Free Response to Motion - District Court of Arizona - Arizona

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40 North Central Avenue Phoenix, Arizona 85004-4429 Stephen M. Bressler, State Bar No. 09032 Direct Dial: (602) 262-5376 Direct Fax: (602) 734-3742 E Mail: [email protected] Ricki L. Cohen, State Bar No. 024884 Direct Dial: (602) 262-5759 Direct Fax: 602 748-2502 E Mail: [email protected] Attorneys for Defendants

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 RESPONSE TO MOTION FOR REMAND TO THE PLAN ADMINISTRATOR, OR, ALTERNATIVELY, FOR DE NOVO REVIEW

Plaintiff incorrectly asserts that Hartford failed to "index" his pre-disability earnings. In fact, Hartford did index his pre-disability earnings when analyzing whether he was eligible for continuing benefits during the "any occupation" period. This is evidenced by the documents contained in the administrative record ­ documents that Plaintiff never requested before filing his motion with this Court. Plaintiff mistakenly assumes that this indexing was also to affect the calculation of his monthly benefit. The plan does not provide for that. Plaintiff's motion sets forth only the plan's definitions for disability and indexing. It fails to include the operative plan language regarding the calculation of the monthly benefit. We set forth the language below. As the Court will readily see, the plan does not call for indexing pre-disability earnings when calculating the monthly benefit. It requires indexing to be done only when determining whether a participant who is earning

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income is still disabled within the meaning of the plan.1 During the first 12 months a participant is disabled, the plan calculates the monthly benefit as follows: multiply the pre-disability earnings by the initial benefit period percentage (which is 60%). In other words, the plan pays 60% of the predisability earnings ­ not a percentage of "indexed pre-disability earnings." During the first, year, it does not reduce this amount if the participant has returned to work and is earning money (unless the current monthly earnings and the monthly benefit exceed what the participant was earning before the sickness or injury). As the Court can see, there is no indexing.

See Plan, p. 24, CF-00110, Exhibit 1 to Defendants' Statement of Facts in Support of Cross-Motion for Summary Judgment, filed August 13, 2007. After the participant is disabled for 12 months, the plan provides a different formula: multiply the monthly income loss by the initial benefit period percentage (60%). Per the plan's definitions, the monthly income loss is the pre-disability earnings less the current monthly earnings. Id. at 10. Unlike the calculation during the first year,
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This benefit is provided as an incentive for those who are otherwise disabled to return to some form of employment.
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if a participant returns to work and earns money, this reduces the monthly benefit. But again, there is no indexing.

Id. at pp. 24-25 Rather, the indexing comes into play when determining whether a participant is disabled under the meaning of the Plan. During the "own occupation period" (the elimination period and the next 24 months) disability is defined to mean that the participant is not earning more than 80% of his or her indexed pre-disability earnings.
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Thereafter, during the "any occupation" period, a participant is not disabled if his earning potential is greater than 60% of his or her indexed pre-disability earnings. This is where the definition that Plaintiff cited in his motion becomes relevant.

Id. at 9. In the Court's February 5, 2008 order, it ruled that Plaintiff's deferred compensation (i.e., his contributions to his 401(k) plan) should be included in the predisability earnings. The Court remanded the claim with instructions to recalculate this amount. And the Court ordered Hartford to pay Plaintiff any difference between the revised calculation and the amount he had already received in benefits. The Court also instructed Hartford to determine Plaintiff's eligibility for continuing benefits during the "any occupation" period based on the revised calculation of his pre-disability earnings as discussed in the opinion. Hartford complied with the Court's order. It recalculated the pre-disability income, including the deferred compensation. Plaintiff does not dispute that calculation.
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Hartford determined that Plaintiff was owed an additional $5,120.37. And though not required by the plan or by the Court,2 Hartford voluntarily paid interest on this amount. This was an additional $5,897.45. Hartford did not index the pre-disability earnings when calculating the monthly benefit, because the plan does not provide such a benefit to its participants. Hartford explained its calculations to Plaintiff's counsel in a letter dated May 1, 2008. When explaining Plaintiff's ineligibility for continuing benefits during the "any occupation" period, which was based on the revised calculation of his pre-disability earnings, Hartford informed him that it indexed those pre-disability earnings:

The plaintiff's earnings potential in the occupations identified far exceeds 60% of his indexed pre-disability earnings, and thus he did not meet the plan's definition of disabled during the any occupation period. Under the plan, the index adjustment to pre-disability earnings is to occur "January 1st each year after you have been Disabled for 12 consecutive months...." The Hartford representative's notes reflect she made these calculations for January 2002 and 2003:

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To deny or award prejudgment interest is within the Court's discretion. Landwehr v. Dupree, 72 F.3d 726, 739 (9th Cir. Or. 1995).
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These notes were contained in the claim file, yet Plaintiff failed to request them before filing his motion. Nonetheless, these notes were provided to the Plaintiff's counsel before filing this response. Unfortunately, he could not be persuaded to withdraw the motion. Further evidence corroborating Hartford's use of indexed pre-disability earnings to determine Plaintiff's continuing disability status exists in a progress note entered into Hartford's computer by the claims representative. Harford requires such notations to be entered contemporaneously with completion of the noted task. The claims representative noted:

See attached Exhibit A. Even if Plaintiff's position had merit, which it does not, his motion is unnecessary. Hartford's letter of May 1, 2008 offered him an opportunity to seek an administrative appeal under ERISA if he disagreed with Hartford's decision.

An order of remand is unnecessary. As to Plaintiff's alternative request for a de novo review based on the bald assertion that Hartford ignored the indexing provision and did not exercise discretion, we
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have shown that Hartford did not ignore the plan's indexing provision. It exercised discretion by determining that because Plaintiff's earnings potential far exceeded 60% of his indexed pre-disability earnings, he did not meet the plan's definition of disability. Plaintiff is confused and mistaken in his belief that the plan language requires the use of indexed pre-disability earnings when calculating the monthly benefit. Where Hartford exercised discretion, the "abuse-of-discretion standard" remains applicable. Gatti v. Reliance Standard Life Ins. Co., 415 F.3d 978 (9th Cir. 2005). In summary, the plan requires Hartford to use indexed pre-disability earnings when determining whether Plaintiff was disabled. The administrative record shows that Hartford did this. The plan does not require Hartford to use indexed pre-disability earnings when calculating the disability benefit amount. Plaintiff's motion should be denied. RESPECTFULLY SUBMITTED this 14th day of July, 2008. LEWIS AND ROCA LLP

By s/Stephen M. Bressler Stephen M. Bressler Ricki L. Cohen Attorneys for Defendants

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CERTIFICATE OF SERVICE I certify that on July 14, 2008, 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

s/Michelle T. Gallegos

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