Gavin v. Life Ins.Co. of North America

Gavin v. Life Ins.Co. of North America, 2013 U.S.Dist.LEXIS 28038 (N.D.Ill. February 25, 2013)(Issue: Standard of Review - Delegation of Discretionary Authority; Discovery). The plaintiff in this case, Lawrence Gavin, filed suit against the Life Insurance Company of North America ("LINA"), a CIGNA company, after his claim for disability benefits was denied. Before the merits could be addressed, the court asked the parties to brief the standard of review and scope of discovery. In this ruling, the court held the de novo standard of review was applicable; and that the scope of discovery was the same as that of any other civil action alleging breach of contract.

Even though the policy of insurance lacked discretionary language sufficient to trigger a deferential standard of review, the insurer nonetheless maintained that it was entitled to a discretionary authority based on language in an overarching plan document. Gavin's employer, Corn Products, International, promulgated a benefit plan that granted full discretionary authority to a "committee" appointed by the employer's board of directors. However, while ERISA permits the delegation of discretionary authority pursuant to 28 U.S.C. § 1105(c)(1), there was no indication that LINA was delegated such authority even though it served as "claims administrator," since there was no indication that the discretion was delegated. The court found that in the absence of an administrative services agreement between the employer and LINA, "LINA is only authorized to 'provide advice in relation to the determination of eligibility for participation in and benefits under [the terms of the Policy].'" (Plan Document § 8.3.).

Although LINA also tried to argue that the summary plan description evidenced delegation, the court determined that the SPD "tends to suggest an attempted delegation of the Committee's discretionary authority to LINA for purposes of determining benefits awards under the terms of the Policy, but the SPD's language, without more, does not mean that this attempted delegation was in fact valid." (emphasis in original). Further, while the court pointed out the Seventh Circuit has not decided whether express delegation is required, other circuits have imposed such a requirement - McKeehan v. Cigna Life Ins. Co., 344 F.3d 789, 793 (8th Cir. 2003); Rodriguez-Abreu v. Chase Manhattan Bank, 986 F.2d 580, 584 (1st Cir. 1993). Nonetheless, the court determined it did not have to resolve the question because "the plain language of the Plan requires an 'administrative agreement' to effect the delegation of 'Plan administrative duties' to a Claims Administrator such as LINA." (Plan Document § 8.3.). Hence, the failure to follow the Plan's express procedures for delegating responsibility barred LINA from assuming discretionary authority. Consequently, the de novo standard of review was applicable (citing McKeehan, 344 F.3d at 793 (declining to apply discretionary review where "LINA failed to present evidence that its contractual agreement with the current Plan sponsor included the grant of such discretion"); Sanford v. Harvard Indus., Inc., 262 F.3d 590, 597 (6th Cir. 2001) (de novo review applies "[w]hen an unauthorized body that does not have fiduciary discretion to determine benefits eligibility renders such a decision"); Sharkey v. Ultramar Energy Ltd., 70 F.3d 226, 229 (2d Cir. 1995) ("Where an unauthorized party makes the determination, a denial of plan benefits is reviewed under the de novo standard."); Nelson v. EG & G Energy Measurements Group, Inc., 37 F.3d 1384, 1389 (9th Cir. 1994) ("[B]ecause we do not have an interpretation of the Plan by the Administrative Committee, to whom such authority was granted by the Plan, there is no appropriate exercise of discretion to which to defer."); Rodriguez-Abreu, 986 F.2d at 584 ("Because the relevant plan documents did not grant discretionary authority to the Plan Administrator and the Named Fiduciaries did not expressly delegate authority to the Plan Administrator, we find that the district court correctly employed the de novo standard of review."); Belheimer v. Fed. Ex. Corp. Long Term Disability Plan, No. 6:12-00383-CRA, 2012 WL 5945042, at *7 (D.S.C. Nov. 28, 2012) (Anderson, J.) ("[A]s Federal Express delegated its final decision making authority to Aetna, and the LTD Plan did not contemplate or authorize such a delegation, this Court will review the decision to deny Plaintiff's long-term disability benefits claim de novo."); Durham v. IDA Group Ben. Trust, 276 F.R.D. 259, 263-64 (N.D. Ind. Aug. 1, 2011) (Cherry, J.) (applying de novo review absent "[c]lear and unequivocal language" delegating plan administrator's discretionary authority to claims administrator); Turner v. Retirement & Ben. Plans Committee Robert Bosch, 585 F. Supp. 2d 692, 700 (D.S.C. Oct. 31, 2007) (Duffy, J.) (applying de novo review where claims administrator "overstepped a partial delegation of discretionary authority"); Skibbe v. Metro. Life Ins. Co., No. 05 C 3658, 2007 WL 2874035, at *10 (N.D. Ill. Sept. 24, 2007) (Kendall, J.) ("Because ADP's discretionary authority was not expressly delegated to MetLife, MetLife's decision to terminate Skibbe's benefits will be subject to a de novo standard of review."); Samaritan Health Cntr. v. Simplicity Health Care Plan, 516 F. Supp. 2d 939, 950 (E.D. Wis. Sept. 17, 2007) (Clevert, J.) (relying on Sanford, Sharkey, Nelson, and Rodriguez-Abreu for the proposition that de novo review is appropriate "when the decision under review was not an exercise of discretion by the entity on whom discretion was conferred by plan documents or the proper delegate")). The court concluded its analysis by remarking:

This court recognizes that a reasonable employee in Gavin's situation would have understood from the terms of the Plan and the SPD that Defendants probably intended LINA to have unfettered discretion in determining Gavin's eligibility for benefits. See Ruttenberg, 413 F.3d 652, 668 n.19 (7th Cir. 2005) ("[C]ourts in ERISA claims interpret policies based on normal contract principles; this includes considering the reasonable expectations of the insured."). Moreover, as Chief Circuit Judge Frank H. Easterbrook has noted, an employee in Gavin's position "has no interest in who, precisely, makes the decision." Aschermann, 689 F.3d at 729. Nevertheless, this court cannot turn a blind eye to the explicit language of the Plan. "Simply put, the court cannot apply an abuse of discretion standard of review to a decision made by a decision maker who never had the discretion to make that decision." Turner, 585 F. Supp. 2d at 700.

Turning to the scope of discovery, the court agreed with the plaintiff on that issue as well, finding that the plaintiff is entitled to "the same discovery as any party would be allowed in a breach of contract suit." (citing Krolnik v. Prudential Ins. Co. of Am., 570 F.3d 841, 843 (7th Cir. 2009) ("litigation under ERISA by plan participants seeking benefits should be conducted just like contract litigation").