Free Statement - District Court of Arizona - Arizona

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40 North Central Avenue Phoenix, Arizona 85004-4429 Ann-Martha Andrews (012616) Phone: (602) 262-5707 Fax: (602) 734-3764 Email: [email protected] Thomas Klinkel ( 010955) Phone: (520) 629-4428 Fax: (520) 879-4712 Email: [email protected] Scott Bennett (022350) Phone: (602) 262-5338 Fax: (602) 734-3816 Email: [email protected] Attorneys for Defendant Hartford Life & Accident Insurance Company

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA David L. Mazet, ) ) Plaintiff, ) ) vs. ) ) Halliburton Company Long-Term Disability ) ) Plan; and, Hartford Life & Accident ) Insurance Company, ) ) Defendants. ) ) ) ) ) No. CV 04-00493 PHX-FJM DEFENDANTS' STATEMENT OF FACTS IN SUPPORT OF THEIR CROSS-MOTION FOR SUMMARY JUDGMENT

The defendants submit the following statement of facts in support of their crossmotion for summary judgment. Unless otherwise noted, the exhibits cited are the three that constitute the administrative record, which the parties filed with this Court on March 9, 2005 (docket No. 20). 1. The plaintiff, David Mazet, was injured on the job in August of 2000. (Ex.

2, claim file, at CF-00444 and CF-00520) 2. He later made a claim for LTD benefits under the employee-benefit plan of

his employer, Halliburton. (Ex. 2, at CF-00681-690)

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3.

Halliburton funded its LTD benefits by purchasing a group insurance policy

from Hartford. (Exhibit 1, policy (aka plan document), at POL00001-54) 4. The Hartford policy provides monthly benefits if a participant becomes

"disabled." The definition of "disabled" changes over time. During the 180-day elimination period (waiting period) and then the first 24 months of benefit payments, "Disability or Disabled means that . . . you are prevented by . . . accidental bodily injury . . . from performing one or more of the Essential Duties of your Own Occupation, and as a result your Current Monthly Earnings are no more than 80% of your Indexed PreDisability Earnings." After a plan participant has received 24 months of benefits, the definition changes from an "own occupation" standard to an "any occupation" standard: "Thereafter, you must be so prevented from performing one or more of the Essential Duties of Any Occupation." (Ex. 2, at CF-00095) 5. In this case, Hartford accepted Mazet's claim. It started paying him benefits

on February 26, 2001, after the expiration of the policy's 180-day elimination period. (Ex. 2, at CF-00517-520) 6. The policy's monthly benefit is 60% of a participant's pre-disability

earnings. (Ex. 1, Policy, at POL-00020 (stating that the "Initial Benefit Percentage" is "60% of Monthly Income Loss")). 7. Halliburton had informed Hartford that Mazet's monthly pre-disability

earnings were $4,524.09. (Ex. 2, at CF-00682 and CF-00520) 8. Hartford therefore paid Mazet a monthly benefit of 60% of that--$2,714.46.

(Ex. 2, at CF-00520) 9. Hartford continued to pay benefits for the entire 24-month, "own

occupation" period. But the company discontinued benefits effective February 26, 2003 because it determined that Mazet did not qualify under the more restrictive, "any occupation" definition of disability that went into effect at that point. (Ex. 2, at CF-00190-

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94) 10. 11. Mazet then brought this lawsuit. (Complaint, docket No. 1) The parties filed cross motions for judgment on the administrative record.

(Docket Nos. 21 and 23) 12. This Court held, in an initial order, that the abuse-of-discretion standard of

review applies. (Order dated July 15, 2005, docket No. 38) 13. Approximately one month later, this Court granted judgment on the

administrative record in favor of the defendants, Hartford and the Plan. (Order dated August 18, 2005, docket No. 40) In that second order, this Court held that Hartford did not abuse its discretion by deciding that Mazet did not qualify for benefits under the "any occupation" standard. (Id. at 3-5) 14. The Court also remanded an issue that Mazet had raised for the first time in

his motion: Whether Hartford "properly calculated Mazet's predisability earnings when determining his benefits during the initial 24 month disability period [the "own occupation" period]." (Id. at 4) 15. Mazet appealed this Court's decision to the Ninth Circuit. Upon the

defendants' motion, that Court dismissed the appeal for lack of a final order because of the remanded issue. (Ninth Circuit Judgment, docket No. 52) 16. This Court subsequently issued an order that stated, in relevant part: "This

entire case is remanded to the plan administrator [Hartford] to determine if plaintiff's predisability wages were properly determined and if he was underpaid during the initial twenty-four month period." (Order dated February 9, 2007, docket No. 53) 17. Mazet did not submit any new material for Hartford to consider on remand.

But rather than simply relying on the documents contained in the administrative record, Hartford sent a letter to Halliburton that asked for Mazet's monthly rate of basic earnings. To assist Halliburton, the letter provided the relevant policy provisions:

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 (Id. at CFsupp-00116) 19. This monthly rate of basic earnings ($4,228) is actually lower than the (Supplement to the Administrative Record, docket No. 56, at CFsupp-00117) 18. In response, Halliburton informed Hartford that on the relevant date

(October 1, 1999), Mazet's monthly rate of basic earnings was $4,228:

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monthly rate that Hartford used during the claim process ($4,524.09). The higher figure was provided by Halliburton during the claim. (Ex. 2, at CF-00682) 20. The monthly rate of basic earnings provided by Halliburton does not appear

to include Mazet's "deferred compensation." Mazet's W-2 wage and tax statement for 1999 (which he did not provide to Hartford, either during the claim or on remand) indicates a "Code D" amount of $8,785.65. The 1999 form gives no indication what "Code D" is. (See 1999 W-2 form, Exhibit 3 to Mazet's Statement of Facts In Support of Motion for Summary Judgment Following Administrative Decision on Remand, docket No. 58, at page 12 of 19) 21. But Mazet's W-2 wage and tax statement from the previous year indicates

that "Code D" includes "DEF COMP 401(k)." (See id. at page 11 of 19) Presumably "DEF COMP" is an abbreviation for deferred compensation. But Mazet's wage and tax statement gives no indication exactly what Mazet's deferred compensation includes. 22. According to Black's Law Dictionary, the phrase deferred compensation has

a number of possible meanings: deferred compensation. 1. Payment for work performed, to be paid in the future or when some future event occurs. 2. An employee's earnings that are taxed when received or distributed rather than when earned, such as contributions to a qualified pension or profit-sharing plan. Black's Law Dictionary, Compensation (8th ed. 2004). 23. On remand, Hartford considered Mazet's argument that his deferred

compensation should count as part of his monthly rate of basic earnings. (Mazet had made this argument in his briefing to this Court; he submitted no letter or other documents to Hartford for the remand.) Applying the policy's definition of Monthly Rate of Basic Earnings, Hartford determined that deferred compensation does not count because it is not "regular monthly pay from the Employer . . . ." (Supplement to the Administrative

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Record, docket No. 56, at CFsupp-00117) 24. Mazet then filed a motion for summary judgment, which challenges

Hartford's decision. (Docket No. 57) 25. This Court previously held that, because the Plan document unambiguously

grants Hartford discretion in making claim decisions, the abuse-of-discretion standard applies. (Order dated July 15, 2005, docket No. 38) 26. The policy states that certain benefits are offset against (deducted from)

LTD benefits. Among the benefits that are offset are any "retirement benefit from a Retirement Plan that is wholly or partially funded by employer contributions . . . ." But any portion of retirement benefits "that was funded by your after-tax contributions" is not offset. (Ex. 1, policy, at POL-00026) 27. For example, suppose a plan participant purchases an individual disability

insurance policy in order to supplement the LTD benefits available under the Halliburton plan. And suppose that employee becomes disabled and collects benefits under both the Halliburton plan and the private policy. The private insurance benefits are not subject to an offset under the Halliburton plan. (Id. (listing the types of funds that are subject to an offset; private disability insurance benefits is not on the list)) 28. The second flaw in Mazet's argument is that it assumes, once again, that his

deferred compensation includes only his own, voluntary contributions to his 401(k) account. As discussed above, the record contains no support for that argument. Based on the record, it is equally possible that all of Mazet's deferred compensation came from Halliburton, and Mazet could not have chosen to receive it in his paycheck instead. And if that were the case, then the deferred compensation, when ultimately paid out to Mazet, would be offset against plan LTD benefits. (Id. (stating that "retirement benefit[s]" are offset if they are "wholly or partially funded by employer contributions")) 29. During the claim process, Hartford determined that Mazet is capable of

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performing at least five occupations, all of which have a monthly earnings potential of $3,103.03. (Ex. 2, at CF-00205) RESPECTFULLY SUBMITTED on August 13, 2007. LEWIS AND ROCA LLP s/Scott M. Bennett Ann-Martha Andrews Thomas Klinkel Scott M. Bennett Attorneys for Defendants CERTIFICATE OF SERVICE I hereby certify that on August 13, 2007, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing of the following CM/ECF registrants: Randolph G. Bachrach, Esq. Law Offices of Randolph G. Bachrach 5103 East Thomas Road Phoenix, Arizona 85018 Attorneys for Plaintiff By

s/Michelle T. Gallegos

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