Breckenridge v. National Union Fire Insurance Company of Pittsburg, Pa.
Filing
13
ORDER granting 10 Motion for De Novo Review. Signed by District Judge Thomas L. Ludington. (SGam)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
DARRYL BRECKENRIDGE,
Plaintiff,
v.
Case Number 12-11677
Honorable Thomas L. Ludington
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA.,
a foreign corporation,
Defendant.
______________________________________/
ORDER GRANTING PLAINTIFF’S MOTION FOR DE NOVO REVIEW
Plaintiff Darryl Breckenridge was riding his motorcycle on September 10, 2010. As he
crossed an intersection, a vehicle failed to yield the right of way. A terrible accident ensued. He
broke his left leg and a rib, tore his ACLs in both knees, and fractured his spine in five places.
Transported to Covenant HealthCare, Plaintiff was hospitalized for almost three weeks. Upon
his discharge, he was deemed paralyzed below his neck, “sensation intact, quadriplegia.” Pl.’s
Compl. 3. Plaintiff was then transferred to Mary Free Bed Rehabilitation Hospital, where he
received treatment for over four months.
Plaintiff’s spouse, Sherry Braxton, works for Dow Chemical Company.
She is a
participant in Dow’s Voluntary Group Accident Insurance Policy, an insurance plan sponsored
by Dow, underwritten by Defendant National Union, and administered by Chartis Casualty
Company. Due to Plaintiff’s relationship with Ms. Braxton, he is a named insured under the
plan. Spouses of Dow employees are entitled to a one-time payment of $250,000 if an accident
renders them a quadriplegic. Pursuant to that coverage, Plaintiff submitted an application for
benefits, which Dow processed and forwarded to Defendant.
On May 27, 2011, Dr. Leonid Topper reviewed Plaintiff’s records, and determined he
was not a paraplegic or quadriplegic as defined by the plan. Defendant then denied Plaintiff’s
claim for benefits, asserting that his injuries did not result in complete and irreversible
quadriplegia, paraplegia, hemiplegia, or uniplegia. Plaintiff appealed the decision, but was again
denied benefits on April 16, 2012. Plaintiff then brought the instant action before this Court.
On June 28, 2012, the Court issued an ERISA scheduling order directing the parties to
file a statement addressing the appropriate standard of review on or before July 23, 2012. ECF
No. 7. Plaintiff filed a motion suggesting a de novo review on July 13, 2012, and Defendant
filed a statement in support of the application of an arbitrary and capricious standard of review
on July 23, 2012.
A participant or beneficiary of an ERISA qualified plan may file suit in federal court to
recover benefits under the terms of a qualified plan. 29 U.S.C. § 1132(a)(1)(B). Courts review
the denial under a de novo standard of review “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, 109 S.Ct. 948, 103 L.Ed.2d
80 (1989). If a plan includes such discretionary authority, then a more deferential “arbitrary and
capricious” standard applies. Yeager v. Reliance Standard Life Insurance Co., 88 F.3d 376, 381
(6th Cir.1996).)
However, as of July 1, 2007, the Michigan Office of Financial and Insurance Services
(“OFIS”) prohibited insurance policies authorizing discretionary authority provisions that would
implicate an arbitrary and capricious standard of review. Mich. Admin. Code R. 500.2201-02
(2012). The code provides:
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(b) [After July 1, 2007], an insurer shall not issue, advertise, or deliver to any
person in this state a policy, contract, rider, indorsement, certificate, or similar
contract document that contains a discretionary clause. This does not apply to a
contract document in use before that date, but does apply to any such document
revised in any respect on or after that date.
(c) [After July 1, 2007], a discretionary clause issued or delivered to any person in
this state in a policy, contract, rider, indorsement, certificate, or similar contract
document is void and of no effect. This does not apply to contract documents in
use before that date, but does apply to any such document revised in any respect
on or after that date.
Mich. Admin. Code R. 500.2202. Discretionary clauses either provide for a standard of review
on appeal that gives deference to the original claim decision, id. at R. 500.2201(c)(vi), or provide
for a standard of review on appeal other than de novo review. Id. at R. 500.2201(c)(vii). The
Michigan code prohibits these clauses in any policy, contract, rider, indorsement, certificate, or
similar contract that is revised after July 1, 2007. Id. at R. 500.2202(b-c).
Under its express preemption clause, ERISA “supersede[s] any and all State laws insofar
as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). But
ERISA contains a savings provision that maintains, “nothing in this subchapter shall be
construed to exempt or relieve any person from any law of any State which regulates insurance,
banking, or securities.” 29 U.S.C. § 1144(b)(2)(A).
In American Council of Life Insurers vs. Ross, 558 F.3d 600 (6th Cir. 2009), the Sixth
Circuit considered the interplay between ERISA and the Michigan code. The plaintiff, American
Counsel of Life Insurers, filed suit against defendant Ken Ross, the Commissioner of OFIS. The
plaintiff claimed that the Michigan code is preempted by ERISA because it interferes with the
statute’s objectives, and that the rules do not fall within the ambit of ERISA’s savings clause. Id.
at 603. Squarely addressing the present issue, the court determined that the “Michigan rules fall
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within the ambit of ERISA’s savings clause and are not preempted by that statute.” Id. at 609.
Accordingly, the court declared that ERISA plans in Michigan are subject to Michigan’s rules, as
outlined above. Id. Therefore, any ERISA plans issued or amended after July 1, 2007 require
“de novo review of denials of ERISA benefits within Michigan.” Gray v. Mut. of Omaha Life
Ins. Co., 2012 WL 2995469, *3 (E.D. Mich. 2012).
The Dow Chemical Company’s Voluntary Group Insurance Policy and Summary Plan
Description (“the Plan”) is an ERISA-governed Plan. The Plan language states that it was
“Amended and Restated: October 19, 2009 — Effective January 1, 2010 and thereafter until
superseded.” ECF No. 10, Ex. 1. The Plan was amended after July 1, 2007, and is therefore
governed by Rule 500.2202. The fact that the discretionary language included in the Plan has
been in place since 1999 is, of course, of no consequence. Because the Court finds that the
policy was revised after July 1, 2007, a de novo standard of review applies. See Pierzynski v.
Liberty Life Assur. Co. of Boston, 2012 WL 3248238, *4 (E.D. Mich. 2012)
Accordingly, it is ORDERED that Plaintiff’s motion for de novo review, ECF No. 7, is
GRANTED.
Dated: September 19, 2012
/s Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
PROOF OF SERVICE
The undersigned certifies tat a copy of the foregoing
order was served upon each attorney or party of record
herein by electronic means or first class U.S. mail on
September 19, 2012.
s/Tracy A. Jacobs
TRACY A. JACOBS
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