Schultz v. Unumprovident Corp..
| Decision Date | 25 February 2011 |
| Docket Number | Case No. 06–CV–622–GKF–PJC. |
| Citation | 782 F.Supp.2d 1276 |
| Parties | Barry C. SCHULTZ, Plaintiff,v.UNUMPROVIDENT CORPORATION, a foreign corporation; Unum Life Insurance Company of America, a foreign corporation; and Unum Corporation, a foreign corporation, Defendants. |
| Court | U.S. District Court — Northern District of Oklahoma |
OPINION TEXT STARTS HERE
Amy Kay Hart, Hart Law Office, Tulsa, OK, for Plaintiff.Matthew Colin Kane, Patrick Michael Ryan, Phillip Gardner Whaley, Ryan Whaley Coldiron Shandy PLLC, Oklahoma City, OK, for Defendants.
Plaintiff Barry C. Schultz (“Schultz”) brings this suit under the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. (“ERISA”), seeking judicial review of his claim that defendants, UnumProvident Corporation, Unum Life Insurance Company of America, and Unum Corporation (collectively, “Unum”), have underpaid benefits owed to him under a long term total disability insurance policy.
Unum, as administrator of the disability plan, had discretion under the plan to determine Schultz's eligibility for benefits and interpret the terms and provisions of the policy. [AR UACL02828; UACL02822]. Therefore, the court's review is limited to determining if the decision was arbitrary or capricious. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989); LaAsmar v. Phelps Dodge Corporation Life, Accidental Death & Dismemberment and Dependent Life Insurance Plan, 605 F.3d 789, 796 (10th Cir.2010); Chambers v. Family Health Plan Corporation, 100 F.3d 818, 825 (10th Cir.1996); Sandoval v. Aetna Life and Casualty Insurance Co., 967 F.2d 377, 380 (10th Cir.1992).
At one time, the Tenth Circuit took the position that where the claim administrator is also the insurer of the plan, an “inherent conflict of interest” exists, and the administrator “bears the burden of proving the reasonableness of its decision pursuant to this court's traditional arbitrary and capricious standard.” Fought v. UNUM Life Ins. Co. of America, 379 F.3d 997, 1006 (10th Cir.2004). However, the Supreme Court rejected such burden-shifting rules in Metro. Life. Ins. Co. v. Glenn, 554 U.S. 105, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008). The standard for review, after Glenn, has been articulated by the Tenth Circuit as follows:
Following Glenn, we now weigh all conflicts of interest-be they standard or inherent-as a factor in our review. See Holcomb v. Unum Life Ins. Co. of Am., 578 F.3d 1187, 1192–93 (10th Cir.2009). In our analysis, “any one factor will act as a tiebreaker when the other factors are closely balanced, the degree of closeness necessary depending upon the tiebreaking factor's inherent or case-specific importance.” Glenn, 128 S.Ct. at 2351. That is, a conflict of interest affects the outcome at the margin, when we waver between affirmance and reversal. A conflict is more important when “circumstances suggest a higher likelihood that it affected the benefits decision,” but less so when the conflicted party “has taken active steps to reduce potential bias and to promote accuracy.” Id.
Hancock v. Metropolitan Life Insurance Company, 590 F.3d 1141, 1155 (10th Cir.2009). Thus, the court must review Unum's decision to discontinue benefits according to an arbitrary and capricious standard by applying a “combination-of-factors” method of review that allows the court to “tak[e] account of several different, often case-specific, factors, reaching a result by weighing all together.” Holcomb, 578 F.3d at 1193, quoting Glenn. A conflict “should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affect the benefits decision ... [and] should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and promote accuracy....” Id., quoting Glenn.
Indicia of arbitrary and capricious decisions include lack of substantial evidence, mistake of law, bad faith, and conflict of interest by the fiduciary. Hancock, 590 F.3d at 1155. To survive the court's review, the insurer's decision Id., citing Finley v. Hewlett–Packard Co. Employee Benefits Org. Income Prot. Plan, 379 F.3d 1168, 1176 (10th Cir.2004) (internal quotation marks omitted).
Schultz, a former employee of BCS Industries, Inc. (“BCS”), had long term disability insurance coverage under Unum Policy No. 510750 001 (the “Policy”) issued by UNUM to BCS on October 1, 1996 [UACL 02838–UACL 02798].1 With respect to calculation of long term benefit payments, the Policy provided:
We will follow this process to figure your payment:
1. Multiply your monthly earnings by 60%.
2. The maximum monthly benefit is $6,000.
3. Compare the answer from Item 1 with the maximum monthly benefit. The lesser of these two amounts is your gross disability payment.
4. Subtract from your gross disability payment any deductible sources of income.
The amount figured in Item 4 is your monthly benefit.
[UACL 02820]. The Policy further provided:
MONTHLY BENEFIT means the total benefit amount for which an employee is insured under this plan subject to the maximum benefit.
GROSS DISABILITY PAYMENT means the benefit amount before UNUM subtracts deductible sources of income and disability earnings.
DEDUCTIBLE SOURCES OF INCOME means income from deductible sources listed in the plan which you receive or are entitled to receive while you are disabled. This income will be subtracted form your gross disability payment.
[ Id.]. The term “monthly earnings” was defined as follows:
“Monthly earnings” means your gross monthly income from your Employer in effect just prior to your date of disability. It includes your total income before taxes, but does not include deductions made for pre-tax contributions to a qualified deferred compensation plan, Section 125 plan, or flexible spending account. It does not include income received from commissions, bonuses, overtime pay, any other extra compensation, or include income received from sources other than your Employer.
[UACL02819]. The Policy stated, “UNUM will subtract from your gross disability payment the following deductible sources of income: ... [t]he amount that you receive from a third party (after subtracting attorney's fees) by judgment, settlement or otherwise.” [UACL02817–UACL01816].
The Policy provides that “[t]he amount that you receive as retirement payments or the amount your spouse and children receive as retirement payments because you are receiving retirement payments under ... the United States Social Security Act” will be subtracted from the gross disability payment. [UACL 02817]. Further, the Policy states:
Once UNUM has subtracted any deductible source of income from your gross disability payment, UNUM will not further reduce your payment due to a cost of living increase from that source.
[UACL 02815].
The Policy provides:
UNUM has the right to recover any overpayments due to:
—fraud;
—any error UNUM makes in processing a claim; and
—your receipt of deductible sources of income.
—You must reimburse us in full. We will determine the method by which the repayment is to be made.
[UACL02808].
The Policy provides, “When making a benefit determination under the policy, UNUM has discretionary authority to determine your eligibility for benefits and to interpret the terms and provisions of the policy.” [UACL02828].
Plaintiff was injured in a boating accident on July 4, 2003. He was subsequently determined by Unum to be totally disabled. [UACL02286–UA02284].
In determining plaintiff's monthly disability payment, Unum relied upon the “Employer Statement” section of plaintiff's claim, completed by Traci McGee, the office manager of plaintiff's employer and received by Unum on October 27, 2003. [UACL02985]. McGee checked the box on the form which indicated plaintiff's premiums for short term disability were paid “pre-tax.” [ Id.] On November 10, 2003, Unum Associate Customer Care Associate Tracey Jullienne spoke with David Heavin, the employer's vice president of human resources, who confirmed the premiums for plaintiff's long term disability had been paid with pre-tax dollars. [UACL02460–02459]. Carolyn Holmquist, a Unum CPA, calculated plaintiff's benefits, noting various pre-tax items which would not be included in plaintiff's gross disability benefits. [UACL02736]. By letter dated November 18, 2003, 2003, Unum notified plaintiff his claim for long term disability had been approved and he would receive monthly disability payments of $5,360.13 ($5,804.15 in Basic Benefit less Social Security tax of $359.86 and Medicare tax of $84.16 per month) beginning October 2, 2003. [UACL02286, UACL2280].
On December 5, 2005, plaintiff provided Unum's Tax Department with his sworn affidavit stating that the long term disability premiums had been paid with post-tax dollars. [UNUM–3rd SUPPLEMENT–00009]. Plaintiff stated therein:
While my premium payments to Unum for my LTD insurance were made by CBS, Inc., it was merely for convenience. Said premiums were not withheld from my payroll checks, nor were they paid with pre-tax dollars, as evidenced by the payroll printout attached (which show no deduction for said premiums). The Unum disability premium payments, along with my health insurance, my AFLAC premiums, my car benefit, and my 401k contributions, were “grossed up” at the end of the year and included my taxable income on my W–2s, meaning I paid all premium payments with 100% post-tax dollars. This was done because I didn't pass the IRS fairness tests for participation as an...
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