In Salomaa v. Honda Long Term Disability Plan, No. 08-55426 (9th Cir. 2011), the plaintiff suffered from chronic fatigue syndrome and fibromyalgia. He applied for long-term disability benefits (“LTD benefits”) under his employer’s plan ( the “Plan”). His claim was denied by the plan administrator, which was CIGNA Group Insurance (“CIGNA”). After exhausting the appeals process, the plaintiff brought this suit under ERISA. The District Court upheld CIGNA’s denial and the plaintiff appealed.
In analyzing this case, the Court said that, since the Plan unambiguously granted CIGNA the discretion to decide Plan eligibility, the Court would review CIGNA’s decision to deny the LTD benefits under the abuse of discretion standard. Here, CIGNA has a conflict of interest, since it acts as both funding source and administrator. This conflict must be weighed as a factor in determining whether there has been an abuse of discretion. Further, in the ERISA context, the test for abuse of discretion is whether CIGNA’s decision is: (1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from the facts in the record.
Under this test, the Court concluded that CIGNA had abused its discretion in denying the LTD benefits because: (1) every doctor who personally examined the plaintiff concluded that he was disabled, while the CIGNA declined to examine the plaintiff; (2) CIGNA demanded objective tests to establish the existence of a condition for which there are no objective tests; (3) CIGNA failed to consider that the plaintiff was awarded disability benefits by Social Security; (4) the reasons for CIGNA’s denial shifted as they were refuted, those reasons were largely unsupported by the medical file, and only the denial stayed constant; and (5) CIGNA failed to engage in any meaningful dialogue with the plaintiff, in that CIGNA did not give the plaintiff access to the two medical reports of its own physicians upon which it relied, and otherwise failed to clearly tell the plaintiff what information he had to provide to perfect his claim. The Court noted that CIGNA’s abuse of discretion is highlighted because it had a conflict of interest.
Due to the abuse of discretion, the Court overturned the District Court’s decision and remanded the case back with the instruction to award plaintiff his LTD benefits.