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Williby v. Aetna Life Insurance Co.

United States Court of Appeals, Ninth Circuit

August 15, 2017

Yvette Williby, Plaintiff-Appellee,
v.
Aetna Life Insurance Co., Defendant-Appellant.

          Argued and Submitted April 5, 2017 Pasadena, California

         Appeal from the United States District Court For the Central District of California Consuelo B. Marshall, District Judge, Presiding D.C. No. 2:14-cv-04203-CBM-MRW

          Matthew G. Kleiner (argued), San Diego, California, for Defendant-Appellant.

          Christian J. Garris (argued), Los Angeles, California, for Plaintiff-Appellee.

          Before: Milan D. Smith, Jr. and N. Randy Smith, Circuit Judges, and Gary Feinerman, District Judge. [*]

         SUMMARY[**]

         Employee Retirement Income Security Act

         The panel vacated the district court's judgment in favor of the plaintiff in an action under the Employee Retirement Income Security Act, challenging the termination of short-term disability benefits.

         The panel held that the district court erred by reviewing the denial of the plaintiff's benefits claim de novo, rather than for an abuse of discretion. The short-term disability plan included a discretionary clause, and thus by its terms called for abuse of discretion review. The panel held that California Insurance Code § 10110.6, which invalidates such discretionary clauses in insurance plans, applied even though the disability plan was self-funded. ERISA, however, preempted § 10110.6 insofar as it applied. The panel remanded for the district court to review the benefits denial under the correct standard.

          OPINION

          FEINERMAN, DISTRICT JUDGE.

         Plaintiff-Appellee Yvette Williby worked for The Boeing Company, which provided her with short-term disability payments through a plan that it self-funded. Defendant-Appellant Aetna Life Insurance Company administered the plan. After Aetna determined that Williby was not disabled and terminated her benefits, Williby brought suit under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461. Applying de novo review, the district court held that Aetna improperly denied Williby's claim. See Williby v. Aetna Life Ins. Co., No. 2:14-CV-042032015 WL 5145499 (C.D. Cal. Aug. 31, 2015). Aetna appeals, contending that the district court should have reviewed the denial only for abuse of discretion. Aetna is correct, so we vacate and remand to the district court for reconsideration under the proper standard of review.

         BACKGROUND

         Boeing's short-term disability (STD) benefit plan for its employees pays them between sixty and eighty percent of their salary if, because of a disability, they cannot perform their usual job responsibilities or other similar work at Boeing. The STD plan is self-funded, meaning that Boeing does not purchase an insurance policy to cover its plan obligations; rather, Boeing pays benefits from its own coffers, and retains Aetna to administer the plan. See FMC Corp. v. Holliday, 498 U.S. 52, 54 (1990) (describing self-funded ERISA plans). There is a 26-week limit on STD benefits, after which the employee must apply for long-term disability (LTD) benefits.

         The STD plan expressly provides Aetna with "full discretionary authority to determine all questions that may arise, " including whether and to what extent a plan participant is entitled to benefits. This provision is known as a "discretionary clause." See Standard Ins. Co. v. Morrison, 584 F.3d 837, 840-41 (9th Cir. 2009) (describing discretionary clauses). The presence of a discretionary clause typically means that a court reviewing an adverse benefits determination will do so only for abuse of discretion. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006) (en banc).

         Williby worked for Boeing as a Supply Chain Specialist, a position that required her to problem-solve, interact with customers and vendors, conduct research, and assess technical issues. In September 2011, she was briefly hospitalized after suffering either a stroke or a stroke-like episode. In November 2012, Williby found herself experiencing chronic headaches and other problems that caused her difficulty at work. In December 2012, she saw a neurologist, Dr. David Edelman, who performed various assessments. Computerized cognitive tests showed that Williby's overall cognitive function fell within a normal range, and an MRI revealed no "acute infarct"-brain tissue damage-and no hemorrhage. But Williby's executive functions-the ability to organize information and to respond quickly and accurately-"predicted a moderate likelihood of 'mild cognitive impairment.'" Dr. Edelman found that Williby suffered from "migraine, acute but ill-defined cerebrovascular disease, and vascular dementia uncomplicated, " and on those premises concluded that she should go on disability "pending further testing." On December 12, 2012, Williby left her employment at Boeing, never to return.

         Aetna approved Williby for STD benefits from December 20, 2012 through February 28, 2013 based on Dr. Edelman's testing and conclusions. However, Aetna denied Williby STD benefits for the period from February 28, 2013 through June 2013. Dr. Vaughn Cohan, the Aetna-retained neurologist responsible for the denial, reviewed the file, spoke with Dr. Edelman by telephone, and concluded that Williby could still work because, despite her executive function impairments, her cognitive function was normal overall, the MRI showed no "acute" abnormalities, and she had not undergone formal neuropsychological testing to follow up on Dr. Edelman's initial tests.

         At several points between April and November 2013, Dr. Edelman reaffirmed his conclusion that Williby was unable to work. Also, between June 2013 and December 2013, Williby saw a second neurologist, a neuropsychologist, a psychologist, and a psychiatrist, all of whom agreed that she exhibited cognitive impairment and the majority of whom specifically determined that it disabled her from working.

         After Aetna terminated Williby's STD benefits, she appealed the decision within Aetna, armed with the additional doctors' reports. Aetna hired an occupational medicine specialist and a neuropsychologist to review the case. Both reviewers concluded that there was insufficient objective documentation of Williby's disability, with the occupational medicine specialist explaining that any impairment was "self-reported" and "primarily based on mood disorder/behavioral issues, " and the neuropsychologist concluding that "the provided information did not include sufficient findings to corroborate" Williby's claimed cognitive impairments or their interference with her work. Aetna upheld its decision to deny benefits in February 2014, determining that "there was insufficient medical evidence to support continued disability" after February 28, 2013.

         Williby then sued Aetna in the Central District of California for "breach of plan and recovery of plan benefits" under ERISA, invoking ERISA's jurisdictional provision, 29 U.S.C. § 1132(e). A ...


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