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MACMILLAN v. PROVIDENT MUT. LIFE INS. CO. OF PHILA.
January 5, 1999
HARROLD M. MACMILLAN, PLAINTIFF,
PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA AND UNUM LIFE INSURANCE COMPANY OF AMERICA, DEFENDANTS.
The opinion of the court was delivered by: Larimer, Chief Judge.
Plaintiff, Harold M. MacMillan, commenced this action against defendants
Provident Mutual Life Insurance Company ("Provident") and UNUM Life
Insurance Company of America ("UNUM") under the Employee Retirement Income
Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. During his previous
employment with Provident, plaintiff was covered by a long-term disability
insurance policy purchased by Provident from UNUM. Plaintiff alleges that
he is permanently disabled, and that defendants have violated his rights to
the policy, first by miscalculating the amount of his benefits, and second
by terminating his payments altogether. All parties have moved for summary
Plaintiff began his employment with Provident as a field underwriter in
1972. In 1988 Provident and UNUM entered into a contract pursuant to which
Provident agreed to pay premiums to UNUM in exchange for which UNUM issued
a long-term disability policy covering Provident's employees. Plaintiff was
covered under the policy.
Plaintiff alleges that he became totally disabled in January 1993 from
ulcerative colitis. In September 1993, he filed a claim for benefits with
UNUM. UNUM approved the claim on February 1, 1994, retroactive to January
1, 1993. In accordance with the terms of the policy, plaintiff began
receiving benefits retroactive to July 1, 1993.
Plaintiff alleges that in calculating his BME, defendants failed to
include various sources of earnings that should have been included.
Specifically, he alleges that defendants should have included renewal
commissions, group annuity commissions, and service and persistency fees.
Plaintiff also alleges that on August 15, 1995, eight days after he filed
the original complaint in this action, UNUM stopped paying him benefits
altogether, on the ground that UNUM had come to the conclusion that
plaintiff was no longer, disabled. Plaintiff contends that he is disabled,
and has been ever since January 1993.
Plaintiff seeks damages for unpaid benefits to date,*fn1 plus interest,
as well as punitive damages and attorney's fees. He also requests
declaratory relief concerning his entitlement to benefits and defendants'
obligations in that regard.
On June 11, 1998, the court sent a letter to counsel for all the parties
asking them to address certain matters relating to the possible bases for
liability here and which panics are the proper defendants. The parties'
responses have clarified those issues and the precise nature of plaintiffs
In particular, plaintiff has stated that although the complaint alleges
that defendants have breached their fiduciary duties to him, he is not
asserting a claim for breach of fiduciary duty in violation of 29 U.S.C.
§ 1109. His only claim is for the recovery of benefits pursuant to 29
U.S.C. § 1132(a)(1)(B). He also contends that both defendants may be
held liable under that section.
In addition, UNUM concedes that, as the claims administrator, it is a
proper party defendant under § 1132(a)(1)(B), though it denies that it
is liable to plaintiff. Provident contends that it is not a proper
defendant under any statute.
After reviewing the record, I find that UNUM is the only proper
responsible defendant here, and that the claims against Provident must be
dismissed. I also find that plaintiff is entitled to summary judgment with
respect to his claim that his renewal commissions, group annuity
commissions, and service and persistency fees should have been included in
the calculation of his BME.
I. Provident's and UNUM's Respective Roles
The law is well established in the Second Circuit that is a claim for
benefits under the terms of an employee benefits plan pursuant to §
1132(a)(1)(B), "only the plan and the administrators and trustees of the
plan in their capacity as such may be held liable." Leonelli v. Pennwalt
Corp., 887 F.2d 1195, 1199 (2d Cir. 1989); accord Crocco v. Xerox Corp.,
137 F.3d 105, 107 (2d Cir. 1998). Accordingly, an employer cannot be held
liable in such a suit unless it is the designated plan administrator or
trustee. Crocco, 137 F.3d at 107-08.
Although Provident concedes that it is the designated plan
administrator, under the facts of this case, I conclude that plaintiffs
claim against Provident must be dismissed. Provident did nothing here in
its capacity as administrator of the plan that could establish liability
on its part to pay benefits to plaintiff pursuant to §
1132(a)(1)(B). In addition, although UNUM may have relied to some extent
on information supplied to it by Provident when calculating plaintiffs
BME, and hence the amount of his benefit, ultimately it was UNUM's
responsibility to determine these matters. Whatever relief that plaintiff
is entitled to in this regard must come from UNUM, not from Provident.
As the plan booklet itself indicates, benefits would be payable by UNUM
if certain conditions were met. UNUM — which is referred to in the
booklet as "we," "our," and "us," see J. Nelson Thomas Aff. (Item 36) Ex. C
— states, "We will pay you a monthly benefit . . ." in certain
circumstances. Id. at LC-BEN-1. Nowhere is there any suggestion that
Provident would play any role in determining an employee's eligibility for
benefits, or the correct benefit amount.
The insurance policy also states that the "employer will furnish at
regular interval intervals" to UNUM information concerning employee's who
qualify to become insured, whose amounts of insurance change, or whose
insurance terminates, as well as "any other information about this policy
that may be reasonably required." It further states that "[t]he employer's
records which, in the opinion of [UNUM], have a bearing on the insurance
will be opened for inspection by [UNUM] at any reasonable time." The policy
states that "[c]lerical error or omission will not: a. deprive an employee
of insurance; b. affect an employee's amount of insurance; or c. effect or
continue an employee's insurance which otherwise would not be in force." It
also states that "[i]f relevant facts about any employee were not accurate
. . . a fair adjustment of premium will be made; and . . . the true facts
will decide if and in what amount insurance is valid under this policy."
Karalunas Aff.Ex. B at L-GPP-1-L-GPP-2 (emphasis added).
These provisions, of course, may be largely for UNUM's benefit, so that
it is not obligated to provide benefits to which an employee is not
actually entitled. Nevertheless, they indicate that UNUM had the discretion
to determine which facts it considered relevant to an employee's coverage,
and based on those facts, the extent of that coverage.
As stated, UNUM concedes that as the claims administrator, it has the
authority for the "full and fair review" of claims and to make benefit
determinations. Thomas Aff. Ex. C at 27. Pursuant to federal regulations,
UNUM is therefore the "appropriate named fiduciary" for purposes of claim
review. Section 2560.503-1(g)(2) Title 29 of the Code of Federal
Regulations provides that
[t]o the extent that benefits under an employee
benefit plan are provided or administered by an
insurance company, . . . the claims procedure
pertaining to such benefits may provide for review of
and decision upon denied claims by such company. . . .
In such case, that company . . . shall be the
"appropriate named fiduciary" for purposes of this
Section 2560-503-1 deals with procedures pertaining to benefit claims and
review of claim denials. Review of claims and claim denials is to be
undertaken by the appropriate named fiduciary.
29 C.F.R. § 2560.503-1(g). Accordingly, UNUM is the proper defendant
in this action challenging a denial of benefits pursuant to 29 U.S.C.
§ 1132(a)(1)(B). See Harless v. Research Institute of America,
1 F. Supp.2d 235, 241 (S.D.N.Y. 1998) (employer was not proper defendant
in claim for recovery of benefits, since it could not be liable for
failing to pay benefits).
II. Calculation of Basic Monthly Earnings
In Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct.
948, 103 L.Ed.2d 80 (1989), the Supreme Court held that "a denial of
benefits challenged under [29 U.S.C. § 1132(a)(1)(B)] is to be reviewed
under a de novo standard unless the benefit plan gives the administrator
. . . discretionary authority to determine eligibility for benefits or to
construe the terms of the plan," in which case the, court is to apply the
more deferential arbitrary-and-capricious standard.
One indication of the presence or absence of discretionary authority is
whether the plan uses categorical or conditional language. Smith v.
Rochester Tel. Business Marketing Corp., 786 F. Supp. 293, 298
(W.D.N.Y. 1992), aff'd, 40 F.3d 1236 (2d Cir. 1994). For example, in
Heidgerd v. Olin Corp., 906 F.2d 903, 908 (2d Cir. 1990), the Second
Circuit held that a statement in a plan that began, "Benefits are payable
if . . ." did not give the administrators discretion, but ...