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Coffey v. Hartford Life & Accident Insurance Co.

United States District Court, W.D. Virginia, Harrisonburg Division

January 4, 2017

DIANE COFFEY, Plaintiff,


          Joel C. Hoppe United States Magistrate Judge.

         This matter is before the Court on a discovery dispute. Each party filed a brief, ECF Nos. 93 and 94, and the Court held a hearing by conference call on December 9, 2016.

         As background, this case involves two claims arising under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq. Plaintiff Diane Coffey's first claim concerns denial of disability benefits under a policy issued and administered by Defendant Hartford Life & Accident Insurance Company (“Hartford”).[1] Her second claim concerns an alleged breach of fiduciary duty under ERISA's catch all equitable relief provision, 29 U.S.C. § 1132(a)(3). This second claim arises from failed settlement discussions between the parties during which Hartford insisted that Coffey sign a release giving up any right to seek or claim disability insurance coverage or benefits on any future policy issued by Hartford. The discovery dispute concerns this second claim, and some further discussion of the nature of that claim is necessary.

         Coffey relies on the Court of Appeals for the Fourth Circuit's decision in Barron v. UNUM Life Ins. Co. of Am., 260 F.3d 310 (4th Cir. 2001), to support her breach of fiduciary duty claim. In that case, Nancy Barron began receiving disability payments under a long-term disability plan administered by UNUM Life Insurance Company of America (“UNUM”). Id. at 312. In settling her claim for future benefits, Barron executed a release, which required her to relinquish forever all claims against UNUM. Id. at 313. Later, Barron recovered from her illness and returned to work at a different employer, and through that employer she enrolled in another, separate long-term disability plan administered by UNUM. Id. Barron's symptoms returned, and she filed a claim for benefits under this second plan. Id. Relying on the release she signed in conjunction with her earlier claim, UNUM denied Barron's claim. The Fourth Circuit found that UNUM was a fiduciary of the first plan and any benefit UNUM obtained through the release belonged to the plan. Id. at 315-16. UNUM could not, consistent with its fiduciary duty, obtain a benefit for itself by limiting its personal liability on the second, unrelated plan. Id. Doing so would conflict with UNUM's duty to apply the language of the second plan in adjudicating a claim for benefits. Id. at 316. Accordingly, UNUM could not use the release to bar Barron's claim to benefits under the second plan.[2] Id. at 317.

         To state a claim under ERISA, Coffey would have to show that Hartford was acting as a fiduciary of an ERISA plan, it breached its fiduciary duty under the plan, and Coffey is in need of injunctive or other equitable relief to remedy the breach or enforce the plan. Adams v. Brink's Co., 261 F. App'x 583, 589-90 (4th Cir. 2008). Coffey asserts that by requiring her to agree to the release, Hartford sought a benefit for itself rather than the plan, thereby engaging in self-dealing and breaching its duty to her.[3]

         As to the breach of fiduciary duty claim, Coffey has issued interrogatories and requests for production of documents, and she intends to depose Hartford representatives. Generally, in ERISA cases the court's review is limited to the administrative record. Helton v. AT&T Inc., 709 F.3d 343, 352 (4th Cir. 2013). “Exceptional circumstances that may warrant an exercise of the court's discretion to allow additional evidence include … circumstances in which there is additional evidence that the claimant could not have presented in the administrative process.” Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1027 (4th Cir. 1993) (en banc). A number of district courts, including one in this district, have allowed limited extra-record discovery for claims under § 1132(a)(3). See Winburn v. Progress Energy Carolinas, Inc., Civ. No. 4:11-3527, 2013 WL 3880149, at *3-5 (D.S.C. July 25, 2013) (supplementing record with plaintiff's affidavit and allowing plaintiff to propound requests for admission and defendant to depose plaintiff); Marlbrough v. Kanawha Ins. Co., 943 F.Supp.2d 684 (W.D. La. 2013); Cress v. Georgia-Pacific, LLC, No. 6:08cv5, 2008 WL 3895796, at *1-2 (W.D. Va. July 9, 2008); see also Sconiers v. First Unum Life Ins. Co., 830 F.Supp.2d 772, 778, 784 (N.D. Cal. 2011) (allowing interrogatories, document requests, and depositions on narrowly drawn issues). As explained by the district court in Marlbrough, a breach of fiduciary duty claim that does not arise from interpretation of policy documents, but that concerns materials and events outside of the administrative review process should not be subject to the same discovery constraints as a typical denial of benefits claim. 943 F.Supp.2d at 692-93. This loosening of the typical constraints on discovery that apply to ERISA claims is necessary where the information relevant to a claim is not likely to come from the administrative record.

         In opposing discovery on the breach of fiduciary duty claim, Hartford asserts that discovery is unnecessary because none of the relevant facts are in dispute. Hartford notes that it has admitted it issued the policy, administered it, and decided claims under it. Answer to Am. Compl. ¶ 1, ECF No. 66. Hartford admitted demanding that Coffey sign the release as part of settlement discussions, id. at ¶ 21, but Hartford denied it acted in its self-interest or engaged in self-dealing in requiring that Coffey sign the release as part of settlement, id. at ¶¶ 23, 32.

         Hartford's argument is persuasive in that some information relevant to Coffey's breach of fiduciary duty claim, such as that concerning whether Hartford was a fiduciary, likely comes from plan documents that are in the administrative record. Other relevant information, however, likely will come from sources outside of the administrative record given the nature of the claim and the fact that it arose well after Hartford's benefits determination. In particular, Hartford has not suggested that the administrative record contains information explaining Hartford's motivation in seeking the release. See Helton, 709 F.3d at 353-54 (citing Booth v. Wal-Mart Stores, Inc. Assocs. Health & Welfare Plan, 201 F.3d 335, 342-43 (4th Cir. 2000)) (finding that evidence outside the administrative record may be necessary to evaluate the fiduciary's motives). Such evidence could be relevant to whether Hartford acted in its own interest in limiting its exposure to potential future claims. Accordingly, some amount of discovery beyond the administrative record is warranted.

         Even if evidence outside of the administrative record is relevant, however, Hartford also challenges the proportionality of Coffey's discovery requests. The Federal Rules define the scope of discovery as follows:

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.

Fed. R. Civ. P. 26(b)(1). Some of these considerations, such as the parties' resources and access to information, weigh in Coffey's favor. Other considerations, however, suggest that discovery must be curtailed.

         As to the importance of the issues in the breach of fiduciary duty claim, the parties agree that the release proposed by Hartford was never signed or enforced in this case, and Coffey's benefits claim was not denied based on the release. Moreover, Hartford has stated in briefing and during the hearing that it will not insist upon the release in future settlement discussions with Coffey. Although Hartford's use of the release to deny benefits to other claimants may present an important issue, that situation is distinguishable from the undisputed facts presented in this case. Additionally, before the failed settlement discussions, Coffey's case focused on a denial of benefits claim, which remains pending in this case, but is not the subject of the disputed discovery requests. Because the release was neither signed nor enforced and Coffey's claim was not denied based on the release, the breach of fiduciary duty claim is of lesser importance.

         Considering the amount in controversy, if Coffey succeeds on her breach of fiduciary duty claim, she could be entitled to equitable relief, including surcharge. At the hearing, Coffey agreed that she could not obtain damages for benefits denied in the future because of the unexecuted release. She proposed that Hartford could be required to disgorge any profit accruing to it as a result of the release. Hartford countered that it received no profit from the release because, at the very least, it was never signed. Coffey also asserts that she may be able to enjoin Hartford from using the release against her. Of course, the release is not in force, as it was never signed. Moreover, the release could only come into play as part of settlement discussions and if Hartford again insisted that Coffey sign it-a stance from which Hartford has retreated. Accordingly, the relief possibly available to Coffey on this claim is extremely limited.

         Regarding the importance of the materials to resolve the issues in the case, the Barron case is instructive. There, the Fourth Circuit examined the language of the two plans and the release in determining that the only explanation for UNUM's use of the release was to further its self-interest by reducing its insurance risk under the second plan. Barron, 260 F.3d at 316. Nothing in the discussion in Barron suggests that materials outside of the administrative record were necessary to the court's determination. ...

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