                      United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                      ___________

                                      No. 00-1376
                                      ___________

Everett E. McGarrah,                  *
                                      *
      Plaintiff - Appellant,          *
                                      * Appeal from the United States
      v.                              * District Court for the
                                      * Western District of Arkansas.
Hartford Life Insurance Company,      *
                                      *
      Defendant - Appellee.           *
                                 ___________

                               Submitted: September 15, 2000

                                    Filed: December 11, 2000
                                     ___________

Before WOLLMAN, Chief Judge, LOKEN and MURPHY, Circuit Judges.
                             ___________

LOKEN, Circuit Judge.

       Hartford Life and Accident Insurance Company issued a group disability policy
(the “Policy”) to fund an ERISA plan for the benefit of the employees of Wal-Mart
Stores, Inc. The Policy granted Hartford “full discretion and authority to determine
eligibility for benefits and to construe and interpret [its] terms and provisions.” Everett
E. McGarrah, a Wal-Mart truck driver, slipped on ice at a truck stop in 1994, sustained
a herniated cervical disc, and applied for long-term disability benefits under the Policy.
Hartford agreed and began paying monthly total disability benefits in January 1995.
In late 1997, after gathering evidence that McGarrah’s physical condition had
significantly improved, Hartford terminated those benefits. McGarrah exhausted his
remedies under the Policy and filed this ERISA action for wrongful denial of benefits.
See 29 U.S.C. § 1132(a)(1)(B). The district court1 granted summary judgment in favor
of Hartford. McGarrah appeals, arguing that the court erred in applying the deferential
abuse-of-discretion standard of review and that the record does not support Hartford’s
termination of benefits under any standard. We affirm.

                                          I.

        As the Policy defines total disability, McGarrah was entitled to benefits for the
first twelve months if he was prevented by accidental bodily injury “from performing
the essential duties of [his] occupation.” To continue receiving benefits after twelve
months, he must be “prevented from performing the essential duties of any occupation
for which he is qualified by education, training or experience.” McGarrah’s initial
disability application included an Attending Physician’s Statement of Disability (a form
document prepared by Hartford) in which Dr. Randall Hendricks stated that McGarrah
was totally disabled by the herniated disc for an undetermined period. Dr. Hendricks
classified McGarrah’s condition as a “Class 5-Severe limitation of functional capacity;
incapable of minimal (sedentary) activity.”

      In February 1995, McGarrah underwent an anterior cervical diskectomy and
fusion of his C5-C6 and C6-C7 vertebrae. In a March 14 Attending Physician’s
Statement, Dr. Hendricks stated that McGarrah was totally disabled but predicted “a
fundamental or marked change” in McGarrah’s prognosis within three to six months.
Dr. Karl Detwiler, the neurosurgeon who performed the diskectomy, also completed
an Attending Physician’s Statement, agreeing that McGarrah was totally disabled but
predicting a marked change at some unknown time in the future.


      1
       The HONORABLE JIMM LARRY HENDREN, Chief Judge of the United
States District Court for the Western District of Arkansas.

                                          -2-
       In January 1996, after McGarrah had received benefits for twelve months,
Hartford requested and he submitted another Attending Physician’s Statement in which
Dr. Hendricks stated that McGarrah remained totally disabled from any job for an
undetermined period. A short time later, McGarrah underwent additional neck surgery
-- a cervical laminectomy and spinal fusion at C5-C6 and C6-C7. Dr. Hendricks saw
McGarrah again in January 1997. His office notes recite that McGarrah was “doing
pretty well . . . the fusion is solid and he has come along nicely.”

       In October 1996, after a hearing, an administrative law judge granted
McGarrah’s application for Social Security disability benefits retroactive to February
1994. The ALJ found that McGarrah’s physical impairments prevented him from doing
his past relevant work and limited him to sedentary jobs, making him presumptively
disabled based upon his advanced age, his minimal education and marginal literacy, and
his lack of transferable job skills. Because benefits under the Policy were reduced by
the retroactive Social Security disability benefits, Hartford recalculated McGarrah’s
past Policy benefits, demanded that he refund $18,200, and began withholding monthly
benefits to offset the prior overpayments. Hartford also asked McGarrah to submit a
current Attending Physician’s Statement. In September 1997, McGarrah’s attorney
replied that withheld benefits had more than offset any overpayments. He also
submitted an Attending Physician’s Statement from Dr. Hendricks dated July 10, 1997,
which opined that McGarrah was totally disabled from any job, his second surgical
fusion was “rock-solid,” and “his symptoms will get better given time.”

       Meanwhile, in May 1997, Wal-Mart informed Hartford of a tip that McGarrah
was working part-time. Surveillance by Wal-Mart investigators, which was shared
with Hartford, suggested that McGarrah was capable of lifting, bending, and engaging
in other physical activities. Hartford then initiated its own investigation, including
videotaped surveillance of McGarrah’s activities on September 4 and 5, 1997. The
videotape, made part of the district court record, revealed McGarrah:


                                         -3-
       -- climbing in and out of a pick-up truck;
       -- driving the truck without restriction;
       -- moving his head and neck without restriction;
       -- reaching and lifting a reclining chair over the truck’s tailgate;
       -- carrying a large dog;
       -- lifting a large bag from the truck bed;
       -- unloading furniture from a trailer and carrying it; and
       -- stepping from the trailer to the ground.

On September 25, after reviewing the videotape, a Hartford investigator and an
investigator from the Insurance Fraud Unit of the Arkansas Department of Insurance
went to the office of McGarrah’s attorney for a prearranged meeting. McGarrah failed
to attend. In response to the investigators’ questions, his attorney stated that McGarrah
could not drive any vehicle, move his neck, or look down at the ground.

       The two investigators finally met with McGarrah and his attorney on October 23.
McGarrah initially stated that he was still totally disabled, barely able to lift ten pounds
on a good day. When shown the videotape, McGarrah first denied he was the man in
the tape, then admitted it was he but claimed it had hurt him to move the furniture.
When the Hartford investigator asked for a further explanation, McGarrah’s attorney
ended the meeting. The Arkansas Department of Insurance investigator gave
McGarrah his card, stating that this appeared to be a criminal matter the Department
would investigate. Six days later, McGarrah was examined again by Dr. Hendricks.

       On December 30, 1997, Hartford notified McGarrah it was terminating his
disability benefits as of September 5, 1997, because he no longer met the definition of
totally disabled based upon “all of the file documentation currently available to us
including but not limited to the surveillance video of September 4, 1997 and September
5, 1997 of Mr. McGarra[h]’s daily activities.” The notice explained that McGarrah’s
daily activities as revealed by the videotape were “not consistent with a Class 5-Severe

                                            -4-
limitiation of functional capacity; incapable of minimal (sedentary) activity.” It also
cited Dr. Hendricks’s July 10, 1997, statement that McGarrah’s cervical fusion was
rock-solid. Consistent with the Policy’s claims provisions, the notice advised
McGarrah that he could submit additional information for Hartford’s review, and he
could appeal the adverse decision in writing within sixty days if he did not agree with
the reasons given. The notice further advised, “you will receive written notification of
the results of that review.” Finally, the notice recalculated the outstanding benefits
overpayment and demanded that McGarrah refund $5,393.14 to Hartford.

       McGarrah timely requested review of the adverse decision. In support, he
submitted a February 9, 1998, Attending Physician Statement by Dr. Hendricks stating
that McGarrah was totally and permanently disabled from any job and would “never”
recover. He also submitted an Attending Physician Statement by Dr. David Wong, who
was treating McGarrah for carpel tunnel syndrome in both wrists. However, McGarrah
did not submit -- either to Hartford or later to the district court -- any notes or report
from Dr. Hendricks’s October 29, 1997, examination.

      When Hartford did not respond to his appeal, McGarrah commenced this action.
Hartford counterclaimed for the unpaid $5,393.14. After determining that McGarrah
had exhausted his contractual remedies, the court ordered the parties to file a stipulated
record (each side filed its own record) and then to brief its position. Based upon those
records and briefs, the court ruled:

             [T]he Court . . . having applied the deferential abuse of discretion
      standard of review, finds that [Hartford] did not abuse its discretion in
      denying [McGarrah’s] long term disability benefits and accordingly, the
      Court will not disturb the decision to deny benefits. Further, the Court
      finds that [McGarrah] remains indebted to [Hartford] for the amount of
      any overpayment which has not been refunded to [Hartford].




                                           -5-
             IT IS THEREFORE ORDERED AND ADJUDGED that this
      action be, and it hereby is, dismissed.

McGarrah timely appealed that order. Hartford did not ask the district court to
reconsider its failure to make a specific award on the counterclaim. Nor did Hartford
either cross appeal that failure or move this court to dismiss the appeal for lack of
jurisdiction because the counterclaim had not been finally adjudicated. Therefore, we
conclude the order being appealed was a final dismissal of both McGarrah’s claim and
Hartford’s counterclaim.

                                            II.

       McGarrah argues the district court erred in applying the deferential abuse-of-
discretion standard, a question we review de novo. See Barnhart v. UNUM Life Ins.
Co. of Am., 179 F.3d 583, 587 (8th Cir. 1999). In general, the abuse-of-discretion
standard applies if, as in this case, the plan expressly gives the administrator discretion
to determine eligibility for benefits and to construe the terms of the plan. See Firestone
Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989); Layes v. Mead Corp., 132
F.3d 1246, 1250 (8th Cir. 1998). However, the degree of deference to be given the
plan administrator’s decision under the abuse-of-discretion standard may vary. The law
of trusts, our guide in reviewing the actions of ERISA plan decisionmakers, affords less
deference when the decisionmaker has labored under a conflict of interest, acted
dishonestly or from an improper motive, or failed to use judgment in reaching a
decision. See Buttram v. Central States, S.E. & S.W. Areas Health & Welfare Fund,
76 F.3d 896, 900 (8th Cir. 1996).

       McGarrah first argues that Hartford operated under a financial conflict of interest
created by its dual role as insurer and plan administrator. This contention is without
merit. In the first place, McGarrah presented no evidence of the financial relationship
between Wal-Mart and Hartford. Thus, we do not know the extent to which continuing

                                           -6-
disability payments to McGarrah would have been incurred by Wal-Mart as a partial
self-insurer or by Hartford as the plan-funding insurer. As we emphasized in Davolt
v. O’Reilly Automotive, 206 F.3d 806, 809 (8th Cir. 2000), it is wrong to assume a
financial conflict of interest from the fact that a plan administrator is also the insurer.
Second, and equally important, McGarrah presented no evidence that the alleged
financial conflict had “a connection to the substantive decision reached.” Sahulka v.
Lucent Tech., Inc., 206 F.3d 763, 768 (8th Cir. 2000). There is simply no hint in this
record that Hartford’s initial grant and later termination of McGarrah’s disability
benefits were tainted by any financial impact those decisions may have had on Hartford
as the plan-funding insurer.

       McGarrah next argues that Hartford is not entitled to the deferential standard of
review because “a serious procedural irregularity existed, which . . . caused a serious
breach of the plan administrator’s fiduciary duty.” Woo v. Deluxe Corp., 144 F.3d
1157, 1160 (8th Cir. 1998). McGarrah alleges two procedural irregularities -- that
Hartford’s December 1997 notice did not adequately explain why disability benefits
were being terminated, and that Hartford totally failed to respond to McGarrah’s appeal
from that adverse decision and submission of additional medical evidence of disability.

       A plan administrator must “set forth the rationale underlying [its] decision so that
the claimant may adequately prepare an appeal to the federal courts, and so that a
federal court may properly review . . . the decision.” Collins v. Central States, S.E. &
S.W. Areas Health & Welfare Fund, 18 F.3d 556, 561 (8th Cir. 1994). Hartford’s
December 1997 notice of decision explained that McGarrah’s disability benefits were
being terminated because Dr. Hendricks had recently described the cervical fusion as
successful (“rock-solid”), and because the September 1997 videotape showed
McGarrah performing many activities inconsistent with his claim of continued total
disability. This initial notice easily satisfied the Collins standard.




                                           -7-
       Hartford’s failure to respond to McGarrah’s February 1998 appeal is more
troubling. This was a serious procedural irregularity. Hartford’s December 1997
notice promised a written response if McGarrah appealed, as the Policy’s claims
procedures require. Moreover, the Department of Labor’s regulations require that a
plan administrator provide an appeal procedure that culminates in a written decision.
See 29 C.F.R. § 2560.503-1(h)(3). Hartford offers no explanation for its failure to
respond to McGarrah’s timely appeal. Indeed, its brief on appeal simply ignores the
problem. But the mere presence of a procedural irregularity is not enough to strip a
plan administrator of the deferential standard of review. As we said in Buttram, 76
F.3d at 900, a claimant must also present evidence that the irregularity raises –

      serious doubts as to whether the result reached was the product of an
      arbitrary decision or the plan administrator’s whim; see Restatement
      (Second) of Trusts § 187 cmt. h. For example, where the plan trustee
      does not inquire into the relevant circumstances at issue; where the trustee
      never offers a written decision, so that the applicant and the court cannot
      properly review the basis for the decision; or where procedural
      irregularities are so egregious that the court has a total lack of faith in the
      integrity of the decision making process, a court may infer that the trustee
      did not exercise judgment when rendering the decision.

      We conclude that McGarrah has failed to meet this rigorous standard. As we
have noted, Hartford made a thorough investigation before terminating McGarrah’s
benefits, and its December 1997 notice adequately explained both the basis for the
adverse decision and McGarrah’s right to appeal. From a substantive standpoint,
McGarrah’s appeal required no response by Hartford to permit meaningful judicial
review. McGarrah submitted Dr. Hendricks’s conclusory February 1998 statement that
McGarrah was now permanently and totally disabled. But that statement was facially
inconsistent with Hendricks’s earlier predictions that McGarrah’s neck condition would
improve, and the failure to submit any notes from Dr. Hendricks’s October 29, 1997,
examination left the appeal with no new medical evidence contradicting the


                                           -8-
overwhelming evidence that McGarrah was no longer disabled provided by the
September 1997 videotape and McGarrah’s evasive October 23 interview. In these
circumstances, Hartford’s failure to respond to McGarrah’s appeal, while wrong, does
not undermine our confidence in the integrity of its decision-making process.

                                           III.

       Finally, McGarrah argues that Hartford’s termination of benefits must be
reversed under any standard of review. Having determined that the district court
correctly applied the abuse-of-discretion standard, this contention requires little further
discussion. Under this deferential standard, the plan administrator’s decision will be
upheld if it was reasonable, that is, if it was supported by substantial evidence. If the
decision satisfies this standard, it “should not be disturbed even if another reasonable,
but different, interpretation may be made.” Donaho v. FMC Corp., 74 F.3d 894, 899
(8th Cir. 1996).

       Here, the primary evidence supporting the decision to terminate benefits were
the September 1997 videotape showing McGarrah performing activities inconsistent
with a claim of continuing total disability; McGarrah’s failure to refute the clear
implications of the videotape at the October 23 interview; and his failure to submit
contrary contemporaneous medical evidence. McGarrah argues that Hartford had no
medical evidence supporting its decision. We disagree. Dr. Hendricks’s earlier
Attending Physician Statements consistently stated that McGarrah was then disabled,
but Dr. Hendricks predicted a “marked change” in March 1995, stated McGarrah “has
come along nicely” in January 1997, and described the second fusion as “rock solid”
in July 1997. These statements are consistent with the improved physical condition
recorded in the September 1997 videotape. McGarrah further argues that Hartford
ignored the findings of the administrative law judge who granted Social Security
disability benefits. But that decision was based upon a presumption of disability that
does not apply under the Policy. In these circumstances, Hartford’s decision to

                                           -9-
terminate McGarrah’s disability benefits effective on the date of the videotape is
supported by substantial evidence and was not an abuse of discretion.

      The judgment of the district court dismissing all claims and counterclaims with
prejudice and on the merits is affirmed.

      A true copy.

             Attest:

                CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                        -10-
