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Hester v. Union Central Life Insurance Co.

October 11, 2006

GERALDINE HESTER, PLAINTIFF,
v.
THE UNION CENTRAL LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Judge Michael R. Barrett

ORDER

This matter is before the court upon Magistrate Judge's Report and Recommendation ("R&R") granting Defendant's Motion to Enforce Decision of the ERISA Administrator (Doc. 15); denying Plaintiff's Motion for a Judgment Awarding Long Term Disability Benefits, Comprehensive Medical Expense and Group Term Life Plan Benefits to Plaintiff Geraldine A. Hester (Doc. 16); and terminating this case from the docket of this Court.

The parties were given proper notice, pursuant to 28 U.S.C. § 636(b)(1)(C), including notice that the parties would waive further appeal if they failed to file objections to the R&R in a timely manner. See United States v. Walters, 638 F.2d 947 (6th Cir. 1981).*fn1 Plaintiff filed timely Objections to the R&R. (Doc. 30) Defendant filed a Response to Plaintiff's Objections. (Doc. 31)

In his R&R, the Magistrate Judge found that the language of the plans contained a clear grant of discretion to Defendant, who is the Plan Administrator. As a result, the Magistrate Judge found that Defendant's decisions regarding Plaintiff's benefits should be reviewed under the arbitrary and capricious standard. However, the Magistrate Judge noted that Defendant both funds and administers the plan, and therefore the Court must consider such an apparent conflict of interest when determining whether there is an abuse of discretion.

The Magistrate Judge also found that contrary to Plaintiff's arguments, Plaintiff's claim involves a basic contract dispute, and is preempted by ERISA.

In analyzing Defendant's decision to deny Plaintiff's LTD claim, the Magistrate Judge rejected Plaintiff's argument that she meets the definition of partially disabled under the Plan. The Magistrate Judge also rejected Plaintiff's arguments that Defendant was obligated to conduct an independent orthopaedic examination and to give special deference to the opinion of her treating physician. The Magistrate Judge found that it was not unreasonable for Defendant rely upon its own job description of Plaintiff's position and conclude that Plaintiff's restriction to three hours of computer work per day would not prevent her physically from performing the substantial duties of her occupation on a part-time basis.

The Magistrate Judge also found that Defendant's decision to terminate Plaintiff's group life insurance coverage under waiver of premiums was reasonable. The Magistrate Judge explained that it was proper for Defendant to rely upon Plaintiff's participation in volunteer work and temporary job assignments in making its decision that Plaintiff did not meet the definition of "totally disabled" under the terms of the Group Life Plan.

As to Defendant's decision to terminate Plaintiff's group medical coverage, the Magistrate Judge found that Plaintiff's participation in volunteer work and temporary job assignments indicated that she is not prevented from performing the duties fo "any job." The Magistrate Judge rejected Plaintiff's argument that the plan fails to distinguish between mental and physical disability as being irrelevant.

Therefore, the Magistrate Judge found that even taking into consideration Defendant's conflict of interest, Defendant's decision to deny Plaintiff's claim for long-term disability benefits, discontinue Group Life Insurance coverage under waiver of premiums, and terminate Plaintiff's coverage under Group Medical Plan was rational in light of policy provisions, and was neither arbitrary or capricious.

Finally, the Magistrate Judge found that Plaintiff's claims for breach of fiduciary duty, ERISA retaliation, and removal of fiduciary fail to state a claim and should be dismissed. The Magistrate Judge noted that the Sixth Circuit has made it clear that where section 1132(a)(1)(B) permits a plaintiff to assert a claim for denial of benefits, he or she does not have the right to assert a breach of fiduciary claim. The Magistrate Judge also noted that a claim for a breach fiduciary duty under ERISA must be brought by Plaintiff in her representative capacity to recover on behalf of the plan, not for the benefit of an individual plan participant. The Magistrate Judge found that Plaintiff's retaliation claim fails because she has not established a prima facie case.

Plaintiff makes the following objections to the Magistrate Judge's R&R: (1) the proper standard of review is de novo because the plan language does not include the required specificity; (2) even if the standard of review is arbitrary and capricious, the Magistrate Judge failed to apply to proper standard in light of Defendant's conflict of interest; (3) the Magistrate Judge did not recognize that the hiring of a independent medical expert demonstrates that the Plan Administrator is acting under a conflict of interest; (4) Plaintiff's claims are not preempted by ERISA because the state of Ohio regulates insurance by imposing conditions on the right to engage in the business of insurance, and the Ohio Supreme Court has held that there is a prohibition against insurers from subjectively interpreting their own policies; (5) Plaintiff is eligible for long-term disability benefits because she is partially disabled; (6) Plaintiff is eligible for long-term disability because the Plan does not distinguish between physical and mental disabilities; (7) Defendant relied on a fictitious job description to deny benefits; (8) Plaintiff is eligible for group medical coverage because she is partially disabled; and (9) Plaintiff's claim for breach of fiduciary duty should not be dismissed because Defendant has failed to provide the trust document for the Comprehensive Medical Plan or the Summary of the Comprehensive Medical Plan that was in effect at the time of Plaintiff's disability date.

The Court finds that the Magistrate Judge properly determined that Plaintiff's claims are preempted by ERISA. The Court finds that Plaintiff's citation to Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329, 334 (2003) is unpersuasive. The issue before the Supreme Court was whether Kentucky's "Any Willing Provider" statutes were saved from pre-emption as "law[s] . . . which regulat[e] insurance" under 29 U.S.C. § 1144(b)(2)(A). Plaintiff has not persuaded the Court that her claim is more than a suit by a participant or beneficiary to recover benefits under an ERISA covered plan, which falls directly under ERISA's civil enforcement provisions, 29 U.S.C. § 1332(a)(1)(B). Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46 (1987).

The Court also finds that the Magistrate Judge applied the proper standard of review and properly considered Defendant's conflict of interest. While no particular language is necessary to vest the plan administrator with discretion to interpret the plan or make benefit determinations, the Sixth Circuit "has consistently required that a plan contain 'a clear grant of discretion [to the administrator] to determine benefits or interpret the plan.' " Perez v. Aetna Life Ins. Co., 150 F.3d 550, 555 (6th Cir.1998), quoting Wulf v. Quantum Chem. Corp., 26 F.3d 1368, 1373 (6th Cir. 1993) (emphasis and alteration in original). Here, the Plan states that the Plan Administrator has "full and complete authority, responsibility and control over the administration of the Plan. This includes, but is not limited to, the discretion and authority to: construe and interpret the Plain provisions; determine all questions of eligibility for Plan participation and for payment of benefits . . . " Based on this language, the Court finds that the arbitrary and capricious standard of review is applicable. Accord McFarland v. Union Cent. Life Ins. Co., 907 F.Supp. 1153, 1156 (E.D.Tenn. 1995) (finding arbitrary and capricious standard of review applicable where plan gave administrator "full and complete authority, responsibility, discretion, and control over plan administration.")

However, where a conflict of interest exists, as it does here, the standard is not altered, but the conflict of interest is a factor that should be taken into account in determining whether the decision was arbitrary and capricious. Peruzzi v. Summa Med. Plan, 137 F.3d 431, 433 (6th Cir. 1998). The Court finds that the Magistrate Judge properly considered Defendant's conflict of interest. The Court recognizes that a court may not "merely . . . rubber stamp the administrator's decision," but must actually "exercise [its] review powers." Jones v. Metro. Life Ins. Co., 385 F.3d 654, 661 (6th Cir. 2004), citing McDonald v. Western-Southern Life Ins. Co., 347 F.3d 161, 172 (6th Cir. 2003). However, here, the Magistrate Judge conducted a ...


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