Hampton v. National Union Fire Ins. Co. of Pittsburg, PA

Hampton v. National Union Fire Insurance Co. of Pittsburgh, PA, 2020 WL 5946967 (N.D. Ill. October 7, 2020). This matter involved a claim for accidental death insurance, but before addressing the merits, the court first needed to determine the applicable standard of review. After considering the arguments of both parties, the court determined the de novo standard of adjudication applied based on inadequate delegation of discretionary authority by the decedent’s employer and plan sponsor.  The death occurred on February 11, 2014 when the decedent, John Hampton, died following a motor vehicle accident. At the time of his death, Hampton was employed by and received accidental death coverage in the aggregate amount of $525,000 through his employer, The Boeing Company.

The ensuing claim brought by the decedent’s widow and beneficiary Barbara Hampton, was denied and a pre-litigation appeal was also denied, leading to the present lawsuit. The court laid out the background of the standard of review issue, acknowledging the presumption in favor of de novo review.  Although Boeing’s Master Welfare Plan unequivocally granted discretionary authority to the Employee Benefits Plan Committee as Plan Administrator, the benefit decision and appeal decision were both made by National Union.  The plan contained provisions for delegating administrative and fiduciary duties, though, which provided:

Article 4.3 Delegation of Authority

The administrative duties and responsibilities set forth in Section 4.1 may be delegated by the Plan Administrator in whatever manner and extent it chooses to such person or persons as it selects.

Any allocation or delegation of fiduciary responsibilities will be in writing, approved by majority vote. An allocation or delegation may be changed or ended by majority vote. Any allocation or delegation may include the power to subdelegate without further recourse to the Plan Administrator.

The court framed the issues as whether the Plan Administrator was required to delegate authority to National Union in writing with approval of a majority of the Employee Benefits Plan Committee members. The parties disagreed if the Plan Administrator was free to delegate authority to National Union however it saw fit, or if it was required to do so in writing, with approval from a majority of Employee Benefits Plan Committee members. That determination hinges on whether National Union was acting in an administrative or fiduciary capacity as the Plan’s service representative.

The court had no difficulty concluding that National Union acted as a fiduciary based on the statutory definition of a fiduciary as someone who “exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets.” 29 U.S.C.A. § 1002(21)(A).  Based on Aetna Health Inc. v. Davila, rendering claim decisions are fiduciary acts.  542 U.S. 200, 218 (2004).  Giving a party the title of fiduciary is unnecessary to reach such a conclusion according to Ruiz v. Continental Cas. Co., 400 F.3d 986, 990 (7th Cir. 2005) (“The measure of whether a person is a fiduciary is not whether that person is formally designated as such. Instead, a fiduciary should be viewed in functional terms of control and authority over the plan”).  The court concluded that National Union filled such a role in its administration of the accidental death program; and in particular, in its decisionmaking with respect to the Hampton claim, and explained:

Here, National Union reviewed relevant documents, interpreted the SPD, and ultimately exercised discretion in denying Hampton’s claim. When National Union denied Hampton’s benefits claim, it was acting as a fiduciary. The question then becomes: Was National Union properly authorized to exercise fiduciary discretion in deciding Ms. Hampton’s claims?

The court answered that question in the negative.  Although National Union maintained that Boeing could delegate discretionary authority “in whatever manner and extent it chooses,” the court ruled that argument conflicted with the plan, which did not name the insurer as a party with discretionary authority.  Nor was there compliance with the specific plan requirements for delegation.  The court thus determined:

The Plan Administrator was bound to follow the Plan’s procedures in delegating fiduciary authority to National Union by memorializing it in writing and conducting a vote. National Union has neither alleged nor offered any evidence indicating that the Plan Administrator conformed with these procedures.

The court cited two rulings that had reached the same conclusion: Gavin v. Life Ins. Co. of North America, No. 12 C 6178, 2013 WL 677886, at *5 (N.D. Ill. Feb. 25, 2013) (finding that the de novo standard of review was appropriate where the Plan Administrator “failed to follow the Plan’s own express procedures for delegating [its] discretionary responsibilities” to the insurer) and Gardner v. Ameritech Sickness & Accident Disability Plan, No. 08-cv-1007, 2009 WL 3188302, at *12 (C.D. Ill. Sept. 30, 2009) (identifying de novo as the proper standard of review where the insurer did not act in accordance with the Plan Administrator’s discretionary benefit-determination authority). Consequently, the court held: “De novoreview is therefore the appropriate standard for this Court to evaluate whether National Union properly denied Hampton’s benefits claim.”

The court acknowledged that the Seventh Circuit has not explicitly held that a plan administrator cannot implicitly delegate discretionary authority to an insurer.  However, other circuits have done so – Shelby County Health Care Corp. v. Majestic Star Casino, 581 F.3d 355, 365 (6th Cir. 2009); McKeehan v. Cigna Life. Ins. Co., 344 F.3d 789, 793 (8th Cir. 2003). The court concluded that it did not have to resolve that issue, though, because “the Plan expressly rejects the possibility of an implied delegation, requiring that ‘[a]ny allocation or delegation of fiduciary responsibilities will be in writing, approved by majority vote.’” Since such action was not taken, de novo review applies.

Discussion: Ultimately, this was not a hard issue for the court to resolve since the plan language was so clear and there was no evidence that the delegation requirement was met.  National Union therefore deservedly was denied discretionary authority and the court will appropriately evaluate the case under the de novo standard of adjudication which could require a trial based on Seventh Circuit guidance in Krolnik v. Prudential Ins. Co., 570 F.3d. 841 (7th Cir. 2009).