Prologue — Kobs v. United Wisconsin Insurance

0 ==

No. 05394 SE 2 3 2005

Sa InEEEEEineeeeemem

IN THE

Supreme Court of the Wnited States

ELVIS KOBS,

Petitioner,

Vv.

UNITED WISCONSIN INSURANCE COMPANY, —

Respondent.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

LAURA W. BRILL. JASON W. WHITLEY

Counsel of Record NOVITZKE, GUST, SEMPF &

TED M. SICHELMAN WHITLEY

IRELL & M..NELLA, LLP 314 Keller Avenue North,

1800 Avenue of the Stars Suite 399

Los Angeles, California 90067 Amery, Wisconsin 54001

(310) 277-1010 (715) 268-6130

Counsel for Petitioner Elvis Kobs

September 23, 2005

(1)

(2)

QUESTIONS PRESENTED

Whether an insurance company that both funds and

makes discretionary benefits determinations under

a plan governed by the Employment Retirement

Income Security Act of 1974 (“ERISA”), 29 U.S.C.

§ 1001 et seq., inherently acts under a conflict of

interest to be considered in the judicial review of a

denial of benefits under 29 U.S.C. § 1132(a)(1\B).

If the anSwer to the first question is “yes,” the

following question is presented: Whether the

appropriate means to consider a conflict of interest

of an insurance company in such an action is de

novo review, a “burden shifting” test, a “sliding

scale” test, or some other means.

hi

PARTIES TO THE PROCEEDINGS BELOW

The only parties to this proceeding are named in the

caption.

iii

TABLE OF CONTENTS

; Page

QUESTIONS PRESENTED ..............:::cccesesessseceecersessereees i

PARTIES TO THE PROCEEDINGS BELOV ............ ii

PETITION FOR A WRIT OF CERTIORAR lL .............. 1

et PO tciscccccetcctsccasnesstintoasantensiidettieyiiedadtens 1

FT BO crcecrcevccsscctesrsessevesencsvsenseventecieasovsoaneoteunees 1

RELEVANT STATUTORY rriOVISIONs..............006+ 1

I ITITITTTT iinctrrcencuscuisinadeinsaieititeithiansaseahbecehininssoreiaaniele 2

REASONS FOR GRANTING THE WRIT.................... 7

I. The Circuit Courts Are Intractably

Divided Over the Questions Presented................. 8

A. There Is A Deep Split Among The

Circuits Over Whether A Dual-

Role Insurer Is Subject To An

Inherent Conflict To Be

Considered In The Judicial

Review Of A Denial Of Benefits .............. 10

B. There Is A Three-Way Split

Among Eleven Circuits Over What

Approach Applies When A Conflict

TR NTI ainsi cisiniensiatetiscelidlamiseiiensinntcdadtinstesontal 17

Il. The Questions Presented Are Frequently

Litigated And Of Manifest National

i icicisccanictitcninincsmisinseibibusiiinacctbmnimytiinsntios 22

A. Each Year, There Are Millions Of

ERISA-Governed Benefits

Determinations, Resulting In

Thousands Of Lawsuits

Challenging Denials Of Benefits ............. 22

B. The Objectives Of ERISA To

Protect Private Employee Benefits

Are Thwarted By The Decision

SEETIITD iccoicelindinssiasindetieianinshesaiiiccdalananalsiiihebamaiidinaial 23

SI esokhkn cissinibetaddnniecicticainhonisieeiini ita cancer cemecls 28

iv

TABLE OF AUTHORITIES

Page(s)

Cases:

Aetna Health Inc. v. Davila, 542 U.S. 200, 124

is Ga Se CIGD cirhinvecsinsichetblinionasctvedasabeeveiioie 7, 23

Alford v. Dch Found. Group Long-Term

Disability Plan, 311 F.3d 955 (9th Cir.

De pciiaslaliciticnsocimaahetlahiandaitubeatidioansiitancastnitsicusastteth 14

Armstrong v. Aetna Life Ins. Co., 128 F.3d

SOR CE BI i hicicccstidetiibivbetciietei 11, 12, 20, 26

Atwood v. Newmont Gold, 45 F.3d 1317 (9th

CUE See actos ctncscanisidnensintnttabitoinpensabiohdia 13, 14, 19

Black & Decker Disability Plan v. Nord, 538

Cs Oe CD tet sritienvissenniepibidieninedtcapisiptidiascheasta 14

Brown v. Blue Cross & Blue Shield of Ala., 898

F.2d 1556 (11th Cir. 1990) ............sscccsesesees passim

Carr v. Reliance Std. Life Ins. Co., 363 F.3d

Ge FO Gs Fa chen tcecsieipithinitnitssiadctinlidamsidesesint 11

Central States, Southeast & Southwest Areas

Pension Fund v. Central Transport,

Bret g BT TTD. TE CGO) ccsenctacsntnscnsvinushteisieenscion 25

Darland v. Fortis Benefits Ins. Co., 317 F.3d

Be CE Ny ED icin ce ncpicaitsetuarsrcsdasnacdbaddedustdubbin 11

Dawvolt v. Executive Comm. of O'Reilly Auto.,

206 F.3d 806 (8th Cir. 2000) .0..... eee eeceseteeeeees 20

DeFelice v. American Int Life Assur. Co. of

New York, 112 F.3d 61 (2d Cir. 1997).............06 13

Doe v. Group Hospitalization v. Med. Servs., 3

F.3G SO (46B Che. 1968) nnccccosersoverecesesevccercerse passim

Page(s)

Doe v. Travelers Ins. Co., 167 F.3d 53 (1st Cir.

lee cistiasctncinictniantititestinniadiaiiieiaioningiecentds 18

Doyle v. Paul Revere Life Insurance Co., 144

op jt te | =a 11,14

Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

| EEE ERS ane eee So passim

FMC Corp. v. Holliday, 498 U.S. 52 (1990)............c00000 23

Fought v. Unum Life Ins. Co. of America, 379

F.3d 997 (8th Cir. 2004) .............cccccecceeees 15, 17, 19

Gismondi v. United Techs. Corp., 408 F.3d 295

Ey ney Seeds cheeanshecnveepndcaeatatampsbeaieiiigieienbameets 10

Glenn v. Life Ins. Co. of N. Am., 240 F.3d 679

Le S| RRERC ERE ess Pe 14

Harden v. Am. Express Fin. Corp., 384 F.3d

ES SC Se 20

HCA Health Services of Georgia, Inc. v.

Employers Health Ins. Co., 240 F.3d

Se CE GAIN Petree tencentesintnibisadnccetnisiueitlinnineebecteees 20

Johnson v. California, 125 S. Ct. 1141 (2005)............... 21

Kirk v. Readers Digest Ass’n, 57 Fed. Appx. 20

EERE ES EL Re 13

Kosiba v. Merck & Co., 384 F.3d 58 (3d Cir.

BENE NS SEER a ae 14, 20

Leipzig v. AIG Li; Ins. Co., 362 F.3d 406 (7th

SEG: SINT caccceaicineeinsischeiecupniicionUeaieiidagiedadiiend ttasteaialicigeveanill 6

Meinhard v. Salmon, 164 N.E 545 (N.Y. 1928)............. 25

Mers v. Marriott Int'l Group Accidental Death

& Dismemberment Plan, 144 F.3d 1014

GREER RS ad alae 6, 11, 12, 17

Page(s)

Miller v. Metropolitan Life Ins., 925 F.2d 979

FE Sy a icccciniariniesisiceniinctesasicnnabicniadinndiies 10, 17

NLRB v. Amax Coai Co., 453 U.S. 322 (1981)............... 25)

Nord v. Black & Decker Disability Plan, 356

F.3d 1008 (9th Cir. 2004) .0........ccceseeceeceeeees 14, 19

Pagan v. NYNEX Pension Plan, 52 F.3d 438

GR eh, SIU itclinitinincniinichisanemedtienciiousineseniniupanies 12

Peach v. Ultramar Diamond Shamrock, 109

Fed. Appx. 711 (6th Cir. 2004) 00.0.0... cccccseeeersees 14

Periman v. Swiss Bank Corp. Comprehensive

Disability Protection Plan, 195 F.3d 975

CE tee SUED Acntinirycadidcbiicipmibennionnameniighdaiingnd 5,11

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41

RSE See ee sae ase SNe 24

Pitman v. Blue Cross & Blue Shield of Okia.,

24 F.3d 118 (10th Cir. 1994) 00.0.0... eeeeeeeee 10, 11

Pulvers v. First UNUM Life Ins. Co., 210 F.3d

I, I ilies eiintens inti ctebitaladieseeteneddiatiae 12°

Rush Prudential HMO Inc. v. Moran, 536 U.S.

Pe nicchteptcinteeittitiianntinieadathiseibinceds 14, 20, 21

Schatz v. Mutual of Omaha Ins. Co., 220 F.3d

GE ae ic Se ticeetnseciheetitianninitiniintniciinieniie 13

Snow v. Standard Ins. Co., 87 F.3d 327 (9th

ME ME MRSA AP SRLS SET 13

Stup v. UNUM Life Ins. Co. of Am., 390 F.3d

ee I Si inchciiccriniincecentcicccnpeiaiiiibianiins 14, 20

Sullivan v. LTV Aerospace & Defense Co., 82

fe: Fe ST eer rerem 19

Page(s)

Trem » v. Bell Indus., Inc., 196 F.3d 970 (9th

CR, Be eiicieninsssenssininseriascieneaidinanients 13, 16, 19, 21

Varity Corp. v. Howe, 516 U.S. 489 (1996)..........cccceeeeee 27

Vega v. Nat'l Life Ins. Serv., Inc., 188 F.3d 287

GED GS. See beccasniescnptepneiedetiansieiamesticngieiiaations passim

Wesiern Industries v. Vilter Mfg. Co., 257 Wis.

SEP Cee aes BUD cicivincinensctininsctadctnaiiitiidiaininaiiiaitiia 25

Whitney ». Empire Blue Cross & Blue Shield,

BOG Fe SIO GR Cat a iscsccentsioscctadtadweccucttortsc 12

Williams v. BellSouth Telecomms., Inc., 373

se eb th Be % SORA R eon 14

Woo v. Deluxe Corp., 144 F.3d 1157 (8th Cir.

iii ictutiapiicincienanviitensnshiitiaiiciensiteihiadiidiicdeaiea 12, 13, 20

Wright v. R. R. Donnelley & Sons Co. Group

Benefits Plan, 402 F.3d 67 (1st Cir.

TIPU dusecvectestenicnubidienittdutcapiaialeaiianamininie ta 9,14

Yeager v. Reliance Standard, 88 F.3d 376 (6th

CARTE Meee Diceitepinsibcinhantelahechakitibilliammaiesiadhetinlldauaaidin 10

Statutes, Regulation, and Rule:

Sr Eras ey Rae a iccstrccssadsenisdgenaheennsinbmmammiommmadiambdions 1

APD TEE sehiinitcs scdsatediasiinscaiinsiamnnda’ Scaiinbilndaibabian 5

Eide © Ts ectitintntimtviccicimiiinniantaaiitantieiaimininiedidens i, 8

ee AsO ED wsccincierinsertsteiienrinsancisaanedibaiadaaadmmaa 8

Be eS Ded tarvcnteceanttteinsnintnel sdescittncasanisicicisunasiat tian 22

- pik To Ba’) ttf \ SRR CCRMeE Tenn ORE: 24

a Erte ean We UM OLRILIED sccivcnssensnnmetissonssisninnsannesmnniiaad 25

BPD. § SD ceccccisntnnnsitienitinssinntionsintonaamitisaiial 25

Page(s)

Suey MP IEIEAY OF EEL DUIND cceccccsevcrsvescstecssescecessonteusees passim

EL SIR ce ee eR Ae oF 5

SS SLR aa a aa: sere 16

a EIS RTI RAS a OE 5

Miscellaneous:

Employee Retirement Income Security Act of

1974; Rules and Regulations for

Administration and Enforcement;

Claims Procedure, 65 Fed. Reg. 70246

ECS Sareea eee S 23

G. Bogert, Trusts and Trustees § 543, at 475-

I 25

Motion of America’s Health Insvrance Plans

and the American Council of Life

Insurers, Fought v. Unum Life Ins. Co.

Of America, cert. denied, 125 S. Ct.

II tis III sicdennndnicettnacsinmathaiirtsnamedpecinein 15

Paul J. Schneider & Barbara W. Freedman,

ERISA: A Comprehensive Guide

§§ 1.02-1.05 (Aspen 2d ed. 2003)..............:ccccceeeeees 8

Peter A. Meyers, Comment, Discretionary

Language, Conflicts of Interest, and

Standard of Review for ERISA

Disability Plans, 28 Seattle U. L. Rev.

a edudicnonlonion 23

Peter G. Gosselin, The New Deal; The Safety

Net She Believed In Was Pulled Away

When She Fell, Los Angeles Times,

po a Se 27

Petition for Writ of Certiorari, Fought v.

Unum Life Ins. Co. of America, cert.

denied, 125 S. Ct. 1972 (May 2, 2005).....

Restatement (Second) of Trusts § 170(1) cmts.

EE sistinnicittlesccsinscivsiltiminmmattehidieninibers

Restatement (Second) of Trusts § 187 (1959) .....

Restatement (Second) of Trusts § 187 cmt. d

(Fie rwertiircrarencstingrioniacncgenapivonstanetintetenaenes

Robert L. Stern et al., Supreme Court Practice

651-52 (Sth ed. 2002)..........cesessseerereersees

Trial Brief, Schneider v. Provident Life &

Accident Ins. Co., No. C 97-4646 SC

(N.D. Cal. Apr. 5, 1999).......c.cccccccccesssoveres

PETITION FOR A WRIT OF CERTIORARI

Petitioner Elvis Kobs respectfully petitions for a writ

of certiorari to review the judgment of the United States

Court of Appeals for the Seventh Circuit in this case.

OPINIONS BELOW

The opinion of the Court of Appeals for the Seventh

Circuit (Pet. App. la-9a) is published at 400 F.3d 1036.

The court of appeals’ order denying rehearing and

rehearing en banc (Pet. App. 21a) is unpublished. The

opinion of the district court (Pet. App. 10a-18a) is

unpublished.

JURISDICTION

The judgment of the court of appeals was entered on

March 16, 2005. Petitioner’s timely request for rehearing

and rehearing en banc was denied on April 26, 2005. On

July 11, 2005, Justice Stevens granted an extension of

time in which to file the present petition until

September 23, 2005. This Court has jurisdiction

pursuant to 28 U.S.C. § 1254(1).

RELEVANT STATUTORY PROVISIONS

In relevant part, 29 U.S.C. § 1132(a)(1\B) states:

(a) Persons empowered to bring a civil action

A civil action may be brought--

(1) by a participant or beneficiary--

xk *

(B) to recover benefits due to him under the terms of

his plan, to enforce his rights. under the terms of the

plan, or to clarify his rights to future benefits under

the terms of the plan[.)

2

STATEMENT

This case presents the question whether an insurance

company that funds and makes discretionary t«nefits

determinations (hereinafter, a “dual-role insurer”) under

a plan governed by ERISA inherently acts under a conflict

of interest to be considered in reviewing denials of

benefits under 29U.S.C. §1132(a)(1)(B). Since this

Court’s decision in Firestone Tire & Rubber Co. v. Bruch,

489 U.S. 101, 115 (1989), this question has deeply divided

eleven circuit courts of appeal. Acknowledging this

square circuit conflict, the Seventh Circuit decided in this

case that a dual-role insurer does not act under such an

inherent conflict.

Because, contrary to the judgment of the Seventh

Circuit, a dual-role insurer does act under such an

inherent conflict of interest, this case presents the

additional question of whether the appropriate means to

consider the conflict is de novo review, a “burden shifting”

test, a “sliding scale” test, or some other means. The

question of the appropriate consideration of a conflict of

interest has also deeply divided the circuits, with at least

three different prevailing approache- in effect among

eleven circuit courts.

1. In January 2002, while removing Christmas

ornaments from the roof of his house, 50-year-old

Petitioner Elvis Kobs fell 25 feet onto concrete pavement

and suffered severe injuries, including memory loss,

cognitive difficulties, recurring headaches, and

musculoskeletal injury to his back and legs. Pet. App. 1a,

54a-7la. At the time of his fall, Mr. Kobs was employed

as a business manager at an auto dealership, earning

about $85,000 per year. Id. at 47a-49a. Mr. Kobs was a

participant in his employer’s group disability plan

(hereinafter, the “Plan”), which is administered by the

United Wisconsin Insurance Company (““UWIC”). Id. at

la. UWIC is a dual-role insurer in that it administers the