Opinion
Case No. 1:03CV2500.
February 17, 2006
OPINION AND ORDER
This matter comes before the Court on Defendant's Motion for Judgment on the Administrative Record. For the following reasons, this Court finds that Plaintiff's long-term disability policy is governed by the Employee Retirement Income Security Act (ERISA) and the termination of Plaintiff's benefits is reviewed under the arbitrary and capricious standard.
I. FACTUAL BACKGROUND
Plaintiff, Pamela Dosky, was employed by Defendant, Rockwell Automation, fka Allen-Bradley Company ("Rockwell"), as a Trade Show Coordinator and/or Exhibit Coordinator, Global Marketing. Plaintiff's employment began in October of 1988. Upon eligibility, Plaintiff purchased a long-term disability policy issued to Rockwell by Defendant, UNUM Life Insurance Company of America ("UNUM"). Plaintiff's premiums were automatically deducted from her pay. In early February of 2000, Plaintiff began to experience severe fatigue and pain in various parts of her body. Ultimately, Plaintiff was diagnosed with fibromyalgia and chronic fatigue syndrome.
Shortly thereafter, Plaintiff stopped working and applied for long-term disability benefits under her policy. From February of 2000 to August of 2000, Plaintiff received short-term disability benefits from Rockwell. Subsequently, in September of 2000, UNUM granted Plaintiff's request and began payment of long-term disability benefits. In December of 2001, UNUM required Plaintiff to complete a Functional Capacity Evaluation ("FCE"). Based upon the findings in the FCE, UNUM believed that Plaintiff was no longer eligible to receive long-term disability benefits because she allegedly could still perform the duties of her former position. Accordingly, UNUM terminated Plaintiff's long-term disability benefits in April of 2002.
Plaintiff administratively appealed the termination of her benefits by UNUM and was denied in May of 2003. Upon learning that she has exhausted all administrative remedies, Plaintiff asserts the following state and federal law claims: 1) Breach of Contract, 2) ERISA, 3) Bad Faith, 4) Tortious Interference with Contract, and 5) Respondeat Superior against Rockwell.
II. LAW AND ANALYSIS ERISA
To determine whether a plan is an ERISA plan, a district court must engage in a three-step factual inquiry. Thompson v. American Home Ins. Co., 95 F.3d 429, 434 (6th Cir. 1996). First, the court must apply the "safe-harbor" regulations established by the Department of Labor to determine whether the program is exempt from ERISA coverage. Id. Second, the court must determine whether a plan did in fact exist. Id. at 435. In making this determination, the Court must inquire into whether, "from the surrounding circumstances[,] a reasonable person [could] ascertain the intended benefits, the class of beneficiaries, the source of financing, and procedures for receiving benefits." Id. (citing Int'l Resources, Inc. v. N.Y. Life Ins. Co., 950 F.2d 294, 297 (6th Cir. 1991)). Lastly, the Court must determine whether the employer "established or maintained" the plan with an intent to provide benefits to its employees. Id.
Plaintiff claims the plan at issue in this case is not governed by ERISA as a result of the safe-harbor exception. Under this exception, an employee's insurance policy is excluded from ERISA coverage if: 1) the employer makes no contribution to the policy, 2) the employee's participation in the policy is completely voluntary, 3) the employer's sole functions are, without endorsing the policy, to permit the insurer to publicize the policy to employees, collect premiums through payroll deductions and remit them to the insurer, and 4) the employer receives no consideration in connection with the policy other than reasonable compensation for administrative services actually rendered in connection with payroll deduction. Id. See 29 C.F.R. § 2510.3-1(j) (2005). A policy will be exempted from ERISA coverage only if all four of the "safe harbor" criteria are satisfied. Thompson, 95 F.3d at 435.
Elements 1, 2 and 4 are not disputed in this case. However, Defendant Rockwell claims it endorsed the plan through its substantial involvement in the creation and administration of the plan. In determining whether an employer endorses a plan, the following factors can be considered: 1) whether the employer plays an active role in determining which employees are eligible for coverage, 2) whether the employer negotiates the terms of the policy, 3) whether the employer determines the level of benefits, 4) whether the employer is named the plan administrator, 5) whether the employer provides a summary plan description that refers to ERISA, 6) whether the plain language states the policy is governed by ERISA, 7) the name given to the policy, 8) the identity of the agent for legal service of process, 9) the identity of the policy holder, 10) whether the employer has the right to terminate the policy, and 11) what role the employer plays in the claim process. Adams v. UNUM Life Ins. Co. of Am., 200 F. Supp.2d 796, 800-01 (N.D. Ohio 2002).
In this case, Rockwell satisfies all of the aforementioned factors. Rockwell determined which employees would be eligible for coverage, negotiated the terms of the policy and determined the level of benefits provided. Moreover, Rockwell provided a summary plan description to its employees that specifically informed them that ERISA governed the plan and the plan itself stated it was governed by ERISA. Finally, the name of the policy identified Rockwell, and Rockwell was the policyholder and agent for legal service of process.
Plaintiff has offered no evidence to refute Defendant's assertions regarding any of the aforementioned factors. Although Plaintiff contests the fact that Rockwell was the named administrator of the plan, in her Complaint she acknowledges that the pages appended to the policies issued by UNUM identified the plan administrator as Allen-Bradley Company (Rockwell is successor in interest). Furthermore, although Plaintiff asserts Rockwell was not substantially involved in the administration of the plan because employees themselves choose whether to participate, this factor is separate under the "safe harbor" analysis and is not applicable in determining whether Rockwell endorsed the plan. Therefore, based on the available evidence, this Court finds that because Rockwell endorsed the Plaintiff's long-term disability policy, the policy is governed by ERISA. As a result, Plaintiff's claims under state law are preempted and federal common law will apply in determining her recovery. Thompson v. American Home Ins. Co., 95 F.3d 429, 434 (6th Cir. 1996).
Standard of Review
Under 29 U.S.C. 1132(a)(1)(B), the denial of benefits under an ERISA plan is reviewed de novo. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). However, if "the plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan, . . . the highly deferential arbitrary and capricious standard of review [applies]." Darland v. Fortis Benefits Ins. Co., 317 F.3d 516, 527 (6th Cir. 2003) (noting that for ERISA purposes, "when an insurance company administers claims for an employee benefit plan, and has authority to grant or deny claims, the insurance company is a `fiduciary' . . . under 29 U.S.C. § 1002(21)(A)(iii)"). Plaintiff's long-term disability policy was first issued in 1991. Subsequently, in 1997, Amendment No. 13 replaced the entire policy with a new version that states:
12. In making any benefits determination under this policy, the Company shall have discretionary authority both to determine an employee's eligibility for benefits and to construe the terms of this policy.
Therefore, at the time of the onset of Plaintiff's alleged disability, the policy granted discretionary authority to UNUM and the arbitrary and capricious standard applies.
The arbitrary and capricious standard is the "least demanding form of judicial review of administrative action." Williams v. Int'l Paper Co., 227 F.3d 706, 712 (6th Cir. 2003). In making its determination, the court need only find that the plan administrator's action was rational in light of the plan's provisions." Id. (citing Daniel v. Eaton Corp., 839 F.2d 263, 267 (6th Cir. 1988). As long as the plan administrator's decision was reasonably based on the available evidence, the decision was not arbitrary and capricious. McDonald v. W.-S. Life Ins. Co., 347 F.3d 161, 169 (6th Cir. 2003). However, courts have recognized that a conflict of interest exists when an insurer both decides an employees eligibility and pays the appropriate benefits. Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). If such a conflict exists, as it does in this case, it is to be weighed as a "facto[r] in determining whether there is an abuse of discretion." Id. (citing RESTATEMENT (SECOND) OF TRUSTS § 187, cmt. d (1959). Finally, under the arbitrary and capricious standard, the court is limited in its review to that evidence known to the administrator at the time of his or her final determination. Miller v. Metro. Life Ins. Co., 925 F. 2d 979, 986 (6th Cir. 1991).
III. CONCLUSION
For the foregoing reasons, this Court finds that Plaintiff's long-term disability policy is governed by ERISA and the termination of Plaintiff's benefits is reviewed under the arbitrary and capricious standard.
IT IS SO ORDERED.