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Those familiar with ERISA jurisprudence know that the rule in federal court is that claimants must present all evidence and argument supporting their claims to the claim administrator or plan trustee in the first instance. Sandoval v. Aetna Life & Cas. Ins. Co., 967 F.2d 377, 380 (10th Cir. 1992). As a consequence, when reviewing an administrator’s decision, a court generally “may consider only the arguments and evidence before the administrator at the time it made that decision.” Id. Discovery beyond the official “administrative record” is therefore not allowed.

Despite the frequent reaffirmation of this rule by courts in the Tenth Circuit, the plaintiff’s bar has continually pushed for discovery in ERISA cases, if not into the merits of a claim, then at least into alleged conflicts of interest on the part of the claim administrator. The United States Supreme Court arguably opened the door to such discovery when it decided Metropolitan Life Insurance Company v. Glenn, 554 U.S. 105, 128 S. Ct. 2343 (2008). However, as discussed below, while the proverbial door to discovery may have been opened, the courts have made clear that the opening is very narrow.

In Murphy v. Deloitte & Touche Group Insurance Plan, 619 F.3d 1151 (10th Cir. Sept. 8, 2010), the Tenth Circuit Court of Appeals held that, while courts should still disallow discovery beyond the administrative record regarding the merits of a claim under ERISA, they may allow limited discovery into the nature and extent of a conflict on the part of a claim administrator. It should be noted that the court emphasized that discovery may be had on the conflict of interest issue only when necessary and that “[t]he discovery must be relevant and cannot serve as ‘a license to engage in an unwieldy, burdensome, and speculative fishing expedition.’” Murphy, 619 F.3d at 1163. If the court permits such discovery, it must apply Rule 26(b)(1) of the Federal Rules of Civil Procedure and allow only relevant discovery. Id. at 1162-63.

The district courts in the Tenth Circuit have reinforced the strict limitations on discovery into conflict of interest issues in several recent decisions. Most recently, in Todd v. CP Kelco et. al., 2011 WL 838848, slip op. at 5 (E.D. Okla. Mar. 1, 2011), a case in which our firm represented the defendants, the court for the Eastern District of Oklahoma allowed only limited discovery “to ascertain the potential effect of [the claim administrator’s] conflict of interest,” but went on to deny almost all of the plaintiff’s specific discovery requests. (The one exception was the request for the relevant claims manual, which was produced only following the entry of an agreed protective order.) Of note, the court denied all discovery requests pertaining to the handling of the claim and how the claim administrator had decided other “similar” claims in the past. Todd, No. 10-cv-00085-KEW, slip op. at 6. In this regard, the court specifically held that the administrator’s “review of other long term disability claims and the resulting decisions are not matters which would be calculated to determine whether [the administrator] had a conflict of interest in Todd’s case.” Id.

Other courts in the Tenth Circuit have followed suit, continuing strictly to limit discovery beyond the administrative record. See Hurley v. Dyno Nobel, Inc., 2011 WL 587591, slip op. at *3 (D. Utah Feb. 09, 2011) (denying plaintiff’s request for extra-record discovery because it did “not appear to be necessary for ‘a fair and informed resolution of claims’ and would prevent a ‘speedy, inexpensive, and efficient resolution of those claims ….’” and holding that “the benefit of the discovery is outweighed by the potential burden and cost because ‘the inherent dual role conflict makes [the DNI Plan’s] financial interest obvious’”); Tillotson v. Life Ins. Co. of N. Am, 2011 WL 285815, slip. Op. at 3-4 (D. Utah Jan 28, 2011) (disallowing discovery into alleged conflict of interest where the claim administrator was not responsible for the payment of disability benefits and finding that contractual relationships between the entity responsible for paying benefits and the claim administrator and between the claim administrator and independent medical reviewer did not create conflicts that would warrant discovery).

In addition to limiting the scope of discovery, in Murphy the Tenth Circuit also provided some tips on how discovery on the conflict of interest issue might be averted completely. Specifically, the court observed that, “[i]f the administrative record does not specifically address” whether the claim administrator “has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administrators from those interested in firm finances[,]” then discovery might be necessary for the plaintiff to prove a serious conflict exists, or, conversely, for the insurer/administrator to prove that it has taken steps to mitigate the effects of an inherent conflict. Id. at 1158. Implicit in this observation is that, by including this information in the administrative record in the first instance, a claim administrator can obviate the need for discovery beyond the administrative record. Adding support to the notion that this approach could avoid the need for discovery, the court noted that “the administrator has better access to information regarding the steps it has taken [to reduce potential bias] and could include these materials in the administrative record if it so chooses.” Id. at 1158 n.2. Thus, an insurer who also plays the role of claim administrator may protect against discovery beyond the administrative record simply by including information about claim handling procedures, the method for engaging independent medical review and claim handler compensation and other protections against bias in the administrative record, thereby preventing the door to discovery from being opened at all.