Source: http://ny.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20130802_0001034.SNY.htm/qx
Timestamp: 2019-04-20 11:04:33+00:00

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FindACase | McDonnell v. First Unum Life Insurance Co.
McDonnell v. First Unum Life Insurance Co.
FIRST UNUM LIFE INSURANCE CO., et al. Defendants.
On April 2, 2012, McDonnell and First Unum filed cross-motions for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure. On June 16, 2012, both parties timely filed their opposition papers. On July 6, 2012, both parties timely filed their reply papers. Oral argument was held on August 16, 2012. For the reasons stated below, the parties' cross-motions for summary judgment are denied.
This action concerning the denial of disability benefits is governed by ERISA, 29 U.S.C.A. § 1001, but "ERISA does not set out the applicable standard of review for actions challenging benefit eligibility determinations." Fay v. Oxford Health Plan , 287 F.3d 96, 103 (2d Cir. 2002) (internal quotations and citations omitted). The Supreme Court has held that an insurer's "denial of benefits challenged under [ERISA] is to be reviewed under a de novo standard unless" the benefit plan provides the plan's administrator or fiduciary with "discretionary authority to determine eligibility for benefits or to construe the terms of the plan" (hereinafter, "discretionary authority"). Id. at 104 (quoting Firestone Tire and Rubber Co. v. Bruch , 489 U.S. 101, 115 (1989)).
In situations where the benefits plan gives the plan administrator or fiduciary such discretionary authority, courts "will not disturb the administrator's ultimate conclusion unless it is arbitrary and capricious." Pagan v. NYNEX Pension Plan , 52 F.3d 438, 441 (2d Cir. 1995). In contrast, if Plaintiff's benefits determination was made by an unauthorized party who lacked such discretionary authority or improperly exercised it, the Court will review the unauthorized party's benefits determination under a de novo standard of review. Sharkey v. Ultramar Energy Ltd., Lasmo plc, Lasmo (AUL Ltd.) , 70 F.3d 226, 229 (2d Cir. 1995).
The plan administrator bears the burden of proving that the deferential standard of review applies. Id . (citing Kinstler v. First Reliance Standard Life Ins. Co. , 181 F.3d 243, 249 (2d Cir. 1999)). Although express use of the terms "deference" and "discretion" in the plan is not necessary to avoid a de novo standard of review, courts construe ambiguities in the plan's language against the insurer. Id . (citing Kinstler , 181 F.3d at 251-52).
Here, both parties agree that the benefit plan issued by First Unum to Morgan Stanley explicitly granted discretionary authority only to First Unum. (Pl.'s 56.1 Stmnt ¶ 8; Def.'s 56.1 Stmnt ¶ 2). The parties also agree that Cleale and Laverriere, the individuals who made and upheld the decision to apply the MIL to McDonnell's long-term benefits claim, were employees of Unum Group,  not First Unum. (Pl.'s 56.1 Stmnt ¶ 12; Def.'s 56.1 Resp. ¶ 12.) The parties disagree, however, about whether or not Cleale and Laverriere (the "Unum Group employees") properly exercised discretionary authority under the Plan to make this benefits determination, and therefore the parties disagree about which standard of review - de novo or arbitrary and capricious - the Court should apply here.
McDonnell argues that the Unum Group employees were not granted discretionary authority of their own under the Plan, and that First Unum did not properly delegate its discretionary authority to the Unum Group employees either. (Pl.'s 56.1 Stmnt ¶¶ 9-12; Pl.'s Mem. of Law in Supp. of Summ. J. ("Pl.'s Mem.") at 3). Accordingly, McDonnell asserts that the Court should review the Unum Group employees' benefits decision de novo. (Pl.'s Mem. at 3); see Muller v. First Unum Life Ins. , 341 F.3d 119, 123-24 (2d Cir. 2003) (quoting Firestone , 489 U.S. at 115 (holding that where the person who made benefits decisions does not have discretionary authority, the court applies a de novo review).
First Unum, however, argues that the Unum Group employees were acting as agents of First Unum, and therefore no delegation of discretionary authority was necessary. (Def.'s 56.1 Resp. ¶ 12; First Unum's Br. in Opp. of Pl.'s Summ. J. Mot. ("Def.'s Opp.") at 11.) By First Unum's logic, the Unum Group employees stood in the place of First Unum and therefore properly exercised First Unum's discretionary authority to make benefits decisions. (Def.'s Resp. Pl.'s 56.1 Stmnt ¶ 12; Def.'s Opp. at 11.) In the alternative, First Unum argues that even if the Court were to find that the Unum Group employees did not act as First Unum's agents, First Unum nevertheless properly delegated its discretionary authority to Unum Group. (See Def.'s Opp. at 5.) Accordingly, First Unum argues that the Court should review the denial of benefits to the McDonnell under the arbitrary and capricious standard of review. See Pagan , 52 F.3d at 441 (ruling that the arbitrary and capricious standard of review is used where a fiduciary is acting within its discretionary authority).
For the reasons stated below, the Unum Group employees were not acting as First Unum's agents and First Unum did not properly delegate its discretionary authority to Unum Group. Accordingly, the denial of benefits to McDonnell is reviewed under the de novo standard of review.

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