UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

KENNETH W. MORRISON, as

Personal Representative of the

Estate of Mark T. Lowe,

CIVIL ACTION NO. 09-11948

Plaintiff,

DISTRICT JUDGE NANCY G. EDMUNDS

v.

MAGISTRATE JUDGE DONALD A. SCHEER

UNUM LIFE INSURANCE 

COMPANY OF AMERICA,

Defendant.

_________________________________/ 

REPORT AND RECOMMENDATION

I. RECOMMENDATION

I recommend that Plaintiff’s Motion for Summary Judgment be denied, and that

Defendant’s Motion for Summary Judgment be granted.

II. REPORT

A. Procedural History

This is an action for judicial review of an ERISA Plan Administrator’s decision

denying Plaintiff’s claim for insurance benefits on behalf of a deceased Plan participant. 

The Complaint was filed on May 21, 2009. Defendant filed its Answer on July 1, 2009. The

court entered a Scheduling Order which directed the parties to file any statements of

procedural challenge by August 10, 2009, and cross motions for summary judgment within

sixty (60) days thereafter. On August 6, 2009, Plaintiff filed a Statement of No Procedural

Challenge. Defendant filed a Statement of No Procedural Challenge on August 10, 2009.
On August 20, 2009, the court entered a Stipulated Order allowing the filing of the

administrative record under seal. On October 8, 2009, the parties stipulated to an extension

of the dispositive motion filing date. Defendant’s Motion for Summary Judgment was filed

on November 9, 2009, and Plaintiff’s Motion for Summary Judgment was filed on the

following day. The dispositive motions were referred to the magistrate judge on November

13, 2009. The motions were heard on December 30, 2009. Following the hearing, Plaintiff

filed a Motion to Permit Discovery regarding the controlling standard of review. That motion

was referred to the magistrate judge on January 11, 2010, and brought on for hearing on

February 4, 2010. On March 15, 2010, the motion was denied. No objection to that decision

was filed. On May 17, 2010, Plaintiff filed a Motion to Amend Scheduling Order and For

Leave to File Supplemental Brief. Defendant filed a Brief in Opposition on May 28, 2010. 

The parties appeared for hearing on June 8, 2010, and the Motion was denied in a written

Order on June 14, 2010.

B. Applicable Law and Standard of Review

The Scheduling Order entered by the district court judge on July 8, 2009 provides

that these proceedings will be conducted in accordance with the guidelines set forth by the

Sixth Circuit Court of Appeals in Wilkens v. Baptist Health Care System, Inc., 150 F.3d 609,

619 (6th Cir. 1998). That decision recognized the determination of the Supreme Court, in

Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101 (1989), that the standard of review

for an ERISA plan administrator’s denial of benefits is de novo, “unless the benefit plan

gives the plan administrator discretionary authority to determine eligibility for benefits or to

construe the terms of the plan.” Wilkens, 150 F.3d at 613. Where the benefit plan gives

such discretion to the plan administrator, “the highly deferential arbitrary and capricious

2
standard of review is appropriate . . ..” Yeager v. Reliance Standard Life Ins. Co., 88 F.3d

376, 380 (6th Cir. 1996). Under either standard, the court’s review is confined to the record

that was before the plan administrator. Miller v. Metropolitan Ins. Co., 925 F.2d 979, 986

(6th Cir. 1991).

C. Factual History

Plaintiff’s decedent, Mark T. Lowe (“Lowe”), was killed in a motor vehicle accident

on September 8, 2006. He was the father of Harlie Lowe, a minor child, who is the sole

beneficiary of his estate. At the time of his death, Lowe was a full-time employee of

PlastiPak, a division of Absopure Water Company (“Absopure”), in Westland, Michigan. 

He had been so employed since April 25, 2005. On January 1, 2006, Absopure

implemented a plan with Unum Life Insurance Company of America (“Unum”) to provide

life insurance and accidental death and dismemberment benefits to its employees,

including Lowe. Plan participants were divided into four eligibility groups, only two of which

are relevant to this case. Group 1 included all full-time employees with basic annual

earnings of less than $30,000.00 in active employment. Eligibility Group 2 included those

employees earning “at least $30,000.00 but less than $40,000.00.” (See Unum Plan, UACL

00027-00038, 00041-00042.) Group 1 members qualified for $30,000.00 in life insurance

and $60,000.00 in accidental death/dismemberment benefits. Group 2 employees were

eligible for $90,000.00 in life insurance and $180,000.00 in accidental

death/dismemberment benefits. (UACL 00038-00042.)

The insurance policy (p. ERISA-7) contains the following language:

DISCRETIONARY ACTS

In exercising its discretionary powers under the Plan, the Plan

Administrator and any designee (which shall include Unum as

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a claims fiduciary) will have the broadest discretion permissible

under ERISA and any other applicable laws, and its decisions

will constitute final review of your claim by the Plan. Benefits

under the Plan will be paid only if the Plan Administrator or its

designee (including Unum) decides in its discretion that the

applicant is entitled to them.

On June 12, 2006, Lowe was promoted to the position of Team Leader, and his

salary increased to $1,150.00 paid biweekly. He also participated in a company sponsored

health savings account (HSA). He elected an option under which he contributed $10.00

biweekly to the account, and the employer made biweekly contributions of $12.50. (UACL

00479.) Decedent’s last pay stub reflected that the employer had contributed $225.00 to

the HSA in 2006. (UACL 00410.) 

On November 30, 2006, decedent’s employer filed a notice of claim with Defendant

Unum, stating that Lowe’s salary was $1,150.00 biweekly. On February 16, 2007, Unum

paid the Group 1 basic life insurance benefit, but denied the accidental

death/dismemberment (“ADD”) benefit. The estate did not dispute the life insurance award,

but it appealed the ADD denial. Unum allowed the appeal and subsequently did pay the

ADD benefit, as well as seat belt/air bag enhancement benefits, in November 2007. 

On July 31, 2008, the estate asserted that the decedent qualified for Group 2

benefits because the Plan had improperly calculated his “annual earnings,” and because

the HSA benefits paid by PlastiPak raised his income above the $30,000.00 Group 2

threshold. Unum accepted and investigated the claim, but denied benefits. This lawsuit

followed.

D. Analysis

Notwithstanding the insurance policy provisions granting to the Plan Administrator

“the broadest discretion permissible under ERISA and any other applicable laws,” Plaintiff

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argues that this court should apply a de novo standard of review. The argument is based

upon Michigan Office of Insurance Services (“OFIS”) regulations which became effective

June 1, 2007. The regulations state, in pertinent part, as follows:

(c) On and after the first day of the month following the

effective date of these rules, a discretionary clause issued or

delivered to any person in this state in a policy, contract, rider,

endorsement, 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.

***

(c) “Discretionary clause” is a provision in a form that purports

to bind the claimant to or grant deference in subsequent

proceedings to the insurer’s decision, denial or interpretation

on terms, coverage or eligibility for benefits including, but not

limited to, a form provision that does any of the following:

***

(vi) Provides that or gives rise to a standard of

review on appeal that gives deference to the

original claimed decision.

(vii) Provides that or gives rise to a standard of

review on appeal other than de novo review.

The insurance contract provided for annual renewals. Plaintiff maintains that any

revision of its terms as a result of renewals after the July 1, 2007 nullification date of the

OFIS regulation would serve to invalidate the discretionary clause of the policy as to the

claim based on Lowe’s death in 2006.

Plaintiff responds that the OFIS Regulations are inapplicable to the contract at issue

in this case because: (a) the policy governing Plaintiff’s claim became effective January 1,

2006, and appears in the record without amendment; (b) the policy was issued, signed and

5
delivered by Unum to Absopure in the State of Maine, and provides that the governing

jurisdiction is Maine; and (c) the death of Mark Lowe, which forms the basis of Plaintiff’s

claim under the policy, occurred in September 2006, ten (10) months before the OFIS

Regulation became effective.

I am persuaded that the law is with the Defendant and against the Plaintiff on this

issue. The contract provides that Maine law should govern any disputes. As a general

proposition, the law of the State chosen by the parties to govern their contractual rights and

duties will be applied if the particular issue is one which the parties could have resolved by

an explicit provision in their agreement directed to that issue. Restatement of Conflicts 2d,

Section 187. 

Plaintiff offers Howting-Robinson Associates, Inc. v. Bryan Custom Plastics, 65

F.Supp. 2nd 610 (E.D. Mich. 1999) as authority for this court to override the parties choice

of Maine law to govern their relationship. In that case, this court correctly observed that

federal courts sitting in diversity must apply the choice of law principles of the forum. 

Klaxon Co. v. Stentor Electric Manufacturing Company, 313 U.S. 487 (1941). The

Michigan Supreme Court has held that, when determining the applicable law, courts must

balance the expectations of the parties with the interests of the states. Chrysler Corp. v.

Skyline Industrial Services, Inc., 448 Michigan 113 (1995). Michigan has adopted the

approach set out in 1 Restatement of Conflict Laws Sections 187, 188 to resolve choice of

law issues. 

Section 187(1) permits the application of the parties “choice of

law if the issue is one that the parties could have resolved by

an express contractual provision. However, there are two

exceptions. The parties’ choice of law will not be followed if (1)

the chosen state has no substantial relationship to the parties

6
or the transaction, or (2) there is no reasonable basis for

choosing that state’s law. Section 187(2)(a). Also, Section

187(2)(b) bars the application of the chosen state’s law when

it ‘be contrary to the fundamental policy of a state’ which has

a materially greater interest than the chosen state in the

determination of the particular issue, and which, under the Rule

of Section 188, would be the state of the applicable law in the

absence of an effective choice of law by the parties.” 

Howting-Robinson, 65 F.Supp. at 612-13 (quoting Martino v. Cottman Transmission

Systems, Inc., 218 Mich.App. 54 (1996).

Under Section 188 of 1 Restatement (2nd) of Conflict Laws, the

court must look to the following factors to determine which

state’s law is applicable: (a) the place of contracting, (b) the

place of negotiation of the contract, (c) the place of

performance, (d) the location of the subject matter of the

contract, and (e) the domicile, . . . place of incorporation and

place of business of the parties.

Id. at 213.

Judge Taylor found in Howting-Robinson that Michigan law applied, despite the

contractual provision designating the law of Ohio as controlling. Because the only Section

188 factor in support of that designation was the fact that the defendant was incorporated

there, she determined that Ohio had “a far less substantial relationship to the contract.” 

She further found that the application of Ohio law would abrogate a “fundamental policy of

Michigan law,” because Michigan had a statute designed to protect sales representatives,

and Ohio did not. 

As to the first ground, it should be noted that the ruling in Howting-Robinson

significantly lowered the Restatement Section 187(1) standard from no substantial

relationship to a comparative standard of “far less substantial relationship” between the

parties or the transaction and the contractually selected legal jurisdiction than with the state

7
of the forum court. That watered down standard finds no support in the authority cited in

the decision. 

In the case at bar, not only is Maine the state of domicile for Defendant Unum, the

contract documents were signed by Unum at Portland, Maine and delivered to Absopure

in that state. It would be difficult to conclude that the State of Maine has no substantial

relationship to the parties or the transaction establishing the insurance coverage. Unum

provides insurance to customers nationwide. Its interest in having its legal obligations

determined by the single standard of the law of its home state is patent. In light of that

interest, it would be absurd as well to conclude that there is “no reasonable basis” for

choosing that state’s law. While it might be argued that, by reason of Absopure’s extensive

operations in Michigan, Maine has a “far less substantial relationship” to the parties or the

contract than Michigan, that is not the standard established by Section 187(1), and adopted

by the Michigan Supreme Court. The correct standard has certainly been met here.

The second ground relied upon by the court in Howting-Robinson is also inapplicable

here. Michigan’s OFIS regulations did not take effect (or even exist) until long after Lowe’s

death, Plaintiff’s claim and Unum’s determination that the decedent was a Group 1

employee. The regulation, by its express language, was to have no application to

previously existing contracts containing a discretionary clause. Even after subsequent

amendment of the contract, the regulation would apply only prospectively. Accordingly,

neither Maine nor Michigan has been shown to have had a “fundamental policy” against

discretionary clauses in contracts created and fulfilled prior to the effective date of the OFIS

regulations.

8
Finally, I would note that OFIS itself appears to have accepted Defendant’s view that

the law of the State of Maine governs the relationship of the parties to the contract in issue

here. In a letter of December 3, 2009, in response to Plaintiff’s counsel’s inquiry, an OFIS

representative noted Defendant’s position, declared that the Michigan Office of Financial

and Insurance Regulation was unable to review the matter further because it was already

in litigation, and suggested that Plaintiff address any additional concerns regarding the

handling of the matter to the Bureau of Insurance of the State of Maine. (See Docket Entry

27, Exhibit 2). To the extent that state regulations are not preempted by the ERISA statute,

Plaintiff has offered no persuasive authority for the proposition that Michigan law should be

applied where the Plan provides otherwise. There is no evidence in the record to suggest

that discretionary clauses are not valid under the standards of Maine law. 

Further, I am persuaded that, even if Michigan law were to be applied, the death of

Mr. Lowe fixed the legal relationship of the parties under the policy of insurance, such that

the subsequent enactment of the OFIS Regulations invalidating discretionary clauses would

have no effect upon the dispute in this case. Under both Michigan and federal law, statutes

that affect substantial rights in respect to transactions or occurrences already past, are not

applied retroactively. See People v. Conyor, 281 Mich.App. 526; 762 N.W. 2nd 198

(Mich.App. 2008); Thaqui v. Jenifer, 377 F.3d 500 (6th Cir. 2004). Plaintiff’s reading of the

regulation, while not technically inconsistent with the language employed, is inconsistent

with its most logical intent. I am satisfied that the intended purpose of the Regulation was

to invalidate discretionary clauses in contracts which existed prior to its effective date, but

only from and after any revision occurring on or after July 1, 2007. The rights of the parties

to this action should be determined by the state of the law at the time of the event triggering

9
the entitlement to benefits. That event was the death of Mark Lowe on September 8, 2006,

ten months before the regulation existed. The administrator’s determination that Lowe was

a Group 1 employee was made no later than February 16, 2007, on which date the basic

life insurance benefit was paid. The OFIS regulation had still not yet become effective. 

The administrator’s exercise of discretion was fully lawful when made, and to withdraw that

discretion retroactively is unfair. The language of the regulation upon which Plaintiff relies

does not compel a contrary result.1

 Indeed, its very terms express the intent to avoid

retroactive application. The highly deferential arbitrary and capricious standard of review

must be applied in this case.

A Plan Administrator’s eligibility determinations are not arbitrary and capricious if

they are “rational in light of the plan’s provisions.” Yeager v. Reliance Standard Life Ins.

Co., 88 F.3d 376, 380-81 (6th Cir. 1996). Where a plan grants an Administrator

discretionary authority to determine eligibility for benefits, or to construe the terms of a plan,

courts grant “great leeway” in the review of such decisions.” Moos v. Square D Co., 72

F.3d 39, 42 (6th Cir. 1995). Where a decision is rational, a court may not second guess the

administrator. Wages v. Sandler O’Neal and Partners, L.P., 39 Fed.App. 108, 112-13 (6th

Cir. 2002). “Thus, the standard requires that the decision ‘be upheld if it is the result of a

deliberate, principled reasoning process, and if it is supported by substantial evidence.’” 

Mitchell v. Dialysis Clinic, Inc., 18 Fed.App. 349, 353 (6th Cir. 2001) (citing Killian v.

Healthsource Provident Admin., Inc., 152 F.3d 514, 520 (6th Cir. 1998). When it is possible

1

 Plaintiff filed a Motion to Permit Discovery as to whether the policy of insurance

was amended after the effective date of the OFIS Regulation. On the grounds stated

above, as well as a procedural ground not pertinent here, I denied the Motion in a

written Order on March 15, 2010. (Docket Entry 32). My order was not appealed.

10
to offer a reasoned explanation, based on the evidence, for a particular outcome, that

outcome is not arbitrary or capricious. Williams v. International Paper Co., 227 F.3d 706,

712 (6th Cir. 2000). Furthermore, where there are two reasonable interpretations of the

Plan, the court cannot reverse the Administrator’s determination. Anderson v. Emmerson

Elec. Co., 351 F.Supp. 2nd 740, 743-44 (W.D. Mich. 2004) (citations omitted); Aff’d,

Anderson v. Emmerson Elec. Co., 161 Fed.App. 504, 2005 Fed.App. 1012 N (6th Cir.

December 23, 2005). Nonetheless, the highly deferential standard of review does not

automatically mandate adherence to [the Administrator’s] decision. MacDonald v. WesternSouthern Life Ins. Co., 347 F.3d 161, 172 (6th Cir. 2003).

Defendant asserts that the administrative record supports its decision to pay benefits

to Plaintiff at the Group 1, rather than the Group 2 level. The policy defines the groups as

follows:

Group 1 

All full-time Salaried employees with Basic Annual Earnings of

less than $30,000 in active employment in the United States

with Employer.

Group 2

All full-time Salaried employees with Basic Annual Earnings of

at least $30,000 but less than $40,000 in active employment in

the United States with the Employer.

B@G-LIFE-1 and B@G-AD&D-1.

The policy contains no specific definition for the term “Basic Annual Earnings,” but

defines “Annual Earnings” as follows:

“Annual Earnings” means your gross annual income from your

Employer in effect just prior to the date of loss. It includes your

total income before taxes. It is prior to any deductions made

11
for pre-tax contributions to a qualified Deferred Compensation

Plan, Section 125 Plan, or flexible spending account. It does

not include income received from commissions, bonuses,

overtime pay, any other extra compensation or income

received from sources other than your Employer.

Policy, p. LIFE-BEN-1 and AD&D-BEN-2.

The glossary section of the policy, applicable to both life insurance and AD&D

insurance, provides that:

ANNUAL EARNINGS means your annual income received

from your Employer as defined in the plan.

Policy, p. GLOSSARY-1.

Defendant correctly observes that the Notice of Claim form submitted by Absopure

to Unum for benefits due as a consequence of Lowe’s death listed his earnings as

$1,150.00 biweekly. A typical year contains 26 biweekly paydays which, at Lowe’s salary

rate, would yield an income of $29,900.00. Both the Notice of Claim (CL at 17) and the

cover letter from the employer (CL at 15) stated that the benefits payable under the policy

were $30,000.00 in life insurance benefits and $60,000.00 in AD&D benefits, the amounts

corresponding to a Group 1 level employee. Indeed, Plaintiff’s January 2007

correspondence to Unum expressly requested payment of $30,000.00 and $60,000.00 for

life and AD&D benefits respectively. (CL at 107). Upon receipt of the $30,000.00 in life

insurance benefits in February 2007, Plaintiff made no complaint as to the correctness of

the amount. Furthermore, in his appeal of the initial denial of AD&D benefits, Plaintiff,

through his attorney, again expressly requested payment of $60,000.00 in AD&D benefits,

the amount corresponding to a Group 1 employee. (CL at 233). When Unum granted the

appeal and paid the $60,000.00 requested, Plaintiff made no objection regarding the

amount.

12
It was not until July 31, 2008 that Plaintiff’s counsel first raised the argument that the

decedent was entitled to Group 2 status under the terms of the insurance contract. The

argument was made in a letter to Ms. Tracey McKenzie, of Unum’s Group Life/Special Risk

Benefits Group. (UACL 00325).

Upon receipt of Plaintiff’s new claim, Defendant reviewed Mr. Lowe’s pay records

for the period from August 2005 through September 2006. (CL at 373-412). The records

were reviewed by Unum’s Financial Consulting Team, which concluded that the previous

$29,900.00 annual earnings calculation was correct. (CL at 413). Unum consulted with

Absopure to determine if anything in Mr. Lowe’s personnel file indicated that his annual

earnings were other than $29,900.00. The employer responded that no such information

appeared in the file, and confirmed that it was paying premiums based upon the benefit

level that was actually paid. (CL at 420). Unum thereupon obtained and examined Mr.

Lowe’s entire personnel record, confirming for itself his employer’s conclusion that it

contained no information indicating that Lowe’s annual earnings were other than

$29,900.00. Unum determined that decedent was a Group 1 employee, and that Plaintiff’s

application for Group 2 benefits was without merit. 

Plaintiff challenges the Plan Administrator’s decision, contending that it was not the

result of a reasoned analysis, and that it is inconsistent with the language of the Unum Plan

and with basic principles of contract interpretation. Plaintiff assigns two primary errors. 

First, he asserts that employer contributions to Mr. Lowe’s employee health savings

account should have been included in the computation of his annual income. Second,

Plaintiff argues that the Plan Administrator’s computation of Lowe’s annual income on the

basis of 26 biweekly pay periods, rather than on a 365 day year, was incorrect. Plaintiff

13
contends that each of the alleged inaccuracies was clearly erroneous. Finally, Plaintiff

maintains that the Plan Administrator’s decision to deny Group 2 benefits constituted self

interested decision making arising out of a clear conflict of interest.

1. Employer Contributions to HSA

Plaintiff contends that the biweekly payments by PlastiPak of $12.50 to the

decedent’s Health Savings Account (“HSA”) for the year preceding his death should have

been treated by the Plan Administrator as part of his “Annual Earnings.” The Plan defines

“Annual Earnings” as “gross annual income from your employer in effect just prior to the

date of loss,” and states that “it includes your total income before taxes.” Accordingly,

Plaintiff maintains that, because the employer contributions are part of the “total” income

paid to the employee before taxes, and because the Internal Revenue Code treats HSA

accounts as part of gross income, the employer contributions should have been included

by the Plan Administrator in computing Lowe’s “Annual Earnings.” 

Defendant argues in response that the Plan definition of “Annual Earnings”

specifically excludes several categories of monetary receipts which are part of gross

income as defined in the Tax Code. The Plan expressly states that Annual Earnings “does

not include income received from commissions, bonuses, overtime pay, any other extra

compensation or income received from sources other than your employer.” Participation

in an HSA is not mandatory. Rather, an employee must affirmatively elect to contribute to

such an account in order to qualify for corresponding contributions by the employer. 

Because the company’s contributions are in addition to the employee’s salary, Unum

determined that they are “extra compensation,” and thus excluded from the Plan definition

of “Annual Earnings.” That interpretation is consistent with the Plan language. 

14
It should further be observed that the central criterion for assignment to insurance

benefit levels under the Plan is not “Annual Earnings,” but “Basic Annual Earnings.” (B@GLife-1and B@G-AD&D-1). Unfortunately, that term is not expressly defined in the Plan. 

Nonetheless, it is clearly a different formulation from “Annual Earnings,” and the addition

of the word “basic” should not be ignored. The accepted definition of the term “basic”

includes “1: of, relating to, or forming the base or essence: FUNDAMENTAL, ESSENTIAL,

IRREDUCIBLE . . . 2: constituting or serving as the basis or starting point . . ..” Webster’s

Third New International Dictionary 181 (1993). In my view, applying that meaning to the

word in the context of the term “Basic Annual Earnings” lends credence to the Plan

Administrator’s determination that employer contributions to a voluntary Health Savings

Plan, though taxable, are not to be considered in assigning an employee to a group for

purposes of life insurance benefits under the Plan.

Plaintiff suggests that the absence of punctuation in the final thirteen words of the

Plan definition of “Annual Earnings” indicates that the term “other extra compensation”

actually refers to income received from sources “other than your employer.” I disagree. 

The terms “income received from commissions,” “bonuses,” “overtime pay,” and “any other

extra compensation,” are separated by commas, indicating their individual status. While

no punctuation separates the terms “any other extra compensation” and “income received

from sources other than your employer,” a separation is supplied by the conjunction “or,”

which serves the function of indicating an alternative between different or unlike things. In

my view, the Plan Administrator’s reading of the words in question represents a natural and

sensible interpretation. While Plaintiff correctly observes that ambiguities in contract

language are to be construed against the drafter, I am not persuaded that his proffered

15
interpretation of the Plan language creates an ambiguity. Not only am I satisfied that the

Plan Administrator’s interpretation is more consistent with the language used, I note that

the conduct of both parties to the Plan (Absopure and Unum) acted in accordance with that

interpretation. Absopure paid premiums and submitted a claim with the understanding that

Lowe was a Group 1 employee. Unum accepted the premiums and paid benefits in a

manner consistent with the identical interpretation. Indeed, Plaintiff himself, through his

counsel, founded his initial claim for benefits on the view that Lowe was a Group 1 worker.

2. Computation of “Annual Earnings”

Plaintiff maintains that no reasoned or principled basis exists for the computation

method selected by the Plan Administrator in determining the decedent’s “Annual

Earnings.” Plaintiff correctly observes that the method of computation called for by the Plan

retrospectively projects the decedent’s salary at the time of death for the annual period

prior to the date of loss. The parties agree that the period for which the earnings must be

computed in this case runs from September 8, 2005 through September 7, 2006, a period

of 365 days. During that time, PlastiPak issued 26 paychecks to the decedent. Had Mr.

Lowe’s final salary rate of $1,150.00 every two weeks been in effect throughout the annual

period, his total salary received would have been $29,900.00. Plaintiff argues that a

computation based solely upon 26 biweekly pay intervals accounts for only 364 days and,

thus, understates the decedent’s annual earnings. 

Defendant responds that Plaintiff’s position is inconsistent with the policy language. 

Unum notes that the contract glossary defines annual earnings as annual income

“received” from the employer as defined in the Plan. (Policy, GLOSSARY-1). Mr. Lowe’s

pay records confirm that he received 26 biweekly salary checks during the 365 day year

16
preceding his demise. At Lowe’s final salary level of $1,150.00 per pay period, those 26

checks would have totaled $29,900.00. Thus, while 26 two week periods account for only

364 days, it is also true that Mr. Lowe would not have “received” payment for the 365th day

during the annual period prior to his death. Defendant emphasizes that Absopure confirmed

decedent’s annual income to be $29,900.00 for purposes of death benefits under the Plan. 

That amount corresponds to employee Group 1. While it is mathematically possible that an

employee on a two week salary interval could receive 27 checks during a calendar year,

such a circumstance would be atypical, and it is beyond dispute that Plaintiff’s decedent

actually received only 26 checks during the annual period at issue in this case. Thus, I am

satisfied that a rational basis existed for the Plan Administrator’s (and employer’s) wage

computation.

Plaintiff emphasizes that, under Michigan law, insurance policy terms are to be

interpreted using their commonly understood meaning. See Ososki v. St. Paul Surplus

Lines, 156 F.Supp. 3rd 714 (E.D. Mich. 1999), Henderson v. State Fare Fire and Cas. Co.,

460 Mich. 348, 356-57 (1999) (all non-technical words and phrases to be defined according

to the common and approved usage of the language). MCL 5.3a; MSA 2.212(1). 

Employing this analysis, the word “annual” means “of or

pertaining to a year, determined by a years time. See, the

American Heritage Dictionary, (2d Ed., p. 402). In the same

dictionary, the word “year” is defined as “comprehending . . .

the twelve calendar months, or 365 days from January 1 to

December 31” (p. 969). Similarly, the American Heritage

Dictionary defines “year” as “consisting of 365 days . . ..

(Plaintiff’s Brief, Docket No. 21, pps. 13-14).

Even assuming that the application of the decedent’s final wage rate for the entire

365 day annual period preceding his death is an appropriate method of calculating his basic

17
annual earnings for purposes of determining death benefits under the Plan, the result would

be the same. Plaintiff himself offered this method as a reasoned and principled approach.2

The decedent’s salary of $1,150.00 every two weeks corresponds to a weekly payment of

$575.00. A commonly understood year of 365 days amounts to 52.1428 weeks. Multiplying

$575.00 by that number yields an annual earnings of $29,982.14, which still corresponds

with Employee Group 1.

Plaintiff next attempts to achieve Employee Group 2 status for the decedent by

offering the opinion of Barry Grant, a CPA. Mr. Grant calculated Lowe’s annual earnings

through the use of an IRS approved 27 year calendar cycle which derives a constant

number of weeks in a business year by averaging three standard 365 day years with a

fourth (leap) year of 366 days. Multiplying the resulting average weeks per year by Lowe’s

final salary rate of $575.00 per week yields an annualized salary of $30,015.00. Nothing in

the Employee Benefit Plan, however, obliges the Administrator to employ a 27 year calendar

cycle in determining an employee’s benefits classification. On the contrary, Plaintiff

concedes that the relevant period for computing Mr. Lowe’s annual earnings for purposes

of a death benefit was September 8, 2005 through September 7, 2006. It is an historical

fact that the relevant period consisted of 365 days, and no averaging is necessary to

determine the correct number of weeks involved. While the 27 year cycle is accepted by the

government for purposes of tax accounting over a period of business years, the averaged

2

 Plaintiff offered this argument under the mistaken factual impression that the

year preceding Lowe’s death was a leap year (366 days) requiring the inclusion of an

extra day’s salary in the annual earnings computation. He subsequently acknowledged

that error in a Reply Brief, conceding that the year at issue in this case was comprised

of 365 days.

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weeks/year factor does not accurately correspond to either a single 365 day year or a single

366 day leap year. Nor can it be reasonably concluded that the 27 year cycle approach

corresponds with the common and approved usage of the words “annual” or “year,” as

explained by Plaintiff himself in his brief. It is simply an IRS approved accounting tool.

Plaintiff’s accountant offered an alternative calculation of decedent’s annual earnings

during the period September 8, 2005 to September 7, 2006. That calculation is based upon

the assumption that the relevant period consisted of 52.2 workweeks. Multiplying that figure

times Lowe’s final weekly salary rate of $575.00 yielded an annual salary of $30,015.00. 

Unfortunately, Mr. Grant’s assumption as to the number of weeks in the relevant period is

inaccurate. The 365 day period from September 8, 2005 to September 7, 2006 consisted

of 52.1428 weeks (365 ÷ 7 = 52.1428). Multiplying that figure times Mr. Lowe’s final salary

rate of $575.00 per week yields an annual earnings figure of only $29,982.14, corresponding

to Employee Group 1.

Finally, Plaintiff attempts to qualify the decedent for Employee Group 2 benefits by

calculating an average daily pay rate using only working days (presumably weekdays) and

not overtime days (presumably weekends). Using that method, Plaintiff contends that Mr.

Lowe’s correct daily salary rate should be $115.00 ($1,150.00 ÷ 2 = $575.00 ÷ 5 = $115.00). 

By adding that daily amount (representing the 365th day of the annual period) to the 26

biweekly payments of $1,150.00, Plaintiff maintains that the decedent should have been

classified in Employee Group 2. Nothing in the Employee Benefit Plan, however, calls for

such a method of computation. Absopure established Lowe’s final salary at $1,150.00 every

two weeks. Further, Plaintiff offers no evidence or persuasive argument that common

understanding and usage of the terms “week” or “biweekly” correspond to periods of time

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other than 7 days and 14 days, respectively. 

Even if the Plaintiff’s various alternative analyses were fully consistent with the

language of the Plan in light of the commonly accepted interpretation of the language used,

affirmance of the Plan Administrator is appropriate because its calculations are also fully

consistent with common understanding of the language in the contract. 

The arbitrary and capricious standard is the least demanding

form of judicial review of administrative action. Williams v.

International Paper Co., 227 F.3d 706, 712 (6th Cir. 2000). If an

administrator’s decision on eligibility for benefits is “rational in

light of the plan’s provisions,” it is not arbitrary or capricious. 

Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir. 1988)

(citations omitted), cert. denied, 488 U.S. 826, 109 S.Ct. 76

(1988). When it is possible to offer a reasoned explanation,

based on the evidence, for a particular outcome, that outcome

is not arbitrary or capricious. Williams, 227 F.3d at 712. 

Furthermore, where there are two reasonable interpretations of

the plan, the court cannot reverse the administrator’s

determination. Anderson v. Emerson Elec. Co., 351 F.Supp. 2nd

740, 743-44 (W.D. Mich. 2004) (citations omitted), aff’d

Anderson v. Emerson Elec. Co., No. 05-1036, 161 Fed. App.

504, 2005 Fed. App. 1012 N (6th Cir. Dec. 23, 2005).

Bailey v. Ford Motor Company, 2006 WL 2620279 (E.D. Mich.).

Plaintiff’s final challenge to the Plan Administrator’s decision is premised upon the

statutory obligation to discharge its duties in respect to discretionary claims processing

“solely in the interests of the participants and beneficiaries of the Plan.” 29 U.S.C.

§1104(a)(1). ERISA further requires that administrator’s provide a full and fair review of

claim denials. 29 U.S.C. §1133(2). When a single insurer acts in the dual capacities of

determining a claimant’s eligibility and paying any benefits award, the law recognizes an

inherent conflict of interest. See, Kalish v. Liberty Mutual/Liberty Assur. Co., 419 F.3d 501,

506 (6th Cir. 2005); Giamondi v. United Tasks Corp., 408 F.3d 295, 298 (6th Cir. 2005). 

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Courts have identified circumstances indicating that an insurer/administrator’s denial of

benefits will reflect self-interest. Plaintiff correctly observes that a significant disparity

between the benefits payable under different coverages may create an inference of selfinterested decision making. Kufner v. Jefferson Pilot Financial Ins., 595 F.Supp. 2nd 785

(W.D. Mich. 2009). The absence of evidence that a claimant’s proofs were assessed by

independent sources may also give rise to such an inference. See, Culvert v. Firstar

Financial, Inc., 409 F.3d 286, 295 (6th Cir. 2005).

In response, Unum asserts that the inherent conflict of interest created by its dual

status as administrator/insurer does not change the standard of review. Rather, the conflict

is simply a factor to be considered in determining whether the insurer abused its discretion

in denying a claim. Metropolitan Life Ins. Co. v. Glenn, 128 S.Ct. 2343 (2008). 

We turn to the question of “how” the conflict we have just

identified should “be taken into account on judicial review of a

discretionary benefit determination.” 552 U.S. , 128 S.Ct.

117 (2008). In doing so, we elucidate what this court set forth

in Firestone, namely, that a conflict should “be weighed as a

‘factor in determining whether there is an abuse of discretion.’” 

489 U.S. at 115, 109 S.Ct. 948 (quoting Restatement §187,

comment d; alteration omitted). 

We do not believe that Firestone’s statement implies a change

in the standard of review, say from deferential to de novo

review. Trust law continues to apply a deferential standard of

review to the discretionary decisionmaking of a conflicted

trustee, while at the same time requiring the reviewing judge to

take account of the conflict when determining whether the

trustee, substantively or procedurally, has abused his discretion. 

See Restatement §187, comments d-j, id., §107, comment f,

Scott section 18.2, at 1342-1344. We see no reason to forsake

Firestone’s reliance upon trust law in this respect.

Glenn, 128 S.Ct. at 2350.

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While Plaintiff here identifies the conflict, he does not offer any evidence that it was

a factor in Unum’s decision to deny payment of Group 2 benefits in this case. Defendant

points to the following facts as evidence that it was not influenced by the inherent conflict

in rendering its benefits decisions in this case: 1) The notice of claim form submitted by the

employer to Unum reported Lowe’s earnings as $1,150.00 biweekly, amounting to annual

earnings of $29,900.00 during the 365 day period at issue in this case. (CL at 17). 2) Both

the Notice of Claim and the cover letter from the employer reflected that benefits payable

under the policy should be those corresponding to Employee Group 1. (CL at 15, 17). 3)

Plaintiff’s January 2000 correspondence to Unum also explicitly requested payment of

benefits at Employee Group 1 levels. (CL at 107). 4) Plaintiff’s appeal from the initial denial

of AD&D Benefits again explicitly sought payment of AD&D Benefits payable at the

Employee Group 1 level. (CL at 233). 5) Upon receiving Plaintiff’s claim for Group 2

benefits, Unum confirmed with Absopure that there was “nothing” in Mr. Lowe’s file to

indicate that his annual earnings were other than $29,900.00. (CL at 420). 6) The employer

also confirmed that it had been paying premiums for Mr. Lowe’s coverage based upon his

status as a Group 1 employee. (CL at 420). 7) Unum requested and obtained Mr. Lowe’s

pay records for the time period from August 2005 through September 2006 (CL at 375-412),

and its financial consulting team reviewed those records to assure itself that the annual

earnings level reported by the employer was accurate. (CL at 413). 8) Unum further

reviewed Lowe’s entire personnel file (CL at 467-511) and determined that it contained no

evidence indicating annual earnings in excess of the $29,900.00 reported by Absopure. It

might further be noted that, after initially denying AD&D Benefits, based upon medical

evidence suggesting intoxication as a factor in Lowe’s death, Unum fairly reviewed the

22
evidence presented by Plaintiff on appeal and reversed its initial decision. Based upon the

parties respective submissions, I am satisfied that the inherent conflict of interest has not

been shown to have had an effect upon Unum’s benefits determinations. I find it especially

persuasive that both parties to the policy of insurance have interpreted its terms in the same

way, and that Plaintiff also accepted the reasonableness of that interpretation until long after

the Group 1 benefits were paid.

In conclusion, having examined the administrative record in light of the parties

arguments, I am satisfied that Unum’s determinations regarding the appropriate benefits

payable in this case easily withstand scrutiny under an arbitrary and capricious standard of

review. I suspect that Plaintiff’s persistent efforts to impose the less deferential de novo

standard is a tacit admission of that fact. Even under a de novo standard, I would have

recommended affirmance in this case. In its original benefits decision, and in its denial of

Plaintiff’s renewed claim in 2008, Defendant rendered a principled decision supported by

substantial evidence. I recommend that Plaintiff’s Motion for Summary Judgment be denied,

and that Defendant’s Motion for Summary Judgment be granted.

III. NOTICE TO PARTIES REGARDING OBJECTIONS:

The parties to this action may object to and seek review of this Report and

Recommendation, but are required to act within fourteen (14) days of service of a copy

hereof as provided for in 28 U.S.C. Section 636(b)(1) and E.D. Mich. LR 72.1(d)(2). Failure

to file specific objections constitutes a waiver of any further right of appeal. United States

v. Walters, 638 F.2d 947 (6th Cir. 1981), Thomas v. Arn, 474 U.S. 140 (1985), Howard v.

Secretary of HHS, 932 F.2d 505 (6th Cir. 1991). Filing of objections that raise some issues

but fail to raise others with specificity, will not preserve all the objections a party might have

23
to this Report and Recommendation. Smith v. Detroit Federation of Teachers Local 231,

829 F.2d 1370, 1373 (6th Cir. 1987), Willis v. Secretary of HHS, 931 F.2d 390, 401 (6th Cir.

1991). Pursuant to E.D. Mich. LR 72.1(d)(2), a copy of any objections is to be served upon

this Magistrate Judge.

Within fourteen (14) days of service of any objecting party's timely filed objections,

the opposing party may file a response. The response shall not be more than five (5) pages

in length unless by motion and order such page limit is extended by the Court. The response

shall address specifically, and in the same order raised, each issue contained within the

objections.

s/Donald A. Scheer

DONALD A. SCHEER

UNITED STATES MAGISTRATE JUDGE

DATED: June 14, 2010

______________________________________________________________________

CERTIFICATE OF SERVICE

I hereby certify on June 14, 2010 that I electronically filed the foregoing paper with

the Clerk of the Court sending notification of such filing to all counsel registered

electronically. I hereby certify that a copy of this paper was mailed to the following nonregistered ECF participants on June 14, 2010: None.

s/Michael E. Lang 

Deputy Clerk to 

Magistrate Judge Donald A. Scheer

(313) 234-5217

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