The opinion of the court was delivered by: Richard J. Sullivan, District Judge
Plaintiff Cynthia M. Kellner brings this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., alleging that she was wrongfully denied disability benefits by Defendant First Unum Life Insurance Company ("First Unum") under the terms of a long-term disability plan funded by her former employer, Nixon Peabody LLP ("Nixon" or "the firm"). First Unum counterclaims to recover benefits it alleges Kellner wrongfully received, as well as attorneys' fees and costs related to this action.
Before the Court is First Unum's motion for summary judgment. For the reasons set forth below, Defendant's motion is granted as to Kellner's claim, denied with respect to the counterclaim, and denied without prejudice as to attorneys' fees and costs.
The Court has taken the facts described below, where possible, from the parties' respective Local Rule 56.1 statements. Where only one party's Rule 56.1 statement is cited, the opposing party does not dispute that fact or has offered no admissible evidence to controvert that fact. Additionally, the Court cites directly to the claim file maintained by First Unum in connection with Kellner's disability claim and, as discussed below, the additional materials submitted by the parties in connection with this motion.
Kellner began working at Nixon in 1982 and became an equity partner in 1992. (First Unum Claim File ("FULCL") at 228, 230.) As a benefit of her employment at Nixon, Kellner was covered under the terms of the firm's long-term disability plan (the "LTD Plan" or "the Plan"). (Pl.'s 56.1 ¶ 8.) The LTD Plan was funded by Nixon and administered pursuant to an insurance policy issued by First Unum. (FULCL at 212.) Kellner worked her last day at Nixon on January 20, 2001. (Id. at 304.) On March 28, 2001, she executed a resignation and release with the firm relating to "issues regarding the over-reimbursement of expenses." (Id. at 59-62.)
As discussed below in greater detail, Kellner submitted a claim for benefits under the LTD Plan on April 13, 2001, without disclosing the circumstances surrounding her resignation. (Id. at 455-59.) On June 8, 2001, Defendant initially approved her request for long-term disability benefits. (Id. at 501-02.) However, in July 2002 - after learning that Kellner had resigned from Nixon, been disbarred, and was the subject of a criminal investigation - First Unum informed Kellner that she did not qualify for disability benefits and that its prior payments "were based upon insufficient information." (Id. at 565-67.) First Unum twice denied Kellner's appeal of this determination (id. at 615-18, 628-29), and this litigation followed.
1. Nixon's Long-Term Disability Plan
The LTD Plan was issued by First Unum to Nixon under policy number 452106-001, effective April 1, 1989 and as amended through May 15, 2000. (Id. at 165, 212.) The terms of Nixon's LTD Plan are set forth in a document describing the plan (id. at 162-212) and summarized in the Summary Plan Description ("SPD") (id. at 138-63).
The SPD in effect at the time of Kellner's disability claim provides a "plain English" summary of the LTD Plan. (Id. at 162.) It makes clear that "[t]he cost of this plan is paid entirely by" Nixon, but denotes the "Type of Administration" as "Insurer Administration." (Id. at 142.) Under the heading "Discretionary Authority," the SPD states that "[i]n making any benefits determination under the policy, [First Unum] shall have the discretionary authority both to determine your eligibility for benefits and to construe the terms of the policy." (Id. at 158.)
The body of the SPD summarizes the basic terms of the LTD Plan, including the Plan's process for calculating benefits, the procedure for making claims determinations, and beneficiaries' rights under ERISA. It states that, under the LTD Plan, "`[d]isability' and `disabled' mean that because of injury or sickness . . . you cannot perform each of the material duties of your regular occupation . . . ." (Id. at 154.) The SPD also makes clear that a covered employee must provide written notice of any claim for benefits "within 30 days of the date [the] disability starts," including proof of "the cause of the disability." (Id. at 144.) It notes that coverage under the LTD Plan ends upon "the date employment terminates," which includes the "[c]essation of active employment." (Id. at 145.)
Under a heading labeled "What happens if facts are misstated?," the SPD states that "[i]f relevant facts about you 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." (Id. at 143.)
The LTD Plan contains the same definition of "disability" as the SPD. (Id. at 201; Def.'s 56.1 ¶ 9.) It specifies further that "[f]or attorneys, `regular occupation' means the specialty in the practice of law which the insured was practicing just prior to the date disability started." (FULCL at 201.) As to benefits determinations, the LTD Plan states, in roughly the same terms as the SPD, that "[i]n making any benefits determination under this policy, [First Unum] shall have the discretionary authority both to determine an employee's eligibility for benefits and to construe the terms of this policy." (Id. at 207.)
As in the SPD, the LTD Plan indicates that an employee's insurance may be terminated if "employment terminates" or upon "[c]essation of active employment." (Id. at 191.) Likewise, it states that "misstatement of facts" will result in a "fair adjustment of premium" and that "the true facts will decide if and in what amount insurance is valid under this policy." (Id. at 188.)
2. Kellner's Resignation from Nixon
In approximately December of 2000, Nixon began to investigate Kellner for misappropriation of the firm's funds. (Id. at 539; see also Def.'s 56.1 ¶ 2.) On January 13, 2001, members of the firm confronted Kellner regarding the conduct. Six days later, on January 20, Kellner ceased working at the firm. (FULCL at 221 ("Personal Statement of Cynthia Kellner").)
Kellner wrote a letter to the firm on January 29, 2001 referencing "`alleged discrepancies' on [her] expense reimbursements . . . ." (Id. at 2.) She stated that she was "`tried and convicted' without any due process" and that "on January 23rd [she was] threatened with losing [her] law license . . . ." (Id. at 1.) The letter also stated that Kellner had "no intention of resigning from the Firm" and that "[t]he way I have been treated has caused me extreme emotional and mental distress as well as severely aggravating my physical disability." (Id. at 1-2.)
Approximately one month later, on March 22, 2001, Nixon's Benefits Manager, Donna Frank, sent a letter to First Unum asking two questions:
If a . . . partner . . . meets the definition of disability under the Policy while a partner, [and] the partner subsequently terminates employment during the 180 day elimination period, will the participant, assuming disability continues, be eligible to collect a disability benefit under the Policy notwithstanding the termination of employment?
Would the termination of employment impact coverage under the Policy in any way?
(Hack Decl. Ex. E at 1.) First Unum responded on March 27, 2001, assuring Nixon that "[t]he determination of benefits is based on the disability date. If an employee is in an eligible class at the date of disability and meets the contract definition of disability, the employee would be eligible for benefits." (Id. Ex. E at 2.)
One day later, on March 28, 2001, Kellner executed a "Resignation, Settlement, and Release Agreement" with Nixon (the "Resignation Agreement" or "Agreement"). (FULCL at 59-62.) The prefatory clauses of the agreement state that (1) "the parties wish to provide for a resolution of issues regarding the over-reimbursement of expenses to [Kellner] and to provide a full and complete resolution of any and all claims . . . . ," and (2) "for personal reasons, including her disabilities and their impact on her ability to practice law, [Kellner] finds it necessary to withdraw from [Nixon] . . . ." (Id. at 62.)
As part of the agreement, Kellner acknowledged that "she was over-reimbursed for certain business related expenses during 1999 and 2000 . . . ." (Id. at 61 ¶ 2.) Both parties released "any and all claims of any nature whatsoever," but agreed that "[t]his release . . . shall not include a waiver by [Kellner] of any rights she may have . . . under [Nixon's] Long Term Disability Policy . . . ." (Id. at 61 ¶ 4.) Further, Kellner agreed to "release and discharge[ Nixon] from any obligations under the Firm Agreement, including any rights to receive continued income from the Firm because of disability." (Id.) The Resignation Agreement stated that:
[Nixon] acknowledges that [Kellner] may assert a claim for disability, either total or partial, under [Nixon's] existing disability insurance coverage. [Nixon] agrees that it shall not contest any such claim, but shall provide whatever materials or information ordinarily requested or required by its insurer in the course of the administration of any such claim.
(Id. at 60 ¶ 5.) The Agreement then reiterated in its final paragraph that "[n]othing contained in this Agreement shall be construed or interpreted to be any waiver of [Kellner's] rights to apply for and receive long-term disability benefits under the group LTD policy under which she was covered during her partnership with the Firm." (Id. at 59 ¶ 10.)
3. Kellner's Application for Benefits
On April 13, 2001, Kellner submitted her application for long-term disability benefits under the LTD Plan. (Pl.'s 56.1 ¶ 4; see also FULCL at 455-59.) She wrote that: "I have "rheumatoid arthritis[ ("RA"),] which began in the Spring of 1999. I stopped working because of my RA on 1/19/01. I also have a significant history of hearing loss which began in 1985." (FULCL at 457.) She also asserted that her rheumatoid arthritis hindered her job duties because "fatigue impedes my performance, medications make me groggy, [and] unable to think as expected, [and] pain, stiffness make working impossible." (FULCL at 457.)
Significantly, Kellner did not disclose in her claim form any of the circumstances relating to her misappropriations, Nixon's investigation, or the Resignation Agreement. (Def.'s 56.1 ¶¶ 5, 35; see also Pl.'s 56.1 ¶ 5.) In fact, Kellner did not provide a copy of the Resignation Agreement to First Unum until after Defendant stopped paying her benefits in 2002. (Def.'s 56.1 ¶¶ 39-40; see also FULCL at 59-62 (attaching the Resignation Agreement to Kellner's November 26, 2002 appeal of Defendan t 's benef it s determination).) Nonetheless, as part of her application for LTD benefits, Kellner signed a document titled "Disability Claim, Claimant's Authorization," and attested that: "The statements made by me are true and complete." (Def.'s 56.1 ¶ 13.)
During its evaluation of her claim for benefits, First Unum examined medical records submitted by three of Kellner's treating physicians: Dr. Sharon J. Glezen, Dr. Tammi Sholtzhauer, and Dr. Jeffrey Levenkron. (See FULCL at 477.) In a memorandum dated June 8, 2001, Kristen Somerville of First Unum concluded that the records provided "[m]edical support for progressive [rheumatoid arthritis]." (Id. at 499.)
Dr. Sharon J. Glezen signed an "Attending Physician's Statement" on April 3, 2001, which was part of Kellner's initial application for benefits. (Id. at 455.) In that document, she opined that Kellner was "incapable of gainful employment in any capacity at this time." (Id.) Dr. Glezen also estimated that Kellner would be able to return to work on a part-time basis in February 2002. (Id.)
In addition to the "Attending Physician's Statement," Dr. Glezen provided documentation relating to Kellner's treatment, including her contemporaneous notes from at or near the time of Kellner's visits to her office. Significantly, Dr. Glezen's notes from a September 29, 2000 examination indicated that "[p]atient appears well" and that Kellner's "rheumatoid arthritis has been under good control . . . ." (Id. at 525.)
Following a January 22, 2001 appointment that took place shortly after Kellner's last day at Nixon, Dr. Glezen's notes state that "in the past several weeks [Kellner] has become increasingly frustrated with increasing hand, elbow and neck pain." (Id. at 514.) Describing the examination itself, she wrote that "I did not examine her neck today. There is no evidence of rheumatoid nodules about the elbows. There is [full range of motion] in both elbows. Hands reveal no evidence of obvious swelling or erythema at the current time." (Id.) Dr. Glezen's notes also indicate that Kellner was "[t]earful" and "appear[ed] quite fatigued." (Id.) Although the notes state that Dr. Glezen "strongly encouraged [Kellner] to consider a medical disability in order to get her feet back under her" (id.), there is no indication that Kellner told Dr. Glezen that she had already stopped working at Nixon. Instead, Kellner apparently stated that "[s]he would like to go to work tomorrow to pull together a few loose ends . . . ." (Id.)
Dr. Glezen's notes dated January 30, 2001 indicate that Kellner's "[e]xamination was deferred." (Id. at 513.) The notes state that Kellner "had a very difficult week. When discussing her rheumatoid arthritis and disability with her coworkers some stressful situations have come up." (Id.)
On March 16, 2001, Dr. Glezen indicated that she counseled Kellner regarding her "recent flare" of arthritis and that it "will likely require long-term disability." (Id. at 510.) Dr. Glezen's notes dated March 27, 2001 - the day before Kellner executed the Resignation Agreement with Nixon - diagnose "[r]hematoid arthritis with a current flare." (Id. at 506.) The notes describe "difficulty ambulating," "increasing pain in both wrists," "increasing neck pain," "swelling of the right wrist," and "moderate swelling of both knees." (Id.) "She remains permanently disabled, and is in the process of discussing long term disability." (Id.) Finally, Dr. Glezen's notes from April 12, 2001 indicate that Kellner was moving "with difficulty and is using a cane." (Id. at 504.)
ii. Dr. Tammi Sholtzhauer
In a March 2, 2001 letter to Dr. Glezen regarding treatments administered to Kellner on that day, Dr. Sholtzhauer indicated that Kellner exhibited "severe" rheumatoid arthritis and was "having a marked flare." (Id. at 481.) Dr. Sholtzhauer injected Lidocaine into both of Kellner's knees on that day. (Id.) The letter also stated that "[s]ince her last visit she's had a terrible time. She's had a lot of stress at work. She was discharged unfairly, and there are a lot of associated problems. Meantime, she's had an acute flare." (Id.)
A brief May 10, 2001 letter describing Dr. Sholtzhauer's appointment with Kellner states that Kellner "continues to have severe disease." (Id. at 478.) The letter states that Dr. Sholtzhauer observed "[s]ignificant swelling in [Kellner's] wrists and knees." (Id.)
iii. Dr. Jeffrey Levenkron
Dr. Levenkron is a clinical psychologist who provided counseling services to Kellner in eight sessions starting on January 29, 2001, just after her last day at Nixon and on the same day she wrote to the firm regarding "being `tried and convicted' without any due process" (id. at 1). (See id. at 489.) In a letter dated May 10, 2001, Dr. Levenkron associated Kellner's symptoms of depression and anxiety with her rheumatoid arthritis: "Coupled with her severe pain and physical immobility, she was and continues to be disabled . . . ." (Id.) In that ...