Gavin v. Life Insurance Company of North America et al

Filing 21

MEMORANDUM Opinion and Order. Signed by the Honorable James F. Holderman on 2/25/13. Notice mailed by judge's staff (ntf, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LAWRENCE GAVIN,

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Plaintiff,
v.
LIFE INSURANCE COMPANY OF,
NORTH AMERICA and CORN PRODUCTS
INTERNATIONAL, INC. MASTER
WELFARE AND CAFETERIA PLAN,
Defendants.

No. 12 C 6178

MEMORANDUM OPINION AND ORDER
IDENTIFYING DE NOVO REVIEW AS THE APPLICABLE
LEGAL STANDARD IN THIS CASE
JAMES F. HOLDERMAN, Chief Judge:
On June 6, 2012, plaintiff Lawrence Gavin (“Gavin”) filed a complaint in this court
seeking to recover long term disability (“LTD”) benefits allegedly due under the terms of an
LTD group policy of insurance, Policy Number LK0960591 (“Policy”), which is underwritten,
funded, and administered by defendant Life Insurance Company of North America (“LINA”) for
the benefit of employees of Corn Products International, Inc. (“CPI”). (Dkt. No. 1 (“Compl.”) ¶¶
1, 4.) The Corn Products International, Inc. Master Welfare and Cafeteria Plan (the “Plan”), also
named as a defendant, was established to provide employee welfare benefits to employees of CPI
in accordance with the Policy. (Id. ¶ 6.) Gavin brings his claims against LINA and the Plan
pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”) § 502(a)(1)(B),
codified at 29 U.S.C. § 1132(a)(1)(B).
On November 8, 2012, the court ordered briefing on the issue of the appropriate standard
of review to apply in this case and any associated limits on the scope of discovery. (Dkt. No.
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14.) For the reasons set forth below, the court holds that the de novo standard of review applies,
such that this court will independently determine based on the evidence presented in this case
whether Gavin is entitled to LTD benefits under the terms of the Policy. All discovery relevant
to this independent determination will be permitted, subject to the Federal Rules of Civil
Procedure and any applicable discovery rulings made by this court or by the assigned magistrate
judge.
BACKGROUND
At this stage of the proceedings, the court accepts as true all well-pleaded factual
allegations set forth in the Complaint. McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d 873,
885 (7th Cir. 2012).
The Policy states, in relevant part, that an employee “is considered Disabled if, solely
because of injury or sickness, he or she is: (1) unable to perform the material duties of his or her
Regular Occupations; and (2) unable to earn 80% or more of his or her Indexed Earnings from
working in his or her Regular Occupation.” (Compl. Ex. A at 2.)
Gavin was employed by CPI as a Senior Process Engineer until February 16, 2011, when
he stopped working due to a combination of osteoarthritis, Marfan’s syndrome, and severe
depression. (Compl. ¶¶ 9-10.) After an occupational health physician deemed Gavin incapable
of working, Gavin submitted a claim for LTD benefits to LINA. 1 (Id. ¶ 10.) LINA denied
Gavin’s claim for LTD benefits on August 11, 2011. (Id.)
Gavin thereafter appealed LINA’s initial decision to deny LTD benefits, submitting
additional medical records as well as the Social Security Administration’s decision to approve
disability benefits for Gavin based on a disability that began on February 16, 2011. (Id. ¶¶ 1112.) On July 26, 2012, LINA upheld its initial decision to deny Gavin’s claim for LTD benefits.
1

The parties agree that LINA was the designated “Claims Administrator” for the Policy, as discussed in n. 2 below.

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(Id. ¶ 13.) Gavin filed his Complaint on June 6, 2012, alleging that “[t]he evidence submitted to
LINA establishes that [Gavin] has been continuously unable to return to work since February 16,
2011, and thus met and continues to meet the Policy’s definition of disability since that date,”
and that he is therefore entitled to LTD benefits under the terms of the Policy. (Compl. ¶ 15.)
APPLICABLE LAW
The Supreme Court has held that “a denial of benefits challenged under § 1132(a)(1)(B)
is to be reviewed under a de novo standard unless the benefit plan gives the administrator or
fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of
the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). The default for
denial of benefits cases is thus “independent decision” by the court. Aschermann v. Aetna Life
Ins. Co., 689 F.3d 726, 728 (7th Cir. 2012). “Absent clear language to the contrary, plans are
read to provide for searching judicial review of benefits determinations: plenary review of the
administrator’s interpretation of the facts and plan, fortified by the district court’s discretionary
authority to hear evidence that was not presented in the administrative process.” Patton v.
MFS/Sun Life Fin. Distributors, Inc., 480 F.3d 478, 485 (7th Cir. 2007) (internal citations
omitted); see also Comrie v. IPSCO, Inc., 636 F.3d 839, 842 (7th Cir. 2011) (“In Firestone’s
framework, deferential review is exceptional, authorized only when the contracts that establish
the pension or welfare plan confer interpretive discretion in no uncertain terms.”).
On the other hand, “when the plan confers discretion to interpret and implement its terms,
deferential judicial review is appropriate.” Aschermann, 689 F.3d at 728. The party invoking
deferential review “has the burden to establish that the language of the plan gives it discretionary
authority to award benefits.” Sperandeo v. Lorillard Tobacco Co., 460 F.3d 866, 870 (7th Cir.
2006) (citing Gibbs v. Cigna Corp., 440 F.3d 571, 575 (2d Cir. 2006)).

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ANALYSIS
1.

Standard of Review
It is undisputed that the Plan is an “employee welfare benefit plan” as defined by ERISA.

See 29 U.S.C. § 1002(1). It is also undisputed that the Plan grants full discretionary authority to
the “Committee,” appointed by CPI’s Board of Directors, to interpret Plan documents and to
resolve “any questions relating to the eligibility of one or more Participants for benefits from the
Plan and the amount of such benefits.” (Pl.’s Ex. B (“Plan Document”) § 8.1(b)(2) and (4); see
also §§ 8.1(a), 8.1(d).) The issue in this case is that the Committee was not the entity that denied
Gavin’s LTD claims. In Defendants’ words, the question before the court “is not whether the
plan confers discretion, but whether the Committee effectively delegated its discretion to LINA.”
(Dkt. No. 16 (“Defs.’ Br.”) at 6 (emphases in original).)
ERISA permits the delegation of fiduciary responsibilities as follows:
The instrument under which a plan is maintained may expressly provide for
procedures (A) for allocating fiduciary responsibilities (other than trustee
responsibilities) among named fiduciaries, and (B) for named fiduciaries to
designate persons other than named fiduciaries to carry out fiduciary
responsibilities (other than trustee responsibilities) under the plan.
29 U.S.C. § 1105(c)(1). Accordingly, the court begins with the plain language of the Plan to
determine whether the Plan “expressly provide[s]” procedures for the Committee to delegate its
discretionary authority to LINA, the Policy’s Claims Administrator.
The Plan states that the Committee “shall have sole discretion to delegate any of its
responsibilities to another person, such as the Plan Administrator or Claims Administrator.”
(Plan Document § 8.1(c).) The text of this section, titled “Delegation by the Committee,” does
not explicitly set forth any specific procedures for effecting the delegation of the Committee’s

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responsibilities to the Claims Administrator. The Plan’s description of the role of the Claims
Administrator, however, clarifies that:
The Committee or Plan Administrator may appoint one or more
persons or entities to act as Claims Administrator under the Plan.
The Claims Administrator shall provide advice in relation to the
determination of eligibility for participation in and benefits under
the Plan or any Group Benefit Plan, shall establish Reimbursement
Accounts pursuant to Sections 6.1(a) and 6.2(a), and shall perform
all other Plan administrative duties specified in the administrative
agreement entered into between the Corporation (acting on behalf
of the Employers) and such Claims Administrator, as such
agreement may be from time to time amended.
(Id. § 8.3.) Thus, pursuant to the plain language of the Plan, absent an “administrative
agreement” between the Corporation (e.g. CPI) and the Claims Administrator, the role of the
Claims Administrator is limited to “provid[ing] advice in relation to” eligibility and benefits.
(Id.)
“Courts have generally found that delegation of discretionary authority is proper where a
plan document such as the [Summary Plan Description], the Plan itself, or an amendment to the
Plan, expressly authorizes a fiduciary to delegate its authority, and the delegation of that
authority is found in an [Administrative Services Agreement].” Roush v. Aetna, No. CV 09-751PHX-NVW, 2010 WL 2079766, at *12 (D. Ariz. May 24, 2010) (Wake, J.) (emphasis added);
see also Semien v. Life Ins. Co. of N. Am., 436 F.3d 805, 810 (7th Cir. 2006) (“the BP LongTerm Disability Plan, coupled with the Administrative Services Agreement between BP and
LINA, established LINA’s authority and requires that decisions by the plan administrator be
reviewed under an arbitrary and capricious standard”); Madden v. ITT Long Term Disability Plan
for Salaried Employees, 914 F.2d 1279, 1285 (9th Cir. 1990) (applying deferential review where
“the Plan gives the LTD Administration Committee discretionary authority and the Committee
has properly designated Metropolitan as ERISA fiduciary” pursuant to a “Claims Administration
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Agreement”); Kinser v. Plans Admin. Committee of Citigroup, Inc., 488 F. Supp. 2d 1369, 137879 (M.D. Ga. 2007) (Royal, J.) (applying deferential review where the plan administrator
“properly delegate[d] [its] discretionary authority to determine entitlement to LTD benefits to
MetLife” pursuant to an “Administrative Services Agreement”); Campbell v. Chevron Phillips
Chem. Co., No. 1:05-CV-0273, 2006 WL 2380896, at *12 (E.D. Tx. Aug. 15, 2006) (Crone, J.)
(finding that “the Chevron Plan, via the Services Agreement and the SPD, delegates authority to
Aetna regarding benefit eligibility for the Medical Plan”).
The Seventh Circuit has further held that, together, an administrative services contract
and a summary plan description explaining the plan administrator’s delegation of discretionary
authority to a third-party claims administrator can be considered an express grant of discretion
sufficient to “lower[ ] the standard of judicial scrutiny from de novo to abuse-of-discretion,”
even if the plan itself is silent on the subject of delegation. See Raybourne v. Cigna Life Ins. Co.
of N.Y., 576 F.3d 444, 449 (7th Cir. 2009) (finding that “the Claim Fiduciary Appointment
modifies the terms of the underlying plan” to grant discretion to the third-party claims
administrator); accord Ehas v. Life Ins. Co. of N. Am., No. 12 C 3537, 2012 WL 5989215, at *4
(N.D. Ill. Nov. 29, 2012) (St. Eve, J.) (same). Likewise, the Seventh Circuit has permitted the
delegation of discretionary authority based solely on an “Administrative Service Agreement,”
when “[n]othing in [the] plan, or [the insurer’s] group policy, forbids delegation.” Aschermann,
689 F.3d at 729.
In this case, the Plan explicitly authorizes the Committee to delegate its discretionary
responsibilities to a Claims Administrator, while clarifying that the scope of the Claims
Administrator’s role is to be defined by an “administrative agreement entered into between the
Corporation (acting on behalf of the Employers) and such Claims Administrator.” (Plan

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Document § 8.3.) This case is therefore distinguishable from Aschermann and Raybourne,
where the plans at issue were silent on the subject of delegation. This case is also distinguishable
from Aschermann, Raybourne, and Semien, because the Seventh Circuit in each of those cases
relied on an express contractual delegation of discretionary authority from the plan administrator
to the insurer before finding that deferential review was appropriate. Here, by contrast—and
despite the plain language of the Plan—no such administrative agreement has been produced,
and it appears that none exists. Without an administrative agreement between CPI 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.)
Defendants argue that “the fact of the delegation is evidenced by and explained in the
[Summary Plan Description (“SPD”)].” (Defs.’Br. at 16.) The court agrees that the language of
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. The
SPD names LINA as the Claims Administrator for the Policy, 2 and further states in relevant part
that:

2

The parties both cite to Appendix A of the SPD as evidence that LINA was the designated Claims Administrator for
the Policy. (See Dkt. No. 15 (“Pl.’s Mem.”) at 5; Defs.’ Br. at 3.) Appendix A clearly states that the Claims
Administrator for the “Long Term Disability Plan” is:
CIGNA
12225 Greenville Ave., Suite 1000
Dallas, TX 75243
800-362-4462
www.cigna.com
(Pl.’s Ex. C (“SPD”) at A-2.) By way of contrast, the “Business Travel Accident Insurance Plan” on the next line of
page A-2 names “Life Insurance Company of North America” as the Claims Administrator for that plan. The
relationship between CIGNA and LINA is not clear to the court; however, for purposes of this motion only, the
court accepts the parties’ apparent agreement that the SPD’s reference to CIGNA should be read as though it were
a reference to LINA. (See also SPD at D-1 (stating that the “Insurance Policy/Booklet” for the “Long Term
Disability” plan is provided by “CIGNA”).)

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Each of your benefit plans is administered by a claims administrator, as outlined
above and detailed in Appendix A. The claims administrator has full discretion
and authority to determine eligibility for benefits and to construe and interpret all
terms and provisions of coverage under the respective plan.
***
In certain instances, the Plan Administrator has delegated some of [its]
responsibilities and authorities to third parties, including the claims
administrators.
Any interpretation or determination made under the discretionary authority of the
Plan Administrator (or its delegate, including a claims administrator) is to be
given full force and effect. The Plan Administrator, its delegate or a claims
administrator, as the case may be, has discretionary authority to grant or deny
benefits under the plans. Benefits under a plan will be paid only if the Plan
Administrator (or its delegate or a claims administrator) decides in its discretion
that the applicant is entitled to such benefits.
(SPD at 11, 21.) This language is consistent with the Committee’s power to delegate its
discretionary authority to the Claims Administrator under the terms of the Plan, but does not
itself constitute an express delegation of discretionary authority in the form of an administrative
agreement between CPI and LINA. Compare Raybourne, 576 F.3d at 449 (noting that the Claim
Fiduciary Appointment “is signed by representatives of the plan and Cigna”).
The Seventh Circuit has declined to decide whether an express delegation of
discretionary authority is required under ERISA. See Semien, 436 F.3d at 811 (“Because we find
that BP provided LINA with an express delegation of discretionary authority to act as plan
administrator, we need not reach the question of whether an implied delegation of authority
would be sufficient to shift discretionary authority from the original plan administrator to an
insurer.”); see also Aschermann, 689 F.3d at 728 (reserving the question while relying on the
“Administrative Services Agreement” as an express delegation of discretionary authority).
Other circuit courts have declined to infer delegation of discretionary authority in the absence of
an express authorization by the plan administrator. See McKeehan v. Cigna Life Ins. Co., 344
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F.3d 789, 793 (8th Cir. 2003); Rodriguez-Abreu v. Chase Manhattan Bank, 986 F.2d 580, 584
(1st Cir. 1993). This court need not decide the issue in this case, 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.)
Because the Committee failed to follow the Plan’s own express procedures for delegating
the Committee’s discretionary responsibilities to LINA, the court finds that LINA was not
authorized to deny Gavin’s claim. The court will therefore apply the de novo standard of review
to independently determine whether Gavin is entitled to LTD benefits under the terms of the
Policy. Accord 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

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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”).
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.

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“Simply put, the court cannot apply an abuse of discretion standard of review to a decision made
by a decisionmaker who never had the discretion to make that decision.” Turner, 585 F. Supp.
2d at 700.
2.

Scope of Discovery
The court agrees with Gavin that he is entitled to “the same discovery as any party would

be allowed in a breach of contract suit.” (Pl.’s Br. at 10.); see 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”). The court trusts that the Federal
Rules of Civil Procedure will establish an appropriate scope for any additional discovery desired
by either party. See Patton v. MFS/Sun Life Fin. Distribs., Inc., 480 F.3d 478, 492 (7th Cir.
2007) (“The record calls for additional evidence only where the benefits of increased accuracy
exceed the costs, a balance familiar to the district court.”).
The court declines to rule at this time on any specific discovery issues identified in the
briefing before the court, in part due to the court’s lack of familiarity with the underlying record.
If the parties find that they are unable to resolve any specific discovery dispute without the
court’s assistance, see N.D. Ill. Local Rule 37.2, the parties are free to file a proper motion under
the Federal Rules of Civil Procedure and notice it before the court for adjudication.
CONCLUSION
For the reasons set forth below, the court holds that the de novo standard of review
applies, such that this court will independently determine based on the evidence presented in this
case whether Gavin is entitled to LTD benefits under the terms of the Policy. All discovery
relevant to this independent determination will be permitted, subject to the Federal Rules of Civil
Procedure and any applicable discovery rulings made by this court or by the assigned magistrate

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judge. Counsel are requested to meet pursuant to Rule 26(f) and jointly file a Form 52 on or
before 3/7/13. This case is set for a report on status and entry of a scheduling order on 3/12/13, at
9:00 a.m. The parties are encouraged to discuss settlement.
ENTER:

_______________________________
JAMES F. HOLDERMAN
Chief Judge, United States District Court

Date: February 25, 2013

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