Conflict Discovery Post-Glenn: Court Allows Short Depositions to Proceed Based on Something Less Than Good Cause

By Deidre A. Grossman

In Metropolitan Life Insurance Co. v. Glenn, the U.S. Supreme Court resolved an issue dividing federal courts for decades when it ruled that the inherent conflict of interest affecting insurance companies that both decide and pay ERISA benefit claims is a factor for courts to weigh in determining whether there has been an abuse of discretion in connection with a benefit denial, but does not alter the applicable standard of judicial review. Unfortunately, the Supreme Court left open the question of when and how a conflict’s weight can be explored in discovery. The uncertainty surrounding the proper parameters of conflict discovery has produced thousands of district court decisions on the subject in the three years since Glenn was decided.

The most recent pronouncement on the issue comes from one magistrate judge from the Eastern District of New York in Varney v. NYNEX Management Pension Plan, et al., (pdf) a case involving a claim to pension and life insurance benefits.  In Varney, the court granted a request for discovery to allow the plaintiff to depose, for 2 hours each, two witnesses with knowledge about the determination to deny the plaintiff’s claim.  The court echoed the reasoning of prior district court decisions to the effect that the showing a plaintiff must make to be allowed discovery is “far less stringent than the standard for actually considering that outside evidence” when the court reviews the claim denial on its merits.  Specifically, although a “full good cause showing” is required for that evidence to be admissible, at the discovery stage, a plaintiff must only show a “reasonable chance that the requested discovery will satisfy the good cause requirement[.]”

The court acknowledged that the plan administrator’s structural conflict (arising from being both the administrator and the payor of the claims) was, standing alone, insufficient to permit the depositions to proceed.  However, it concluded that the plaintiff had identified what appeared to be procedural irregularities that  justified conflict discovery, namely:  (i) an unexplained reversal by the claims administrator of its initial determination to grant benefits; (ii) an email from the plan sponsor to the claims administrator stating that the plaintiff was ineligible for benefits, which, the court concluded,  may have revealed that the claims administrator was “pressured” to deny claims generally; and (iii) a failure to respond to the plaintiff’s request for a claim form, which may have been evidence of a flawed review process.

Lessons Learned . . .

The Varney decision is most problematic, in our view, because the court permitted discovery by way of depositions (albeit short ones).  District courts that have allowed discovery on conflict considerations have, in most cases, limited it to document discovery.  The reason for this is compelling.  First, even short depositions are expensive and, as such, run counter to ERISA’s policy of containing the cost of benefit claim litigation.  Second, the law is settled that a plaintiff may not pursue discovery into the merits of a claim determination, which would presumably include the mental impressions of those charged with making the adverse benefit determination.  Although courts will likely order that a deposition be limited to the conflict question (as the Varney court did), barring a plaintiff’s counsel from delving into merits issues during the course of a deposition may prove difficult for most practitioners.  The outcome of Varney highlights the importance of having a careful – and well-documented – claim review process, which may obviate a court ordering depositions to fill in unexplained gaps in the administrative record. 


Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.