Baird et al v. Unum Group et al

Filing 28

OPINION AND ORDER - The Court denies Plaintiffs' MOTION for Judgment on the Administrative Record ( 26 ) and grants judgment to defendants Unum Group and Unum Life Insurance Company of America oh her claims. Signed by Magistrate Judge Terence P Kemp on 10/15/12. (jr1)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION

Joy L. Baird, et al.,

:

Plaintiffs,

:

v.

:

Unum Group, et al.,

Case No.

2:11-cv-634

:
Magistrate Judge Kemp

Defendants.

:
OPINION AND ORDER

Plaintiffs Joy and Jack Baird filed this ERISA-based action
after Joy’s workplace insurer, Unum, terminated long-term
disability benefits which had been awarded to her in 1994.

Unum

also told Joy that she should only have received benefits for two
years and that it had overpaid her to the tune of some
$180,000.00.

She has exhausted her administrative remedies.

In

this case, she seeks reinstatement of her benefits, an award of
past due benefit payments, and a finding that she is eligible to
keep getting benefits until she turns 65, which will happen in
2015.
Unum filed the administrative record under seal on October
11, 2011.

After efforts at mediation failed to resolve the case,

Joy filed a motion for judgment on the administrative record on
May 15, 2012.
a reply brief.

Unum responded on June 15, 2012.

Joy did not file

The case is now ready to decide, and will be

decided by the Magistrate Judge pursuant to the parties’ consent
and the Court’s order of reference entered pursuant to 28 U.S.C.
§636(c).

For the reasons which follow, the Court decides this

case in favor of the defendants and directs the Clerk to enter
judgment in their favor.

I.

The Facts.

The parties have stated the facts accurately in their
memoranda, and few of them are disputed.

It is helpful to note

at the outset that this is not a case about whether Joy is
disabled.

The reason her benefits were terminated has nothing to

do with her medical condition.

Rather, Unum based its decision

on a limitation in the policy that, in its view, capped Joy’s
benefit period at 24 months.

Were that the case, Unum should

have stopped paying her benefits in 1996.

Unum claims that the

error which caused it to keep paying her after that date was not
discovered until 2010.
payments.

When it came to light, Unum stopped her

Joy argues that the record does not support that

decision.
There are not many documents in the record that bear on this
issue.

One, of course, is the policy issued to Joy’s employer, a

company now known as GATX Logistics.

In Section I, entitled

“Policy Specifications,” eligible employees are divided into two
classes: “[e]xempt employees with a salary grade of 25 and
higher,” and “[e]xempt employees with salary grades of 20 through
24.”

(Doc. 19, PAGEID #121)(“PAGEID” numbers are generated by

the Court’s electronic filing system, and the Court will use
those numbers when it refers to the administrative record).
Section I(3) of the policy specifies the “Maximum Benefit
Period.”

For Class 1 employees who become disabled at less than

60 years of age, the maximum benefit period is “[t]o age 65 but
not less than 60 months.”

Id.

For Class 2 employees who become

disabled at less than 68 years of age, the maximum benefit period
is “2 years.”

Id. at #122.

The policy makes it clear that

“[d]isability benefits will cease on the earliest of,” among
other dates, “the end of the maximum benefit period.”
#130.

PAGEID

Somewhat oddly, however, the policy also defines

disability for a Class 2 employee as meaning, first, that the
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employee (or insured) “cannot perform each of the material duties
of his regular occupation,” and then, “after benefits have been
paid for 24 months, the insured cannot perform each of the
material duties of any gainful occupation for which he is
reasonably fitted by training, education or experience.”
#126.

PAGEID

It is curious that if a Class 2 employee cannot recover

more than 24 months of benefits under any circumstances, the
drafters of the policy found it necessary to define under what
circumstances such an employee would be considered disabled after
that time.

More on that later.

Notwithstanding this apparent inconsistency, it seems plain
that the policy intended to tie payment of benefits to employees
who meet the definition of disability to two factors: age and
salary grade, which is translated into “class.”

Everyone agrees

that Joy was less than 60 years of age when she became disabled.
The crucial question is whether she was a Class 1 or a Class 2
employee.

The policy does not define or explain the differences

in these two types of employees beyond the salary grades recited
above; presumably, the employer was the one who set the salary
grades of its employees, and the policy meant to refer to those
grades.
As noted, only a handful of documents speak either directly
or tangentially to this issue.

It is true that, in connection

with some offers made by Unum to pay Joy a lump sum rather than
continued monthly payments, Unum represented that “Ms. Baird’s
group disability policy provides a monthly benefit that will
continue for the duration of her lifetime, or age 65, whichever
is less, as long as she continues to meet the policy definition
of disability.”

(Doc. 19, PAGEID #183).

And it is apparent that

Unum believed this statement, made in 2004, to be correct, or it
would not have been offering her a buyout based on an actuarial
calculation of the value of her continuing stream of payments.
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In fact, it concedes as much, stating that it was mistaken about
her maximum benefit period all the way up to 2010.

Its

calculation forms also show that her benefits continued to age
65.

See, e.g., Doc. 19, PAGEID# 187.

On the other hand, a

document entitled “New Claim Checklist” which begins at PAGEID
#266 contains a handwritten note on the second page which says
“Salaried Class 2.”

Someone also checked off boxes which show

Joy to have been a member of “Eligible Class” and that the “Class
#” was “2.”

PAGEID # 267.

Those documents appear to have been

completed by Unum in 1994 when Joy submitted her claim.

Another

Unum-generated document, entitled “Management File Review,”
PAGEID #425, which appears to be dated December 23, 1994, has the
number “24" in a box titled “Claim Duration,” which could also
have been a reference to the 24-month maximum benefit period.
There is other evidence from which it can be inferred that
Unum should have appreciated, from the beginning of the claim,
the fact that Joy was a Class 2 employee.

Its initial letter

awarding her benefits, dated July 26, 1994, told her that
benefits were “payable as long as you continue to remain disabled
as defined and meet all other provisions as outlined in the
contract,” and it quoted the definition of disability that
applied only to Class 2 employees.

PAGEID #435-36.

In 1995 and

1996, a Unum Disability Benefit Specialist, Beverly Valdez, wrote
Joy two letters dealing specifically with the question of
determining her continuing eligibility for benefits.

Given the

maximum benefit period stated in the policy, one would have
thought that these letters would simply have told Joy she would
not get any

payments after 24 months had elapsed.

Instead, each

letter, like the initial letter, cited to the policy provisions
defining “disability” and “disabled” for Class 2 employees.
PAGEID #359, #408.

The first letter, sent in June, 1995, advised

Joy that Unum was “beginning to review your eligibility for
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benefits beyond the 24th month.”

The second, written on January

26, 1996, addressed the specific issue of

“benefit eligibility

beyond 02/10/96,” (which happens to be the two-year or 24-month
anniversary of her first benefit payment) and told Joy that she
remained “eligible for benefits at this time.”

Again, in

somewhat contradictory fashion, the letter also said that
“[b]enefits will continue to 02/10/96 ... provided you remain
disabled according to the terms of the policy.”

PAGEID #359.

Unum continued to pay benefits after February 10, 1996, however,
and periodically asked Joy to update her medical records so that
it could continue to judge her eligibility for benefits.

See,

e.g., PAGEID #353 (1996 letter from Brendan O’Donnell, Disability
Benefit Specialist, to Joy Baird); PAGEID #528 (2007 letter from
Judith Boucher, Benefits Center Representative, to Joy Baird).
It also seems that Unum sometimes reviewed “the policy” when, for
example, determining in 2009 that it had slightly underpaid Joy
over the 15-year period during which she received benefits.

See

PAGEID 560-61.
2010 is when things changed.

A document with a “Notify

Date” of February 18, 2010, states this:
Following extensive review of claim it has been
determined that the claimant was only entitled to 24
months of benefit payments. She falls under class 2
which is “All Exempt Employees with salary grades of 20
through 24" and she was confirmed as salary grade 23
during TPC w/ ER on 06/20/94 which is contained in the
paper claim file.
The claims system read correct duration of 24 months.
Correct policy was contained in claim file. The
duration was manually overriden to be to the age of 65
and is not supported by the policy.
PAGEID #624.
that year.

Joy was advised of this problem on February 26th of

Her attorney, Bruce Hyslop, then asked for

documentation of the fact that she was a Class 2 employee.
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In

response, Unum sent Mr. Hyslop a letter attaching a document
headed “Claim File Documentation” reflecting a telephone call
with Sherri Cagle sometime in June, 1994.

The notes indicate

that “she” (no specific name is in the notes) was at pay level 23
effective on June 3, 1991.

Joy Baird’s name does not appear

anywhere on this document, which is PAGEID #652.
II.

The Administrative Appeal

Joy’s appeal of the decision to terminate her benefits was
made through a letter written by Mr. Hyslop to Unum on May 14,
2010.

In that letter, Joy contested the determination of her

salary grade, stating that “[w]e can only assume that the proper
examiners with proper information determined that Joy was a Class
1 employee.”

She also argued that the document Unum relied upon

did not sufficiently identify her and there was no explanation of
how it had been misplaced or lost for sixteen years.

Finally,

she noted that a large number of Unum representatives had, over
the years, approved continuing her benefit payments.

She also

raised some state law issues such as detrimental reliance,
laches, and bad faith.

See PAGEID #662-665.

Unum decided the appeal on June 15, 2010.

It concluded that

although Unum had correctly been advised that Joy was a Class 2
employee (and it provided a detailed explanation of why it
believed the recently-uncovered notes of the telephone
conversation with Sherri Cagle did, in fact, relate to Joy’s
claim - mostly because Ms. Cagle was Unum’s contact person at
Joy’s employer and the note is dated the same day as a telephone
call between Joy and Unum about her claim), when a “system
generated document” (which appears to be PAGEID #358) from 1996
showed that the benefits period had expired, that document was
manually overriden by one of its benefits specialists, Brendan
O’Donnell, who apparently thought that the reason benefits were
set to expire was that Joy’s disability had been incorrectly
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designated as psychological rather than physical, and that only
psychological benefits expired after 24 months.

That mistake was

not detected until the 2010 file review took place.

Unum

responded to the state law issues by noting that it had waived
any recovery of the overpayments.

Because that was Unum’s final

decision, Joy then filed this lawsuit.
III.

Discussion.

Each party has submitted a fairly short memorandum.

They

recognize that Joy’s claims arise exclusively under ERISA, and
specifically 29 U.S.C. §1132, and present their arguments in that
context.

Joy’s argument is simply that the document used by Unum

to support its decision - the note of the telephone call to
Sherri Cagle which does not contain Joy’s name or make specific
reference to her claim - does not outweigh the sixteen-year
history of approval of payments to her as if she were a Class 1
employee.

Therefore, she must have been such an employee.

If

not, however, she argues that Unum did not give her timely notice
of its action as required by 29 C.F.R. §2560.503-1(f)(3); had it
done more promptly, she might have been able to show that her
employer regarded her as a Class 1 employee, but due to the
passage of time she cannot do so now.
Unum’s argument is similarly straightforward.

It does

address, briefly, the standard of review which the Court must use
here (Unum argues for an arbitrary and capricious standard, but
also contends that its decision should be upheld even if the
Court’s review is de novo) - and contends that the key document
bears enough evidence of authenticity and of a relationship to
Joy’s claim to make Unum’s reliance on it reasonable.

It

responds to the timeliness argument by noting that it acted very
promptly after it discovered its mistake and, in any event, the
complaint does not plead a claim based on the lack of timely
notice.
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A.

Standard of Review

In any ERISA case, it is important to identify, at the
outset, the proper standard of review.

There is a significant

difference in the way the Court conducts its analysis if the
question is whether the plan administrator’s decision is
arbitrary and capricious, as opposed to whether the Court would
independently reach the same decision from the administrative
record.

This plan does not contain more typical language vesting

discretionary authority in Unum to make benefit decisions, so the
question is whether the plan language Unum relies on in arguing
for the more lenient standard of review is legally sufficient to
justify that type of judicial scrutiny.
Unum cites to some of the policy’s general provisions in
support of its argument for an arbitrary and capricious standard
of review.

As it notes, the policy requires that an applicant

for benefits submit a proof of claim and it allows Unum to ask a
beneficiary to submit to either an interview or a medical
examination, or both.

These provisions, says Unum, “demonstrate

the requisite discretionary authority.”
Opposition, Doc. 27, at 5 n.3.

Unum’s Brief in

Unum cites no case law to support

this particular argument, and the cases from the Sixth Circuit
Court of Appeals are not particularly helpful to Unum’s position.
Although Unum correctly notes that no “magic language” is
needed in order for a plan to vest discretionary authority in the
administrator to determine eligibility for benefits or to
construe the language of the plan, there must be some language
that does so.

Thus, in Perez v. Aetna Life Ins. Co., 150 F.3d

550 (6th Cir. 1998), the Court found that a plan provision
requiring “satisfactory evidence” of disability was enough to
vest discretion in the administrator.

However, in Hoover v.

Provident Life and Acc. Ins. Co., 290 F.3d 801 (6th Cir. 2002),
it deemed the absence of the word “satisfactory” to be
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significant, noting that provisions which merely require “proof”
of loss do not, by themselves, create the type of discretion
required to support an arbitrary and capricious standard of
review.

The Hoover court also “reject[ed] the idea that [the

administrator] reserved itself discretion by providing that it
may require physical examination at its own expense.”
808.

Id. at

Again, it focused on the fact that the policy did not

require that the examination produce satisfactory evidence of
disability.
The same is true of Unum’s policy here.

Other judges of

this Court have construed similar language - in fact, arguably
broader language that requires “due proof” of disability - not to
vest discretion in the plan administrator.

See, e.g., Rist v.

Hartford Life and Acc. Ins. Co., 2011 WL 2489898 (S.D. Ohio Apr.
18, 2011), adopted and affirmed 2011 WL 2559372 (S.D. Ohio June
21, 2011).

And the Court of Appeals has, in an unpublished

decision, considered what would appear to be similar if not
identical provisions of a Unum policy as not vesting in Unum the
kind of discretion needed to support an arbitrary and capricious
standard of review.

See Torello v. UNUM Life Ins. Co. of

America, 201 F.3d 441 (6th Cir. December 3, 1999).

Other courts

considering identical policy language have also rejected Unum’s
argument.

See, e.g., Tavares v. Unum Corp., 17 F.Supp. 2d 69

(D.R.I. 1998).

This Court concludes that Unum has not met its

burden of proof as to the arbitrary and capricious standard of
review, and that the Court must review Unum’s decision on a de
novo basis.
It is important to describe what a de novo review entails in
the context of an administrative decision made under an ERISA
plan.

The Court does not take new evidence.

Rather, it must

“review the administrator's decision de novo, that is without
deference to the decision or any presumption of correctness,
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based on the record before the administrator.”

Perry v.

Simplicity Engineering, 900 F.2d 963, 966 (6th Cir. 1990).

As

this Court has said, that means the district court “must consider
‘the proper interpretation of the plan and whether an employee is
entitled to benefits under it’” when it decides such a case.
Mitchell v. First Unum Life Ins. Co., 65 F.Supp. 2d 686, 692-93
(S.D. Ohio 1998), quoting Perry, supra, at 966-67.
B.

The Merits of Joy’s Claim.

Most cases require the Court to resolve both issues of fact
and issues of law, and this one is no different.

The Court

begins with the key issue of fact: Joy’s status as either a Class
1 or Class 2 employee.
It certainly would have been helpful had there been more
evidence before the administrator on this issue.

For example,

any evidence from Joy’s employer as to what it meant by the
various pay grades described in the plan, or how it determined
that an employee was within a certain pay grade, would have shed
a good deal of light on the question of where Joy fell on that
scale back in 1993.

Nevertheless, as Perry indicates, the Court

cannot take additional evidence on that point, at least where
there was an opportunity (as there was here) for Joy to have
submitted additional evidence to the plan administrator.

She did

not, so the Court must look to the existing record for evidence
as to her pay grade.
There is no question that evidence exists to support the
proposition that she was a pay grade 23, or at least that she
fell within the plan’s definition of a Class 2 employee.

In

addition to the notes of the call to Sherri Cagle, which does
contain enough circumstantial evidence to persuade the Court that
it more likely than not pertains to Joy’s claim, there is the
“New Claim Worksheet” which clearly deals with her claim and
which says, at PAGEID 267, that she is a Class 2 employee.
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There

are also the various letters written by Unum employees which
consistently cite the definition of disability which applies to
Class 2, but not Class 1, employees.

There is the letter (PAGEID

#359) which states directly that Joy’s eligibility for benefits
was confirmed through February 10, 1996, the 24-month anniversary
of the granting of her claim - a date which, if 24 months were
not a relevant time period, would have little meaning.

And there

are documents that suggest at least a plausible explanation for
Unum’s failure to enforce this limit, including the transfer of
responsibility for Joy’s claim to a different office and
different Unum employee only a few days before the end of the 24month period, see PAGEID #357 (Letter from Brendan O’Donnell to
Joy Baird dated February 5, 1996, explaining that her claim was
going to be administered out of Unum’s home office in Portland,
Maine - it had previously been in the Atlanta, Georgia office),
and Mr. O’Donnell’s subsequent override of a Unum’s system, which
had terminated Joy’s benefits as of February 10, 1996.
By contrast, the evidence that Joy actually was a Class 1
employee is virtually nonexistent.
file says she was.

Not a single document in the

Certainly, Unum treated her that way after

Mr. O’Donnell intervened in 1996, at least in terms of paying
benefits, but it never generated a letter which alluded to the
standard of disability applicable to Class 1 employees.

Its

numerous file reviews after that date could not have reasonably
led any of Unum’s representatives to conclude that they were
dealing with a Class 1 employee, because nothing in the file
supports that conclusion.

Unum’s employees did conclude,

apparently, that they were dealing with someone who was entitled
to benefits up to age 65, but the record indicates that at
various times (but not at the exact time Joy became disabled)
Class 2 employees were entitled to that longer benefit period, so
the fact that she was a Class 2 employee may not have been a red
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flag to those reviewers as long as they did not independently
confirm which version of the policy was in effect at the time her
disability began.

Overall, the evidence that she was a Class 2

employee, while not terribly strong, is more persuasive than the
evidence she was a Class 1 employee, and the Court so finds.
The legal impact of that determination seems clear.

Joy has

not argued that, as a Class 2 employee who became disabled in
1993, she was entitled to more than 24 months of benefits under
the policy in effect at that time.

The policy states clearly in

two different places that the maximum benefit period for Class 2
employees, no matter what the cause for their disability, is 24
months.

Although it also includes a definition of disability for

Class 2 employees which discusses what they need to prove after
receiving 24 months of benefits - something that is precluded by
other provisions in the policy - that definition would be useful
if, as happened here, the policy were changed from time to time
to allow Class 2 employees to receive more than 24 months of
benefits.

Since Joy has not made an argument that even if she

were properly determined to be a Class 2 employee, this
particular policy can somehow be construed in a way that entitled
her to more than 24 months of benefits, her claim under the
policy itself must fail.
The only other issue she raises here is the lack of timely
notice.

The regulation she cites, 29 C.F.R. §2560.503-1(f)(3),

has this to say about timely notice:
Disability claims. In the case of a claim for
disability benefits, the plan administrator shall
notify the claimant, in accordance with paragraph (g)
of this section, of the plan's adverse benefit
determination within a reasonable period of time, but
not later than 45 days after receipt of the claim by
the plan. This period may be extended by the plan for
up to 30 days, provided that the plan administrator
both determines that such an extension is necessary due
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to matters beyond the control of the plan and notifies
the claimant, prior to the expiration of the initial
45–day period, of the circumstances requiring the
extension of time and the date by which the plan
expects to render a decision.
By its terms, this section would not appear to apply to
situations where a claim is granted.

Most situations where a

claim is granted, and then benefits are terminated at a later
date, do not allow for the termination decision to be
communicated “not later than 45 days after receipt of the claim
by the plan.”

Joy does not dispute that she received timely

notice of Unum’s decision to terminate her benefits after Unum
came to that decision in 2010.

Further, if there is

noncompliance with this regulation, the proper remedy is not
ordinarily to award benefits but simply to cure whatever timing
problems the lack of compliance caused, see Murphy v. Wal-Mart
Associates' Group Health Plan, 928 F.Supp. 700, 708
(E.D. Tex. 1996), unless the plaintiff can show that the “failure
to provide proper notice affected the outcome of the decision.”
Smith v. Blue Cross Blue Shield of Massachusetts, Inc., 597
F.Supp. 2d 214, 222 (D. Mass 2009).
Joy has suggested that the long delay in notifying her of
her lack of eligibility for more than 24 months of benefit
payments may have affected her ability to show that she was a
Class 1 employee.

However, she did not submit any evidence to

the administrator in support of that claim, nor did she submit
any evidence at all to suggest that, if given more time, she
might be able to produce evidence that she actually was a Class 1
employee.

Since this Court is, again, limited to the

administrative record, it cannot find that Joy was prejudiced by
any delay here, even were the Court to conclude (which it does
not) that, as a matter of law, Unum violated 29 C.F.R. §2560.5031(f)(3).

Thus, this argument, which is the only other one raised

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in Joy’s motion for judgment on the record, also fails.
IV.

Conclusion and Order

For the reasons set forth in this Opinion and Order, the
Court denies Plaintiffs’ Motion for Judgment on the
Administrative Record (#26) and grants judgment to defendants
Unum Group and Unum Life Insurance Company of America on her
claims.

This case is dismissed with prejudice.

The Clerk is

directed to enter judgment in favor of the defendants.

/s/ Terence P. Kemp
United States Magistrate Judge

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