                                                                           FILED
                           NOT FOR PUBLICATION                              MAR 04 2010

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                            FOR THE NINTH CIRCUIT



BARBARA STERIO,                                  No. 08-17426

             Plaintiff - Appellant,              D.C. No. 2:06-cv-01045-MCE-
                                                 GGH
  v.

HM LIFE (formerly known as                       MEMORANDUM *
HIGHMARK LIFE INSURANCE
COMPANY); DIABETES WELL LONG
TERM DISABILITY PLAN; THE
PLAN/POLICY PROVIDED BY
DIABETES WELL TO ITS EMPLOYEES
THROUGH HIGHMARK LIFE
INSURANCE COMPANY GROUP
POLICY NO. 911553-B AND/OR ITS
PLAN ADMINISTRATOR,

             Defendants - Appellees.



                   Appeal from the United States District Court
                      for the Eastern District of California
                  Morrison C. England, District Judge, Presiding

                     Argued and Submitted February 11, 2010
                            San Francisco, California




        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
Before: THOMPSON and McKEOWN, Circuit Judges, and ZILLY, ** Senior
District Judge.

      Appellant, Barbara Sterio appeals the district court’s entry of judgment in

favor of HM Life, an insurance company administrator that denied Sterio’s claim

for long term disability under an employee plan governed by ERISA. Sterio, a

former receptionist, claims she is disabled primarily due to sciatic pain, restricted

mobility and depression following several hip surgeries. We have jurisdiction

under 28 U.S.C. § 1291. We conclude that HM Life abused its discretion in

denying Sterio benefits, and we reverse and remand for the district court to enter

judgment in her favor.

      Sterio has undergone multiple hip revision surgeries following hip

replacement surgery in 1975. In January 2000, Sterio underwent her most recent

total hip revision surgery, after which she developed postoperative complications,

including sciatic pain and numbness and weakness in her right leg and foot. In

December 2000, Sterio stopped working. In January 2002, the Social Security

Administration (“SSA”) determined that Sterio was permanently disabled and

awarded her benefits.




       **
             The Honorable Thomas S. Zilly, Senior United States District Judge
for the Western District of Washington, sitting by designation.

                                           2
      In 2003, Sterio applied for long term disability benefits with HM Life, which

is both the insurer and the administrator of Sterio’s ERISA plan. HM Life engaged

Broadspire Services to process Sterio’s claim. Broadspire, in turn, hired six

independent physicians to review Sterio’s medical records. The reviewing

physicians all concluded that Sterio was not disabled. Broadspire initially denied

Sterio’s claim and HM Life denied Sterio’s appeal, both concluding that the

objective medical evidence did not support her disability claim. The district court

conducted a bench trial and concluded that HM Life did not abuse its discretion in

light of “conflicting evidence.”

                                   Standard of Review

      The district court correctly concluded that an abuse of discretion standard

applies to HM Life’s denial of benefits. See Abatie v. Alta Health & Life Ins. Co.,

458 F.3d 955, 962 (9th Cir. 2006) (en banc) (“We review de novo a district court's

choice and application of the standard of review to decisions by fiduciaries in

ERISA cases.”). Where, as here, the Plan unambiguously provides discretion to

the administrator, the standard of review shifts “from the default of de novo to the

more lenient abuse of discretion.” Id. at 963. See also Burke v. Pitney Bowes Inc.

Long-Term Disability Plan, 544 F.3d 1016, 1023-24 (9th Cir. 2008).




                                           3
      The Plan gives HM Life full and exclusive authority to administer claims

and interpret the policy. This language unambiguously confers discretion on HM

Life even though it does not use the word “discretion.” Abatie, 458 F.3d at 963-64.

      We reject Sterio’s contention that the district court should have applied a de

novo standard because there is no “plan” document, only an insurance policy. The

insurance policy is the plan document in this case. See Cinelli v. Security Pacific

Corp., 61 F.3d 1437, 1441 (9th Cir. 1995) (“[I]t is clear that an insurance policy

may constitute the ‘written instrument’ of an ERISA plan . . . .”); 29 U.S.C. §§

1002 and 1102(a)(1).

      We also reject Sterio’s contention that de novo review applies because

Broadspire, not HM Life, initially denied her claim. Broadspire’s initial decision is

insufficient to revert the standard of review to de novo because HM Life

unquestionably made the final decision to deny Sterio benefits on appeal. See

Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978, 985 (9th Cir. 2005)

(“[P]rocedural violations of ERISA do not alter the standard of review unless those

violations are so flagrant as to alter the substantive relationship between the

employer and employee . . . .”); Abatie, 458 F.3d at 971 (same). This case does not




                                           4
fall into the “rare class of cases” that revert back to de novo review. Abatie, 458

F.3d at 971.1

                                  Conflict of Interest

      Although the district court correctly chose the abuse of discretion standard,

it did not apply that standard properly.

      In ERISA cases, abuse of discretion review is “informed by the nature,

extent, and effect on the decision-making process of any conflict of interest that

may appear in the record.” Abatie, 458 F.3d at 967. Thus, where, as here, a

structural conflict exists because the insurance company administrator both funds

and administers the Plan, “the court must consider numerous case-specific factors,

including the administrator's conflict of interest, and reach a decision as to whether

discretion has been abused by weighing and balancing those factors together.”

Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623, 630 (9th Cir. 2009).

      In Abatie, and later in Montour, we provided specific factors that a court

should weigh in determining whether an administrator abused its discretion. See



      1
         Cf. Nelson v. EG&G Energy Measurements Group, Inc., 37 F.3d 1384,
1388-89 (9th Cir. 1994) (applying de novo review where an unauthorized
employee made the benefits decision); Blau v. Del Monte Corp., 748 F.2d 1348
(9th Cir. 1984), abrogation on other grounds recognized by Dytrt v. Mountain
State Tel. & Tel. Co., 921 F.2d 889, 894 n.4 (9th Cir. 1990) (applying de novo
review where the administrator kept the policy details secret).

                                           5
Abatie, 458 F.3d at 968-969, 972, 974; Montour, 588 F.3d at 630. Unfortunately,

the district court did not have the benefit of the additional guidance provided in

Montour as that case was decided after the district court entered judgement. Our

decision in Montour, together with our decision in Abatie and the record in this

case, make clear that HM Life abused its discretion in denying Sterio benefits.

      First, the quantity and quality of the medical evidence supports Sterio’s

disability claim. Montour, 588 F.3d at 630. HM Life rejected Sterio’s claim

stating there was no objective medical evidence supporting her disability, but the

facts show otherwise. An EMG test confirmed that Sterio had right sciatic

neuropathy after her last hip revision surgery. Two MRI exams revealed excess

metal artifacts in Sterio’s pelvis region. Two x-ray exams revealed bone thinning

in Sterio’s right foot. Sterio’s records show consistent use of strong pain

medication. A Functional Capacity Evaluation (“FCE”) submitted by Sterio’s

treating physician reported that Sterio could not sit, stand or walk for more than 1-

hour a day. Both of Sterio’s treating physicians concluded that she was

permanently disabled, which is consistent with the evaluations of Sterio’s treating

neurologist and two orthopedists. HM Life failed to credit this reliable medical

evidence. Abatie, 458 F.3d at 968.




                                          6
      Second, HM Life failed to distinguish or even acknowledge the SSA’s

contrary disability determination despite having knowledge of it. While HM Life

was “not bound by the SSA’s determination, [its] complete disregard for a contrary

conclusion without so much as an explanation raises questions about whether [its]

adverse benefits determination was the product of a principled and deliberative

reasoning process.” Montour, 588 F.3d at 635 (internal quotation marks omitted).

“In fact, not distinguishing the SSA's contrary conclusion may indicate [HM

Life’s] failure to consider relevant evidence.” Id.

      Third, HM Life failed to conduct an in-person medical evaluation of Sterio.

Montour, 588 F.3d at 634. Although the Plan did not require an in-person exam,

HM Life’s choice to rely on a pure paper review, as in Montour, “raises questions

about the thoroughness and accuracy of the benefits determination . . . as it is not

clear the Plan presented [the six reviewing doctors] with all of the relevant

evidence.” Id. (internal quotation marks, citations, and brackets omitted). Not one

of HM Life’s six reviewing physicians “mentioned the SSA’s contrary conclusion,

not even to discount or disagree with it, which indicates that they may not have

even been aware of it.” Id. (internal quotation marks and brackets omitted).

      Fourth, HM Life failed to adequately investigate Sterio’s claim and request

necessary evidence. Abatie, 458 F.3d at 968. HM Life did not procure the SSA


                                           7
file or ask Sterio to do so. Nor did HM Life request any specific evidence that it,

or its reviewing physicians, concluded was necessary to prove up Sterio’s claim.

See Montour, 588 F.3d at 636 (requiring a “plan administrator denying benefits in

the first instance to notify the claimant . . . of what additional information would be

necessary to perfect the claim.”) (internal quotation marks omitted). For example,

one reviewing physician dismissed Sterio’s osteoarthritis diagnosis because no

“bone density study” had been performed. Another dismissed Sterio’s FCE

because it relied on unspecified exams, x-rays, and evaluations. HM Life’s

medical director similarly discredited the FCE because it purportedly lacked an

actual objective evaluation. Yet, HM Life failed to communicate these specific

deficiencies to Sterio or ask her to supplement the record. See id.; Booton v.

Lockheed Medical Ben. Plan, 110 F.3d 1461, 1463 (9th Cir. 1997) (“[I]f the plan

administrators believe that more information is needed to make a reasoned

decision, they must ask for it.”); Saffon v. Wells Fargo & Co. Long Term Disability

Plan, 522 F.3d 863, 871 (9th Cir. 2008).

      Finally, HM Life violated ERISA’s procedures by “tack[ing] on a new

reason for denying benefits in [its] final decision, thereby precluding [Sterio] from

responding to that rationale for denial at the administrative level.” Abatie, 458

F.3d at 974. HM Life’s reviewing physicians conceded that Sterio was in fact


                                           8
disabled during the time she was hospitalized in response to two mental

breakdowns. In its final decision, HM Life added for the first time that Sterio’s

hospitalizations did not entitle her to long term benefits because she was not

deemed disabled at the onset of her disability effective date and because mental

health coverage ends at 24 months. HM Life’s last-minute addition of a new

reason for denial suggests not only a conflict of interest, but can also be

“categorized as a procedural irregularity where, as here, [Sterio was] foreclosed

from presenting any response to the new reason.” Id. at 974 n.9.

      These factors, taken together, show that HM Life abused its discretion in

denying Sterio benefits. An award of retroactive benefits is appropriate because

HM Life’s denial of benefits is contrary to the factual record. Grosz-Salomon v.

Paul Revere Life Ins. Co., 237 F.3d 1154, 1163 (9th Cir. 2001). We therefore

reverse and remand to the district court with directions to enter judgement in favor

of Sterio and to calculate the amount of retroactive benefits to which Sterio is

entitled under the Plan. Silver v. Exec. Car Leasing Long-Term Disability Plan,

466 F.3d 727, 736 (9th Cir. 2006) (reversing denial of benefits under ERISA and

remanding to district court to calculate award of benefits). The district court




                                           9
should also determine whether Sterio is entitled to attorney fees and prejudgment

interest.2

       REVERSED AND REMANDED.




       2
          See United Steel Workers of Am. v. Ret. Income Plan for Hourly-Rated
Employees of ASARCO, Inc., 512 F.3d 555, 564 (9th Cir. 2008) (“[A]s a general
rule, the prevailing party on an ERISA claim is entitled to attorney's fees, unless
special circumstances would render such an award unjust.”) (internal quotation
marks omitted); Blankenship v. Liberty Life Assurance Co. of Boston, 486 F.3d
620, 627 (9th Cir. 2007) (“A district court may award prejudgment interest on an
award of ERISA benefits at its discretion.”).

                                         10
