Court Rejects “Overbroad” Discovery Requests, Ordering that Insurer Only Provide Limited Statistical Information

A federal district court in California has refused to order an insurance company to comply with a plaintiff’s “overbroad” discovery requests. The court, instead, only ordered the insurer to provide “some statistical discovery.”  

The Case 

An employee who was insured under an employer sponsored plan was fatally injured in a single vehicle accident after he left a casino, where he had been observed drinking three martinis. The insurer paid $250,000 in basic death benefits, but denied accidental death benefits based on an exclusion in the policy for a loss “(6) to which the insured’s acute or chronic alcohol intoxication is a contributing factor; or (7) to which the insured’s voluntary consumption of an illegal or controlled substance or non prescribed narcotic or drug is a contributing factor.” 

After the insurer was sued for the accidental death benefits under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the parties reached an impasse over certain of the plaintiff’s discovery requests. 

The plaintiff sought information pertaining to other claims made under accidental death and disability (“AD&D”) policies with an intoxication exclusion that involved a vehicular accident, over a five year period. In particular, the plaintiff requested the number of such claims that were denied based on the intoxication exclusion, and the number of times a toxicologist was retained. The plaintiff also sought the number of claims that were paid when the insured had a measurable amount of alcohol in his or her system, including the measured amount of alcohol and how alcohol was causatively related to the accident. Additionally, the plaintiff requested the number of claims that were denied when the insured had a blood alcohol level between 0.01 and 0.07, and the specific blood alcohol levels for those claims. 

The plaintiff argued that this discovery was necessary to assess the insurer’s conflict of interest. The insurer countered that the requests exceeded the permissible scope of ERISA discovery and were unduly burdensome and oppressive. 

The Court’s Decision 

The court explained that discovery generally was disfavored in ERISA actions because a primary goal of ERISA was “to provide a method for workers and beneficiaries to resolve disputes over benefits inexpensively and expeditiously.” Discovery may be permitted, the court continued, where there was a “structural conflict of interest,” which occurred when an insurer acted as both the plan administrator and the funding source for benefits – as was the situation in this case. 

The court then ruled that the majority of the plaintiff’s discovery requests were overbroad. The court denied the plaintiff’s request for specific, detailed information based on other insureds’ claims, explaining that this kind of information was “not particularly probative” of the effect of Reliance’s conflict of interest unless a finding could be made that it had wrongly denied the other claims. Moreover, the court continued, this was the kind of “extensive discovery into past claims” that was contrary to ERISA’s goal of resolving disputes over benefits inexpensively and expeditiously.  

The court then stated that, even assuming that the plaintiff’s requests were not overbroad, the burden on the insurer of producing this information outweighed the plaintiff’s potential benefit in receiving the information. The court reached this conclusion after noting that the insurer did not maintain a database that could be searched electronically to obtain the requested information; that the insurer would have to manually search each claim file for claims made under an AD&D policy for a five year period; and that it likely would take hundreds of hours to obtain the information and the cost of doing so would be prohibitive. 

The court recognized, however, that “some statistical discovery,” aimed at assessing whether the denial of benefits was tainted by the insurer’s conflict of interest, was appropriate. It then ordered the insurer to produce “general statistical data on the number of claims denied based on the alcohol exclusion,” limited to two years. 

Finally, the court rejected the plaintiff’s request for “all reports and/or evaluations” prepared by the insurer’s consultant, explaining that it already had provided relevant statistical data concerning this consultant to the plaintiff.

 The case is Cerone v. Reliance Standard Life Ins. Co., No. 13cv184-AJB (DHB) (S.D. Cal. Dec. 13, 2013).