Nasalroad v. Standard Insurance Company et al

Filing 31

ORDER re Motion for Order tore Standard of Review and Tolling of the Discovery Schedule filed by Brenda Nasalroad (Doc. 28 ). Signed by Judge Staci M. Yandle on 4/26/2016. (mah)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS

BRENDA NASALROAD,

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Plaintiff,
vs.
STANDARD INSURANCE COMPANY
and GENCO DISTRIBUTION SYSTEMS
LONG TERM DISABILITY PLAN,
Defendants.

Case No. 15-CV-895-SMY-DGW

MEMORANDUM AND ORDER
YANDLE, District Judge:

Plaintiff Brenda Nasalroad filed this action against Defendants Standard Insurance
Company (“Standard”) and Genco Distribution Systems Long Term Disability Plan (“Genco”)
seeking to recover long-term disability benefits under an employee welfare benefits plan
pursuant to Section 502(a)(1)(B) of the Employee Retirement Income Security Act (“ERISA”),
29 U.S.C. § 1132(a)(1)(B). Pending before the Court is Plaintiff’s Motion for Order Regarding
the Applicable Standard of Review and Tolling of the Discovery Schedule (Doc. 28). Plaintiff
requests this Court determine the standard of review applicable to Standard’s decision to deny
Plaintiff’s disability benefits. Plaintiff contends that the standard of review is relevant to the
nature and scope of the discovery the parties can take in accordance with Rule 26(b)(1) of the
Federal Rules of Civil Procedure.
Under ERISA’s civil enforcement provision, § 1132(a)(1)(B), judicial review of a plan
administrator's benefits determination is de novo unless the plan grants discretionary authority to
the administrator. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103
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L.Ed.2d 80 (1989). Where a qualifying plan gives the administrator discretionary authority to
determine eligibility for benefits, the court shall review the administrator's decision to deny
benefits under the arbitrary and capricious standard. Mote v. Aetna Life Ins. Co., 502 F.3d 601,
606 (7th Cir. 2007); Hackett v. Xerox Corp., 315 F.3d 771, 773 (7th Cir. 2003).
In this case, it is undisputed that the LTD Policy contains a provision giving Standard
discretionary authority to determine Plaintiff’s eligibility for long-term disability benefits. The
policy specifically provides that Standard has “full and exclusive authority to control and
manage the Group Policy, to administer claims and to interpret the Group Policy and resolve all
questions arising in the administration, interpretation and application of the Group Policy” (Doc.
1-1, p. 27).
Ordinarily, the existence of the discretionary clause ends the inquiry and this Court would
review Standard’s denial of benefits under the arbitrary and capricious standard. Hackett, 315
F.3d at 773.

However, Plaintiff contends that Section 2001.3 of Title 50 of the Illinois

Administrative Code (“Section 2001.3”), which prohibits discretionary clauses in insurance
contracts and related documents, strips the LTD Policy of its discretion-conferring language and
triggers de novo review. Section 2001.3 provides:
No policy, contract, certificate, endorsement, rider application or agreement
offered or issued in this State, by a health carrier, to provide, deliver, arrange for,
pay for or reimburse any of the costs of health care services or of a disability may
contain a provision purporting to reserve discretion to the health carrier to
interpret the terms of the contract, or to provide standards of interpretation or
review that are inconsistent with the laws of this State.
50 Ill. Admin. Code § 2001.3 (2010); 29 Ill. Reg. 10172. Standard disagrees; arguing that
Section 2001.3 is inapplicable because its policy was not “offered or issued” in the State of
Illinois.

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In support of her position, Plaintiff relies on Curtis v. Hartford Life & Accident Ins. Co.,
2012 WL 138608, at *1 (N.D. Ill. 2012).

Defendant Standard counters that Curtis is

distinguishable. The Court agrees with the defendant.
In Curtis, the plaintiff sought to recover long-term disability benefits under an employee
welfare benefits plan subject to ERISA and argued that Section 2001.3 banned the policy’s
discretionary clause. Id. at *2. In determining whether Section 2001.3 applied to the policy, the
Curtis court first looked to the policy itself which had been issued and delivered by Hartford Life
and Accident Insurance Company (“Hartford’) to Children’s Memorial Hospital (the “Hospital”)
for insurance coverage for employees of the Hospital in the State of Illinois. Id. at *6-7. Later,
the Hospital became a participating member of a trust located in Delaware. Id. In 2008,
Hartford delivered a policy of insurance in Delaware to the trust as policyholder. Id. However,
the Hospital negotiated the policy from Illinois, the policy applied only to Hospital employees
working in Illinois, and the Hospital paid the premiums. Id. Based on these facts, the court
concluded that the policy was “offered” in Illinois and, as such, Section 2001.3 invalidated the
discretionary clause. Accordingly, the court applied the de novo standard of review. Id. at * 8.
Here, Genco, a Delaware corporation with its principal place of business in Pennsylvania,
negotiated the Standard policies insuring the Genco Plan in Pennsylvania (see Doc. 30-1). All
negotiations and decision-making regarding the LTD Policy occurred outside the State of
Illinois. Id. The LTD Policy and its associated Certificates of Insurance were delivered by
Standard to Genco in Pennsylvania. Id. Genco paid all the premiums from its Pennsylvania
office. Id. In light of these uncontroverted facts, the Standard Insurance LTD Policy was not
“offered or issued” in the State of Illinois within the meaning of Section 2001.3.

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Accordingly, this Court will review Standard’s decision to deny Plaintiff’s disability
benefits under the arbitrary and capricious standard. Further, as the Court finds no good cause
for Plaintiff’s Motion for Tolling of the Discovery Schedule, it is DENIED.

IT IS SO ORDERED.
DATED: April 26, 2016
s/ Staci M. Yandle
STACI M. YANDLE
United States District Judge

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