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January 5, 1999


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 judgment.


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.

Section I, paragraph 2 of the policy sets the benefit level at two-thirds of "basic monthly earnings not to exceed the [$10,000] maximum monthly benefit, less other income benefits." Paragraph 6 defines basic monthly earnings ("BME") as the insured's "average monthly rate of earnings from the employer in effect just prior to the date disability begins. It includes earnings from supervisory and second line management salaries, and earnings from first year commissions, but not bonuses, overtime pay, advances, collection fees, expense allowances or other extra compensation received from Provident Mutual." Affidavit of Deborah H. Karalunas (Item 44) Ex. B at L-PS-2 — L-PS-3.

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 claims.

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.

This is made evident by the fact that there is really no relief that could be granted to plaintiff against Provident. The court cannot direct Provident to pay benefits to plaintiff, since it is not Provident's decision whether to do so. Assuming that the court could direct Provident to inform UNUM that renewal commissions and the other items in question should be included in the calculation of plaintiffs BME, it would be pointless to do so; if the court were to determine that those items should be included, the court could simply direct UNUM to do so.

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

A. Standard of Review

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 ...

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