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Orantes v. Cnh Group Insurance Plan Et. Al

April 12, 2011

ORANTES, PLAINTIFF,
v.
CNH GROUP INSURANCE PLAN ET. AL., DEFENDANTS.



The opinion of the court was delivered by: Tucker, J.

MEMORANDUM OPINION

Presently before the Court is Plaintiff Silvia Orantes's Motion to Determine the Court's Standard of Review (Docs. 13-14.), Defendant Prudential Insurance Company of America's Response in Opposition thereto (Docs. 15-17.) to Plaintiff's Reply Brief, which the Court will treat as a Motion for Leave to Reply (Doc. 16.) and Defendant Prudential Insurance Company of America's Sur-Reply to Plaintiff's Reply Brief (Doc. 20.). Upon careful consideration of the parties submissions and exhibits thereto, the Court will grant the motions.

I. BACKGROUND

Plaintiff, Silvia Orantes, brings this action under section 502(a)(1)(b) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), seeking to overturn the decision of Defendant Prudential Insurance Company of America, ("Prudential") finding that she is no longer eligible for partial long-term disability benefits under the terms of the Long Term Disability Plan (the "Plan") provided by her employer, CNH Group Insurance Plan. ("CNH").*fn1

II. LEGAL STANDARD

At issue here is the applicable standard of review for the instant action. ERISA permits a participant or beneficiary of a plan to initiate an action "to recover benefits due to him [or her] under the terms of his plan, to enforce his [or her] rights under the terms of the plan, or to clarify his [or her] rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(A)(B). The act does not specify the applicable standard of review for an action brought under § 1132(a)(1)(B); however, in Firestone Tire and Rubber Co., v. Bruch, 489 U.S. 101, 109 S. Ct. 948, 103 L. Ed. 2d 80 (1989), the Supreme Court provided guidance on the issue. There, the Supreme Court held that a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard, unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.

Id. at 115. If, however, the plan confers such discretion, an "arbitrary and capricious" standard of review applies. See e.g., Howley v. Mellon Fin. Corp., 625 F.3d 788, 792 (3d Cir. 2010); Smathers v. Multi-Tool Inc./Multi-Plastics, Inc. Employee Health and Welfare Plan, 298 F.3d 191, 194 (3d Cir. 2002); Gillis v. Hoechst Celanese Corp., 4 F.3d 1137, 1141 (3d Cir. 1993) "[W]hen the arbitrary and capricious standard applies, the decision maker's determination to deny benefits must be upheld unless it was clear error or not rational." (citing Shiffler v. Equitable Life Assurance Soc'y, 838 F.2d 78, 83 (3d Cir. 1988).

No clear cut test exists for determining whether a plan confers discretion on an administrator or fiduciary. Luby v. Teamsters Health, Welfare, & Pension Trust Funds, 944 F.2d 1176, 1179 (3d Cir. Pa. 1991) (noting that "ERISA is silent on the proper standard by which the district court should review fact findings made by plan administrators. . . ."). To determine the applicable standard of review, the Court must look to the terms of the plan at issue to ascertain whether it granted Prudential discretion to interpret plan terms, act as a fact finder or to determine a beneficiary's right to benefits. Luby, 944 F.2d at 1180. ("Whether a plan administrator's exercise of power is mandatory or discretionary depends upon the terms of the plan."). To alter the de novo standard of review, the grant of discretionary authority must be clear and unambiguous. The burden is on the administrator to show that the plan gives it discretionary authority. A plan can confer discretionary authority in one of two ways. See Luby, 944 F.2d at 1180. First, a plan may include language creating an express grant of discretion. Second, "[d]iscretionary powers may be implied by a plan's terms even if not expressly granted." Id. In both situations the grant of discretion of must be clear and unambiguous for the Court to abandon the default de novo standard of review.

III. DISCUSSION

The parties in this case vigorously dispute whether the plan confers discretionary authority on Prudential. Plaintiff argues that Prudential's decision is subject to de novo review because the plan does not reserve the discretion to determine eligibility for benefits or to interpret the terms of the plan. In making this argument, Plaintiff maintains that the ERISA Statement attached to the LTD Plan is not a part of the LTD Plan; thus, it cannot confer discretionary authority on Prudential.

In opposition, Prudential contends that the plan grants it discretion for two reasons. First, Prudential argues that the ERISA Statement is a part of the LTD Plan and confers the requisite discretionary authority to warrant application of the "arbitrary and capricious" standard of review. Second, Prudential contends that language contained in the LTD Plan document itself, stating that receipt of benefits is contingent upon the claimant submitting proof of disability that is "satisfactory to Prudential" grants Defendant Prudential sufficient discretion for deferential review to apply. (Def.'s Mem in Supp. of Resp. in Opp'n 3).

In the case sub judice, the ERISA Statement provides in relevant part that The Prudential Insurance Company of America as Claims Administrator has the sole discretion to interpret the terms of the Group Contract, to make factual findings, and to determine eligibility of benefits. The decision of the Claims administrator shall not be overturned unless arbitrary and capricious.

(Ex. 4. Def.'s Resp. in Opp'n 2) (emphasis added). Despite this broad grant of authority, the ERISA Statement explicitly states that "it is not part of the Group Insurance Certificate." (Ex. 4. Def.'s Resp. in Opp'n 1).

The Third Circuit has not squarely addressed whether an ERISA Statement is a plan document. However, district courts in the Fourth, Ninth and Seventh Circuits have had occasion to address this issue and have decided almost uniformly that they are not. The Court finds Besser v. Prudential Insurance Co. of America,, 2008 U.S. Dist. LEXIS 116869 (D. Haw. 2008) instructive. In Besser Defendant Prudential argued that the ERISA statement at issue there granted it discretion by stating, "[Prudential] as Claims Administrator has the sole discretion to interpret the terms of the Group Contract, to make factual findings, and to determine eligibility for benefits. The decision of the Claims Administrator shall not be overturned unless arbitrary and capricious." Id. at *5. The Besser court held that the ERISA statement was not a plan document, reasoning that the ERISA statement following the certificate of insurance was preceded by a notice stating, "[t]his ERISA Statement is not part of the Group Insurance Certificate." Id. at *3. Thus, the statement did not vest discretion in the plan administrator. Additionally, the long-term disability insurance policy stated the group contract was comprised of, among other things: (1) the insurance certificates; (2) all modifications and endorsements to the ...


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