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DAWES v. FIRST UNUM LIFE INS. CO.

March 28, 1994

MICHAEL V. DAWES, Plaintiff,
v.
FIRST UNUM LIFE INSURANCE COMPANY, Defendant.



The opinion of the court was delivered by: KIMBA M. WOOD

 WOOD, D.J.

 In this action, plaintiff Michael V. Dawes ("Dawes") seeks recovery of present and future disability benefits from defendant First Unum Life Insurance Company ("UNUM"). The dispute arises from UNUM's denial of Dawes' claim of disability, based on his alcoholism. Presently before the court are three issues to be resolved prior to trial: *fn1" (1) which standard of review should be applied to review defendant's decision to deny disability benefits; (2) is the question of defendant's liability for future benefits a question for the court or for the jury; and (3) what is the governing definition of "regular occupation." For the reasons set forth below, the court concludes that a de novo standard of review should apply; future benefits are a question for the jury; and the applicable definition of "regular occupation" is preliminarily identified as any employment of the same general character as the insured's previous job, requiring similar skills and training, and involving comparable duties.

 Discussion

 I. Standard of review.

 Plaintiff contends that the court should apply a de novo standard of review in considering the insurance company's decision to deny him disability benefits. Defendants respond that either an arbitrary and capricious or abuse of discretion standard should apply.

 The Supreme Court addressed this question in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 103 L. Ed. 2d 80, 109 S. Ct. 948 (1989), holding that "a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." 489 U.S. at 115. Although UNUM concedes that the plan at issue does not give the administrator discretion to determine eligibility or construe the plan, UNUM urges the court to adopt an arbitrary and capricious or abuse of discretion standard, because the plan administrator "had certain discretion to administer, the plan." Defendant's Memorandum in Support of its Motion to Exclude Evidence, at n.2 ("Defendant's Exclusion Mem."). In making this argument, UNUM misconstrues Bruch and its progeny. The cases on which UNUM relies involve insurance plans that, unlike the plan at issue here, expressly assign discretionary authority over eligibility determinations to the administrator. See Boyd v. Trustees of United Mine Workers Health & Retirement Funds, 873 F.2d 57, 59 (4th Cir. 1989) (applying abuse of discretion standard where plan trustees "have the power of 'full and final determination as to all issues concerning eligibility for benefits'"); Bali v. Blue Cross and Blue Shield Ass'n, 873 F.2d 1043, 1047 (7th Cir. 1989) (applying abuse of discretion standard where plan "clearly gives the administrator discretion as to the amount and kind of information required to prove disability"). These cases simply follow the plain language of the Bruch holding: de novo review applies except where the administrator has discretion over plan interpretation or eligibility determinations, in which case a more deferential standard is appropriate. These cases do not support UNUM's suggestion that an abuse of discretion standard should apply whenever an administrator enjoys some vaguely defined discretion to administer the plan. C.f. Scalamandre v. Oxford Health Plans Inc., 823 F. Supp. 1050, 1059 (E.D.N.Y. 1993) ("in the vast majority of decisions since [Bruch] that have held that a deferential standard of review applies there were explicit provisions in the respective plans giving the trustee or plan administrator discretion to interpret the plan"); Clark v. Bank of New York, 801 F. Supp. 1182, 1189 (S.D.N.Y. 1992) ("a narrow view of when a plan document confers discretionary authority is needed to check the potential for biased decisions on the part of ERISA plan administrators") (internal quotations omitted); Guisti v. General Electric Co., 733 F. Supp. 141 (N.D.N.Y. 1990) (same). Because the instant plan gives the administrator no particular discretion over eligibility or plan interpretation, Bruch dictates that a de novo standard of review should apply.

 UNUM argues, however, that Bruch notwithstanding, an abuse of discretion or arbitrary and capricious standard should apply in this case, because the determination at issue was based on a factual finding by the claims administrator. Defendant's Exclusion Mem. at 6. In support of this argument, UNUM notes that the Bruch Court indicated that its discussion was "limited to the appropriate standard of review in § 1132(a)(1)(B) actions challenging denials of benefits based on plan interpretations." Bruch, 489 U.S. at 108 (emphasis added). UNUM claims that its conclusion that Dawes is not disabled was based on findings of fact, rather than an interpretation of the plan, and therefore, the Bruch holding does not apply here.

  Since Bruch was decided, there has developed a difference of opinion among Courts of Appeals regarding the standard of review for findings of fact. See Pierre v. Connecticut General Life Insurance Co., 116 L. Ed. 2d 470, 112 S. Ct. 453 (1991) (White, J., dissenting) (dissenting from denial of certiorari and noting need to resolve dispute between Third and Fourth Circuits, employing de novo review, and Fifth Circuit, using abuse of discretion standard). The Court of Appeals in this circuit has not taken a position on the issue. This court finds the decisions choosing de novo review of factual findings more persuasive. A de novo standard of review is not only consistent with the holding in Bruch, but it also serves the policy behind ERISA, which is to protect the interests of beneficiaries of employee benefit plans. See Luby v. Teamsters Health, Welfare & Pension Trust Funds, 944 F.2d 1176, 1185-86 (3d Cir. 1991); Guisti, 733 F. Supp. at 147-48.

 Consideration of ERISA policy is particularly appropriate in this case, where the administrator failed to comply fully with ERISA's procedural regulations. In an Opinion and Order dated November 12, 1992, I found that UNUM neglected its obligation under ERISA to give Dawes timely notice of the specific reasons for denial and to describe with sufficient specificity the additional information required for Dawes to perfect his claim. Opinion & Order, 8-9 (Nov. 12, 1992). I concluded that it would be inappropriate to preclude admission of evidence that had not previously been submitted to the claims administrator, because the fault for the incomplete submission of evidence rested with the administrator. Id. at 9 - 10. For substantially the same reasons, it would defeat ERISA policy to apply a deferential standard of review to the procedurally defective determination of facts underlying UNUM's denial of Dawes' claim.

 Even if this circuit decided that a deferential standard of review should generally apply to administrators' factual findings, the court concludes that a de novo standard is appropriate in this case, because UNUM's decision to deny benefits was based not only on its finding of facts, but more significantly, on its interpretation of the plan and application of the plan to those facts. As is evidenced by the parties' dispute over the proper definition of Dawes' "regular occupation" discussed infra, Dawes' disability status turns largely on interpretation of the plan. Although eligibility determinations necessarily require some factual findings, "the validity of a claim to benefits under an ERISA plan is likely to turn on the interpretation of terms in the plan at issue." Bruch, 489 U.S. at 114. Bruch creates a presumption of de novo review, from which a court should not depart just because the eligibility determination at issue requires determination of some questions of fact. See Guisti, 733 F. Supp. at 147 (applying de novo review to both factual findings and plan interpretations where it was "far from clear . . . that the defendants' decision to deny benefits was based solely on factual findings"). Thus, the court concludes that a de novo standard of review should be applied in this case.

 II. Question of future benefits.

 As noted above, the parties are in dispute over whether the question of Dawes' eligibility for future benefits should be decided by the judge or the jury. As the court recognized in its Opinion and Order of November 12, 1992, the text and legislative history of ERISA are silent on the right to a jury trial. Opinion and Order at 12. In Katsaros v. Cody, the Second Circuit Court of Appeals held that the right to a jury trial in an ERISA case turns on whether the claim is legal or equitable, which in turn depends on the relief sought. 744 F.2d 270, 279 (2d Cir.), cert. denied 469 U.S. 1072 (1984). In the Opinion and Order, I applied the Katsaros rule to this case, and found plaintiffs entitled to a jury trial. The parties now ask the court to clarify whether the right to a jury trial applies to the question of future benefits as well as to present benefits. Defendant contends that while the jury can determine benefits currently due under the plan, determination of whether defendant is permanently disabled and therefore entitled to future benefits should be reserved for the court. Plaintiff counters that both questions should be submitted to the jury.


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