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DOE v. CIGNA LIFE INSURANCE CO. OF NEW YORK

United States District Court, W.D. New York


January 26, 2004.

JOHN DOE, Plaintiff
v.
CIGNA LIFE INSURANCE CO. OF NEW YORK and LIBERTY LIFE ASSURANCE CO. OF BOSTON, Defendants

The opinion of the court was delivered by: WILLIAM SKRETNY, District Judge

DECISION & ORDER

I. INTRODUCTION

In this case, Plaintiff John Doe seeks to recover long-term disability benefits from Defendants Cigna Life Insurance Company of New York ("Cigna") and Liberty Life Assurance Company of Boston ("Liberty") pursuant to § 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA"). In addition, Plaintiff claims that he is entitled to equitable relief pursuant to ERISA § 502(a)(3) because Liberty breached its fiduciary duty. Currently before this Court is Liberty's Motion for Summary Judgment.*fn1

  II. BACKGROUND

 A. Facts

  The facts of this case, which are undisputed for purposes of the instant motion, may be summarized as follows.*fn2 In July of 1998, Plaintiff began working as an attorney at Page 2 Harris, Beach, & Wilcox ("Harris Beach"), a law firm located in Rochester, New York. (Liberty's Rule 56 Statement, ¶ 1). Plaintiff was eventually promoted to partner. Id.

  Defendant Liberty is an insurance company licensed to do business in the State of New York. (Amended Complaint, ¶ 3). In 1995, Liberty issued a Group Disability Income Policy (the "Policy") to Harris Beach. (Liberty's Rule 56 Statement, ¶ 2). The Policy, which became effective on July 1, 1995, provided long-term disability benefits to certain eligible classes of Harris Beach employees, including partners. Id. at ¶¶ 2-3.

  On August 14, 1997, Plaintiff was hospitalized for three weeks after contracting encephalitis and spinal meningitis. (Plaintiff's Memorandum of Law, p. 1). Except for a brief period in September, Plaintiff was absent from work as a result of his illness until December of 1997. (Liberty's Rule 56 Statement, ¶ 16).

  On October 31, 1997, Susan Dearstyne, Harris Beach's administrative manager, composed and mailed a letter to Liberty (the "Dearstyne Letter").*fn3 Id. at 17. In her letter, Ms. Dearstyne stated that she wanted to provide Liberty with "preliminary notice of a disability claim which may be made on behalf of one of [Harris Beach's] partners." (Dearstyne Letter, at LL-00048, attached as Exhibit C to Affidavit of Paula McGee). The letter did not identify the partner or describe the nature of his illness, but advised that Ms. Dearstyne would provide Liberty with additional information if the situation progressed. Id.

  After returning to work in December of 1997, Plaintiff continued to practice law at Harris Beach until July 31, 1998, when he joined the law firm of Trevett, Lenweaver, & Page 3 Salzer, P.C. ("Trevett").*fn4 (Liberty's Rule 56 Statement, ¶ 29-30).

  On June 22, 2000, Plaintiff submitted a Disability Claim Form to Liberty. Id. at 15. Plaintiff claimed that he was entitled to long-term disability benefits under the terms of the Policy because he had suffered "encephalitis and spinal meningitis resulting in permanent brain damage" while employed at Harris Beach. (Disability Claim Form, at LL-00047, attached as Exhibit C to McGee Affidavit). After reviewing the claim, Liberty determined that Plaintiff had not provided timely notice of his claim as required under the Policy. (Liberty's Rule 56 Statement, ¶ 23). Thereafter, Liberty informed Plaintiff that his claim was denied. (Notice of Rejection of Claim, at LL-00044, attached as Exhibit E to McGee Affidavit).

 B. Procedural History

  Plaintiff commenced this action on October 24, 2000, by filing a Summons and Complaint in the New York State Supreme Court, Monroe County. Defendant Liberty removed the case to the United States District Court for the Western District of New York on November 27, 2000.*fn5

  On April 26, 2002, Defendant Libertyfiled a Motion for Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.*fn6 Thereafter, this Court referred this Page 4 matter to the Honorable Leslie G. Foschio, United States Magistrate Judge, to hear Liberty's summary judgment motion and issue a Report and Recommendation.

  Judge Foschio filed a Report and Recommendation on September 11, 2003, recommending that Liberty's motion be granted in all respects. On October 8, 2003, Plaintiff filed Objections to the Report and Recommendation.*fn7 This Court heard oral argument on December 8, 2003, and reserved decision at that time.

  III. DISCUSSION

 A. Summary Judgment Standard

  Rule 56 of the Federal Rules of Civil Procedure provides that summary judgment is warranted where the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. Civ. P. 56(c). A "genuine issue" exists "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Ford v. Reynolds, 316 F.3d 351, 354 (2d Cir. 2003). A fact is "material" if it "might affect the outcome of the suit under governing law." Anderson, 477 U.S. at 248. In a case where the non-moving party bears the ultimate burden of proof at trial, the movant may satisfy its burden by pointing to the absence of evidence supporting an essential element of the non-moving party's claim. See Celotex Corp. v. Catrett, Page 5 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

  When deciding a motion for summary judgment, a court must view the evidence and the inferences drawn from the evidence "in the light most favorable to the party opposing the motion." Addickes v. S.H. Kress and Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970). "Only when reasonable minds could not differ as to the import of evidence is summary judgment proper." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir. 1991). The function of the court is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249.

  Summary judgment is not appropriate if "there is any evidence in the record that could reasonably support a jury's verdict for the non-moving party." Ford, 316 F.3d at 354. However, the party against whom summary judgment is sought "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . [T]he nonmoving party must come forward with specific facts showing that there is a genuine issue for trial." Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002).

 B. Liberty's Motion for Summary Judgment

  Plaintiff asserts two causes of action against Defendant Liberty. First, pursuant to ERISA § 502(a)(1)(B), Plaintiff contends that he is entitled to receive disability benefit payments under the terms of the Policy. Second, Plaintiff alleges that he is entitled to equitable relied under ERISA § 502(a)(3) because Liberty breached its fiduciary duty to him. Liberty argues that it is entitled to summary judgment with respect to both causes of action. This Court will address each cause of action in turn. Page 6

  1. ERISA § 502(a)(1)(B) Claim

  Under ERISA § 502(a)(1)(B), a participant or beneficiary of an employee benefit plan may commence a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." ERISA § 502(a)(1)(B), 29 U.S.C. § 1132 (a)(1)(B).

  In an action commenced pursuant to § 502(a)(1)(B), the court reviews a plan administrator's decision to deny benefits "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." Muller v. First Unum Life Ins. Co., 341 F.3d 119, 123-24 (2d Cir. 2003) (quoting Firestone Tire & Rubber Co. v. Branch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)).

  If the benefit plan vested the administrator with discretionary authority, the denial of benefits is subject to a deferential, "arbitrary and capricious" standard of review. Burke v. Kodak Retirement Income Plan, 336 F.3d 103, 109 (2d Cir. 2003). Under this standard, the decision to deny benefits "may be overturned only if the decision is `without reason, unsupported by substantial evidence or erroneous as a matter of law.'" Kinstler v. First Reliance Standard Life Ins. Co., 181 F.3d 243, 249 (2d Cir. 1999) (quoting Pagan v. NYNEX Pension Plan, 52 F.3d 438, 442 (2d Cir. 1995)).

  In the present case, the Policy provided that Liberty possessed discretionary authority to construe the terms of the Policy and determine benefit eligibility. (Policy, at LL-00024, attached as Exhibit A to McGee Affidavit). Accordingly, this Court must evaluate Liberty's decision to deny Plaintiff's claim under the arbitrary and capricious standard of Page 7 review. Therefore, in the context of the instant summary judgment motion, the question presented is whether, viewing the evidence in the light most favorable to Plaintiff, a reasonable trier of fact could conclude that Liberty's decision to deny benefits was arbitrary and capricious.

  As discussed supra, Liberty denied Plaintiff's claim because it found that he had failed to file a timely notice of claim. The Policy required Plaintiff to provide written notice of claim "within 30 days of the date of the loss on which the claim is based, if that is possible." (Policy, at LL-00025, attached as Exhibit A to McGee Affidavit). If it was not possible for Plaintiff to provide notice within thirty days of the date of the loss, he was required to provide notice of his claim "as soon as it [was] reasonably possible to do so." Id. As noted above, although Plaintiff was hospitalized with encephalitis and spinal meningitis in August of 1997, he did not file a Disability Claim Form with Liberty until June of 2000, almost three years later. Liberty determined that this notice was untimely and denied Plaintiff's claim for benefits.

  In his Report and Recommendation, Judge Foschio concluded that no reasonable trier of fact could find that Liberty's decision was arbitrary and capricious. (Report & Recommendation, p. 10-19). Plaintiff objects to the Report and Recommendation and argues that genuine issues of fact exist as to whether Liberty's decision was arbitrary and capricious. Specifically, Plaintiff contends that Liberty's decision was arbitrary and capricious because (a) the Dearstyne Letter provided Liberty with timely notice of Plaintiff's claim, (b) Liberty never conducted an investigation to determine whether it was reasonably possible for Plaintiff to provide notice of his claim prior to June of 2000, and (c) Liberty's Page 8 decision was based upon an unreasonable interpretation of the Policy's terms. This Court will address each argument seriatim.

  a. The Dearstyne Letter

  As part of its decision to deny benefits, Liberty determined that the Dearstyne Letter, which was mailed in October of 1997, did not constitute timely compliance with the notice provisions of the Policy. For the following reasons, this Court finds that no reasonable trier of fact could conclude that Liberty's decision in this regard was arbitrary and capricious.

  It is undisputed that Plaintiff was required to provide written notice of his claim to Liberty. While the Policy does not set forth specific requirements regarding the contents of a notice of claim, it is axiomatic that a document purporting to provide notice of a claim must, at minimum, provide notice of a claim. In other words, it must advise Liberty that the plan participant claims that he or she is entitled to receive benefits.

  This Court finds that there is no genuine issue regarding the fact that the Dearstyne Letter did not provide Liberty with notice of Plaintiff's claim. The letter did not identify Plaintiff by name. It did not describe either the nature of his illness or the extent of his disability. The letter did not demand or suggest that Liberty pay benefits to anyone, conduct an investigation, or take any action whatever. The letter simply stated that a Harris Beach partner had been hospitalized and that a disability claim might be filed in the future on his behalf. Critically, it advised that Ms. Dearstyne would keep Liberty "aware of this situation if it progresses." (Dearstyne Letter, at LL-00048, attached as Exhibit C to McGee Affidavit) (emphasis added). No reasonable trier of fact could conclude that it was arbitrary and capricious for Liberty to determine that the Dearstyne Letter did not constitute Page 9 compliance with the Policy's notice requirement.*fn8

  b. Investigation

  As noted above, the Policy required that written notice of claim be provided to Liberty within thirty days of the date of loss or, if that was not possible, as soon as it was "reasonably possible" to do so. Plaintiff argues that Liberty acted arbitrarily and capriciously when it denied his claim as untimely without conducting an investigation to determine whether it was reasonably possible for him to provide notice before June of 2000. This Court finds that argument unavailing.

  Preliminarily, this Court notes that Plaintiff has asserted contradictory arguments. First, Plaintiff contends that he provided notice of his claim in October 1997 through the Dearstyne Letter. On the other hand, Plaintiff asserts that an investigation by Liberty would have reveled that it was not reasonably possible for him to provide notice of his claim until June of 2000.

  Further, as discussed fully in Judge Foschio's Report and Recommendation, the undisputed facts in the administrative record demonstrate that Liberty's decision regarding the need for an investigation was neither arbitrary nor capricious.*fn9 For example, Plaintiff's Disability Claim Form stated that his illness began on August 14, 1997. It further advised that he had worked as a partner at a law firm since December of 1997. Indeed, the form Page 10 stated that Plaintiff was presently working as an attorney. (Disability Claim Form, at LL-00047, attached as Exhibit C to McGee Affidavit). The form also stated that Plaintiffs employment with Harris Beach had been terminated on July 31, 1998, when Plaintiff "left to join another firm." Id. Thus, the administrative record establishes that Plaintiff worked as a partner at a law firm for nearly two and a half years after the onset of his alleged disability. In light of this undisputed fact, no reasonable trier of fact could conclude that it was arbitrary and capricious for Liberty to decide that it did not need to conduct an investigation to determine whether it was reasonably possible for Plaintiff to provide notice of his claim prior to June of 2000.

  c. Interpretation of Policy Term

  Under the Policy, Plaintiff was required to provide written notice of his claim within thirty days of "the date of the loss on which the claim is based. . . ." (Policy, at LL-00025, attached as Exhibit A to McGee Affidavit). The term "date of the loss" is not defined by the Policy. It is clear from the record that Liberty's decision to deny Plaintiff's claim for benefits was based upon the fact that it interpreted "date of the loss" to mean the date on which Plaintiffs disability allegedly commenced, which was August 14, 1997.*fn10 Plaintiff argues that Liberty's interpretation of the term "date of the loss" was arbitrary and capricious.

  As noted supra, the Policy vests Liberty with the sole discretion to construe the terms of the Policy and to determine benefit eligibility. Id. at LL-00024. It further provides that "Liberty's decisions regarding construction of the terms of this policy . . . shall be conclusive Page 11 and binding." Id. Accordingly, Liberty's interpretation cannot be disturbed unless it was unreasonable. Burke, 336 F.3d at 109; see also Zuckerbrod v. Phoenix Mut. Life Ins. Co., 78 F.3d 46, 49 (2d Cir. 1996) (noting that "[a] district court may not upset a reasonable interpretation by the [plan] administrator") (quotation omitted).

  Thus, the question presented is whether Liberty could reasonably conclude that the term "date of the loss" referred to the date on which Plaintiff's alleged disability commenced. Under the Policy, a claimant is "disabled" only if he or she is unable to perform "all of the material and substantial duties" of his or her occupation. (Policy, at LL-00006, attached as Exhibit A to McGee Affidavit). It would therefore be reasonable for Liberty to conclude that "the date of the loss" refers to the date on which the claimant lost the ability to perform all of the material and substantial duties of his or occupation, i.e. the date on which the disability commenced. This interpretation is also supported by the fact that the notice deadline runs from "the date of the loss on which the claim is based." Id. at LL-00025 (emphasis added). A claim for disability benefits is, by definition, based upon an allegation that the claimant is disabled. As such, Liberty could reasonably conclude that the "the loss on which the claim is based" refers to the onset of the alleged disability. In sum, this Court finds that no reasonable trier of fact could conclude that Liberty's interpretation of the term "date of loss" was arbitrary and capricious.

  In the alternative, Plaintiff argues that this Court should review Liberty's interpretation of the term "date of the loss" under a de novo standard. Specifically, Plaintiff contends that Liberty's interpretation is not entitled to any deference because the company first advanced the "date on which the disability commenced" interpretation during this litigation. This Court Page 12 finds Plaintiffs argument to be without merit. As noted above, it is clear from the administrative record that Liberty's decision to deny Plaintiff's claim was based upon the fact that the company interpreted "date of the loss" to mean the date on which the disability commenced. (Notice of Rejection of Claim, at LL-00044, attached as Exhibit E to McGee Affidavit).*fn11

  2. ERISA § 502(a)(3) Claim

  In his second cause of action, Plaintiff seeks equitable relief pursuant to ERISA § 502(a)(3). That provision states that a civil action may be commenced by an ERISA plan participant, beneficiary, or fiduciary "to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or . . . to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provision of this subchapter or the terms of the plan. . . ." ERISA § 502(a)(3), 29 U.S.C. § 1132 (a)(3).

  The Supreme Court has held that Congress intended § 503(a)(3) to be a "catch all" provision, which acts "as a safety net, offering appropriate equitable relief for injuries caused by violations that § 502 does not elsewhere adequately remedy." Varity Corp. v. Howe, 516 U.S. 489, 512, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996).

  Plaintiff contends that he is entitled to relief under § 502(a) (3) because Liberty breached its fiduciary duty. Under ERISA, a plan fiduciary is required to "discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and Page 13 . . . with the care, skill, prudence, and diligence" of a prudent person acting in like circumstances. ERISA § 404(a), 29 U.S.C. § 1104 (a). The Second Circuit has held that "[a]though a fiduciary is not required to voluntarily disclose changes in a benefit plan before they are adopted . . ., a fiduciary . . . has a duty to deal fairly and honestly with its beneficiaries." Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76, 88 (2d Cir. 2001) (internal citations and quotation marks omitted); see also Becher v. Long Island Lighting Co., 129 F.3d 268, 271 (2d Cir. 1997) ("An ERISA fiduciary has an obligation to provide full and accurate information to the plan beneficiaries regarding the administration of the plan.").

  In the present case, Plaintiff argues that Liberty had a fiduciary duty and affirmative obligation to respond to the Dearstyne Letter. Specifically, Plaintiff contends that upon receiving the Dearstyne Letter in November 1997, Liberty was required to alert Plaintiff to the fact that he was in danger of failing to comply with the notice provisions of the Policy.

  Plaintiffs argument relies upon the assumption that Liberty knew, or reasonably should have known, that the Dearstyne Letter was an attempt to comply with the notice provisions of the Policy.*fn12 In light of the following undisputed facts, this Court finds that no reasonable trier of fact could accept this assumption. The first line of the Dearstyne Letter states that the letter's "purpose" was to provide Liberty "with preliminary notice of a disability claim which may be made on behalf of one of [Harris Beach's] partners." (Dearstyne Letter, at LL-00048, attached as Exhibit C to McGee Affidavit) (emphasis added). The use of the term "preliminary" indicates that Harris Beach was aware that further action would be Page 14 required to comply with the notice provisions of the Policy. The use of the word "may" suggests that it was not certain that a claim would even be filed.

  Moreover, the Dearstyne Letter neither invited nor demanded a response by Liberty. Indeed, as Judge Foschio noted in his Report and Recommendation, the letter implied "that Liberty should await further advice before taking any action." (Report & Recommendation, at p. 34). Specifically, the letter advised that Ms. Dearstyne would "keep [Liberty] aware of this situation if it progresses." (Dearstyne Letter, at LL-00048, attached as Exhibit C to McGee Affidavit) (emphasis added). In light of this advice and the fact that the letter simply stated that a claim might be filed in the future, no reasonable trier of fact could conclude that it was dishonest, unfair, or negligent for Liberty to await further instruction from Ms. Dearstyne.*fn13

  IV. CONCLUSION

  For the foregoing reasons, this Court finds that Liberty is entitled to summary judgment with respect to both causes of action. No reasonable trier of fact could conclude that Liberty's decision to deny Plaintiff's claim was arbitrary and capricious. Further, there is no genuine issue regarding the fact that Liberty did not breach its fiduciary duty to Plaintiff by deciding not to respond to the Dearstyne Letter. Page 15

  V. ORDERS

  IT HEREBY IS ORDERED that Defendant Liberty's Motion for Summary Judgment (Docket No. 29) is GRANTED.

  FURTHER, that this Court ACCEPTS the Report and Recommendation filed by the Honorable Leslie G. Foschio, United States Magistrate Judge, (Docket No. 44) to the extent referenced in this Decision and Order.

  FURTHER, that Plaintiff's Objections to the Report and Recommendation (Docket No. 47) are DENIED.

  SO ORDERED.


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