FILED
NOT FOR PUBLICATION
APR 04 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
GREGORY SMITH, No. 16-15319
Plaintiff-Appellee, D.C. No. 4:15-cv-00022-RCC
v.
MEMORANDUM*
RELIANCE STANDARD LIFE
INSURANCE COMPANY,
Defendant-Appellant.
GREGORY SMITH, No. 16-15413
Plaintiff-Appellant, D.C. No. 4:15-cv-00022-RCC
v.
RELIANCE STANDARD LIFE
INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Arizona
Raner C. Collins, Chief Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Page 2 of 5
Argued and Submitted March 16, 2017
San Francisco, California
Before: TALLMAN and WATFORD, Circuit Judges, and GUIROLA,** Chief
District Judge.
1. We vacate the district court’s order affirming the denial of Gregory
Smith’s request for short-term disability benefits. In issuing that decision, the
district court appeared to apply the ordinary abuse of discretion standard of review.
In this case, however, a more searching review of Reliance’s decision to deny
benefits is required by virtue of the fact that Reliance was responsible both for
paying benefits and for administering the claims review process. See Abatie v. Alta
Health & Life Ins. Co., 458 F.3d 955, 965–68 (9th Cir. 2006) (en banc). While this
structural conflict of interest does not alter the standard of review, it is a factor to
be weighed in determining whether a plan administrator abused its discretion.
Stephan v. Unum Life Ins. Co. of Am., 697 F.3d 917, 929 (9th Cir. 2012); Abatie,
458 F.3d at 967. On remand, in determining the level of skepticism to apply to
Reliance’s decision, the district court should take into account the likelihood that
the structural conflict of interest affected Reliance’s decision to deny Smith’s
request for short-term disability benefits, Stephan, 697 F.3d at 929, any record of
**
The Honorable Louis Guirola, Jr., Chief United States District Judge
for the Southern District of Mississippi, sitting by designation.
Page 3 of 5
Reliance’s self-dealing, Abatie, 458 F.3d at 968, and the fact that Reliance relied
on a paper review of Smith’s medical records rather than an in-person medical
evaluation, Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623, 630 (9th
Cir. 2009).
2. We vacate the district court’s award of long-term disability benefits based
solely on Reliance’s failure to issue a denial of the claim within the 90-day limit
imposed by ERISA. 29 C.F.R. § 2650.503-1(f)(1). Reliance’s failure to comply
with ERISA’s procedural requirements cannot on its own justify an award of
benefits under the policy, although it may alter the standard of review. See Gatti v.
Reliance Standard Life Ins. Co., 415 F.3d 978, 984–85 (9th Cir. 2005); McKenzie
v. Gen. Tel. Co. of Cal., 41 F.3d 1310, 1315 (9th Cir. 1994).
On remand, the district court should determine whether the procedural
violation caused Smith substantive harm such that de novo review of Reliance’s
benefits determination is appropriate. See Gatti, 415 F.3d at 984–85. If Smith did
not suffer substantive harm as a result of the violation, the court should review
Reliance’s denial of long-term disability benefits under the same abuse of
discretion standard that governs its review of the denial of short-term disability
benefits, while according the procedural violation appropriate weight. See Abatie,
458 F.3d at 972.
Page 4 of 5
Smith is incorrect in arguing that Harlick v. Blue Shield of California, 686
F.3d 699 (9th Cir. 2012), supports the district court’s decision. In Harlick, plan
administrators gave one reason for denying the claimant’s claim during the
administrative process, but then asserted a new reason during litigation in federal
court defending that decision. Id. at 705–06, 719. We held that the plan
administrators could not invoke, for the first time in litigation, grounds held in
reserve as the basis for denying benefits. Id. at 719–21. Here, by contrast,
Reliance has never asserted conflicting reasons for denying benefits. Reliance
denied short-term disability benefits on the ground that Smith had a pre-existing
condition. It asserts the same basis for its denial of long-term disability benefits.
While Reliance failed to issue a denial before litigation began, it has not attempted
to invoke a new and different ground for the denial, held in reserve, for the first
time in litigation.
3. Because the district court committed clear error by failing to determine
whether Reliance’s procedural violation caused Smith substantive harm, we vacate
the court’s denial of reconsideration of its award of long-term disability benefits.
See Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000).
4. Because we vacate the district court’s award of long-term disability
benefits, we also vacate the court’s award of attorney’s fees.
Page 5 of 5
Each party shall bear its own costs on appeal.
VACATED and REMANDED.