Stout v. Hartford Life and Accident Insurance Company, 4:11-cv-06186

Background

Kathleen Stout, a former senior technical program manager at Amazon, stopped working in March 2009 after fatigue, cognitive complaints, and other symptoms; treating physicians diagnosed probable Sjögren’s syndrome and obstructive sleep apnea and reported ongoing cognitive and physical limitations.
Stout received short-term disability and applied for long-term disability (LTD) benefits under Hartford’s group policy; Hartford initially paid but terminated benefits in January 2011 under the policy’s 24-month “own occupation” standard.
Hartford’s termination relied on paper reviews and independent experts (who did not examine Stout in person or consult one of her treating physicians) and on limited surveillance footage; Hartford did not meaningfully analyze the SSA’s contrary disability award.
The Social Security Administration had awarded Stout disability benefits in January 2011; Hartford assisted in applying and sought reimbursement from Stout for any overlapping SSA award.
Stout appealed Hartford’s termination; Hartford upheld the denial in September 2011. Stout sued under ERISA § 502(a)(1)(B). The administrative record was disorganized and incomplete.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standard of review / conflict of interest	Stout argued Hartford had a structural conflict (administrator + funder) and its process was biased, warranting heightened scrutiny.	Hartford relied on policy language conferring discretionary authority and urged abuse-of-discretion review with no disqualifying procedural defects.	Court applied abuse-of-discretion review but accorded significant weight to Hartford’s conflict given procedural deficiencies.
Termination under “own occupation”	Stout argued Hartford abused discretion by relying on flawed paper-only expert reviews that ignored/discounted treating physicians, WTS/FCE, and cognitive testing raw data.	Hartford relied on independent expert reports concluding Stout could perform sedentary work and that most neuropsych testing was within normal limits.	Court held Hartford abused its discretion in terminating benefits under the own-occupation standard and ordered reinstatement and payment of unpaid benefits plus prejudgment interest.
Treatment of SSA determination and investigation adequacy	Stout argued Hartford improperly disregarded the SSA award and failed to analyze or incorporate SSA findings, while also failing to ensure neutral claims procedures and to contact key treating doctors.	Hartford pointed to definitional differences between SSA and plan standards and asserted its independent assessment.	Court found Hartford’s failure to compare/contrast SSA findings or to conduct a thorough review (including in-person exams or contacting treating providers) aggravated its conflict and supported finding of abuse of discretion.
Benefits beyond 24 months (“any occupation”)	Stout sought continuation of benefits under the more stringent any-occupation standard.	Hartford argued the record did not establish entitlement under any-occupation; decision under own-occupation was the operative issue.	Court remanded to Hartford to determine entitlement under the any-occupation standard, because the court may reinstate benefits only under the same standard it found abused.

Key Cases Cited

Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (gives framework for de novo vs. abuse of discretion review)
Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir.) (conflict of interest doctrine and spectrum of skepticism)
Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (weighing structural conflict as a factor and counsel on neutrality procedures)
Montour v. Hartford Life & Accident Ins. Co., 588 F.3d 623 (9th Cir.) (signs of bias; need to address SSA determinations; paper reviews)
Saffle v. Sierra Pacific Power Co., 85 F.3d 455 (9th Cir.) (district court may reinstate benefits only for the same disability standard erroneously applied)
Nord v. Black & Decker Disability Plan, 538 U.S. 822 (courts need not give special weight to treating-physician opinions but cannot arbitrarily refuse them)
Kearney v. Standard Ins. Co., 175 F.3d 1084 (9th Cir.) (bench-trial-on-the-record standard for FRCP 52 motions)
McKenzie v. General Tel. Co. of Cal., 41 F.3d 1310 (9th Cir.) (abuse-of-discretion review requires substantial evidence)
Blankenship v. Liberty Life Assurance Co. of Boston, 486 F.3d 620 (9th Cir.) (use of statutory post-judgment interest rate for prejudgment interest calculations)