Parkman v. Prudential Insur. Co. of America, 2006 U.S.App.LEXIS 5131 (8th Cir., March 1). The plaintiff, who worked at a ''medium'' duty job for Armstrong World Industries, sought disability benefits after experiencing thumb and elbow problems, along with acute lumbar spasms.

Because conservative therapy failed to improve her condition, the treating doctor referred Parkman to a rheumatologist who thought her condition was ''probably'' consistent with carpal tunnel syndrome and fibromyalgia. The plaintiff also underwent a functional capacity evaluation, which showed she could only perform ''light'' work. Another examining doctor also reported to Prudential that Parkman was limited to light duty. Reviewing those reports, a Prudential physical therapist reported that Parkman's medical findings did not preclude her from returning to her job; and the insurer denied the claim. Parkman appealed and submitted reports from her two principal physicians. Reviewing those reports, Prudential's medical director found ''insufficient medical evidence of impairments that would preclude medium duty work.'' Summarizing his review of the medical records and his findings in a 10-page report, Prudential's medical director found inconsistencies in the FCE and in the medical evidence; and Prudential accepted the doctor's recommendations and upheld the denial. Parkman then filed suit, and included a claim for common law fraud; however, the district court dismissed the fraud claim as preempted by ERISA and granted summary judgment to the insurer on the underlying claim.

The 8th U.S. Circuit Court of Appeals affirmed. The court found the fraud claim ''relates to the administration of benefits'' and therefore ''falls within the scope of ERISA.'' *9. The court also ruled that the insurer properly denied benefits under a deferential standard of review. Citing the language in the plan's summary plan description reserving discretionary authority, the court upheld the insurer's conclusions, finding them supported by a ''reasonable explanation for its decision.'' Parkman protested that Prudential improperly required her to provide objective evidence of disability; however, the court cited Pralutsky v. Metropolitan Life Insur.Co., 435 F.3d 833 (8th Cir. 2006) for the proposition that it is not unreasonable for a plan administrator to require objective evidence. Moreover, the court was impressed by the report prepared by the insurer's medical director and its careful review of the records and clinical findings, and therefore found the decision supported by substantial evidence.

This short decision raises questions that should probably have merited additional discussion. Although the court quickly disposed of the fraud claim (although in fairness, it does not appear that fraud could be proven), in Trustees of the AFTRA Health Fund v. Biondi, 303 F.3d 765 (7th Cir. 2002), the court ruled that a common law fraud claim against a plan participant who failed to notify the plan of his divorce so that his wife was covered under COBRA and not as a beneficiary whose coverage extended beyond the COBRA period is not preempted by ERISA, even though the claim clearly had to do with the administration of benefits. If the plan could pursue such a claim against a claimant, there is no reason why an individual could not pursue such a claim against a plan.

As to the merits of the claim, a recent ruling by the Wisconsin Supreme Court offers some fascinating insight as to why the Prudential medical director's report should not have been accepted by the court as considered substantial evidence. In Gehin v. Wisconsin Group Insurance Bd., 278 Wisc.2d 111, 692 N.W.2d 572 (2005), the court disallowed reports from physicians who did not testify, and characterized those reports as uncorroborated hearsay under a doctrine known as the ''legal residuum rule.'' Although there were three dissents, both the majority and dissenting opinions focused on a U.S. Supreme Court case, Richardson v. Perales , 402 U.S. 389 (1971), which allows non-testifying doctors' reports to constitute substantial evidence in Social Security proceedings. However, in Social Security cases, a neutral fact finder makes decisions and the claimant has the right to cross-examine. Because the claimant lacked the opportunity to cross-examine, Gehin ruled that the doctors' reports failed to constitute substantial evidence.

The Gehin court said: ''The harm to claimants in having their income continuation insurance benefits terminated on the basis of controverted written hearsay medical reports, without an opportunity to cross-examine the authors of those reports exceeds the burden on the Group Insurance Board to call a witness to corroborate those hearsay medical reports.'' 692 N.W. at 590.

Although the dissenting justices, disagreed with the holding of Gehin, they discussed Perales in great depth and as justification for allowing the evidence which Gehin excluded, the court explained that as in Perales, the doctors were percipient witnesses. In fact, the dissent identified nine separate factors that allowed for a non-testifying doctor's report to be received into evidence in Perales that also applied in Gehin: the physician examined the claimant; the impartiality of the administrative agency evaluating claim; the clinical evaluation process was scientific; the range of tests performed; the presence of consistency among all of the medical reports; the claimant had the opportunity to request a subpoena to cross-examine the doctor; medical records are an exception to the hearsay rule; medical reports are reliable and have probative value; the sheer magnitude of administrative process — live testimony would make process too cumbersome.

However, in relating Gehin to Parkman and other ERISA cases involving disability benefits, not a single one of the Perales protections exists for ERISA claimants whose claims are being denied as the result of opinions received from reviewing doctors who have never examined the claimant and whose findings do not even arguably fall within the hearsay exception for statements made for the purpose of medical diagnosis or treatment. Fed.R.Evid. 803(4). Yet most courts routinely consider such reports to be substantial evidence without giving claimants an opportunity to contest the bias and underlying rationale inherent in such reports; with the exception of the 6th Circuit, which has begun questioning reviewing doctor reports ( Calvert v. Firstar Finance Inc., 409 F.3d 286 (6th Cir. 2005); Kalish v. Liberty Mutual/Liberty Life Assur.Co. of Boston, 419 F.3d 501 (6th Cir. 2005); and Evans v. UnumProvident Corp., 434 F.3d 866 (6th Cir. 2006)).

There is reason for concern. In the Gehin ruling, the Wisconsin Supreme Court cited the Mississippi Supreme Court's discussion in one of its rulings about non-testifying doctor reports being accepted as substantial evidence:

''Medical reports arguably have indicia of reliability and therefore seem to have probative force; they are furnished by independent, impartial experts and are arguably admissible as exceptions to the hearsay rule. Nevertheless, the reliability and probative force of the written medical reports in the present case are suspect. As noted by the Supreme Court of Mississippi in examining hearsay medical reports in the workmen's compensation context, it is quite likely that the bench and bar would be scandalized if this Court should approve the receiving in evidence of ex parte, unsworn statements of persons other than doctors, even in workmen's compensation cases.

''While doctors occupy an important role in our scheme of things, they are, after all, merely human, and may not be considered wholly free from the frailties that beset the rest of us. There is nothing, therefore, in the fact that a witness may be a member of the medical profession that reasonably may be said to justify his exemption from the requirements and restriction which would apply to others giving testimony in an adversary proceeding.'' 692 N.W.2d at 589 (citing Georgia Pacific Corp. v. McLaurin, 370 So.2d 1359, 1362 (Miss. 1979)).

Therefore, despite the fact that in this case Prudential's medical director wrote an extensive report, questions should have been asked about the report's reliability and the author's potential bias as a Prudential employee. The way courts evaluate employee benefit cases which are of crucial importance to claimants does not afford fairness or justice, and betrays the Congressional purpose in enacting the ERISA law, which was to protect claimants' rights and afford them remedies and access to the procedures available in federal court. 29 U.S.C. §1001(b). This case illustrates the need for the Supreme Court to reevaluate the entire ERISA regime.