arbitrary and capricious standard.?
|

IIlr.

I find that Unum’s decision to deny Mr. Cheng benefits was
arbitrary and capricious. I do not make this determination on the
merits of Mr. Cheng’s claim for benefits. Indeed, the parties have
made it impossible for me to determine whether Mr. Cheng is
entitled to those benefits. In determining whether a party is
entitled to benefits under an ERISA plan, I must look to the terms
of that plan. Filipowicz v. Am. Stores Benefit Plans Comm., 56
F.3d 807, 812 (7th Cir. 1995). Here, however, the parties cite to
two, different versions of the Plan documents with two different
definitions of disability. (Pl.’s Resp. Def.’s Statement Facts
f@ 5; Def.’s Resp. Pl.’s Statement Facts 9 12.)* As such, I am

unable to determine whether Unum’s decision to deny benefits was,
!

3 Mr. Cheng argues that even if the Plan retains discretion
to determine eligibility for benefits, a de novo standard of review
applies because Unum failed to properly review his appeal. In
support, he cites Jebian v. Hewlett-Packard Co., 310 F.3d 1173 (9th
Cir. 2002), Gilbertson v. Allied Signal, Inc., 328 F.3d 625 (10th
Cir. 2003), and Seman v. FMC Corp. Retirement Plan for Hourly
Employees, 334 F.3d 728 (8th Cir. 2003). These cases only hold,
however, that when an appeal is deemed denied due to the plan’s
failure to act within a specified time, or when the plan fails to
act, at all on an appeal, de novo review is appropriate. Here,
although (as discussed below) Unum failed to respond appropriately
to Mr. Cheng’s appeal, it is not the case that Unum failed to act
within a specified time or failed to act at all.

| 4 Phe versions of the Plan cited to by the parties here are
different still from a third version of the policy submitted Dy
ung with its motion for a remand and stay of proceedings. (Def.’
Mot. Remand and Stay Ex. J.)

t



required by ERISA and its accompanying regulations. Consequently,

Unum’s decision to deny benefits was arbitrary and capricious.
Iv.

Having determined that Unum’s decision to deny benefits was
arbitrary and capricious, the only remaining issue is remedy.
Remand to the administrator is generally the appropriate step,
unless the case is “so clear cut that it would be unreasonable for
the plan to deny the application for benefits on any ground.” Hess
v. Hartford Life & Accidental Ins. Co., 274 F.3d 456, 463-64 (7th
Cir. 2001). As noted above, the parties dispute the proper
definition of disability under the Plan, and consequently, it is
not clear cut one way or the other whether Mr. Cheng is entitled to
benefits. Consequently, this case will be remanded to Unum to
determine whether Mr. Cheng is entitled to benefits. The remand
shall take the form of a new appeal of Unum’s initial denial of
benefits, to comply with all Plan terms and ERISA regulations. For
purposes of timing and other requirements, entry of this opinion
and order shall serve as Mr. Cheng’s receipt of notification of the

initial adverse benefit determination.
j

V.

Plaintiff’s motion for summary judgment is Denzzp; defendant’s

motion for summary judgment is DENIED. This matter is remanded to
|

the Plan administrator for further proceedings. Additionally, I

|
| 7


under the policy, Unum has discretionary authority to determine
your eligibility for benefits and to interpret the terms and
provisions of the policy.” (Pl.’s Resp. Def.’s Statement Facts
q 4.) This language is sufficient to make clear that entitlement
to benefits under the Plan is subject to the discretion of the Plan
administrator. See Herzberger, 205 F.3d at 331 (suggesting “safe
harbor” language for plans that wish to avoid de novo review:
“Benefits under this plan will be paid only if the plan
administrator decides in his discretion that the applicant is
entitled to them”)?; Gerlib v. R.R. Donnelley & Sons Co., No. 95 C
7401, 2001 WL 1313794, at *6 (N.D. Ill. Oct. 26, 2001) (Kennelly,
g.) (applying an arbitrary and capricious standard of review to a
plan that gave its administrator “the authority to construe and
interpret the Plan, decide all questions of eligibility and
determine the amount, manner and time of payment of benefits”)

Because the Plan here makes clear that its administrators retain
discretion to determine eligibility for benefits, decisions of the
Plan’s administrators will be reviewed under a deferential

| 1 I cite to Mr. Cheng’s response to Unum’s statement of facts
as ‘opposed to the Plan itself because, as discussed below, the
parties have presented me with two different versions of the Plan.
Nevertheless, Mr. Cheng does not dispute Unum’s assertion that the
Plan contains the quoted language.

lo,

2 Use of the suggested safe harbor language is not mandatory
in jorder to receive deferential arbitrary and capricious review.
Any language indicating with the requisite clarity that a
discretionary determination is envisaged is sufficient.
Herzberger, 205 F.3d at 331.

3
|


on the merits, arbitrary and capricious.

Nonetheless, I find that Unum’s decision to deny benefits was
arbitrary and capricious because it failed to provide a “full and
fair review” of Mr. Cheng’s appeal. See Halpin v. W.W. Grainger,
Inc., 962 F.2d 685, 693 (7th Cir. 1992) (citing 29 U.S.C. 1133)
There were some serious procedural irregularities in Unum’s
handling of Mr. Cheng’s claim and appeal. First, Unum’s initial
denial letter failed to set forth “[a] description of any
additional material or information necessary for the claimant to
perfect the claim and an explanation of why such material is
necessary.” 29 C.F.R. § 2560.503-1(g) (1) (iii). See also Halpin,
962 F.2d at 691. The letter simply indicated that if Mr. Cheng had
“new, additional information to support [his] request for
disability benefits,” he should send it to Unum. (Def.’s Ex. C at
UACL 00129.) Such a “blanket request” for additional information
does not satisfy the regulatory requirement. Halpin, 962 F.2d at
691. Second, on appeal, Mr. Cheng requested “any and all pertinent
dogument's relevant to this matter so that [he could] respond with
issues and comments in writing.” (Def.’s Ex. C at UACL 00164.)
ERISA regulations require that a claimant be provided, upon
request, copies of “all documents, records, and other information
relevant to the claimant’s claim for benefits,” 29 C.F.R.
§ 2560.503-1(h) (2) (iii), and be given the opportunity “to submit
written comments, documents, records, and other information

I



note that Unum filed a motion to strike certain material submitted
by Mr. Cheng and to deem certain facts as admitted. That motion is

DENIED as moot.

“ZY ORDER:
Elaine E. Bucklo
United States District Judge

Dated: October q , 2003


sd
Minute! Order Form (06/99)

United States District Court, Northern District of INinois

fame of Assigned Judge laine E sittin ¢ if Other
" or Magiswate Judge Elaine E. Bucklo Sika sscieea Sudse
t
CASE NUMBER 01 C 9735 DATE 10/9/2003
‘ASE Cheng vs. Unum Life Insurance Company
ITLE

[In the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

Mr, Cheng’s receipt of notification of the initial benefit determination.

(11) Ml, [For further detail see order attached to the original minute order.]

MOTION: | of the motion being presented.]
\
DOCKET ENTRY:
qd) OG Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion due
@) QO Answer brief to motion due___. Reply to answer brief due.
(4) a Ruling/Hearingon___setfor_ at
(5) QO : Status hearing[held/continued to] [set for/re-set for]on__——ssetfor_— at.
(6) Qa Pretrial conference[held/continued to] [set for/re-set for]on set for att,
(7) OO: Trial [set for/re-set for]on_ at
(8) im] [Bench/Jury trial] [Hearing] held/continued to at __
(9) O , This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) COlLocal Rule 41.1 CFRCP41(a)(1) CFRCP41(a)(2).
do) fl [Other docket entry] | Enter Memorandum Opinion and Order denying both parties’ motions for

summary judgment and denying defendant’s motion to strike certain materials as moot. This case is
remanded to Unum to determine whether Mr. Cheng is entitled to benefits, The remand shall take the
form of a new appeal of Unum’s initial denial of benefits, to comply with all plan terms and ERISA
regulations. For purposes of timing and other requirements, entry of this opinion and order shall serve as

y , ar
No notiges required, advised in open court.
2

No notiges required. number of notices

| Notices mailed by judge’s staff. OCT 10 2003
Notified counsel by telephone. dase docketed
Docketing to mail notices. .

JY | Mail AQ 450 form. ing dogky Niels
Copy to, judge/magistrate judge.

H ‘1orp/2003
-
due mbtedaftice
courtroom ¢
MP} deputy’s Mie MPS
i initials SIT ERNCERITAS?
Datg/time received iny ,
f contval Clerk's Office mailing deputy initials

t



relating to the claim,” 29 C.F.R. § 2560.503-1(h) (2) (ii). While
Unum apparently complied with Mr. Cheng’s request for the relevant
doguments, it nonetheless denied his appeal shortly thereafter,
before receiving any further submissions from Mr. Cheng and despite
his indication in his previous letter that “[uJpon receipt of the
reguested information, [he would] submit a final statement
regarding the appeal.” (Def.’s Ex. C at UACL 00164, UACL 00175.)
Further, although Unum stated that Mr. Cheng had ninety days from
the date of the initial denial letter (May 10, 2001) to appeal,
(Def.’s Ex. C at UACL 00129), ERISA regulations indicate that a
claimant has 180 days to appeal a denial of disability benefits,
which begins upon the claimant’s receipt of the denial, 29 C.F.R.
§ 2560.503-1(h) (4).° Thus, even if Mr. Cheng received the initial
denial letter on May 10, 2001, the day it was written,® Unum’s
August 9, 2001 decision on appeal was premature given the length of
time Mr. Cheng had to appeal and his expressed intent to submit a
final statement regarding the appeal. Clearly, Mr. Cheng cannot be

said to have received a “full and fair review” of his appeal as
|

5 29 C.F.R. § 2560.503-1(h) (4) applies to claims for
disability benefits specifically. That section indicates that in
order for a claimant to have a reasonable opportunity for full and
fair review of an adverse benefit determination, the requirements
of, among others, § 2560.503-1(h) (3) (i) must be met. That section
provides a claimant with 180 days following receipt of a
notification of an adverse benefit determination within which to
appeal the determination.

© Mr. Cheng indicates that he did not receive the letter
until June 5, 2001. (Def.’s Ex. C at UACL 00164.)

6



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS VERE
EASTERN DIVISION DOCKETED

ocT 1 9 2003
PIUS KAI WAH CHENG,

Plaintity,
}

ve
t

LIFE INSURANCE COMPANY OF

ore

No. 01 C 9735

Defendant.

MEMORANDUM OPINION AND ORDER

Plaintiff Pius Kai Wah Cheng was a partner with the Hong Kong
office of Baker & McKenzie, which provided a long-term disability
insurance plan (“Plan”) through defendant Unum Life Insurance
Company of America (“Unum”). From November 1, 2000 to January 31,
2001, Mr. Cheng took a leave of absence from Baker & McKenzie.
During that time, Mr. Cheng submitted a long-term disability claim
to Unum indicating that he had become disabled on November 1, 2000
due to Trigeminal Neuralgia (“TN”). On May 10, 2001, Unum denied
Mr. Cheng’s claim for benefits. Following an appeals process, the
details of which are somewhat disputed, Mr. Cheng filed suit in
this court for benefits. Before me now are cross-motions for
summary judgment. I deny both motions, and remand the matter to

i
the Plan administrator for further proceedings.
i

I.
)

As an initial matter, I address Mr. Cheng’s request that I

reconsider my order of August 2, 2002, in which I held that this

SD


case is governed by ERISA. Mr. Cheng argues, as he did before,
that as a partner of Baker & McKenzie, he is neither a participant
nor a beneficiary under the Plan. Citing two conflicting lines of
cases, I found the better reasoned line supported treating law firm
partners as beneficiaries under ERISA. Mr. Cheng’s citation now to
an additional non-binding state case, Ritter v. Massachusetts
Casualty Insurance Co., 786 N.E.2d 817 (Mass. 2003), holding that
the founder and president of a company is not a plan beneficiary
under ERISA does not change my earlier decision that this case is
governed by ERISA.
II.

Under ERISA, de novo review of a denial of benefits is the

default rule, “unless the benefit plan gives the administrator or
fiduciary discretionary authority to determine eligibility for
benefits or to construe the terms of the plan.” Postma v. Paul
Reyere Life Ins. Co., 223 F.3d 533, 538 (7th Cir. 2000) (quoting
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)).
Where a plan confers such discretionary authority, a deferential
arbitrary and capricious standard of review applies. Id. In order
for decisions of its administrators to be subject only to this
arbitrary and capricious standard, the plan must “make clear” that
ies administrators retain discretionary authority. Herzberger v.

Standard Ins. Co., 205 F.3d 327, 331 (7th Cir. 2000). Here, the

Plan expressly states that “[w]hen making a benefit determination
i