Montour v. Hartford Life & Accident Insurance Company
Filed September 14, 2009
Cite as 08-55803

Court must Consider Insurer's Conflict of Interest

Robert Montour (Montour) was an employee of Conexant Systems, Inc. for seven years. He participated in a long term disability insurance plan governed by the Employee Retirement Income Security Actof 1974 (ERISA).

The plan granted Hartford Life and Accident Insurance Company (Hartford) as the administrator tasked to interpret the Plan’s terms, determine eligibility for benefits and place the burden of proving both initial and ongoing disability on the claimant.

When he developed symptoms of acute stress disorder, Montour took a medical leave of absence from his position as a telecommunications manager. After 180 days, Montour applied for benefits under the Plan. Hartford accepted the application and began paying him disability benefits.

Eventually, Dr. Kenneth Kengla (Dr. Kengla), an orthopedic surgeon, diagnosed Montour as having physical disability that would prevent him from working. Dr. Kengla performed arthroscopic surgery on his right knee. Dr. Kengla maintained that Montour remained physically disabled and would not be able to return to work.

To determine the truth to Montour’s disability, Hartford hired two investigators to conduct surveillance on him for four consecutive days. The video footage from his surveillance showed Montour driving his car, picking up his grandchildren and getting a haircut.

An interview was also conducted at Montour’s home. The investigator observed that he was alert and responsive to the questions during the four hour interview although he demonstrated signs of pain in front of the investigator.

Meanwhile, a Hartford nurse furnished letters to Montour’s doctors that the latter was capable of performing “sedentary to light” work. Dr. Kengla disagreed with Hartford’s conclusions citing persistent orthopedic symptoms and physical restrictions.

Hartford hired Dr. Gale Brown to conduct a file review on Montour’s condition. Dr. Brown concluded that although Montour had a ‘degenerative spondylostenosis/DDD’ condition, Dr. Kengla’s restrictions were excessive and that Montour would be capable of working full time with modest restrictions.

Consequently, Hartford informed Montour of its decision to terminate his benefits. Montour appealed and included a vocational appraisal report by Gene Bruno concluding that Montour “was not employable in any setting”. Hartford, in turn, hired Dr. Renat Sukhov to conduct a second file interview. Dr Sukhov noted that Montour could work at a minimum.

Eventually, Hartford appealed specialist affirmed its previous decision to terminate Montour’s benefits. Montour and his wife then filed a suit against Hartford in California Superior Court to recover benefits under ERISA.

Hartford successfully removed the case to the Central District of California and moved to dismiss it.

The district court dismissed the claim by ruling that although Hartford had a structural conflict of interest in its position as both the administrator of the insurance policy and the payor of benefits, it did not abuse its discretion when it found that Montour failed to provide sufficient evidence to demonstrate disability within the meaning of the policy.

The United States Court of Appeals, Ninth Circuit, in finding in favor of Montour ruled that the court must take into account Hartford’s conflict of interest. This necessarily entailed a more complex application of the abuse of discretion standard.

A modicum of evidence in the record supporting Hartford’s decision would not alone suffice in the face of such a conflict. This is because this more traditional application of the abuse of discretion standard allowed no room for weighing the extent to which the Hartford’s decision may have been motivated by improper considerations.

Therefore, the district court erred in awarding summary judgment to Hartford in action challenging its decision to terminate benefits where its conflict of interest improperly motivated its decision. Hence, an abuse of Hartford’s administrative discretion.