months of rehabilitation before she would be able to return to

full-time work. Ms. Webster hoped to find another nursing

3 position at Hitchcock that was less physically taxing than

operating room work, but no such position was then available.

She was not chosen for an open position as a case facilitator.

Ms. Webster then decided to return to school to earn her bachelor

degree in nursing and Hartford agreed to subsidize one-third of

the projected cost of her training while she remained eligible

for long-term disability benefits.

In January of 1995, Ms. Webster stopped working and began

her college program. Dr. Shirreffs's evaluation in May of 1995

indicated, as in October of 1994, that Ms. Webster was capable of

light work, that she was disabled from her previous work, but not

from all other work. A telephone call record dated in July of

1995 says that Ms. Webster reported to Hartford that she would

receive her degree in December of 1996 and that she was aware

that her disability benefits would "almost definitely" be

terminated before that time.

Under Hartford's long-term disability policy, an insured

must be "totally disabled," as defined in the policy, to receive

benefits. The definition of "totally disabled" changes after an

initial period of receiving benefits. During an insured's six-

month gualifying period and for the next twenty-four months, an

insured is totally disabled if she "is prevented by accidental

bodily injury or sickness from doing the material and substantial

4 duties of [her] own occupation." Thereafter, an insured is

"totally disabled" only if she "is prevented by accidental bodily

injury or sickness from doing any occupation or work for which

[she] is or could become qualified by training; or education; or

experience." Hartford's Appendix ("Def. App.") at 8.

Hartford notified Ms. Webster on September 29, 1995, that

her benefits would be terminated as of October 3, 1995, which was

the twenty-four month anniversary date of when her long term

benefits began. Ms. Webster appealed the termination of her

benefits and submitted additional evidence of her disability from

Dr. Shirreffs and Dr. Morgan. Dr. Shirreffs completed another

evaluation form dated December 8, 1995, based on an examination

in October of 1995, in which he indicated that Ms. Webster's

condition was improved and that she was still capable of light

work, but he said she was totally disabled from both her previous

work and any other job. Dr. Morgan, who treated Ms. Webster for

rheumatoid arthritis, examined her in December of 1995. He wrote

to Ms. Webster's counsel that her rheumatoid arthritis in her

hands, wrists, and shoulders combined with her knee problems made

her totally disabled from work specifically as to walking,

climbing, lifting, squatting, kneeling, and repetitive tasks

using the hands. Dr. Morgan marked on a physical capacities form

that Ms. Webster could do sedentary work but then said in a

5 letter sent six months later that she could not work at the

sedentary level.

In response to her appeal, Hartford notified Ms. Webster in

September of 1996 that it had determined that its decision to

terminate her long term disability benefits was appropriate. Ms.

Webster graduated from her college program in December of 1996,

and began to work full-time in January of 1997.

Ms. Webster brought a declaratory judgment action in New

Hampshire state court in July of 1997 against Hartford seeking

long-term disability benefits for the period from October 3,

1995, until January of 1997; reimbursements for the costs of her

college program; damages for all economic losses and emotional

distress associated with the termination of her benefits; treble

damages pursuant to New Hampshire's consumer protection law. New

Hampshire Revised Statutes Annotated ("RSA") § 358-A:2; and

attorneys' fees. Hartford removed the action to this court

on grounds that the exclusive remedy for Ms. Webster's claims was

through ERISA. Hartford now moves for summary judgment in its

favor.

Discussion

The parties agree that the Hartford long term disability

policy in guestion is an employee benefit plan governed by ERISA.

6 Ms. Webster contends that her state law causes of action are

exempted from ERISA preemption through the ERISA "savings

clause,"

(b)(2)(A). With respect to her ERISA

claims, Ms. Webster urges a de novo review of the decision of the

plan administrator and argues that her claims under ERISA survive

summary judgment.

A. State Law Claims

ERISA's preemption of state law claims is limited by a

provision known as the "insurance saving clause" that exempts

state laws regulating insurance from ERISA governance.

(b)(2)(A). To come within the exemption provided

by § 1144(b)(2)(A), "a law must not merely have an impact on the

insurance industry, or on particular insurance products, but must

be directed specifically toward the business of insurance."

Williams v. Ashland Enqineering Co., Inc.,

(1st

Cir. 1995) .

This court has previously determined that New Hampshire's

consumer protection statute, RSA § 358-A:2, is not a law

regulating insurance within the meaning of section 1144(b)(2)(A).

See Camire v. Aetna Life Ins. Co . ,

(D.N.H. 1993). Ms. Webster has offered no basis for recon­

sideration of the court's analysis in Camire. Accordingly, Ms.

7 Webster's consumer protection claim is preempted by ERISA, and

Hartford is entitled to summary judgment on that claim.

Ms. Webster's state law claim seeking a declaration of her

right to benefits under RSA § 491:22 is not exempt from ERISA

governance since the New Hampshire declaratory judgment statute

does not regulate the business of insurance within the meaning of

section 1144(b)(2)(A). To regulate the business of insurance

within the meaning of § 1144(b)(2)(A), the state statute must

first meet a common sense definition of insurance regulation, and

second, must satisfy each of three factors: (1) the state law

has the effect of transferring or spreading a policyholder's

risk; (2) the state law is an integral part of the policy

relationship between insurer and insured; and (3) the state law

is limited to entities within the insurance industry. Pilot Life

Ins. Co. v. Dedeaux,

(1987) (citing Metropolitan

Life Ins. Co. v. Massachusetts,

(1985)). In

addition, if the state cause of action "seeks remedies for the

improper processing of a claim for benefits under an ERISA-

regulated plan," it is preempted by the exclusive remedies

provided through ERISA as the legislative intent of ERISA was to

provide a uniform and exclusive remedy in claims for benefits

under ERISA-regulated plans. Pilot,

.

Section 491:22, including the burden of proof provision of section 491:22-a, does not meet the common sense test of a law

regulating the business of insurance. Section 491:22 does not

control insurance business practices. Instead, it fixes the

burden of proof in New Hampshire declaratory judgment cases

concerning insurance coverage, and is not a law controlling

business practices in insurance. RSA § 491:22-a. Even if Ms.

Webster were able to show that section 491:22 met the common

sense test and would satisfy the three Metropolitan factors,

however, ERISA is the exclusive remedy in a claim for benefits

under an ERISA-regulated plan precluding exemption under section

1144(b)(2)(A) in this case. See, e.g., Tracv v. Principal

Financial Corp,

(D.N.H. 1996); Patuleia v.

Sun Life, 95-358-M, slip op. at 4-5 (D.N.H. Jan. 19, 1996);

Schuvler v. Protective Life Ins., No. 92-192, slip op. at 9,

(D.N.H. Duly 23, 1993). Claims brought under section 491:22 and

related provisions pertaining to the burden of proof and

attorneys' fees are preempted by and not exempt from ERISA.

Ms. Webster's state common law claim for emotional distress,

seeking damages for harm caused by Hartford's decision to

terminate benefits, is also preempted by ERISA. See Pilot Life,

(common law claim for emotional distress

preempted). Ms. Webster has not argued that her emotional

distress claim is exempt, pursuant to section 1144(b) (2) (A) . Accordingly, Hartford is entitled to summary judgment with

respect to Ms. Webster's claims brought under New Hampshire law.

Ms. Webster also argues that Hartford's policy language

defining long term disability is at odds with the rules of the

New Hampshire Insurance Commission. As Ms. Webster has

identified no private state law cause of action arising from an

alleged violation of the Commission's rules, none of her state

law claims may be exempted from ERISA on that basis. See, e.g.,

Andrews-Clarke v. Travelers Ins. Co . ,

, 56 n.22

(D. M a s s . 1997).

B. ERISA Claim

Ms. Webster also seeks benefits under ERISA,

1 3 2 (a). When a plan beneficiary challenges a denial of benefits

from an ERISA-regulated plan, the decision is reviewed under a de

novo standard unless the plan gives the administrator

discretionary authority to determine eligibility or to construe

terms of the plan. Firestone Tire and Rubber Co. v. Bruch,

(1989). If the plan confers the reguisite

discretionary authority, the court reviews an administrator's

decision under a deferential arbitrary and capricious standard.

See

see also Terry v. Baver Corp.,

(1st Cir.

1998). While the decision of an impartial and disinterested

10 administrator is entitled to great deference, a conflict of

interest in the decision making process will be considered "in

determining whether there is an abuse of discretion." Firestone,

(citations omitted).

1. Standard of Review

Ms. Webster relies on the burden of proof provided in RSA §

491:22-a as part of the standard of review for her ERISA claim.

While section 491:22-a provides the burden of proof in diversity

jurisdiction cases involving insurance coverage, see General

Linen Serv. Co. v. Charter Oak Fire Ins. Co . ,

(D.N.H. 1995), a dispute governed by ERISA is founded on

federal guestion subject matter jurisdiction and federal law

applies, see Tracv,

. In the unpublished case

Ms. Webster relies on, Johnson v. Watts Regulator Co . , No. 92-

508, the district court held that ERISA did not govern the long

term disability policy in guestion as it was not a plan

established or maintained by an employer as reguired by the

statute.

(D.N.H. May 3, 1994), aff'd ,

(1st Cir. 1995). Since the court's subject matter

jurisdiction rested on diversity of the parties' citizenship in

Johnson, the court applied New Hampshire decisional law including

the applicable burden of proof. See Johnson, No. 92-508,

587801, at *6 (D.N.H. Oct. 26, 1994), aff'd ,

(1st

Cir. 1995). Because ERISA controls Ms. Webster's claims in this

case, federal law applicable to ERISA claims provides the

standard of review.

Under applicable federal law, "a benefits plan must clearly

grant discretionary authority to the administrator before

decisions will be accorded the deferential, arbitrary and

capricious, standard of review." Rodriquez-Abreu v. Chase

Manhattan Bank, N.A.,

(1st Cir. 1993).

Hartford, as the administrator of its plan, relies on language in

the "Proof of Loss" section of the policy as a grant of

discretionary authority sufficient to invoke the deferential

standard of review: "The Hartford reserves the right to

determine if proof of loss is satisfactory." Ms. Webster argues

that the policy language is not sufficiently clear to entitle

Hartford's decision to deference. In particular, Ms. Webster

contends that the language does not explain what is to be proven

or the purpose for submitting proof.

For purposes of a deferential standard of review, the plan

must clearly grant discretionary authority to decide claims,

Rodriquez-Abreu,

, but need not clearly define

what information is necessary to make a sufficient claim, as Ms.

Webster contends. The language in the Hartford policy is neither

12 as clear nor as detailed as the description of decisional

authority considered in Terry. See Terry,

, (plan

gave Bayer "exclusive right" to make necessary factual findings,

to interpret the plan's terms, and to determine a claimant's

eligibility for benefits). On the other hand, the Hartford plan

language is more specific than the statement determined to be

insufficient in Cooke v. Lynn Sand & Stone Co . ,

(1st Cir. 1995), where "the plan language stated only that the

administrator had 'exclusive control and authority over

administration of the Plan.'" Terry,

.

Two other district courts determined that the same language

in Hartford long term disability benefit plans was a sufficiently

clear grant of discretionary authority to reguire a deferential

standard. See Vesaas v. Hartford Life & Accident Ins. C o ,

(D. Minn. 1996), aff'd ,

(8th Cir.

1997); Ceasar v. Hartford Life and Accident Ins. Co . ,

(D.S.C. 1996). "Magic words" are not necessary to

confer discretionary authority, and most courts have found a

sufficient grant of authority in proof of loss statements when

the plan reguired that a claimant's evidence of loss be

satisfactory to the insurer. See Perez v. Aetna Life Ins. Co . ,

(6th Cir. 1998) (citing cases).

13 Taken in context,1 the proof of loss statement gives

Hartford the right to determine whether a claimant's proof of

disability is satisfactory to Hartford for purposes of awarding

benefits. Accordingly, the statement is a sufficient grant of

discretionary authority to invoke deferential review.

Ms. Webster contends that deference is inappropriate in this

case because Hartford was operating under a conflict of interest

since Hartford was both the administrator, deciding who will

receive benefits, and the insurer, liable for paying benefits.

Ms. Webster offers no evidence of an actual conflict or that

Hartford's decision was improperly influenced by the existence of

a conflict of interest. While crediting an inference that

Hartford's dual role as administrator and insurer of the plan may

conflict with a beneficiary's interest in receiving benefits, a

competing motive may be inferred that an insurer would not be

overly "tight fisted" in benefit determinations in order to

maintain good relations with the employer and to continue

participation in the plan. Doyle v. Paul Revere Life Ins. Co . ,

(1st Cir. 1998). In circumstances of an

1ERISA governed plans are construed using federal common law which employs "common-sense canons of contract interpretation" including interpreting contracts according to their plain meaning taken in context. Smart v. Gillette Co. Long-Term Disability Plan,

(1st Cir. 1995) (guotation omitted).

14 inferred conflict, the court applies the deferential arbitrary

and capricious standard "with special emphasis on reasonableness,

but with the burden on the claimant to show that the decision was

improperly motivated."2

As Ms. Webster offers no evidence

that the decision was improperly motivated, the court will

proceed under a deferential standard of review.

2. Hartford's Decision to Terminate Benefits

In determining whether Hartford's decision was arbitrary or

capricious, "a court is not to substitute its judgment for that

of the decision-maker," but rather the decision will not be

disturbed if it is reasonable. Terry,

(guotations

omitted). A decision is reasonable as long as it is "rational in

light of the plan's provision" and shows no abuse of discretion.

Tavares v. Unum Corp., No. 96-614-L,

(D.R.I. Sept. 2, 1998).

Hartford's long term disability policy reguired that a

claimant be "totally disabled" within the meaning of the policy

to be eligible for long term disability benefits. For the first

thirty months (the six month gualifying period and twenty-four

2The court notes that neither party cited applicable First Circuit law pertaining to the appropriate standard for evaluating a decision under a conflict of interest.

15 months thereafter) the policy defined "totally disabled" to mean

"that the Insured Person is prevented by accidental bodily injury

or sickness from doing the material and substantial duties of his

own occupation." Hartford's Appendix ("Def. App.") at 8. After

that initial period, a claimant would remain eligible for

benefits "as long as he stays disabled," meaning "that he is

prevented by accidental bodily injury or sickness from doing any

occupation or work for which he is or could become gualified by:

training; or education; or experience."

After receiving benefits for thirty months, Ms. Webster was

notified that Hartford had determined "that by your education,

training, and experience, you gualify for occupations in nursing

which do not reguire lifting or prolonged standing, i.e., medical

case management, nurse in doctor's office, research, etc." For

that reason, Hartford determined that Ms. Webster was no longer

totally disabled, as defined in the policy, for the period after

the initial thirty months of benefits.

Ms. Webster argues that Hartford's definition of "totally

disabled" is prohibited by the New Hampshire Insurance

Commissioner's rules and, therefore, that the definition in the

rules should apply. The referenced rules provide, in pertinent

part, that policies may define total disability "in relation to

the inability of the person to perform duties but such inability

16 may not be based solely upon an individual's ability to: (1)

Perform 'any occupation whatsoever,' or 'any occupational duty, '

or 'each and every duty of his occupation,' or (2) Engage in any

training or rehabilitation program." N.H. Code Admin. R. Ins.

1901.04(13) (1993). Although Ms. Webster's argument is not

entirely clear, she seems to contend that Hartford's decision was

based on her ability to be trained for other work and that

reguirement violated the Commission's rule. She also contends

that Hartford's agreement to pay part of her school tuition as

long as she remained totally disabled, when Hartford knew that

she would not gualify as "totally disabled" as soon as the second

definition became applicable, violated public policy.

Even if the New Hampshire insurance rule defining disability

would apply in this context, it offers no support for Ms.

Webster's claim. As Hartford points out, its decision that Ms.

Webster was not totally disabled within the meaning of the policy

was based on her then present education, training, and

experience, not her ability to gain education or training that

would gualify her for particular work in the future. The court

need not decide, therefore, what effect, if any, a violation of

the New Hampshire rule would have on review of Hartford's

decision. The court also finds that Hartford's willingness to

pay part of Ms. Webster's college tuition for only a limited

17 period does not raise a public policy issue.

Ms. Webster contends that Hartford's decision was arbitrary

and capricious because it gave inconsistent interpretations of

its policy language in three written explanations of its decision

to terminate her benefits. In the September 2 9 , 1 9 9 5 , letter

from Carol Johnson to Ms. Webster notifying her of Hartford's

decision to terminate benefits, Ms. Johnson guoted the applicable

policy definition and then stated Hartford's determination that

Ms. Webster was gualified for particular occupations in nursing.

In the notification letter to the hospital, Ms. Johnson

paraphrased the applicable policy definition saying "it must be

shown that she is prevented by disability from doing any

occupation or work for which she is or could become gualified by

training, education or experience." Plaintiff's Appendix at H.

Ms. Johnson then stated that Hartford found Ms. Webster was not

disabled according to the definition without giving the specific

determination provided in the letter to Ms. Webster.

In a

letter to Ms. Webster's counsel pertaining to Ms. Webster's

appeal of the termination of her benefits, Hartford (writer is

not identified) paraphrased the applicable definition in terms

more pertinent to Ms. Webster's particular determination: "she

must be Totally Disabled from any occupation based upon prior

experience, training and education."

18 The three letters Ms. Webster compares present explanations

with varying levels of specificity about Hartford's determination

in her case. The differences Ms. Webster notices between prior

training and future training are due to references to her

particular situation, which depended on her prior training, and

statements of the general disability definition which included

work a claimant could become gualified to do. Hartford's

determination was clearly based on her gualifications as of

October of 1995. The letters are not inconsistent with

Hartford's definition of "totally disabled" or with its decision

in this case.

Ms. Webster also contends that Hartford's decision is not

supported by the medical evidence. She points to evaluations and

opinions given by her treating physicians in late 1995 and 1996

to show that contrary to Hartford's determination, she was

totally disabled in October of 1995. The evidence of record

supports Hartford's decision.

Despite Ms. Webster's physical limitations caused by her

knee injuries and the effects of rheumatoid arthritis, she was

able to work part time as an operating nurse from March of 1994

until January of 1995 when she began attending a college program

full time. She continued her full time college program until

graduation in December of 1996. She returned to full time work

19 in January of 1997.

Dr. Shirreffs's evaluations during the period before Ms.

Webster's benefits ended indicate that Ms. Webster was unable to

work full time as an operating room nurse but do not rule out her

ability to do other sedentary and, later, light duty work. In

the evaluation form Dr. Shirreffs completed in December of 1995,

he continued to find her able to do light duty work. Dr.

Shirreffs also indicated that she had improved, but he then

marked boxes to indicate that she was totally disabled from her

previous job and any other job. Dr. Shirreffs opinion in 1995,

therefore, contradicted his previous opinions about Ms. Webster's

ability to work and contradicted his opinion that her physical

condition continued to improve. Given the inconsistencies in Dr.

Shirreffs's opinions, Hartford was justified in giving his

opinion of total disability in December of 1995 little weight.

Although Ms. Webster's medical records confirm she had been

treated for rheumatoid arthritis before her injury in April of

1993, the records do not show that rheumatoid arthritis

interfered with her ability to work until Dr. Morgan's opinion in

December of 1995. Even then. Dr. Morgan indicated that Ms.

Webster was capable of sedentary work until he amended his

opinion in a letter in August of 1996. The timing and

inconsistencies of Dr. Morgan's opinions might reasonably be

20 interpreted as his efforts to help Ms. Webster gain benefits

rather than to provide an objective view of her capabilities.

As part of Ms. Webster's appeal process, Hartford referred

Ms. Webster to their Vocational Rehabilitation Unit for a

"Transferable Skills Analysis." Hartford reported to Ms.

Webster's counsel on January 31, 1997, that the analysis found

Ms. Webster qualified for four jobs listed in the letter as of

October of 1995. Hartford upheld its decision in part based on

the results of the analysis.

Applying the appropriately deferential standard, the court

concludes that the record supports Hartford's decision to

terminate Ms. Webster's benefits. The decision was also based on

a reasonable interpretation of the policy provision for

disability benefits. As Ms. Webster has raised no trialworthy

issue pertaining to her claim for benefits, based on the facts of

record Hartford is entitled to summary judgment.

21 Conclusion

For the foregoing reasons, Hartford's motion for summary

judgment (document no. 6) is granted. The clerk of court is

directed to enter judgment accordingly and to close the case.

SO ORDERED.

Joseph A. DiClerico, Jr, District Judge

November 2, 1998

cc: Gordon A. Rehnborg Jr., Esguire William D. Pandolph, Esguire

22