"> JUNE 2008 BAD FAITH CASES DENIAL LETTERS DISCOVERABLE WHERE 3RD PARTY VENDOR & DR. REVIEWING FILES MAY NOT BE QUALIFIED; BUT EVALUATION DOCUMENTS NOT DISCOVERABLE (Philadelphia Federal) - Fineman, Krekstein, & Harris

JUNE 2008 BAD FAITH CASES DENIAL LETTERS DISCOVERABLE WHERE 3RD PARTY VENDOR & DR. REVIEWING FILES MAY NOT BE QUALIFIED; BUT EVALUATION DOCUMENTS NOT DISCOVERABLE (Philadelphia Federal)

    

In Santer v. Teachers Insurance and Annuity Association, the case arose out of the discontinuance of disability benefits that were being paid to the Plaintiff.  Plaintiff had developed severe and violent vertigo and nausea, which was subsequently diagnosed as an unspecified peripheral vestibular dysfunction, a dysfunction of the inner ear, which caused her to cease working at the end of January 1994.  Plaintiff had been receiving disability benefits from her employer that were administered by Defendant, Teachers Insurance and Annuity Association (“TIAA”).  TIAA sold its rights to administer its disability claims to Defendant, Standard Benefits Administrators (“Standard”), and Standard began administering the Plaintiff’s benefits in March of 2003.  Standard subsequently arranged a functional capacity evaluation by a third party vendor and an independent medical examination by a doctor.  Standard also conducted surveillance on Plaintiff.  Following the findings of the functional capacity evaluation, the independent medical examination and the surveillance footage, Standard terminated Plaintiff’s disability benefits in June 2005.  Plaintiff initiated this lawsuit in May 2006.  In June 2006, Standard reinstated her benefits and provided her with back pay for the period of her termination.  Plaintiff continued its action, seeking damages for breach of contract, breach of covenant of fair dealing, and bad faith pursuant to 42 Pa.C.S.A. § 8371.

Before the court was the Plaintiff’s Motion to Compel Production of Documents in three categories:  1) documents relating to TIAA and Standard’s pre- and post-transaction evaluations of the disability claims business block TIAA sold to Standard; 2) documents relating to Standard’s performance evaluations of the units and individuals handling Plaintiff’s claim; and 3) claims denial letters from the doctor and third party vendors who performed Plaintiff’s independent medical examination and functional capacity evaluation on Standard’s behalf.  The Court reviewed the requests to determine if:  1) the information sought was sufficiently relevant to outweigh the burden of its production; and 2) the information sought was applied in the handling of Plaintiff’s insurance claim.  Addressing the transaction evaluations, the Court noted that the Plaintiff argued that such documents are relevant in bad faith litigation because they might contain information indicating TIAA and Standard’s state of mind regarding what they hoped to gain from the purchase and sale of the disability claims, and how they sought to accomplish those goals.  The Court noted that corporate state of mind evidence is sometimes relevant, but, in this case, Plaintiff had failed to produce some hint that Defendants applied the alleged bad faith practices in the handling of her specific case.  Despite Plaintiff’s arguments, the Court found no reason to order the discovery of Defendants’ transaction evaluations.  Addressing the performance evaluations, the Court noted that the Plaintiff argued that such requests are appropriate because evidence of improper pressures to evaluate claims on reasons other than their merits is relevant in bad faith cases.  In this case, it was argued that the Defendants set ceilings on claims payments and tied employee bonuses to their ability to enforce those limits.  The Court disagreed and stated that, despite Plaintiff’s efforts to characterize Defendant’s documents, the Court finds no evidence of a conspiracy for corporate profits.  Addressing the claims denial letters, the Court noted that the Plaintiff argued the use of biased experts, improper use of experts, or the use of inappropriate evaluative criteria, can support a claim for bad faith and punitive damages.  The Court found that Plaintiff had been able to connect some of the bad faith practices alleged to the particular requests at issue.  Evidence showed that the third party vendor and doctor, who were retained to review files and were the basis of denial letters, may not have been qualified to perform reviews.  As a result, the Court ordered the production of all claim denial letters arising from the reviews of the third party vendor and doctor, redacted to exclude information concerning other insurance claimants.

Date of decision:  March 18, 2008

Santer v. Teachers Insurance and Annuity Association, United States District Court for the Eastern District of Pennsylvania, Civil Action No. 06-CV-1863, 2008 U.S. Dist. LEXIS 21767 (E.D. Pa. March 18, 2008) (Golden, J.). 

 

R.E.M.