Schussheim v. First Unum Life Insurance Company

Filing 52

AMENDED MEMORANDUM AND ORDER vacating and replacing the Court's prior Memorandum and Order dated July 13, 2012. (See Docket No. 46 .) Ordered by Judge Denis R. Hurley on 7/31/2012. (Malley, Sean)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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CHERYL SCHUSSHEIM,
Plaintiff,

AMENDED 1
MEMORANDUM & ORDER
09 CV 4858 (DRH)(GRB)

-againstFIRST UNUM LIFE INS. CO.,
Defendant.
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APPEARANCES:
Wilkofsky Friedman, Karel & Cummins
Attorneys for Plaintiff
299 Broadway- Suite 1700
New York, New York 10007
By: Mark L. Friedman
Begos Horgan & Brown LLP
Attorneys for Defendant
327 Riverside Avenue
Westport, Connecticut 06880
By: Patrick W. Begos

HURLEY, Senior District Judge:
Plaintiff, Cheryl Schussheim, brings this action under the Employee Retirement Income
Security Act (“ERISA”), 29 USCS § 1001 et seq., challenging defendant’s denial of her longterm disability insurance benefits. Presently before the Court is plaintiff’s motion to amend the

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This Amended Memorandum and Order replaces and vacates the Court’s prior Memorandum and Order dated
July 13, 2012. (See docket no. 46.) On page five of the previous Memorandum and Order, the Court erroneously
attributed one of plaintiff’s positions to defendant. The instant decision rectifies that error by replacing the
subject position statement with a quote from defendant’s memorandum of law submitted in opposition to the
relief sought by plaintiff. Save for that change, and a non-substantive restructuring of the first sentence
thereafter, this opinion mirrors the prior Memorandum and Order.

complaint pursuant to Fed. R. Civ. P. 15. For the reasons stated below, the Court grants the
motion.

I.

BACKGROUND
In February of 2004, plaintiff began receiving long-term disability (“LTD”) benefits

through an employee benefit plan sponsored by her employer, and administered by defendant
First Unum Life Insurance Company. (Compl. ¶ 16.) On July 28, 2008, these benefits were
terminated by defendant even though plaintiff alleges that there was “no improvement or change
whatsoever in [her] physical condition.” (Id. ¶ 17.) Plaintiff administratively challenged that
decision, but defendant denied the application, as well as plaintiff’s subsequent internal appeal.
(Letter dated 12/1/10, attached to the Proposed Am. Compl. as Ex. 4.) Plaintiff filed the present
ERISA claim in this Court on November 9, 2009.
Less than a month after filing her complaint in this action, plaintiff applied for Social
Security benefits (“SSDI”). That application was approved by the Social Security
Administration (“SSA”) on November 4, 2010, retroactive to October 28, 2003. (SSA Decision,
Pl.’s Ex. 3.) Two weeks after receiving this decision, plaintiff’s counsel forwarded the SSA
approval of benefits to defendant’s counsel and requested that plaintiff’s claims and appeal
determinations be reopened at the administrative level. (12/1/10 letter.) Defendant denied the
request stating that the Plaintiff “had not cited any legitimate basis for [her] demand that First
Unum re-open the closed administrative record and provide an additional review under these
circumstances.” (Id.)
Plaintiff then filed a letter motion on December 30, 2010 to Magistrate Judge Wall,
seeking to compel defendant to reopen the administrative determination for reconsideration and
reinstatement of her benefits in light of the SSA decision. (Letter Motion dated 12/30/11, docket
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no. 24.) Magistrate Judge Wall denied this motion, and plaintiff appealed the Order to me. (See
Order dated 2/9/11.) This Court subsequently upheld the decision, noting inter alia:
Plaintiff’s request . . . disregards the content of her own
pleading. As noted above, the complaint seeks review of
defendant’s denial of plaintiff’s disability claim prior to the
issuance of the SSA decision. The pleading, in its current state,
does not implicate the propriety of any decision made by defendant
after that point. To the extent that plaintiff suggests defendant
acted arbitrarily and capriciously in denying plaintiff’s requests to
re-open her case file below, no such allegation is made in the
complaint, and plaintiff has not moved to amend or supplement her
complaint accordingly.

(Order dated 5/19/11 at 6.)
Plaintiff now moves to amend her complaint. The proposed amended pleading asserts
that under defendant’s own internally mandated procedure, defendant is required to reopen
plaintiff’s administrative claim in light of the SSA award. (Proposed Am. Compl. ¶¶ 24-25.) This
purportedly mandatory procedure is found in defendant’s Claims Manual, which states that when
a claimant supplies “additional information,” regarding a benefits claim determination, First
Unum must “determine if the previous claim should be re-opened or if a new claim should be
marked up.” (The Benefits Center Claims Manual: Re-opening a Claim (“Re-opening
Provision”), Pl.’s Ex. 6.) The Claims Manual further states that upon review of a claim, First
Unum must “give any SSA award of disability benefits . . . significant weight under certain
circumstances in making the disability determination.” (The Benefits Center Claims Manual:
Social Security Award of Disability Benefits (“SSA Provision”), Pl.’s Ex. 7.) Aside from these
additional claims—embodied in the second and third causes of action of the new pleading 2—that

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Plaintiff’s third cause of action seeks related relief in the form of an expansion of the administrative record to
include “all documents relating to Defendant’s refusal to consider the SSA determination.” (Proposed Am. Compl.
¶ 32.)

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defendant’s termination of benefits should be reopened at the administrative level, plaintiff’s
amended pleading mirrors the original complaint.

II.

DISCUSSION
a. Standard of Review
Under Rule 15(a), the Court “should freely give leave [to amend a pleading] when justice

so requires.” Fed. R. Civ. P. 15(a); AEP Energy Servs. Gas Holding Co. v. Bank of Am., N.A.,
626 F.3d 699, 725 (2d Cir. 2010). However, a district court may deny a motion to amend where
there is “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by
virtue of allowance of the amendment, futility of amendment, etc.” Ruotolo v. City of New York,
514 F.3d 184, 191 (2d Cir. 2008) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). “The
standard for futility with respect to a motion to amend under Rule 15 is identical to the standard
for a Rule 12 (b)(6) motion to dismiss — namely, the court must determine whether the
allegations in the complaint state a claim upon which relief can be granted.” Amna v. New York
State Dep’t of Health, 2009 U.S. Dist. LEXIS 127139, *4 (E.D.N.Y. Sept. 3, 2009)(citation
omitted).
To survive a motion to dismiss [under 12(b)(6)], a plaintiff must allege “only enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007).

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b. Allegations Regarding Violations of the “Terms of the Plan”
As noted above, the thrust of plaintiff’s new allegations is that defendant’s own claims
manual mandates that the matter be reopened at the administrative level in light of her SSA
award, and that upon reconsideration, her SSA award be afforded “significant weight.”
Under ERISA, a plaintiff is entitled to bring a civil action “to recover benefits due to
[her] under the terms of [her] plan, [and] to enforce [her] rights under the terms of the plan.” 29
U.S.C. § 1132(a)(1)(B). Defendant argues that the “plan,” as it is referred to in that provision,
“is restricted to the document established or adopted by the plan sponsor” (plaintiff’s employer,
in this case), and does not encompass the Claims Manual. According to Defendant, “there are no
‘terms of the plan’ at issue in the proposed amendment.” (Def.’s Opp. at 6.) The Reopening and
SSA Provisions, as mentioned earlier, are found solely in the Claims Manual. Plaintiff does not
dispute that these provisions exist exclusively in the Claims Manual, and that no similar
provision can be found in the main policy document. Rather, plaintiff argues that the Claims
Manual may be considered part of the administrative record in evaluating defendant’s benefits
termination decision, and that the two previously identified provisions contained in the Manual
are controlling.
Defendant supports its position by citing to a recent Supreme Court case in which the
Court reemphasized the importance of focusing on the terms of the benefit plan itself. (D’s Opp.
at 6 (citing Cigna Corp. v. Amara, --- U.S. ---, 131 S. Ct. 1866, 1877 (2011)).) This focus on
the actual terms of the plan arose in that case through an apparent conflict between the terms of
an ERISA plan, and a summary of those terms – a conflict which the district court found to be
misleading. See Amara, 131 S. Ct. at 1872. Under 29 U.S.C. § 1022, policy administrators are
required to furnish plan participants with “summary plan descriptions” written “in a manner

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calculated to be understood by the average plan participant, and . . . sufficiently accurate and
comprehensive to reasonably apprise such participants and beneficiaries of their rights and
obligations under the plan.” After Amara, to the extent that the language of a “plan summary”
conflicts with the actual terms of the plan, the terms of the plan control. See Amara, 131 S. Ct. at
1878 (“[S]ummary documents, important as they are, provide communication with beneficiaries
about the plan, but [] their statements do not themselves constitute the terms of the plan for
purposes of [29 U.S.C. § 1132] (a)(1)(B).”) (emphasis in original). Defendant urges that a
similar distinction between the terms of the ERISA plan and the Claims Manual be found here,
precluding the Court from incorporating into the benefit plan any provisions found exclusively in
the Claims Manual.
While the Claims Manual may not alter the terms of the benefit plan, the Court will not
foreclose plaintiff’s new claim in the present circumstances simply because the re-opening
provision is found in the former and not the latter. The Amara Court’s holding was based on
three concerns: (1) the text of the statute requiring the creation of plan summary descriptions
distinguishes between plan summaries and the plan itself; 3 (2) because the plan administrator
(defendant First Unum, in this instance) authors the plan summary, whereas the plan itself is
negotiated by both parties, giving legal effect to the plan summary would allow the administrator
to effectively change the terms of a contract without the consent of plan sponsor (typically the
employer); and (3) binding parties to the language of a summary document would defeat the
purpose of creating a summary description written “in a manner calculated to be understood by
the average plan participant,” as “simplicity and comprehensibility” would necessarily be
sacrificed to the “language of lawyers.” Amara, 131 S. Ct. at 1877-88.

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See the excerpt from 29 U.S.C. § 1132 (a)(1)(B) on the preceding page.

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None of these concerns are present in the context of defendant’s Claims Manual. Most
importantly, in contrast to Amara, the cited Manual provisions here—the purported analogue to
the plan summary in Amara, which were authored by defendant—do not conflict with either the
language of ERISA, or the subject policy plan. Rather, they provide for the operations and
procedure by which First Unum, the administrator of the policy, determines who is “disabled.”
Notably, the Amara decision preserved a court’s ability to “look outside the plan’s written
language in deciding what those terms [mean].” Amara, 131 S. Ct. at 1877 (citing UNUM Life
Ins. Co. of America v. Ward, 526 U.S. 358, 377-79 (1999), wherein the terms of an ERISA plan
were permitted to be interpreted vis-à-vis state insurance rules). Although defendant contends
that “the proposed amendment does not seek to enforce ‘the terms of the plan,’” (D.’s Opp. at 6),
that is precisely what plaintiff is ultimately attempting to do in seeking to amend the pleading.
When all the dust settles, plaintiff seeks a determination that she is “disabled” under her plan.
The Claims Manual speaks to the methods by which defendant determines the applicability of
that term to a particular claimant.
Where, as here, the “administrator or fiduciary [is given] discretionary authority to
determine eligibility for benefits or to construe the terms of the plan,” a court’s review of the
administrative termination is limited to whether defendant acted in an “arbitrary and capricious”
manner. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). That review is further
limited to the administrative record. Nevertheless, as plaintiff rightly points out, courts in this
Circuit routinely consider the content of an administrator’s claims manual because “it was also
available to [the defendant] when it was evaluating plaintiff’s claim.” Nelson v. Unum Life Ins.
Co. of America, 421 F. Supp. 2d 558, 573 (E.D.N.Y. 2006); see also Zuckerbrod v. Phoenix
Mutual Life Ins.Co., 78 F.3d 46, 50 (2d Cir. 1996)(holding that the insurer’s partial denial of

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coverage was arbitrary and capricious in light of a “policy” set forth within the insurer’s medical
claims manual of “resolving doubts in claims determinations in favor of the claimant.”); Taaffe v.
Life Ins. Co. of N. Am., 769 F. Supp. 2d 530, 534 (S.D.N.Y. 2011). The Court does not view the
holding of Amara to abrogate this practice. Indeed, a review of the Claims Manual may prove
essential in determining whether defendant acted arbitrarily or capriciously in this instance.
Plaintiff’s proposed amended complaint alleges that defendant was aware of the
provisions of the Claims Manual when plaintiff sought to re-open her claim, but that defendant
refused to follow its mandates. (Proposed Am. Compl. ¶¶ 24-26.) Under the terms of
defendant’s Claims Manual, when the company receives “additional information” relevant to a
closed claim, it must determine if the previous claim should be reopened, or if a new claim
should be “marked up.” (Re-opening Provision.)

Further, defendant must afford “any SSA

award of disability benefits significant weight under certain circumstances in making the
disability determination.” (SSA Provision.) Only if there is compelling evidence that the SSA
decision is 1) based on an error of law or abuse of discretion; 2) inconsistent with applicable
medical evidence; or 3) inconsistent with the definition of disability contained in the policy,
would defendant not be required to give the SSA award significant weight in its determination.
(Id.) Additionally, if there is other evidence that clearly shows that the claimant is not disabled,
then the Defendant is also not required to give the SSA award significant weight. (Id.)
Here, plaintiff has sufficiently stated a claim for relief that the decision not to re-open her
claim was arbitrary and capricious as it relates to the terms of the plan, to wit: plaintiff alleges
that she provided the defendant with additional information in the form of a SSDI award from
the SSA in an effort to have her claim re-opened at the administrative level. (Proposed Am.
Compl. ¶ 22.) Plaintiff further claims that defendant’s prior statement that one “must apply for

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SSDI while receiving disability benefits,” is contrary to the language of the Claims Manual. (See
id. ¶¶ 27-28.)

c. Violations of ERISA
ERISA allows litigants to bring claims for equitable relief for violations not just of the
terms of a plan, but for violations of the ERISA statute as well. See 29 U.S.C. § 1132 (a)(3).
Plaintiff alleges that defendant’s refusal to reopen her claim violated 29 U.S.C. § 1133(2), which
requires an administrator to “afford a reasonable opportunity to any participant whose claim for
benefits has been denied for a full and fair review by the appropriate named fiduciary of the
decision denying the claim.” (See Proposed Am. Compl. ¶ 30.) Defendant counters that it gave
plaintiff this opportunity through the appeal of her initial disability termination, and that neither
this provision, nor the attending regulations of the Department of Labor, require a second
administrative review or the reopening of a fully administered claim. (D’s Opp. at 7.)
However, plaintiff cites this statutory provision not in the context of defendant’s initial
administrative denial of her benefits, but in the context of her request to reopen that prior claim.
(See Proposed Am. Compl. ¶ 30.) As noted above, the Claims Manual states that “[w]hen
additional information or a new claim for is received on a closed claim, we must determine if the
previous claim should be re-opened or if a new claim should be marked up.” (Re-opening
provision.) While defendant may be correct that ERISA does not require reopening a claim after
it has been closed, the Claims Manual here potentially does. In other words, if defendant is
required under the manual to reopen the claim, or “mark up” a new one, then defendant’s
subsequent determination on that new or reopened claim may also require a full and fair review.

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The parties have not addressed this particular issue, nor can the Court make such a determination
at the pleading stage. The Court will therefore allow this allegation to proceed.

III.

UNDUE DELAY AND DILATORY MOTIVE
Finally, defendant argues that plaintiff acted with undue delay and with a dilatory motive

in seeking leave to amend. The basis for this argument is grounded primarily on the argument
that plaintiff could have applied for Social Security benefits while her claim was being decided
at the administrative level, but chose not to do so. In fact, defendant notes, she filed this civil
action here before applying for those benefits with the SSA. This version of events, however,
does not tell the entire story. While it is true that plaintiff did not file for SSDI benefits during
her administrative proceeding, defendant provides no authority to suggest that this is in any way
required or expected of her. Indeed, whether the plan required plaintiff to have filed with the
SSA at that point is one of the issues raised in her new pleading. Second, while it is also true
that she filed her SSA application after filing the instant case here, she actually waited only a
month to do so.
More to the point, however, the question of undue delay and dilatory motive relates to the
timing of her motion to amend the pleading, not the timing of the events that give rise to the
underlying allegations. If the timing of those preceding events has any bearing on these
proceedings, it relates to the merits of her claims, not the propriety of lodging her new
allegations at this stage in the case. With that backdrop in mind, the Court notes that within two
weeks of receiving her SSA approval, plaintiff forwarded the decision to defendant’s counsel
with a request to reopen the case. Then, within a month of receiving a letter from defendant

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denying her request, plaintiff sought relief from Judge Wall. Each subsequent application to this
Court leading up to the present request for leave to amend was likewise made within a
reasonable time. The Court therefore finds that plaintiff did not act with undue delay or dilatory
motive in bringing the present motion.

IV.

CONCLUSION
For the foregoing reasons, plaintiff’s motion to amend is granted. Plaintiff shall file the

amended pleading as a new docket entry within two weeks of the entry of this Order. Defendant
shall respond thereto within fourteen days of service. See Fed. R. Civ. P. 15(a)(3).

SO ORDERED.
Dated: Central Islip, New York
July 31, 2012

/s
Denis R. Hurley
United States District Judge

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