The opinion of the court was delivered by: FREDERICK SCULLIN, Chief Judge, District
MEMORANDUM-DECISION AND ORDER
Plaintiff John M. Shutts commenced this declaratory judgment action on
October 30, 2001, seeking a declaration from this Court, pursuant to
28 U.S.C. § 2201-2202, that he is entitled to long-term disability
benefits pursuant to the provisions of the policy that Defendants
First UNUM Life Insurance Company of America and Unumprovident
Corporation (hereinafter collectively referred to as "Defendant" or
"First UNUM") issued to him. Presently before the Court are Defendant's
motion for judgment on the administrative record and Plaintiff's
cross-motion for judgment on the administrative record.*fn1
During 1999, Plaintiff was employed as President of the John I. Shutts
Agency, Inc. Defendant issued long-term disability and group health
insurance policies to Plaintiff's employer, the John I. Shutts Agency,
Inc. The policies are governed by the Employee Retirement Income Security
Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA").*fn2 The
policy's effective date was October 1, 1998.
Plaintiff suffers from organic brain syndrome.*fn3 On July 19, 2000,
he applied for long-term
disability benefits, listing April 1, 1999, as his date of disability.
Defendant, relying upon several pieces of written correspondence and
telephone interviews, denied Plaintiff's claim for long-term disability
benefits on the ground that Plaintiff was not in active employment prior
to the effective date of his policy and, as a result, Plaintiff's waiting
period was never satisfied.*fn4
Plaintiff then appealed Defendant's decision on December 5, 2000.
Defendant affirmed its prior determination and upheld its denial. At that
time, Defendant also alleged that Plaintiff failed to provide timely
notice of his alleged disability as the policy required.*fn5
After exhausting his administrative remedies, Plaintiff commenced the
instant action, seeking a declaration from this Court that he is entitled
to long-term disability coverage. Plaintiff bases his claim on various
grounds which the Court will address seriatim.
As a preliminary matter, Plaintiff asserts that Defendant waived any
right it may have to dispute the timeliness of Plaintiff's notice of
claim by failing to assert late notice as a ground for denying coverage.
Plaintiff cites Lauder v. First Unum Life Ins. Co.,
284 F.3d 375, 381 (2d Cir. 2002), to support his argument and specifically
asserts that the policy does not require notice within a thirty- or
ninety-day notice period, but, to the contrary, merely encourages
the insured to notify the insurer of a claim within those time periods.
Defendant, on the other hand, argues that Plaintiffs failure to file
proof of loss in a timely manner precludes his claim for benefits under
ERISA. Defendant asserts that under the policy, if Plaintiff was disabled
as of April 1, 1999, he was required to give notice within thirty days of
that date, i.e., May 1, 1999, or, at the latest, December 1999. Plaintiff
did not give notice, however, until July 19, 2000 approximately
seven months later.
The Second Circuit has held that the doctrine of waiver applies to an
ERISA claim. See Lauder, 284 F.3d at 381 (citations omitted).
However, there is no bright-line rule for determining whether waiver
applies in a particular case and a case-specific analysis is required.
See id. First, it is necessary to determine whether timely
notice is a required element of the policy under which the plaintiff
seeks reimbursement, since such an element cannot be waived, and
seemingly, with respect to the first consideration, "a claim of waiver
[can]not be used to expand the policy so that the insured `extend[s] its
coverage to more than it originally bargained.'" Id. (quotation
omitted). However, if waiver would not expand the coverage
bargained for, then the court must analyze the particular case
under a different waiver principle, which is as follows: "[A]n insurer is
deemed, as a matter of law, to have intended to waive a defense to
coverage where other defenses are asserted, and where the insurer
possesses sufficient knowledge (actual or constructive) of the
circumstances regarding the unasserted defense.'" Id. at 382
The policy reads:
We encourage you to notify us of your
claim as soon as possible, so that a claim
decision can be made in a timely manner. Written
notice of a claim should be sent within
30 days after the date your disability begins.
However, you must send UNUM written
proof of your claim no later than 90 days after
your eliminations period. If it is not
possible to give proof within 90 days, it must be
given as soon as is reasonably possible.
See Hall Aff. at Exh. "B" at LTD-CLM-1 (emphasis added).
The policy does not, contrary to Defendant's assertions,
require that notice be given within thirty days but states that
it should be given within that time period. Additionally, although the
policy states that notice must be given within ninety days after the
insured's elimination period, it leaves an exception open to those who
cannot do so. Moreover, failure to timely file proof of loss does not
expand the policy so as to extend its coverage to more than originally
With respect to the second consideration, the Court must look to see if
the record supports Defendant's contention. The administrative record
contains a comment from a UNUM representative, dated March 9, 2001,
stating: "[n]ext steps Uphold denial on reappeal as not actively
employed. (Note N.Y. not a strict time limit state; consequently
will not put in late
notice as uphold reason)." See Hall Aff. at Exhibit "B."
Not only did First Unum intend to uphold its denial of benefits on other
grounds and deliberately avoid using failure to timely file as a defense,
but its reason for doing so was based upon its opinion that New York was
not a "strict time limit state." Defendant's statement appears to show
that it ...